U.S. corn exporters to maintain their advantage in 2021-2022 over their competitors
U.S. corn exporters that dominated their competitors in 2020-2021 may face increasing competition in 2021-2022, but will likely retain an advantage over other major suppliers, an analysis of forecasted global crop production has shown, competitor inventory and market conditions.
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The corn marketing year in the United States runs from September to August.
Planting of corn in the United States is currently in its final stages and is expected to be harvested in September-October. Around the same time, Ukraine also enters the market with its crops.
The United States and Ukraine are the main exporters to China, which has been the main driver of the corn market since last year.
China has already reserved more than 10.74 million tonnes of U.S. corn for shipment in the 2021-2022 marketing season, which begins in September.
The US Department of Agriculture estimates China’s corn imports in 2021-22 at 26 million tonnes, stable at a record high for 2020-2021. The volume remains significantly higher than China’s usual corn purchases, which amounted to 7 million tonnes in 2019-20.
Maize production in the United States, the leading producer and exporter of coarse grains, is expected to reach 380.76 million tonnes in 2021-2022, up about 6% from 2019-20, according to the USDA.
High multi-year corn prices in 2021 are expected to result in more corn planted area and increased production in major producing and consuming countries in 2021-2022.
Ukraine lost market share
Ukraine, the world’s fourth-largest corn producer, is expected to produce 37.5 million tonnes in 2021-2022, nearly 24% more year-on-year, according to the USDA.
With better production prospects in 2021-2022, Ukraine could regain its position as an attractive option for China, which has recently become the largest buyer of US corn. Traditionally, Ukraine has been China’s largest supplier of corn until 2019.
Ukraine’s corn production was hit in 2020-2021, as dry weather loomed in key regions of the country, leading to export cuts, USDA data showed.
Meanwhile, strong local demand in Brazil, the world’s second-largest corn exporter, limited the corn available for export in 2020, allowing US corn exporters to take advantage of the supply.
The United States is expected to export 70.49 million tonnes of corn in 2020-2021, up from 45.17 million tonnes in 2019-20.
However, US corn became more expensive in 2021, as prices hit a record high near $ 7 / bushel, led by US ending stocks hitting a multi-year low of 31.93 million tonnes in 2020-21. On the other hand, Argentina, the third largest exporter of maize, now offers maize at much lower prices.
A comparison of corn loading prices for Argentina and the United States shows that American corn has so far had a higher premium than Argentinian corn.
S&P Global Platts Analytics valued Argentina’s FOB Up River corn at $ 251.67 / tonne on May 24, while the USGC’s FOB price for Gulf is $ 307 / tonne.
Mismatch between supply and demand
Persistent drought in Brazil, the second-largest corn exporter, has cast huge doubt on the 2020-2021 corn crop, which will be harvested in the second half of this year.
Crop estimates in Brazil by various agencies range from 91.1 million tonnes to 106.4 million tonnes for 2020-2021, compared to 109 million tonnes forecast earlier.
If Brazil’s maize output ends up at the lower end of estimates, some key Asian buyers like Japan and South Korea, which recently increased their share of South American maize imports, may need to rely more on United States.
In addition, as of now, the 2021-22 corn production cycle is only at the planting stage for some of the largest producers such as the United States, Europe, Ukraine and China. and planting in South America will not begin until September.
Therefore, any unfavorable weather event in any of these growing regions could quickly reduce the already tight maize supply.
With the exception of the United States and China, other countries do not have huge stocks of corn, and doubts also remain about China’s actual stock levels, with the country having auctioned more than 100 million tonnes of corn from its reserves in recent years.
Recent purchases of corn by China indicate that demand is also expected to be strong in 2021-2022, and that the United States and Ukraine will remain its main suppliers.
Despite the expected increase in corn acreage in China, its corn supply deficit is expected to increase. The Chinese government is urging ranchers to increase the use of alternative feeds instead of corn and soybean meal, indicating the country expects the supply gap to widen.
This comes at a time when China is rebuilding its pig herds, which were devastated by an African swine fever outbreak in 2018. The growth in Chinese pig stocks is likely to be led by the organized sector, which unlike the small backyard pig producers, uses corn and soybean meal instead of food waste.