US Ethanol Production Nears a Seasonal Inflection Point:
Stronger US ethanol production pushed the use of corn for fuel alcohol in March higher by 5% from a year ago. Ethanol production is higher by 6.8%, so far, in the 2016/17 marketing season, while the USDA is projecting a 4.3% increase. At the same time, Brazil’s imports of corn ethanol from the US soared fivefold year-over-year in Q1:2017. Given that US ethanol inventory is now at a 5-year high, the demand pull for corn will depend on the US summer driving season and Brazil’s decision on a proposed 20% import tariff on US ethanol. We recommend watching for the USDA’s initial forecast of corn, for ethanol use in 2017/18 within the May 10 WASDE.
Heavy Rainfall Could Impact Chinese Rice:
Good yields are expected for India’s rabi rice and Indonesia’s wet-season rice. On the other hand, China’s early rice could be at risk from heavy rainfall. Although global stocks of rice are projected to climb, China accounts for nearly 60% of global stocks. What’s more, climate coincides with the country prioritizing quality over quantity this season. In fact, Hunan, China’s largest producing province, plans to plant roughly 667,000 hectares of high-quality rice this season, while Sichuan is projected to plant 1 million hectares of higher-quality rice. Physical traders of rice and researchers can compensate for limited in-season data by monitoring vegetative conditions within Gro.
Brazil’s Promising Safrinha Corn Enters Risky Period:
Given lofty projections for Brazil’s second-season corn (safrinha), we will be watching whether the crop can keep up with expectations. Gro shows generally good vegetative conditions across safrinha corn growing areas. Nevertheless, safrinha corn is still a risky crop for growers. The potential for low rainfall in Mato Grosso from May onward and frost in Parana during May and June should never be discounted, despite current conditions. Beyond vegetative indices, we suggest that traders and agribusiness groups keep a watch on temperature in Parana and rainfall in Mato Grosso.