A look at USDA’s long-range forecast
USDA expects big increases in corn exports. The most likely place for stronger corn demand is in the export market. U.S. corn exports are expected to drop to their lowest level since the early 1970s this year and a big rebound in exports is essential to even maintaining acreage near current levels. USDA’s forecast has corn exports nearly doubling next year to 1.7 billion bushels, and reaching 2.0 billion by 2015/16. Exports continue to rise to 2.5 billion bushels by the end of the forecast period. China becomes a huge corn importer, with imports rising to nearly 20 million tonnes (770 million bushels) by 2022/23. That accounts for about half of the growth in total world trade. China’s corn demand has increased dramatically in the last several years rising by about 75 million tonnes over the last decade. However, China’s production has increased by nearly the same amount and China remains a very small corn importer. The key uncertainty about China’s corn deficit, and indirectly U.S. corn exports, is how much China can increase corn acreage. China added 10 million hectares of corn (24 million acres) during the last decade. If the acreage increase is similar for the 2012 to 2022 period, China may not need to import almost 20 million tonnes of corn and U.S. exports may not rise to 2.5 billion bushels.
The U.S. corn market also faces serious competitive challenges from Argentina, Ukraine and Brazil. These three countries have added about 17 million acres of corn in the last decade, and all three have room for further expansion. According to the USDA’s long range projections, Brazil’s corn exports increase by about 3 million tonnes over the next decade, compared to a 15 million tonnes increase in the last decade and exports from the former Soviet Union rise by 7 million tonnes, versus nearly 15 million tonnes in the last decade. The U.S. takes market share from these competitors, getting back to 46 percent of the world total by 2022/23.
We may have too much corn acreage. At least with current demand levels, 96 million acres of corn may be too much. USDA has demand totaling 13 billion bushels for 2013/14 and 13.5 billion for 2014/15. With trend yields near 165 bushels per acre, we only need about 80.5 million harvested acres to satisfy demand, which calculates to about 87 million planted acres. So if yields are near trend in 2013, USDA has ending stocks rising to more than 2 billion bushels next year, which pushes prices down to $5.40 per bushel. With the lower prices, farmers cut corn acreage to 90 million acres in 2014, which still isn’t a big enough cut and stocks rise to 2.23 billion bushels, pushing prices down to $4.10. Corn acreage then falls to 86 million acres in 2015 in the USDA forecast, finally bringing production in line with use.
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