Strong prices typically tend to weaken demand for commodities. But global maize consumption and trade both are projected to increase to record levels in the 2006-07 marketing year, even with maize prices near historical highs.

Total world maize use in 2006-07 is expected to reach nearly 730 million tonnes, up 4% from the previous marketing year, while maize exports are forecast to increase by 8% to almost 88 million tonnes. These records are projected amid an increase of as much as 82% in indicative maize prices over the past year.

One reason for the jump in maize demand and trade is a shortfall this season in alternative coarse grains, particularly sorghum. World sorghum trade is forecast to fall to a near 40-year low this year, according to the U.S. Department of Agriculture (USDA), largely because of reduced U.S. supplies, which typically account for 90% of global trade.

Severe drought in the U.S. Southern Plains decimated the sorghum crop, causing production to fall to the lowest level since 1960 and sharply curtailing exports. The severe drought in Australia also reduced that country’s sorghum export availability by half.

Argentina has been able to compensate for some of the shortage in exportable sorghum supplies, but the overall tight situation has forced many users to look to maize as a replacement. Mexico, for example, is forecast to see its sorghum imports drop to a 10-year low of 2.3 million tonnes and is shifting to maize for feeding.

Ironically, Mexico’s maize imports in 2006-07 also will get a boost from the high maize prices themselves. More than 50% of maize is consumed in Mexico for food use, and high prices have sparked public protests.

Because of high consumer prices and the need to find replacements for tight sorghum supplies, forecasts for Mexico’s maize imports have been on the increase. Whereas last season Mexico imported about 6.7 million tonnes of maize, the 2006-07 projection recently was raised to a record 8 million tonnes.

The continued growth of maize demand in the world’s two largest consuming nations, China and the United States (U.S.), also accounts for the increases in world consumption. In China, strong economic growth is spurring demand for more meat products and, subsequently, for maize for feed.

In the U.S., the well-documented surge over the past three seasons in the use of maize for ethanol continues to be a factor in U.S. and world maize markets. For the 2006-07 season, U.S. maize use for fuel is forecast at 54.6 million tonnes, a figure representing 23% of total domestic use and 95% of exports by the U.S., which is the world’s largest maize exporter.

The ethanol issue, along with shrinking U.S. and world ending stocks, contributed to the sharp jump in maize prices, both in the futures market and in the benchmark U.S. Gulf export market, through the first three months of 2007. The rally came to a screeching halt — and a sharp reversal ensued — after the USDA released its U.S. prospective plantings report at the end of March.

The USDA estimated 2007 U.S. maize plantings at 36.2 million hectares, up 15% from 2006, higher than expectations and the largest U.S. maize area since 1944. The maize acreage is expected to come at the expense of soybean and spring wheat plantings, both of which are forecast to decline from the previous year.

Although maize prices subsequently retreated from their highs on the planted area report, mid- and longer-term prospects remain firm, according to many analysts. The U.S. ethanol industry is continuing to expand, encouraged by U.S. energy policy, and economic growth in many other nations should keep maize demand on an upward track.