September 24, 2007

 

Feed grains help US agricultural exports to hit record-highs

 

 

US agricultural exports are expected to rise 15 percent to US$79 billion this year, with feed grains fuelling much of the increase.

 

High grain demand from biofuels, grain shortage in Europe and continued expansion of livestock production worldwide are keeping demand and prices high, said Darrel Good, an agriculture economist with the University of Illinois. This would lead to record exports, he said.

 

The USDA is forecasting record exports in dollar terms but not on tonnage, giving further evidence of rising prices. 

 

The value of corn exports are expected to rise 40 percent this year from fiscal 2006's US$6.2 billion to US$9.3 billion this year, said Joel Severinghaus, international trade analyst with the Iowa Farm Bureau Federation (IFBF).

 

In contrast, tonnage would be lower 5 percent from 56 million tonnes in 2006, to 53 million tonnes this year.

 

A 40-percent increase in value with a 5 percent drop in tonnage is not too far-fetched as export statistics for the first half of this year support this theory, he said.

 

For the first seven months of the year, US corn export tonnage is down 8 percent, but the dollar value of corn export sales is up 41 percent, compared to the same period last year.

 

The change is also apparent in DDGS export, where tonnage is up 64 percent in the first half of 2007, with export dollar value up 114 percent.

 

Corn exports are expected to account for 11 percent of total value of US agricultural exports.

 

Along with rising corn prices, demand for barley and sorghum also is growing as countries search for feed alternatives.

 

Sorghum exports are expected to rise by US$200 million.

 

Drought in Europe caused Argentine and Brazilian corn exports to be diverted to Europe, meaning less competition for US corn in other markets.

 

Sorghum exports have increased because countries such as Japan and Spain are looking for non-GMO feed grain. But the main cause of higher corn prices, is demand from the US ethanol industry, Severinghaus said.

 

The US, the top corn producer, currently has few competitors capable of matching it in terms of exports. China, the second largest producer, is currently clamping down on its exports to feed its domestic market.

 

Although Argentina grows less than a tenth corn as the US, it is the number two corn exporter.

 

Even if high world corn prices might induce Argentine farmers to plant more corn, they would trail far behind the US- US corn exports are twice that of total Argentine corn production.

 

While Brazil could expand corn production, farmers would likely plant more profitable crops such as sugarcane, coffee or cotton.

 

Although the USDA estimates that US corn output would be 24 percent higher than 2006, ethanol plants would absorb most of the increase.

 

Despite consumption by ethanol plants, they would not absorb all the corn produced, as they would still churn out DDGS, which can be used as animal feed and exported as well.

 

Grant Kimberley, director of market development with the Iowa Soybean Association, said US soy exports hit a record 1.11 billion bushels for the year ended Aug 31, an increase of 18 percent from last year. Meal and oil sales are ahead of last year's pace.

 

Soymeal exports are 5 percent ahead of last year and soy oil exports are up 77 percent, even with the increased soy oil use in biodiesel.

 

Kimberley said strong global economic growth and increasing expenditures on food, growing global feed industries such as aquaculture in China, the lower valued US dollar and the increasing use of bulk containerized shipments all contributed to the increase.

 

Although strong demand means higher exports, record exports would mean bottlenecks along the logistics chain and could possibly prevent the realization of USDA figures, Kimberly said.

 

As grain piles up at elevators and bottlenecks grow at shipping ports, the biggest effect farmers may notice is a locally variable basis. The areas of the country that have regional grain deficits could end up competing against foreign buyers for grain, leading to higher cash prices, analysts said.