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OVERVIEW

Global corn production for 2017/18 is lower this month primarily driven by reductions for Argentina, Brazil, and Paraguay. Global corn trade is down with lower imports for Iran, Malaysia, Taiwan, Chile, and Mexico. U.S. corn exports are unchanged. The U.S. seasonaverage farm price is unchanged at $3.35 per bushel.

PRICES

Global corn prices have moved up since the previous WASDE. Argentine bids rose $4/ton to $190 on worsening crop conditions. Brazil bids are seasonally unavailable. Black Sea bids jumped $12/ton to $205 on expectations for stronger demand, particularly from China. U.S. quotes rose $9/ton to $192 reflecting stronger foreign demand and record high outstanding sales this point in the marketing year. Higher barge rates due to swollen water levels also the upper Mississippi River also boosted export quotes.

Saudi Arabia: Demand for Commercial Feeds Drives Record Corn Imports

Saudi Arabia’s corn imports are set to double from 5 years ago as the government revamps efforts to modernize the country’s feed industry. The world’s largest barley importer makes up about a third of global barley trade but is seeking more efficient feedstuffs. High barley prices, dwindling water supplies, and efforts to expand the poultry and processed corn industries are driving corn imports to a record. Compound feed production is set to grow as the government offers import subsidies for corn and other feed ingredients to reduce its historic dependence on barley.

Farmers have traditionally favored mixing barley with alfalfa to raise traditional livestock (i.e., sheep, camels, goats). Both feedstuffs are prominent among rural farmers as the government subsidizes barley imports and has traditionally supported domestic alfalfa farmers. However, efforts to modernize the industry are changing the existing feed market. Saudi Arabia is set to phase out production of alfalfa by 2019, primarily due to constrained groundwater supplies. Financial pressures have mounted as global barley prices are at their highest in nearly 3 years, making it more expensive for the government to procure. Because barley is offered at fixed prices to domestic farmers, higher prices are borne by the government.

Compound feeds (composed primarily of corn) developed for traditional livestock are increasingly marketed to rural populations as consumption is expected to grow. With one of the largest poultry industries in the Middle East and expanding capacity for food processing (e.g. high fructose corn syrup, starch, etc.), overall corn consumption in Saudi Arabia is also expected to grow. Government incentives to conserve water and diversify grain imports are shifting the country’s feed industry away from traditional supplies and driving 2017/18 corn imports and consumption to new records.

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