December 29, 2022
US corn affected by low demand and drought, likely to continue to 2023
Analysts said drought in parts of the US have affected US corn logistics, resulting in increased shipping rates, uncompetitive prices, and declining export demand, with these issues likely to continue until next year, Hellenic Shipping News reported.
Market sources predict that the weather will be a major factor in determining the trajectory of US corn in 2023/24, at least through the first half of 2023.
Corn exports have been impacted by the US's ongoing dryness for the past few months.
Due to record-high barge freight costs and barge transit restrictions, low water levels in the Lower Mississippi River had an impact on the potential for US corn export, according to a corn in-barges market participant. Reduced water levels forced shippers and vessel operators to use lighter loads due to draught restrictions, which called for less cargo per barge and fewer barges per tow.
As of December 21, barge freight cost to move corn was down over 25% from its record levels in October and November but remains high for the season.
Peter Meyer, Head of Grains, Oilseeds and Advanced Feedstocks Analytics at S&P Global Commodity Insights said there is really no market for US corn, adding that winter weather has dampened export demand, especially from the ethanol sector.
Due to competition from other exporters and the fact that US corn prices are currently uncompetitive when compared to its rival nations, Brazil and Argentina, the US Department of Agriculture reduced its estimate for US corn exports for the 2022/23 crop by 75 million bushels from its previous estimate to 2.075 billion bushels. This is the lowest after 2019/20.
US corn sales were reported to be 39% of the USDA's forecast as of December 15. In a recent report, S&P Global stated that this makes the new target of 2.075 billion bushels even more vulnerable in their opinion, with a lower number nearer 2 billion bushels a good bet.
The demand for US corn in 2023 would also be significantly influenced by China. China's corn demand in 2022 has been muted after rising to become one of the top importers of US corn in the previous two to three years.
Meyer said that despite the US economy favouring corn planting, farmers may be prompted to consider soybeans if they are concerned about crop disease and persistent drought.
According to early projections from S&P Global, the combined US corn and soybean acreage in the 2023/24 season will likely be around 89 million acres, or 89.5 million acres each.
Arlan Suderman, Chief Commodities Economist at consultancy firm, Stone X, said US corn acreage will increase to 92 million acres in 2023/2024.
Meyer said he does not see the corn prices collapsing, even with Brazil's record corn production.
Even with the low demand, US deficits will provide some support to the market, he said, adding that it will likely moderate US corn prices and keep them around US$5.75/bu, if uncertainty continues over Ukrainian corn output and there are weather worries in Brazil and Argentina.
- Hellenic Shipping News