A Weather & War Hit Global Corn Supply to Recover in Longer Time

29 October 2022

Global corn supplies have been hit by myriad issues this year, and it is likely to take two-three years of good harvest across the top exporting regions to restore supply. In Ukraine, corn export and production capacity have been curtailed by the Russia-Ukraine war. Dry weather in Argentina has delayed the sowing of corn and hit the crop supplies. In fact, an extended period of war will likely see a reduction of 25 million MT of corn from global trade flows. The United States, Argentina, Brazil, and Ukraine are the world’s biggest corn exporters to the world. Their corn supplies have slowed down in 2022 due to higher prices, lower supply, and a fall in demand from key consumer China.

All Hopes on Brazil    

Brazil remains the only hope for corn buyers as the other three prominent exporters stare at falling output levels. Although it does not has the potential to deliver record crop in MY 2022-23, the country still can do better than the U.S., Argentina, and Ukraine. The second-corn crop planting in Brazil, which accounts for the bulk of exports will only arrive in the market in meaningful volumes in June 2023.

Argentina and Prolonged La Nina

The La Nina factor has delayed the early corn planting in Argentina with 5.8% of the forecast area sown as of Sept 28, compared with 16.8% a year ago due to drought. Early-corn planting in Argentina begins in September, but the lack of sufficient rainfall may force farmers to delay planting this season. Harvesting of this crop begins in April-May, while the late-corn crop is sown in December-January and harvested in June-July. Here’s a data visualization of corns top 10 suppliers reported in the first half of 2022.  

*****Stats are in US$ Million

La Nina is a climate phenomenon that usually leads to dry conditions in southern South America. Historically, the impact of La Nina on crops in Argentina has been more adverse and severe compared with its northern neighbor Brazil. La Nina weather phenomenon has hit crop yields in the previous two seasons in Argentina and the latest forecast shows this may continue for the rest of the year.

According to weather reports, La Nina is favored to continue through the Northern Hemisphere winter of 2022-23, with a 91% chance in September-November. That would decline to a 54% chance in January-March 2023.

The global demand and supply of corn in the international market have been increasing for more than a decade. In 2012, the global supply of corn totaled US$35,826 million, that dollar amount rose to US$53,985 million in 2021. Take a look at year-wise global corn supplies in the chart given.

China Puzzle

China is the world’s largest importer of corn, accounting for about 14% of the world’s imports in 2021, but the country has been trying to reduce reliance on imports to feed local demand by increasing domestic production. So far in 2022, corn imports from China have been muted. It is unclear whether China is not reporting its corn imports or whether there is a slowdown in China’s corn imports due to lower demand or higher prices.

However, China has shown eagerness in recent months to pave way for corn imports from Brazil. It is likely that buyers are waiting for prices to ease. Typically, China mostly imports corn from the United States, Ukraine, and Bulgaria. Let’s visualize the data to understand the Chinese import market of corn.

******Stats are in Value US$ Million

Corn is a key ingredient in the diet of hogs farmed by the organized sector. Pork consumption has shifted from dining out to home consumption. Pork is a stable animal protein for China-based consumers.

It is expected that the Chinese demand for corn will improve further in the second half of 2022 as businesses are expected to normalize in response to government efforts to stabilize the economy. If it happens, corn exports from the United States will increase and that will push the global corn export market upwards.