US Corn Export Outlook

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With six weeks left in the 2018-19 marketing year, US corn exports are struggling to find their footing as South American loadouts take center stage. US loading marketing year-to-date have totaled 43.60 million tonnes with the USDA now forecasting 2018-19 export demand at 53.34mn tonnes. The US will need to ship 1.62mn tonnes per week to reach that target. This appears nearly impossible to us given that the United States is shipping about a third of that at the moment. With total shipments hitting 1.85mn tonnes for the first three weeks of July, it’s conceivable that total loadings will only reach 2.2-2.3mn by the end of the month. In contrast, South America was able to loadout more than 2mn tonnes just last week. In other words, South America is loading more in a week than the United States might for the entire month of July. We expect downward revisions to US old crop export demand in upcoming USDA Supply and Demand reports for these reasons.

One of the most dominant regions for US corn exports has been Central and Latin America. As recently as 2016-17, the US market share was 76 percent. This share, however, has dropped since then, with a 67 percent market share for the 2017-18 marketing year.  According to ClipperData arrival data, this could decline to just 49 percent to end the current marketing year. July arrivals have only totaled 195,000 tonnes, compared to close to 1mn tonnes in July 2018, while Argentina and Brazil have been able to capture increased business due to discounted FOB prices. It’s also troublesome that since January, the overall offtake trend for this region has been moving sharply lower.

Finally, we believe there is a strong likelihood that South America will hold up to a 75 percent share of the global dry bulk corn market in the near future unless price spreads between competitive suppliers tighten. We estimate that global offtake per month is nearly 10.5mn tonnes on average. Based on this, South American loadouts per month could top out at just short of 8mn tonnes, a new record high. With US FOB corn prices trading upwards of $20-25 per tonne premium to South American origin, it is clear that export demand is being rationed, and will likely fall further in the months ahead.