Coarse Grains. World Markets and Trade. August 2019 – USDA Aug. 13, 2019
OVERVIEW FOR 2019/20
Global corn production is forecast up with larger crops for Ukraine and the United States. Global trade is up from last month with larger imports for the European Union and Indonesia. On the exporter side, higher exports for Ukraine more than offset a reduction for Russia. The U.S. season-average farm price is down $0.10 to $3.60 per bushel.
OVERVIEW FOR 2018/19
Global corn production is up slightly this month driven by the European Union and Thailand. Global trade is up with larger exports for Argentina, Brazil, and the European Union more than offsetting reductions for Serbia, South Africa, and the United States. The U.S. season-average farm price is unchanged at $3.60 per bushel.
Another Record for Ukraine Corn Exports
Corn exports in Ukraine are projected at 30.0 million tons in 2019/20 on another record crop, exceeding the record of 29.5 million tons estimated for 2018/19. Ukraine has become an export-focused producer because domestic use of corn is somewhat limited. As production has tripled over the last decade, the percentage of its crop being exported has crested beyond 80 percent in the current year and is expected to remain high in the coming year. Ukraine’s geographic proximity to the European Union (EU) and the Middle East and favorable trade relations with China have made these markets principal destinations for corn exports. Ukraine also has advantages in these markets due to their preference for non-biotech corn.
Growth in corn production and exports has corresponded with a decline in other coarse grains alongside improvements to export capacity. The 2019/20 crops for rye and oats are projected to be the smallest and second-smallest, respectively, in Ukraine’s history. Barley has seen more fluctuations in production, but it has not seen the level of growth evident in corn. The world’s importers have benefited from this shift, as a glut of supplies in export-driven Ukraine has resulted in competitively-priced corn. The European Union in particular has been a beneficiary, as large purchases of Ukrainian corn finally propelled it to become the world’s biggest importer in 2017/18 and is projected to retain this title through 2019/20. Favorable reports of crop prospects have had a sharp effect on Black Sea-origin corn prices; please refer to the Coarse Grains section of this circular for the price graph. Though 2019/20 EU wheat and barley crops are projected to recover relative to a year ago, it remains to be seen how much European buyers can resist the temptation of plentiful, inexpensive Ukrainian corn in the coming year.
China’s Total Corn Consumption to Rise
For 2019/20, China’s total consumption is forecast to rise, driven by larger use for food, seed, industrial (FSI). FSI accounts for about a third of overall corn use, while feed and residual use accounts for the rest. Feed and residual use is currently forecast to decline largely due to the impact of African Swine Fever (ASF) and nearly flat protein meal consumption growth. Since the first report of ASF in August 2018, the disease has been detected in nearly all provinces in the country. Challenges containing and eradicating the disease have dampened demand for feed, although the growth in poultry production is expected to mitigate some of the decline in corn demand. In contrast, FSI use is expected to rise, stimulated by industrial processing.
Since auctioning corn from the reserves began in 2016, the central and provincial governments have encouraged the corn processing industry with various support schemes, including discounted sales and transportation subsidies, as well as refunds of value-added taxes based on throughput. Public information on processing is sparse; however, higher exports of corn-based industrial products suggest that a greater volume of corn has been used in processing compared to a year ago. The goal for blending fuel ethanol with transportation gasoline has also contributed to the growth. Robust demand for industrial processing could explain why domestic corn prices have remained elevated, despite the pressure of ASF on feed demand.