KNOXVILLE, Tenn. -- One of the speeches at the 2012 U.S. Department of Agriculture Outlook Forum was given by Mariano Marquez, director of commodity analysis for Brazil's crop assessment agency. In that speech, Marquez summarized the changes in the production, domestic consumption and exports of corn and soybeans in both Brazil and Argentina and the effect these changes have on U.S. markets. Let's think beyond these three countries and their impact on each other's agricultural markets, starting with a broader look at corn.
In 2000, the U.S., Brazil and Argentina accounted for nearly 84 percent of world corn exports, with China making up another 9 percent. These four countries were responsible for 93 percent of the world exports of corn. It took 33 other countries to make up the remaining 7 percent of world corn exports.
By 2011, these four -- U.S., Brazil, Argentina and China -- were responsible for only 70 percent of world exports, with Brazil and Argentina posting small gains in their share of world exports, 1.3 and 2.1 percentage points respectively. China had virtually dropped out of the world corn export market; in 2011 it was, instead, a net importer of 154 million bushels. U.S. exports of corn declined by 241 million bushels comparing 2000 to 2011, while China's corn exports declined by 279 million bushels.
In addition to Brazil and Argentina, 33 other countries increased their share of world exports led by Ukraine, India, the European Union, Serbia, Russia, Paraguay and South Africa. The total share held by these seven exporters in 2011 was 26 percent. Ukraine, alone, increased its exports by a larger number of bushels than the combined decline of China and the U.S.
The decline in U.S. exports of corn was not the result in a decline in the international trade of corn; it increased by 712 million bushels. Neither was the lower share of corn exports the result of a decline in production -- U.S. corn production increased by 25 percent from 2000 to 2011.
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Corn for ethanol
Most of the increase in U.S. corn output went for domestic ethanol production. Similarly, domestic factors drove change in China, as well. A large portion of China's increased corn production was used for food and feed. In the U.S., it is doubtful that the increased use of grain for ethanol prevented the filling of a large number of export orders. Rather, the higher corn prices provided encouragement for other countries to increase corn production, and increase export competition for the U.S.
There was a time when the U.S. had the corn export market locked up, with everyone else playing a minor role. In the last decade or so, U.S. farmers and commodity traders have had to pay more attention to South American corn production, particularly Brazil and Argentina. Today, that view has to include countries in Europe, Asia and Africa as well.
As multinational agribusiness firms have begun selling corn seed with top-notch genetics to farmers around the world, the list of competitors has increased dramatically. This is reflected in the increase in non-U.S. yields from 50.1 bushels per acre in 2000 to 65.1 bushels per acre in 2011, a 30 percent gain. Comparing those yields with U.S. yields in the 150 to 165 bushel-per-acre range, we have an indication of the potential competition U.S. farmers may face in world export markets in the next couple of decades as these countries bring their yields closer to U.S. levels.
With the collapse of the Soviet Union, breadbasket countries whose trade was limited to the Soviet sphere are now free to participate in world agricultural commodity markets. They are also able to access the management systems, equipment and seed technologies they were previously denied. As a result, agricultural production is booming in some of these countries.
Looking at these numbers, one is apt to conclude that if it were not for the more than 5 billion bushels of domestically grown corn to produce ethanol in the U.S., the U.S. corn production sector would be a lot smaller and much less prosperous.
Editor's Note: Ray holds the Blasingame Chair of Excellence in Agricultural Policy in the Institute of Agriculture at the University of Tennessee in Knoxville and is the director of the university's Agricultural Policy Analysis Center. Schaffer is a research assistant professor at APAC.
