Ukraine’s corn exporters bank on niche trade to stave off stock build

Ukraine’s corn exporters are counting on demand for non-GMO corn and last-resort buying from nations like Iran to ensure the country’s ending year stocks levels are managed amid mounting international competition and expectations of another huge crop in 2020/21.

Such has been the demand for Ukraine’s corn through this period that domestic CPT prices are holding firm, giving exporters limited scope to drop prices as prices in other origins fall sharply on a potent combination of demand destruction and burgeoning harvest supply.

But the maths are against the country, with the local marketing year ending in August and forecasts of another record-breaking crop next year, Ukraine may still need to clear out up to 6 million mt of corn, depending on who’s export forecast you’re backing.

Fear of meltdown in the US ethanol sector has kept corn futures under pressure through late March, but reaction from Ukraine’s corn prices has been restrained, blocked by the strong domestic price.

“Corn prices came crashing down because of lower ethanol production… so the big surplus right now is in the US and they will have to try to capture demand. Ukraine has a captive market for all non-GMO markets,” a broker said.

Bid levels in the CPT market have held stable at $167-170/mt level, with trades reported at $171-172/mt as slow farmer sales starve supply, while exporter’s price to secure supply to cover their existing contracts.

Meanwhile, FOB offer prices have slid to levels around $176/mt for May loading, squeezing the margin for building cargoes from the domestic market to potentially as little as $4/mt – versus the more typical $10-12/mt.

Ukraine’s FOB prices have fallen by around  $2/mt over the space of a week, for May-June loading, while prices in the main competing origins of the US and Argentina are down by at least $3-4/mt over the same period, and thus look more attractive.

Especially given that the US is laden with corn that has been displaced from ethanol demand, while Argentina is coming into peak harvest.

Agricensus assessed May loading for Ukrainian corn at $175.50/mt FOB on Wednesday, while US Gulf corn was assessed at $152.25/mt, with Argentina’s FOB Up River market at $158.75/mt.

“We know that world prices are an indicator, both buyers and traders on FOB are not ready to pay more, so CPT has to be tightened to FOB levels, because there is still more volume available and soon traders will not overpay for it," a source based in Ukraine said.

But South Korea’s corn processing association, Kocopia, is a regular buyer of non-GMO corn and chose US Gulf loading corn at a Thursday tender, raising fears that a lack of competitiveness could leave the country nursing large stocks.

But the Ukraine source said that the country’s farmers are not in hurry to sell corn, leaving last resort buyers, such as Iran, and preferential buyers such as the European Union and China to carry the burden.

Traders note as well, that the country has maintained a strong export pace, and even through current demand for Ukrainian corn is weak, most of the export contracts for spot loading are already sold out.

But the numbers suggest there is still volume to move before the combines begin rolling in August.

Between July 1 and April 15 Ukraine has exported 24.6 million mt of corn, including 2 million mt from old stocks during the first two months.

With another 1.8 million mt scheduled to be loaded in April, according to line up data, the country has cleared 26.4 million mt from a harvest that could top 35.8 million mt – surpassing the record 2018/19 harvest according to the USDA.

Forecasts have set a range for the country’s 2019/20 exports at anywhere from 28.5 million to 32 million mt range, according to different sources and the application of different marketing years, there remains anywhere between 2.1 million mt and 5.6 million mt.