Analysis: Corn export dominance to bend, not break
By Karl Plume
Reuters) - For the first time in 40 years,
Domestic ethanol is sucking up record crops. Emerging suppliers like
After supplying four out of every five kernels of corn traded internationally in the mid-1990s,
However, that decade-long erosion should stabilize or at least slow as global demand growth may start to outpace steadily rising production outside of the United States, and as demand for corn from the U.S. ethanol industry plateaus.
Still, the stiff competition in a market the
"Other countries have been stepping up to the plate and improving their exporting abilities, getting phytosanitary agreements in place, and things of that sort," said Sterling Smith, analyst with Country Hedging.
For instance,
Argentina, Ukraine and Brazil, the world's largest corn suppliers behind the United States, could see their combined market share grow to 41 percent in the marketing year ended September 2012 from 18 percent a decade ago, according to U.S. Agriculture Department data.
"As foreign production over the past 10 years has grown faster than foreign consumption, our export potential has eroded," said Rich Pottorff, chief economist with Doane Advisory Services.
"The outlook is a little brighter over the next decade than it was in the past decade, but that's not to imply that
PEAK ETHANOL
One big obstacle for
That rapid demand growth was seen tempered by 2015 as the Renewable Fuels Standard tops out its requirement for corn-ethanol blending in the
With
"Assuming that they don't raise the renewable fuels standard mandate and 15 billion gallons of ethanol is about all we can use domestically, then we've clearly seen the big gains in demand from the ethanol industry already," Pottorff said.
The next great growth area for
An increasingly affluent population in the world's most populous nation is urbanizing and upgrading diets at an exponential rate, requiring more grain to produce meat, eggs and dairy products. Demand from industrial processors was also soaring.
"With demand from the (
"Their string of self-sufficiency in feed grains is slowly declining. If their economy continues to grow and demand for corn-based products such as meat continues to increase, they're going to have to come into the market more aggressively."
China, formerly a large corn exporter, imported more than 1 million tonnes of U.S. corn in each of the previous two marketing years and was projected to import at least 2 million tonnes in the current 2011/12 season, according to USDA.
In a Reuters poll on Thursday, analysts on average forecast imports to hit 4 million tonnes. Other forecasts have suggested even larger imports of up to 9 million tonnes this year and 20 million tonnes by 2020.
ACREAGE THE KEY
Whether corn production outside the United States can keep pace with such a jump in world import demand will be the key to determining if U.S. market share continues to shrink, stabilizes, or if it bounces back.
Corn output outside the
The deficit of 61 million tonnes in 2001 will shrink to a projected 39 million tonnes this year, according to USDA data.
If foreign corn acreage were to freeze at the current level while yields and demand continue to grow as they have over the past decade, the deficit would rebound to roughly 2.5 billion bushels, or about 63 million tonnes, Pottorff said.
But if acreage continues to grow by the roughly 6 million acres a year as is has averaged over the past decade, along with demand and yield growth trends, that deficit would narrow to 1.4 billion bushels, or about 35 million tonnes, he said.
The reality -- to be determined by market prices, the broader economic climate, global weather and other factors -- lies somewhere in the middle.
High corn prices will keep encouraging output growth, which must come from higher yields in the
![[cfoot0925]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uO5ldmweh-UfUwRjN0-kobj18u4yJghMiwLs6-sLK2iact3cc59fikHlxDQsWhfTcALXLSe9pi-K8MQVJKFtZnDtV7nMlrJwKP3OLfBoK5vF6qmeYjFZiBVtaFeYZsK09yJdWyW0s_NYA_RXjoC7xkzw=s0-d)
