Coarse Grains. World Markets and Trade. October 2018 – USDA Oct. 12, 2018
OVERVIEW FOR 2018/19
Global corn production is down this month with smaller crops for the United States and Russia more than offsetting gains for Egypt, Mali, and Kenya. Global trade, currently forecast at a record, is up marginally as greater exports by Serbia and the United States more than offset smaller Russian exports. The U.S. season-average farm price is unchanged at $3.50 per bushel, supported by projected record use.
Global: Corn prices have changed slightly since the previous WASDE. Both Argentine and Brazilian bids were down $1/ton and $3/ton to $163 and $172, respectively, on slow foreign demand. Black Sea bids were down $10/ton to $169 reflecting ample supplies and slow exports by Ukraine. U.S. bids were bounced back to $165, the same as a month ago, reflecting concerns over harvest delays in the Midwest and continued strong sales and shipments.
U.S. Corn Exports Forecast to Tie Record
Strong foreign demand, a continued lack of competition, and abundant supplies are expected to brighten export prospects well into 2018/19 (Oct-Sep). U.S. exports are currently forecast at 62.5 million tons, tying the record from 2017/18.
Early season sales of new-crop corn have been robust. As of the end of September, sales were up sharply from a year ago, and now represent nearly a quarter of the current forecast. Strong sales in the early season do not necessarily lead to strong exports throughout the year, e.g. 2017/18. However, they do shed light on trade dynamics responding to the global feed grain market situation.
Combined global wheat and barley production is forecast to decline 3 percent from a year ago due to damage from hot and dry weather, tightening exportable supplies available to the world market. This may have triggered the rush for corn purchases to ensure adequate alternatives in feed rations.
U.S. exports are raised this month reflecting higher expected demand for Mexico, and exports for Russia are lowered due to a smaller crop. Moreover, developments surrounding the minimum freight rate in Brazil and the new tax scheme on agricultural exports including corn in Argentina add uncertainties to their export outlook. Much of Ukraine’s corn is expected to find a home in Europe where alternative feedstuffs are needed to mitigate the impact of smaller wheat and barley supplies.
U.S. corn prices have remained competitive for much of 2018. With larger-than-anticipated stocks of old crop reported in USDA-NASS’s Grain Stocks and the forecast near-record new crop on the way, the United States has abundant supplies to meet rising global feed demand. For this year, at least, large early season sales bode well for another year of near-record exports.
U.S. DDGS, At A Glance
Corn use for fuel ethanol in the United States (Sep-Aug) has steadily inched up, resulting in greater volumes of Distiller's Dried Grains with Solubles (DDGS). Distillers grains are the primary coproducts from corn dry milling ethanol plants. DDGS are created after the starch portion of corn is fermented; alcohol is removed through a distillation process; and then dried, giving its name. This creates unique characteristics in which DDGS can be used as both a protein and energy ingredient in animal feed rations.
While much of production is used in the U.S. domestic market, roughly a quarter of production is consumed overseas, supported by growing feed demand in the global market. In recent years, DDGS use has increased exponentially in Mexico and Turkey, as well as the European Union, Vietnam, and South Korea. The right chart above shows the top DDGS importers and their total feed use growth. While total feed growth fluctuates by country, the share of DDGS in their feed mix remains robust. More importantly, the U.S. share of each DDGS import market, indicated by the red pie, accentuates the dominant position that the United States enjoys. This is due to the size of the dry milling ethanol industry, which results in an over 90 percent global market share. Despite heightened competition from other feed ingredients, 2017/18 U.S. DDGS exports were still up slightly compared to 2016/17.
For 2018/19, with another record crop projected, corn use for fuel ethanol production is forecast slightly up, at 2 percent. This will increase DDGS supplies, and potentially support DDGS exports as well.