Maize Prices Remain Relatively Stable, at High Levels

Market Fundamentals Remain Solid

Market fundamentals remain solid and justify the current price levels, especially since the situation is equally tense on the world wheat market.

Indeed, despite the record or almost record maize harvests in the major exporting countries in the northern hemisphere – the U.S. (with 382 000 tons – the second best harvest) and Ukraine (38-40 000 tons – a new production record), world demand remains highly dynamic, limiting stock rebuilding. Thus in the U.S., ethanol production (which absorbs almost 40 percent of the U.S. corn production) has exceeded its average level over the past few weeks, after having largely gone down in 2020, in the wake of the pandemic. Moreover, the recent rise in oil prices guarantees good margins to processors.

World demand also remains very strong, to the point where maize may outpace wheat and become the first cereal crop traded worldwide, in 2021/22, with 200 000 t. This is largely the result of China’s appetite for this cereal since 2020/21, after its domestic hog production restructuring. China had thus suddenly become the world’s first maize importer (26 000 tons). While its buying frenzy seems to have slowed down during the running season, China has nevertheless signed contracts for the purchase of nearly 18 000 tons of maize and seems to have resumed its buying activity in November, due to a freight drop that has rendered imported maize more competitive than domestic maize, in some areas.

Operators also continue to follow Latin American developments closely. Brazil and Argentina will plant record corn areas, and current weather seems generally favourable in both countries. Their harvests will be the first to arrive on the world market in 2022 (in March-June) and save for unexpected weather events, they will slacken the current price levels. In the opposite case, the tension should continue on the maize market.

Volatility Is Back, Prices Trend Upwards

Despite the solid market fundamentals, there are some clouds on the horizon.

First, the emergence of the Omicron Covid variant, spreading panic on the markets – including the maize one – and fuelling a strong rebound of world prices, already noted over the past few months. The volatility will stay for as long as the Omicron-related fears continue.

The scenario is similar for the production costs (expected up), especially those of nitrogen-based fertilizers.  Indeed, the Covid-triggered freight increases and the sharp rise in gas prices over the past months (the latter being the main production cost of nitrogen fertilisers) have caused fertiliser – and particularly, nitrogen costs – to increase significantly (up almost three times compared to the same time last year!). On the other hand, the supply, too, is problematic, because of countries limiting their exports – especially China, one of the world’s main fertilizer exporters –, whose primary concern is to supply its domestic market. Production costs should therefore surge in 2022 – which in turn may cause areas to drop, next spring, in regions such as the Corn Belt, where the producers will have to decide between soybeans (for its nitrogen-fixing ability) and maize, whose prices remain attractive.

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