Ukrainian corn export changes direction from China on Iran

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    In December 2016 Ukraine continued to increase its exports of corn. At the end of of the delivery month shipments of grain abroad exceeded 2.6 MMT, which is 18.8% more than in November. Moreover, since the beginning of MY 2016/17 (September-August), they reached 6.3 MMT, exceeding the result of the last season by more than 10%.

    The increase in export sales of corn is directly related to the growth of grain production. According to preliminary reports of the State Statistics Service of Ukraine, in 2016 Ukrainian farmers harvested a record 30 MMT of corn against 23.3 MMT a year earlier. Thus, the export of corn in the current season may reach 21 MMT, which is not only more than 16.5 MMT shipped abroad in MY 2015/16, but also exceeds the previous peak -19.5 MMT in MY 2014 /15.

    Since the second half of the grain season corn is becoming a major export crop in Ukraine. Given how much grain has yet to ship, monthly supply should be around 2 MMT. However, practical experience shows that starting from the spring corn exports usually decline up to 1 MMT per month and even more by the end of the season. The decrease in supply could be related to: the new harvest from South America being activelly involved into world market trade, a seasonal rise in prices for grain in the Black Sea region; the gradual exhaustion of stocks from local farmers resulting into volume reduction of the grain supply.

    Current season for Ukrainian corn is complicated by the decline in demand from China, which has accumulated reserves equal to the annual volume of the domestic grain production. At the same time, the exact amount of corn, which China would buy on the foreign markets is still unknown even for Chinese officials. Yet, USDA estimates Chinese imports of grain in MY 2016/17 at the level of 3 MMT, on the other hand, the forecast from China National Grain and Oils Information Center predicts no more than 2 MMT and even more interestingly that the Ministry of Agriculture of China forecasts 1 MMT of grain imports.

    Considering that in the last season China bought more than 2 MMT of Ukrainian corn and became its largest importer (about 15% of total shipments from Ukraine and 63% of total purchases by China), the prospect of reducing the supply into the country and a record harvest require exporters to increase sales more to “traditional” buyers additionally widening the market for the grain products. Current season situation with “traditional” buyers is quite intense in regard to many aspects. For example, while Egypt has increased purchases of Ukrainian corn by 60% – to 1.1 MMT, the EU has reduced them by 37% – to 1.9 MMT.

    However, it seems that a new market for Ukrainian grain has been found in the face of Iran. With the cancel of US trade embargo last year, this country with 80 million people population has returned to the world grain market. As a result, nowadays Iran is the leader among Ukrainian corn buyers in purchase volumes – for the last four months there have already been delivered 1.2 MMT, which is 19% of Ukrainian grain exports. In total, in MY 2016/17, according to USDA estimates, Iran will purchase abroad 7 MMT of corn, but what share of the “corn pie” Ukraine might take is still unknown.

    All in all, there is no clear vision regarding the corn market from Ukrainian grain exporters yet. Paying tribute to Iran, traders still consider Southeast Asia as one of the most promising regions in terms of supply increase. Indeed, in comparison to the last season traders managed to increase more than three times the sales of Ukrainian corn to South Korea to 350 KMT, although, such high-profile successes are more a matter of chance than a tendency for now. Apart from North Africa, the exporters are also trying to expand to the south and center of the continent. Additionally, working with Middle East and the Persian Gulf states require further market expansion. Conclusively, first notable results will appear at the end of the first half of the corn season, so it will be clearer whether or not those challenges are easily achievable for the exporters.