The market is increasingly turning its focus to demand prospects.

USDA’s ideas on demand, which are apparent in the November WASDE numbers, include:

Increased feed consumption

Feed/residual is projected to be up just 18 mbu versus 23-24 to 5.825 bbu. USDA is presumably assuming that a 45-50 cent decline (10%) in corn prices will stimulate feed demand – even in the face of a larger percentage reduction in soybean meal prices (expected to be 17% or $64 cheaper at $320/short ton in 2024-25). Animal numbers (Grain Consuming Animal Units or GCAUs in USDA terms) are expected to be unchanged at 101 million. Anecdotal comments suggest that lower feed costs and improved profitability of pork, beef and poultry are encouraging heavier weights and thus, more corn and meal per animal unit. Thus, there may be room for further increases in feed consumption.

Increased ethanol use

Corn used for ethanol production is off to a strong start, in large part due to an increase in exports. For example, the amount of corn used to support ethanol exports between January and September 2024 is nearly 150 mbu ahead of the previous year. Also, the USDA is forecasting a 28 mbu decline in corn demand for 2024-25. Yet, consumption for the month of September was 14 mbu, about 3% greater than a year ago. We note that a few analysts see corn used by the ethanol industry up 25 to 100 million mbu.

Related:Hook up the grain trucks!

Export market

The area which offers the most potential for an increase in demand is the export market. Several forces are driving this:

Combining the export impact from the above the shippers suggests close to 980 mbu less corn will be moving into the world pipeline in 24-25.

A recovery in the Argentine crop from last year’s severe drought is expected to increase that country’s exports by around 300 mbu. Still, the net impact – 980 less 300 equals 680 mbu – is substantial and explains much of the surge in unshipped U.S. corn sales as shown in this graph.

Related:Can the corn rally go higher?

One final and particularly important market is China, which imported approximately 15 MMT of Brazil corn between July 2023 through May 2024. July-October shipments this year have dropped to less than 700,000 tonnes. At first glance, this reduction is freeing up more corn for either Brazil’s domestic market or to meet other importer needs. However, the growth in Brazil’s internal use since the 2022-23 crop was harvested is expected to reach 16 MMT, suggesting little of the reduced Chinese demand will be switched to other importers.

Corn exports spike

Excluding China, U.S. export sales of corn are the second highest in the past 30 years. Export sales have spiked in recent weeks.

The following table provides data for those years in which corn exports were near or above the 2.3 bbu level as well as the quarterly distribution of shipments and the final stocks-to-use ratio for each. The graph shows July corn futures for each of those years.

Related:How high will Brazil jump?

Conclusion

Should a number of the supply/demand factors noted above fall into place, a 2.5-2.6 bbu U.S. export program could lift CN above the $5 level later in the year.

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