China gave an unpleasant surprise to the corn market operators. Local officials revised estimates of corn production in the country over the past 10 years in the direction of growth.
So, only in 2017, they increased grain production by 20%. As a result, the corn reserves rapidly grew to almost 150 million tons, which the USDA immediately integrated into the global balance.
Thus, in general, the upward report of the American department in the corn market instantly turned into a “bearish” one. However, if you look at this situation objectively, the huge reserves of corn in China, in general, do not affect the global balance at all. It is because this corn does not enter the global market.
That does not mean at all that in 2018 China will import less grain. The Ukrainian producers are so afraid of this.
First, in China, the demand for corn from the ethanol industry is growing. Secondly, the country significantly reduced imports of sorghum and barley, which should compensate for the increased purchases of corn.
Thirdly, the level of prices in the domestic market remains a record for the last three years. Therefore, quite logical questions arise: are the reserves of corn really as high in the country as the Chinese statistics claim, and how much can we believe it, in general?
By the way, the latter question has been unanswered for many years. The secrecy of the Chinese information sphere is often used as a tool for manipulation.
As a result, we predict that this season, Chinese companies will import about 5 million tons of corn, the lion’s share of which will be of Ukrainian origin. And we are already seeing the loading of grain in the ports of Ukraine, preparing to the export to China.
In addition to the bearish adjustments to the Chinese balance, the USDA reports a decline in the estimate of US corn production by almost 4 million tons, as well as a 2.5 million tons increase in Ukraine’s harvest, which looks completely logical, given the record-breaking harvest this year.
The USDA expects Ukrainian production in the amount of 33.5 million tons. But we estimate it 0.5 million tons more.
At the same time, the Ukrainian corn market fell down significantly in mid-October under the pressure of a large supply of new crops, logistical problems and relatively weak external demand.
CPT prices in ports dropped to $147/t and on FOB they fell to $ 162/t. As a result, the Ukrainian grain became the most competitive in the world market, displacing American corn.
This stimulated the growth of demand for our grain from the world importers. As a result, prices began to go up gradually.
Viktoriia Blazhko, the Agritel analyst
Source: Agro FM