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Update for November 3rd, 2022

Mexico's Ban on Genetically Modified Corn & China/Brazil Corn Imports

News out of the Black Sea continues to greatly impact prices in the U.S. but trying to second-guess Putin’s next move is a coin toss. Actions taken by China will always be critical to our commodity market, and with the current relationship strained between the two nation’s they are solidifying alternative corn import options elsewhere. China has primarily relied on the U.S. and Ukraine for their corn needs in the past but since exports out of Ukraine are extremely unpredictable and U.S. prices are high, they are turning to Brazil to fill needs.

A new list on China’s General Administration of Customs website included 136 corn export terminals they will begin accepting imports from located in Brazil. These terminals are owned by Archer-Daniels-Midland Co, Bunge Ltd, Cargill, Louis Dreyfus Co, and Cofco International. Until this week complex inspection requirements had kept corn imports from Brazil off their approved list.

An official with Brazil’s Ag Ministry said, “it is a good alternative for Brazil, having more markets to send products to.” This change had been made known prior to it’s official release so it really isn’t expected to be a shock to the grain market. So, while this opens the door to Brazil which could reduce Chinese demand for U.S. corn, it has not added or subtracted bushels from the global balance sheets and demand from other countries is expected to balance out any shift.

It is no secret that Mexico is one of the biggest buyers of U.S. corn, so recent decisions to potentially ban imports of genetically modified corn are worrisome. The current president of Mexico, Andres Manuel Lopez Obrador took office in 2020 and soon after taking office signed a decree to phase out imports of GM corn by the beginning of 2024. Very few details of the decree were made public which has left the industry largely guessing how far the ban would reach. Previously the Mexican government had reassured producers that the ban would not impact imports of yellow corn for use in animal feed but that may be changing. Some Mexican officials still say that yellow corn for animal feed will not be affected by the ban others have said that the government is considering an outright ban of all GM corn and derived products and have plans to issue direct contracts with producers of non-GMO corn. A full ban would ultimately have major financial impacts.

While Mexican farmers produce nearly 60% of their own nation’s corn needs 40% is imported and 90% of those bushels come from the U.S. In 2021 Mexico imported 15.6 million metric tons of corn from the U.S. This amounts to more than 25% of all U.S. corn exports. Of this total the USDA reports 59% of Mexico’s corn usage is for animal feed. 22% of that total is made from Mexican white corn and 78% is yellow corn which is mostly imported. Most Mexican food products made for human consumption is made with white corn. Mexico’s Deputy Agriculture Minister Victor Suarez says that more specific details to clarify the decree aren’t expected until the second half of 2023 even though he doesn’t anticipate any modifications in the meantime.

The research consultancy World Perspectives, Inc (WPI) working on behalf of Crop Life International has studied the financial impacts a total GM corn ban would have on American farmers and Mexican consumers. The WPI expects GM corn prices would fall 10% over 3 years, change crop acreage and the entire U.S. grain handling system. The net loss in the U.S. corn industry year 1 would be $3.56 billion, and over a 10-year period the U.S. economy would lose $73.89 billion in economic output. They also foresee the additional costs to Mexico for importing this non-GMO corn would be $9.73 billion more than it would be otherwise.

StoneX released the results from their monthly U.S. farmer survey yesterday. The latest data shows an increase in the estimated corn yield of 0.6 bpa to 174.5 and lowered the soybean estimate by 0.4 bpa to 50.9. In the graph below you will see the considerable difference between the current StoneX and the October USDA yield and production estimates.

Our Strategic Petroleum Reserve has been depleted to its lowest level since 1984. Millions of barrels of this crude are expected to hit the market in December in an effort to lower gas prices. The Biden Administration is also telling the Department of Energy to be ready to release even more barrels from the Strategic Petroleum Reserve this winter. (Axios)

The 7-day forecasted precipitation followed by the 6-to-10-day outlooks

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