Inside the Market

One of the bearish surprises of the new 2022-23 season has been the sharp drop in U.S. corn export sales, pegged at 946 million bushels (mb) at the time of this writing and down 45% from a year ago. It is the worst 4 1/2-month start for U.S. corn export sales since 2019-20. Part of the surprise is that the slow pace happens at a time when Ukraine, the world's fourth-largest exporter of corn, is fending off daily attacks from Russian forces.

The primary competition has come from Brazil's success, where last summer's harvest capped off record production. The 116 million metric tons (mmt) or 4.57 billion bushels (bb) of Brazilian corn production in 2021-22 was 550 million bushels (mb) more than Brazil had ever produced. Here in late January 2023, the U.S. is waiting for Brazil to sell off its cheaper corn and should have a few months before Brazil's large safrinha harvest returns in July.

So far, Ukraine has done an impressive job of exporting its 2022 corn harvest under difficult conditions, but it's difficult to know if it can continue. Antonina Broyaka, of Kansas State University, explains that 8.24 mmt (324 mb) of corn had left Ukrainian ports as of Jan. 17, 2023, likely part of the reason USDA increased its export estimate for Ukraine to 20.5 mmt (807 mb) in January.

There are two glimmers of hope for U.S. corn exports in 2023, and the first comes from drought in Argentina. Lack of rain in the third year of La Nina influence gave Argentina its smallest wheat crop in seven years and is now threatening corn. In late January, the Buenos Aires Grains exchange said only 12% of Argentina's corn crop was rated good to excellent and estimated the crop at 44.5 mmt or 1.75 bb, the lowest in five years.

The second hope for higher U.S. corn sales in 2023 comes from Mexico, where livestock producers may preemptively step up U.S. corn purchases, worried the Mexican government may pursue its intention to ban genetically modified corn. So far in 2022-23, Mexico has purchased 455 mb of U.S. corn, down 10% from a year ago. The Mexican government has not yet officially declared the corn ban will go through or when it might start. The U.S. government has made it clear it will challenge any ban, based on the provisions in the U.S.-Mexico-Canada Agreement.

The good news for U.S. corn producers is that even with poor export business, corn prices have done well so far in 2022-23. The 13.7 bb fall harvest was the smallest in three years and left livestock producers and ethanol producers short of corn in the Western Plains. The new U.S. growing season will bring new challenges in 2023, but for old-crop corn, another seasonal high for prices in May is looking likely.

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