Global corn markets braced for 1Q23 supply shortage

Global corn markets may face a corn shortage in the first quarter of 2023, as rapidly declining export supply in Brazil is coinciding with delayed and weak harvests in Argentina, alongside a sluggish shipment pace from Ukraine, leaving the US as the only major viable option.

An unseasonably high export pace over the past few months has left Brazil with low supply for the rest of its 2021-22 marketing year (March 2022-February 2023). Shipments from the country reached 33.7mn t from March-November this year, significantly above the past five-year average of 22.5mn t for the period and a new high since at least 2013.

With the US Department of Agriculture (USDA) pegging Brazil's corn exports at 44.5mn t for the current marketing year and considering already-shipped volumes, Brazil would have just 10.8mn t of corn to export from December-February.

And the country's December exports are expected to reach a record of 6.7mn t, under estimates from Argus' agricultural analytics arm, Agritel, sharply up from 3.41mn t a year earlier, with rising volumes heading to Brazil's new market, China, supporting the flows. At the same time, market participants expect Brazilian corn shipments to China to total 1.5mn t in December-January alone, suggesting limited availability for the rest of the world.

Meanwhile, Argentina, having already shipped 30.5mn t of corn so far this marketing year, holds an estimated 6mn t of exportable corn stocks until February to meet the USDA export projection of 36.5mn t for the country. But of this volume, much could be carried over into the 2022-23 marketing year to compensate for a likely delayed and lower harvest next season, with a recent extension to 2021-22 export licenses further facilitating the carryover. Just 2mn t of corn could be shipped over the remainder of this season, according to market participants.

Ukraine — another major corn supplier — is facing increasingly challenging export conditions, with slow vessel inspections in the Black Sea and power outages in the country weighing on the pace of shipments. And while the country's ample old-crop stocks provided some support to corn shipments, volumes carried over from 2021-22 are declining and not being fully replaced by new crop. Ukrainian farmers so far have harvested just 21.4mn t of corn for the 2022-23 season, down by about 14.0mn t on the year.

Where will the world turn for corn?

Many corn buyers could turn to the US, which exported just 8.2mn t on 1 September-15 December of the 52.7mn t projected by the USDA for 2022-23.

At the current pace, US corn exports would total 9.3mn t by the end of December, implying a shipment potential of 43.4mn t from January-August.

But the US' genetically modified corn crop may turn away potential buyers, particularly in Europe.

EU buyers depend heavily on Brazilian and Ukrainian supply, which totalled a combined 11.85mn t in 2021-22, about 73pc of the bloc's global imports at the time. The EU's reliance on Brazil and Ukraine has increased further so far in 2022-23, both in volumes and share, having already received 12.44mn t from both origins since July, 92pc of the bloc's global receipts during the period.

This puts the EU at a greater risk of a supply shortage than other parts of the world and could prompt the region to seek volumes from other origins at less competitive prices or turn to alternative feed grains.

By Michael Hanbury

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