by PressThe cost of corn on the world market will fall by 10%: a forecast
Factors that affect the cost of corn
The World Bank presented forecasts for the global agricultural market. According to analysts, by the end of 2022, the average cost of corn will fall by 10% compared with the results of 2021. One of the factors influencing this situation was a decrease in demand for crops from Asian countries. In addition, after the sharp increase in consumption of corn, many farmers increased its seeding, which also affected the decline in grain prices.
Last year, the cost of corn rose by 57% from the previous period to $260 per ton. Despite the fact that trends point to lower corn prices, World Bank experts note that the forecast may not come true. The matter is that the agricultural market, as well as others, depends on energy carriers, the cost of which keeps growing. The rise in the price of raw materials leads to higher prices for fertilizers and higher rates for logistics services. Climatic conditions also play an important role, a good example is Brazil and Argentina, where the weather has significantly reduced crop production.
Corn shipments continue to grow steadily since 2019, with the U.S., Argentina, Ukraine, and Brazil being the main exporters in the global market. Last year, the U.S., Argentina, and Brazil accounted for 60% of the crop’s profits.
It should be noted that fertilizer prices started rising back in 2021 and reached record levels by the end of the year. This led to an increase in farmers’ costs for production processes. Some substances and preparations rose in price by more than 4 times. A prime example is urea, which soared from $280 per ton to $934 per ton.
Despite all the difficulties, experts expect a record volume of corn production in the world in the new season. According to USDA forecasts, it will be at the level of 1.2 billion tons. Prior to that, the maximum was registered in 2016; a little more than 1.1 billion tons were grown then.
The likely fall and increase in production intensify competition in the market. The United States remains the leader so far, but South America, especially Brazil and Argentina have a good chance to increase export volumes. One should also take into account the rate of grain sales, which is influenced by inflation. Because of this, farmers from different countries prefer to hold on to their crops rather than sell them right away. If this trend reaches the global scale, the market situation will deteriorate significantly.
As for demand from Asian countries, it has sagged a little, although last year analysts predicted its growth. However, the overall consumption of corn is growing, so we should not expect a sharp decline in interest in the crop.