World Grain - January 2019 - 18

GRAINMARKET REVIEW
Monthly corn prices

GRAINS
Corn firms slowly in a market
facing political risks
by Chris Lyddon

Corn prices have moved up slowly in recent months, but there
is a warning, in a world of trade turbulence, that volatility remains a risk, especially as the market is affected by the international trade policy environment.
The U.S. Grains Council in its Market Perspectives for Dec.
20 noted: "Cash corn prices in the U.S. are trending higher amid
strong export demand and quiet farmer selling. Futures have been
XQDEOHWRVXVWDLQDVLJQL¿FDQWUDOO\VLQFH1RYHPEHU¶V*PHHWings, but cash basis levels have strengthened substantially."
The Council reported a 2.5% fall in March corn futures during the previous week "as bears have been aggressive sellers
on rallies."
"Fundamental news has been somewhat light, as is typical
for this time of year, leaving the market to lean more heavily on
technical indicators for direction," the UGC said. "Still, some
demand-side fundamentals remain supportive for the contract
going forward."
A week earlier, the USGC described the December World Agricultural Supply and Demand Estimates report as "expectedly
uneventful with modest additions to world ending stocks not exHUWLQJPXFKLQÀXHQFHRQWKHFRUQPDUNHW´
Cash prices at that time were up by 13% in comparison with
the same date a year earlier.
"Without strong U.S. exports or a supply shock somewhere in
the world, it seems March corn futures will continue their sideways trend, slowing grinding higher," the Council's note concluded.
Rabobank, in a report called "Outlook 2019: Trade War Turbulence, With Softs Landing," said CBOT corn prices remained
stubbornly low throughout 2018, despite tightening inventories
across both the United States and globally, making it "the second consecutive year of tightening since record 2016-17 world
stocks."
"Acres fell out of favor in 2018 U.S. summer plantings, while
Brazilian 2017-18 safrinha faced a challenging drought after late
plantings," Rabobank said. "Volatility has heightened on CBOT
corn in the past 12 months ... amid record demand, emerging
global trade tensions, and record U.S. yields.
"This volatility sets a precedent for the 2018-19 season, making risk management increasingly vital. Arguably the largest single factor across the agri-commodity spectrum is Chinese tariffs
on U.S. imports, including corn and soybeans, which are anticipated to remain in the medium term. This factor alone drives distortions into the global agri-markets, including corn prices, which
are expected to be felt more dramatically in 2019-20."
18

150

100

May

Jun

Jul

Aug
2018

Sep

Oct

Nov

Source: USDA, World Bank

COARSE

(in U.S. dollars per tonne)

200

In its Grain Market Report at the end of November, the
International Grains Council (IGC) reported a month-onmonth fall in U.S. corn futures of 2%.
"Traders have trimmed their speculative net long position in
UHFHQW ZHHNV DV KDUYHVW GDWD FRQ¿UPHG SURVSHFWV IRU DPSOH
supplies," the IGC said. "Stiffer global export competition also
weighed on sentiment."
For barley, there had been a 4% fall in a month in the IGC's
barley sub-index, led by a sharp fall in Australia.
"Nevertheless, amid tight global supplies and solid export demand, the sub-index remains much higher year on year, by some
24%," the IGC said. "Despite some support from poor production prospects, export quotations in Australia weakened sharply
following China's announcement that it is to launch an antidumping probe into barley imports from that origin."
Sorghum prices in the United States were affected by weakness in corn, while in Australia the market in the crop was pressured by favorable weather for planting and weakness in wheat
and barley.
The IGC said U.S. oats nearby futures showed little change, in
mostly technical activity. Canadian export quotations were softer,
although still 15% up on the year, "underpinned by reduced supply and solid demand, including from non-traditional buyers owing to limited availabilities at other origins."
In its Feed Outlook report, the USDA's Economic Research
Service highlighted one change in the numbers on corn in the
December WASDE report. The USDA raised its estimate for
Ukraine's 2018-19 corn crop to 35 million tonnes from a previRXV¿JXUHRIPLOOLRQDQGDWWKHVDPHWLPHUDLVHGLWV¿JXUHIRU
Ukraine's exports to 28 million tonnes from 27 million.
7KH(56UHSRUWH[SODLQHGWKDWWKLV¿JXUHSXW8NUDLQHDKHDG
of Brazil and Argentina, making it the second largest exporter of
corn after the United States.
"Since 2010, Ukraine has more than tripled its corn production, as well as increased exports almost sixfold," the ERS said.
"Ukrainian corn is very price competitive, which facilitates expansion of export markets."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you - Send comments and inquiries to
worldgrain@sosland.com. For reprints of WG articles, e-mail reprints@sosland.com.

January 2019 / World Grain / www.World-Grain.com

http://www.World-Grain.com

World Grain - January 2019

Table of Contents for the Digital Edition of World Grain - January 2019