U.S corn imports are expected to surge despite growing domestic supply.
Surprisingly, the U.S. would rather import corn from South America to feed its livestock than use animal feed that is produced domestically. Analysts explained that a mix of a strong dollar and lower transportation rates makes it more profitable to import corn from our neighbors than purchasing it from the Midwestern U.S.
Wade Byrd, a 72-year-old corn producer from Clarkton, N.C., said that he and other growers cannot grasp why the U.S. keeps importing corn when “we’ve got grain running out of our ears.”
Nevertheless, corn imports currently account only for 5 percent of the market in the U.S., which remains the largest corn exporter on the planet, but the recent surge is a reason of concerns for domestic growers.
According to the U.S. Agriculture Department, corn imports could rise by as much as 56 percent this season despite oversupply. A similar situation happened between 2012 and 2013 when a major drought killed domestic production.
Byrd also noted that cheap imports would destabilize grain prices and farm incomes, which are already expected to hit a decade low this year. In the U.S., there is an overproduction of corn as farmers produced more corn to satisfy the surging demand coming from the biofuels industry and the developing world.
But other countries around the world did the exact thing. Brazil announced that this year it expects its all-time second-largest corn crop, and so does Argentina. The U.S. can buy corn from Argentina at 6 percent discount while Brazilian corn remains cheaper than U.S. corn.
Furthermore, lower shipping fees amid weak demand also entice the U.S. to import corn. Analysts noted that corn imports climbed more than 100% in January and February from last year’s levels.
Yet, Tom Capehart of the USDA believes that corn imports are about to stall as there is an excess of supply in the Farm Belt, where growers have been hoarding grains not wanting to sell their last year’s production at lower prices. But as this year’s harvest comes, they’ll have to sell the old corn at meager prices to make room for new corn.
Additionally, Brazilian corn can become more expensive overnight as the country’s currency can rebound at any time and supplies are already shrinking. Moreover, it is better to export U.S. corn now as prices sank to a three-year low last month.
For the moment, poultry and livestock producers prefer foreign-produced grains to domestic-grown grains due to currency valuations and lower shipping costs. But they said that they would rather buy U.S. corn “whenever possible.”
Image Source: Pixabay
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