September 5, 2019 / 9:39 AM / 2 months ago

Column: U.S. corn exports likely fall short of 2018-19 target while soybeans exceed

FORT COLLINS, Colo. (Reuters) - U.S. corn exports finished off the recently concluded U.S. marketing year at the slowest pace in seven years, while soybean exports hit a record high in the fourth quarter owing to anomalously large shipments to China.

Corn plants are seen silhouette outside Sikeston, Missouri, U.S., May 16, 2018. REUTERS/Shannon Stapleton

Analysis of the latest data suggests that U.S. corn exports in 2018-19, which ended on Aug. 31, will fall short of the current full-year government forecast but soybeans likely topped its target.

The United States shipped 2.88 million tonnes (113 million bushels) of corn in July, according to data published on Wednesday by the U.S. Census Bureau. That was the lowest monthly total since November 2017 and the smallest July volume since 2013.

Weekly export inspection data from the U.S. Department of Agriculture implies August exports may have been up to 4% lighter than in July, which would also be the smallest for that month since 2013.

Using the assumptions about August, corn shipments in the fourth quarter of 2018-19 fell about 56% from a year ago and 34% from two years ago, which featured more modest exports between June and August.

But the world has not been missing out on corn. Combined August corn exports out of the United States and Brazil likely exceeded 10 million tonnes, which is record-high for any month.

Brazil, the No. 2 corn exporter, shipped an all-time monthly record of 7.65 million tonnes of the yellow grain in August. July’s volume of 6.3 million had briefly held that title.

A record-large harvest, competitive pricing against the U.S. product, and much-improved exporting logistics in recent years have allowed Brazil to supply such massive volumes.

Argentina and Ukraine have also shipped record volumes this year, denting U.S. business as domestic prices soared during the excessively wet planting season. Logistical problems stemming from the weather also plagued U.S. grain shipments earlier this year.

USDA pegs 2018-19 U.S. corn exports at 2.1 billion bushels (53.3 million tonnes), but the data suggests the reality may have been closer to 2.06 billion. That would be down 15% from the previous year.

This is not a huge discrepancy as the 40 million-bushel difference is only 2% of the predicted year-end supply of 2.36 billion, but the prognosis is not great. U.S. corn sales for the new marketing year were at 14-year lows as of mid-August, meaning there is a lot of ground to cover if exports are to reach USDA’s projection of 2.05 billion bushels.

SOYBEANS AND CHINA

U.S. soybean shipments in July reached 3.68 million tonnes (135 million bushels), a record for the month. That follows June’s record volume as well.

Some 1.94 million tonnes of beans were sent to China in July, the second-largest monthly volume in 2018-19 behind February’s 2.1 million. Shipments to China accounted for 53% of all soybean exports in July, which is unusually high for the time of year.

Total shipments in August should have easily reached a new high for the month, possibly coming in just shy of 5 million tonnes. Data suggests at least 2.5 million of that was to China, which would be the biggest monthly soy shipment to the Asian country since January 2018.

But despite the banner fourth quarter, 2018-19 U.S. soybean exports through July stood at 42.6 million tonnes, down 22% on the year and the lowest for the period in six years. This is driven by greatly reduced shipments to China of just 10.6 million tonnes, down 62% from last year and the lowest for the period since 2005-06.

Chinese purchases for 2018-19 totaled 14.15 million tonnes as of Aug. 22, and weekly inspection data implies around 1 million tonnes had yet to be shipped when the marketing year ended on Aug. 31. As of Aug. 22, China had only 260,000 tonnes of U.S. beans on the books for 2019-20, some 5% of total commitments.

USDA’s current target for U.S. soybean exports in 2018-19 is 1.7 billion bushels (46.3 million tonnes), and the recent data suggests the final number might be closer to 1.75 billion, which would be down 18% on the year.

But 2019-20 soybean sales are also very slow, so a better-than-expected finish to 2018-19 is lackluster. As of mid-August, sales for the new year were at a 13-year low, but competitive pricing may lure non-Chinese buyers back to the U.S. product soon. USDA on Wednesday announced the sale of 451,766 tonnes of soybeans to Mexico for shipment in 2019-20.

On Wednesday, USDA’s attaché in Beijing forecast 2019-20 Chinese soybean imports at 80 million tonnes, down from 82 million last year and 94 million in 2017-18. The five-year low in bean imports is spurred by reduced demand in the wake of African swine fever across the country. USDA’s official projection for 2019-20 imports is 85 million tonnes.

PORK AND CHINA

China’s problem with African swine fever and its greatly reduced hog herd may be bad news for exporters of soybeans and feed grains, but it spells opportunity for meat suppliers around the world, including U.S. pork producers.

The United States exported 60,732 tonnes of pork to China in July, an all-time high for any month and significantly more than the previous record of 53,145 tonnes set back in November 2011. The January through July total of 237,793 tonnes is also a record for the period, topping the 2016 volume by 5%.

But China has not bought a significant amount of U.S. pork since May, and steep tariffs may continue to be prohibitive. However, many analysts see the African swine fever issue sticking around for the next couple of years, at least. This implies that U.S. livestock producers could greatly benefit should the United States and China put an end to the trade war and the punitive tariffs.

If China were to increasingly seek U.S. pork supply, it would be in luck. U.S. inventory of all hogs and pigs on June 1 was 75.5 million head, the largest ever for the date. USDA also sees U.S. pork production reaching record high levels in 2019.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Matthew Lewis

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