Ukraine’s corn may be next to join a trickle of corn cargoes that are moving from the Black Sea to France as a rare arbitrage opportunity persists, market sources told Agricensus Wednesday.
“Price-wise, it would make sense… it might be an outlet for some of the big guys as there is no proper demand anywhere else,” one market source said.
France is typically an export market itself, making the move from the Black Sea to Northwest Europe a rare opportunity, but the pick-up in interest reflects two adjacent regions that have seen diametrically opposite experiences through the summer.
For France, the long, hot summer has diminished corn yields, and seen analysts slash the country’s anticipated crop size – tightening fundamental balances and providing support to domestic prices.
While Russia has also seen its corn crop hit by bad weather, Ukraine in particular is on course for a big harvest, with FOB values in the region under pressure across Bulgaria, Romania and Ukraine.
That has put France’s feed and industrial users on alert, with a number of market players looking to exploit the opportunity despite potential backlash from France’s own farmers.
“It’s political – few can make the move work because farmers own most of the silos and they don’t like to get imported corn… A Brittany feed maker would like to do the same, but they are owned by the farmer,” a second market source said.
Economics of a rare arb
Currently, market sources estimate FOB Bordeaux corn prices at around €172/mt ($198.25/mt) with Ukraine’s FOB corn price for November loading assesssed at $164.75/mt on a handysize basis, according to Agricensus data.
The freight rate for a 30,000 mt corn vessel from Odessa to Northwest Europe was around $25/mt, according to ISM, a Ukraine-based agency that reports on freight, while the relative strength of the continent’s domestic corn price means the bloc is currently not levying an import duty.
Beyond political sensitivities, the EU remains a non-GMO destination even for areas – such as industrial use – where imports may be easier to place.
This has made it hard to source corn from the US, while the bloc slapped a 25% retaliatory tariff on US corn in June as part of an ongoing trade dispute.
“The (starch) industry can always try to find non-GMO corn which satisfies their quality requirements, so this is not surprising at all,” a third source said.
Previously, two cargoes are thought to have moved from the European Black Sea to France with the EU-origin meaning the cargoes could be delivered against the Euronext corn futures contract.
The first, the Murgash, sailed from Constanta, Romania, on October 3, arriving in the English Channel port of Dunkirk on October 16, according to ship tracking data.
The second is believed to be the Amira Eman, according to market sources, which departed Varna, Bulgaria on October 16 and is currently expected to arrive in France’s Atlantic port of Lorient on October 26.