With corn and soybean prices at or near record-high levels due to the drought gripping the Midwest, global importers, as well as some U.S. users, are looking to other suppliers such as Brazil for better prices, says Joe Kerns, president, Kerns and Associates, Ames, Iowa.
“We are seeing cancellations of certain obligations right now as buyers look for alternatives to those offered in the U.S. market,” Kerns says. “Odds are good they can source it cheaper in other foreign markets.”
Net U.S. corn export sales for the week ended July 12 totaled just 180,700 tons, according to a Reuters report. In the same week a year ago, corn sales totaled 901,500 tons. The majority of the sales were to Japan, the top U.S. corn customer. Corn export sales have failed to top 400,000 tons in seven of the past eight weeks, according to USDA data.
Soybean export sales fell to 407,600 tons for the week ending July 13, the lowest since late January. Purchases by China, the world's top soybean importer, were that country's smallest in seven weeks.
Corn users in the United States also are looking at non-U.S. grain to reduce costs amid soaring domestic prices. “Corn users will be bringing Brazilian-grown corn into the southeast United States and almost certainly Asian destinations that have relied on U.S. corn will be doing likewise,” according to Kerns. “Corn is cheaper from origins outside the United States.”
Brazilian corn production may exceed soybean production for the first time in history, Kerns predicts.
One net effect of the U.S. drought will be more corn being planted in foreign countries. “The U.S. drought is creating great incentive for South American producers to plant as many acres to corn and soybeans as they possibly can, Kerns says.
According to Soybean and Corn Advisor, Inc, due to the tropical climate and long growing season in Brazil, their crop production cycles are much more complicated than the traditional cropping cycles found in the United States. Corn and soybean planting in Brazil generally starts in September and continues through October. Harvest of Brazilian crops is usually completed in March.