U.S. Corn Exports On The Rebound

Sep 11, 2013

Corn thrives along a road in central Illinois in mid-August 2013.
Credit Darrell Hoemann/The Midwest Center for Investigative Reporting

Last summer’s drought knocked the nation’s corn exports to the mat.  And while U.S. farmers may be getting up from that punch, it may take them longer to regain their footing in international markets.  

For those corn growers who had crop insurance, last year turned out pretty well, as a combination of higher prices and significant insurance payouts meant they fared well when they closed the books last year. However, a report from the University of Tennessee’s Institute of Agriculture Policy Analysis Center warns of some long-term pain ahead. 

The center’s Daryll Ray and Harwood Shaffer expect overseas corn production to keep increasing, especially because foreign farmers benefited from the higher corn prices last year and have increased production by 171 percent over the past three and a half decades.

The researchers say “that exports from outside the U.S. were up to 3 billion bushels last year, while U.S. drought-ravaged exports were a paltry 715 million bushels. As the advantage the U.S. had in corn technology has spread around the world, corn exports have fallen both in absolute terms and as a percentage of the world use of corn.”

Both Ray and Shaffer say it has been more than just a bad drought that has other countries surpassing the U.S. in exporting corn around the globe.   They note that even though U.S. farm policy has been geared toward export revenue since 1985, countries such as Brazil and Argentina have added more land to be used to grow corn — and in Brazil’s case will continue to grow more.  They also expect production output on that land to increase.

At the same time, U.S. farmers may not grow as much corn when prices drop. With high grain prices like we’ve seen the last few years, farmers spend extra money to grow crops on less desirable land.  (The U.S. Department of Agriculture projects a record crop this year.) Farmers won’t make that effort when the costs outweigh the returns.

The University of Tennessee researchers say the U.S. will always be a presence in international corn trade, but because the others caught up, the international market won’t be as profitable as it once was.

Pam Johnson, president of the National Corn Growers Association, acknowledged the challenge while attending the recent Farm Progress Show  in Decatur, Ill.

“We know that we have competitors around the world, but during a drought like that we had, we are glad there is a supply of grain.  The year before it was Argentina who had the drought and we are able to fulfill the demand,” she said.

Johnson said corn growers are hoping to produce a normal crop in order to “increase the markets for domestic livestock, ethanol and exports.”  

Crop projections have shrunk since the spring, when it looked like this could be one of the largest corn yields ever. But still, as the U.S. harvest approaches, corn prices have dropped, which means farmers may not realize the profits they were seeing during the years where demand for ethanol was driving up the prices. (As of mid-September, year-to-year corn prices were down almost 40 percent.One analyst, speaking to livestock farmers, recently said that ethanol prices may have reached a high, something echoed by the University of Tennessee report.  

While there are projections of lower prices for much of the next decade, Johnson noted that farming has always run in cycles.

“Prices have been good (in recent years) so that farmers could pay down debt on land and make machinery purchases that could help them farm better,” Johnson said. “Going forward, if we get a couple of bumper crops under our belt, perhaps all of us will have to tighten our belts for a while.”

The National Corn Growers Association continues to work at expanding exports. Johnson was in Panama last week as North America and South America work together on exporting to Asia.  So they find themselves approaching a belt tightening period working with, not competing against Brazil and Argentina.   It is another indicator that dominating the international corn market may be a thing of the past.

The industry will have a better feel for things on Thursday (Sept. 12), when the U.S. Department of Agriculture releases its production forecast.