Coarse Grains. World Markets and Trade. February 2018 – USDA Feb. 8, 2018
There are few changes this month for 2017/18 global corn supply and use. Corn production is lower with reductions for Argentina and Ukraine. Global corn trade is marginally higher with larger imports for Turkey and the European Union. With strong foreign demand and competitive prices, U.S. corn exports are forecast higher, more than offsetting reductions for Argentina and Brazil. The U.S. season-average farm price is raised $0.05 to $3.30 per bushel at the midpoint.
Global corn prices have continued to trend upward since last month’s WASDE. Argentine bids rose $4/ton to $167 and Brazilian bids were up $3/ton to $168, mainly amid concerns over dryness in Argentina. Black Sea bids were up $7/ton to $175 on tightening supplies from Ukraine. U.S. quotes, reflecting ample supplies, remained unchanged from last month at $165/ton despite strong foreign demand.
U.S. Corn Exports Prospects Brighten
The global corn market is primarily supplied by four countries – Argentina, Ukraine, Brazil, and the United States. Combined, they account for nearly 90 percent of all global exports. While these countries continue their dominance, 2017/18 prospects for each exporting country are changing, influenced by weather and, ultimately, prices.
The Argentine corn crop is forecast sharply lower this month reflecting the impact of ongoing heat and dryness. With reduced production, forecast exports are cut substantially. For Ukraine, the preliminary statistics by the State Statistical Service show much smaller production with a lower yield, leading to prospects for smaller exports. For Brazil, the shipping pace of the previous crop (2016/17) has remained slower than anticipated, impacted by heavy rains and road conditions. For 2017/18, exports will depend on the size of the second crop (safrinha) that is currently being planted, as forecast production is still highly tentative and determined largely by the outcome of the rainy season in the Center-West in April and May.
Meanwhile, sales and shipments of U.S. corn have been brisk in recent weeks as foreign buyers turn to the United States. With successive bumper crops, the United States has abundant exportable supplies and prices are expected to remain competitive on an FOB (free on board) basis until Brazil’s second crop comes onto the market.
South Africa Corn Returns to East Asia Market
After a severe drought that led to a smaller corn crop and tighter exports, South Africa has rebounded and is once again selling to global corn markets. South Africa is the largest corn exporter in Sub-Saharan Africa and is the primary supplier for most southern African markets. While the majority of its corn is used domestically and regionally, South Africa’s recent surplus has been a boon for exports reaching global markets, providing ample supplies to East Asia in particular. In contrast, when supplies were tight in 2014/15 and 2015/16, South Africa retained its African export markets but withdrew from East Asia. South Africa exports both white and yellow corn, with white corn, primarily used for food, mostly destined for regional African markets and yellow corn, used for feed, to Asian markets. Now that total corn production has recovered, South Africa is once again competing in Asian markets.
Although South Africa’s current share of the East Asian market is relatively small and dominated by the United States, South Africa provides some competition. Both countries export corn to an already oversupplied global market, and to a region that has historically been very sensitive to price and product quality. With South Africa’s 2017/18 corn production forecast at 12.5 million tons and exports expected to reach 1.9 million tons, it will likely continue to expand its global reach into East Asia and beyond.