Global feed market: US corn prices lower, export outlook cloudy

In the week ending November 11, 2022, global feed prices were lower, led by corn, mainly because the US Department of Agriculture raised its US corn production forecast in its monthly supply and demand report, while Mexico, a major US corn buyer, reiterated that it would stop importing genetically modified corn in the future, and China, another big buyer, will also import Brazilian corn from next month.

The December 2022 corn contract on the Chicago Board of Trade closed Friday at $6.58 a bushel, down 3.4 percent from a week earlier. The spot price of Mei Wan 2 yellow corn for November shipment was quoted at $8.09 per puail, down 4.7 percent from a week ago, and the December shipment was quoted at $7.8600 per puail. The March 2023 corn contract on the EURONEXT exchange traded at 320 euros a tonne, down 4 percent from a week ago. The FOB price for Argentine corn in Upper River is $300 / ton, down 2.3% from a week ago.

International oil futures fell for the week, ending lower for the first time in four weeks, on growing U.S. crude inventories and worries about a recession and the outlook for fuel demand in China. But China's improved anti-epidemic measures, which raised expectations of an improvement in economic activity and energy demand in the world's top crude importer, limited price declines. The December contract for West Texas Intermediate crude settled at $88.96 a barrel on the New York Mercantile Exchange on Friday, down about 4 percent from a week ago. January Brent crude futures, the global benchmark, traded at $95.99 a barrel, down about 2.6 percent from a week ago. The ICE dollar index closed Friday at 106.164, down 4.2 percent from a week earlier.

The US Department of Agriculture raised its forecast for the US corn crop, but the stocks-to-use ratio remains at historically low levels

In its November supply and demand report, the USDA raised its 2020/23 U.S. corn crop estimate to 13.930 billion bushels, up 0.35 million bushels from October and above analysts' forecast of 13.887 billion bushels, though down 7.6% from the previous year. Corn yields were revised higher to 172.3 cu/acre, up 0.4 Cu/acre from the previous month and above market expectations of 171.9 Cu/acre.

The USDA left demand data unchanged for the month, with corn exports unchanged at 2.15 billion bushels, but down 13 per cent from a year earlier; Corn use for the ethanol industry is expected to be 5.275 billion pui, unchanged from last month and down 1% from a year ago.

202/23 U.S. corn ending stocks were revised higher to 1.182 billion bushels, up 0.1 million bushels from the previous month and down 14.2 percent year on year, below the average analyst estimate of 1.207 billion bushels.

The U.S. corn stocks-to-use ratio for 2020/23 was near record lows at about 8.3%, down from 9.2% a year earlier.

Global corn production was revised lower

This month the USDA slightly lowered its 2020/23 global coarse grain production estimate to 1.4595 million tons, down 2.9 percent from the previous year, as global corn production was cut to 1.68 billion tons, with declines in the European Union, South Africa, the Philippines and Nigeria outweighing gains in the United States, Angola, Mali, Pakistan, Turkey and Senegal. The revised global maize production is 4 per cent lower than the previous year.

The US Department of Agriculture this month forecast EU corn production at 54.8 million tonnes, down 1.4 million tonnes or 2.5 per cent from last month's forecast and 22.8 per cent from last year's 70.98 million tonnes. South Africa's maize production was cut by 600,000 tonnes to 16.7 million tonnes. Production forecasts are unchanged for some major exporters, including Argentina with 55 million tonnes of maize and Brazil with 126 million tonnes.

Global maize ending stocks are forecast at 300.76 million tonnes, down slightly from the 301.1 million tonnes forecast last month and down 2.2 per cent year-on-year. The global corn inventory utilization ratio is expected to be 25.6 percent, unchanged from last month's forecast and from a year ago.

U.S. corn export targets may be lowered

The USDA left its forecast for US corn exports unchanged this month, a bit of a surprise as a lower target makes sense given that the pace of sales has been sluggish.

The US Department of Agriculture's weekly export sales report showed net sales of 265,000 tonnes of 202/23 corn in the week ending November 3, down from 372,000 tonnes a week earlier.

Total US corn export sales for the year to date, including exported and unshipped contracts, were 14.73m tonnes, down 54.1 per cent year-on-year. By contrast, the USDA forecasts US corn exports this year at 54.61 million tonnes, down 13.0 per cent from a year earlier. U.S. corn exports are down this year, largely because of big declines in shipments to China and Mexico.

Year-to-date, U.S. sales to China were 3.49 million tons, down 70.8 percent from the same period last year. Tensions with the United States have prompted China to seek to diversify its sources of corn away from the United States.

So far this year, the US sold 6.05m tonnes of corn to Mexico, down 31.8 per cent from the same period last year. On November 9, Mexican President Andre Manuel Lopez Obrado (AMLO) said his country would not buy American yellow corn because it did not want genetically modified corn. On January 1, 2021, AMLO issued a presidential order seeking to ban genetically modified corn by 2024 and phase out the herbicide glyphosate. Mexico imports about 17 million tons of GM corn a year, with the United States being the top supplier. More than 90 percent of all corn grown in the United States is genetically modified. World Vision recently released research showing that if Mexico implemented a GMO corn ban in 2024, the U.S. corn industry would lose $3.56 billion in the first year and $5.56 billion in the second year. The U.S. corn industry will suffer a 13.61 billion dollar economic loss over 10 years.

Sales of E15 have been boosted throughout the year by major corn producing states, helping to boost demand for corn in the ethanol industry

This month, the USDA left 2020/23 corn use for ethanol unchanged at 5.275 billion bushels, down about 1 percent from a year earlier. In the first month of 2020/23, US corn use for fuel ethanol was 383.1 million bushels, down from 430.7 million bushels in August and 407.1 million bushels last year. That is largely because corn costs have risen sharply and margins on ethanol production have fallen sharply from record highs last year. But given the continuing strong demand for gasoline, ethanol prices remain lower than RBOB gasoline, so demand is expected to remain healthy going forward.

Since October, US ethanol production has shown continuous growth momentum. U.S. ethanol production rose for the fifth straight week in the week ended Nov. 4, the highest daily average since late June, according to the U.S. Energy Information Administration. Ethanol production for the week was 1.051 million b/d, up 1.2% from the same week last year.

One positive message for the corn-based ethanol industry is that state governments in the Midwest corn Belt are pushing for higher blending rates of E15 gasoline to be sold year-round in the United States. The U.S. previously restricted sales of the highly blended ethanol gasoline during the summer because of concerns that E15 could exacerbate smog during the summer. Governors of several Midwestern states asked the EPA in early November to lift restrictions on sales of E15.

On November 10th media reports said Ms Deb Fisher, a Republican senator from Nebraska, the second-largest corn-producing state, planned to introduce federal legislation, backed by the American Petroleum Institute (API), to expand sales of E15 across the country. If passed, the bill would be a victory for U.S. corn growers and the ethanol industry, helping boost demand prospects for corn-based ethanol. API is one of the leading oil industry trade groups in the United States. Earlier this year, the API and the Renewable Fuels Association (RFA) began discussions to expand E15 use across the country.

Brazil's corn crop is down, still heading for a record high

On November 9, Brazil's state commodity Supply company (CONAB) forecast total maize production in 2020/23 to reach 126.397m tonnes, down slightly from last month's forecast of 126.941m tonnes, but still a record and up 12% from a year earlier. The area of corn in the second season is expected to be 17.25 million hectares, an increase of 5.4% year on year, and the yield of corn in the second season is expected to be 96.27 million tons, 12.4% year on year.

Rabobank said Brazil's 202/23 maize crop could reach a record 126.6 million tonnes if the weather holds up, up from 115 million tonnes a year earlier. The increase in Brazilian corn supplies, coupled with logistical problems facing major exporters such as the US, will help boost exports. Rabobank expects Brazilian corn exports to hit a record 44m-46m tonnes in 2023.

Brazil's corn exports are expected to be 6.024 million tonnes in November 2022, up from 2.741 million tonnes in November last year, according to the Brazilian Association of Grain Exporters (ANEC). If the forecast materialises, corn exports for the first 11 months of 2022 will reach 37.921 million tonnes, up from 20.615 million tonnes for the whole of 2021.

Argentina has raised export quotas for corn plants due to drought

Farmers are likely to convert 100,000 hectares of maize land to soya, reducing the country's maize area to 7.9 million hectares in 202/23, as poor soil moisture continues to hamper maize cultivation in Argentina, according to the Rosario Grain Exchange.

The Argentine government confirmed this week that it had increased Argentina's corn export quota for 2020/23 to 20 million tons, up from 10 million tons the previous year, which will apply to the corn crop harvested in 2023.