February 3, 2022


Russia-Ukraine tensions expected to push US corn exports in 2021-22


Weather concerns in South American nations and Russia-Ukraine tensions are likely to support corn exports out of the United States, the world's top seller, analysts said.


"Given the uncertainty around South American crops as well as concerns over the Russia-Ukraine tensions, we see US exports in marketing year 2021-22 (September-August) possibly being 5% higher than the current USDA estimate," Peter Meyer, head of grains and oilseed analytics at S&P Global Platts Analytics, said.


During the initial phase of corn planting in Brazil and Argentina, a record output was forecast on the back of an expected increase in crop area and early rains. However, the output projections have been cut down subsequently due to drought during the critical crop cycle phase.


Although the first half of the year is typically a slow period for Brazilian corn exports, concerns over supply have intensified as the country entered 2022 with low stocks due to severe drought in 2021.


The US is likely to produce 15.115 billion bushels (383.94 million tonnes) of corn in MY 2021-22 and estimated exports from the country are at 2.425 billion bushels (61.6 million tonnes), according to data from the United States Department of Agriculture (USDA).


The USDA recently cut its export estimates due to increasing competition from other nations. However, the competition seems to be easing as the weather turned unfavorable for South American corn and uncertainty arose over Ukrainian supplies due to border tensions with Russia.


Ukraine is a leading corn exporter globally and is estimated to contribute 16% of global corn supplies in the MY 2021-22, according to the USDA.


Both Ukraine and the US are leading corn markets for China, which has emerged as the top corn buyer in recent years.


Rosario Grains Exchange, known as BCR, recently cut Argentina's 2021-22 corn production forecast by eight million tonnes to 48 million tonnes due to prevailing drought.


Argentina, one of the top exporters of corn, had produced 52 million tonnes of corn in MY 2020-21, according to the BCR report.


Brazil's corn production forecast was cut to 112.9 million tonnes for MY 2021-22 -- still a record crop -- from 117.18 million tonnes projected in December, the national agricultural agency Conab said in its monthly crop survey report.


Drought in the neighboring countries, especially Argentina, is also seen bringing down the yield of corn crops and increasing the cost of imports, Conab said in its weekly market report.


Corn supply to the export markets may come down in Brazil in the near term if the imports become expensive as domestics corn feed manufacturers will have to raise their bids to secure their animal feed inputs.


Although Brazil is among the world's largest exporters of corn, the southern states often import from Paraguay and Argentina as it is cheaper than transporting corn from the Midwest region of Brazil, where the bulk of the country's corn crop is grown.


"The Chicago Board of Trade corn is strongly supported by market participants; consumers and speculators are bidding up reluctant sellers. We do not see any indication of a shift in this bullish dynamic before mid July, when a successful safrinha harvest in Brazil and corn pollination in the US could restore confidence in supplies," Rabobank said in a report.


Corn export from the US Gulf also became cheaper than Brazilian corn towards the end of January, data from the International Grains Council showed.


The demand from China, Ukraine's leading corn export destination, is seen to be steady, analysts said, adding that they do not see any near-term impact on that as of now. However, uncertainty remains over how the situation is going to evolve in Ukraine, and any possible curb on exports from the country could send corn buyers towards the US.


"China could easily switch to the US if Ukraine corn exports get disrupted, but we don't see this in the near future," Terry Reilly, senior commodity analyst with Futures International, said.


Supporting the sentiment on US corn are also concerns around high costs and lower availability of fertilisers impacting US farmers' planting decisions for the crop.


Corn is a highly fertiliser-intensive crop and US fertiliser prices at the moment are at multi-year highs. Additional concerns of fertiliser shortage are also clouding prospects of a bumper acreage, which the current US corn prices would suggest.


Platts Analytics has an initial estimate for US corn acreage in MY 2022-23 of 90 million acres, down three million acres from MY 2021-22 acreage of 93.4 million acres.


Even if the US's corn MY 2022-23 acreage expands, it merely provides a buffer for yield risk especially in the temperamental Northern Plains, which face lingering dryness, Rabobank said in a recent report.


The USDA is likely to come up with the first look at US corn acreage for 2022-23 in its USDA crop outlook forum later in February.

- S&P Global Platts

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