The Van Trump Report

Weather and War… Will There Be Any Corn Supply Worries?

Corn harvest is now underway in many parts of the US, with the crop on track to be the smallest since 2019 thanks to a string of weather hiccups this season. Weather has also negatively impacted corn production for a few other major growers around the world, including China and the EU. Combined with the geopolitical fallout in major corn producers Russia and Ukraine, some worry that the world could soon find itself in a much tighter supply situation.

The US will remain the world’s top producer by a very wide margin with output currently pegged at 14.4 billion bushels (nearly 365 MMT) by the USDA. However, that’s expected to be revised down as harvest progresses and the full extent of drought damage is realized. ProFarmer’s recent crop tour pegged the crop at 13.76 billion bushels (approximately 350 MMT). Below is a little more information about critical corn harvests around the world and some of the various production concerns that traders are currently monitoring.
CHINA – While China produces massive amounts of corn, total production falls short of what the country consumes so none of that supply makes it onto the global market. This year’s harvest by the world’s number two corn producer, pegged at 271 MMTs, is threatened by extreme summer drought conditions that took a toll on key corn-producing regions. That has the bulls thinking that China might need to import even more corn in 22/23, which USDA already pegs at 18 MMTs. This of course would translate to even more strain on available global supplies. In 2021, nearly 70% of China’s corn imports came from the United States with 30% from Ukraine. 

The world’s third-largest corn producer is currently wrapping up harvest of its second crop corn, aka safrinha crop. The second-crop now accounts for about 75% of total corn production and makes up the bulk of exports. Some disappointing yields led to a recent reduction in this year’s total corn production to 114.6 MMT by state crop agency Conab with the safrinha crop accounting for over 87 MMT. That compares to the USDA’s total corn production estimate of 116 MMTs. It’s not clear how much corn the country might have available to export in the last half of 2022 but China is already making moves to take part of it. The two country’s signed an export agreement earlier this year to allow for Brazil’s GM corn imports which were originally scheduled to begin next year. That agreement has since been amended and officials estimate at least 1 MMT will be sold to China in the last part of the year. Other destinations for Brazilian corn include Japan, Iran, Vietnam, South Korea and Egypt. Looking ahead, most are starting with a 126 MMT forecast for Brazil’s upcoming 2023 production and a jump in exports to a record 47 MMTs. For reference, the first corn crop in Brazil is planted from September-December and harvested in February-May, while the second crop is planted in February-March and harvested in June-July.

EUROPE –  The European Union is currently witnessing its most severe drought in years which has led to expectations for a much smaller corn crop. Several sources inside the trade are thinking total EU production could fall to 50 MMTs, down from nearly 71 MMT in 21/22. The USDA recently reduced its forecast from 68 MMTS down to 60 MMTs. As a result, EU exports are going to be much smaller than they had been forecast. 

The world’s fourth largest corn producer is wrapping up a 21/22 harvest of around 53 MMT. A majority of the country’s production is exported with 21/22 corn shipments pegged at around 39 MMT. At least 30 MMT has already been exported. Looking ahead, new-crop production is forecast at 55 MMTs and exports are forecast at 41 MMTs. The top export destinations for Argentine corn are Vietnam, Algeria, Egypt, South Korea, Peru, Saudi Arabia, Malaysia, Chile, Japan, Morocco. For reference, more Argentine corn production has shifted towards late season planting from December onwards, with some 55%-60% of expected corn planting to come in that period. Early-planted corn in Argentina is harvested in March through April, while harvesting of late-planted crops generally goes through July. It’s all about the upcoming weather.

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