Corn Prices Back on the Rise

Spend Matters welcomes a guest post from Yuliya Nam-Wright of Mintec.

Corn prices are rising again! When we wrote about corn in October, prices were steadily heading south. The falls continued through to December, when prices were at a three-year low in the aftermath of a record US production and surprisingly high global stocks. However, the trend reversed at the turn of the year, and by the end of April, corn futures on CBOT were trading 20 percent higher than in the beginning of January.

Corn production in the US is still estimated at a record high of 356.7m tons, up 29 percent compared to the same time last year and global supplies are still estimated at a record high of 973.9m tons for 2013/14. So, what has changed in the past few months?


First, the crucial South American crops have come in below expectations. Dry weather conditions were experienced in Brazil at the start of 2014, reducing yields for the region. A lower planted area in Brazil also reduced production. And don’t forget about El Niño!

Brazil’s production estimate for 2013/14 is down 12 percent compared to 2012/13 levels, at 72.0m tons, whilst consumption is estimated higher. With very little imports to speak of, ending stocks are set to fall 16 percent to 11.9m tons. Similar trends can be seen in Argentina, with production down and consumption up. Argentine production is estimated at 27.0m tons, down 11 percent year-on-year with consumption set to rise 8 percent to a record 8.3m tons.

Developments in South America matter to the global market because Brazil and Argentina combined are responsible on average for around 33 percent of the world’s exports. Both countries’ exports are estimated to fall in 2013/14 with their combined exports expected to drop to only 28 percent of the global market. More importantly, harvest in the southern hemisphere occurs from April to May – a time when fresh supply is needed to boost global stocks.

Secondly, international developments have affected the wider grains market, including corn. Ongoing political uncertainty in Ukraine has raised demand for exports from the U.S. Although supply from Ukraine has not been disrupted so far, demand has started to shift towards other export sources to mitigate potential risks. Supply from Ukraine is important because in recent years it has emerged as major player in the maize market. In 2013/14, Ukraine is projected to become the world’s third largest exporter with its exports estimated at 19m tons.

Finally, all eyes will be on the U.S. in the next few weeks as the planting season continues. So far though, the sowing progress has been slow due to April’s cold and wet weather in the eastern Corn Belt. This has raised concerns over lower planted areas and raised global prices further.

It is still very early in the season however, and the delay could be negated if the weather turns more favourable in May.

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