March 14, 2005

Argentina's record corn crop reaches market

Competition in global corn trade is likely to intensify in the coming months as Argentina's new-crop corn sales are 75 percent ahead of last year, with notable increases to South Korea, Southeast Asia (Malaysia and Indonesia), and North Africa (Egypt and Algeria), according to the USDA.

In contrast, US shipments to Egypt and Algeria - traditionally large markets - have lagged behind last year and will have a hard time rebounding as Argentina continues to aggressively market its new crop.

Exports are expected to reach a record despite logistical constraints such as the lack of deep water ports near Rosario, over-reliance on truck transportation, underutilization of railways, and competition for the use of export facilities from larger soybean and wheat exports. Unlike the United States, where domestic consumption dominates, Argentina's corn economy is largely driven by exports, which usually constitute over two-thirds of domestic production.

Even with a 20 percent export tax, traders have been able to offer competitive prices by keying off the Chicago Board of Trade prices and cutting producers' profits. Rising beef and milk prices have spurred the expansion of feedmills and feedlots, which will draw more corn into domestic feed channels. However, consumption cannot increase drastically as it takes time to expand cattle production. Thus exports will continue to be the main channel of distribution and the United States can expect sustained, strong competition.