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U.S. Unlikely to Dominate Future Corn Exports

November 27, 2012
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By Steve Leer, Purdue University

The United States remains the world's corn export king, although its empire is shrinking, says a Purdue University agricultural economist.

Foreign nations that previously relied on the U.S. for corn are growing more of their own or buying from other producing countries, said Philip Abbott. He predicted the trend will continue even if market conditions improve and U.S. corn production increases.

"The U.S. has historically been a very important part of the international corn market," Abbott said. "Prior to the 2007-08 food crisis and spike in commodity prices, the U.S. exported well over half the amount of corn that entered international markets. Since then, the high prices have caused the rest of the world to expand their production and become more self-sufficient.

"Even if we get bigger corn crops in the future, it's likely that the demand in foreign markets will not soon recover to the level that it once reached."

U.S. Department of Agriculture statistics bear that out. In the 2007-08 marketing year, the U.S. exported 2.4 billion bushels of corn. The USDA estimates just 1.1 billion bushels of U.S. corn will be exported in the 2012-13 marketing year.

What has happened to U.S. corn exports, and why might the U.S. not claim 50% of future world corn markets? There are a few reasons, Abbott said.

First, ethanol. The federal Renewable Fuel Standard mandates that gasoline sold in the U.S. be blended with ethanol. This year, the law requires oil companies blend 13.2 billion gallons of ethanol with the gasoline they produce. Next year, the blending requirement increases to 13.8 billion gallons.

Corn is the primary feedstock of ethanol, and 5.5 billion bushels of U.S. corn were used for that purpose in 2011-12.

"Roughly 40% of the corn that's produced in this country is used in ethanol, although some of it is later used as distillers grain for livestock feed," Abbott said. "That's up from about 10-12% five years ago. The amount of corn that makes up the increase is more than we export."

Because the law requires that ethanol be produced, there is less corn available for other non-ethanol users, including foreign buyers and U.S. livestock producers. The high demand for corn, coupled with the partially regulated market, has pushed corn prices higher.

Secondly, the U.S. has not kept up with many other nations that have significantly increased their corn acreage. Although U.S. farmers have shifted acreage away from other crops and into corn, competing nations and customers have significantly increased their area planted.

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