IndustryGlobal Feed Market Annual Outlook: Corn Market May Rise and Fall in 2025
As of the week ending December 27, 2024, global corn prices have mostly risen, with Chicago corn futures rising for the fourth consecutive week due to strong demand for corn in the United States and the possibility of dry weather in Argentina.
Looking back at the trend of the past year, for most of 2024 (from January to August), Chicago corn futures continued the weak trend of a 30% drop in 2023 and fell below $4 at the end of August, setting the lowest price since 2020. However, after the corn harvest in the United States ended, with strong growth in the domestic ethanol industry and export demand, while European corn production decreased and Black Sea corn export supply tightened, the supply and demand situation for corn in the United States and globally tightened, boosting the rebound of corn prices and recovering most of the lost ground at the beginning of this year.
Looking ahead to 2025, the market will focus on whether the optimistic outlook for South American corn production has changed, as well as the new US government's biofuel policy; And the intention of American spring broadcasting.
On Friday (December 27th), the Chicago Board of Trade (CBOT) closed March corn futures at around $4.615 per bushel, up 3.4% from a week ago; The spot price of No. 2 yellow corn for the January shipping schedule in Meiwan is $5.2400 per bushel, an increase of 1.5%. The Euronext corn futures for March closed at around 206.25 euros per ton, up 0.6%; Due to Christmas reasons, there are no quotes available in Argentina from Tuesday to Friday; The corn futures on the Brazilian B3 exchange were reported at 72.65 Brazilian reals per bag, down 0.1%.
International crude oil futures rose this week. The global benchmark Brent crude oil futures for February closed at $74.17 per barrel, the highest price since December 13th, up 1.7% from a week ago.
US corn export demand remains strong
At the end of 2024, the demand for US corn exports will continue to remain strong. The US Department of Agriculture's Export Sales Weekly Report shows that as of the week ending December 19th, the net sales volume of corn in the United States was 1.71 million tons, 46% higher than last week and 37% higher than the 1.25 million tons sold in the same period last year. So far in 2024/25, the total sales of corn in the United States have been 38.02 million tons, a year-on-year increase of 29.2%; The US Department of Agriculture predicts a full year export growth of 8.0%. If the current pace of corn sales in the United States continues, the US Department of Agriculture may still raise its corn export target.
However, so far this year, the sales volume of corn in the United States is still lower than the 41 million tons in the same period of 2021, mainly reflecting a decline in US exports to China. So far this year, the United States has only sold 26000 tons of corn to China, which is lower than the 1.76 million tons sold in the same period of 203 and a fraction of the 12.29 million tons sold in the same period of 2021.
This year, China's corn production has set a record, and domestic corn prices have fallen, resulting in a continuous decline in China's corn imports over the past few months. According to customs data, China's corn imports in November were only 300000 tons, a year-on-year decrease of 91.8%. The import volume for the first 11 months of this year was 13.32 million tons, a year-on-year decrease of 39.9%.
In the absence of Chinese buyers, the strong growth in US corn exports so far this year has mainly benefited from the support of traditional buyers such as Mexico.
At present, the export price of corn from the United States is still competitive. From the quotation situation, on December 23rd, the FOB price of Meiwan corn was $211 per ton, an increase of $2 from a week ago. The price of Brazilian corn at the Paranagua port is $219, up $2 from a week ago. Argentine corn is priced at $209 in Shanghe, up $2. On December 27th, the FOB price of Ukrainian corn was $223 per ton, unchanged from a week ago.
US corn ethanol demand maintains strong growth, but future demand prospects are questionable
According to data from the US Energy Information Administration (EIA), as of the week ending December 22, 2023, the daily ethanol production in the United States was 1.107 million barrels, unchanged from the same period last year. The amount of corn used for ethanol production this week was 111 million catties, equivalent to 15.89 million catties per day, which is higher than the pace required to achieve the goals of the US Department of Agriculture. The US Department of Agriculture currently predicts that the ethanol industry will consume 5.45 billion bushels of corn in 2024/25, which is equivalent to 14.9 million bushels of corn needed per day. If corn ethanol consumption continues at the current pace, it means that the US Department of Agriculture may need to raise this demand expectation in future supply and demand reports.
One third of the annual corn production in the United States is used to produce ethanol. The increase in ethanol production will help consolidate the demand for corn in the United States. However, US President elect Trump strongly supports increasing US oil and gas production, which could create a headwind for the demand outlook for US corn in the biofuel industry. It is worth mentioning that last week, the US Congress removed the provision allowing the annual sale of 15% ethanol gasoline (E15) from the spending bill, which disappointed the biofuel industry and corn farmer groups.
In the coming year, the market will focus on whether ethanol based renewable aviation fuel (SAF) is eligible for government subsidies. Due to the aviation industry generating approximately 3% of global emissions, airlines are under pressure to reduce their emissions. SAF currently accounts for approximately 0.1% of global aviation fuel consumption. The US government's goal is to meet all of America's aviation fuel needs with SAF by 2050, and to supply at least 3 billion gallons of SAF annually by 2030. Compared to the 95 billion gallons of aviation fuel consumed annually in the United States before the pandemic, SAF still has enormous growth potential. The estimated SAF production released by the International Air Transport Association (IATA) in December this year indicates that global SAF production will reach 1 million tons (1.3 billion liters) by 2024, far lower than the previously predicted 1.5 million tons (1.9 billion liters), as major SAF manufacturers in the United States have postponed their production growth to the first half of 2025. The global SAF production is expected to reach 2.1 million tons (2.7 billion liters) by 2025, accounting for 0.7% of the total aviation fuel production and 13% of the global renewable fuel capacity. Willie Walsh, Director General of the International Air Transport Association, stated that global SAF production is increasing, but the growth rate is disappointing as governments send confusing signals to oil companies to continue providing subsidies for exploration and oil and gas production, while investors in SAF producers seem to be waiting for guarantees of easy profitability. However, with the changing political landscape in the United States, people generally believe that the prospects of SAF are not optimistic.
Over the past few months, the market has been paying attention to the prospects of the 45Z tax credit, which applies to SAF produced between 2025 and 2027, but is limited to domestically produced SAF in the United States; In contrast, the 40B tax credit applicable to 2023 and 2024 also applies to imported SAF. Due to the expiration of the 40B tax credit on December 31, 2024, and the possibility that the Biden administration may not introduce the final bill for the 45Z in the next three weeks, potential investors may be reluctant to invest resources in SAF production due to concerns about the continued instability of the regulatory environment.
The global corn inventory ratio for 2024/25 is the lowest in 12 years
The US Department of Agriculture lowered its year-end corn inventory for 2024/25 to 1.738 billion catties in its December report, a year-on-year decrease of 1.3%. The estimated inventory to usage ratio of US corn for 2024/25 is 11.44%, lower than last month's forecast of 12.93%, as well as lower than last year's 11.76% and the 10-year average of 12.48%. This indicates that the supply situation of US corn will tighten in the next year, forming a significant turning point from the previously predicted loose supply. This means that corn prices are expected to receive support at the $4 level. The US Department of Agriculture predicts that the average annual farm price for US corn in 2024/25 will be $4.10 per bushel, lower than the previous year's $4.55 per bushel.
From the perspective of global supply and demand situation, the US Department of Agriculture predicts that the global corn ending inventory for 2024/25 will be 296.44 million tons, a decrease of nearly 20 million tons or 6.3% year-on-year; The inventory usage ratio is 20.85%, lower than the previous year's 22.34% and the 10-year average of 24.72%, and also the lowest inventory usage ratio since 2013/14. In addition, the supply of corn exports from Ukraine and Russia has tightened, European corn production has dropped to the second lowest level in the past 15 years, and Brazilian corn exports will fall to a four-year low, which also means that the global supply and demand situation will be tight in the coming months.
The optimistic outlook for global corn production in 2025/26 will constrain the room for price increases
The US Department of Agriculture will release a preliminary forecast for the planting area for 2025/26 in February, and the first planting intention report based on a survey of farmers will be released at the end of March. In November of this year, the US Department of Agriculture preliminarily predicted that American farmers may increase their corn planting area in the next year, while reducing the planting area for soybeans and wheat. The US Department of Agriculture predicts that the corn planting area in the United States will increase from 90.7 million acres to 92 million acres in 2025/26. The estimated total wheat planting area in the United States for 2025/26 is 46 million acres, slightly lower than the 46.1 million acres in 2024/25.
In the European ｕｎｉｏｎ, corn production is expected to increase by around 3% in 2025/26. The consulting firm Strategic Grains predicts for the first time this month that the EU corn production for 2025/26 will reach 59.6 million tons, an increase of 1.7 million tons or 2.9 percentage points year-on-year. The EU Grains Chamber of Commerce (Coceral) also predicts a year-on-year increase of 2.9% in EU corn production for the next year.
In Ukraine, a major corn exporting country, the First Deputy Minister of Agriculture, Taras Vysotsky, stated in November that the planting area of corn in Ukraine may increase by 500000 hectares by 2025. This is because corn prices have remained relatively high this year, and the high yield of soybeans has led to a decline in prices, which will prompt Ukrainian farmers to switch back to planting corn.
If the corn production in the United States, European ｕｎｉｏｎ, and Ukraine increases in the next year and the global corn supply outlook improves by 2025, it will constrain the upward space for corn prices.
Looking ahead to 2025, the corn market may emerge from a trend of first rising and then falling. In the first few months of 2025, weather in South America will become a key variable influencing corn prices. If the weather is not ideal, it is likely to provide potential support for a rebound in corn prices. However, as time progresses, the prospect of global corn production growth in 2025/26 will constrain the rebound space of corn prices.
