World Maize Prices Rise
Numerous Production Regions Hit by Unfavourable Weather
During the course of the summer, many production regions were hit by unfavourable weather, with consequences for their production potential. Such was the case in the United States (the world’s first world producer and exporter), where the August drought and the derecho storm that hit Iowa (the first production state, with 20 percent of the total US production) reduced initial projections by 20 million tons (down to 378 million) from the August numbers. This was also the case in the EU and the Black Sea region, respectively, where drought hit several production countries: France, Romania, Ukraine, Russia, and others. Thus, the European Commission has recently cut its EU production estimates by 2 quintals per hectare (72 q/ha as against 80 q/ha in August), while the Ukrainian government has announced a production estimate of 33 million tons, down from the 40 million expected at the beginning of the season.
Lastly, in the southern hemisphere, operators are worried by the “La Niña” climate phenomenon, which causes air masses in South America to dry out – thus generating drought in Brazil and Argentina – and which may end up damaging maize plantings and production cycles.
As these production developments elicit market responses, the demand trend keeps prices high.
Dynamic World Demand
Maize is the most eaten cereal grain in the world currently, followed by wheat and rice. Its use is projected at 1158 million tons for the upcoming 2020/21 crop year, above the previous year.
The maize demand has been spurred by the processing (semolina, ethanol, etc) industry, in particular by feed demand. This contributes to the world price rise. Swine production in China – the world’s first swine producer – has made a strong comeback, recording a net increase after a swine fever epidemic that had compelled the country to slaughter half of its total swine numbers. Moreover, the country’s structural feed deficit has been worsened by commercial conflicts (suspension of Australian barley imports) and typhoons that damaged crops in its northern regions. As a result, China currently imports large amounts of US and Ukrainian maize, having signed contracts for more than 12 million tons, as against the average 4 million tons that it will import every season in normal circumstances.
In the US, on the other hand, domestic demand has remained flat, mostly on account of difficulties in the ethanol industry – which typically receives 40 percent of the country’s maize production. Use is 10 percent below its average because of the Covid-19 epidemic and related movement restrictions. Moreover, stocks in the main exporting countries (the US, Brazil, Argentina, and Ukraine) have remained high on the world market and should limit any subsequent increases in prices – which have otherwise been unable to regain their pre-Covid levels for the time being.