Coarse Grains. World Markets and Trade. December 2019 – USDA Dec. 11, 2019
OVERVIEW FOR 2019/20
Global corn production is forecast up with larger crops in China and Bolivia more than offsetting declines in Australia and Canada. Global trade is up from last month with higher imports for Taiwan and Brazil. Exports for Brazil and Paraguay are up but down for Canada, Mexico, and Laos. The U.S. season-average farm price is unchanged at $3.85 per bushel.
Global: Since the November WASDE, major exporters’ bids (aside from Brazil) have seen convergence. U.S. bids have eased $4/ton to $170 reflecting weak demand. This is the first time since March 2019 that U.S. bids have seen sustained price competitiveness against Brazilian bids, which are up $5/ton to $177 on tight nearby stocks and strong foreign demand. Argentine bids are up $5/ton to $170 under increased short-term demand ahead of possible export policy changes. Black Sea bids have moved up $3/ton to $169.
Corn: A Banner Year for Brazil
Brazil’s corn exports have been massive this year. The marketing year (MY) 2018/19 for Brazil is from March 2019 to February 2020. Thus, corn shipments for the March-November 2019 period are accounted for 2018/19 MY exports. Cumulative exports from March to November totaled 33.3 million tons, more than doubling the amount for the average of 3 previous years. Export destinations have not been limited to traditional markets of Iran, Vietnam, and Egypt, but also expanded to Japan, the EU, and South Korea.
While robust foreign demand, abundant supplies, and competitive prices have boosted exports, the depreciation of the real has further stimulated sales to the global market. Since April 2018, the value of the real has dropped about 20 percent against the dollar.
Strong exports have drawn down stocks. Currently, ending stocks for the marketing year 2018/19 are expected at 5.0 million tons, the smallest since 2011/12. This would give little buffer to meet domestic needs in case of adverse events and constrain later sales. Moreover, prices have moved up reflecting the market situation. In Mato Grosso, the top-producing state, corn prices are about 50 percent higher at the end of November than a year ago. These strong prices are expected to boost area for the second-crop (safrinha) corn. The second-crop corn planting starts in January in the Center-West.
Global import demand remains solid, while uncertainty continues for a few exporting countries. With a newly-elected government in Argentina, speculation is rampant over potential export policy changes. Unfavorable weather conditions in the United States disrupted planting and now harvest, though prices are becoming competitive. Prospects for Brazil’s corn appear bright in the short term, as evidenced by USDA’s forecast for record exports.
Vietnam Corn Imports Remain Strong Despite African Swine Fever
According to Vietnam Customs statistics, corn imports marketing-year-to-date in 2019/20 are the highest in history. Despite the confirmation of African Swine Fever (ASF) in the country in February 2019, corn imports have not slowed at all. In fact, monthly corn imports in September and October 2019 were the highest and second-highest, respectively, of all time. To put the volume in perspective further, the 1.66 million tons imported in September exceeds each full marketing year total for 2009/10 through 2011/12.
Based on this data, it is clear that substantial amounts of corn continue to enter Vietnam. The natural follow up question is “how is it being used?”. Though Vietnam does not publish any corn export data, market intelligence suggests that exports are not a major driver of the balance sheet. Seismic shifts in food, seed, and industrial use have not been reported either. Furthermore, the climate of Vietnam makes long-term storage of these high volumes of corn an unlikely possibility. As a result, it stands to reason that feed and residual will be the line item most likely to see continued growth.
Nearly 6 million pigs have been culled since the first confirmed ASF outbreak according to data reported to Organisation Mondiale de la Santé Animale (OIE). For context, as of 2018 (the latest year of data availability), there were 28.2 million hogs in the herd. Though ASF has undoubtedly had a significant impact on the swine herd, other animal proteins are expected to see growth. USDA forecasts production growth of beef and chicken meat in Vietnam at 3 percent and 5 percent respectively. Moreover, FAO data on aquaculture shows that aquaculture production has increased year-over-year from 1996 to 2017, reaching 3.8 million tons. Pork may be an important driver of feed demand, but there are plenty of other mouths to feed and, evidently, plenty of corn being imported to feed them.