Global corn de­mand drop

Warwick Daily News - South West Queensland Rural Weekly - - News - PETER McMEEKIN Nidera Aus­tralia

GLOBAL corn pro­duc­tion is fore­cast to be lower in the com­ing sea­son, but it is dif­fi­cult to see val­ues mov­ing sig­nif­i­cantly higher de­spite the strong US corn ex­port num­bers over re­cent months.

The big­gest de­clines are fore­cast for China and the United States, but these will be partly off­set by the larger crops pro­jected for Canada and the Euro­pean Union.

There are a num­ber of fac­tors in play, which ap­pear to be cap­ping global corn val­ues at the mo­ment.

The US crop is now 84 per cent planted. Sure, there is talk of some ar­eas that have been flooded and may have to be re­planted, and yes, some of this area may be switched to soy­beans but there are no huge pro­duc­tion con­cerns.

In South Amer­ica, corn pro­duc­tion is set­ting new records, with Ar­gen­tinian pro­duc­tion pegged at 39MMT and the Brazil­ian crop fore­cast now sit­ting at 95MMT.

Har­vest­ing of the Safrinha (sec­ond corn crop) in Brazil is about to com­mence.

A large pro­por­tion of this har­vest goes to ex­port and this will put enor­mous pres­sure on the pace of US ex­ports as con­sumers turn to the cheaper South Amer­i­can op­tions in the sec­ond half of the year. The last fac­tor, is the high clearance rates in China’s grain re­serve auc­tions this month.

China re­cently an­nounced an end to its corn stock­pil­ing pro­gram so the sell down was ex­pected, but the quan­ti­ties sold have been at the up­per end of trade ex­pec­ta­tions.

Last week saw more than 4.5MMT cleared from state re­serves, but it is the quan­ti­ties of older sea­son stocks within that to­tal, which have been im­pres­sive.

More than 4MMT of 2013/14 sea­son corn was of­fered with 3.56MMT, a clearance rate of more than 89 per cent.

Since early May the auc­tion process has cleared about 7.5MMT of 2013/14 sea­son, more than 1.7 MMT of 2012/13 sea­son and around 0.5MMT 2011/12 sea­son corn from state re­serves.

How­ever, the corn stock­pile was es­ti­mated to be as high as 230MMT be­fore this month’s sell down be­gan.

Apart from clear­ing old stock, the aim is to find a price high enough to keep lo­cal farm­ers happy and low enough to keep do­mes­tic feed mills in busi­ness, and to choke off im­ports.

How­ever, the re­serve stocks are also held in the north of the coun­try, in the heart of the main pro­duc­tion re­gions and the ma­jor­ity of the con­sump­tive de­mand is in the south of China.

The av­er­age auc­tion price last week was about 1400 Ren­minbi (Rmb) and the av­er­age cost of freight from north­ern China to the south­ern con­sumers is around 350 Rmb. This equates to 1750 Rmb CNF south China or US$254 CNF us­ing last week’s Rmb/USD ex­change rate of 6.9.

The lat­est US Depart­ment of Agri­cul­ture re­port pro­jected China’s corn im­ports at 3MMT and a fall in do­mes­tic sup­ply of around 14MMT.

On the de­mand side, feed and resid­ual use is ex­pected to in­crease based on rel­a­tively low in­ter­nal mar­ket prices, ef­forts by the gov­ern­ment to pro­mote the use of do­mes­tic sup­plies and re­duced im­ports of corn sub­sti­tutes.

This is where it im­pacts the Aus­tralian pro­ducer. Two of the pri­mary corn sub­sti­tutes are feed bar­ley and sorghum.

Aus­tralian sorghum has been un­com­pet­i­tive into the Chi­nese feed ra­tion, with prices el­e­vated well above US ori­gin sorghum due to a 50 per cent re­duc­tion in pro­duc­tion. How­ever, US sorghum prices have also been quite re­silient com­pared to global feed bar­ley val­ues.

This meant that Chi­nese feed bar­ley im­ports in­creased to record lev­els this year at the ex­pense of sorghum de­spite plen­ti­ful corn.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.