W20: Maize (Corn) Update

In W20 in the maize (corn) landscape, so far in the 2022/23 season, the EU expects larger-than-expected maize imports, having received 23.6MMT of grain maize, with seven weeks to go until the end of the season. This is attributed to the disappointing maize harvest in 2022 at 52.3MMT, down by more than 21MMT compared to 2021 due to drought in Spain and France, among others. Also, the EU expects a further 4% decrease in the area planted with grain maize in 2023, to around 8.5M ha. The USDA projects US corn production in MY 2022/23 to reach 15.265B bushels, up 11% YoY due to higher yield and acreage expectations. A YoY rise in corn production by the US is expected to increase global supplies, leading to bearish prospects for prices. According to WASDE data, the US corn planted acreage is forecast at 92M acres, up 4% YoY, while yield is expected at 181.5 bushels/acre, an increase of 4.6% YoY. Also, US corn exports are expected to amount to 2.1B bushels, an advance of 18.3% YoY, while the ending stocks are estimated to settle at 2.222B bushels, up 57% YoY. US corn exports for MY 2023/24 are forecast to rise as lower prices support a sharp increase in global trade following the decline seen during MY 2022/23. Thus, the USDA expects the US corn market share to increase slightly albeit remaining below the average of the past five years. As of May 14th, 65% of the US corn crop was planted, up 16% WoW and ahead of the five-year average by 6%. Furthermore, 30% of the US corn crop has emerged, more than double from W19 and ahead of the five-year average by 5%.

Brazilian corn prices have been in consecutive daily decline since March 27, 2023, currently operating at the lowest nominal levels since September 2020. According to CEPEA, the development of the Brazilian second corn crop is satisfactory and official estimates continue to indicate a harvest cereal record in 2022/23. In this scenario, sellers are more flexible in negotiating prices, while buyers postpone acquisitions, waiting for more intense price drops. Thus, from the end of March until May 12th, the drop in the ESALQ/BM&FBovespa Indicator (Campinas – SP) is more than 30%, which already operates below USD 12.07/bag, which is the lowest nominal level since September 22, 2020. In the field, CONAB estimates the second crop to total 96.13MMT, 12% more than the previous one. Brazilian corn harvesting for the first 2022/23 summer corn crop reached 72.4% of the area planted, an increase of 4.9% points WoW, but down from the 80.1% harvested in the same period of the 2021/22 season. São Paulo has already completed harvesting, while Paraná and Minas Gerais harvested 93% and Rio Grande do Sul and Santa Catarina 87%. For the second 2022/23 Brazilian corn crop, planting has been completed.

The Buenos Aires Grain Exchange indicates that, as of May 11th, the Argentine corn harvest reached 21% of the planned area, up 1% WoW but down compared to 32% achieved in both the same period in 2022 and the five-year average. The experts anticipate that Argentine corn yields are lower than in the 2021/22 season due to the drought. However, analysts still maintain that the forecast for the Argentine corn harvest in MY 2022/23 is at the level of 36MMT. Ukrainian corn exports from October to April 2022/23 MR amounted to 19.96MMT, up 1.01% compared to the same period in the 2021/22 season, of which 12.1MMT (61%) were shipped through the ports of the Black Sea Grain Corridor. Despite all the difficulties, exports through the Black Sea Grain Corridor remains the key route for Ukrainian grain to foreign markets. Ports of Greater Odesa provided 61% of corn exports in the current season. In the first four months of 2023, Peruvian hard yellow corn imports totaled 1.073MMT, valued at USD 354.829M, a reduction of 2.03% in volume and 7.22% in value compared to the same period in 2022. Peru mainly sourced hard yellow corn in the period from Argentina (703.8K MT), the US (173.72K MT), Brazil (47.42K MT), and others (147.83K MT).

Kenyan maize prices increased from USD 41.27/90kg bag in late April to USD 44.17/90kg bag in W20 due to reduced supply, adding more pressure on maize flour and pain to consumers who are already grappling with the high cost of living. Subsequently, Kenyan maize millers have increased the factory price of maize flour from USD 15.79/bale to USD 17.16/bale on average in response to the rising cost of maize, which accounts for 80% of the total cost of production. Lastly, China, a top corn importer, could cancel more purchases of US corn, following a buying spree in March 2023, with purchases of almost 4MMT announced by the US government between March 14th and April 14th. This is due to US corn being less competitive, with supplies from Brazil about USD 30/MT cheaper for delivery in Q3. Also, there is weak demand for corn as local Chinese producers of hog feed replace corn with wheat in their rations. Therefore, corn futures in Chicago have come under pressure from Chinese cancellations of 832K MT in the past three weeks. Increased competition from Brazil is underscored by forecasts for it to pass the US as the top exporter in 2023.