Corn traders are trying to understand the details and fill in the blanks regarding the move by the Chinese government to officially drop their corn reserve program. The exact details of the changes are still unknown but most sources suspect it clearly confirms a glut of corn supply circulating inside the Chinese borders and lower domestic prices moving forward. Don't forget, Chinese corn prices have already tumbled aggressively in the past several months.
In the wake of policy change, we are starting to hear more talk and rumors of the Chinese perhaps becoming a larger short-term exporter of corn. The only way the Chinese headlines could be twisted into something bullish is to believe longer-term the lower prices will discourage Chinese farmers from planting as many corn acres.
Here at home the trade is bracing for the USDA's Quarterly Stock Report and Planting intentions data scheduled to be released Thursday. Most sources are looking for quarterly stocks to push to levels not seen in almost three decades. Unfortunately, there's also a chance planted corn acres could push higher.
The bulls are hoping the farmer surveys submitted down south showed conditions were far too wet for all of the originally intended corn acres. On the flip side, the bears are arguing that unusually warm weather across a majority of Corn Belt has provided farmers with additional early field time and in turn more corn acres are going to get planted. Personally I'm not looking for the USDA to deliver any major surprises, but as a producer I feel I need to keep my downside protection in place just in case we see some type of wild-pitch.
A graphic look at growth in global corn production
Below are some easy to read graphics we put together in the office using the latest USDA International Baseline Corn Projections for 2016-2025. You can find more detail by visiting their site.