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South American corn may struggle to maintain export momentum to Asia in 2020

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South American corn may struggle to maintain export momentum to Asia in 2020


Asian corn demand strong

Black Sea exports to Asia rise

US-China trade deal may lead to US recovery

Feed mills in Asia imported record volumes of corn from South America in 2019, but it remains to be seen if the region can sustain momentum as its own demand rises and the US prepares its return as a top exporter.

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Commodities 2020 | S&P Global Platts

Asian feed demand has not eroded despite the African Swine Fever due to strong growth in other livestock sectors, and effective disease management in countries such as South Korea.

The poultry sector has seen steady growth and has supported feed demand. South Korea's livestock has expanded 1.4%-19% annually, according to data published by Statistics Korea.

Malaysia, one of the largest consumer of poultry meat per capita, is maintaining 4%-5% growth rates annually, industry sources said.

Brazil and Argentina are the second and third largest exporters of corn after the US. Yet, the South American duo dominated the Asian market in 2018-2019.

Brazilian corn exports are forecast to hit 40 million mt between February 2019 and January 2020, according to Conab, the government's food supply and statistics agency.

But estimates from the industry, including Conab and S&P Global Platts Analytics, is between 30 million-36 million mt for next year.

Similar downgrades were observed for Argentina. S&P Global Platts Analytics expects Argentina to export 33 million mt of corn in the marketing year 2019-2020 (March 2020-February 2021), down from the US Department of Agriculture's estimate of 36 million mt in 2018-2019.

Expectations are lower as the conditions last year were unprecedented. A combination of bumper harvests in South America, and the entrapment of US corn due to freak weather in the Mississippi area contributed to the change in trade flow.


Brazil's own corn demand is set to rise next year, leaving lesser room for exports.

Domestic corn demand is expected to rise from 64 million mt in the marketing year 2018-2019 (March 2019-February 2020) to 68 million mt in marketing year 2019-2020, a Rabobank analyst said.

"This growth is expected given the strong demand from the animal protein industry, which may boost local feed demand," Victor Ikeda, senior analyst with Rabobank said.

Following the ASF breakout in Asian countries, especially China and Vietnam, Brazil's meat export has been steadily rising, creating demand for corn feed and driving up local prices, industry sources said.

Two new ethanol plants are also expected to start operations in Mato Grosso -- Brazil's largest corn producing region -- in 2020 and may use an additional 2.5 million mt of corn, Ikeda said.

The surge in exports this year has seen FOB Brazil corn Santos basis triple from a 2019 low of 18 cents/bushel on June 4 to 80 cents/bushel on November 29, S&P Global Platts data showed.

Brazil's local corn prices have also risen steadily. Prices were at $122.50/mt on December 12, up from $83.50/mt during the same period last year, according to local farmer's research institute IMEA.

Higher local corn prices saw Brazil turn into an importer, as one meat processing company bought 200,000 mt of corn from Argentina for January and February delivery, market sources said.

Argentina's export tax on grains has meanwhile cast uncertainty around exports.

Argentina's new government, in a widely anticipated move, raised export taxes on grains, including corn in early December to 12% from 6.7% and this may go up further to 15%.


Ukraine emerged a new corn supplier to Asia in late 2019 and this trend is expected to continue next year.

Black Sea corn prices started to look attractive to Asian buyers in November and South Korean feed millers bought over 1.1 million mt of corn from the region in the month. This compares with only 100,000 mt sourced in November-December 2018, Platts records show.

"In Platts Analytics we estimate Ukraine corn export potential at 28.2 million tons (October 2019-September 2020) and 8.4 million tons have been exported. Therefore, there is still a large portion of corn to be shipped in the coming months," Victoria Sinitsyna, Senior Grains Analyst with Platts Analytics said.


While strong US corn cash premiums may have been advantageous for South American suppliers, that situation may not last next year, INTL FCStone Chief Commodity Economist Arlan Suderman said.

"[There is] an expectation that the US may recover their corn production in 2020, after a challenging year in terms of weather in 2019. This scenario of [South American] corn cheaper than in the US, it is unlikely, assuming our current estimations," Rabobank's Ikeda said.

While the expectation of some decrease in South American corn exports is a welcome development for US exporters, exports from the US may continue to struggle against Black Sea supply.

But a key driving factor will be the evolution of the US-China trade deal. With Phase 1 of the US-China trade deal reached, China is expected to boost imports of farm products including corn and the US may regain lost ground from its rivals. Under Phase 1, Beijing has committed to buy an additional $16 billion worth of US-origin agricultural products per year, on top of the $24 billion baseline purchases of 2017, making total Chinese purchase commitments from the US at $40 billion per year.

Commodities 2020 | S&P Global Platts

-- Elizabeth Thang, with Mugunthan Kesavan and Shikha Singh in New Delhi,

-- Edited by Mriganka Jaipuriyar,