Platts proposes to launch corn arbitrage price matrix, associated assessment

S&P Global Platts proposes to launch a daily global corn arbitrage price matrix to reflect the competitiveness of each major export origin delivered into Asia, the world's largest corn import region. The proposed corn arbitrage price matrix will launch on September 2, 2020, and will include the existing and new price assessments.

The proposed price matrix will reflect the replacement values and profit margin calculations associated with the import of feed corn from the US Gulf Coast, the US Pacific North West, Brazil, Argentina and Ukraine at destination in Northeast Asia. Below is an example of the proposed matrix:

*CIF New Orleans corn M2 basis c/bu

** FOB Black Sea corn (Ukrain) Handysize $/mt

***FOB Argentina corn basis c/bu

The existing Platts corn CFR North East Asia price assessment is basis Pyongtaek, South Korea. Platts understands that the South Korea corn purchase price is widely used in the market as a reference price for purchases done by neighboring countries in Asia such as Japan, Taiwan, Vietnam and China.

Together, these five countries constitute the largest importing hub in the world, with 29% of global corn imports on average over the past five years and an estimated 49.6 million mt of corn to be imported in the 2019-20 marketing year ending September 30, according to the US Department of Agriculture.

The corn arbitrage price matrix will reflect the most recent global assessments available at the 1630 Singapore time daily, in line with the Platts Market on Close assessment process timestamp of the existing Platts corn CFR North East Asia assessment.

As part of this matrix, Platts proposes to launch the following corn assessments on September 2, 2020:

1. New corn assessments:

1.1. FOB US PNW assessment

The proposed daily FOB US PNW corn assessment would reflect Panamax cargoes of 60,000 mt (+/- 5% operational tolerance) loading two calendar months forward from the US Pacific Northwest ports of Seattle, Tacoma, Longview, Kalama, Vancouver and Portland. This will roll to the next calendar month on the first publication day after the 15th of each month. For example, from September 16-October 15, Platts would assess cargoes in December; on October 16, this will roll to January-loading cargoes. The assessment would reflect the tradable value at 1630 Singapore time.

The proposed assessment would reflect US yellow corn Number 3 as specified by the US Federal Grain Inspection Service.

The assessment will be published in US dollars/mt, as well as a US cents/bushel differential, or basis, to the prior day's CBOT corn futures settlement price. The relevant futures contract month letter code will be published next to the basis value.

1.2. Argentina corn FOB Panamax cargo

The proposed Argentina export cargo assessment would reflect two-port loading Panamax cargoes of 60,000 mt (+/- operational tolerance) loading at an Up River port not above Timbues, with a topoff at the ports of Necochea or Bahia Blanca at the seller's option.

The assessment would reflect product meeting GAFTA grade 2 corn specification loading one calendar month forward. This would roll to the next month on the first publication day after the 15th of the current month. For example, from September 16-October 15, Platts will assess parcels loading over November, while from October 16-November 15, Platts will assess parcels loading over December.

Platts is proposing to assess a weekly Panamax cargo differential to its existing Argentina corn FOB Up River assessment. The weekly differential will be published in US cents/bushel and reflect the tradable value at 5:30 pm Sao Paulo time every Wednesday, or the next publishing day if Wednesday is a pricing holiday.

The Argentina corn FOB Panamax cargo assessment would be published daily in US dollars/ mt, by applying the weekly Panamax cargo differential to the existing daily Argentina corn FOB Up River assessment. The Argentina corn FOB Panamax cargo assessment would also be published as a US cents/bushel differential, or basis, to the CBOT corn futures settlement price.

1.3. FOB US Gulf Coast cargo

The proposed daily FOB USGC assessment would reflect Panamax cargoes of 60,000 mt (+/- 5% operational tolerance) loading from the US Gulf Coast, basis New Orleans, one calendar month forward. This will roll to the next calendar month five publication days before the end of the month.

For example, on September 2, Platts would assess FOB USGC cargoes loading in October; this would roll to November-loading cargoes on September 24.

The assessment would reflect US Yellow Number 2 corn as specified by the US Federal Grain Inspection Service, but with a maximum moisture content of 14.5%.

In the absence of pricing data on an FOB USGC basis, Platts may consider pricing data for associated markets such as the CIF New Orleans delivered barge market factoring in elevation costs.

The daily assessment would reflect the value at 1330 Houston time. Platts proposes to publish the US corn FOB Gulf Coast cargo assessment in US dollars/mt, as well as a US cents/bushel differential, or basis, to the CBOT corn futures settlement price. The relevant futures contract month letter code would be published next to the basis value.

2. New calculated corn assessments

2.1. FOB Black Sea corn (Ukraine) PMX

The proposed daily assessment would reflect Panamax cargoes of 60,000 mt (+/- 5% operational tolerance) loading 28-42 days forward from the Ukrainian ports of Odessa, Yuzhny and Chornomorsk.

The proposed assessment would be calculated by adding a fixed differential of $2/mt -- reflecting the premium for loading a Panamax-sized cargo -- to the existing FOB Black Sea corn (Ukraine) assessment, which reflects Handysize cargoes.

The proposed Panamax assessment would reflect product meeting the same specification as the existing FOB Black Sea corn (Ukraine) assessment.

Net forwards and Margin calculations

2.2. US Gulf CFR NE Asia Corn Replacement:

Will be calculated by adding the FOB US Gulf PMX assessment to the freight assessment PP35 New Orleans, US Gulf Coast to Qingdao, North China

2.3. US PNW CFR NE Asia Corn Replacement:

Will be calculated by adding the FOB US PNW corn assessment to the freight assessment PP43 Vancouver, West coast Canada to Pyeongtaek, South Korea

2.4. Brazil CFR NE Asia Corn Replacement:

Will calculated by adding the Brazil corn FOB Santos assessment to the freight assessment PP26 Santos, Southeast Brazil to Qingdao, North China

2.5. Argentina CFR NE Asia Corn Replacement:

Will be calculated by adding the Argentina Corn FOB PMX assessment to the freight assessment Bahia Blanca, Argentina to Qingdao, China

2.6. Ukraine CFR NE Asia Corn Replacement:

Will be calculated by adding the FOB Black Sea corn (Ukraine) PMX assessment to the freight assessment Odessa, Ukraine to Qingdao, China.

2.7. US Gulf CFR NE Asia Corn Margin:

Will be calculated from Corn CFR North East Asia assessment minus the US Gulf CFR NE Asia Corn Replacement.

2.8. US PNW CFR NE Asia Corn Margin:

Will be calculated from Corn CFR North East Asia assessment minus US Gulf CFR NE Asia Corn Replacement.

2.9. Brazil CFR NE Asia Corn Margin:

Will be calculated from Corn CFR North East Asia assessment minus Brazil CFR NE Asia Corn Replacement.

2.10. Argentina CFR NE Asia Corn Margin:

Will be calculated from Corn CFR North East Asia assessment minus Argentina CFR NE Asia Corn Replacement.

2.11. Ukraine CFR NE Asia corn Margin:

Will be calculated from Corn CFR North East Asia assessment minus Ukraine CFR NE Asia Corn Replacement

Platts is also launching the following new freight assessments, which will be published in the proposed matrix:

- Freight Argentina to Pyeongtaek, South Korea freight rate: Subnote Link

- Freight Ukraine Panamax Port to Pyeongtaek, South Korea freight rate. Subnote Link

The existing assessments to be used in the proposed matrix are as follows:

1. Corn CFR North East Asia

2. Brazil corn FOB Santos

3. Argentina corn FOB Up River

4. CIF New Orleans corn M2

5. FOB Black Sea corn (Ukraine)

6. Freight route PP26. Santos, Southeast Brazil to Qingdao, North

7. Freight route PP35. New Orleans, US Gulf Coast to Qingdao, North China

8. Freight route PP43. Vancouver, West coast Canada to Pyeongtaek, South Korea

Please send any feedback, questions or comments on the proposed corn arbitrage price matrix and the new corn assessments by July 24, 2020, to ags@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if the comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.