CBOT Grain Contracts Surge on Rising Demand, Falling Supply Estimates

CBOT corn futures closed limit up while CBOT soybeans and wheat also shot higher following Tuesday’s USDA reports showing official estimates of corn ending stocks below analyst expectations. 

USDA lowered both US corn supply and demand. But with supply dropping more than use, US corn ending stocks were lowered by 150 million bushels to 1.552 billion bushels. Gro first suggested in November that a downward revision to ending stocks was likely. 

The USDA’s Grain Stocks report also surprised the market as corn usage was a record for the quarter, which seemed to run counter to the lowered corn demand forecast in the WASDE. It is strange to expect US corn exports to fall in the absence of a South American weather change. 

The USDA lowered estimates for corn production in Argentina and Brazil to 47.5 million and 109 million tonnes, respectively, due to dry conditions impacting yields. Gro’s South American corn and soybean yield models cover both Argentina and Brazil, and offer near-real-time updates on in-season yield potential. 

Gro’s models are already pointing to below-trend yield in South America as indicated by the Gro Drought Index heading into the growing season. The GDI has been a great leading indicator of futures prices since September. The market was already sensitive to lower South American production, and the larger-than-expected reduction in US corn supply sent prices higher. 

Strong demand from China also has supported prices. The USDA raised estimates for China’s corn imports to 17.5 million tonnes for the year—the USDA’s projection sat at a mere 7 million tonnes in October. Gro has suggested since February that the USDA was too low in its projections, as various data points, such as elevated cash prices, destocking of reserves, and rebuilding of China’s hog herd painted a different picture. 

If current conditions hold, Gro believes that China’s corn imports will comfortably exceed the USDA’s latest estimate of 17.5 million tonnes. Check out Gro's report "China's New Push for Food Security" for a real-time assessment of China’s food security situation.

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.