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.
China is good market for U.S. corn
In 2013, China imported about seven million tons of U.S. corn. Projections for imports were expected to fall to about five million tons, primarily because of biotechnology issues with U.S. grown corn. In recent weeks, however, the issue has become a bigger issue, and now projections are three million tons to be exported to China.
“My suggestion to U.S. growers is to be patient with China, endure the growing pains of the Chinese economy and their leadership. China can still be a stabilizing factor in U.S. grain prices, but we can’t afford to put all our export eggs in that one basket,” Erickson said.
He points out that every year in the past several years, China has added more than 300 million people to its middle class. That’s the entire population of the U.S. and that growth will provide a demand for high-protein meat that requires lots of grain, he adds.
Erickson showed the 200 or so grain growers in the audience a map of the world. By drawing a line from China to India and making a circle, he notes that more people live in the circle than live outside the circle.
The rapid development of Asian economies and the astonishing growth of the middle class in these countries will have an ongoing impact on grain supply and demand and will indirectly have a significant impact on U.S. grain production.
In the Upper Southeast, demand is not an issue, huge poultry and swine operations in North Carolina and Virginia will take all the local grain they can buy. Supply is the issue and foreign trade that impacts price has a direct, and negative, impact on the livestock industry throughout the region.
The U.S. will likely continue to grow more corn than it can use, but a bigger problem is getting U.S. corn to parts of the U.S. where it is needed most. Current freight prices alone add about a dollar a pound of pork production in the Southeast, putting producers at a distinct disadvantage with Midwest producers.
Conversely, building a grain industry in the Southeast large enough to support the region’s livestock industry is limited by acres planted, which is directly impacted by price.
It’s a classic Catch 22 and both grain growers and livestock producers in the Upper Southeast in particular are caught in a seeming no-win situation. Livestock producers are the best customers grain growers have. If the livestock industry is forced by price to move to locations closer to adequate grain supply, the Southeast grain growers will be looking for new markets for their crop.