Reduce Demand, and Drought Effects are Projected to Increase US Maize (Corn) Prices
Reduce Demand, and Drought Effects are Projected to Increase US Maize (Corn) Prices

Reduce Demand, and Drought Effects are Projected to Increase US Maize (Corn) Prices

  • 20-Jan-2023 4:56 PM
  • Journalist: Shiba Teramoto

USA: Market sources predict that the weather will be a major factor in deciding the trajectory of US Maize (Corn) in 2023–2024, at least during the first half of 2023. Due to ongoing dry conditions in some US regions, US Maize (Corn) already has logistical issues that have increased freight costs, resulting in uncompetitive prices, and decreased demand for exports.

The US's ongoing dryness has impacted Maize (Corn) exports for the previous few months. The Lower Mississippi River's low water levels had an impact on the possibility of exporting US Maize (Corn) due to record-high barge freight costs and barge transit limitations. Reduced water levels forced shippers and vessel operators to employ lighter loads due to draught constraints, which called for less cargo per barge and fewer barges per tow.

While Maize (Corn) barge freight costs in December 2022 were down by 25.1% from record highs in October and November, they are still high for the season. According to market report statistics, the cost of barge freight to transport Maize (Corn) from Illinois to the US Gulf Coast in H1 2023 will be about 45.2% higher than the prior year, or 25 cents/bushel of Maize (Corn). The US Maize (Corn) price may rise because of higher freight costs, further reducing its competitiveness in international markets. The US dollar's strength and other reasons would also make US Maize (Corn) less appealing to purchasers.

In terms of demand, there is really no demand for US Maize (Corn). Export demand and demand from the ethanol industry are also muted right now due to the winter season. Lower domestic demand is another issue that raises questions. The economy continues to offer some dangers for the market for ethanol in the upcoming year to constrain feed consumption as well.

According to the ChemAnalyst database, if the dryness and drought in the US persist, the price of Maize (Corn) is likely to rise since the crop is likely to be harmed, which would also lead to low water levels, exacerbating the logistic issues.

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