Corn hits USD 3.80/bushel on CBOT, best price since February

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     Porto Alegre, September 21, 2020 – Still amid the pandemic, discreet job recovery, and doubts about the pace of recovery in the global economy, some commodities are standing out in the international context. Sugar, coffee, and cotton were the first commodities to recover prices with a financial flow associated with some fundamental factor. Then, soybeans gained momentum based on a global demand concentrated on the U.S. product, which is favorable to prices on the CBOT. Wheat begins to try to recover prices. Corn has been the commodity for which bullish arguments have not yet been consolidated, mainly because there is still a harvest of 378 million tons ahead. China continues as the hypothesis for bullish hope, with bets on massive purchases for next year. The fact is that world market prices are rising, while there is a large crop to be reaped in the United States.

     The 2020 U.S. crop was planted in a perfect window: planting in May, a good initial development, a pollination period without serious events, and an end of a cycle with lower rainfall in points of the Midwest such as Iowa and western Illinois. Iowa was the state that brought the big surprise of the year, with the storm that occurred in August, for which the USDA already brought its correction in the September report. This situation is different for soybeans, which are defined in August and early September, and the end of the crop cycle may have been affected by the drought in Iowa.

     Thus, losses for corn are already priced on the CBOT. The correction of production from 388 to 378 million tons, and the fall in stocks from 70 to 63.4 million tons are the adjustments presented by USDA. Any future surprises regarding demand? Could the outbreak of African swine fever in Germany leverage the U.S. pig farming and bring more future demand? All chances are possible on the eve of the harvest of a big crop in the U.S. Midwest. One of the variables being worked on is a small decline in Ukrainian production and some retraction in the country’s export flow, which affects the supply to Europe and the Middle East. Ukraine prices were at USD 151/ton FOB in August and now hit USD 175 in September. The flow of goods distorted by the pandemic may also be collaborating.

     Agência SAFRAS Latam

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