Ukraine corn prices push past feed wheat to 12.5% parity

Prices for FOB Ukraine corn prices have powered past feed wheat and some grades of milling wheat to reach parity with 12.5% protein wheat, trading sources in the Black Sea said Monday.

The move could be an indicator that corn prices in the region are approaching their ceiling, after a run up globally that has seen the corn complex strengthen on the back of the good demand and unfavourable weather.

With an unconfirmed corn trade, potentially destined for China, for an April loading handymax-sized vessel in a panamax port heard done at $208/mt on Friday, corn prices are now on par with 12.5% Russian wheat, which was heard bid for the second half May loading at the same price Monday.

“Corn is above the 11.5% or even feed wheat… it’s a good signal that it is starting to be too hot, or wheat is too cheap,” one market source said.

“Corn prices seem overdone and might correct; already it does not compete into Egypt versus the US… then again, it is still cheap versus barley,” a second source said, with that relative strength in barley also affecting the market dynamics.

“When you have feed barley at $215/mt FOB, then everything could be possible,” a third source said, with the strength in barley fired by limited availability and unyielding demand from countries like Saudi Arabia.

The Kingdom has soaked up $1 billion worth of barley via import tenders, eschewing alternate, cheaper feeds in favour of its regular, established demand.

Barley competes with wheat and corn as an animal feed.

Firmer corn prices in the Black Sea region have been driven by a mixture of “fear and fundamentals” according to the first source, as farmers have held on to supply in the belief that prices are set to move higher as fears mount over Argentina’s corn crop.

With China still picking up corn cargoes from Ukraine, the EU’s decision to cut all import duties for grain imports may also be providing a second tier of buying interest.

“I think more Ukraine origin imports are possible,” a Ukraine-based source said, with the EU already taking something in the region of 8.1 million mt of Ukrainian corn imports in January to November 2017, according to data from the European Union’s statistical arm.

That compares with 6.7 million mt for the whole of 2016, with January, February and March typically the busiest months of the year with an average of one million mt per month seen moving in both 2016 and 2017.

Ukraine’s government data puts the volume of exports of Ukrainian corn to the EU at 7.8 million mt for the first eleven months of 2017, rising to 9.1 million mt for the full year including December.