USA lost Chinese corn market even before the trade war thanks to Ukraine, fast-growing Black Sea exporter

Andrey Sizov 07.08.2019

Looks like the end of the trade war between Beijing and Washington is very far from over. China will keep buying soybeans from other suppliers urgently trying to fill the US share which accounted for 40% of total imports in pre-trade war times. However, for another important crop, corn, China is well prepared for any trade tensions with the US.

Several years ago, the USA used to be a dominant corn supplier to China. In 2011/12 US sold 201 mln bu (5.1 MMT) of corn to China which accounted almost to 100% of all Chinese imports. In 2017/18 when the trade war was just starting US exports fell to 11.8 mln bu (0.3 MMT) or less than 10% of Chinese imports. What has changed? Even before the trade war, China started to switch to other corn suppliers, mainly to Ukraine.

In 2013 the first vessel of Ukrainian corn reached China and by now the country has become the largest supplier of corn. In 2018/19 Ukranian corn exports to China are expected to be around 0.16 bln bu (4 MMT) and account for more than 80% of total Chinese imports.

The Black Sea country is expanding corn exports fast. Ten years ago Ukraine shipped only to 0.2 bln bu (5 MMT) of corn to other countries, while in the current 2018/19 season exports are expected to reach 1.2 bln bu (30 MMT) with EU, China, and Egypt being major buyers. Production grew from 0.4 bln bu (10.5 MMT) to 1.4 bln bu (35.8 MMT) in 2018, supported by both area expansion and yields improvement. At the same time, domestic consumption remains relatively flat around 0.2-0.3 bln bu (6-7 MMT) as the livestock sector grows slowly and the industrial consumption is negligible.

We expect Ukrainian corn harvest in 2019 to be at 1.37 bln bu (34.8 MMT), just slightly below 2018 record level. Exports are also expected to be slightly lower than in the 2018/19. Expected good Ukranian crop won’t offset a sharp decline of production in the US in 2019/20 but longer-term the threat from the country as a key corn exporter is likely to continue to grow.

However, we believe that the rate of growth of production could slow down. Current average Ukraine’s corn yields of 110-125 bu/ac (7-7.8 mt/ha) are 60% higher than we saw a decade ago and are equal to EU’s yields. To boost yields noticeably further the country would need access to new biotech corn varieties, while officially growing of all biotech/GM crops is forbidden in Ukraine.