CORN MARKET OUTLOOK

October 2022

Orlando Rodriguez
Market Analyst, Agriculture Research
orlando.rodriguez@lseg.com

Dong Soon Choi

Senior Analyst, Agriculture Research
dong.choi@lseg.com

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Global Corn Market Outlook

 Unfavorable weather conditions lower 2022/23 global corn production to 1.162 billion tons
 Russia threatens the continuation of the humanitarian corridor deal.
 Low global economic growth diminishes the corn trade
 Corn-based ethanol production in the U.S. reach a 10-week high

 Global Production Outlook

2022/23 global corn production is estimated at 1.162 billion tons (down 2% from last update), below the previous
season's 1.204 billion tons, largely underpinned by a combination of unfavourable late season weather conditions in
the U.S. and the aftermath from catastrophic heatwaves during the summer throughout western Europe, despite a
strong upside potential of the Brazilian crop which is poised to hit a record production amid considerable acreage
expansion and yield recovery from last season. Our current median estimate is lower than USDA's October outlook
of 1.169 billion tons. Now the market is particularly sensitive to any potential of further setback in the U.S. and
European crops, as the prime season is coming to a close with harvest in full swing. The base effects of an expected
yield recovery in Brazil, coming off a dry season especially for the first crop corn, should mitigate some of the declines,
but are unlikely to overcome the overall downward pressures from elsewhere in the world. While prices should remain
at historically elevated levels for the reminder of the year, the short-term movements will likely display some volatility
dictated by the weather dynamics around the globe.

More specifically, 2022/23 total Brazil corn production is estimated at a record of 124.1 [116.7–131.5] million tons,
up 9.5% from last season thanks to strong domestic/external demand, high expected profitability and healthy soil
moisture conditions, despite continued fertilizer market woes and some potential acreage shifts to soybeans amid
less favorable forward weather conditions. Our current median estimate is 1.9 million tons below the USDA's World
Agricultural Outlook Board (WAOB) 's 126 million tons, which assumes total corn sowings at 22.7 million hectares
and national level yield of 5.55 tons per hectare (tph) (vs. Refinitiv Agriculture Research's 22.1 million hectares and
5.61 tph, respectively). Brazil's agriculture state agency (CONAB) has recently pegged corn production and area at
126.9 million tons and 22.4 million hectares, respectively.

Brazil's second crop corn area has been expanding aggressively for four consecutive seasons, unlike the first
corn area which has largely stalled since 2018. This trend is likely to continue, as farmers are expected to plant a
record of 16.4 million hectares of the safrinha corn this season, while being cautious about the first corn's potential
and slightly reduce its area to 4.4 million hectares. External demand for Brazilian corn remains high and will likely
continue to stay strong through next year, amid the smaller availability of the global grain on the back of a drought-
stricken European crop and a record high and yet less attractive U.S. crop with the dollar appreciation, as well as
frequent/potential interruptions of Ukrainian exports. Domestic demand should remain healthy as well with increased

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ethanol output expectations year on year. Fertilizer market disruptions remain unpredictable and nominal input costs
may continue to climb, but the less favorable cost of production will unlikely hinder Brazilian farmers' acreage
decisions as the crop's profitability stays afloat thanks to higher prices and dramatically improved soil moisture
conditions across the key producing areas such as Minas Gerais, Mato Grosso, Mato Grosso do Sul, and Paraná.

The first crop corn in Brazil is normally planted during October-December and harvested in February-April, while
the second corn is planted in February/March and harvested in June/July. Long-term weather outlooks from
November through February by Refinitiv Weather Research suggest that the chances of La Niña during the period
are high, though its longevity remains in question. The potential impacts from the third consecutive La Niña on
Brazilian crops are difficult to predict as there is little statistically significant relationship between ENSO episodes and
crop yield levels in Brazil (unlike in Argentina which displays a strong correlation between the two). Our latest forecast
indicates that cool and dry conditions are likely to prevail across the core first/second corn areas of the Central-West
and the Southeast, but the current soil moisture conditions in those regions are close to optimal, buffering any
potential weather woes in the months to come.

Figure 1: Improved soil moisture conditions across major first and second corn areas of the Central-West and the
Southeast (in contrast to the South where deficits are still prevalent)

On the other hand, 2022/23 U.S. corn production is lowered to 13.9 [13.6–14.2] billion bushels, down 2%
from last update, following unfavorable late season conditions and some October freeze events. In October's WASDE
(October 12), USDA pegged U.S. corn production at 352.95 million tons, slightly below our median projection. The
average of a Reuter's poll of analysts' own estimates (October 07) placed national-level yield at 171.9 bushels per
acre (vs. Refinitiv Agriculture Research's 171.4 bushels per acre) and production at 13.89 billion bushels (with a

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range of 13.6 to 14.1 billion bushels). Our current estimate puts planted area at 89.2 million acres, down 4.3% from
last season, which is now 0.6 million acres above the USDA's latest estimate of 88.6 million acres.

The latest Crop Progress report (October 17) set the national-level corn mature estimate at 94%, behind last
year's 97% but largely in line with the 5-year average of 92%. Corn conditions continue to show a damaged crop
following recent weather anomalies during the summer, with now only 53% in the good-to-excellent (GEX) category
(vs. last year's 60%). The national-level condition scores have been consistently declining since mid-June, reflecting
adverse crop impacts from hot and dry weather during July/August (especially throughout the Plains) despite
relatively favorable September weather. Harvest is nationally now at 45%, behind last year's 50% but ahead of 40%
five-year average. While Iowa and Nebraska are showing a rapid progress, delays remain considerable in Illinois and
Pennsylvania (8% and 14% behind schedule, respectively), warranting attention. The first large-scale frost event of
the season is being spread from the Upper Midwest into the eastern Corn Belt at the moment, which could potentially
hinder the late season development and harvest activities.

Switching gears, 2022/23 EU-27 corn production is now cut by 7% from last update to 55.7 [52.9–58.5]
million tons, confirming widespread damage from a historic drought and successive heatwaves during the summer
in western Europe. Many key producing countries have shown record (or near record) low vegetation densities –
including the Europe's top corn producer France – during the crop's prime growing season, though the latest weather
conditions have been relatively favorable and moderate with harvest in progress. Our current median estimate is
largely in line with the USDA's October outlook of 56.2 million tons and the European Commission's latest projection
of 55.5 million tons. Harvest activities should continue to proceed with little issues in most crop regions, given steady
and moderate overall weather conditions (despite occasional little rains) expected through the next few weeks.

Production (MMT)
Country 2020/21 2021/22E 2022/23E
World 1134.83 1204.42 1161.75
U.S. 372.81 385.01 354.03
China 261.77 269.96 273.78
Brazil 86.94 115.51 124.05
E.U. 65.49 66.52 55.72
Argentina 46.03 50.18 50.93
Ukraine 32.26 39.08 31.75
South Africa 16.43 15.15 15.70
Paraguay 4.38 3.06 4.50
Table 1: Top corn producers, E Estimates as of October 20 2022 (Source: Refinitiv)

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 Demand Outlook

 U.S. Corn Demand

Sluggish gas demand and scarce corn supply diminish corn consumption for ethanol. Refinitiv's Agriculture
Research forecasts the 2022/23 U.S. corn consumption for ethanol use at 5,257.4 MBU, a 42.5 MBU reduction from
the last update and 17.5 MBU below the USDA reduced October estimate. Motor gasoline demand and U.S. corn
supply are significant drivers of corn consumption for ethanol use in the U.S. In October, the Energy Information
Administration (EIA) published a lower motor gasoline demand estimate in its Short-term Energy Outlook.

Corn consumption for ethanol use totaled 466 MBU in September, 6.9% below the monthly average. On the week
of October 10, U.S. ethanol reached a 10-week high, but the 4-week average is still under trend. As of October 20,
accumulated 2022/23 U.S. corn consumption for ethanol use is at 664.7MBU, slightly below average. Ethanol exports
are under the trend as well. The U.S. exported 39.5 KT of ethanol in September, a 58% decrease from August and
62% below last year. Ethanol share of finished gasoline consumption closed September at 9.9%, the lowest since
April 2021. However, the EIA foresees increases for Q4 to 10.4%. For the second week of October, ethanol margins
are at $0.21/gal, 40.4% below the monthly average.

A higher beef demand and GCAU increase the feed and residual corn use. The beef industry is in high demand
in the U.S. On October 18, the CME feeder cattle index, which indicates the feeder cattle demand, was at $173.08;
this represents a decrease from September levels but is still at a 5-year high and 4.19% over YTD. In addition, the
accumulated U.S. beef exports reached 719.3 thousand metric tons (M.T.) for the first week of October, a seven-
year high. Weekly exports were at 18.4 thousand M.T., also at a seven-year high. Japan and Korea continued to be
the primary buyers of U.S. beef

In October, the USDA raised the Grain Consuming Animal Units (GCAU) to 99.8, back to 2021/22 levels. As corn
prices stabilize with a clearer supply picture, the produce prices will likely stay elevated due to the low cattle supply,
resulting in better profits for the sector. Refinitiv forecasts 2022/23 Feed & Residual Corn Use at 5,276 MBU, slightly
above USDA October's projection. If the demand is sustained at these soaring livestock prices, we will have another
period of decreased stocks.

 Exports: The U.S. corn exports started better than last year, yet below the trend.
Brazilian exports soar.
The U.S. has completed its first month of the 2022/23 corn exports season at 2.42 MMT, 3.95% above last
September, and 25.6% below the 5-year average for the month. As of October 20, the accumulated U.S. corn exports
totaled 3.3 MMT, 35.1% below the trend. Due to Ukraine's reduced export capabilities, China increased U.S. corn
purchases by 85.9% in September compared to last year. However, China continues to slow down its overall corn
demand. The U.S. corn exports to China decreased by 21.5% from August to September. If the trend continues,
Mexico will regain its position as the primary U.S. corn buyer in the mid-term. Based on the U.S. corn harvest and
the current global demand, Refinitiv maintains its 2022/23 U.S. corn exports at 57.76 MMT, a drop of 3.04 MMT
compared to the previous season and 3.15 above October’s WASDE.

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On September 28, Refinitiv published the first 2022/23 Brazil corn production outlook at 124.1 MMT, 9.5% above
last season, an all-time high. Brazilian corn exports reached an all-time high in September at 6.32 MMT, 39.7% above
the 5-year average. As of October 20, Brazil 2021/22 accumulated corn exports reached 25.4 MMT, 47.2% above
the 5-year average. For October, Brazilian corn exports between sailed, loading, anchored, and expected totaled
5.8 MMT, 56.7% above the 5-year average. Given the record supply, strong demand, and favorable Brazilian corn
competitiveness due to the strong U.S. dollar, Refinitiv increased the 2021/22 Brazil corn export to 43.1 MMT, a 4.1%
increase from the last update, 8.3% below the USDA October estimate.

Moving to Argentina, the Buenos Aires Grains Exchange reported that the drought is affecting corn planting. The
exchange mentioned that 5.8% of the expected area had been sown, 11% below the previous season leading to the
2022/23 corn harvest at 50 MMT, slightly decreased from the 2021/22 season. According to Refinitiv trade flows,
Argentina's corn exports totaled 5.3 MMT in September, 40.1% above the monthly average. Refinitiv maintains the
2021/22 Argentina corn exports at 39.2 MMT, 0.2 above USDA's October update.

Ukrainian exports are increasing gradually. The agriculture ministry announced 2.08 MMT of corn shipments in
September, an increase from the 1.75 MMT in August and the highest level since the Russian invasion. Refinitiv
forecasts the 2022/23 Ukrainian corn exports at 15.5 MMT, at the same level as USDA's October estimate.

 Market drivers
a) Unfavorable weather conditions lower 2022/23 global corn production
Adverse late-season weather conditions in the U.S. and heatwaves around western Europe impacted the 2022/23
global corn production outlook. Brazil is set to produce a strong corn season; however, it does not offset the losses
in the U.S. and Europe.

b) Russia threatens the continuation of the humanitarian corridor deal.

Ukrainian grain shipments have been increasing since the U.N. set the deal for the humanitarian corridor exports in
the Black Sea, alleviating food security in developing countries and bringing grain prices down from historical highs.
However, there is increasing uncertainty about the continuation of the deal. The Russian government expressed that
the Black Sea corridor has been used to deliver corn to rich countries, which was not the target. In addition. Russia's
foreign ministry said on October 20 that the Kremlin was ready to support food exports and fertilizers to keep helping
the global food crisis, but the U.S. has been blocking them.

c) Ethanol production in the U.S. reach a 10-week high

On the week of October 10, U.S. ethanol production reached a 10-week high, but the 4-week average is still under
trend. In addition, the accumulated 2022/23 U.S. corn consumption for ethanol use is below average. Margins have
also been below trend, but the U.S. corn harvest is expected to increase ethanol production in the U.S. with a higher
motor gasoline demand.

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d) Low global economic growth diminishes the corn trade

The high global inflation levels, the spike in interest rates from the biggest world economies, and the strengthening
of the U.S. have decreased global corn exports. In addition, China, one of the main corn buyers, continues with its
zero-Covid policy. On the other hand, the E.U. increased its corn imports forecast due to the low supply; however,
the energy crisis has affected grain purchases.

 World Supply & Demand Estimates

2022/23 World Balance Sheet
Beginning StocksProduction Imports Total SupplyDomestic Feed Other Domestic Use Exports Total Use Ending Stocks Stock to Use
World 291 1162 179 1453 740 434 186 1174 278 20
US 36 354 1 391 134 170 58 304 29 8
China 207 274 18 498 214 81 0 295 203 69
Brazil 6 124 1 131 66 12 47 77 7 6
EU-27 6 56 20 81 56 20 3 76 2 3
Argentina -2 51 0 49 10 4 41 14 -6 -10
Ukraine 2 32 0 33 10 1 16 11 7 27
South Africa 1 16 0 16 7 6 4 13 -1 -3
Paraguay 0 5 0 4 1 1 3 2 0 0
Other 38 251 138 428 243 139 16 382 30 8

2021/22 World Balance Sheet

Beginning StocksProduction Imports Total SupplyDomestic Feed Other Domestic Use Exports Total Use Ending Stocks Stock to Use
World 293 1204 184 1497 751 455 201 1206 291 21
US 31 385 1 417 144 176 61 320 36 9
China 206 270 22 498 209 82 0 291 207 71
Brazil 4 116 2 122 62 11 43 73 6 5
EU-27 8 67 20 94 62 21 6 83 6 6
Argentina 1 50 0 51 10 4 39 14 -2 -3
Ukraine 1 39 0 40 10 1 27 11 2 4
South Africa 2 15 0 17 7 6 3 13 1 5
Paraguay 1 3 0 5 1 1 3 2 0 -2
Other 38 260 139 437 245 153 19 399 19 5
Table 3: Global S&D balance sheet for the 2022/23 & 2021/22 marketing years. Estimates as of October 2022 (Source:
USDA, Refinitiv)

 Conclusion
The global corn market keeps going through severe disruptions. The heatwaves and droughts significantly
affected the 2022/23 global supply leading to lower corn stocks by the end of the season. In addition, the continuation
of the Russian invasion of Ukraine and the uncertainties about the availability of grain transit in the Black Sea keeps
fuelling the scarce global corn supplies. Demand will set the rules for the global corn market in the upcoming months.
Global corn consumption has decreased due to high inflation, low economic growth, and high-interest rates. We
foresee that meat consumption will grow at a slower pace and impact the feed demand; however, international
policies are increasing the corn demand for industrial uses like biofuels which can bring the market soaring again.

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