Effective global corn supplies heading for 29-year lows

Relative to demand, world corn stocks later this year are predicted to hit 11-year lows. But when considering corn supplies actually accessible to the global market, the milestone is closer to three decades.

On-and-off grain importer China has an extraordinary amount of corn in storage, more than five times that of the United States, the No. 2 corn stockpiler. As such, China is sometimes excluded from world grain balances to obtain a more realistic view of available supplies.

After subtracting China, estimates from the U.S. Department of Agriculture show 2024-25 world corn ending stocks at a 12-year low of about 87 million metric tons.

Supplies are even tighter when measured against demand. In 2024-25, world corn stocks-to-use sans China is pegged at 7.8%, the lowest ratio since 1995-96. That compares with a four-year average of 9.2% and a 20-year average of 11%.

Corn supplies in No. 2 exporter Brazil are predicted at the lowest levels in more than two decades, and Ukrainian and European Union stocks are the thinnest in over a decade. U.S. inventory is now seen as modest versus prior expectations for ample volumes.

Things are still somewhat snug even when adding back China. USDA’s figures imply full world corn stocks-to-use in 2024-25 at 20.3%, the lowest since 2013-14. That compares with a decade average of 24.6% and a low within that period of 22.2%.

Stocks-to-use throughout most of the 2000s and early 2010s was notably lower, usually below 15%. That might make the current situation appear a bit less extreme, but a glance at Chinese stocks perhaps explains the difference.

CHINA CONUNDRUM

In the mid-2000s, China accounted for around 30% of global corn ending stocks, though that surged in the early 2010s as the country incentivized increasing production.

China’s share of global corn stocks has been above 60% over the last decade, and according to USDA will reach a 28-year high of 70% in 2024-25.

In 2008, Beijing began a government corn stockpiling program, paying farmers above-market rates for their crops. This ended in 2016 amid sky-high costs for the government, which was keeping domestic prices well above global ones, unintentionally encouraging imports.

China has continued to subsidize corn farmers and output has grown even further, hence the large stockpiles.

Excluding China from global grain analyses might be controversial because the original premise lies in the country’s minimal involvement in global trade. Although it has backed off significantly this year, China has been the world’s No. 1 corn importer within the last five years.

However, China’s corn imports in the last few years have accounted for about 7% of its annual corn consumption, extremely light versus other top importers. Nearly 100% of Japan and South Korea’s corn use comes from imports, and Mexico’s rate has climbed above 50%.

This statistic plus China’s enormous share of world stocks defends the exclusion of China from global corn balance sheets, but its sometimes-importer status means that both calculations are worthwhile.

U.S. STOCKPILES

Corn stocks in the United States, the leading exporter, will be thinner than originally assumed. But the situation is not as rare as the global one.

USDA figures peg 2024-25 U.S. corn stocks-to-use at 10.2%, below the year-ago 11.8% and the decade average of 12.5% but slightly above the levels of the early 2020s.

In mid-2024, the 2024-25 ratio was forecast above 14%, but strong demand plus a smaller crop pared inventory. This helped propel large speculators into their currently massive bullish bets on Chicago corn futures.

However, corn bulls know that U.S. farmers are ready and willing to boost supplies by planting a potentially huge area this spring.

Although an inherently bearish force, plentiful corn supplies are what allow the United States to dominate the global export market and provide for customers like China, should it ever resume the interest.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

Tags: China, corn, Brazil, EU, USA, Mexico, Ukraine