The United States remains the world's corn export king, although its empire is shrinking, says Philip Abbot, a Purdue University agricultural economist. Foreign nations that previously relied on the U.S. for corn are growing more of their own or buying from other producing countries, says Abbott. He predicts the trend will continue even if market conditions improve and U.S. corn production increases.
"The U.S. has historically been a very important part of the international corn market," Abbott said. "Prior to the 2007-2008 food crisis and spike in commodity prices, the U.S. exported well over half the amount of corn that entered international markets. Since then, the high prices have caused the rest of the world to expand their production and become more self-sufficient.
"Even if we get bigger corn crops in the future, it's likely that the demand in foreign markets will not soon recover to the level that it once reached."
USDA statistics bear that out. In the 2007-2008 marketing year, the U.S. exported 2.4 billion bushels of corn. The USDA estimates just 1.1 billion bushels of U.S. corn will be exported in the 2012-2013 marketing year.
What has happened to U.S. corn exports, and why might the U.S. not claim 50% of future world corn markets? There are a few reasons, Abbott says.
First, ethanol. The federal Renewable Fuel Standard mandates that gasoline sold in the U.S. be blended with ethanol. This year, the law requires oil companies blend 13.2 billion gallons of ethanol with the gasoline they produce. Next year, the blending requirement increases to 13.8 billion gallons. Corn is the primary feedstock of ethanol, and 5.5 billion bushels of U.S. corn were used for that purpose in 2011-2012.
"Roughly 40% of the corn that's produced in this country is used in ethanol, although some of it is later used as distillers’ grain for livestock feed," Abbott says. "That's up from about 10-12% five years ago. The amount of corn that makes up the increase is more than we export."
Because the law requires that ethanol be produced, there is less corn available for other non-ethanol users, including foreign buyers and U.S. livestock producers. The high demand for corn, coupled with the partially regulated market, has pushed corn prices higher.
Secondly, the U.S. has not kept up with many other nations that have significantly increased their corn acreage. Although U.S. farmers have shifted acreage away from other crops and into corn, competing nations and customers have significantly increased their area planted.
"We haven't expanded overall planted area like the rest of the world. Our acreage is basically flat," Abbott says.
Since the late 1990s, South America has boosted crop acreage 53%. The nations that make up the former Soviet Union are growing crops on 24% more acres, with acreage up 13.4% in sub-Saharan Africa and Oceania. By contrast, crop acreage in the European Union is off 4%.
U.S. corn exports were further hurt by the summer drought. According to the USDA, domestic corn production is expected to be down 13% from 2011, at 10.7 billion bushels. That would represent the lowest corn production volume since 2006.
For those reasons, the outlook for U.S. corn exports going forward is less positive than a few years ago, Abbott says.
"We've tried to accommodate the export markets by working to increase production, but we haven't managed to do that," he says. "We've had to keep feed use flat and watch exports shrink. All the hard work we did to build export markets has been hurt by the high commodity prices of the last four or five years. As a result, the world has figured out ways to meet their own needs. And with a couple of exceptions, like China buying more soybeans, we're probably going to see weaker export demand in the future."