South America muscles in on U.S. corn dominance

2017-03-19T10:00:00Z South America muscles in on U.S. corn dominanceBy Nat Williams, Illinois Farmer Today Illinois Farmer Today

The United States is still the king of corn. But there are others looking to knock it off its throne.

It probably comes as no surprise to many corn producers here that the greatest rival is Brazil.

“From my standpoint, when you look at our big competitor in corn, it’s Brazil,” said Paul Bertels, vice president of production and sustainability with the National Corn Growers Association.

Brazil isn’t the second-largest producer — China is. But China consumes most of its corn, and is not a major player in export markets.

Meanwhile, Brazil continues to challenge the top dog in world corn marketing. And its neighbor, Argentina, isn’t far behind.

While still the world’s largest producer and exporter of corn, the U.S. has slipped recently, falling from 40 percent of world production to about 37 percent. U.S. corn exports are estimated to hit 56.5 million tons this year.

The pile of corn is growing, and everyone is looking for a place to dump it.

“In the coming months, we’re seeing U.S. sales and shipments slow down. And this is mainly due to increased competition from Brazil and Argentina,” said USDA economist Thomas Capehart. “The reason is their upcoming corn harvest will be swinging into play very shortly, and that will pose a real challenge to U.S. exports, because their corn is competitively priced.

“Forward export prices show that Argentina, especially, will be competitive relative to the United States, probably starting in March. The early planted corn crop in Argentina will be marketed at that point. There’s going to be, basically, a glut of corn on the market.”

Ridgway, Ill., farmer Jim Raben has seen Argentina’s emergence first hand. He was among a number of producers from Corn Belt states who recently took an information-gathering trip to the country.

One impediment to South America’s rapid growth as a major corn exporter has been its inferior transportation system. But that is changing.

“I was impressed with their road system. There were a lot of four-lane roads, and they were in good shape,” Raben said. “I thought the infrastructure, as a whole, was good.”

Bertels sees similar progress in Brazil.

“They’ve put a lot of money into their infrastructure,” he said. “The distance from Mato Grosso (a major agricultural state) to some ports on the Amazon is probably the same as central Illinois to New Orleans. They are closing that transportation gap.”

Development of better hybrids, genetic engineering and superior cropping techniques have improved yields worldwide. A growing population and expanding middle class across the globe have opened up demand, but there are plenty of suppliers waiting to meet that demand.

Average world corn yield increased 1.3 percent per year from 1990 to 2016, according to the USDA’s Foreign Agricultural Service. The United States has consistently produced the highest-yielding corn crop in the world.  However, some countries have made significant progress toward achieving U.S. level yields.

“Brazil is the No. 2 exporter,” Bertels said. “They still have land that can be brought into production. Their yield curve is below ours, but a lot of that technology is transportable. They had a drought last year, so numbers are off.”

China produced 220 million metric tons of corn last year, second to the 385 million tons grown in the U.S. That places the country second in percentage of world production, at 21 percent. And while it holds onto much of its corn, the gates are occasionally flung open.

“Periodically you’ll see China come into the export market. They’ll dump stocks and then go back to what they consider a reasonable level and exit the market,” Bertels said. “Also, periodically, China will be a major importer. But they’re sitting on a mountain of corn right now. There’s speculation they may start exporting some of that to get it out. Their corn stocks are notorious for being of really poor quality.”

The Black Sea region is also a major mover and shaker in the corn business. Ukraine ranks sixth in production, and Russia is not far behind.

“Russia is actually growing a lot of corn now, and they’re starting to export as well,” Bertels said.

But the immediate challenge to the U.S. in corn dominance continues to be South America. One reason is climate. In some areas of Brazil and Argentina, farmers are able to grow two crops in a single year.

According to the USDA, 55 percent of the increase in global corn production has been achieved from increased yields, but 45 percent is from expanded acreage. And many countries outside the U.S. have much more arable land still untapped.

It’s a different marketing world today for farmers like Raben. But he takes it all in stride. And he doesn’t think competition as a bad thing.

“I’m a firm believer that we need to be on the same page,” he said. “Granted, we’re all in it to sell grain. And yes, we are competitors. But working together we’ll gain more than we will working apart.”

Copyright 2017 Illinois Farmer Today. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

No Comments Posted.

Add Comment
You must Login to comment.

Click here to get an account it's free and quick