International corn prices will tend to stabilize in the future
The economy is cyclical. Perhaps over the next 10 or 15 years, the international corn price level will not change much.
Global actual corn stocks have already reached a record high. With the increase in South American planting area in the 2016/2017 season and the recovery in US corn production, the loose global corn supply situation will continue. Current corn market prices have already fully reflected the global supply and demand pattern, and prices are already close to the equilibrium point.
Overall, US corn planting area is about 3502 hectares, at a relatively high level. This year's yield is expected to reach 174 bushels per acre, with production reaching about 38.33 million tons, so the total volume is still relatively large.
At present, because Argentina and Brazil still need some time to return to the international market, US exports may be somewhat larger than now.
The current US stock ratio is 16.47%, compared with 19.83% in 2004, which is relatively high in recent years. Looking at the US situation alone, the overall corn supply is still relatively ample.
Another situation is that Brazil adjusted its planting area. Brazilian production was expected to fall by 18 million tons in 2015, and later the production estimate was lowered again. It is estimated that there will definitely be a recovery growth in 2016 and 2017, and Brazil's supply capacity to the international market will increase substantially.
The biggest change in planting area is in Argentina. Argentina's area is expected to be about 30%, and its current total production will reach a record level of 36.5 million tons, an increase of 8.5 million tons from 28 million tons in the same period last year, with international sales reaching 24 million tons.
In Ukraine, including the Black Sea region and the former Soviet Union, overall production has still recovered somewhat compared with last year, and international supply is 17 million tons.
European corn is somewhat worse than other varieties, and planting area remains relatively tight, but yield has recovered, so European production is now 61.14 million tons, 12 million tons higher than last year's production, but Europe's imports themselves have actually declined slightly, by about 12 million tons. This is mainly because at that time the supply of barley and wheat within Europe was still very ample.
Overall, global corn planting area reached 180 million hectares in 2013 and 2014. Although it has decreased somewhat in recent years, it has also recovered somewhat, and the global total is 1.02 billion tons.
In terms of import volumes, compared with last year, the overall total has still shrunk somewhat, mainly because demand is declining, including China's demand for corn, sorghum and rice, and the United Nations report also included China's factor.
Over the past ten years, corn demand has mainly been driven by the development of deep processing itself. In terms of demand distribution, population and dietary demand are growing every year.
Both China and the United States are very concerned about industrial development, but based on what is known, future changes, whether in the United States or China, will require a very long time, and in the short term the United States may not change either.
Analyzing the domestic situation, we once relied on policy, including the upgrading of domestic use, including the high inventory situation in 2000, but now we face great obstacles. Therefore, global feed demand is relatively stable, but the export share may shrink in the next few years.
In terms of total exports, US exports will recover somewhat this year, while Russia's export volume, relatively speaking, will not be particularly large.
In terms of feed demand, if we look at Japan and South Korea, demand in these countries is very stable.
We believe that China's market is continuously developing, and China's feed deep processing will also reach a certain degree of saturation. But compared with developed countries and regions such as the United States and Europe, China's feed industry is still at a relatively low level. In the long run, we think global market prices will rise, but overall will be in a stage of relatively stable fluctuation.
The economy is cyclical. For an industry, the general cycle is about 25 to 30 years, and 10 years is a short-term cycle. Perhaps over the next 10 or 15 years, normal compensation and rebalancing will be needed for this major adjustment. I believe the international corn price level will not change much.
This article was compiled based on Chai Xiaofeng's speech at the 9th Corn Industry Conference
Chai Xiaofeng: Assistant General Manager of the Corn Center and General Manager of the Hedging Department at COFCO Trading