Large forecast corn crops around the world, at a time when the effects of the coronavirus (COVID-19) pandemic have reduced demand, has added a bearish tone to coarse grains markets.
The reduced fuel usage as the result of COVID-19 has been especially hard on the corn ethanol industry, although a recent recovery from record-low oil prices has helped the ethanol market.
The USDA Economic Research Service Feed Outlook report of May 14 explained that “global 2020-21 coarse grain production is projected at a new record of 1.5 billion tonnes, with a rebound in the United States and large crops in Brazil, Argentina and Ukraine.”
“Despite record-high corn production prospects, US 2020-21 corn exports face tough competition and are projected at a mere 30% of global corn trade, while Brazil, Argentina and Ukraine are expected collectively to have a 58% export share,” the USDA said. “Sorghum exports are boosted for both 2020-21 and 2019-20, based on growing demand from China. Coarse grain use affected by the pandemic in 2019-20 is projected down, but recovering in 2020-21.”
The European maize producers’ confederation CEPM, in its Corn Market Report of May 15, noted stable prices over the previous week. It pointed out a recovery in crude oil prices.
“This can be explained by recent well shutdowns in the United States, the reduction in Saudi Arabia’s production and increased consumption due to the resuming of activity,” CEPM said. “These factors are supporting the ethanol industry. However, the pace and good sowing conditions are bringing an element of pressure.”
CEPM also considered the USDA’s report, noting “Analysts expected larger revisions in demand due to pandemic-related difficulties in the feed and ethanol sectors.
CEPM also reported that Brazilian body CONAB had added 470,000 tonnes to its corn production forecast for 2019-20, bringing that country’s production up to 102.3 million tonnes.
“In Argentina, 40% of the maize has been harvested,” CEPM said. “Exports are penalized by the level of Paraná River, which is at its lowest level in 50 years.”
In its Grain Market Report of April 30, the International Grains Council (IGC) said that during the previous month “world maize export prices were heavily pressured by waning demand against the backdrop of the evolving coronavirus crisis.”
With outlooks for ample supplies, including in the United States and South America, also a bearish influence, the Council’s index for corn prices had fallen by 12%. US futures fell by 13% in the five weeks since its previous report.
“After initially surging on firm overseas demand and challenging inland logistics, Up River premiums in Argentina subsequently fell steeply as truck traffic returned to normal,” the IGC said. “With low water levels on the Paraná River also limiting vessel loading, exportable port supplies have recently increased.
“Also linked to mild harvest pressure and a further weakening of the peso, export quotations slid by $29 over the month, to around $144 fob. Fob quotations in Ukraine receded by $8 (month-over-month), to $169. Slower demand was bearish, as was a recently triggered EU import duty, but losses were capped by firm domestic values, a slightly stronger hryvna and dry planting weather.”
Barley prices changed little.
“While global feed barley values initially received some support from gains in wheat, more recently prices in the Northern Hemisphere were mostly lower due to heightened uncertainty about future demand, not only from the feed industry amid expected ample supplies of maize (corn), but also from the brewing sector,” the IGC said. “However, price declines were capped by ongoing concerns about overly dry conditions for 2020-21 crops in parts of Europe, Ukraine and Russia.”
The IGC also reported a rise of $16 a tonne to $208 fob in US Gulf export prices for sorghum on strong export demand. Dollar denominated quotations for sorghum in Argentina were steady.
The IGC said world markets for oats were “seasonally firm” in April, supported by tightening old crop supplies and slow grower selling as farmers concentrated on 2020-21 fieldwork.”
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