Competition on the global market of corn is getting tough

Source

APK-Inform

1503

In the current season, the estimations of the corn export potential in Brazil, Argentina and Ukraine have nearly matched for the first time in a long period, which means that the competition will be more intense. Due to the considerable corn production decline in the USA in terms of the unfavourable weather conditions, the production rates of the grain in Argentina and Ukraine are going to be slightly lower than the record harvest results in 2018/19 MY, whereas Brazil is going to reach a new record in corn production. Following the upcoming corn crop in South America, on the global market the price development in this segment is becoming more and more interesting.

In 2019/20 MY, Ukraine harvested the second largest corn crop, which started to pressure the prices far before the beginning of the season. Despite the fact that the Ukrainian market of corn is traditionally low-volatile, few expected the tendencies of low prices to preserve during the peak of the season (especially in terms of the record export deliveries of corn).

The increasing competition on the global market played the important role here and, as a result, the low price formed earlier helped to increase the competitiveness of the grain and to reach such high export figures.

Nevertheless, all these demonstrate a clear message of Ukraine to continue strengthening its positions on the global market. For 4 recent seasons, Ukraine occupied the position of the 4th largest exporter of corn and increased the competition with Argentina, Brazil and the USA. In particular, according to the USDA, since 2010 the share of Ukrainian corn in the global exports increased from 5.5% to 18.7% (from 5 mln tonnes to 31 mln tonnes), which together with the upward dynamics of the global production of the grain and the relevant increase of the exports, demonstrates the growth of the importance of Ukraine on the global arena. Moreover, the results which Ukraine showed since the beginning of 2019/20 MY, created the opportunities for the cardinal repositioning in several following seasons.

According to the USDA, Ukraine is the 6th largest producer of corn in the world and occupies 3.2% (35.2 mln tonnes) of the global share, thus substantially lags behind Argentina (4.5% and 50 mln tonnes), Brazil (9.1% and 101 mln tonnes) and the USA (31.3% and 347.8 mln tonnes). Herewith, Ukraine provides nearly 1/5 of the global import requirements, due to country’s low domestic consumption and processing. Based on the slight decline of the corn export estimations of the main competitors in 2019/20 MY, the share of the Ukrainian corn in the global exports is only 1.5% lower compared with Argentinian corn (20.2%), 3% — compared with Brazilian corn (21.7%), and 7.7% — compared with US corn (26.4%).

 

Rating of the global exporters of corn, mln tonnes

 

2015/16

2016/17

2017/18

2018/19

2019/20

USA

48,2

58,3

61,9

52,5

43,8

Brazil

14,0

31,6

24,2

42,0

36,0

Argentina

21,7

26,0

22,5

36,0

33,5

Ukraine

16,6

21,3

18,0

30,3

31,0

Rating of the global producers of corn, mln tonnes

 

2015/16

2016/17

2017/18

2018/19

2019/20

USA

345,5

384,8

371,1

364,3

347,8

China

265,0

263,6

259,1

257,3

260,8

Brazil

67,0

98,5

82,0

101,0

101,0

EC

58,7

61,9

62,0

64,4

65,0

Argentina

29,5

41,0

32,0

51,0

50,0

Ukraine

23,3

28,0

24,1

35,8

35,8

Source: USDA

 

Therefore, subject to the continuing upward trend of corn production (especially such active as in 2018-2019), Ukraine has all chances to outrun Argentina and Brazil. In order to achieve it, it is necessary to strengthen the positions on the traditional for Ukrainian corn distribution markets, such as the EU, Egypt and China, and also to work on obtaining the markets traditional for the Argentinian and Brazilian grain. There are already some achievements. In particular, since the beginning of the season Ukrainian traders performed successfully in terms of such key corn distribution markets as Egypt and China (the exports increased by 278% and 33%, respectively), and also accelerated the Ukrainian corn presence on such large and interesting markets as of Algeria, Iran, Morocco and Bangladesh.

 

 

Considering the current market conjuncture, it is safe to say that in the second half of the season Ukraine will need to compete strongly on these markets. But the increase of the export taxes for wheat and corn in Argentina can advantage the Ukrainian traders.

Aside from the quality and traditional preferences, the prices will play a crucial role. Despite the ongoing tendency of the moderate price rise on the Ukrainian export market, caused first of all by the wheat market, the offer prices of corn are still declared at competitive rates. We should not count on the corn rally and apparently the prices of the grain have reached their maximum this season thus further the prices will develop in downward trend. The market operates in terms of the permanent stress on the global market, due to the concerns about the further spread of coronavirus and some trade activity decline. As soon as the Argentinian and Brazilian grain enter the market, the competition will intensify considerably, which can substantially reduce the prices on the global market. Together with this, currently some market players (China and Iran) have incomplete import demand, which can support the prices. Herewith, the trade dispute between the USA and China remains unsettled, and the countries left too many questions despite signing the phase 1 trade deal.

The analysis of the previous years’ dynamics shows that the prices will start moving upward by the end of April-May, however, according to lineups and the export forecasts, by the end of May-June Ukrainian traders can nearly fully realize the corn export potential.

 

Anna Tanskaya, APK-Inform Agency

 

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