Corn exports lose ground
Strong U.S. corn exports have been losing traction. Record-high prices have created demand destruction among reliable customers. Global competitors are sharing the stage – and even being cast in lead roles.
In 2012, U.S. corn exports totalled 715 million bushels, the lowest level since 1970. The U.S. fell to third-largest corn exporter behind Brazil and Argentina. The severe drought is an obvious explanation. Daryll Ray, Agricultural Policy Analysis Center, University of Tennessee, says that the drop is part of a long-term trend dating back about 50 years.
In 1960, U.S. exports were almost half of world corn exports. “While both U.S. and non-U.S. yields nearly tripled between 1960 and 2010, U.S harvested acres increased by 14%,” Ray says. “At the same time, non-U.S. corn harvested acres increased by 79%.”
Non-U.S. corn exports reached 1 billion bushels in 1999; they hit 3 billion bushels in 2011 and 2012, Ray says. The rate of increase in non-U.S. corn yields also is expected to accelerate.
“The market has called on the U.S. to supply over 13 billion bushels of corn every year,” says Sterling Liddell, Rabobank Food and Agribusiness Research and Advisory Group. “The country has met that goal only twice – in 2007 and 2009.”
One reason is the driving piston of ethanol demand, beginning in 2007. The USDA projects 4.9 billion bushels of corn will be consumed by ethanol production this year, down from a high of 5 billion in 2011.
Declining U.S. gas usage and bumping into the 10% ethanol blend wall also signal an ethanol plateau. EPA may propose reducing the renewable fuel mandate for 2014.
“Headwinds are developing,” Liddell says. “Even if we get to the blend wall for ethanol in the next two years, we’ll have export challenges.”
The U.S. is expected to remain a strong player, but corn exports will have to rebuild for several years. In the 2013-2014 marketing year, USDA is forecasting the U.S. to export 43.2 million metric tons of corn (1.25 billion bushels), a bit more than 40% of total world exports.
Higher U.S. grain stocks also will make exports more competitively priced. Without a strong export rebound, will carryover drag prices below the cost of production for U.S. farmers?
Emerging factors including world population growth, rising incomes, and pent-up demand are brightening the export horizon. By 2022, 82% of the world will live in developing countries, up from 80% in 2010.
Kevin Roepke, manager of global trade for the U.S. Grains Council, says new developing countries are coming into their own in terms of corn consumption: Mexico, Indonesia, China, and South Korea.
The USDA estimates that over the next 10 years, these countries (known as the MICKS) will account for 9 million metric tons (1.1 billion bushels) of global corn import growth vs. just over 20 million tons (787 million bushels) for the rest of the world.