Despite the fact that the course of the corn market is erratic in the short term, ABN Amro expects a higher corn price in the long term. The market for ethanol is picking up and grain maize is ideally suited for this.
The price of grain corn, especially in the United States (US), is currently a plaything in the trade negotiations between China and The United States. Prices can therefore fluctuate considerably, just as is the case with soy. If a consensus is reached here, the bank expects a recovery of this commodity.
More ethanol
Approximately 60% of all grain maize is used as animal feed, approximately 10% is intended for consumption and the remaining 30% goes to the production of biofuels such as ethanol. This segment is growing the fastest in percentage terms; in the past 10 years by an average of 7% per year, ABN Amro calculated. However, most of this growth was achieved up to and including 2014.
The biofuel sector is not looking very positive at the moment. There is significant overcapacity, which means that small factories have to close and all players work with low margins. Yet the bank has good reason to believe that better times will come. The US recently approved allowing more ethanol to be added to gasoline, which is expected to increase production.
Production comes to a standstill
Ethanol production in the US increased by 2018% in 25. This is mainly the result of increased exports to Brazil, but exports are erratic. As more and more countries blend ethanol into fuel, demand is increasing. In addition, both the acreage and the average yield worldwide have decreased. This means that global stocks have to be used, which decreases by 11%.
Not just corn, but also sugar is an important raw material for ethanol production. If sugar prices are low and the ethanol market is positive, a lot of sugar cane is processed into ethanol in Brazil, among other places. "The increasing demand certainly has a positive influence on the demand for sugar," thinks Casper Burgering, senior agricultural commodities economist at ABN Amro. He does not dare to say whether we will also notice this immediately in the Netherlands.
sugar prices
The 'Liffe' futures market for refined white sugar in London is currently recovering somewhat. Sugar prices rose at the end of last year, only to drop sharply again towards the new year.