February 16, 2018 / 4:52 PM / 9 months ago

U.S. set to lose top spot as global corn exporter to Brazil

CHICAGO (Reuters) - Brazil could eclipse the United States as the world’s top exporter of corn within five years, ending decades of U.S. dominance over the market for one of the world’s basic foodstuffs.

Corn kernels are dumped into a grain elevator during a harvest on a farm near Dixon, Nebraska, U.S., October 26, 2017. REUTERS/Lucas Jackson

Brazil is growing in stature as a global agricultural powerhouse. American farmers, who for generations have boasted of being the world’s breadbasket, now must struggle with grains prices and aging infrastructure. Washington’s efforts to renegotiate trade agreements also could affect exports.

At the same time, cheaper supplier Brazil is reaping the benefit of massive investment in export infrastructure. In 2012/13, the South American country passed the United States as top soy exporter. Three years later, Russia displaced America as No. 1 wheat supplier.

“If you look down the road five, 10 years, absolutely Brazil will compete with the United States to be the No. 1 corn exporter in the world,” said Michael Cordonnier, president of consultancy Soybean and Corn Adviser.

“They have got the land: hundreds of millions of hectares that can be brought into production; they have got the weather; they have got the know-how. On the agronomic side, there is no limit in sight.”

Billions of dollars of investments in Brazil’s ports, particularly in the more accessible north, have ended years of chronic delays for exporters, making shipments cheaper and more reliable and boosting buying from consumers such as China. In addition to soybeans, Brazil is the top global supplier of beef and sugar.

Brazil lags the United States in road infrastructure, but gradual improvement in that area is expected. U.S. farmers face their own challenges. A crumbling lock and dam system on Midwest rivers has hurt their reputation as the world’s most reliable grain suppliers.

The U.S. Agriculture Department projects U.S. corn exports will fall by 6.2 million tonnes, valued at around $1 billion, in the current marketing year. Brazil corn exports meanwhile are expected to rise by 1 million tonnes from a year ago, speeding Brazil’s ascendancy to top exporter.

“If we do not look to the future, there will be a point down the road where we are going to get pushed into second place,” said Fred Helms, a farmer from Illinois who recently toured Brazil and Argentina with the Illinois Farm Bureau to get a sense of the competition.

“It is not fun to be number two.”

Brazil’s warmer climate gives its farmers a longer growing season than their U.S. counterparts. Most Brazilian growers can seed corn immediately after harvesting soybeans, planting two corn crops per year. U.S. farmers must wait through winter.

That has led to a jump in Brazilian corn plantings as farmers scramble to boost soybean production to satisfy demand from China, Cordonnier said.

U.S. corn is expected to account for just 33.8 percent of global corn exports in the 2017/2018 marketing year, down from 62.6 percent a decade ago, according to USDA projections. Brazil’s projected corn exports of 35 million tonnes would account for 22.7 percent of global shipments.

Just 20 years ago, Brazil exported just 6 million tonnes, less than 1 percent of the world total.

“Ten years ago nobody believed the country would be able to achieve this,” said Sergio Mendes, director general at Anec, Brazil’s national association of cereal exporters. “Producers in Brazil are very efficient and things happened fast.”

The most recent data from Brazil’s Trade Ministry showed that the country exported 3.02 million tonnes of corn in January, more than double the 1.45 million tonnes it shipped overseas a year earlier.

‘MAINTAIN A PLACE AT THE TABLE’

The U.S. briefly fell from its perch as top corn exporter in 2012/13, but that was because of drought. The next time Brazil surpasses the United States it will likely be permanent.

Changes in trade pacts could hasten the decline of U.S. market share. The United States, Canada and Mexico are renegotiating the North American Free Trade Agreement (NAFTA). That deal has given U.S. farmers unfettered access to top buyer Mexico, which accounted for 23.8 percent of U.S. corn shipments in the 2016/17 marketing year. Brazilian sellers are already making inroads into Mexico.

For now, the USDA forecasts the United States will remain the top corn exporter for the next decade but with a market share falling below 30 percent.

“We are not the only player in the world anymore,” said Mark Welch, assistant professor in the Department of Agricultural Economics at Texas A&M University.

“It is so critical that the U.S. maintain a place at the table when it comes to trade agreements and trade relationships and trading partnerships.”

(Graphic: World corn export market share: tmsnrt.rs/2BzBNuH)

Additional reporting by Ana Mano in Sao Paulo; Editing by Caroline Stuaffer and David Gregorio

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