Corn prices are poised for a fifth successive year of gains in 2022 – their longest winning streak since the 1940s.
As then, war has this year played a role, with Russia’s invasion of Ukraine curbing production and exports from the biggest shipper of the grain outside the Americas.
But can prices manage a sixth year of headway in 2023?
In the first of a series of GrainPriceNews outlooks on crop prices, leading commentators give their views.
We anticipate that corn prices will find further support – and so, remain above their pre-2022 levels – in a deteriorating outlook for global production in 2022-23.
We stress too that an expected fall in global corn exports – a fall larger than that expected for global corn production, in part due to the impact of the Russia-Ukraine conflict – will result in an elevated degree of market tightness through 2022-23, in turn suggesting a period characterised by above-average price volatility and a heightened sensitivity of quoted prices to developments in major markets.
With regard to the consumer, we forecast muted global demand growth in 2022-23, anticipating an increase of 0.6% year-on-year4 (equal to 7.4m tonnes) from 1,179.8m tonnes to 1,187.2m tonnes.
We expect the share of demand accounted for by animal feed demand to remain broadly unchanged between 2021-22, when it stood at 62.2%, and 2022-23, although we note that the weaker outlook for global economic growth through 2022 and into 2023 may weigh on animal feed demand via reduced meat consumption.
Conversely, elevated fuel prices will support demand for corn-based biofuels in transport markets in which corn-derived ethanol is either the predominant or one of the leading variants of alternative fuel, such as the US.
Fitch forecast an average 2023 Chicago corn price of $6.60 per bushel on a second-month contract basis.
Coming after a summer of disappointing yields in both Europe and the US, the corn market’s upside potential – like many commodities – failed to materialise in the fourth quarter of 2022 as Chinese import demand for US corn persistently disappointed, a dry Mississippi river presented logistical challenges and a strong US dollar lowered US competitiveness with Ukrainian and Latin American origins.
With export arbs to China finally open, we expect a sequential improvement in US exports, albeit not a return to record levels seen in 2021-22.
Despite 325m bushels of downward export revisions since summer, expectations for 2022-23 US ending stocks have in fact fallen by about 100m bushels on the back of stronger ethanol run rates and tighter supply. Moreover, while US balances remain isolated by a stronger dollar and uncompetitive prices, corn prices remain one bad crop away from returning to the highs seen in 2022.
We expect corn prices to face a bumpy start to 2023 on the back of weaker Chinese demand and uncertain Latin American supply, after which we see stronger prices into the US growing season, with average weather softening balances by the end of the year.
We expect corn prices of $6.75, $6.90 and $6.00 per bushel in three, six and 12 months’ time.
Recession-weakened demand and reflationary hopes underpin our bearish Chicago corn call near $6.00 per bushel by the fourth quarter of 2023, but reinvigorated buyers will keep prices [from] falling below that level.
US 2022-23 corn ending stockpiles will tough nine-year lows of 1.1bn bushels, 37% below the five-year average, limiting downside for Chicago corn prices.
Brazil and Argentina will (weather permitting) be fully called upon to relieve the US’s poor harvest and offset a war-diminished Ukrainian corn export programme. 2022-23 will be a year to forget for consumers, as corn’s supply scarcity requires rationing and provides a broad foothold for prices.
Hope lies in second-half 2023 corn supplies. Rabobank expects 2023-24 US corn acreage to rise to 91m acres (+2.4m acres year on year) as input squeezed margins are outweighed by timely plantings, and a highly favourable price ratio to soybeans, whose Brazilian supply relief will arrive in February 2023, just prior to US spring plantings.
It is not often that corn futures manage even five successive years of gains. The last time was during the 1940s, when World War II and its aftermath provoked an urgency to boost agricultural production.
Achieving a sixth year of headway this time looks a stretch, without another exceptional event, such as an escalation in, or expansion of, the Ukraine war.
Supply prospects do look like suffering some disappointment early in 2023 from prospects of a drought-reduced Argentine corn crop.
However, Argentina’s woes reflect a La Nina which, after three successive years, looks likely to disappear.
With Brazil looking set for a large safrinha corn crop, and expectations of increased US sowings, prices may suffer a weak second half of the year, unless perhaps the world economic downturn proves less severe than expected, meaning enhanced demand prospects.