Asian feed corn buyers are entering 2023 after high market volatility and record prices in 2022, with demand facing some resistance in the new year as Asia grapples with inflation and sluggish economic growth.
The global grain industry suffered the aftermath of the Russia-Ukraine war in 2022 as it recovered from the pandemic. Platts, part of S&P Global Commodity Insights, valued Northeast Asia CFR corn at a record $425/mt on March 14 as war reduced Ukraine’s corn supply and US cultivation was delayed, while a bumper crop of Safrinha in Brazil brought some relief.
China diversified its corn suppliers away from Ukraine and the US, in a move that saw Brazilian corn flows to China accelerate in November following phytosanitary certifications and approval of GM crops.
South Korea, a major buyer in Asia, imported consistent volumes of corn year over year despite record high corn prices and volatile physical and futures markets. South Korean customs data showed that 10.79 million tons of corn were imported from January to November 2022. Trade records compiled by S&P Global show that the country bought 737,700 tons of corn in December, for a total of 11.5 million tons in 2022.
China’s appetite for Brazilian corn
China’s Brazilian corn purchases are expected to increase competition for supplies to Asian destinations. However, the U.S. Department of Agriculture, or USDA, has forecast another record corn crop in Brazil of 126 million tonnes in the 2022-23 (October-September) season, up 10 million tonnes year-on-year, which could allay supply concerns. Brazil’s grain export group Anec estimates that Brazil could export up to 5 million tons of corn to China in 2023.
Since the launch and expansion of the Black Sea Grains Initiative, China has imported over 1.3 million tons of corn from Ukraine as of Dec. 27. However, slow inspection rates are encouraging China to further reduce its reliance on Ukrainian corn.
The USDA China Attaché expects Chinese domestic corn production to remain stable at 270 million tons in 2022-23. The deficit volume covered by imports will depend on China’s corn balance and the economy’s recovery after COVID-19, market sources said.
“Some recovery in Chinese demand is expected in 2023. It will be a bigger game changer for corn prices next year compared to Argentina’s crop,” said a Singapore-based grain trader.
The USDA and S&P Global estimate that China will import 18 million tons of corn in 2022-23. S&P Global has highlighted a potential downside to this number due to COVID-19. According to customs data compiled by S&P Global, China imported 23.9 million tons of corn between 2021 and 2022.
Demand from Southeast Asia weak
Vietnam, once a top global corn importer, has seen imports slow due to African swine fever, higher interest rates, a weak Vietnamese dong and increased inflation.
Vietnam’s corn exports are expected to decline for the second straight year. The country’s corn imports totaled 8.4 million tons from January to November 2022, according to customs data, while 2021 corn imports fell 20% from 2020 to 9.7 million tons. Market participants doubt that total imports will exceed 9 million tons in 2022.
Shoppers in Asia went hand-to-mouth in early 2023 due to increased prices for agricultural produce and feed commodities. “[Southeast Asian] Buyers are not actively seeking requests for delivery several months in advance right now,” said a Singapore-based trader.
The biggest problem is that buyers aren’t keen to push for more deferred purchases, and that’s partly due to uncertainty about growth in the local economy and rising financing costs, another trader said.
Substitution of feed wheat probable
Supply constraints and high corn prices in the US will spur buyers to seek alternatives pending another bumper crop from Brazil.
Feed wheat could replace corn in the first half of 2023 after another record wheat harvest in Australia and high volumes of feed wheat.
“Argentina’s first corn crop is smoked by the drought and the Black Sea remains a war event. With US domestic demand still strong, January-May focus will be on Australian feed wheat,” said a trader.
Indian corn alternative
Southeast Asian buyers have turned to India for cheaper sources of corn in 2022, but such a strategy has its flaws going into 2023. India may consider curbing exports in response to rising domestic corn prices, which are hurting the domestic feed and poultry industries pressure, market sources said.
While the market remains skeptical, it is too hasty to rule out the likelihood of an export ban. Traders said the Southeast Asian market would turn to South American corn or nearby origins like Pakistan and Myanmar in 2023 when export restrictions on Indian corn come into effect.
Source: Platts
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