Global Markets: Coarse Grains – U.S. Corn Exports to Peru Down Again

    U.S. exports of corn to Peru look poised to perform very similarly to last year, having lost substantial market share to Argentina in recent years despite trade advantages gained by the U.S.-Peru Trade Promotion Agreement (PTPA). The PTPA entered into force in 2009 and established a duty-free tariff rate quota (TRQ) for U.S. corn imports.

    The TRQ grew yearly and in-quota U.S. corn was excluded from a variable levy imposed under Peru’s price band system that is meant to support Peruvian producers when imports are priced lower than domestic corn. Non-U.S. origins still face this variable levy. This advantage helped the United States gain ground in Peru’s corn market and led to dominant market shares from 2013/14 through the first half of 2018/19.

    As most recently reported by FAS/Lima, higher global corn prices have reduced the variable levy on imported corn to zero. As a result, corn from the United States and Argentina, the other major supplier to Peru, have competed more directly on price.

    Despite U.S. corn entering Peru duty and quota-free from January 1, 2020 onwards, a period of Argentine prices being competitive with or cheaper than U.S. corn has led to an inversion in market shares; 2019/20 concluded with Argentina’s market share at over 80 percent.

    Export Sales Reports have shown no outstanding sales for U.S. corn since early April 2021, meaning Argentina has essentially maintained its market share for 2020/21 as well. The future of corn exports to Peru will depend not only on relative prices between U.S. and Argentine corn but also relative domestic corn prices and their influence on the variable levy.

    U.S. Corn Exports to Mexico Rebound in 2020/21

    Mexico is the third-largest destination for global corn imports. The country is also a major producer of corn. Local production is mostly white corn used for the food industry. With growth in the livestock sector (cattle, swine, and poultry), demand for imports (yellow corn) has expanded to satisfy the need for feedstuffs. Brazil has gained a foothold in recent years, although the United States remains the top supplier.

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    U.S. exports to Mexico for 2020/21 are estimated at 15.7 million tons, up 7 percent from a year ago, based on trade data from the U.S. Census Bureau and the September USDA Inspections report. The sizeable rebound could be attributed to reduced competition from Brazil and steady demand for feedstuffs.

    U.S. corn, although priced higher compared to Brazil in recent months, has competitive advantage in logistics. About 60 percent of U.S. corn exports to Mexico travel by truck and/or rail via entry points in Texas and, to a minor extent, in Arizona. U.S. shipments from the Gulf to the port of Veracruz take only a few days, compared to a week or longer from Brazil.

    For Brazil, exportable supplies of second-crop corn in the Center-West are substantially smaller this season, impacted by dryness over the past several months. Until next June/July when the new second-crop comes onto the market, the United States is essentially the only supplier to Mexico.

    Mexico had been the top destination until 2020, when China started buying U.S. corn. As of September 30, outstanding sales to Mexico for delivery before August 2022 stand at 5.1 million tons, up significantly from a year ago. Large early-season sales do not necessarily translate into large exports for the year, but tight exportable supplies out of Brazil should support U.S. export prospects for the months ahead.

    Turkey Accelerates Barley Imports Due to Drought

    Turkey’s state grain board (TMO) has been aggressively importing feed barley in the new marketing year (June-May) after severe droughts caused significant yield loss in the Southeast and Central Anatolia regions. Turkey’s barley fields are generally unirrigated, and yields are directly linked to rainfall. The crop conditions were poor enough that some farmers decided not to harvest their fields because of low yields.

    The two major sectors using barley in Turkey are the malting and beer industry, accounting for approximately 10 to 20 percent of total consumption, and the feed sector, which uses the vast majority of available barley supplies. Barley has traditionally been preferred as a feed grain in Turkey, especially for ruminants.

    Barley consumption for feed use is directly linked with price; however, the feed sector continues to grow, and, in turn, drives continued demand for barley. Imports are a regular part of the balance sheet when domestic production is forecast to fall to levels well below domestic industry demand.

    In the last several years, Turkey has struggled with food inflation not only in food staples like rice and bread, but also in popular livestock and poultry products with compound feed prices increasing as much as 58 percent for broiler feed in 2020.

    The surges in food prices can be attributed to insufficient domestic production due to drought, a serious increase in international commodity prices, and the Turkish Lira’s depreciation against other currencies. To curb increasing costs of importing feed barley, the Government of Turkey issued a presidential decree on September 8 to eliminate import tariffs on several pulses and grains, including barley, through the end of 2021.

    TMO has been active in the barley market with tenders and sales to stabilize the domestic barley price. To begin MY2021/22, TMO imported nearly 670,000 tons of barley from June through August with two issued tenders in June and July 2021, almost as much all of MY2020/21. The primary origins of those sales were Russia, Ukraine, and Romania. TMO also issued tenders for another 505,000 tons of barley in September for October delivery.

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