What is in this article?:
- Competition by other countries may alter U.S. corn planning
- Other countries major players
- Large exports increase?
“There has been a pretty dramatic change in the U.S. share of global corn exports, each year going back to the mid-1990s," says John Anderson, American Farm Bureau Federation deputy chief economist. "As recently as 2007, we had almost two-thirds of corn exports globally; last year, we had 20 percent. There are now a lot more people playing in that market — more people we’ve got to compete with, more people who aren’t going to stop growing corn just because we have a good U.S. crop. And I think that’s the long-term challenge we’re going to have to face."
JOHN ANDERSON, second from right, American Farm Bureau Federation, Washington, visits with Neal Huskison, from left, Pontotoc County Farm Bureau; Donald Gant, Bolivar County Farm Bureau; and Tripp Thomas, Panola County Farm Bureau, at the Mississippi Farm Bureau Federation’s annual meeting.
Other countries major players
“Over last five or six years, Brazil and Argentina and, surprisingly, Ukraine, have become big players in this market, and they’re not going to shut down corn production overnight, regardless of what we do.”
It’s a similar situation, Anderson says, to that of South America’s soybean production. “Markets have learned to live with a tighter U.S. soybean balance sheet because of the South American crop. We may see the same phenomenon developing with corn, and looking ahead, that could really change the marketing environment — not so much this year, but over the next five to 10 years. And because of that, if we’ve got these other major players out there teaching the world to live with a tighter U.S. supply situation, it may change how you have to think about marketing your crop.”
The corn supply situation has loosened up quite a bit with this year’s large crop, “perhaps a bit more than the raw USDA number indicates,” Anderson says, “and we’re looking at the corn price coming down to about $4.50 for a market year average, according to USDA.”
There will be a lot of debate, looking ahead to next year, on what’s the right trend yield to use for corn,” he says. “Should it be 164 bushels, or 157, or somewhere in between? There are some really strong differences of opinion on this, and that will have a big impact on what our expectations are going forward.
“I have a more simple approach, and tend to be on the low end of that scale — a high 150-bushel yield. But, some analysts will be using 165 bushels, and that is certainly doable.”
USDA’s projection of 5.2 billion bushels for feed and residual use “is a challenge when I try to figure out what’s going on in the grain markets,” Anderson says. “For the last marketing year, it was 4.3 billion bushels. So, the big question is: Can we go from 4.3 billion to 5.2 billion bushels in just one year? Can we change feed use that fast?
“I’m very pessimistic about that. But, residuals are also a part of that number, and it’s a rather nebulous category — you can make the number pretty much whatever you want. It’s the fudge factor in the corn balance sheet. But with a big crop, we should expect bigger residual use. I still think that number’s a bit high, but maybe not by more than 100 million bushels or so.”
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Corn use for ethanol, projected by USDA at 4.9 billion bushels, would be up from last year, Anderson notes, but “there is controversy around that number following the EPA’s recent proposed change in the Renewable Fuel Standard.
“I frankly don’t think the proposed rule change will affect the ethanol expectation at all this year, given where the market is and the amount of time it would take to make adjustments to higher blend levels. I tend to agree with USDA that 4.9 billion bushels for ethanol use is pretty realistic. The impact of the proposed rule would be more long term. For this marketing year, I think we’ll stick somewhere around 4.9 million bushels, regardless of what EPA does.”