Raw materials 2022: Ukrainian corn prices expected to be strong on demand, costs rising

Strong points

Firm demand to support prices in the first half of 2022

Record Ukrainian maize harvest could turn bearish in first half of 2022

The increase in the cost of inputs is reflected in the prices; unlikely to interfere with planting

Ukrainian corn prices are expected to be high throughout the first half of 2022 due to demand from major importers and a potential drop in production in South America.

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Ukraine, one of the world’s largest corn producers, has seen firm prices in recent months at China’s request and harvest delays, despite bumper harvest expectations.

In MY 2021-22 (October-September), Ukraine is expected to produce 40 million tonnes of maize, nearly 10 million tonnes more than last year, according to S&P Global Platts Analytics, with an export potential 38% higher this year at 33 million. Mountain. However, some analysts have predicted a corn harvest of over 40 million tonnes. If the higher potential holds true and the additional volume is harvested, it may be a bearish factor in 2022.

The global maize balance also appears heavier than last year, putting pressure on the world maize market. The United States Department of Agriculture, or USDA, estimated the 2021-22 global corn production at 1.208 billion tonnes, up 8% from the previous year, with ending stocks rising 4% to 305, 5 million tonnes, according to its global agricultural supply in December. and Demand Estimates, or WASDE, report.

However, prices have remained firm in Ukraine following harvest delays, resulting in low availability at ports and decent demand from China.

Strong demand from China

China imported 3.3 million tonnes of corn from Ukraine from October to December, with around 700,000 tonnes of produce already for January, according to logistics companies and market sources.

China is expected to continue importing corn from Ukraine in the first half of 2022, sources say, with Ukraine’s total corn imports for the 2021-22 crop year likely to be 6 million to 7 million tonnes. “It seems that at present, China still likes the Non-Genetically Modified Corn label. This is why Ukraine is still in a pretty good position,” said Matt Ammerman, Commodity Risk Manager, Vice President of the Eastern Europe / Black Sea region at Stone X..

China’s pig herd recovering from African swine fever in 2018-2019 – when up to 40% of the pig population was lost – as well as the ambition to become self-sufficient in pig production have maintained the country’s imports. countries on the move. China’s maize demand for 2021-2022 has been estimated at 26 million tonnes by the USDA.

However, China’s maize production in MY 2021-22 increased to 272.55 million tonnes from 260.67 million tonnes in MY 2020-21, according to estimates by China’s agricultural supply and demand. This raised doubts about China’s corn import intentions. Platts Analytics estimates that China’s corn imports for 2021-22 will be 22 million tonnes.

At the same time, the pace of Ukraine’s exports has been the same as last year so far due to falling demand from other importers, harvest delays and tight logistics in the country. Exports from October to December amounted to 8.8 million tonnes, according to the agriculture ministry and market participants, the same level as last year.

Imports of maize by the EU – the main importer of maize from Ukraine – were held at the same level over the year at around 15 million tonnes by the USDA.

The EU imported 6.5 million tonnes of maize from July 1 to December 1. January 19, 2021, according to the European Commission, up from 8.2 million metric tonnes during the same period in 2020. This offers good opportunities for Ukrainian maize in the first half of 2022, although it will compete with the Brazil for the EU market.

Meanwhile, safrinha maize in Brazil, which accounts for most of the country’s exports, will not hit the market in significant quantities until July 2022.

Fierce competition unlikely in the first half of 2022

Ukraine will also compete with Argentina in the first half of 2022 for destinations in the Middle East in particular. Harvest is expected to start from mid-February to March in Argentina. “Argentina, on the other hand, is likely to be strong competition for Ukraine given the price advantage,” Ammerman said.

However, corn harvest conditions in Argentina deteriorated due to dry and hot weather conditions and only 58% of crops were reported to be good to excellent as of December 30, according to Buenos Aires Grains Exchange, or BAGE.

Even though rains are expected in the coming weeks, Argentine maize production in MY 2021-22 could decline from current estimates of 57 million tonnes per BAGE and 54.5 million tonnes per BAGE. USDA. This should support the prices.

Increased cost of inputs

The higher cost of fertilizers around the world will increase the cost of producing corn, and potentially prices, sources said, although the impact may be limited, they added.

In Ukraine, the cost of growing corn is likely to increase by around 30%, sources say, leading to some reduction in fertilizer use.

Farmers are expected to have a financial reserve this season, however, following high corn prices, said Elena Neroba, market analyst for grain trading company Maxigrain. This allowed farmers to finance the spring planting campaign with almost no reduction in fertilizer inputs, Neroba added.

Explore this topic: Commodities 2022


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