World events affect U.S. corn, DDG export demand
BROOKINGS, S.D. (SDSU) – During the past year, decisions made by China and Russia have potential to negatively impact trade with the U.S., said Kim Dillivan, a South Dakota State University Extension crops business management specialist.
“While the potential for U.S. producers to export excess production primarily depends on economic factors affecting supply and demand, world geopolitical events also impact international trade,” Dillivan said.
In China, he said, authorities have begun enforcement of a zero-tolerance policy in regard to the biotech trait MIR 162.
This action led to an ongoing disruption of U.S. corn shipments to China.
Russia, in response to sanctions imposed because of its alleged military involvement in Ukraine, has initiated trade embargoes targeting agricultural products originating from Europe and the U.S.
“While most U.S. corn is consumed domestically, becoming feed for livestock or is used to produce ethanol, foreign markets represent an important source of demand for U.S. corn and distiller’s dried grains with solubles,” Dillivan said.
Corn containing MIR 162 has been approved for production in various countries such as the U.S., Argentina and Brazil.
And despite approval from other major corn import markets, such as the European Union, the material has not been approved by China, Dillivan said.
Used to combat various insect pests that attack corn plants, MIR 162 was detected by Chinese officials in corn shipments from the U.S. in late 2013.
“Approval has been pending in China for more than four years and during that period China has consistently imported corn containing the trait,” he said. “However, in November 2013 China began rejecting shipments of U.S. corn and by January 2014 corn exports to China had essentially fallen to zero.
While U.S. corn exports to China were ending, other countries began to increase their purchases of U.S. corn.
For the past two years, Russia has not been a significant importer of U.S. corn.
According to USDA, U.S. agricultural exports to Russia totaled $1.31 billion in 2013 (only 0.8 percent of total U.S. exports value).
Dillivan said Russia’s self-imposed 1-year ban on food imports from the U.S. will primarily affect poultry meat, tree nuts, prepared foods, and fish products.
USDA anticipates Russia’s share of U.S. agricultural exports to fall to approximately 0.3 percent by 2015 (value basis).
“Although Russia has recently imported significant amounts of soybeans and live cattle from the U.S., these products do not appear to be on Russia’s list of banned agricultural items, therefore trade of these products is expected to continue without interruption,” Dillivan said.
DDGS to China
The U.S. Grains Council is requesting that China approve the biotech trait MIR 162.
Dillivan said the request comes after China announced certificates are now required from point-of-origin exporters, such as the U.S., that guarantee DDGS shipments are free of that particular genetically-modified material.
According to the U.S. Grains Council, no U.S. government agency has authority to issue these certificates.
Although Chinese officials have begun requesting these certificates from the U.S. government, the disruption in corn trade between China and the U.S. has apparently not spilled over into DDGS markets.
As a result, Dillivan said China remains the primary market for U.S. DDGS exports.
“However, China’s announcement places current shipments and future sales of DDGS in jeopardy,” he said. “It remains unclear whether any shipments of DDGS to China have been affected since the beginning of September.”
DDGS to the world
Like corn, U.S. DDGS prices have fallen in the past two years.
As a result, many countries that import U.S. DDGS have increased their purchases compared to the same period one year earlier.
The USDA predicts world economic growth to accelerate modestly in 2015, increasing from 2.7 percent in 2014 to 3.2 percent in 2015.
If world economies improve overall, growing consumer incomes and spending will likely increase international demand for U.S. agricultural products.
USDA also anticipates the U.S. dollar remaining weak, but stable in 2014 and 2015.
However, the dollar is expected to depreciate relative to many currencies in Asia, including currencies from some of our major trading partners.
As a result, U.S. agricultural exports are expected to remain competitive into 2015.
To learn more, visit www.iGrow.org.
Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page