South America loses edge as US flash sales reclaim corn exports
Higher basis prices in South America’s FOB corn markets are finally stimulating a switch in demand for some destination markets back to US corn supply, with two consecutive daily private sales announcements highlighting an improvement in demand.
US net sales are lagging well behind last year’s pace, but Monday and Tuesday brought announcements from the USDA of private sales of 132,000 mt and 191,000 mt of corn to unknown destinations.
“Given Argentina premiums are close to the 60s, the US should be taking back Latin and Central America demand if anyone is still open for December,” one market source said, with recent net sales and export inspection data showing a pick-up in demand from those destinations.
“My guess yesterday was Japan, the odd 191,000 mt size makes me think Mexico… The FTA quota from Colombia resets to 0% for US corn for January 1, so it will most certainly be the Gulf versus South America,” the source said.
The twin sales notices follow an announcement on November 8 from the USDA for 217,040 mt of corn – also for unknown destinations but thought to be heading to Mexico.
South American basis values began to climb in October, as a combination of the approaching end of harvest, appreciating currencies, and a lack of farmer selling drove basis values higher in Argentina and Brazil.
As a consequence, this tipped the balance towards Ukraine’s huge corn harvest.
Overnight, FOB Santos Brazil corn for December shipment was heard bid at 70 cents over December, with the same loading period offered at 65 cents just a week earlier.
Meanwhile, US Gulf December cargoes were heard offered at 66 cents over December, while Argentina’s basis premiums have jumped from single figure premiums to now stand at around 55 cents.
The switch was underscored by the wholesale ousting of South America from a recent burst of buying from South Korea, which stocked up on over 500,000 mt of corn in the space of a week in early November – the bulk of it from the Black Sea.
However, US domestic values have remained well supported as a slow harvest and strong domestic demand kept internal basis values high and starved supply to the Gulf and Pacific Northwest export hubs.
This has meant the country has continued to struggle to compete.
However, for countries with existing free trade agreements in place, the US is proving to be competitive, with much of the recent buying heading to Mexico, Japan or Colombia.
US weekly net sales data shows Mexico has bought 6.3 million mt of net sales in the 2019/20 marketing year to date, followed by Japan with 1.7 million mt and Colombia on 650,001 mt.
However, the figures are well behind last year’s pace, with Mexico on 7.3 million mt, Japan on 3.7 million mt and Colombia on 1.1 million mt at the same point of 2018/19.
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