CHICAGO (Reuters) - Although the United States is having much more success with its efforts to export feed grains than it did a year ago, the shipping pace of both corn and wheat must remain strong over the next several months to prevent even more bushels from stacking up on the supply side of the balance sheet.
At the end of February, U.S. wheat exports through the first nine months of the current marketing year were 30 percent greater than year-ago and the largest since 2013/14. For corn, total shipments were up 70 percent on the year through the first six months, representing the heaviest volume since 2007/08 (reut.rs/2ojulgt) (reut.rs/2pmmNHr).
A successful 2016/17 export season would be considered a victory for the U.S. grain markets given both the lousy demand throughout most of 2015/16 and the accumulating supply of domestic grain. Healthy exports help prevent the overstuffing of grain bins and they often relieve pressure from domestic prices in the process.
The U.S. Department of Agriculture predicts combined corn and wheat supply to hit a 29-year high in the United States this year, and analysts expect the agency to bump this number another 1 percent on Tuesday.
At the same time, USDA projects 2016/17 U.S. corn exports at 2.225 billion bushels (56.52 million tonnes), which if realized will be the sixth-largest annual volume in history and the largest in nine years. The 1.025-billion bushel (27.9 million-tonne) wheat target would be the biggest in three years.
And since the beginning of March, U.S. ports have been busy. In five of the last six weeks, both corn and wheat weekly inspections – a proxy for actual exports – have topped average trade expectations, a good sign for domestic grain merchants.
The huge volumes of corn exported by the United States so far this year have provided domestic shippers with just a sliver of room to spare going forward – which is very much needed as the competing crop of South America is swelling to unprecedented levels.
In the first six months of 2016/17 – September through February – the United States shipped just under half of USDA’s full-year expectation, the fastest fulfillment rate in five years (reut.rs/2nxZkXg).
Given the amount of corn already shipped in the first half of the marketing year, U.S. ports need to process roughly 1.1 million tonnes of corn per week between March 1 and Aug. 31 to meet USDA’s target of 56.52 million tonnes. Port inspection data suggests this mark may have been topped in each of the last six weeks (reut.rs/2nydE22).
This is a reasonable weekly schedule, as it is close to the realized pace of 2014 and 2015. But to match 2016’s second-half shipment pace of 1.23 million tonnes per week would be difficult given how that pace was obtained.
U.S. corn exports began terribly slowly in 2015/16, but crop failure in Brazil shot combined July and August 2016 exports to an all-time high, making the final U.S. marketing year volume look a little better than it actually was.
But a crop disaster does not appear to be in the cards for Brazil this year, as the country is heading for a record corn output. In June, Brazil will begin harvesting second-crop corn – the supply that it exports – and Argentina has already begun collecting its record-breaking crop, something that U.S. corn dealers should keep in mind.
Coming off the worst export campaign in 44 years, the current season has been much more fulfilling for U.S. wheat shippers. But exports through the last three months of 2016/17, which ends on May 31, need to be the strongest of the year in order to avoid falling behind expectations.
At the end of February, the United States still had about 30 percent of USDA’s annual wheat target left to process. This is about average or slightly behind the previous few years (reut.rs/2oZngjo).
If the United States is going to ship the full 27.9 million tonnes of wheat by the end of May, about 629,000 tonnes must be leaving U.S. ports on a weekly basis beginning March 1 – a clip similar to those observed between 2012 and 2014 (reut.rs/2pm9ZAW).
Shipping this much wheat would not be an easy feat for the United States, although export prices at the U.S. Gulf are even lower than last year, and about 95 percent of the annual export target was sold through the end of March – both positive factors for 2016/17 to finish on a respectable note.
(The opinions expressed here are those of the author, a market analyst for Reuters.)
Editing by Matthew Lewis
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