Asia’s corn significance rises as demand fires US prices, PNW gains share

Cash premiums for US corn loading out of the Pacific Northwest are continuing to find support on solid demand from Asia’s feed markets, as the region enters a key demand period and takes on greater significance for US corn.

“We see stronger demand from Southeast Asia for US corn because prices in Argentina are not competitive. A lot of demand is flowing from South America to the US,” one Singapore-based corn trader told Agricensus Wednesday.

While the trend is seasonally expected – the US is poised to fill a gap in supply as South America’s crop reaches its end – there are signs that the PNW is taking on greater significance as a springboard for US exports into Asia.

Premiums for March physical loadings out of the PNW have been heard at 85 cents over the March futures contract, according to market sources, while outright prices have continued to firm.

The USDA, which publishes indicative bids for shuttle trains delivered into the Pacific Northwest, showed indications for February arrivals reaching as high as $4.7075/bu on Tuesday, the highest bid seen since July 20, 2017 when it was pegged at $4.73/bu.

The morning after the night before

“The US PNW works much better,” a second market source said, with more demand potentially following in the weeks ahead as the region returns after the Chinese New Year celebrations.

“People are going on breaks, they normally start looking at [feed demand] after the holiday,” the second source said, a view backed up in USDA data.

PNW bids spiked at $5.01/bu on January 18, 2017 - just ahead of the new year festival on January 28, but fell away again rapidly to reach $4.75/bu by January 31.

That heralded nearly three weeks of solid rises, with bids eventually topping $5.13/bu on February 17 and averaging $4.90/bu for the six weeks that followed January 28.

PNW: The gateway to Asia

Physical prices along the US Gulf have also felt the effect of Asia’s buying, with Japan already loading 481,894 mt – almost exactly a third of total US-based loadings in 2018 – from the Gulf, according to USDA data.

While that has helped firm cash differentials in the US Gulf, it is the only Asia-based country to take volume from the US Gulf in 2018, versus 2017 when Japan, Taiwan, Indonesia and Malaysia all took exports from the Gulf.

In fact, Japan took the bulk – 58% – of its total 11.9 million mt corn exports from the US Gulf in 2017, rather than the PNW.

It is early days, but US data seems to show a move towards the PNW as the gateway to Asia for US corn exports.

The US exported just over 49 million mt of corn in 2017 to all destinations, with Asian destinations split between 15.2% out of the US Gulf, 22.7% out of the PNW and around 1.5% interior moves – typically via container from the US West Coast.

For 2018 to date, 11% of Asia’s exports have left via the Gulf, 2% via the interior and 29.7% via the PNW – meaning in total Asian destinations have taken 42.73% of US corn exports to date in 2018, versus 39.34% in the whole of 2017.

Such has been its competitiveness in recent weeks that US corn has found outlets in countries like Vietnam, which typically prefers lower-moisture South American corn, and has dominated in recent tenders from KOCOPIA and NOFI.