PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:06 GMT, Monday, 13th May 2013, by Mike Verdin
Bumper crops won't repair all the damage from 2012's drought

Improved weather cannot repair all the damage that last year's drought did to US agriculture.

Sure, prospects for US spring crops - assuming they get in the ground - look far better than they did at the start of the year, when more than half the Midwest was still suffering from the drought which sent crop yields slumping last year.

Now just 10.4% of the Midwest is in drought, a factor reflected in US Department of Agriculture forecasts for record domestic corn and soybean harvests this year.

But even assuming these estimates are reached, US agriculture appears to have lost something it is not getting back - and that is share of export markets.

Lesser force

Sure, the US is to remain a huge power in crop trade.

It will regain in 2013-14 its top place among corn exporters lost this season.

But its share of the world market, at 32%, will be - bar last year's drought-affected result the lowest on records going back to the 1960s, according to USDA expectations.

The average of the previous 10 years was a 52% share of the world corn market.

In soybeans, the US will remain in the second place it fell to in 2012-13, forecast to record a share of 37% of global trade, still behind Brazil, and below the 43% average recorded for the previous decade.

New suppliers

The trouble for the US is that last year's drought, in leaving the country unable to meet the demands of its traditional foreign buyers, force importers to overcome suspicion, prejudice or habit and seek alternative suppliers.

Some importers have got used to the set up, and aren't coming back, at least for such a big portion of their needs.

China, for instance, in soybeans, of which it is the top importer, is adding Argentina to its list of approved sellers. Brazil has already overtaken the US as the major origin for Chinese soybean purchases.

In corn, the quest for fresh suppliers has fuelled the rise Ukraine as a force in the grain, with a market share of world exports of 16% forecast for 2013-14, up from a 5.5% share two seasons ago.

Pricing impact

That matters, as America's own demand is not enough to mop up all the extra domestic supplies, even in corn, of which the USDA forecasts a jump of nearly 12% in US consumption.

And rising supplies means less competition for crops, and weaker prices as the USDA indeed, has forecast.

There could be longer-term effects over values too. If America's grip on world crop trade continues to weaken, the country will find it loses some of its power over market pricing.

Up to now, farmers in America have been compensated for poor harvests by higher prices for what they do produce, besides by crop insurance.

But that impact would wane if the US declines as such a dominant force.

Double whammy

It is difficult to see the US being anything less than an agricultural superpower.

But its farmers may find themselves a little more exposed to the setback, to which more minor farming nations are vulnerable, of both weak crops and disappointing prices.

(UK rapeseed and wheat growers, for example, could suffer such a double whammy this year.)

The winners, of course, are buyers, for which a broader spread of suppliers reduces the risk of being held to ransom by a single weather threat, and allows them better ability to play off exporters against one another.

RELATED ARTICLES
World corn stocks to rebound, lifted by US revival
US to lead global soybean stocks to all-time high
Wheat prices dip after US foresees huge world crop
USDA's first stab at world 2013-14 crops poses big questions
LINKS
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events