Corn exporters are certainly less than busy, with shipments much lower than recent years. While there is the potential for competition from feed wheat, those supplies are low. New supplies of corn from Brazil are not likely to extend much past the current marketing year. But the demand for corn in typical importing countries remains, and they have just been slow in buying, but the trend should eventually pick up.
Corn export shipments were 15 million bushels for the past week and new sales were only 6 million bushels. Total shipments of 83 million bushels for the marketing year are 37% behind last year and sales are down nearly 50%. What is wrong with U.S. corn? Strong dollar? High cost? Aflatoxin? Is feed wheat more abundant and lower priced? Competition from typical or atypical sources? With short supplies you would think buyers would be grabbing up whatever they could before it runs out.
Corn exports have been miserable since the start of the new marketing year and there may be several reasons in the mind of Iowa State University Economist Bob Wisner. His thoughts about dismal exports are a portion of a report on demand for the 2012 corn crop.
USDA is expecting corn exports to be down by 25% from the last marketing year, and while current shipments and sales are down, does that mean there is rationing underway in the corn export market? Wisner says when you look at the recent purchase of typical buyers and their annual needs, there is a need to be filled, but the purchases have not yet been booked. And he adds, “It is highly doubtful that corn use in these individual countries will be reduced by anywhere near the amounts indicated from sales data. More likely, these countries have much more corn to purchase.”
But will those purchases be U.S. corn, foreign corn, or be covered with feed wheat? Wisner says the shortage of feed wheat pretty well eliminates that alternative. And he says the global shortage of feed wheat points back to the U.S. supply of corn.
Another source of feed is the new competition from Brazil’s “second crop corn.” Friendly weather in the northern part of Brazil produced a better-than-average crop. (At last report some 514 million bushels had been exported.) But Wisner says don’t assume Brazil will be a perennial corn competitor, because the weather will not always be conducive, there is a much greater shift to soybeans in the coming year, and changes in transportation laws are not friendly to exported crops. And dry weather has delayed soybean crops to the point there may not be enough of a growing season for second crop corn.
Global corn importers will still rely to some extent on Brazilian and Argentine corn, which is expected to seen larger acreage for 2013. Wisner says the combined production should be up by 168 million bushels, however because of higher domestic consumption, exportable supplies should only be up by 20 million bushels. And he says when the current South American supplies are combined with the decline in the global supply of feed wheat, “the combined numbers suggest that U.S. corn export sales may increase significantly as the marketing year progresses. In short, there are reasons to question whether U.S. corn export demand is being adequately rationed.”