Recent Trends in U.S. Corn Export Demand: Record Early Season Sales
December 6th, 2016
The USDA released the November report of the World Agricultural Supply and Demand Estimates (WASDE) on November 9, 2016. Compared with the October 2016 WASDE report, the November report forecasts higher corn production, increased food, seed and industrial (FSI) use — including corn use for ethanol production, larger ending stocks, and slightly higher prices during the 2016/17 marketing year.
Due to increased expected yield, now at a record 175.3 bushels per acre or 1.9 more bushels per acre than last month’s projection, the production forecast for the 2016/17 marketing year now stands at 15.226 billion bushels, which is 169 million bushels up from last month’s projection and a record high. If realized, production would be up 1.625 billion bushels from the 2015/16 marketing year estimate. Supply is projected at a record of 17.013 billion bushels. Ending stocks were up 83 million bushels to 2.403 billion bushels from the October forecast and 665 million bushels above last year’s estimate. The projected ending stocks would be the highest since 1987/88 (2.4 billion bushels). The projected price, now at $3.30/bushel, is up $0.05/bushel from last month’s projection, but down $0.31/bushel from last year’s estimate. The projected price increase this month is based on early-season price strength.
The new report also included an upward revision to the non-ethanol food, seed and industrial (FSI) use for the 2014/15 and 2015/16 marketing years, based on updated usage estimates for sweetener and starch use (USDA-ERS, 2016). Given that stocks are known, reductions were made in feed and residual use during those years. 2016/17 corn use for feed and residual remained the same as last month’s forecast at 5.650 billion bushels, but is projected to be up 520 million bushels from last year’s estimate.
Meanwhile, 2016/17 FSI use was up 85 million bushels compared with last month’s forecast, with an increase of 60 million bushels for non-ethanol FSI use and 25 million bushels for corn for ethanol use. The new projection for corn use for ethanol and products stands at 5.300 billion bushels compared with 5.206 billion bushels in 2015/16 (up 1.8%). With an ethanol yield of 2.8 gallons per bushel of corn, the 2016/17 projected corn use for ethanol (5.300 billion bushels) would yield 14.840 billion gallons.
The Short-Term Energy Outlook report published by the U.S. Energy Information Administration on November 8, 2016 projected fuel ethanol production between September 2016 and August 2017 would average 0.994 million barrels per day, resulting in an annualized ethanol production of 15.234 billion gallons during 2016/17 compared with 14.840 billion gallons. That is the ethanol production that could be achieved based on USDA November projection for 2016/17 corn use for ethanol production and assuming a conversion factor of 2.8 gallons of ethanol per bushel of corn. On November 23, 2016, the Environmental Protection Agency released its final Renewable Fuel Standard (RFS2) renewable volume obligations (RVOs) for 2017 in which the implied RVO for conventional biofuel, such as corn ethanol, will be 15.0 billion gallons, up from 14.8 billion gallons proposed in May. This could mean next month’s WASDE projection for 2016/17 corn use for ethanol production might be adjusted higher.
U.S. Corn Exports
Total corn exports in 2015/16 reached a volume of 1.898 billion bushels (see Figure 1). The main U.S. corn exports destinations during the 2015/16 marketing year (September to August) were Mexico and Japan, importing 525 million bushels (28%) and 410 million bushels (22%) of total U.S. foreign demand for corn in 2015/16, respectively. Colombia, South Korea, and Taiwan imported 179, 117, and 81 million bushels, respectively. These three countries combined represented 20% of total U.S. corn exports in 2015/16. Total 2015/16 U.S. corn exports were valued at $8.671 billion. Impacted by low corn prices, this value declined by $279.5 million from the 2014/15 estimate ($8.951 billion).
The 2016/17 corn exports projection was unchanged from last month’s USDA WASDE projection at 2.225 billion bushels. But projected 2016/17 exports are up 327 million bushels compared with last year and are based on strong early season sales and shipments. The projected exports would represent 14.6% of 2016/17 expected production and would be the highest since 2007/08 (see Figure 1).
Figure 1. U.S. Marketing Year Corn Exports
The U.S. export sales reported by USDA-Foreign Agricultural Service (FAS), based on reports from weekly exports for the November 11 to November 17, 2016 period, indicates net corn sales* of 66.5 million bushels (1,688,790 MT) were up 2% from the previous week (65.4 million bushels) as well as up 31% from the previous four-week average (50.9 million bushels). Weekly export sales during the 12th week of the 2016/17 marketing year (23.3 million bushels) rose 9% compared with the previous week (21.3 million bushels). Figure 2 shows weekly export sales were down 4.0% compared with the same period in 2014/15, but remained up 11.3% relative to the same period in 2015/16 (see Figure 2). As the figure indicates, since the beginning of the current marketing year to November 17, 2016, weekly export sales have outpaced the previous year and most weekly sales in 2014.
Figure 2. U.S. Corn Weekly Exports (All Countries)
Total commitments** by November 17, 2016 increased 6% to 1.155 billion bushels compared with the previous week (1.088 billion bushels), with 430.4 million bushels from accumulated exports*** and 724.5 million bushels in outstanding sales . Outstanding sales**** by November 17, 2016 were up 79% year over year (404.4 million bushels).
As Figure 3 indicates, accumulated and outstanding exports to main U.S. corn export destinations so far this marketing year (first 12 weeks of the 2016/17 marketing year) have been up compared with the same period last year, with Mexico’s total commitments (333 million bushels) up 24.8% year over year and representing 28.8% of total commitments to all countries. Likewise, Japan, South Korea, Colombia, Peru, and Taiwan export commitments outpaced last year’s.
Figure 3. U.S. Accumulated and Outstanding Corn Exports by Selected Countries
Figure 4 indicates U.S. quotes have remained the most competitive among major corn exporters since February 2016, even after rising above $192/ton due to strong demand and constrained competitor supplies. As indicated in the Grain-World Markets and Trade report published by USDA-FAS on November 9, 2016, since October 2016, the spread between major FOB export quotes has reduced. The Brazil quote declined slightly based on planting progress. The quote declined $2/ton to $185, whereas Argentina’s quote increased $2/ton to $174. The U.S. and Black Sea quotes were pegged at $167 and $171/ton, respectively. The U.S. corn price continues as the lowest on an FOB basis. The USDA-FAS report also indicated world corn production is expected to increase 7.4% to a record 40.570 billion bushels in 2016/17 from 37.789 billion bushels last year, with the U.S. as the largest global corn producer, followed by China (8.504 billion bushels), Brazil (3.287 billion bushels), the European Union (2.373 billion bushels), and Argentina (1.437 billion bushels)*****. Global ending stocks in 2016/17 are projected to grow 4.2% to 8.590 billion bushels compared with 2015/16. These large global supplies add downward pressure on corn price.
Source: USDA-FAS (Grains: World Markets and Trade, Nov. 2016)
Figure 4. Corn Daily Export Bids
With large U.S. corn production forecast for 2016/17 plus large U.S. ending stocks, U.S. corn price, although projected slightly higher this month, continued below last year’s estimate. This favors large corn shipments from the U.S. The U.S. is expected to continue as the global leader in corn exports. Brazil and Argentina exports are expected to rebound in 2016/17.
U.S. Energy Information Administration (EIA), 2016. Short-Term Energy Outlook (November 2016).
U.S. Environmental Protection Agency (EPA), 2016. Final Renewable Fuel Standards for 2017, and the Biomass-Based Diesel Volume for 2018 (November 23, 2016).
USDA-ERS (U.S. Department of Agriculture, Economic Research Service), 2016. Feed Outlook (November 9, 2016).
USDA-FAS (Foreign Agricultural Service), 2016. Grain-World Markets and Trade (November 9, 2016).
USDA-WOAB (USDA-World Agricultural Outlook Board) 2016. World Agricultural Supply and Demand Estimates Report (WASDE) (November 9, 2016).
*Net sales or net changes is the sum total resulting from new export sales, increases resulting from changes in destination, decreases resulting from changes in destination, decreases resulting from purchases from foreign sellers, and cancellations resulting from contract adjustments, buybacks, loading tolerances, changes in marketing year, or change in commodity.