For more than 50 years, US farmers have dominated the international corn market, exporting more corn than any other country, reports UkrAgroConsult, citing Bloomberg.
In the 2022/23 agricultural year, which ended on August 31, the US ceded the lead in corn exports to Brazil and will probably never regain it.
According to the USDA, the USA will account for around 23% of global corn exports in the 2023/24 season, significantly less than Brazil (around 32%). Brazil is also expected to take the lead in terms of acreage for the 2023/24 season, which begins on September 1. Only once has America left the top spot: in 2013 after a devastating drought.
Losing the lead in corn exports may sound familiar to American farmers, as they have also lost the top spot in soybean and wheat exports over the past decade. Soybeans were the first to lose, with Brazil eventually taking the lead in 2013. In 2014, the US also lost its supremacy in wheat exports as the EU and later Russia began to displace US farmers in the global market.
Several factors are responsible for this shift: rising costs in the USA and a lack of available arable land, the ongoing effects of former President Donald Trump’s “trade war” with China and the strong US dollar. Today, the USA accounts for around 1/3 of global soybean exports, putting it in second place behind Brazil. The USA is now in fifth place for wheat.
The steady decline and loss of competitiveness of the USA is a blow for a country that has long used food as a geopolitical force. At the height of the Cold War, the US used its considerable reserves to prevent the spread of communism in the developing world, supplying around a quarter of its wheat to Russia after crop failures in the early 1970s.
Admittedly, the change in corn exports is not so unexpected: for years, the federal government has promoted the use of domestically grown corn to produce ethanol, which is blended with gasoline. About 40% of U.S. corn goes to domestic plants that produce ethanol for use as fuel, although that demand is at risk with the rise of electric cars. If the crops are not purchased, the corn crop in the US can also be stored in large silos or grain elevators to be used for many years and wait for better prices.
Translated with www.DeepL.com/Translator (free version)
Krista Swanson, Illinois farmer and senior economist for the National Corn Growers Association, said the huge Brazilian corn crop and shortages in the U.S. combined with a weak Brazilian currency have given Brazilian corn exports an advantage in the 2022/23 season. She hopes this is only temporary. “This year we faced some challenges in the world market,” she said. ”It’s hard to compete when in May and June the market price in Brazil was 75 cents a bushel lower than in the United States.”
However, some of the challenges to a globally competitive U.S. corn industry will remain beyond the 2022/23 marketing year. Labor and transportation costs are higher in the U.S., particularly because the ongoing drought along the Mississippi River is preventing corn exports from the Midwest. Brazil has modernized its ports and infrastructure, closing previous logistical gaps. Due to the warmer climate, Brazil also has two corn harvests per year instead of just one, which gives it a competitive advantage over the US. Even if the US corn sector regains its export leadership within a year or two, it is unlikely to regain it in the long term given the obstacles in the global market compared to Brazil.
At its peak, the US exported 78% of annual wheat, 54% of soybean and 45% of corn production; by 2024, these figures are expected to fall to 40%, 43% and 14% respectively. The US share of total global grain exports is also lower.
In 2022, China signed an agreement to buy Brazilian grain to reduce its dependence on the United States and replace supplies from Ukraine that were interrupted by the Russian invasion. The first shipment of corn from Brazil under the new agreement was shipped in November 2022.
Of course, China remains a major buyer of U.S. grains and has imported more corn and soybeans than any other buyer for at least the last two calendar years. But now millions of tons of Brazilian agricultural products are also flowing into China each year. In July 2023, China was the leading destination for corn shipments from Brazil with 902,000 tons, up from zero tons at the same time in 2022.
Brazil “is not a close ally of the US, so Beijing is confident it can continue trade with Brazil even if relations with the US suddenly deteriorate,” reports Trivium China. Brazil is also demanding more of what China has to offer, such as investment in infrastructure and technology, which would further strengthen the burgeoning relationship. “It is unlikely that diplomatic relations between the US and China will improve significantly in the foreseeable future, which, like it or not, will be detrimental to US agriculture.
Source: Ukragroconsult (Ukraine)