Grains down to 4-year lows due bumper crop from US, Russia, others
The largest US grain harvest in history has pushed prices to four-year lows, which usually means a sales bonanza for the world's largest food exporter. Not this year.
The largest US grain harvest in history has pushed prices to four-year lows, which usually means a sales bonanza for the world's largest food exporter. Not this year.
Traditional rivals and aggressive new competitors with their own huge harvests, such as Ukraine and Russia, are leveraging the US dollar's strength to snap up a bigger share of a market that is shrinking as importers themselves boost output.
In addition, a clogged domestic transport system has pushed rail and river freight rates sky-high, making it expensive to bring the mountains of grain to ports for shipping. That is driving down what farmers get paid by exporters, encouraging many to hold on to their crops hoping that US rivals will eventually run down their stocks and bids for their grain will pick up.
"We're going to get this crop harvested, put it away and our exports are going to pick up," said Jerry Mohr, president of the Iowa Corn Growers, who farms 445 hectares of corn and beans near Davenport, Iowa.
Rail congestion caused by soaring demand for hauling crude oil by rail sent rates from the usual US$200 to US$300 per 100 tonne rail car just a little over a year ago to around US$5,000 this harvest season. Barge costs for harvest-time shipping hit records in some areas this year.
"Agriculture has not paid that price before," said analyst Stephen Nicholson at Rabobank.
As the US share of the global export market shrinks, analysts expect the resulting supply backlog will mean more soybeans planted in the United States and less corn and wheat next season. That will add to the shift in world grain trading patterns, with the Black Sea region continuing to be an aggressive world player in grains.
Exports of corn, the biggest US cash crop, are expected to drop 9 per cent this season to 1.75 billion bushels, according to the US Department of Agriculture. Big crops overseas will reduce total world imports by 8 per cent to 4.4 billion bushels.
Competitors such as Brazil, Ukraine and other Black Sea producers will start running out of corn supplies by February or March, giving US players a chance to return to the game, grain analysts say.
"I think there is steady demand moving forward in January, February and March but not anything that's going to knock our socks off," said one US wheat exporter who declined to be named.
