OVERVIEW FOR 2020/21

Global corn production is forecast up with larger crops in Brazil, Nicaragua, and Zambia more than offsetting a reduction for Vietnam. Global trade is up marginally from last month with higher imports for Thailand, Honduras, and Belarus. Exports for Zambia and Moldova are up marginally as well. The U.S. season-average farm price remains at $3.20 per bushel.

OVERVIEW FOR 2019/20

Global corn production is little changed overall as larger crops in India and South Africa mostly offset a smaller crop in Paraguay. Global trade is up slightly from last month as higher imports for Thailand, Honduras, and Venezuela more than offset a reduction for Iran. Exports are nearly unchanged with offsetting changes for Argentina and Brazil. The U.S. season-average farm price remains at $3.60 per bushel.

CORN PRICES

Global: Since the May WASDE, U.S. bids have strengthened by $12/ton to $157. An improved outlook for fuel ethanol has boosted prospects in the domestic market, while the weakening of the dollar has supported competitiveness overseas. Argentine bids are unchanged at $148/ton on harvest pressure and Black Sea bids are up $11/ton to $181 reflecting continued strong demand amid tight old-crop supplies. Brazilian bids are up $9/ton to $160 reflecting dryness in southern states.

EU Corn Exports to Reach Historic Record

While the EU (EU27 and UK) is a large corn importer, it also maintains its position in the world as a top corn exporter. With abundant supplies and strong foreign demand, EU corn exports in 2019/20 are expected to reach a recent historic high. Romania and France are the largest corn producers and exporters in the EU, each accounting for 21 percent of total EU exports. Romanian and French corn supplies have expanded supported by yield growth and a shift in area from rapeseed into corn and wheat. While domestic supply for both wheat and coarse grains has normally been abundant, exports are a key component of the balance sheet, particularly for trade to the Middle East and North Africa (MENA) regions. Turkey leads as the top EU corn export destination at 25 percent, followed by other MENA countries such as Egypt and Lebanon, as well as more distant destinations such as South Korea. Destinations have remained relatively consistent over the past 2 decades, but the amount exported to the top ten countries has grown dramatically.

In the past year, Turkish demand for EU corn has increased 139 percent due to the presidential decree to fight food inflation. Since January 16, 2019, the Turkish Grain Board (TMO) has been actively purchasing large amounts of grain – wheat, barley, corn, rice – and pulses at zero duty in order to tame prices in the domestic market. This authorization of purchases for bulk commodities has continually increased, helping support EU corn exports at a record forecast of 4.5 million tons.

The increase in exports to other MENA countries (such as Egypt and Lebanon) stems from the need to supplement the MENA region’s domestic production. MENA countries have looked to the EU due to geographic proximity and logistics, which makes shipping cheaper and the availability to buy smaller, individual loads helpful for port logistics. Countries outside of the region may continue to purchase EU corn based on buyer preference, or for factors such as country regulations on non-genetically engineered (GE) products.

EU corn exports account for a small share to its production and a far smaller share compared to major global exporters. However, it has secured a niche market in the Middle East and North Africa. While the EU forecast for corn exports is a record 4.5 million tons in 2019/20, the 2020/21 forecast is down only slightly and is expected to continue primarily exporting to the MENA region.

China’s Anti-Dumping Duties Rattle Australian Barley

On May 18, 2020, China imposed anti-dumping and countervailing duties totaling 80.5 percent on Australian barley following the conclusion of an 18-month long investigation. The duties are expected to remain in place for 5 years. China is the world’s second-largest importer of barley after Saudi Arabia and Australia has been its primary supplier for both malting and non-malting purposes. These tariffs come at a particularly inopportune time by contracting export demand as Australia’s barley crop is set to recover by 1.2 million tons in 2020/21 after several years of drought. Moreover, the recent rainfall has also improved pasture conditions, a boon to livestock producers. Despite all of this, there are a few factors that could alleviate some concern for barley growers.

Export bids for feed quality barley have eased since the announcement of the duties which could spur additional volume to Southeast Asia. Thailand in particular has grown its appetite for Australian barley in the last 2 years. Domestically, the feed quality barley-wheat price differential could shift feedlot grain usage further towards barley. While the number of cattle on feed has declined since the December 2019 historical peak, the Australian Lot Feeders’ Association estimates that just under 1.1 million cattle were on feed in the first quarter of 2020, so feedlot demand is still fairly healthy. Finally, some malting quality barley that would have otherwise been shipped to China as grain could be malted domestically and then exported. In CY 2019, Australia exported a historical high of 726,000 tons of malt (HS 1107). Though a negligible amount is destined for China, demand for Australian malt remains robust in the rest of East and Southeast Asia.

The Australian government and industry are considering a World Trade Organization challenge, but such a case would take years before a ruling is issued. In the absence of a bilateral resolution to the tariffs, Australian barley growers who have come to depend on China’s reliable buying are likely to face a patch of uncertainty in the months to come.