Demand for Argentinian corn grain remains high.
With the Argentine corn harvest mid-way completed and the recent release of the United States Department of Agriculture (USDA) report on global corn production, this could prove to be a positive year for Argentina’s participation in the global market and consolidation as the second-largest exporter of corn.
After years of an extended focus on soy and its impact, corn is now starting to play an important role in the world of commodities — thanks to greater world consumption led mainly by China, not only for food but also as animal feed.
An ever-increasing global population and a subsequent increase in the demand for pork and poultry would indicate that corn production is only going to rise in further years.
Advances in biotechnology have also allowed countries such as Brazil, which used to import its corn from Argentina, to grow over five years to become the fourth-largest exporter of the crop.
The latest USDA annual report on global crop production, which estimated production for 2012/13, raised several eyebrows with its prediction that US corn production would reach an approximate level of 375.68 million tons — a record number. This has been achieved through sowing the largest amount of land in the past 50 years: some 36 million hectares of corn.
“The market is still finding it difficult to digest that a super harvest of 375 million tons in the US (and 193 million in China) has not had a downward effect on prices, at least during the first days following the report’s release. This may indicate some suspicion of the estimates, or a much firmer demand than the market expected,” grain expert and head of AgriPAC Consulting, Pablo Adreani, told the Herald.
Brazil’s estimates have also caused some surprise, as it is the first time in 10 years that the corn harvest is set to surpass the soy harvest, according to consultancy Céleres.
In estimates released last week by the group, “Brazil’s 2011/12 soy bean harvest will reach 64.95 million tons, compared with 67.97 million tons forecast in April.” As for corn, Céleres’ latest estimate is a total harvest of 65 million tons.
These results help the G3 (Argentina, Ukraine and Brazil) consolidate itself as the second-largest group of corn exporters with a total of 42 million tons, against the 48 million that the US is projecting to export.
But at a local level, “the successive policies of the current Argentine government, the scheme to limit exports implemented by the Secretary of Commerce, are now the main factor that does not allow Argentina to consolidate as the second-largest corn exporter. Based on this alone, this year Argentina runs the risk of being displaced by Ukraine as the second-largest exporter. Ukraine is just starting to participate in the global market, and has done surprisingly well,” Adreani added
Ukraine and Brazil are currently Argentina’s main competitors, thanks to the continued advances in biotechnology that will give both these countries the tools to continue with their increased production. The corn market appears to be becoming more competitive and, based on the market reaction, demands will increase, leaving for enough space to grow. The increase in global meat consumption opens an opportunity for Argentina, with the support of governmental policies, to increase its participation in the global market not only as an important soybean exporter but also as a corn producer and exporter.
“Argentina only requires that the government does not intervene in the export market. If this is the case, it could quickly grow 6 million hectares and produce 50 million tons. While the Argentine government does not allow free corn exports, corn-exporting countries and competitors can meet the growing global food demand, with virtually no competition from us,” stated Adreani.
Original Article : Buenos Aires Herald
Story By Andrew Hughes