Coarse Grains. World Markets and Trade. January 2020 – USDA Jan. 11, 2020
OVERVIEW FOR 2019/20
Global corn production is forecast up with larger crops in Bangladesh, the European Union, Russia, and the United States. Global trade is down marginally from last month with lower imports for Bangladesh. Lower exports for the United States more than offset higher exports for Brazil, the European Union, and Ukraine. The U.S. season-average farm price is unchanged at $3.85 per bushel.
Global: Since the December WASDE, the convergence of major exporters’ export bids has continued except for Brazil, where quotes are unavailable seasonally. Argentine bids are up $6/ton to $176 and Black Sea bids are up $7/ton to $176 as well. U.S. bids are up $5/ton to $175. While overall prices are little changed since last month, prices have been climbing steadily for 4 months, reflecting hopes of the U.S.-China Phase One agreement.
Kazakhstan Barley Exports Grow to Meet Iranian Demand
Kazakh exports of barley have grown significantly over the past decade to meet demand from Iran, its primary customer. Since 2010/11, at least half of Kazakhstan’s barley exports have been destined for Iran, reaching a decadal high of 94 percent of total exports (for a volume of 1.3 million tons) in 2017/18. Despite this growth, Kazakhstan remains the smallest of the major players in the world’s barley export market, ranking seventh globally for most of the decade. The European Union and Russia are forecast to be the largest exporters of barley in 2019/20, with export volumes totaling two to three times that of Kazakhstan.
As Kazakhstan’s exports have grown, Iran’s balance sheet also shows corresponding growth in barley imports over the same time period. The growth in imports has fueled expansion of Iran’s barley feed use. The current forecast for Kazakhstan’s 2019/20 barley exports is the highest to date at 1.8 million tons. Although Iran also imports large amounts of barley from Russia and the European Union, in all likelihood, Iran will continue to import a substantial percentage from Kazakhstan.
Corn Trade Expands Over the Decade
Corn is the primary feed grain used as an energy source in livestock and poultry sectors. Grown widely and with relative abundance, corn is typically less expensive on an energy-equivalent basis compared to other feed grains such as barley, sorghum, oats, and feed-quality wheat. Corn use has steadily grown as demand for competitively-priced feedstuffs has expanded around the world. In response to strong import demand, corn trade has nearly doubled over the past decade. Although the United States has maintained its place as the largest supplier, exports from Argentina, Brazil, and Ukraine have expanded, accounting for most of the growth.
Argentina’s exports grew after the elimination of export taxes and permits in December 2015 (During 2007-2015, corn exports were subject to a 20 percent tax and permits (also known as quotas)). The impact of the export tax introduced in September 2018 was minimal (In September 2018, the then-government introduced the export tax at 4 pesos per U.S. dollar. The tax was assessed on the value of exports in U.S. dollars, but paid in pesos. The effective tax rate declined from about 10 percent in September 2018 to about 7 percent in November 2019). Shortly after taking office in December 2019, the new government changed the export tax to a fixed 12 percent rate on the peso value. The announced tax increase could impact export prospects. Major destinations have been countries in North Africa, mainly Algeria and Morocco, and in Southeast Asia, largely Vietnam and Malaysia.
Brazil has emerged as a competitive supplier with expansion of the second-crop corn (safrinha), which comes onto the market coinciding with the U.S. shipping season. The first crop corn, planted in Sep/Oct for harvest in Feb/Apr, is mostly used in the domestic market because it is grown in the south where animal production (swine and poultry) is concentrated. The second-crop corn, planted in Jan/Feb for harvest in Jul/Aug. Much of Brazil’s second-crop corn has been destined to overseas markets, even though feed demand and ethanol use have grown in the domestic market. Top destinations by volume have been Iran, the European Union, Egypt, Japan, Vietnam, Malaysia, Taiwan, and South Korea.
Ukraine has expanded its production and exports benefitting from preferential access to China and the European Union since 2013/14. Continued expansion in port capacity, proximity to key markets in the Middle East and North Africa, and a biotech-free reputation have contributed to the growth in exports over the period, as has declining domestic use.
In comparison, the gains for the United States have been mixed. Exports declined during the early decade hindered by tight supplies and a simultaneous explosion in fuel ethanol production. With large crops after the drought in 2012/13, the United States regained its competitiveness and expanded exports setting a record in 2017/18 amid tighter supplies of other feed grains in the world. Countries in the Western Hemisphere have been key destinations for U.S. corn, supported by preferential agreements and transportation advantages. Exports to other destinations, however, have faced strong competition from other suppliers.
For 2019/20, global exports are currently forecast at 172 million tons, marginally higher than the previous year. Many importing countries have shifted their purchases to Argentina, Brazil, and Ukraine where exportable supplies have been abundant. Meanwhile, the pace of U.S. corn sales and shipments have been slow and the smallest since 2012/13. Moreover, cash bids in the U.S. interior have been higher than a year ago and relatively stronger than Gulf exports bids, implying strong demand and/or limited supply in many areas. This also indicates uninspiring exports in coming months.