The extent of the Russian invasion’s impact of on Ukraine’s corn production and exports continues to remain uncertain
Already tight global corn stocks could become even tighter in 2022 as traders contemplate the impact of reduced exports from Ukraine and continued dryness in parts of South America, commodity analysts said late last month.
In a Feb. 24 web event hosted by Refinitiv, analysts said dry weather and poor soil moisture in southern Brazil and parts of Argentina could have a significant impact on second crop (safrinha) corn yields.
Although it is still early in the safrinha production cycle, soil moisture reserves in key production areas of Brazil are extremely low or non-existent.
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Brazil’s southern production regions of Mato Grosso do Sul, Sao Paulo and Parana are particularly dry, said Refinitiv weather analyst Ed Whelan.
Together, those three regions typically account for about 30 percent of Brazil’s safrinha crop.
Whelan said soil moisture conditions in central-west and southeastern Brazil have improved significantly since last October.
“We’re at over five-year highs regarding soil moisture (in those areas)… but it’s really the opposite in southern Brazil,” he said.
In southern regions, “you see dryness really persisting from October through now.”
Refinitiv is projecting Argentina’s total 2021-22 corn production at about 49 million U.S. tons, nearly five million less than the U.S. Department of Agriculture’s estimate of 54 million.
Brazilian production is estimated at 108 million tons, about six million tons below USDA projections.
Dong Soon Choi, senior market analyst with Refinitiv, said growers in many parts of Brazil and Argentina have experienced extreme weather conditions over the past few months, ranging from severe drought in some areas to widespread flooding in others.
“The question is of course how much impact will this have on yields,” Soon Choi said.
“How much damage are we talking about?”
Satellite vegetation (NDVI) indices showed nearly record-low levels of vegetative growth across key regions of northern Argentina in mid-January.
Rainfall in late January briefly contributed to more favourable soil moisture conditions but field conditions have been deteriorating over the past month or so.
With a few exceptions, South American plantings of second season corn were on pace across much of Brazil, if not slightly ahead of schedule, Soon Choi added.
Safrinha corn crops are planted after the South American soybean harvest is complete.
“The second crop corn is largely progressing on schedule as well without any major delays (but) the season has really just started so there are still a lot of uncertainties there …,” Soon Choi said.
The planting window for second season corn is narrow and untimely rains can disrupt planting efforts as well as the entire production cycle, he added.
“Those things definitely warrant attention.”
Global corn markets have been watching South America closely, especially since Russia’s military invasion of Ukraine in late February.
Last year, Ukraine exported more than 33 million tonnes of corn, making it one of the largest corn exporters in the world.
By comparison, the United States exported about 67 million tonnes of corn in 2021-22, Brazil exported nearly 38 million tonnes and Argentina exported 29 million tonnes.
It remains to be seen how Ukraine’s corn production and exports will be impacted by Russia’s military invasion.
The invasion has already prompted global grain-handling companies to suspend export operations in Ukraine and there is growing uncertainty about whether Ukrainian producers will be able to plant a crop this season.
In late February, U.S. Agriculture Secretary Tom Vilsack said the war in Ukraine will put global grain exports at risk.
In many parts of the world, the availability of fertilizers and other farm inputs will be uncertain, potentially leading to reduced production on a global scale, he added.
“It will take some time, obviously, for the impact of all of this to be understood and felt,” Vilsack told reporters.
“I sincerely hope that no company out there — whether it’s fertilizer or any other supply that may be impacted by this — will take unfair advantage of the circumstances and situation,” he added.
A number of global grain companies have export operations in Ukraine, including Cargill, CHS, Bunge, ADM and Glencore.
Last week, Bunge and ADM confirmed that they would suspend operations in Ukraine.
Bunge has more than 1,000 employees in Ukraine, working primarily at processing facilities and a grain terminal in the port city of Odessa.
ADM operates a network of country elevators as well as an export terminal in Odessa.
On an annual basis, Ukraine ranks fourth in the world in terms of exports of corn and wheat and is the world’s largest exporter of sunflower oil.
Although Ukraine produced a large corn crop last year, export activity has been disrupted leaving buyers around the world looking elsewhere for supplies.
Compounding concerns over the availability of Ukrainian corn is the fact that Chinese demand for foreign corn has been increasing considerably, in step with the rapid expansion of the Chinese hog herd.
In October, the USDA revised its forecast for Chinese pork production, suggesting annual production could reach 49.5 million tonnes, up 13 percent from the previous USDA estimate.
Refinitiv market analyst Orlando Rodriguez said Brazilian corn exports in 2020-21 were at the lowest level in five years.
Argentinian exports were also expected to fall to below the previous three-year average.
U.S. corn exports to China are expected to increase in response for reduced trade flows from other major corn-producing nations.
“The Chinese demand is a major impact in the global corn market,” Rodriguez said.
“China is not going to be able to import as much corn from South America (and)… China has been buying a lot of corn from Ukraine. However, during the current situation (in Ukraine), the Chinese demand for U.S. corn has been growing.”
