(Bloomberg) -- For more than half a century, US farmers dominated the international market for corn, shipping more of the critical crop than any other country to feed the world’s livestock, fill its stockpiles and manufacture its processed foods.
No more. In the agricultural year ending Aug. 31, the US handed the corn-exporting crown to Brazil. And it might never get it back.
In the 2023 harvest year, the US will account for about 23% of global corn exports, well below Brazil’s nearly 32%, US Department of Agriculture data show. Brazil is seen holding onto its lead in the 2024 planting year that begins Sept. 1, too. Only once in data going back to the Kennedy administration did America drop out of first place before: for a single year in 2013 following a devastating drought. The US corn-exporting industry has never before spent two back-to-back years in second place — until now.
Losing its lead in corn exports may feel familiar to American farmers, who in the last decade have also relinquished the top spot in both soybean and wheat exports. Soy was the first to go, with Brazil definitively taking the lead in 2013. The next year, the US lost its wheat dominance, too, with the European Union, then Russia, beginning to elbow out American farmers in the global market.
An array of factors is behind the shift: the country’s rising costs and a shortage of open farmland, the lingering effects of former president Donald Trump’s trade war with China, a strong US dollar. The US today comprises about one-third of global soybean exports, a distant second to Brazil. On wheat, it’s now in fifth place, with a single-digit share of the global market.
The steady decline and loss of competitiveness for the US is a blow for a country that has long wielded food as a geopolitical force. At the height of the Cold War, it used its ample supplies as a tool to keep communism from spreading in developing nations and even supplied about a quarter of its wheat to Russia after a crop failure in the early 1970s.
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“The US reminds me of the frog being slowly boiled,” said Ann Berg, an independent consultant and veteran trader who started her career at Louis Dreyfus Co. in 1974. “It’s lost its dominance but it took 40 years.”
To be sure, the shift in corn shipments isn’t all that unexpected: For years, the federal government has been incentivizing the use of domestically grown corn for ethanol, which is added to gasoline. About 40% of US corn goes to supply domestic mills making ethanol for use as a transportation fuel — though that demand will be at risk as more electric vehicles hit the road. When mills aren’t buying, the US corn crop can also be stored in massive silos or grain elevators for future use for years at a time, awaiting better prices.
“In the case of corn and beans, what you’re seeing is we’re using a lot more of it at home,” said Gregg Doud, former chief agriculture negotiator for the United States Trade Representative under the Trump administration. “That’s not a bad thing. What’s really going on here is that we’re making ethanol, we’re feeding it to livestock, we’re making renewable diesel and we’re more energy independent in terms of fuels.”
Krista Swanson, an Illinois farmer and the lead economist at the National Corn Growers Association, said a huge crop in the Latin American nation and a shortfall in the US, paired with a weak Brazilian currency, gave Brazil’s corn export industry the upper hand this season. She’s hoping it’s temporary. “We were kind of up against some challenges in the world market this year,” she said. “It’s hard to compete when throughout May and June, Brazil’s market price was 75 cents per bushel lower than the United States.”
Still, some of the US corn-industry’s challenges competing on a global stage will remain well after the current marketing year. The US has higher labor and transport costs, especially as a continued drought on the Mississippi River clogs the main trade artery for Midwest crops. Meanwhile, Brazil has been upgrading its ports and infrastructure, closing earlier logistics gaps. Brazil, with its warmer climate, also gets two corn harvests a year, instead of one, giving it a competitive advantage over the US. Even if the US corn sector regains the top exporting spot for a year or two in the near term, given all its obstacles in the global market compared to Brazil, it’s unlikely to recapture the crown in the long term.
That’s a big shift for a country whose patriotic songbook exalts the nation’s “amber waves of grain.” At its peak, the US exported 78% of its annual wheat production, 54% of its soybeans and 45% of its corn; in 2024, those figures are forecast to slip to 40%, 43% and 14%, respectively. It’s also making up a smaller share of global crop exports overall.
For major agricultural buyer China, Brazil also doesn’t come with any of the US’s political baggage. Last year, China inked an agreement to purchase Brazilian grains to reduce its dependence on the US and replace supplies from Ukraine cut off by the Russian invasion. Brazil’s first shipment of corn under the new deal set sail in November.
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Of course, China is still a major buyer of American crops, importing more of the US’s corn and soybeans than any other buyer for at least the last two calendar years. But millions of tons of Brazilian crops now flow to China every year, too. In July, China was the leading destination for Brazil’s corn shipments at 902,000 tons, up from zero at the same time last year.
Brazil “isn’t a close US ally, so Beijing feels confident it could continue to trade with Brazil, even if the relationship with the US deteriorates suddenly,” said Even Pay, an agriculture analyst at Trivium China, a policy research consultancy. Brazil also needs more of what China has to offer, like investment in infrastructure and technology, further strengthening its nascent bonds, she said. “It doesn’t look likely that the US diplomatic relationship with China will improve much in the near term, which, like it or not, will leave US agriculture at somewhat of a disadvantage.”
--With assistance from Hallie Gu, Mike Dorning and Tarso Veloso Ribeiro.
©2023 Bloomberg L.P.