China Shifts to Brazilian Corn Raises Concerns for US Exporters

Maize (Corn)

United States

Published May 11, 2023

China's cancellation of US corn shipments in late April has raised concerns about the export potential for US corn. These cancellations resulted in Chinese buyers shifting their attention to the Brazilian corn market. Chinese buyers anticipate a further fall in prices due to the sharp decline in Brazilian corn prices. The absence of new purchases by China and the lack of good exports by Argentina have not been enough to keep US sales leveraged and it has lost some room to sustain support. Despite the lower price, the negotiation outcomes of the Ukrainian export corridor will be crucial to watch for potential speculation movements in the corn market. Market participants will closely monitor Chinese buying patterns, Brazilian corn crop developments, and the negotiation outcomes involving the Ukrainian export corridor. These factors will significantly influence the future trajectory of US corn prices and export prospects.

The cancellation of US corn shipments by China in late April has raised concerns about the export potential for US corn. According to USDA's Foreign Agricultural Service data, 327,000 mt of corn shipment to China was canceled on April 24 and another 233,000 mt on April 27. Overall, a total of 624,300 mt of US corn export shipments to China have been canceled so far in the MY 2022/23. These cancellations were a result of Chinese buyers turning their attention to the Brazilian corn market.

Chinese buyers are anticipating a further fall in prices due to the sharp price decline in Brazilian corn. They are relying on strong safrinha corn crop prospects as the rainfall in central Brazil has generally been beneficial for the safrinha corn development. This anticipation has put a pause on US corn shipments to China.

The absence of new purchases by China and the lack of good exports by Argentina have not been enough to keep US sales leverage. Consequently, the market has witnessed a decline, leading to a loss in the ability to sustain upward price movements The July corn contracts in W2 of May-23 experienced a decrease, dropping by 2.05% WoW to 584.2 US cents per bushel, reaching an all-time low in 2023.

Additionally, there is positive news about the 2023 US corn crop which has already started with a strong planting pace. As of the first week of May 2023, 26% of the projected area has been planted, higher than the 13% planted during the same period last year. Favorable weather conditions have contributed to this pace, and it is expected to continue or surpass 50% US corn area planted in the coming weeks.

Despite the lower price, the outcome of negotiations of the Ukrainian export corridor will be a crucial factor to watch for potential speculation movements in the corn market. The recent negotiations between Ukraine, Russia, Turkey, and the UN did not yield a breakthrough, creating uncertainties regarding the agreement. Ukraine's selling of wheat and corn at low prices in Eastern Europe has been causing harm to neighboring countries, including Russia. It is expected that Russia may limit flows through the corridor in the upcoming agreement renewal, which could impact corn prices.

Market participants will closely monitor Chinese buying patterns, Brazilian corn crop developments, and the outcome of negotiations involving the Ukrainian export corridor, as these factors will significantly influence the future trajectory of US corn prices and export prospects.