The Commodities Feed: Corn output slashed

US oil inventories: The API reported yesterday that US crude oil inventories increased by 4.85MMbbls, which was very different from the 1MMbbls drawdown the market was expecting. The build has put renewed pressure on the market this morning. Meanwhile, Cushing stocks continue to grow, increasing by 2.37MMbbls over the week. Looking at products, gasoline saw an 829Mbbls increase, which was broadly in line with expectations. However distillate fuel oil inventories fell by 3.46MMbbls, which was at odds with the 1.1MMbbls that the market was expecting. The EIA is scheduled to release its more widely followed weekly report later today.

In its latest Short Term Energy Outlook yesterday, the EIA revised lower its 2019 production forecast from 12.44MMbbls/d to 12.32MMbbls/d. Similarly for 2020, their production forecast was lowered from 13.38MMbbls/d to 13.26MMbbls/d.

China infrastructure: Nickel and zinc led the rally in base metals yesterday, following news that China will allow local governments to use part of the proceeds from special bond sales as capital for qualified major projects such as railways and national highways. This has added to the optimism that the market is now expecting stronger infrastructure spending for the remainder of this year, and therefore should boost demand for steel products, an area that both nickel and zinc are widely exposed to.

Looking specifically at nickel, floods in Indonesia’s Sulawesi have seen local people flee their homes. The market is also concerned that these floods could affect ore and NPI shipment, as well as potentially disrupting Tsingshan’s operations in the area.

Chile copper: Labour unions at Codelco’s Chuquicamata mine are not happy with the latest wage offer by management and have recommended workers reject the offer in a vote on Thursday. Five-day government mediated talks also end on Thursday and if workers vote to strike, industrial action could start as soon as Friday. Any prolonged disruption to mine supply could get speculators nervous, and see some sizeable short covering, with speculators holding a net short of 45,677 lots in COMEX copper as of 4 June.

USDA WASDE report: In yesterday’s WASDE report, the USDA lowered its corn yield estimate for the 2019/20 US crop from 176bu/acre to 166/bu/acre, which saw their production estimate for the season fall from 15.03b bushels to 13.68b bushels. This would be the smallest crop since the 2015/16 season and follows heavy rains in the US, which delayed plantings significantly. The cut was much bigger than most in the market was expecting, and explains the rally in the corn market following the release. As a result of the reduction, the USDA also estimates that 2019/20 global endings stocks will fall from a previous estimate of 314.71mt to 290.52mt- the lowest global stocks number since 2014/15.