Last week the USDA’s export “data dump” was released for most of January and early February that was absent during the government shutdown. With the corn market just one week shy of the halfway point of the 2018/19 marketing year, we examine the current export pace with respect to the USDA’s treatment of the category in the WASDE.
Currently, the USDA has 18/19 corn exports estimated at 2.45 billion bushels. Using the weekly export data and export inspections data, we find that the current export pace is well behind the required volume to meet the USDA’s 2.45 BBU estimate. This should force the government to re-examine the category for the 18/19 marketing year and could lead to a negative adjustment in the March WASDE.
Current Export Performance is SLOW.
Using the weekly reported export data alongside of the USDA’s export estimate from the February WASDE, we derive an estimate of the required weekly export volume that it would take to meet the annual goal. Using the current export estimate of 2.45 BBU for the 18/19 marketing year requires a weekly export program of approximately 47 MBU per week. While the 47 MBU of weekly volume is an approximation that fluctuates with the weekly volume, higher some weeks and lower others, the number serves as a benchmark with the USDA’s WASDE estimate. As the 18/19 marketing year approaches the halfway mark, the estimated 47 MBU of weekly volume has become a lofty goal.
Using the current weekly export data from FAS and the inspection data from the federal grains inspections services (FGIS) and comparing the reported volumes to the required volume from the WASDE, both export metrics show that the 18/19 corn export program is well behind the weekly volume to the USDA’s 2.45 BBU goal. Using data from the Weekly USDA’s FAS export sales data suggests that the the U.S. corn export program needs to do 62 MBU of weekly volume to meet the 2.45 BBU goal. Using the FGIS weekly inspections data, the current corn export pace is approximately 17% or 210 MBU behind and would require an additional 8.5 MBU of export volume per week to reach the 2.45 BBU goal. Put another way, YTD FGIS inspections data is 7 MMT or 28% behind the same level in 2018 when the USDA estimated a 2.43 BBU export program.
FOB Spreads Telling the Story
What the USDA has failed to miss, and what we believe the biggest driver of the slow U.S. export pace is, is the competitiveness of Ukraine, Brazil and Argentina corn in the global export markets. The FOB spreads illustrate the lack of U.S. competitiveness of U.S. corn and the structural weakness against other origins. At the current levels, there is little economic incentive to purchase corn from the U.S. versus other origins. Whether the FOB spreads are driven by strength of the U.S. dollar or large production in other origins, the estimated export program of Argentina, Brazil and Ukraine are toward the top of the five-year ranges.
Given the lack of weekly export information from January until the time that the February WASDE figures were created, the USDA’s decision to leave the export number in the February WASDE at 2.45 BBU, or unchanged from December, was prudent. However, after the “data drop” of weekly export data on Feb., 21 which made the export numbers current, it seems likely that the USDA will reduce the 2.45 BBU export number in the March WASDE.
Regardless of the source, FGIS or the FAS reports, the current WASDE export figure presents an overly optimistic export scenario and should force the government to lower the number in the March WASDE. Given the USDA’s history and treatment of the export category, a 50-75 MBU downward adjustment to 2.40 BB or 2.375 BBU is possible. Removing 100 MBU of export demand would also be appropriate and not a stretch.
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