Global corn acres up for grabs
The U.S. will rebound this year, regaining the top rung of the world’s corn export ladder, but Brazil and Argentina combined will export more corn than the U.S.
“In 1979, U.S. exports accounted for about 10% of the world’s use of corn,” says Daryll Ray, Agricultural Policy Analysis Center, University of Tennessee, Knoxville. “By 2010, that number had fallen to 4.34%.”
The U.S. is paying a price for record-high profits in the form of greater global competition. These acres will stay in production for years unless there’s a prolonged price slump, Ray says.
“Increased global acreage, especially in South America and the Black Sea, has been expanding dramatically in response to higher prices,” agrees Sterling Liddell, Rabobank Food and Agribusiness Research and Advisory Group. “During the last five years, poor weather and increased demand caused demand to outpace supply, creating an environment with substantially increased margins.”
As a result, foreign buyers learned to turn to competitors to supply their needs. “It may not be their first choice, but they’ve learned it’s a workable option,” he says.
The USDA projects that global coarse grain supplies for 2012-2013 will increase by 2.1 million tons. What’s the risk that the U.S. will become a residual supplier?
Here’s a look at how the competition stacks up.
Brazil’s winter corn crop (the second crop, referred to as the little crop) has grown dramatically. Since 2000, Brazil has doubled its corn production, largely on the shoulders of its second-crop corn.
Although Brazil exported about 21 million metric tons of corn this past year, limited storage still hampers its flexibility in global markets. It lacks an efficient transportation infrastructure, and its southeastern and southern port regions are saturated.
University of Illinois ag economist Peter Goldsmith has studied Brazil’s state of Mato Grosso for a dozen years. He points to its chronic 10% postharvest loss.
“Losses occur in three areas: grain left in the field after harvest, grain that falls off trucks in transportation from the field to storage or commercial sale, and loss of private storage,” he says.
“There’s a 34% under-capacity of soybean storage, and the situation is aggravated by the rapidly increasing production of second-crop maize,” he adds.
Nonstop, year-round farming in the tropics has its disadvantages, Goldsmith says. “Farmers have to harvest soybeans during the rainy season, because if they wait until the rain ends to plant corn, the corn won’t get pollinated due to the onset of the dry season. The equipment is in constant demand, far from farms. Combines and trucks aren’t maintained properly,” he says.
Domestic corn prices are below cost of production. Brazil is expected to cut both full-season and second-corn acres and to plant more beans.
Argentina has doubled its corn exports since 2003. Argentina is the fifth-largest corn producer in the world, with the bulk grown in Buenos Aires and Cordoba provinces. Argentina produced a record corn crop in 2013: 25.7 million metric tons, up from a drought-reduced 21.5 million last year.