Crops > Outlook & Prices > Outlook & Prices
The struggles in international trade
The December release of USDA’s World Ag Supply and Demand Estimates (WASDE) report made minimal changes to the US corn and soybean supply and use tables, but the one substantive change that was made highlights a major challenge for the markets in 2023. That change was a reduction in 2022-23 corn exports by 75 million bushels, lowering projected international sales to 2.075 billion bushels. The strength in international demand had been one of the strongest pillars supporting crop prices over the past couple of years. In the 2020-21 marketing year (Sept. 1, 2020 to Aug. 31, 2021), both corn and soybean exports hit record levels in terms of the number of bushels shipped internationally. In 2021-22, for both crops, the number of bushels dropped, but the prices captured on those exported bushels rose more than enough to cover the losses. But the outlook for 2022-23 is for even fewer bushels leaving the country at lower prices. So what was a strength last year is now a weakness within the crop markets.
While this outlook is generally across the agricultural markets, the corn market is a good example of the erosion of international sales. Figure 1 shows the highs and lows of export sales for corn. International corn sales for the 2020-21 marketing year set the record for the most bushels shipped out to the rest of the world. The surge in sales was tied to the rebound in the global economy following the initial COVID wave and the implementation of the US-China Phase 1 trade deal. The two large jumps in the 2020 line, occurring in late January and early March of 2021, were driven by large purchases by China. In fact, China, for a short while, became the top market for US corn exports. Beyond the surge in Chinese purchases, US corn sales were also growing in many of our traditional markets. Sales into Mexico and Japan grew by roughly 10%. Purchases by South Korea increased by 31%, while purchases by Taiwan rose by 83%. Overall, corn exports expanded by roughly a billion bushels.
The 2021-22 marketing year started strong, with early sales exceeding the 2020 pace, but exports fell back below the 2020 pace and approached the 5-year average as the marketing year continued. The biggest reduction originated from China, as the burst of sales that occurred the previous year did not repeat and China slipped back behind Mexico in corn purchases. But China wasn’t the only market purchasing fewer bushels, as Japan, South Korea, and several other countries reduced their trade.
Thus far, during the 2022-23 marketing year, corn sales are well below the past couple of years and are also well below the five-year average pace. Figure 2 details the year-over-year change in US corn export sales by country, specifically highlighting the current top 10 markets for US corn (listed in order from left to right across the graph). The Chinese pullback continues and is still the largest component of the export loss, but it is hardly the only market in decline. Out of the top 10 markets, nine of the 10 are smaller currently, with only Honduras providing a very small boost in corn purchases. South Korea and Taiwan fell out of the top 10. The decline is broad-based and sizable, with many countries reducing US corn purchases by 30% or more. Some of the major factors steering this downturn are high US corn prices (especially relative to corn prices in other competing export countries), the strengthening of the US dollar over the past couple of years, the relative increase in corn production outside the US, and the availability of other feed grains to balance out livestock rations around the globe. The problem looking forward into 2023 is that many of these factors will continue to challenge US corn exports for the rest of the marketing year. This set the stage for USDA’s downward adjustment in projected exports. By the end of the marketing year, USDA’s current projection puts corn exports roughly 150 million bushels below the five-year average.
While the corn market is already feeling the effects of a significant withdrawal of export demand, the soybean market has maintained the pace of sales set last year. However, as the calendar shifts to 2023, the projections show that a similar fade is expected for soybeans. The general trade story for soybeans over the past couple of years is similar to that of corn. The 2020-21 marketing year was one for the record books, with China leading the purchases. However, a major difference is the sheer size of the Chinese trade relative to other export markets. Corn exports are much more evenly distributed than soybean exports, as China represents over half of all US soybean sales. Thus, the shifts in Chinese purchases tend to crowd out and overwhelm shifts in other markets. For example, during the 2020-21 marketing year, soybean sales to three of our top five markets were lower than the previous year. But because Chinese sales were higher, US soybean exports set a record.
That sort of see-saw effect reversed itself in 2021-22, as Chinese purchases declined and sales to the rest of our top five markets increased. However, given China’s dominant position in the trade, US soybean exports fell. The growth in Mexico, the European Union, Egypt, and Japan were not enough to offset the Chinese losses.
The current export sales pace is holding closely to last year and that is thanks, mostly, to a rebound in Chinese demand. As Figure 4 shows, Chinese purchases are up 80 million bushels this year. Without that growth, soybean exports would be well off of last year, as total export sales are only 5 million bushels above last year. While the general pullback in soybean export sales is not as widespread as it is in corn, there are a number of countries and regions purchasing fewer US soybeans, including the European Union, Egypt, Taiwan, Indonesia, and Pakistan. The factors limiting soybean exports parallel those hampering corn: high US prices (especially relative to prices in other competing export countries), the strengthening of the US dollar over the past couple of years, and the increase in production outside the US. USDA’s projections have the 2022-23 exports following the five-year average pace for the remainder of the marketing year. Thus, we’ll likely fall behind the pace of soybean export sales from last year sometime in February.
From a marketing perspective, the timing of the export challenges is actually fairly good, as the export changes have closely paralleled the production shifts over the past year. The drought this year reduced soybean production slightly and had a larger impact on corn production. Thus, the demand changes have roughly been in the same direction and of the same magnitude as the supply changes. And this has allowed prices to hold steady even as export sales have been lackluster. One concern for the 2023 crops will be the ability of the international markets to bounce back, especially if US corn and soybean production increases next year. The current sales data shows that an international rebound might not be in the cards until US crop prices retreat enough to compete with other exporting countries.
View the December 2022 Crop Market Outlook video for further insight on outlook for this month.
Chad E. Hart, extension economist, 515-294-9911, firstname.lastname@example.org