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Global corn competition gets difficult

DANIEL LOOKER 05/03/2012 @ 3:05pm Business Editor

In a Washington, D.C., office building, Tom Dorr, president and CEO of the U.S. Grains Council, takes stock of big changes sweeping the global grain trade.

“This year, for the first time, the U.S. will export less than 50% of the corn exported around the globe,” says Dorr. His group has a membership list that's a who's who of agriculture: ADM, Cargill, John Deere, American Farm Bureau Federation, National Corn Growers Association, state checkoffs.

The Council has promoted U.S. exports of barley, corn, milo, and now distillers' grains for more than half a century. Not long ago, the U.S. had at least 60% of the global corn trade. But as ethanol has taken a growing share of our own corn, competitors are meeting the demand for exports.

Last year, for example, Ukraine doubled its corn production over the previous year and tripled its corn exports. It sold enough corn to tie Argentina for second place among the world's corn exporters. A recent USDA forecast put both nations' total sales at 14 million metric tons (mmt) apiece. That's in the current trade year, which ends in September.

It's still far behind the 43.5 mmt of corn that the U.S. will export from the 2011 crop. Ukraine's total corn crop of 22.5 mmt, or about 886 million bushels, is a little more than the 839.5 million bushels grown in Indiana last year.

Even so, competition from other exporting nations is starting to add up. Brazil is the next biggest corn exporter, at 10 mmt (far less than its 36.9 mmt of soybean exports). Even India, once a nation dependent on food aid, now exports 2.4 mmt of corn, just behind the European Union's 2.5 mmt. Altogether, global corn exports will total 96.3 mmt by next fall, and the U.S. share will be 45%, if USDA forecasts hold up.

Demand booms, too

Last February, just as the USDA released its 10-year projections for global food production and exports, the U.S. Grains Council put out its own ambitious report, Food 2040, which anticipates how Asian consumers will affect exports nearly 40 years from now.

The report extrapolates current and future buying habits of affluent Japanese consumers to China. The U.S. Grains Council expects China to have the largest economy in Asia in 2040, even after India overtakes it in population.

Dorr points out how computing technology has changed in a similar time period and says the U.S. Grains Council can't know what the global food market will be like. “Food 2040 is not designed to be a prediction. It lays out a number of possibilities,” he says.

Among the possibilities is an aging but prosperous Chinese population in a segmented market with its own food safety system. Niches include foods with health benefits. Because China's market is so big, its standards will dominate global trade.

One result for the U.S. may be a shift from bulk commodity exports to greater use of containers, and even from selling commodities like feed grains and wheat to selling more meat and pasta.

Dorr is not a pessimist. He believes U.S. farmers and businesses will figure out how to compete. And he also sees an astounding array of new markets beyond China's borders.

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