Feed companies will need to import more corn

The European Union currently assumes that the member states will need to import slightly less corn than last season. However, whether this need will be sufficiently covered is the question, as the latest harvest estimates are lower. There is a good chance that the animal feed companies will have to procure a larger amount of corn from outside the EU. The European Commission reduced the harvest estimate for corn in the 27 member states at the end of last month to 57.8 million tons. This meant a significant reduction, as at the end of July the estimate was still 64.9 million tons. A new harvest estimate from the European Grain Traders Association Coceral indicates that corn production in the EU is likely to be even smaller than expected. Coceral believes that corn production will now be limited to just under 56.5 million tons. This means over 1.3 million tons less than the European Commission's estimate. Especially in the southeast of the EU, the yield development is lagging behind previous estimates. Adjustment Coceral's new forecast raises the question of whether the EU will have to import more corn than anticipated. Based on the adjustment at the end of last month, the European Commission raised the import expectation for corn to 18.8 million tons. Additionally, the sales to animal feed were lowered to 60.7 million tons. This meant that the decline in production could not be compensated, and a significant correction was applied to the ending stock of corn. In recent years, the ending stock fluctuated between 19 and 20 million tons, but due to the disappointing harvest this year, the European Commission now estimates that it will drop to 13.6 million tons. The question is whether an even smaller harvest can be accommodated by trimming this stock number further. It is likely that especially the animal feed companies will have to purchase a bit more corn from outside the EU to prevent the stocks in the internal market from declining too much. This may lead companies to turn their attention to corn from the US. In South America, European companies are now facing serious competition. China is shifting to the southern part of America due to being caught up in a trade conflict with the United States. Free trade benefits Ukraine has been by far the largest supplier of corn to the EU in recent years. However, since this season, the free trade benefits for Ukrainian exports to the EU have been halted. This means that the country can bring in less than 400,000 tons of corn without import duty to the EU in the second half of this year. This amount has already been exceeded, as Ukraine has already delivered 660,000 tons of corn to the EU between July 1 and mid-September. The Netherlands has taken 154,000 tons of that. Italy is an even larger customer of Ukraine with a corn import of 207,000 tons. The halt on the temporary free access to raw materials from Ukraine in the EU since this season has suppressed the import of corn from that country. A year ago, Ukraine was by far the main supplier with 2.6 million tons until mid-September. The drying up of this flow has been compensated by increased imports from Brazil. That country has now supplied 1.75 million tons of corn to the EU. That is 1 million tons more than in the same period last year. Trade issues Now that China is also shifting its focus to South America due to trade issues with the US, it seems difficult to further increase the volume from that region. This brings the US into view, or at least it may require extra payment for corn from Ukraine. The latter may still be partially compensated if the European Union and Ukraine conclude a new free trade agreement. The expectation is that the quantity of corn for the zero tariff will be increased to 1 million tons. So far, member states have imported a tight 3.2 million tons of corn this season. This amount is 1.8 million tons (36%) smaller than last year's imports. Ultimately, 19.8 million tons were imported last season. If it turns out that this amount must at least be matched, then imports will need to make a significant catch-up.