US agriculture faces tough competition

A strong dollar tops a number of factors contributing to a weaker export market that is squeezing crop prices, analysts agree.

It appears unlikely things will improve in the near future for U.S. corn and soybean growers. There could be a wild card or two buried in the deck, however.

“The strength of the dollar is absolutely killing any product right now,” said Paul Bertels, vice president of production and sustainability with the National Corn Growers Association.

A strong dollar makes all U.S. goods more expensive abroad, and agricultural commodities are no exception.

The ag market can be affected in a way most commodities aren’t, however — by the whims of Mother Nature.

Bertels sees adverse weather as one of the few factors that could alter the export market for corn and beans.

“Within the next six months or a year, short of a weather event either here or abroad, I don’t see that changing,” Bertels said. “Unless there’s some kind of supply hiccup coming out of Brazil or Argentina, it’s probably not going to happen.”

John Baize, a Virginia-based consultant who advises the U.S. Soybean Export Council, also points to the dollar as a drag on exports.

“We have a strong U.S. dollar, and we’ve got weak currency in Argentina and Brazil, our primary competitors,” Baize said. “Our farmers see prices today as being terrible. But farmers in Brazil and Argentina, they say these prices are higher than we’ve had in a long time, in terms of their local currency.”

The USDA recently projected U.S. soybean exports at 1.75 billion bushels, down from the 1.843 billion bushels exported last year. That’s largely due to a slight drop in global demand and three years of bumper crops in South America.

Argentinian politics may also play a role in corn and soybean prices. Free-market capitalist Mauricio Macri took office in December and quickly began reversing years policies.

Macri removed export taxes on wheat, sunflowers and corn, and lowered them on soybean exports. That could potentially lead to reduced soybean acreage in Argentina, helping U.S. soybean growers.

“Now they’re getting effectively 100 percent of the world price for corn, sunflowers and wheat,” Baize said. “In the case of soybeans, they reduced it from 35 percent to 30 percent. And they intend to reduce it 5 percentage points a year in the future. They would do more, but it’s a major source of revenue for the government.

Macri also eliminated export quotas on corn and wheat, which could have an effect on production there.

“The previous government put in export quotas that would only allow a certain percent to be exported, which was also suppressing the price, the same as a tariff,” NCGA’s Bertels said.

Baize said he believes Argentina’s political changes will affect the export market, but not as soon as U.S. farmers may like.

“I think it’s going to have an impact,” he said. “It may not show up fully for two or three years.”

One silver lining may be a decrease in corn planting in the United States. The USDA reduced its projected plantings estimate recently.

“There’s some potential for market gain,” Bertels said. “That report threw everybody a curve on corn acres they are calling for. I can’t see the number moving higher. If we get to the end of June and they drop a billion and a half acres off that corn number — for whatever reason — that might have some short market help.”

Demand in the world’s largest import market could result in increased imports over the next year, but the American farmer may not be the beneficiary.

“China is expecting an increase in imports. The problem with that is, most of that will probably come from European producers,” Bertels said.

Bertels and Baize agree the only hope for short-term relief would be weather conditions.

“In the next six months or so, it’s going to have to take some kind of weather event, hopefully not in the U.S.,” Bertels said.

Baize said, “The only thing that might be good is that Argentina may plant less soybeans. Other than that, we’ve got to look at weather.”