China’s Corn Under Extreme Weather Threat // Bad News Again for Orange Production
China’s Corn Under Extreme Weather Threat // Bad News Again for Orange Production
The Commodity Report #177
China’s Corn Under Extreme Weather Threat
China's corn production is currently under pressure due to extreme weather events in the country. Still, as it seems this might not be enough to even lift prices up a little bit. Local prices have ticked higher since the end of September, but they’re still close to four-year lows.
Stockpiles of corn are plentiful, and demand is currently sluggish as the second-largest economy of the world battles its own economy demons at the moment.
Last year’s harvest came in at a record 289 million tons, government data show. Output in 2024 may drop by between 5 million and 20 million tons, according to a Bloomberg survey. In the worst case, that means production would fall by about 7%,
On the flip side, China could be vulnerable to rising import needs if the government’s efforts to kickstart the economy prove successful. The latest disappointing communication by the government of further stimulus efforts couldn’t support that thesis yet though.
The sluggish Chinese demand also is a gloomy prediction for the farmers in the US. The USA supplies most of those shipments. The Chinese government expects imports to keep falling. In the current crop year, which began in October, the farm ministry is forecasting overseas purchases at just 13 million tons, a sharp drop from the 19.5 million tons estimated for 2023-2024.
Bad News Again for Orange Production
Progress has been made in combating a deadly citrus disease called greening that has decimated orange production. Groves were recovering from Hurricane Ian two years ago, after crawling back from Hurricane Irma in 2017.
The industry got further bad news on Friday. The US Department of Agriculture’s first forecast
for the 2024-25 season showed Florida orange production falling 16% from a year earlier to 15 million boxes, the lowest level since 1933. That figure doesn’t even account for Milton and is near certain to be reduced later.
While it wasn’t as destructive as many feared, the hurricane came at the worst possible time for citrus farmers. Not only did it arrive just ahead of the all-important harvest season, it delivered yet another blow to an industry that was just seeing the glimmers of a turnaround.
Full damages from Milton are still being assessed - a reduction between 20 and 40% seems likely at the moment according to market talk.
Past storms provide some indication of the severity of impacts to groves. The state’s production dropped more than 60% in the 2022-23 season after Hurricane Ian. Output dropped by more than a third after Hurricane Irma in 2017.
Once again the focus on commodity production falls on Brazil. The country is the world’s top producer, makes more than 70% of the world’s orange juice.
In Other News…
The Economist published this cover story for this week’s issue. This isn’t a story editors pick in times of a balanced economy - more like a hot economy near its cyclical peak...
Also Bitcoin has entered its typical most bullish phase of the year according to its recent seasonality. Since the first Bitcoin-ETF has been launched in the US the demand for the product has skyrocketed as this chart by Bitwise AM shows.
Meanwhile you can put this chart into the basket “correlation does not necessarily equal causation”.
This week, look out for the following:
Richmond Manufacturing Index on Tuesday
Flash PMI’s on Thursday (watch for hotter-than-expected data)
Durable Goods Orders on Friday
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Till next Monday, Lukas
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