What is in this article?:
- Grain markets: Global issues with local consequences
- China is good market for U.S. corn
- Uncertainty over corn prices and global grain trading fuels speculation that 2014 corn acreage will fall significantly in the Southeast and Mid-South.
- China remains a good market for U.S. corn.
"IF YOU LOOK at corn exports and corn use over the past three years, it’s easy to see why growers are heading into the cropping year less than optimistic about the pricing situation,” says Erik Erickson, director of global strategy for the U.S. Feed Grain Council.
Grain prices are directly impacted by global trading, regardless of where the crop is grown. “Grain export marketing is not a spectator sport,” said Erik Erickson, director of global strategy for the U.S. Feed Grain Council, at the recent North Carolina All Commodities Conference in Durham.
In the Upper Southeast, corn prices promise to create uncertainty among growers and will likely reduce corn acreage in the Carolinas and Virginia, says Jay Sullivan, president of the North Carolina Corn Growers Association.
Reduction in corn acreage will have a detrimental ripple effect on the region’s livestock industry. Already in a grain deficit situation, the region’s dependence on out-of-state and out-of-country grain to feed livestock is not a good situation for producers.
In the past three years, corn prices have held steady, but this year producers will plant a crop that is more likely to bring between $4 and $5 per bushel, than the $7 to 8 prices they’ve seen in recent years.
A panel of regional marketing leaders for grain and cotton, including Edgar Woods, founder and president of Palmetto Grain Brokerage, agreed with other panel members that not much will likely happen with corn prices over the next few months.
Dave Fogel, vice-president with Advance Trading in Bloomington, Ill., advised growers to do all they can to defend their balance sheets. “No matter what happens with price, always have a firm plan for what to do with your crop, and do it,” he stresses.
Uncertainty over prices for corn has fueled speculation that corn acreage will fall significantly in both the Southeast and Mid-South. “If you look at corn exports and corn use over the past three years, it’s easy to see why growers are heading into the cropping year less than optimistic about the pricing situation,” Erickson said.
Corn exports reached a high of 60 million tons in 2007. By 2012, corn exports dropped to 18 million tons. During that time period corn for ethanol and other domestic uses kept demand high and supply on the low side—an ideal combination for high prices.
The livestock industry, not just in the Southeast, suffered to varying degrees because of the continued high grain prices. Subsequently, many large commercial operations cutback herd size to compensate for extended high grain prices. The combination of lower animal numbers and subsequently less demand for feed grain, combined with lower demand for ethanol production and stable demand for commercial use led to a decline in demand.
Typically, the reduction in domestic demand has been taken up by global demand and exports increased to compensate. However, in the past decade or so, competition for corn export markets has changed dramatically, Erickson pointed out.
For example, Brazil doubled corn exports from 40 million tons to 80 million tons. The Ukraine, which had less than five million tons in the export market less than a decade ago, now exports nearly 20 million tons annually. And, China, which was an exporter of corn a decade ago, is now a leading importer of foreign corn.