Ukraine corn sellers unfazed as logistics ease burden of low prices

New storage capacity and a smaller corn harvest are enabling Ukraine’s corn farmers to resist downward price pressure across the corn complex, as a raft of bearish factors has undermined values on futures contracts.

“The ups and downs on Chicago adds some emotion to the buyers’ side, but the glut of grains that has accrued is well known and is already priced in on physical markets,” one trading source said.

“There is less crop overall and now we have more storage capacity so, in terms of logistics, we have more power to wait,” the trader added.

While there is no shortage of supply globally, the main competition has come from South America with volumes working into destinations like the Middle East, locations that should naturally favour Ukraine’s geographic location.

However, the strength in Black Sea and Azov Sea freight rates has made it harder to compete, but with Ukraine’s rain-delayed harvest still underway and overall production expected to fall in 2017/18, domestic CPT prices versus Black Sea export prices leave little room to manoeuvre.

According to the USDA’s World Agricultural Supply and Demand Estimates, published at the beginning of November, Ukraine’s corn harvest has been revised downwards to currently stand at 34.99 million mt, versus 36.99 million mt in October.

Internally, CPT prices were said to be at around $150/mt, with FOB costs to translate that into a cargo ready for export standing at around $10/mt – bringing the total to around $160/mt.

However, with offer prices on a FOB basis already heard at around the $162/mt level for handysize vessels, there was little scope for offers to fall much lower.