Global Markets: Grains – Record Corn, Wheat, and Rice Crops Build Stocks in 2020/21

Global corn production in 2020/ 21 is projected up, primarily driven by a recovery in area for the United States. For major exporters, the United States, Brazil, and Ukraine are all projected to have record crops while Argentina has another near-record crop. Global production is forecast to exceed consumption for the first time in 4 years.

Both feed and non-feed use are expected to grow under exceptionally low prices, spurring expansion in global trade. Ending stocks are projected up as the United States is set to have the highest ending stocks since 1987/88, offsetting a decline in China.

For 2020/21, global wheat production is forecast up with larger crops in most major exporting countries. Production for Argentina, Australia, Canada, Kazakhstan, and Russia is forecast higher than the previous year. Overall consumption is up with larger Food, Seed, and Industrial (FSI) use more than offsetting reduced feed and residual use.

Food consumption continues to rise due to population growth and changing diets, especially in developing regions of Asia. Feed use is expected lower this year as wheat prices are expected to be less competitive with corn. Consumption, production, trade, and stocks are all forecast to reach records. China is still expected to represent more than half of global wheat stocks.

For 2020/21, global rice production is forecast up with larger crops in China, Southeast Asia, and the United States. Global consumption is also forecast to rise, particularly in China, India, and Sub-Saharan Africa. Global trade is forecast up at the third largest volume. The Philippines will be the top importer, driven by lower domestic production.

Global stocks are also forecast to rise to record levels, driven primarily by continued expansion in India’s government-held stocks. The country now accounts for more than one-fifth of global stocks, while China still holds the majority.

Impacts of COVID-19 on Wheat Consumption and Trade

COVID-19 has had a significant impact on the global economy with varying effects on wheat consumption and trade trends that differ based on each country’s culture, economic development, and consumption patterns. These impacts are taken into consideration in the global wheat projections. However, the exact impact of the pandemic is still unclear since its duration and effects on the global economy remain uncertain.

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At the micro level, the pandemic has created a consumption shift with reduced commercial demand in restaurants and hotels as a result of social distancing practices and limited travel. On the other hand, retail demand has increased with a shift from dining out to home-prepared meals. Globally, some producing countries are showing stronger demand for wheat products as consumers revert to bread and pasta as key staples.

Alternatively, demand in other importing countries is negatively impacted by economic slowdowns resulting from reduced tourism or a shift to other staples such as rice. The change in consumption demand has, in turn, affected trade dynamics. Some producing countries, concerned with domestic food security, have imposed temporary export restrictions on staple foods, but the policies have not yet had a dramatic impact overall.

Wheat is a versatile and inelastic staple food that is widely consumed globally. While trends have varied by country, USDA data currently shows that the COVID-19 impact on overall global consumption of wheat for food use has been minimal to date.

Global Coarse Grains Imports Push Higher Yet Again

China corn is projected to rise to its tariffrate quota level on expectations for competitively priced feedstuffs. Domestic corn prices in southern China have remained elevated, while prices at world levels have plunged in response to falling U.S. demand amid COVID-19 and supply pressure. Sorghum imports are projected to rise sharply. In March 2020, China waived its retaliatory tariffs on U.S. sorghum.

The tariff waiver is valid for a year, which goes well into 2020/21. With larger inflows of corn and sorghum, barley imports are projected to fall moderately. Combined, feed grain imports are projected to expand to the largest level since 2014/15.

Corn in the rest of East Asia (South Korea, Japan, and Taiwan) will see small increases as overall feed demand is expected to experience limited growth. Feed and FSI consumption will be flat in Japan. While corn imports and feeding will grow in South Korea, it will primarily offset lower wheat feeding. Feed demand in Taiwan, despite growing year-to-year, reflects only an anticipated return to its pre-COVID-19 levels.

European Union corn is expected up 1.5 million tons to 23.0 million to partly offset reduced supplies of feed-quality wheat. Wheat has been a major grain used for feed; however, in the past few years, corn use has outpaced wheat due mainly to prices. With abundant supplies in the global market, corn is expected to be price-competitive relative to wheat. Feed demand in the EU is expected to strengthen, driven by the swine sector with prospects for meat exports to China. FSI corn use will see modest gains in biofuels, starch, and other industrial products.

Mexico corn is projected up 1.0 million tons to a record 18.3 million on growing feed demand for the poultry, swine, and cattle sectors. The country predominantly produces white corn, which is mainly used for food and exports, while importing yellow corn for feed use. Mexico sorghum imports are expected to decline on expectations that importers shift to corn. With abundance, corn is pricecompetitive relative to other grains.

Of the North African countries, Egypt corn is forecast to reach a new high on expectations of stronger demand for feed primarily in the poultry sector. The sector continues to expand and modernize for efficient feed use. Corn is the key ingredient used in poultry feed. Similarly, Morocco corn is up on expectations of strong demand for competitively priced feedstuffs. The barley crop, the key feed grain grown in the country, is forecast to be the lowest since 2016/17 due to the lack of rains during the growing season (January-April) this year. With a projected smaller crop, barley imports are projected to rise.

For selected countries in the Middle East, Iran corn is expected to rise to a new high supported by growing feed use. The country has been a key destination for corn from Brazil, Russia, and Ukraine. Saudi Arabia barley declines slightly from a year earlier as the country continues to modernize its feed sector by shifting to corn-based manufactured feed. Consequently, imports of corn are projected higher. Imported barley and corn substitute for forages in feed rations, as the country limits production of forage crops due to concerns over water availability. Turkey corn and barley decline with projected record domestic production. Abundant supplies are expected to tame domestic prices and lessen the needs for imports.

U.S. corn is up on expectations of improved competitiveness supported by a record crop, if realized. Sorghum is forecast to rise sharply with improved prospects to China.

Argentina corn declines on expectations of stronger competition from nearby exporters, namely Ukraine, in the Middle East and North Africa. Barley is projected down on smaller exportable supplies.

Brazil corn remains at the same level as a year earlier. Although production is projected at a record, smaller carryin stocks and stronger feed use limit exports. Imports rise on expectations of strong demand in southern states where swine and poultry production are concentrated and feed grain supplies are limited. For these southern states, importing corn from neighboring Paraguay and Argentina has been more cost-efficient than trucking from the Center-West.

Ukraine corn is up 1.0 million tons to 33.0 million under expectations of a truly record crop size; if realized, 2020/21 production will be up nearly 9 percent over the previous year. Comparatively small domestic use relative to production will spur corn exports.

European Union corn is projected down 100,000 tons to 4.4 million reflecting large domestic production and competitively priced corn. Barley is forecast down 600,000 tons due to reduced supply, returning to the level seen in MY 2017/18.

As Canada remains a steady market for two-way trade with the United States, its trade fluctuates only slightly year-to-year. Strong ties to the United States reflect its continued trade relationship as a net exporter of rye, oats, and barley. Canada will continue to export corn supplies produced in Ontario and Quebec while continuing to import feedstuffs for livestock produced in the Prairies.

For MY 2020/21, slight variations of trade are reflected in an increase of 30,000 tons of rye exports, 100,000 tons of corn imports, and a decrease of 100,000 tons of corn exports (due to the abundant supply of competitively priced U.S. corn). Nearly all barley, oats, corn, and sorghum imports come from the United States because of its border proximity and the North American Free Trade Agreement (NAFTA).

On July 1, 2020, Canada will enter into the United States—Mexico—Canada Agreement (USMCA) which will replace NAFTA. Similar to NAFTA, USMCA will continue to have zero tariffs allowing market access opportunities and continued free trade of rye, oats, barley, sorghum, and corn.

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