Demand for US corn and wheat to dampen, but soybeans hold strong: USDA

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Global demand may support an expansion of US soybean exports, while other feed grains look for a rebalancing year, says analyst.

The US agricultural trade report, released last week by the US Department of Agriculture (USDA), included expectations for the export market for 2017 into 2018.

Overall, US agricultural exports for 2017 are predicted to be $136bn, up $2bn from the previous forecast, said the USDA. The improvement is driven, in part, by anticipated demand for livestock, poultry and dairy products.

Grain and feed exports, however, are predicted to drop by about $1bn to around $28.6bn, said the USDA. Oilseeds and related products are set to rise to about $31.6bn based on strong soybean prices even as meal exports slow.

“The story line on the feed grain side is we’re going to see more competition for all the feed [grains] - corn, feed wheat and soybeans,” Chad Hart, associate professor of economics, crop market specialist and extension economist with Iowa State University, told us. “In the case of corn and wheat, we’re looking at declining exports for the next year, but [in terms of] soybeans, even with more competition, the world market place is going to need more.”

The last three to four years have seen a buildup in supplies and a buildup in usage in feed and other usage, he said.

But the supply buildup has been quicker than the demand buildup for some grains. "Supplies will continue to run ahead of demand for corn and wheat, but in soybeans, the export [market] and international demand may exceed the supply growth for the next year," said Hart.

Global economy

Globally, per capital GDP is predicted to grow about 1.6% in 2017 - an improvement on the 1.2% seen in 2016, said the USDA.

The increase is based, in part, on per capital income growth in several emerging markets, said the USDA. Markets in Brazil, Russia, India, Indonesia and China were predicted to see growth of 3.7% in 2016, increasing to 4.3% in 2017.

US per capita income is expected to increase by 1.5% in 2017, said the agency.

And the agricultural exports-weighted dollar value index is predicted to continue to rise, with a 3.7% appreciation in 2017, expected to weigh on export competitiveness.

Even though the dollar has got stronger, there was not a corresponding drop in exports in 2016, said Hart. “It’s counterintuitive, but next year the dollar would have that dampening effect,” he added.

There has been strong demand for feed and feed ingredients as the global animal protein market expanded, he said.

“That’s helping drive the exports, but the question going forward is [whether] will we continue to see that expansion,” he said. “As I look at USDA numbers, US livestock will continue to grow into 2018, but we’re expecting to see the global industry slowdown.”

Growth rates have been lowered for Mexico, said the USDA. However, economic growth rate in Canada is predicted to improve in 2017.

Corn and coarse grains

Overall US grain and feed exports are predicted to drop by $1bn from earlier estimates, said the USDA. The reduction is predicated in the lower volumes and unit values for corn, sorghum, feeds and fodders.

“For corn, exports will likely fall in 2017 and in 2018, due to a combination of smaller production and larger production in countries that compete with us for market share – Argentina, Brazil, the Ukraine – so [there will be] more competition,” said Hart. “Our prices would be higher and we’ll see fewer export sales as we look into 2017.”

There likely will be some market re-balancing for corn and wheat, he said. That situation could generate lower prices in 2017 and price improvement in 2018.

US coarse grain exports are set to decrease $300m to $10.4bn, said the USDA. And corn is expected to see a reduction of $100m to about $9.5bn based on large global supplies and expected competition from South America.

US sorghum exports are predicted to drop the same amount - to $900m - stemming from decreased demand, predominately from China, said the agency.

The US agency predicted that feed and fodders will see a sales downturn of about $1.4bn to stay around $6bn, based on the lower value for corn products and dried distillers grains (DDGS).

Import for feed and grains has been increased, and is expected to offset a drop in corn imports, said the USDA.

Soy and oilseeds

Exports for US oilseeds and related products have been forecast at $31.6bn, up $600m since earlier estimates - the increase is based on strong soybean unit prices, but is offset slightly by lower meal values.

The export value for soybeans is continuing to see global demand led by China, said the USDA. And the improving Brazilian real is limiting price discounts from South America.

The import of oilseeds has been increased to about $8.6bn, based primarily on rapeseed oil and meal, it noted.

The USDA increased soybean export value to $22.6bn, but decreased that for meal by $200m to $4bn. The reduction in meal value stems from lower projected volumes and slightly lower unit prices.

Large supplies also are expected from South America, said the department. And there is downward pressure from other competitively prices grains and DDGS.

Wheat

The export market for US wheat is predicted to improve to $6.1bn stemming from larger volumes and higher unit values. Strong sales of old crop have boosted volume and unit values improved from strong prices, forecast the USDA.

The reduction in planted area for US winter wheat also is contributing to the improved unit values, reported the US agency.

However, there may be additional challenge from other feed wheat producing regions, including the EU, said Hart. “They [EU wheat producers] had a fairly poor wheat crop last year, and we think they’ll have a good crop this year. We expect them to regain some of that export share,” he added.

“Given the weather conditions, I think we’ll see a reduction in yield potential in that crop, so we’re looking at lower supplies here in the US,” he said. “Those lower supplies here will turn out – in combination with tough international competition –  to limit US wheat exports as we look to 2017/18.”

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