The Grain News

 Sept_Grain_News

Download September 2009

U.S. Farmers Set to Harvest Bumper Corn Crop; New Record Possible
Harvest is on track this year to bring bumper crops to market in the United States, particularly in the corn sector, which saw very good overall crop conditions for nearly the entire growing season.

“In my corner of the world – southwest Iowa – we have an excellent corn crop coming, perhaps one of the best in my lifetime,” said Darrell McAlexander, a farmer from Sidney, Iowa.

Farmers from across the country have reported outstanding conditions, confirming U.S. Department of Agriculture’s crop condition figures and production estimates.

USDA estimated in September that U.S. corn farmers would harvest 329.1 million metric tons (13.0 billion bushels) of corn. That is a 7 percent increase from a year ago. Corn yields were estimated to be 10.16 metric tons per hectare (161.9 bushels per acre), which if realized would be a 0.5 ton per hectare increase (8.0 bushels per acre) from last year.

If reached, the average corn yield would break the record set in 2004, and total crop production would be very close to the record set in 2007.

McAlexander said this year’s crop reinforces the point U.S. farmers have been making about producing plenty of corn to meet all demands – for domestic feed and processing, for fuel ethanol and for corn customers around the globe.

“USDA actually estimated U.S. corn exports may increase some this year compared to last year. The crop farmers are seeing in their fields will easily ensure the corn will be there to meet that demand,” he said.

“There should be no doubt that there will be a good supply of high-quality U.S. corn for importers around the world,” McAlexander said.harvest

USDA estimated U.S. corn exports would reach 55.9 million tons (2.2 billion bushels) during the 2009/2010 marketing year.

It estimated another 106.7 million tons (4.2 billion bushels) of U.S. corn would be converted to ethanol. During that process, however, approximately 33.3 million tons (73.5 billion pounds) of distiller’s dried grains with solubles (DDGS) would be produced.

“That is a lot of distiller’s grains,” McAlexander said, “and it is fair to say that a growing percentage of that production will be imported around the world because it is such a good feed source. When combined with the anticipated large corn crop, it’s safe to say there will be plenty of feed options from the United States this coming year and into the future.”

Feeding trials, several sponsored by the U.S. Grains Council around the world, have shown DDGS to be an outstanding feed ingredient. (For more information on trials with fish, swine, dairy cattle, beef cattle and more, contact your local U.S. Grains Council office.)

Barley, Sorghum Update
As for other grains, USDA estimated U.S. farmers would produce some 4.5 million tons (206.7 million bushels) of barley this year and 9.9 million tons (389.7 million bushels) of sorghum. While yields of both crops are anticipated to be higher than last year, total production of both barley and sorghum are a bit lower simply because planted hectares were less than year ago.

Reduced plantings for sorghum and barley remained in line with early season expectations due to lower prices for the two grains. In addition, some hectares typically planted to barley were switched to other crops due to wet spring weather in barley growing regions.

Trade Missions Build Relationships, Promote U.S. Sorghum
Market shifts over the last few years changed the quantity of U.S. sorghum sales to Mexico. In the process, relationships between sorghum buyers and sellers became somewhat routine, and the flow of knowledge to feed companies and nutritionists slowed.

“The U.S. Grains Council approached this issue by coordinating a number of meetings between all interested parties and advancing the understanding of sorghum feeding properties,” said Alvaro Codero, USGC manager of international operations for marketing.

Starting earlier this year, a series of trade teams made up of importers and buyers from Mexico came to the United States for a firsthand look at U.S. sorghum production and transportation and to learn about the benefits of feeding sorghum.

To expand the knowledge base of feeding sorghum, a team of animal nutritionists from Mexico also came to the United States to participate in a two-day short course at the International Grains Program at Kansas State University. Nearly 20 nutritionists and industry professionals attended the program, which focused on the nutritional value of U.S. sorghum in feed rations.

One participant in the trade missions was Arturo Basulto, purchasing manager for feed grains and oilseeds at Inter Industrias del Sureste, S.A. in Yucatan, Mexico.

“The Council has played an important role in supporting us from the beginning,” Basulto told attendees at a Council meeting in July.

“You have provided the connections to grain farmers, agribusiness representatives and the field specialists needed to improve our operations. This information and assistance is not always available,” Basulto said.

Meanwhile, U.S. sorghum producers and exporters went to Mexico to learn about the country’s livestock and poultry industry.

Osmane noted the trade agreement provides long-term viability for the livestock and poultry industries because in the past there were frequent tariff changes.

Schultz explained that frequent tariff changes stymied growth in the livestock and poultry sector. “Having a solid trade agreement in place has benefited importers, feed companies, livestock and poultry producers and, ultimately, consumers,” he said. “This is true not only in Morocco, but also in the other countries that have adopted the trade agreements.”

“These trade missions are valuable for both parties because they promote understanding and build relationships between buyers, sellers and end-users,” Codero said.

Council representatives also attended a poultry science meeting in Mexico to visit with end-users about the benefits of sorghum in poultry rations. One seminar specifically focused on the benefits of using up to 20 percent sorghum in rations, which may improve productivity compared to traditional rations.

The result of all these efforts, Codero said, is increased sales of U.S. sorghum to Mexico – and buyers and end-users in Mexico appreciate the assistance and opportunity.

“This is the kind of work the Council does so well,” he said, “and, importantly, it benefits everyone – buyers, sellers and end-users – alike.”

FTAs Benefit Livestock Producers, Consumers
An analysis of four free trade agreements (FTAs) implemented since 2001 – between the United States and Jordan, Chile, Singapore and Morocco – shows the agreements grew trade between the countries through better market access and stronger trade rules.

The analysis, performed by the U.S. Government Accountability Office (GAO), said overall merchandise trade between the United States and partner countries increased from 42 percent to 259 percent (see table). Services trade and foreign direct investment also increased, GAO said.

Once the FTAs were implemented, a large percentage of goods, including some grains, became duty free immediately, while duties on other products were reduced over time.

For example, said Kurt Schultz, U.S. Grains Council director in the Mediterranean and Africa, 95 percent of all bilateral trade between the United States and Morocco became duty free once the agreement was implemented in January 2006.

In the grains sector, Schultz said U.S. sorghum sales to Morocco became duty free immediately, while duties on U.S. corn are being phased out over a five-year period and duties on U.S. barley are being phased out over 15 years.

“The free trade agreement gave Moroccan importers improved access to U.S. feed grains and allowed importers to lower costs for their livestock and poultry feed customers,” Schultz said.

FTAIn fact, Schultz said reduced costs and other industry changes supported by the Council has allowed the farm-gate price of chicken to decline over time – to prices last seen in 1988. “In this age of inflation, the fact that Moroccan poultry producers have lowered prices for consumers is very positive,” Schultz said. “It has helped make poultry meat and eggs more available and more affordable.”

Youssef Ben Osmane, manager of the trading company Graderco in Casablanca, Morocco, said the free trade agreement is beneficial to his customers due to the reduced duties on feed grains and other feed products. “The tariff on corn will be eliminated over the next two years, which is expected to further stimulate poultry, milk and meat production,” he said.

Osmane noted the trade agreement provides long-term viability for the livestock and poultry industries because in the past there were frequent tariff changes.

Schultz explained that frequent tariff changes stymied growth in the livestock and poultry sector. “Having a solid trade agreement in place has benefited importers, feed companies, livestock and poultry producers and, ultimately, consumers,” he said. “This is true not only in Morocco, but also in the other countries that have adopted the trade agreements.” 

GSM-102 Funds Keep Grain Moving
With credit markets remaining tight around the globe, an additional $650 million (U.S.) was made available by the U.S. Department of Agriculture for export credit guarantee authorizations as part of the GSM-102 program.

“The foreign currency liquidity crunch forced local banks to cut credit lines dramatically,” said Byong Min, U.S. Grains Council director in Korea. “Banks cut trade financing periods too, as short as 30 days – from 180 days – and in some cases demanded early payments and raised interest charges. That created a surge in demand for GSM-102 credit, which has more flexible terms and a lower interest rate.”

The additional funds were quickly dispersed – and pushed the GSM-102 program to the $5.5 billion (U.S.) limit allowed by the U.S. Congress.

The Council, which helps administer the program, tallied up regions that utilized the most recent funds and total funds through the year. It noted the $650 million were allocated to the following countries:

  • South Korea, $100 million ($1.3 billion total for the year);
  • Mexico, $75 million ($300 million for the year);
  • South America, $75 million ($850 million for the year);
  • Africa/Middle East $100 million, ($200 million for the year);
  • Caribbean, $50 million ($425 million for the year);
  • Central America, $75 million ($750 million for the year);
  • China and Hong Kong $100 million, ($350 million for the year);
  • Turkey, $50 million ($500 million for the year); and
  • Southeast Asia, $25 million ($525 million for the year).

Min noted that while Korean importers used a large amount of GSM-102 program credit during the past year, it used a large amount of credit during the Asian financial crisis in 1997-1998. In 1998, Korean importers used $1.6 billion in GSM-102 credit, but as Asian credit markets returned, importers in the country reduced the use of GSM-102. The same will happen again as the current credit crisis ends, he said.

Importers find the program to be much more cost effective. “The Korean Feed Association noted the financing cost of using the GSM-102 program to be significantly less than accessing credit through local banks, at least for now,” Min said.

GSM-102 provides competitive credit terms to buyers, and by lessening the financial risk to lenders they are able to help importers finance the purchase of U.S. food and agricultural products, including feed grains. The program has credit terms of up to three years.

“The program helps importers keep feed grains going to livestock and poultry operations so they can continue operating,” Min said. “It is very beneficial.”

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