In W39 in the maize (corn) landscape, the European Commission (EC) expects European Union (EU) maize production to reach 59.8 million metric tons (mmt) in the 2023/24 season, a downward revision of 1.9 mmt compared to the Aug-23 estimate. While this estimate is significantly higher than the 2022/23 harvest of 52.1 mmt, it is below the five-year average by 13%. This deviation is primarily attributed to a reduction in the cultivation area, notably in Southern Europe, where maize sowing was below normal. Maize production in Southern Europe lags behind the five-year average. Germany and Poland expanded their maize cultivation areas, leading to the expectation of larger harvests than in recent years. However, the reduction in Southern Europe offset the increase anticipated in Germany and Poland.
The Russian corn market continued to fall in W39, increasingly diverging from the estimated parity levels. This situation could be attributed to subdued corn demand from Turkey at the start of the 2023/24 season and large purchases from Iran during the 2023 summer. Also, competition from Ukraine has dampened importer interest in Russian corn. Traditionally, the corn market takes time to gain momentum in the initial two to three months of the season, leaving room for the expected price recovery before the end of the campaign. However, prices will likely continue facing downward pressure in the short term due to corn oversupply on the Russian market.
Ukrainian corn export prices witnessed weekly declines ranging from USD 3 per metric ton (mt) to USD 5/mt during W39 across various bases. Despite ample grain supplies, ongoing logistical challenges are poised to exert downward pressure on corn prices, particularly as the harvest season advances. Projections indicate that corn prices will hover between USD 140/mt to USD 150/mt at SRT river ports and USD 145/mt to USD 155/mt at DAP border points. Weather forecasts for Ukraine do not anticipate immediate rainfall, which is likely to maintain corn grain moisture levels at a relatively low range of 17% to 20% for the 2023/24 season, a significant decrease from the 30% to 35% span in 2022/23. This scenario is expected to reduce the overall production cost of corn grain, as a single drying cycle will suffice for the harvested crop.
Chinese importers secured substantial corn purchase contracts from Ukraine over the past two weeks. Although the exact corn volumes remain undisclosed, traders estimate them to be around 500 thousand mt to 1 mmt, with deliveries anticipated between Oct-23 and Dec-23. This significant demand from China is attributed to the competitive prices offered by Ukraine. Ukraine's agricultural exports had faced limitations following Russia's withdrawal from the grain deal earlier in 2023, causing a shift in export routes from Black Sea ports to the Danube and smaller European ports with reduced capacities. Notably, China has been a consistent and major importer of Ukrainian corn, predominantly used as feed for livestock.
The Chinese market is expected to witness a corn supply surge in the coming weeks, driven by a significant domestic harvest and increased imports from Brazil. This situation is anticipated to create downward pressure on global corn prices, which are already hovering near three-year lows. China's Ministry of Agriculture predicts a record harvest of 285 mmt for the 2023/24 season, a 2.9% increase from the 2022/23 output despite some crop damage from summer typhoons in certain northern provinces.
While this price drop could pose challenges for United States (US) farmers, it is expected to benefit Chinese pig and poultry farmers who rely on corn as a primary feed ingredient. Chinese feed manufacturers have also turned to Australian barley, which is more competitively priced than Chinese corn, following the removal of anti-dumping duties. This supply influx has led to a 5% decline in Nov-23 corn futures on the Dalian Commodity Exchange. This situation further pressured Chicago corn futures, which were already at multi-year lows due to expectations of ample global corn supplies.