US corn export interest sees Pacific NW surge as Gulf differentials sink
The prospect of improving demand for US corn from Asia’s markets is spurring North American market participants to turn to the Pacific Northwest as the major jumping off port for exports, market sources said Tuesday.
Values in the PNW have surged this week, with brokers putting the value at 70 cents/bu over the front month March CBOT futures contract at the end of last week, climbing to around 84 cents/bu over March on Tuesday, for delivery in February.
US Gulf coast differentials have faced pressure over the same time frame, with the Agricensus US Gulf FOB corn differential slumping from 57 cents/bu over the front month contract on December 1 to stand at a premium of 47 cents/bu by December 18, according to Agricensus data.
Domestic corn jitters have been fired by a huge and delayed harvest, disappointing export sales and heavy competition – particularly from Argentina – and mounting logistic concerns for some of the key transit rivers as winter takes hold.
The PNW has provided an outlet and some relief for that, with demand in to Asia key in driving up bids at the ports in the region – USDA data shows that bids for Portland have reached $4.37/bu as of December 19, equating to a premium of around 90 cents over the CBOT front month corn contract.
Sensing an opportunity, US train operators are offering discounts to tempt corn to move to the railways, with shuttle services – lines of 110 railcars carrying up to half a million bushels of corn – constantly connecting the western states of the Midwest with the export ports of the Pacific Northwest.
“The railroads are giving the export terminals a $700/car incentive… so plus 90 cents traded today, but they’re getting a 17.5 cent/bu incentive,” one market source said with each car capable of holding around 4,000 bushels.
Market sources have also highlighted low water levels along key rivers like the Illinois helping to drive the move of corn out to the rail, as market sources fear export routes to the US Gulf could be cut off, while poor buying interest has seen corn bids wilt in the port of New Orleans.
USDA data shows export bids in New Orleans at $3.73/bu – equating to around $149.50/mt with the PNW at $174.50/mt.
“That is the market that’s hot right now… Japan and Cargill have bought a lot and the demand is heading towards PNW, there’s the elevation at PNW to manage it, the opportunities [are accessible] from PNW and the railroad system has introduced incentives to keep bushels moving in that direction,” the source said.