Maize (corn) Price to Stabilize
Global maize(corn) price increased by 7%(CBOE Generic first future) this year, with high price volatility of 26.33%(as of 7 June, Tridge data).
Such fluctuations were mainly caused by ongoing disputes in U.S. market; U.S.-China trade war, NAFTA threat, and biofuel policy revamp. However, a rise in global demand for corn-based ethanol and animal feed acted as a key price supporter. The Chinese government plans to roll out E10 ethanol mandate by 2020. With market demand remaining high, maize price is to stabilize in the longer term, as disputes resolve.
Usages of Maize (Corn)
Maize, also known as corn, is a popular crop. Especially in countries with hot and dry weather, no other crop utilizes sunlight more effectively than maize does: maize only needs 450~600mm of water per season, which can easily be acquired by soil moisture reserves.
Maize is widely used as the main ingredient of livestock feed and fuel ethanol. Livestock feed currently accounts for 38% of global maize usage, and fuel ethanol accounts for 30%. Both usages are high in demand as a favorable market condition is set to continue.
Global Trade
Source: Production data provided by Tridge
USDA projects world maize production to reach 1.056 billion tonnes in 2017/2018 harvest, up 19 million tonnes from 2016/2017 harvest.
Source: Export data provided by Tridge
According to Tridge, U.S., Brazil, Argentina, Ukraine, Romania, and Serbia are the top maize exporters in the world. In 2016/2017 harvest, U.S. produced 367 million tonnes, down 18 million tonnes from last year, but still accounting for 37% of total maize exports. Brazil produced 81 million tonnes, Argentina produced 39 million tonnes, and Ukraine produced 28 million tonnes respectively in 2016/2017 harvest.
U.S. maize acres are expected to total 88million acres, down 1.5 million acres from 2017. Such lower acreage is associated with low price, encouraging growers to plant less.
Lingering drought in Argentina has caused smaller-than-expected maize production earlier this year; only 18 percent harvested during the first three months. However, recent favorable weather condition recovered the pace, resulting in 40 percent harvested by the end of May. BAGE expects Argentina to meet final production of 32 million tonnes by the end of 2017/2018 harvest.
Source: Import data provided by Tridge
Amount of world maize import totals to USD 26 billion in 2016, Japan accounting for 15% of total imports, followed by South Korea, Vietnam, Egypt, Iran, and China. China’s annual maize import is to grow by 25% this year, and Vietnam by 22%, according to USDA projection.
Vietnam, the biggest maize importer in Southeast Asia, is expected to import 11 million tonnes of maize in 2018, up 2 million tonnes from last year. This record high import was driven by economic growth, growing population encouraging meat consumption and demand for livestock feed.
2018 Market Outlook
Source: Bloomberg, Tridge
Earlier this year, maize price started low as USDA raised U.S. maize production forecast for 2018. Even with such projection, the market managed to sustain upward price movements with signs of new demand entering the market. China lifted its forecast for 2017/2018 maize imports to 1.2 million tonnes, up 2 million tonnes from the previous forecast.
Concerns arose as U.S., largest maize producer, announced import tariff on steel and aluminum from China on 9 March 2018. This triggered a global trade war that would put a dent in the agricultural market. The possibility of U.S. leaving the NAFTA further added concerns to the market. In April 2018, EPA gave three Andeavor oil refinery a waiver from the regulation on ethanol mandate, in response to oil refineries that had been claiming that they are struggling to meet the RFS standard as the cost of ethanol burdens.
Still, global maize price is set to stabilize, as the market signals strong demand, along with signs of dispute resolution.
The trade war between U.S. and China had come to a truce, and Trump administration delayed biofuel deal indefinitely, lifting major political uncertainties from maize market.
Growth in global demand from corn-based ethanol and animal feed market remains strong. Ethanol output in China is expected to increase up to 500,000 tonnes in 2018, as the government plans to roll out gasoline with 10 percent ethanol mandate by 2020. Such practice is expected to create 19 billion litres of ethanol demand every year from the current production of 3.9 billion litres.
Current lower maize price implies potential demand for animal feed and residual use. USDA projects growth in global meat consumption to continue; poultry growing at annual rate of 1.8%, beef and pork each at 0.9% rate for the next decade. This naturally leads to higher consumption in animal feed, thus increased demand for maize.
Contact Us:
Editor: Juhee Yoon / juhee.yoon@tridge.com
Sourcing Team Expert: Eunjee Lee / eunjee.lee@tridge.com
Or request for quotation through: https://www.tridge.com/inquiry