USDA closes Europe's corn gap with wheat, not imports
Since May, 10 Mt have come off the EU corn crop and only 3 Mt have come back as imports, so the rest comes out of feed use while wheat trades under corn. The corn the November WASDE found in South America is not heading to Europe.
The USDA added 4 Mt to South America's next corn crop on Tuesday and still cut what Europe will use by another 1.5 Mt. Since May, Washington has taken 10 Mt off the EU harvest, from 57.5 to 47.5 Mt, and found only 3 Mt of it in imports. The rest comes out of the ration: European feed compounders are replacing corn with wheat.
Europe closes its corn gap in the feed trough
Since the summer, the lost harvest has mostly landed on the same line. EU corn use has gone from 74.8 Mt in May to 69.5, while ending stocks have stayed at 5.05 Mt since August. Imports helped only for a while: raised to 23.5 Mt in August, they were cut back to 22.5 this month. At 69.5 Mt, Europe would use less corn than it has in many years.
Wheat has become the cheaper feed
The swap has a price behind it. Wheat has traded under corn on Euronext at every session since late May, and the 23 €/t gap of 9 November is one the market rarely sees. Compounders keep a floor of corn in their rations, but above it wheat is the cheaper grain, and the USDA now writes that into the balance sheet.
The European Commission still reads it the other way. Its October balance keeps EU imports at 25 Mt and use close to last season's, and lets stocks fall from 20.3 to 13.5 Mt instead.
The extra corn is not heading to Europe
More imports could have closed the gap, but the corn the USDA found this month mostly stays where it grows.
- Brazil gains 5.5 Mt across two seasons, and its own use takes 5 Mt of it.
- Argentina adds 2 Mt, all of it for export.
- Ukraine, the nearest supplier, loses 2 Mt of exports to a railway that cannot move its harvest faster.
- The United States gives back 3.6 Mt of the 6 Mt it added to its crop in October.
Our reading: the import line still asks for more than ships deliver
Even the USDA's lower import figure is demanding. Europe has brought in 2.44 Mt of corn since October, about a normal start. Reaching 22.5 Mt takes about 0.43 Mt a week until next September, the pace Europe held over the same months after the 2022 drought, while the last four weeks ran at 0.39. If arrivals stay at their recent pace, the shortfall lands on the ration again and the swap toward wheat goes further than the USDA has written. Three signals will show it:
- Weekly EU corn imports. Near 0.43 Mt a week, imports carry their share. Near 0.39, feed use takes more of the gap.
- Euronext wheat against corn. While wheat stays under corn, the swap pays. Wheat back above it sends compounders back to imported corn.
- Ukrainian loadings. More corn moving on the railway puts more of it within reach of European buyers.
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