Global Markets: Coarse Grains – Corn Prices Reach Record Highs

    Corn harvest. Photo: Texas A&M AgriLife

    Per International Grains Council (IGC) data going back over 20 years, the corn price has reached $350/ton for the first time for a major exporter (the United States). Bids for all major exporters notched record highs in early March. Along with some other agricultural and non-agricultural commodities, corn has seen a sharp jump in prices coinciding with the beginning of Russia’s military action in Ukraine.

    The associated disruptions of both port activity and commercial shipping have essentially halted corn supplies from Ukraine. Ukraine generally accounts for about 15 percent of global corn exports.

    This current spike in prices has compounded last year’s run-up, which was driven by both supply and demand factors. For demand, China began importing large volumes of corn beginning in July 2020.

    China’s strong demand persisted through 2020/21 (Oct-Sep), ultimately resulting in 29.5 million tons of corn imports. This volume cemented China as the world’s largest corn importer in 2020/21, exceeding the second largest importer, Mexico, by just over 9 million tons.

    On the supply side, conditions for Brazil’s second-crop corn (safrinha) deteriorated leading up to the start of harvest in June 2021. Lower production reduced available supplies for export, further supporting prices last year.

    Looking forward, Argentina and Brazil are both forecast to have record corn production in their 2021/22 (March 2022-Feb 2023) marketing years; however, these corn supplies will not be available to the world market for another few months.

    With Brazil normally beginning harvest of its heavily exported second crop in June or July, a higher percentage of late-planted corn in Argentina could push overall South American corn availability to later in the calendar year.

    The United States, as the world’s largest and also residual supplier of corn, has ample supplies and could fill the gap until South American exports are fully online. However, the current high corn price may cause some importers capable of substitution to look for an alternative.

    Despite also experiencing a rise in price, barley from Argentina and Australia remains less expensive than corn at $330/ton and $311/ton, respectively.

    Corn Import Demand for the Middle East and North Africa Remains Strong

    2021/22 corn import forecasts are lower this month for the Middle East and North Africa (MENA) region to reflect the closure of Ukrainian ports in the Black Sea and sanctions on Russia. However, the forecast remains higher than the previous year. Both Ukraine and Russia have been sizable suppliers to MENA with freight and transportation advantages.

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    In addition, Argentina, Brazil, and to a lesser extent the European Union have been key suppliers to the region. Typically, shipments from the South American countries gain steam during April-September when their new crops come onto the market.

    All countries in the region depend on imports to satisfy growing feed demand for animal production (e.g., poultry, cattle, sheep, and goats), and the lion’s share of import growth comes from Iran, Turkey, and Saudi Arabia. Iran has been a top destination for corn from Brazil.

    While there is little information on feed demand in Iran, the most recent statistics from the Food and Agriculture Organization show that Iran’s meat production in 2020 was up 10 percent from a year earlier with strong gains for cattle, sheep, and goats.

    Turkey has allowed zero-duty imports of corn and other grains since last September, and the policy has been extended until the end of 2022 to help ease price inflation in the domestic market. Turkey has been actively buying corn and barley, even though the depreciation of the lira against other currencies makes imports costly.

    For Saudi Arabia, there are ongoing efforts to improve feed efficiency by offering compound feed at competitive prices relative to unprocessed barley. With corn having higher energy value in feed rations, this is expected to boost demand for corn.

    Disruptions in the Black Sea have added greater volatility to prices of corn and other grains. It is too early to predict the final impact on trade levels for the year ending September 30, but exporters’ data indicate larger shipments during the first 4 months (Oct 2021-Jan 2022) compared to a year ago, implying strong demand in the region despite high prices.

    Historically, U.S. exports to the region have peaked when other exporters had tight supplies such as in 2017/18 and 2020/21. Currently, U.S. supplies appear ample to fill unexpected import demand surges.

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