Why Are Corn Prices Noticing A Surge On CBOT?

Corn prices soared, with benchmark U.S Corn Future surged from the level of $357.50, which marked the day’s low on 1st March 2019, to $377.12 (Day’s High on 5th March 2019), amid on-going trade talks. The U.S President Donald Trump has asked the Chinese government and diplomats to remove the tariff on U.S. Agriculture products, which was originally raised in the event of escalated U.S-China trade war. Seeing that the trade talks are progressing pleasantly, U.S President did not raise the tariff on Chinese goods, which was due on 1st March 2019, which in turn, helped in building an optimism among investors that the long-standing trade dispute between the two major economies is finally coming to an end.

Apart from the on-going events, another factor which is supporting the corn prices is the supply and demand fundamentals. The High production gain from Argentina and Ukraine, which exerted the pressure on corn prices, were offset by the reduction in production from the United States, Mexico, and South Africa.

The Trade change (Exports) from Argentina marked a decline by 1 million metric tonnes and was noticed at 26.5 million MT for February 2019, as compared to 27.5 million metric tonnes in the previous corresponding period due to smaller than expected port loadings in the recent month.

The trade change from Brazil (Exports) reported 28 million metric tonnes of corn in February 2019, which marked a surge over previous reported 26.5 million metric tonnes in February 2018 and larger shipments marked the gain in the export during December to January 2019.

The United States’ corn yearly production reached 366.3 million metric tonnes from 2018 to 2019, which marked a decline from previously reported production level of 371.1 million metric tonnes in the period of 2017 – 2018.

However, the domestic consumption also increased from 314 million metric tonnes to 315.4 million metric tonnes in the period of 2018 -2019, leaving a net ending stock of 44.1 million metric tonne for the period of 2018 – 2019, which although marked a decline as compared to the previously reported ending stock of 54.4 million metric tonnes in the period of 2017 – 2018.

The total world corn production was marked at 1099.6 million metric tonnes for the period of 2018 -2019, increased as compared to the previous reported 1,075.6 million metric tonnes. The total world consumption also rose from 1,088.8 million metric tonnes to 1,123.0 million metric tonnes from 2018 to 2019.

The total world ending stock also marked a decline and reported at 309.8 million metric tonnes in the period of 2018-2019, as compared to previously reported 340.8 million metric tonnes in the period of 2017 -2018.

The Corn demand surged over the South and Southeast Asia as both food and feed, and both regions marked a higher import in February 2019 as compared to the previous year import. The corn imports in both regions almost doubled as compared to the period of 2012—2013.

Brazil and Argentina were the top exporters of corn to these regions, with Brazil exported majorly to Bangladesh and Argentina exported majorly to Vietnam and Malaysia.

The high demand and increasing global consumption led to a fall in ending stock value for corn, and thus, in turn, supported the corn prices.

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