As the ethanol industry has grown, U.S. corn exports have become a smaller share of total demand but growth in exports may become much more important in the future as ethanol production levels off. With only modest growth expected in domestic wheat, corn and soybean use, growth in exports will be needed as crop production increases in the future.

Exports have been a less important factor for the corn market in recent years. We used to export about 20 percent of the corn we produced, but now it is closer to 15 percent. The forecast for this year is that we will export just 13 percent of total production, and total production was hurt by below trend yields. If the USDA forecast for exports is correct, 2011/12 exports will be the smallest since 2002/03 and the third lowest since 1995/96.

Meanwhile, world corn trade has increased significantly. World corn trade was generally between 70 million and 80 million tonnes between 1995 and 2005, but since then world trade has averaged 93 million tonnes with the forecast for this year at 94.7 million.

In recent years the loss of share of world trade has been offset by soaring demand from the ethanol industry. But that very important source of demand growth may be changing. Ethanol production in 2011 will be near 13.5 billion gallons and ethanol production is expected to level off at around 15 billion gallons over the next few years.

Demand from the ethanol industry has added about 700 million bushels to corn demand in each of the last few years. Going forward, the increase will probably be less than 100 million bushels per year and sometime soon, it may not increase at all. With yield growth adding about 160 million bushels to production each year, a different source of demand growth will be needed.

The impact that the countries of the former Soviet Union have had on world wheat trade is well recognized, but these countries are having a similar affect on the world corn market. This region accounted for less than 1 percent of world corn trade in 2000, but the share is more than 13 percent in 2011/12. They have more than doubled corn area since 2000 and production has quadrupled. In addition, this region of the world produces and exports a significant amount of feed quality wheat that competes with corn in world markets.

There is a good chance that world corn trade will increase significantly in the future. Most people believe that China will need to import corn to meet their rapidly rising demand and this new source of demand for corn could provide an important outlet for U.S. corn. However, if that doesn’t happen, the U.S. would need to regain market share or face rising supplies and lower prices. Exports will need to rebound to near the 2 billion bushel mark very soon if corn yields bounce back to trend levels in the next year or two.