4 Demand Bright Spots Outshine U.S. Grain Glut

June 7, 2017 12:00 PM
4 Demand Bright Spots Outshine U.S. Grain Glut

Basic economics dictates that when supply strongly outweighs demand, the value pendulum swings to low prices. That story has been unfolding during the past few years as U.S. farmers have produced bin-busting corn, soybean and wheat crops.

As a result, excess supply continues to plague the global grain complex, write Farmer Mac economists Jackson Takach and Ryan Kuhns in the Spring 2017 edition of The Feed, Farmer Mac’s quarterly report on agriculture.

For example, U.S. corn production has set records in each of the last four years, and U.S. soybean production has set records for each of the last three years. U.S. wheat production is down in recent years, but global production is still booming, with record crops in each of the last nine years, largely due to more area planted and better growing conditions in Russia, the economists explain.

Add it all up, and in 2017, global ending stocks of corn, soybeans, and wheat are each at all-time highs.

Even so, strong demand is chasing the high grain supplies and creating several bright spots for farmers, Takach says.

Power Hour Logo
  1. Corn-based ethanol production in the U.S. continues to increase, driven largely by exports to Brazil. High sugar prices have made U.S. ethanol more competitive compared to South American, sugar-based ethanol.
  2. Growing protein demand has led to an increasing number of animals on feed, causing the demand for grain for feed to jump. The index for grain-consuming animal units in the U.S. is up 3.6% since 2012. However, cheap, abundant corn is crowding out usage of other feed grains like wheat and sorghum, for which demand is down in 2017.
  3. Soy products continue to find favor by consumers, particularly for soybean oil products in Asia. “For soybeans, it is really about exports,” Takach says. “China continues to be a huge demand source for us.”
  4. Trade relations with Mexico are still strong, despite all the talk and bluster around Mexico and NAFTA, Takach notes: “We still move a lot of corn and cattle through to Mexico. The relationship between the U.S. and Mexico is still really good, and that has helped to do a lot for corn prices.”

Listen to Tackah discuss the farm economy on the June 6, 2017 episode of AgriTalk.

To subscribe to The Feed, produced by Farmer Mac, visit www.farmermac.com/thefeed.


Back to news




Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by QTInfo.com
Brought to you by Beyer