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Volga Baikal AGRO NEWS Update on the Corn Market in Russia !!!
Corn market grew by 4% over the week.
Corn is becoming the main driver for the growth of the world grain markets!
The market for this agricultural crop has grown by 4% over the past week, according to the analytical center SovEcon. A key factor in this recovery is a sharp rise in Chinese corn appetite. According to traders, the country has already contracted 17 million tons of corn this season, Reuters wrote. USDA estimates China’s imports in the 2020/2021 season only at 7 million tons. The annual quota is set at only 7.2 million tons, and so far the Chinese authorities have not officially confirmed that it will be revised, – says SovEkon. Uncertainty over the quota is fueling the wildest speculations about real Chinese imports this season. Some market participants say that the country’s authorities may establish an additional quota of 20 million tons. The Foreign Agricultural Service (FAS) of the USDA in China also wrote about this possibility in an October report.
Another factor supporting the world corn market is a poor harvest in the Black Sea region. According to the forecast of SovEkon, The gross harvest in Ukraine in 2020/21 agricultural year will decrease from 35.9 million tons to 29.4 million tons (the forecast of the US Department of Agriculture – 36.5 million tons), in Russia – from 14.3 million tons to 13.7 million tons (15 million tons). Against the background of high world prices and significant contractual obligations of exporters, analysts from the center expect continued growth in corn prices on the Russian market.
According to the vice-president of the Russian Grain Union( RZS) Alexander Korbut, domestic purchase prices for grain are traditionally guided by the world market and by the ruble exchange rate – the weaker it is, the higher the prices. This is especially noticeable in the current season, when new niches for export deliveries are opening, in particular, to China, where demand for corn began to recover after ASF and avian influenza in the southern provinces. World prices for this agricultural crop in September were supported by forecasts of a decrease in yields in Ukraine, a decrease in production in southern Africa and Argentina. “All this gives Russia the opportunity to increase supplies, in September 250 thousand tons of corn were already shipped abroad – of course, not very much, but there is a feeling that the pace can grow,” the expert predicts. According to RZS, in the 2020/2021 agricultural year, corn exports may amount to about 3.5-4 million tons, which is lower than last year’s level (4.3 million tons).
General Director of the analytical company ProZerno Vladimir Petrichenko does not exclude lower indicators for the export of corn, despite the high prices on the world market: “This season we will see the struggle of good demand at a good price with smaller volumes of goods on the market.” The situation in Ukraine plays an important role. The country is the “main violin” in the Black Sea region in the corn trade and is among the top 4 world exporters. Now production forecasts there have been significantly reduced, which raises export prices: for example, corn of the new crop already in September cost $ 193-194 / t (FOB Black Sea), against $ 180 / t in August and $ 162 / t in September 2019, the expert notes. According to him, export prices will move up in the near future.
In this regard, Petrichenko does not see any factors for lowering domestic prices for corn, and the devaluation of the ruble also plays a role. “If extraordinary measures, such as duties, export restrictions, are not taken, prices for cereals, and corn in particular, will remain at a steadily growing level,”- agrees Alexander Korbut. “But changes in the conjuncture are possible if there are radical changes in the world market, however, before the new year and before the final data on winter crops are received, I do not see such prerequisites.”
