Coarse Grains. World Markets and Trade. July 2020 – USDA July 11, 2020
OVERVIEW FOR 2020/21
Global corn production is forecast down, driven by a substantive cut to the U.S. crop; larger crops in Bolivia and Russia offset a reduction in Canada. Global trade is up from last month with higher imports for Algeria and Canada, while exports are little changed overall. Smaller exports for the European Union are nearly offset with a larger volume for Burma. The U.S. season-average farm price is up 15 cents to $3.35 per bushel.
OVERVIEW FOR 2019/20
Global corn production is little changed overall as a larger crop in Bolivia mostly offsets a reduction in the Philippines. Global trade is down slightly from last month as lower imports for Kenya, Mexico, and Turkey more than offset increases to Egypt and Algeria. Despite offsetting changes for major exporters Argentina and Brazil, global exports are up due to Burma and the European Union. The U.S. season-average farm price remains at $3.60 per bushel.
Global: Since the June WASDE, U.S. bids are up $14/ton to $171 supported by larger-than-anticipated corn area cuts in the June 30 NASS Acreage report and continued weather uncertainty. South American bids responded to the U.S. crop size change by also strengthening at the end of June, with Argentine bids up $7/ton to $155 and Brazilian bids up $6/ton to $166. Black Sea bids are little changed, ending $2/ton higher at $183.
Corn Prices in China Run High
Ongoing recovery in feed use combined with tighter-than-anticipated stocks in China’s temporary reserves have driven the national average corn price to its highest level since March 2018. Trade sources reported that weekly auctions by the government resulted in substantial sales of corn since they started in May. Nevertheless, domestic prices are headed upward.
As the country rebuilds its hog sector from the outbreaks of African Swine Fever (ASF) at a fasterthan-anticipated pace, feed demand has been robust in both grain-surplus regions in the North and grain-deficit regions in the South. The use of protein meals (soybean meal equivalent) has also grown relative to prior expectations. According to the Chinese Academy of Agricultural Science, hog production is estimated to recover more than 80 percent of its pre-ASF level by the end of 2020.
Trade sources reported that corn auctions from temporary reserves have been well subscribed and nearly all volumes offered at each auction have been sold. In May, the average sales price was roughly $250 per ton, but by June, the average price had gone up to $270 per ton. In addition, worries that temporary reserves are running out and expectations that no other reserves will be opened for auction (e.g. non-temporary central, provincial, and county reserves) are apparently leading to higher demand, driving feed mills and processors to look for alternatives.
This could partly explain strong imports of feed grains for the October-May period. Combined imports of corn and sorghum are up sharply from a year ago, more than offsetting smaller imports for barley. This may also reflect implementation of the U.S.-China Phase One Agreement. Regardless, demand for competitively priced feed grains runs strong as China’s corn harvest is still a few months away. Simple economics says that China should expand purchases of global corn and other feedstuffs that are priced much lower than domestic corn to mitigate the burden on feed mills and processors in the domestic market. However, options are limited due to tariff-rate quota in corn imports, anti-dumping duties on U.S. distillers’ dried grains with solubles (DDGS) and Australian barley, and a decline in U.S. sorghum acres relative to planting intentions.