Global Markets: Corn – Argentina Reverses Course on Suspension of Exports

Corn harvest. Photo: Texas A&M AgriLife

On December 30, 2020, the Argentina Ministry of Agriculture, Livestock, and Fisheries announced a temporary suspension of corn export registrations through February 28, 2021. Under the policy, corn could have been booked for export provided that the shipment date was on or after March 1, aligning with the start of its next marketing year.

The export restriction was intended to keep corn available in Argentina for animal protein production and help alleviate food price inflation. However, Confederaciones Rurales Argentinas, a group representing a large number of agricultural producers in Argentina, indicated that it had not been consulted about this decision and did not agree with the reasoning.

In its initial statement, the Ministry of Agriculture indicated its openness to reevaluating the decision based on market dynamics and production prospects for the new marketing year. As producers strongly believed there was sufficient corn to meet domestic needs even with continued exports, several growers’ associations planned a 72-hour strike to begin on January 11 unless the suspension was rescinded.

As a result of industry pressure and negotiations with government, also on January 11, the Ministry of Agriculture announced a 30,000-ton daily export quota for new sales shipping prior to February 28 in lieu of a total suspension, a policy change that reportedly remained unsatisfactory to producers.

Argentina is the third-largest global exporter of corn after the United States and Brazil. U.S. corn export prospects have been buoyed this year by strong demand from China concurrent with lower exportable supplies in Ukraine, a major global competitor. As a result, U.S. exports are forecast at a record high of 64.8 million tons.

Though a 2-month absence by another global competitor may have seemed like an additional opportunity for the United States, the effect on U.S. exports would likely have been muted. As January and February are the last 2 months of Argentina’s marketing year, corn exports tend to wind down seasonally relative to the rest of the year.

Moreover, historically during these months, Argentine corn largely heads to destinations where U.S. corn is not particularly competitive, such as Algeria and Southeast Asian markets.

Strong Corn Prices to Curb Import Growth Outside of China

Corn prices in exporting countries have gone up sharply from a year ago, initially impacted by smaller supplies in Ukraine and strong demand from China. Supply concerns in South America and rising soybean prices have further stimulated corn prices. Argentina’s short-lived action to suspend export registrations for old crop corn sales during January and February has further fueled prices.

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As of early January, exporters’ prices ranged between $240 and $260/ton per ton, the highest since the summer of 2013. U.S. corn No. 2 at Gulf FOB hovered around $225/ton.

While available supplies are smaller in Ukraine, the export season is winding down for Argentina and Brazil. Corn planting is underway in Argentina and Brazil. Until the South American crop comes onto the market, typically in May/June, corn prices are expected to remain elevated reflecting tight availabilities and demand in China.

Strong prices are expected to curb import demand as most countries are sensitive to feed costs. Import forecasts for many countries are trimmed from prior expectations. China imports, however, are raised reflecting stronger feed demand and rising domestic prices. In fact, the spread between China’s national average wholesale price and U.S. corn has widened throughout 2020.

In December, China corn prices reached $394/ton, almost twice as high as U.S. corn. As China continues to rebuild its swine sector, demand for competitively priced feedstuffs is likely to remain strong. China corn imports for 2020/21 (October-September) are currently forecast at 17.5 million tons, the second largest after the European Union.

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