Posted on April, 6, 2023 at 05:32 am
Volatile wheat prices have certainly dominated news in recent weeks and months in grain markets. However, over the past few weeks we have been seeing a different movement in maize markets, with less significant falls than wheat.
Today, I look at the reasons why this is happening, whether this might continue and what this could mean for maize prices – the floor to the grain market.
Since the start of 2023, old crop (May-23) Chicago maize futures have fallen 2% and new crop futures (Nov-23) have fallen 8% over the same time frame. So, let’s compare this to wheat markets. Over the same period, May-23 and Dec-23 Chicago wheat futures have fallen 12% and 9% respectively, with Paris wheat futures dropping 17% (May-23) and 10% (Dec-23). UK feed wheat futures also have fallen 18% (May-23) and 7% (Nov-23) over the same period too.
There seems to be several key factors to why maize markets have not seen falls to the same extent as wheat markets. Firstly, the Argentinian supply outlook has been reduced on drought conditions. In addition to this, tight US stocks, combined with continued Chinese buying has also provided some support to markets in recent weeks. This is also in the context of war ongoing in Ukraine too, though maize has continued to leave Ukraine. Lastly, wheat markets have been pressured, unlike maize, by competitive Black Sea supplies.
Maize harvest has started in Argentina, though at 7% complete nationally to 29 March, this lags behind the same point last year of 14.4% and the five-year average of 16.7% complete according to the Buenos Aires Grain Exchange.
It is understood that early maize yields have been impacted by hot and dry conditions during grain filling and yields of late planted maize are expected to be impacted by high temperatures during pollination (Soybean and Corn Advisor). The Argentinian crop is currently forecast at 36Mt by the Buenos Aires Grain Exchange, down from 52Mt in 2021/22.
In addition to Argentinian crop concerns, as well as the ongoing war in Ukraine impacting maize harvest, US maize stocks as at the end of March were tighter than seen in previous seasons.
As the world’s largest maize exporter for the past five years, accounting for an average of 33% of global maize exports (2017/18 – 2021/22), the US is important to global availability (USDA). US maize exports are expected to be down on the year, with the USDA forecasting the US to be the second biggest global maize exporter in 2022/23, after Brazil who have had an ample crop.
Finally, flash sales of US maize to China, has also lent some support to prices in recent weeks. So how much are China importing and from where?
We can see in the graph that while China is still purchasing from the US, and Ukraine, they are more heavily relying on Brazilian maize this season too.
Despite some support remaining in the maize market, old crop wheat prices continue to fall, pressured by competitive Black Sea wheat.
I have talked about many factors supporting maize markets short term, with tight US stocks and reduced Argentinian supply, met with continued Chinese purchasing, but how much of this is priced in? Short term, demand may be a key influence on price direction, including the outlook for Chinese buying, as well as demand outlets for ethanol in the US and Europe.
However, what we do know is that supply looks to increase going forward. The large Brazilian crop is on the market, plus a large US maize area is forecast for 2023/24 (37.2Mha, up 4% on the year). Plantings have started too and are 2% complete, as at 02 April. US harvest is due in September. If this large crop is realised, we could expect some maize price pressure as the year progresses.