China announced Aug. 11 it would devalue its currency, the renminbi, and continued the process Aug. 12 and Aug. 13.
The move caught traders globally off guard, which prompted heightened market reactions and significant, mostly negative, speculation about what led to the move and what its long-term effects would be.
In the short term, other Asian currencies fell, and U.S. exports suddenly became more expensive for Chinese buyers.
Mid-day Aug. 12, commodity markets received another shock when the latest USDA World Agricultural Supply and Demand Estimates (WASDE) report - watched closely due to corn pollination timing - reported an expected increase in U.S. corn yields and total production for the current crop year. Commodity prices plummeted on the news, with corn and soybeans taking the hardest hit.
The USDA estimated corn production for 2015-16 crop year at 347.6 million tonnes (13.7 billion bushels), 4 million tonnes (157.5 million bushels) higher than last month’s estimates, with estimates for average yields increased from 166.8 bushels per acre (10.5 tonnes per hectare) to 168.8 bushels per acre (10.6 tonnes per hectare). While the percentage increase is relatively small, it was surprising and on the heels of the China moves.
On the competition front, the USDA also increased Brazil’s corn export estimates by 1.5 million tonnes (59 million bushels), Argentina’s by 0.5 million tonnes (19.7 million bushels) and the Ukraine’s by 1.5 million tonnes (59 million bushels) while the U.S. corn export estimate was reduced by 1 million tonnes (39.4 million bushels), from 48 million tonnes (1.9 billion bushels) in July to 47 million tonnes (1.85 billion bushels) in the Aug. 12 report.
The E.U. is facing a heatwave that will lower its corn crop, according to USDA, and increase corn imports by an estimated 1 million tonnes (39.4 million bushels).
Both the pricing and export estimates point to a need for strong market development efforts for U.S. grains to continue to show customers the value and stability of the coming crop and the U.S. agricultural system.