Fundamentally Speaking

USDA Pegs Corn Exports 375 mb Higher Next Season

Chart by Joel Karlin

In addition to boosting this year's U.S. corn exports by 50 million bushels (mb) in its latest WASDE report based on a recent pickup in the sales pace to 1.775 billion bushels (bb), in its first projection for next year's exports the USDA pegged those at 2.150 bb, 375 mb over this year.

Despite record-high corn production prospects, U.S. 2020/21 corn exports face tough competition and are projected at a mere 30 percent of global corn trade, while Brazil, Argentina, and Ukraine are expected collectively to have a 58 percent export share.

USDA goes on to say that under normal circumstances and short of crop failure in South America or Ukraine, the United States usually captures hardly any share from the steady expansion in global corn trade.

However, the side effect of this year's COVID-19 pandemic was a historical rapid reduction in gasoline use and corn ethanol production, leaving the United States awash in low priced corn.

A decline in domestic prices projected for 2020/21 is boosting U.S. price-competitiveness vis-à-vis other major exporters, which is expected to give a small window of opportunity for U.S. corn exports, despite the constant stiff competition from Brazil, Argentina, and Ukraine.

On the other hand, the pandemic has led to depreciation of many countries' currencies vis-à-vis the dollar, as capital and wealth flow out to the United States because of the relative security of its large economy and institutions.

Since mid-February, the currencies of all three major corn export competitors of the United States -- Brazil, Argentina, and Ukraine -- have been depreciating against the dollar, enhancing the competitiveness of those countries' exporters relative to U.S. producers.

Given all these developments, U.S. corn exports are still projected at a mere 30 percent of global corn trade. Similar to what we recently did with soybeans, this graphic shows new crop U.S. corn export sales in million bushels as of final week in May on the left hand axis.

This figure as a percent of the first USDA new crop export projection is plotted on the right hand axis along with the projected U.S. share of world corn trade.

This year's exports as of the final week of May for new crop are 134.3 mb, slightly above the ten-year average of 128 mb.

Given the USDA's initial new crop export projection of 2.150 bb, sales so far are only 6.2%, below the ten-year average of having 7.2% sold by this point in the season.

It is far too early to determine how likely it will be to attain this 2.150 bb export target but as USDA noted and the chart indicates, our share of the global corn market is less than half what it was just 11-12 years ago.


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