OVERVIEW FOR 2019/20

Global corn production is forecast down slightly with smaller crops for Egypt and the United States more than offsetting an increase in Russia. Global trade is down from last month, with lower imports for Saudi Arabia and Mexico. U.S. exports are slashed this month on tight supplies. The U.S. season-average farm price is up $0.20 to $3.80 per bushel.

OVERVIEW FOR 2018/19

Global corn production is up this month driven by Mexico. Global trade is down slightly with lower imports for Saudi Arabia, Cuba, and Venezuela more than offsetting higher imports for the European Union and Turkey. For exports, Ukraine is up, reflecting substantial shipments in July. U.S. exports are cut based on sales and shipments observed through September. The U.S. season-average farm price is estimated at $3.61 per bushel.

CORN PRICES

Global: Since the September WASDE, major exporters’ bids have recovered, reflecting developments in the United States. U.S. bids have increased $12/ton to $168 reflecting unfavorable weather during the early harvest period. All major bids reacted to the September 30 NASS Grain Stocks report showing smaller-than-expected U.S. stocks. Argentine bids are up $12/ton to $152 and Brazilian bids have climbed $17/ton to $168. Black Sea bids are up $9/ton to $164.

Pet Food Sees Value Growth Despite Smaller Volumes

The value of U.S. dog and cat food (HS code 230910) exports reached nearly $1.5 billion in CY 2018. CY 2019 year-to-date export values through August are 10 percent higher than the same period in 2018. This puts dog and cat food exports on par with hay exports in terms of value and eclipses any other prepared animal feeds. Canada is the primary market for U.S. dog and cat food exports, representing nearly half of the 700,000 metric tons exported in 2018; Japan and Mexico are distantly second and third. The expansion in export values has occurred despite a contraction in volume about a decade ago (roughly corresponding with the global economic downturn), which means that the unit value of pet food exports has increased steadily over this time period. One contributor to this trend could be the growth of “super-premium” products, specifically tailored for a pet’s lifecycle stage or catering to functional and therapeutic needs.

Similar to feed for livestock, grains have served as an energy source in dog and cat food. Recently, however, there has been increased attention towards “paleo” or “ancestral” diets for pets, which are high-protein, meat-based diets. These pet foods include more animal-origin ingredients and specifically tout the exclusion of grains or gluten. As pet ownership expands, particularly in higher income households, more consumer spending can be directed to these super-premium products, potentially driving export growth in developed markets like Canada and Japan. In conjunction, economic development in Latin America and Asia will increase disposable incomes, marking an opportunity for growth in exports of standard, grain-containing dog and cat food to these regions as well.

Brazil’s Corn Exports to Thrive

Abundant supplies and competitive prices combined with strong foreign demand have sharply boosted Brazil’s corn exports in 2018/19 (October-September) which completed the year with a new record of 39.0 million tons, well above the previous record of 35.4 million tons in 2015/16. Large supplies from the second crop (safrinha), which typically comes onto the market in August, have greatly boosted exports. Meanwhile, crop uncertainty since May supported strong prices for U.S. corn and lowered U.S. competitiveness to Brazil’s benefit. While Brazil’s exports to all destinations have expanded this year, exports to traditional U.S. markets such as Mexico and Colombia have grown noticeably.

Prospects for Brazil’s corn exports remain bright. The country has ample supplies as production has grown faster than domestic use. The relatively weak real could boost competitiveness of its corn and encourage producer selling. Export terminals along the Amazon river and its tributaries (known as the Northern Arc) have expanded, shortening travel distance and lowering costs from farms in the Center-West to ports. In recent years, corn exports via ports along the river have increased, accounting for a third of exports. In the coming year, tight exportable supplies in the United States could again strengthen Brazil’s exports.