U.S. corn market share threatened by importers and fellow suppliers alike -Braun

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NAPERVILLE — Logistical troubles and a poor 2022 crop have dampened early hopes for U.S. corn exporters, but recent global market developments could present longer-term, negative impacts on the traditional corn giant.

The United States was once responsible for more than three-fourths of world corn exports, but that share has slipped to around 30% with the rise of suppliers like Brazil and Ukraine.

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China’s recent nod toward Brazilian corn is perhaps the biggest threat to U.S. dominance, as China has emerged as a leading corn importer in recent years. Brazil has proven itself a strong producer, increasing its total corn crop by almost 20% over the last five years.

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China on Wednesday added more Brazilian corn traders to its list of approved imports, a sign that trade could begin imminently. Brazil’s exports have likely peaked for the year, and while it is thought that China may wait until Brazil’s next harvest in mid-2023, some cargoes could be sent in the meantime.

Recently, China has not shown a major appetite for the yellow grain, as its U.S. purchases through mid-October for the current marketing year were down 70% from last year.

Some experts in recent years have suggested Brazil could soon overtake the United States as top corn supplier as it did for soybeans a decade ago. Chances of that scenario coming true surge if China were to mostly or completely shift its focus to Brazil.

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That may not happen right away, but the more immediate risk is that current assumptions of China’s U.S. corn intentions are overstated, meaning actual U.S. exports could land well below current targets.

MEXICO

Mexico’s plan to ban genetically modified (GM) corn by 2024 is a head-scratcher for many given how much it uses, which is perhaps why the corn market has yet to react in a serious manner. But any potential shift as big as this one cannot be dismissed.

Mexico is the world’s No. 2 corn importer, bringing in nearly 40% of its annual consumption. About 95% is originated from the United States, and most of the imports are used in livestock feed.

More than 90% of U.S. corn is GM. Mexico has restrictions on domestic GM corn production and its yields are well below global averages, but it plans to partially meet its goals by increasing output.

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Mexico last week said it was on track to halve imports of U.S. yellow corn by 2024, which would be a loss of more than 8 million tonnes based on 2021 import volumes. It was hoping to make direct deals with farmers in North and South America to grow non-GM corn specially for Mexico’s needs.

Mexico also said last week “there are many alternatives” available to achieve this plan, but a look at tight global grain balance sheets along with sky-high prices would suggest otherwise.

Mexico is already behind schedule if it has not yet secured deals with farmers. U.S. producers are currently buying their 2023 seeds, which will supply the market through mid-2024. Argentina is planting its 2023 harvest now, though maybe Mexico has a shot with Brazil’s second corn crop in 2023 depending on when farmers there make decisions.

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UKRAINE AND RUSSIA

Reduced production and limited export volumes out of Ukraine generally mean that buyers will increase reliance on other grain suppliers. But how this impacts U.S. markets in the near term largely depends on the expectations.

Ukrainian grain exports in the last three months have probably surpassed most analysts’ predictions given how tense the situation with Russia has been. The No. 4 corn exporter this year also produced a much larger corn crop than was originally expected, increasing shipping potential.

After suspending its participation in the grain export deal last weekend, Russia on Wednesday agreed to rejoin the effort, but threatened it could pull out again if Ukraine were to misuse the Black Sea export corridor.

That warning alone suggests this specific conflict is far from over and that uncertainty must remain. The export deal expires on Nov. 19, and there is not yet word on possible extension.

Russia said if it withdraws from the agreement again, it will ensure Ukraine grain shipments to Turkey are unimpeded despite repeatedly suggesting Ukraine’s shipments should be targeting the poorest countries. Russia is a bigger grain supplier to Turkey than Ukraine. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Writing by Karen Braun Editing by Matthew Lewis)