Coarse Grains. World Markets and Trade. December 2018 – USDA Dec. 11, 2018
OVERVIEW FOR 2018/19
Global corn production is up marginally this month as larger crops for the European Union and Ukraine more than offset reductions for Canada and South Africa. Global trade is larger, driven by greater imports for Canada, Colombia, Japan, and Vietnam. Exports are higher for Brazil and Ukraine. The U.S. season-average farm price is unchanged at $3.60 per bushel.
Global: Corn prices have trended up since the previous WASDE on strong global demand. Argentina bids were up $5/ton to $167, and Brazil bids jumped $10/ton at $178 reflecting stronger domestic prices. Black Sea bids are unchanged at $166, despite strong European Union demand, reflecting ample new-crop supplies in the region. U.S. bids rose steadily by $5/ton to $170 on strong foreign demand.
China’s Exports of Corn-based Products Rise
China and the United States have been top exporters of corn-based products (Lysine and glutamic acid includes HS 292241 and 292242; Citric acid are HS 291814 and 291815; Sweeteners include HS170230, 170260, and 170290; Residue of starch is HS 230310; and Corn starch is HS 110812). In 2017/18 China’s exports of these products have grown nearing 5 million tons, roughly equivalent to 10-15 million tons of unprocessed grain corn. South Korea, Indonesia, the Philippines, Malaysia, and the European Union have been top destinations for these products. While China is not competitive on corn exports due to higher domestic prices relative to world levels, it appears that the country is competitive in the corn-based product market.
China already has ample wet milling (so-called “deep processing”) capacity established years ago when the government singled out corn processing as a key industry and stressed developments of value-added supply chains. Similarly, there have been support programs that include subsidies for purchasing corn aimed at industrial processors and support in the form of refunds of value-added tax for exports of corn-based products. Moreover, because of limited competition in global trade of corn-based products, China benefits from proximity to its key markets.
For the United States, corn-based products are exported mainly to Canada, Mexico, and other countries in the Western Hemisphere.
U.S. Corn Exports to East Asia Surge in 1st Quarter
According to the USDA Foreign Agricultural Service Export Sales Reporting data, early-season shipments of corn to East Asia (Japan, South Korea, and Taiwan) have been exceptional, supporting a strong start to the marketing year. The latest information shows that accumulated shipments this marketing year have reached nearly 16 million tons, near-doubling that of a comparable time from a year ago. Among these exports, shipments to East Asian destinations account for almost 5 million tons, which is 30 percent of all exports from August to the end of November. In contrast, last year’s accumulated exports to East Asian buyers at Week 13 of MY2017/18 was 1.3 million tons.
The main reason for this increase is the competitiveness of corn. First, the global availability of corn, boosted by record crops, has increased its overall competitiveness. Corn demand as feed, over other feed grains such as wheat and barley, has grown globally including East Asia. Second, unlike last year, U.S. corn is competitive compared to Brazil, which is a key supplier in East Asian markets. A smaller-than-expected corn crop, combined with logistical challenges stemming from soybean exports to China dominating ports, has made seasonal corn shipments from Brazil to key markets uncharacteristically slow. Third, on the domestic side, U.S. soybean exports from the Pacific Northwest to China have been minimal this year and are opening opportunities for corn exporters looking across the Pacific. Because of these factors, first quarter corn exports to East Asia are boosted nearly four times to what they were in 2017.
Total commitments are ahead-of-pace with strong shipments. However, the pace of outstanding sales has been slower than a year ago, reflecting rebounding competition from South America, and record supplies in Ukraine. Regardless, a strong first quarter performance bodes well for U.S. corn exporters.