US corn exports are facing increased competition from Brazil and Argentina, the two South American nations that are offering cargoes at competitive prices on the back of high crop output, a trend that could put downward pressure on Chicago corn prices in coming months, analysts said.
The changing trend should potentially see corn exports from Brazil and Argentina making double-digit gains in the 2018-19 marketing year, while the US corn exports will drop marginally, as buyers in South Korea, Taiwan, Japan, China, Egypt, and other traditional destinations of the US cargoes queue up for more attractively-priced South American offers.
Corn production in Brazil and Argentina in 2018-19 is forecast to be 17.1% higher at 96 million mt, and 47% higher to 47 million mt, respectively, from the year ago levels, according to the April World Agricultural Supply and Demand Estimates, WASDE, report by the US Department of Agriculture.
Exports from Brazil are seen rising 23% to 31 million mt in the current year, whereas Argentina is likely to export 30.5 million mt of corn, 45.2% higher than last year, USDA said in the report.
The US, however, is likely to see a 1.3% year on year drop in its corn production to 366.3 million mt, and a 5.7% drop in its exports at 58.4 million mt, the USDA data showed.
Export prices for corn from Brazil and Argentina are at relatively lower levels since February due to higher availability, whereas export prices for the US corn remain elevated because of concerns over planting delays caused by flooding in the Midwestern corn belt, the USDA said in its April grain report.
Argentine corn prices have fallen about $3/mt to $159/mt , while Brazilian prices, reflecting improved prospects for second-crop corn, were down $25/mt to $165/mt. US corn prices fell only $3/mt to $170 as larger than-expected planting intentions were mostly offset by concerns over planting delays and weather-related river logistics complications, according to the International Grains Council.
Corn prices in the US may witness additional pressure around July-August, as that is the peak shipping period for the second corn crop from Brazil, Reilly said, adding that the second corn crop from Brazil is expected to be least at 97 million mt, higher than USDA's projection of 96 million mt.
With abundance of corn in the global market, sales and shipments of the US corn have been slower than expected in recent months, the USDA grain report said. Outstanding sales by the end of March totaled about 13 million mt, relatively lower than the volumes recorded in the same period in the past several years, a sign that demand for the US corn would remain subdued for the rest of the year, it said.
The pace of exports from the US suggests that the country might fall short of meeting the USDA's export projections as competition from Brazil and Argentina intensifies. Lower exports from the US would also mean that the US stocks will grow larger which will keep prices under pressure into the 2019-2020 crop season as well, he said.
The USDA, in its April forecast, said it expects US ending stocks of corn for the 2018-19 year to be at 51.7 million mt, higher than its March forecast of 46.6 million mt.