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Ukraine To Fill China’s Corn Needs, Replacing U.S. Product

Ukraine's corn output remains way below U.S. production.

It looks like the end of the trade war between Beijing and Washington is very far from over.

China will keep buying soybeans from other suppliers urgently trying to fill the U.S. share, which accounted for 40% of total imports in pre-trade war times. However, for another important crop, corn, China is well prepared for any trade tensions with the U.S.

Several years ago, the U.S. used to be a dominant corn supplier to China. In 2011/12, the U.S. sold 201 million bushels (5.1 mmt) of corn to China, which accounted for almost 100% of all Chinese imports.

In the 2017/18 marketing year, when the trade war was just starting, U.S. exports fell to 11.8 mln bu (0.3 MMT), or less than 10% of Chinese imports.

What has changed?

Even before the trade war, China started to switch to other corn suppliers, mainly to Ukraine.

In 2013, the first vessel of Ukrainian corn reached China. This year, Ukraine has become the largest supplier of corn. In 2018/19, Ukranian corn exports to China are expected to be around 160 million bushels (4 MMT) and account for more than 80% of total Chinese imports.

The Black Sea country is expanding corn exports fast. Ten years ago, Ukraine shipped only 200 million bushels (5 MMT) of corn to other countries, while in the current 2018/19 season exports are expected to reach 1.2 bln bu (30 MMT), with EU, China, and Egypt being major buyers.

Ukraine’s production grew from 400 million bu (10.5 MMT) to 1.4 bln bu (35.8 MMT) in 2018, supported by both area expansion and yield improvement.

At the same time, domestic consumption remains relatively flat around 0.2 to 0.3 bln bu (6 to 7 MMT) as the livestock sector grows slowly and the industrial consumption is negligible.

We expect Ukrainian corn harvest in 2019 to be at 1.37 bln bu (34.8 MMT), just slightly below 2018 record level. Exports are also expected to be slightly lower than in the 2018/19.

The expected good Ukranian crop won’t offset a sharp decline of production in the U.S. in 2019/20, but longer term, the threat from Ukraine as a key corn exporter is likely to continue to grow.

However, the rate of growth of corn production could slow down. Current average Ukraine corn yields of 110 to 125 bushels per acre (7 to 7.8 mt/ha) are 60% higher than we saw a decade ago and are equal to EU’s yields. To boost yields noticeably, Ukrainian farmers would need access to new biotech corn varieties. Today, the use of all biotech/GM crops is forbidden in Ukraine.

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Andrey Sizov is the managing editor of The Sizov Report on the Black Sea grain market.
 

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