The U.S. corn and soybean export markets together account for about 70% of the total grains and oilseeds exported. As major drivers of the demand for grain transportation, these markets have been rocked by large shifts in recent years.
Among the many factors that have caused these shifts are U.S. agricultural trade policy, China’s role in the broader international grain and oilseed markets, competition from Brazil and Ukraine, and the global coronavirus pandemic.
For the last several years, the collective, cumulative effect of these various factors has been added variability to the corn and soybean export markets. It remains to be seen how the trends will play out, though corn and soybean export sales currently show some signs of growth. Year-to-date 2020/21 outstanding (unshipped) export balances and cumulative (shipped) exports are up notably from 2019/20.
Despite some of the same challenges, wheat export sales are also growing slowly. This article primarily focuses on the demand for U.S. grain transportation and China’s role in driving the market.
Exports Sales of Corn and Soybeans Begin to Recover
For the current marketing year (MY) 2020/21, which began September 1, 2020, transportation demand for U.S. corn and soybean exports is significantly higher than for the same period last year.
This is mainly because of more exports to China. Accumulated corn exports for the new marketing year to date (YTD) are 58% higher than 2019. China accounted for 43% of the YTD total corn export commitments, followed by Mexico (17%), and Japan (11%).
Looking forward, total YTD outstanding corn sales are 21 MMT — more than double those of the same time last year. Representing sold volumes that have not yet shipped, outstanding sales indicate future transportation demand.
According to USDA’s September 11 World Agricultural Supply and Demand Estimates (WASDE), MY 2020/21 U.S. corn exports are projected to be 59.2 MMT, 4% higher than last month’s projections.
U.S. corn exports are expected to increase by 32% from MY 2019/20 because of less production in the EU and Ukraine. As of September 17, outstanding soybean export sales (32 MMT) are also more than triple those for the same period last year, with China accounting for 53%.
Soybean exports projections for MY 2020/21 remain unchanged from last month, but according to WASDE, are expected to increase by 26% from MY 2019/20.
Compared to the same period last year, total wheat commitments (13.5 MMT) are 7% higher, while accumulated exports are 3% higher. However—if the United States sustains competitive prices, its freight advantage, and its relationship with buyers—the Nation may soon ship more wheat to Brazil. The recent opening of Brazil’s tariff rate quota and slowed Argentine exports to Brazil may create opportunity for the United States. In the September WASDE, U.S. wheat exports are projected to remain unchanged from last month, but are 1% above MY 2019/20.
China’s Demand for U.S. Corn and Soybeans Starts to Grow Again
A number of factors suggest future growth in corn and soybean exports to China. These factors include the large year-to-date outstanding sales of corn (9.3 MMT) to China, China’s commitment to the Phase 1 U.S.-China trade agreement, and recent vessel demand, which has been high.1 Export sales of corn to China are expected to grow for the first time since MY 2013/14.
Besides commitment to the Phase 1 U.S.-China trade agreement, China’s rising feed demand and high domestic prices have also contributed to the country’s need to procure competitively priced feed. Additionally, after imposing anti-dumping and countervailing duties on Australian barley, China has been left with few options for corn substitutes. For MY 2019/20, total U.S. corn shipments to China were 2.1 MMT, the largest since MY 2013/14.
Total year-to-date MY 2020/21 U.S. export commitments for corn (accumulated and unshipped) are 9.8 MMT, compared to just 0.060 MMT for the same period last year.
U.S. soybean exports to China have also increased as a result of the Phase 1 agreement. Total shipments of U.S. soybeans to China for MY 2020/21 to date (19.2 MMT) are significantly higher than for the same period last year (2.1 MMT). Still, Brazil has recently offered more competition to U.S. exports to China in the form of a weak Brazilian real and large soybean harvest. Although MY 2019/20 total soybean shipments to China (16.2 MMT) were 22% higher than in FY 2018/19, they were significantly below previous years’ highs.
YTD outstanding sales to China reflect possible increased future demand across all modes of transportation. The YTD average barge grain shipment on the Mississippi River is 30% larger than the same time last year, and from August 27 to September 24, an average of 62 oceangoing grain vessels were expected to load within the next 10 days in the U.S. Gulf, compared to 39 vessels during the prior 10 weeks.
Similar patterns can also be seen in rail. Because of multiple ongoing influences on trade, it is possible the strong early-season export sales may not result in greater total exports. However, if the early projections (based on current trends) are realized, the higher exports would significantly increase the demand for transportation.
Information provided by the USDA Grain Transportation Report.
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