The 2022-23 corn season will face uncertainties globally as some major producing countries have faced weather disruptions while key producer Ukraine's supply has been restricted by the war with Russia.
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The weather in Argentina, Brazil and the US has been less than ideal, while soaring fertilizer and farm input prices have made the global supply demand situation and price trend something to watch out for.
The US, Brazil, Argentina, and Ukraine are the world's top producers of corn -- itself the world's leading grain by volume -- with almost 50% of total global output. They are also the largest exporters of the grain.
Global corn markets have been supported in the past few years by reductions in stock-to-use ratios, demand from China, adverse weather, and now Russia's invasion of Ukraine.
In 2022-23, there are some regional and global factors that are likely to affect corn markets and prices, more than others.
"The biggest driver for global corn markets has been, and will continue to be, uncertainty over Ukraine," said Pete Meyer, Head of Grain, Oilseed, and Advanced Feedstock Analytics at S&P Global Commodity Insights.
Ukraine is the fourth-largest producer and exporter of corn, but damage to agricultural land and the country's infrastructure has put grain output and exports at risk.
S&P Global's Platts Analytics has pegged Ukraine's corn production in marketing year 2022-23 at 26 million mt, down from 42.1 million mt in MY 2021-22, with exports seen down to 18 million mt from 23.9 million mt.
The US Department of Agriculture sees a bigger reduction in Ukrainian corn supply, forecasting production falling 53% to 19.5 million mt, and exports at just 9 million mt.
US output falling
In MY 2022-23, corn in the US will be planted in fewer acres than soybeans, according to USDA estimates. That would be the third time soybean acreage has been higher than corn, which analysts have attributed to high fertilizer costs -- corn is a highly fertilizer intensive crop.
Meanwhile, planting progress in the US has not been impressive to date, leading to concerns of lower yield. The USDA in May cut its MY 2022-23 corn yield forecast by 4 bushels/acre to 177 bushels/acre, blaming the slow planting progress. In MY 2022-23, the US is likely to produce 14.5 billion bushels of corn, down 4.3% year on year.
Going forward, weather is likely to play a significant role in US corn yields and, ultimately, production, exports and prices.
US corn prices on the benchmark Chicago Board of trade have risen recently to reach almost a decade high of $8/bushel.
Cloud hanging over Brazil
Brazil's second-corn campaign started on a good note this year, though the crop has been beset with weather issues.
The latest forecast indicated chances of frost in southern Brazil which is not conducive to the development of second-corn crop. The forecast came on the back of dryness hitting second-corn crops in the key producing regions of Brazil.
Brazil's national agricultural agency Conab cut its corn production forecast for MY 2021-22 to 114.6 million mt from the 115.60 million mt projected in April, though that estimate would still be a record high. Brazil's 2021-22 corn crop is marketed from February 2022 to January 2023.
Weather is going to play a key role in achieving the estimated yield.
In regions like Mato Grosso do Sul, corn crops in the north-central region have been hit by a lack of adequate water supply, while in Goias the decrease in rainfall is likely to bring down corn crop yield, Conab said.
Meanwhile in Argentina, corn production was seen at 49 million mt for the MY 2021-22, lower than the previous year as the early corn crop suffered from a lack of rain.
Argentina, the third-largest exporter of corn, produced 52.5 million mt of corn in MY 2020-21, according to BAGE.
Fertilizer and logistics costs
At a time when the world is grappling with high grains and oilseeds, increase in logistics costs in agricultural powerhouses Brazil and the US were adding to the total cost, further burdening consumers.
Owing to high cost of natural gas and coal -- key inputs for manufacturing fertilizers -- and certain supply issues, fertilizer prices have surged to historical highs in recent months.
Brazil and the US are top importers of fertilizers along with being the top producers of corn. In some cases, farmers may also use fewer inputs due to the high prices.
Meanwhile in transportation, high crude oil prices and the Russia-Ukraine war have resulted in a rise in prices also likely to be reflected in corn prices.