Coarse Grains. World Markets and Trade. November 2019 – USDA Nov. 9, 2019
OVERVIEW FOR 2019/20
Global corn production is forecast down slightly with smaller crops for Mexico, Ukraine, and the United States more than offsetting gains for several African countries, Russia, and Turkey. Global trade is up from last month with higher imports for Colombia, Japan, South Korea, and Vietnam. Exports for Brazil and Russia are up, but down for the United States this month on slow early season sales and shipments. The U.S. season-average farm price is up $0.05 to $3.85 per bushel.
Global: Since the October WASDE, major exporters’ bids (aside from Argentina) are little changed. U.S. bids have grown $6/ton to $174 reflecting continued supply uncertainty from harvest weather. Argentine bids are up $13/ton to $165 on speculation about potential policy changes under the newly elected government. Brazilian bids are up $4/ton to $172 supported by strong foreign demand. Black Sea bids hopped $2/ton to $166.
Feed Barley’s Price Gap With Corn Shrinks Dramatically
World barley production in 2019/20 is projected to be the highest since 1994/1995. As a result, exportable supplies of barley are plentiful across the globe. USDA forecasts world exports of barley in 2019/20 at 28.0 million tons, a 9 percent increase over last year and the third-highest on record. The world’s major exporters of barley (Argentina, Australia, the European Union, Russia, and Ukraine) comprise 83 percent of this trade. As supply has expanded, barley is also seeing weaker global demand in the shorter term. Barley trade to both China and Saudi Arabia – the world’s top two importers – is down relative to the combined high of 18.1 million tons in 2014/15.
Ample supply and flagging demand from major buyers have had a collective weakening effect on feed barley prices. The major barley exporters’ bids have been averaged and compared to average corn bids for analytical purposes in the chart above. In the past year, the price gap between barley and corn has narrowed from over $80/ton in September 2018 to nearly $20/ton by October 2019. Corn has seen its own price effects, driven by market uncertainty over U.S. crop size and weather premiums between May and August. The two grains nearly reached price parity in July but recovering market sentiments eased corn back down in the following months. In a world where exporters are seemingly fighting tooth and nail to get their corn into the hands of global customers, barley traders may continue to have difficulty finding alternative markets despite the increasing competitiveness and abundant availability of feed barley.
China’s Exports for Corn Starch and Starch Residues are Robust
China has again become a leading exporter of corn starch. The growth has coincided with its policy changes – the removal of support prices and adoption of measures to boost corn use. China has ample wet-milling capacity established years ago when the government singled out corn processing as a key industry and stressed developments of value-added supply chains. Supports from the central and provincial governments in the form of discounted sales, subsidies on transportation, and VAT refunds have encouraged processing of corn. Likewise, exports of starch residues (HS 230310, residues of starch, which include corn gluten meal, corn gluten feed, and other residues) have also grown, and China has become the second-largest supplier after the United States. Corn starch is widely used for food manufacturing, textiles, and numerous industrial purposes. Residues of starch have relatively high protein contents, thus are used as a protein source in feed rations as well as in pet foods.
Major destinations for China’s exports have been neighboring countries. For corn starch, Indonesia, Malaysia, the Philippines, and Vietnam have been the leading markets. For residues of starch, virtually all exports have been destined to just three countries - South Korea, Vietnam, and Japan.
China’s corn exports have not been competitive over a decade because domestic prices have remained higher than world levels. However, China is well positioned for exports of the highvalue corn-based products with surplus corn, ample processing capacity, supportive policies, and nearby markets that have growing demand.