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US corn exporters to retain edge in 2021-22 over competitors

US corn exporters who enjoyed dominance over their competitors in 2020-21 may face increasing competition in 2021-22 but are likely to retain an edge over other major suppliers, an analysis of the projected global crop output, inventories and rivals' market conditions showed.

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The US corn marketing year runs from September through August.

Corn planting in the US is currently at the final stage and is likely to be harvested in September-October. Around the same time, Ukraine also comes to the market with its harvests.

Both the US and Ukraine are major exporters to China, which has been the leading driver of the corn market since last year.

China has already booked over 10.74 million mt of US corn to be shipped in the in 2021-22 marketing season, which starts September.

The US Department of Agriculture estimates China's corn imports in 2021-22 at 26 million mt, steady at the record high estimates for 2020-21. The volume remains sharply higher than China's usual corn purchases, which stood at 7 million mt in 2019-20.

Corn production in the US, the leading producer and exporter of the coarse grain, is expected to reach 380.76 million mt in 2021-22, up around 6% from 2019-20, according to the USDA.

Multi-year high corn prices in 2021 are expected to lead to a larger corn planting area and increased output across the major producing and consuming countries in 2021-22.

Ukraine eyes lost market share

Ukraine, the world's fourth-largest corn producer, is likely to produce 37.5 million mt in 2021-22, nearly 24% higher year on year, according to the USDA.

With a better production outlook in 2021-22, Ukraine may regain its position as an attractive option for China, which has recently emerged as the top buyer of US corn. Traditionally, Ukraine has been the biggest supplier of corn to China until 2019.

Ukraine's corn production took a hit in 2020-21 as dry weather loomed large over key regions of the country, leading to export cutbacks, according to USDA data.

Meanwhile, robust local demand in Brazil, the world's second-largest corn exporter, restricted corn available for export in 2020, handing supply leverage to US corn exporters.

The US is likely to export 70.49 million mt of corn in 2020-21, up from 45.17 million mt in 2019-20.

However, US corn became pricier in 2021, as prices hit a record close to $7/bu, led by US ending stocks hitting a multi-year low of 31.93 million mt in 2020-21. On the other hand, Argentina, the third-largest corn exporter, is now offering corn at much lower values.

A comparison of corn loading prices for Argentina and US origins shows US corn holds a higher premium over Argentinian corn so far.

S&P Global Platts Analytics assessed Argentina corn FOB Up River at $251.67/mt on May 24, while USGC's FOB price for Gulf is $307/mt.

Supply-demand mismatch

The ongoing drought in Brazil the second-largest exporter of corn has cast a huge doubt over the 2020-21 corn crop, which will be harvested in the second half of this year.

The Brazil crop estimates by various agencies range from 91.1 million mt - 106.4 million mt for 2020-21, compared to 109 million mt expected earlier.

If Brazil's corn output ends up towards the lower end of the estimates, some key Asian buyers such as Japan and South Korea, which have recently increased their share of South American corn imports, may have to rely more on the US.

Moreover, as of now, the 2021-22 corn production cycle is only at the planting stage in some of the biggest producers such as the US, Europe, Ukraine and China and planting in South America will not begin until September.

Therefore, any adverse weather event in any one of these production regions could quickly reduce already strained corn supply.

Except for the US and China, other countries do not have huge corn stocks and there are also doubts over China's true stock levels, with the country auctioning over 100 million mt of corn from its reserves over the last few years.

The recent corn purchases by China indicate demand is expected to be strong in 2021-22 as well, and the US and Ukraine will remain its key suppliers.

Despite the expected increase in the corn area in China, its corn supply deficit is likely to grow. The Chinese government is urging livestock producers to increase the use of alternative feed in place of corn and soymeal, indicating the country expects the supply gap to widen.

This comes at a time when China is rebuilding its pig herds, which were devastated by an outbreak of African Swine Fever in 2018. The growth of China's swine stocks is likely to be spearheaded by the organized sector, which unlike small backyard swine producers uses corn and soymeal feed instead of food waste.