GLOBAL feed grain markets look set to come under increased price pressure throughout 2014, with a "double whammy" of large carryout stocks of 2013-harvested US corn compounded by expectations of another large South American corn harvest.
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Brazil and Argentina - two of the world's biggest corn exporters - are forecast to produce 94 million tonnes of corn in 2014 and the historically large crop is expected to limit upside for corn prices and weigh heavily on global feed grain prices.
Global corn stocks are projected to increase by 26.7 mt in the 2013-14 season driving stocks-to-use ratios to 17.4 per cent, the highest levels in more than three years.
Following a record for corn production in the US last year, and with world corn and soybean stocks-to-use ratios recovering from record lows in 2012, a large South American production is pivotal in ensuring global feed stocks continue to be replenished.
During the past five years, there has been an increasing presence of South American-grown corn and soybeans on the international export market.
In this time, South American corn exports have increased by a staggering 101pc, while soybean exports have grown by 24pc.
This growth in exports has led to an increasing dependence on the region for feed grain supplies by global consumers.
In 2013-14 almost 40pc of the total global corn export trade is expected to come from South America, starkly highlighting the importance of the region to the stability of prices and consistency of supply.
Although growing conditions in Brazil have been very favourable, planting conditions for the corn crop in Argentina have been far more variable.
Hot and dry conditions in Argentina throughout December and early January have delayed the completion of planting, however rainfall during the past two weeks should see the remainder of the intended acres planted despite being later than ideal.
With both the corn and soybean crops at a crucial stage of development however, a return of poor weather has the potential to dramatically affect yields.
As we approach sowing for winter crops in Australia, growers should keep an eye on South American crop developments.
If conditions in South America turn dry again and production does not meet market expectations many buyers will be looking to other origins to fill their feed grain requirements.
Any reduction in production expectations could result in further pricing opportunities in feed grain markets.
Graydon Chong is senior grains analyst at Rabobank.
