Coarse Grains. World Markets and Trade. August 2018 – USDA Aug. 11, 2018
OVERVIEW FOR 2018/19
Global corn production is up sharply this month with larger crops for the United States, Serbia, Ukraine, and Zimbabwe more than offset reductions for Brazil and the European Union. Global imports are higher, driven by record EU trade with stronger exports for Ukraine and Serbia. U.S. exports are also raised on expectations of competitiveness well into the fall. The U.S. seasonaverage farm price is lowered to $3.60 per bushel.
OVERVIEW FOR 2017/18
Global corn production is slightly lower this month primarily driven by a smaller second crop (safrinha) in Brazil. Global trade is forecast lower driven by smaller imports for Iran, Saudi Arabia, and Vietnam more than offsetting gains for the European Union, Israel, and Lebanon. U.S. exports are raised to a record on continued strong sales and shipments. The U.S. season-average farm price is unchanged at $3.40 per bushel.
Global: Corn prices have moved up since the previous WASDE, largely driven by concerns over tightening supplies of wheat in the global market and moderating U.S. corn yield expectations. Even with slow foreign demand, both Argentine and Brazilian bids were up $13/ton each to $175 and $185, respectively. Black Sea bids were up $10/ton to $189 on demand from EU and China. U.S. bids were up $15/ton to $175 reflecting continued strong sales and shipments. The United States remains the most competitive supplier.
Ukraine's Corn Exports Trend Up
Just in the last 5 years, Ukraine's corn exports have expanded rapidly with rising acreage and competitive prices. Due to its proximity and acceptability as biotech-free, Ukraine corn has been increasing its presence in nearby markets such as the European Union, North Africa, and the Middle East.
One key destination, however, is worth noting: China. In 2012/13, Ukraine exported only 83 tons of corn to China. In 2014/15, exports to China exceeded 4.0 million tons, and in 2017/18, year-to-date exports to China have already exceeded the total amount shipped in 2016/17. This makes Ukraine the top supplier to China for the fourth year in a row, replacing the United States. For China, particularly in the graindeficit southeastern provinces, Ukraine corn is attractive due to strong demand for feed grains and price competitiveness. The two countries also have a symbiotic partnership that fits their broader strategic goals, such as the "loan-for-corn" deal that was signed in 2012.
Furthermore, a year-over-year comparison of Ukraine corn exports shows that the share exported to China has grown at the cost of other smaller destinations in East Asia and in the Rest of the World (ROW). Exports to the European Union have been steady, if not growing, partially due to the duty-free access Ukraine has enjoyed since 2014. Key markets in North Africa and the Middle East have sputtered on increased competition from the United States.
In 2018/19, Ukraine will be in a prime position to continue its growth as a corn exporter, with a growing crop and increasing export dependency. While tighter wheat supplies in Europe could boost demand for corn in the region, a solid partnership with China and rising competitiveness provides significant tailwind for Ukraine exports.