Did War Affect the US Corn Industry?
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The United States is the world’s largest Corn producer and currently exports between 10 and 20 percent of its annual production. Since most of the competition is located South of the US, producers plant their Corn after discovering the size of the US crop, thereby providing a quick, market-oriented supply response to short US crops. Other significant producers, including Brazil, Ukraine, Russia, India, and South Africa, had important Corn exports when their own crops were bountiful or international prices were attractive. This usually allows great opportunities for the US.
US Corn production is projected to be 14,460 million bushels (1 bushel =.0254 metric ton) in 2022/23, a 4.3-percent decline from the 2021/22 estimate. These decreased production projections result in tighter projected supplies and reduced use for the year. The season-average farm price for Corn in 2022/23 is projected at $6.75 per bushel, compared with the current 2021/22 estimate of $5.90. US Corn exports are projected down 1.5 million tons to 62 million, still the 4th highest Corn exports on record.
In USDA weekly report, Corn production harvest tends to get lower due to the worsening condition of the crop amid heat waves in Midwest, and hot and dry weather during crucial Corn pollination is likely to weigh on the crop due to harvest in September. The second Brazilian crop is also impacted by droughts and is expected to drive additional new crop demand to US markets. Moreover, the war in Ukraine is supporting old crop demand, while China has continued to purchase US Corn, and with every additional sale, US stocks decrease. This situation keeps tightening US’s domestic use too.
In 2022, the US exported to 73 different countries. According to Agflow’s August data China, Mexico and Japan were major importers.
Ukrainian effect on the US
Ukraine is forecasted to be the world’s eighth-largest Corn producer and the fourth-largest exporter in the marketing year 2022/23. Until May 2022, Ukraine had shipped about 90 percent of its expected Corn exports for the 2021/22 marketing year. Ukraine’s 2021’s Corn exports were valued at $5.9 billion, with 32 percent of shipments destined for China and another 30 percent to the EU, followed by Egypt, Iran, and Turkey.
The war in Ukraine is affecting global trade flows tremendously. When Ukraine’s grain exports were blocked, China and other major importer countries were forced to seek alternative sources of supplies. China needed a new massive supplier and has agreed to import Corn from Brazil. China has more than doubled its annual Corn imports in the past decade, mainly for livestock feed, with most of the increased purchases in recent years coming from the US and Ukraine. Ukraine first began shipping Corn to China in 2014, providing nearly one-third of all China’s Corn imports by last year.
China’s deal with Brazil will initially aim to replace at least part of Ukrainian imports. However, in the longer term, it could potentially take export share away from the US and increase further Corn production in Brazil. Even though projected Corn output is lowered and domestic demand limits US supplies of Corn, Ukraine’s temporary absence in the competition will benefit US export in 2023.
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