The coarse grains market is still characterized by tight supplies following the U.S. drought and its effect on maize production this year, and prices have firmed around the world. U.S. exporters are hoping for an improved 2013 crop and a bigger world market role in 2013-14.
“The tight global supply and demand outlook, compounded by bullishly perceived reports from the USDA, resulted in net gains in world export prices during October. After recent strong export sales, tightening old crop availabilities in South America also underpinned,” the International Grains Council (IGC) said of the world maize market in its Grain Market Report at the end of October. “Price gains were recorded in all major exporters, and the IGC GOI maize sub-Index increased by 4% month on month.
“U.S. futures traded in a relatively narrow range during the past month. Profit taking initially saw futures drop to a near three-month low, but lower than expected 2011-12 closing stocks triggered a strong rally in late September.”
With the U.S. Department of Agriculture’s (USDA) forecast for 2012-13 inventories also cut, the firm market tone was generally maintained throughout October, the IGC said.
“Strong domestic cash markets added support and, although weak export demand weighed at times, nearby futures were around 1% higher month on month.”
The report also explained that although export prices in Argentina had continued to trade at a wide discount to U.S. values, the differential had narrowed.
“With nearby demand mostly covered, buying interest started to shift to shipments for January and February,” it said. “Trade in new crop supplies remained light, with prices nominally quoted at around $274 fob.
“In Brazil, slow producer selling, firm export demand and strength in U.S. prices lifted Paranagua export prices by $18, to $285 fob. After recent heavy sales, shipping capacity was reported to be tight up to the end of 2012.”
Export prices in Ukraine followed the upward trend in the world market.
“Overall gains were capped by seasonally rising availabilities and reports of sluggish demand from North Africa and Near East Asia.”
In China, Dalian futures were “mostly weaker on mild seasonal harvest pressure and talk of a bumper crop,” the IGC said. “However, losses were limited by quality concerns.”
In its November World Agricultural Supply and Demand Estimates Report (WASDE), the USDA raised its projection for the U.S. 2012-13 maize crop to 272.43 million tonnes from a previous projection, made a month earlier, of 271.94 million, reflecting a higher estimate for potential yield. The 2011-12 crop was 313.92 million tonnes.
The USDA projects total world maize production in 2012-13 at 839.7 million tonnes, compared with the previous month’s estimate of 839 million. The previous year’s figure was 880.49 million tonnes.
The report noted that maize imports into the U.S. would increase, “particularly into the southeastern feed market which ordinarily relies heavily on supplies from the eastern Corn Belt.”
It also pointed out that 2012-13 maize production, according to its figures, will be the second highest on record, with non-U.S. production at a record.
The U.S. Environmental Protection Agency (EPA) has rejected requests from some states to waive the Renewable Fuels Standards, a move which would have allowed a reduction in the amount of maize used to produce ethanol.
“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact. “Economic analyses of impacts in the agricultural sector, conducted with USDA, showed that, on average, waiving the mandate would only reduce corn prices by approximately 1%. Economic analyses of impacts in the energy sector, conducted with the Department of Energy, showed that waiving the mandate would not impact household energy costs.”
The National Corn Growers Association (NCGA) supports the Environmental Protection Agency’s decision to deny the Renewable Fuel Standard waiver request.
“We believe Administrator Jackson appropriately recognized petitioners did not properly prove severe nationwide economic harm had occurred, thereby creating no justification for a waiver of the RFS,” NCGA President Pam Johnson said in a statement. “The ethanol industry plays a pivotal role in job creation throughout the country, supporting over 400,000 jobs nationwide. This includes many in ethanol plants in rural America. The RFS advances the use of domestically produced renewable fuels, encourages new technologies and enhances U.S. energy independence.”
The U.S. Grains Council is hoping for a greater role in the world coarse grains market for U.S. exporters who have lost share as a result of the drought. “While the U.S. share of world coarse grain imports has fallen over the past six years, a return to trend yields in 2013 will mean a bumper crop and opportunity for U.S. coarse grains to resume their leadership role,” it said on its website.