Agricultural trade remains a top priority
The coronavirus pandemic has dealt an economic blow to many U.S. industries, and agriculture is certainly no exception. Grain and livestock prices have taken a hit, grain basis is getting smashed on rail values and ethanol plants have had to cut production.
But despite the outbreak, people and animals everywhere still need to eat. And trade remains vital to the U.S. economy and to agriculture.
The U.S. Grains Council, one of South Dakota Corn’s partners, continues to promote exports all around the world. Although the coronavirus has forced the Grains Council to limit in-person programs in many countries, it continues to reach out to customers by telephone, email, text, social media and webinars on a daily basis.
Despite the challenges, there are some positive things happening.
Travis Strasser of Wilmot, who is secretary/treasurer of the South Dakota Corn Growers Association, serves as a Grains Council delegate and keeps in contact with the Council’s staff. He reports that the shipping industry is running close to capacity and ports are running pretty smoothly, which is particularly important to states like South Dakota that transport grain and other products by rail to the Pacific Northwest for export.
“First and foremost, the most positive thing is all of our export facilities are up and running. Everything with our export system seems to have a green light,” Strasser said. “We’re still able to export.”
The Grains Council is receiving a growing number of inquiries from countries as to whether the United States will be able to continue supplying grain and other products. The answer is a resounding yes.
“It’s a top priority for us to remain open to our trade partners, to be able to provide a quality and timely product to them in the midst of this pandemic,” Strasser said. “I think everything is on pace to meet those needs. There’s no question the U.S. can still be a reliable trading partner.”
Grains Council President and CEO Ryan LeGrand says although operating procedures have changed, the council’s mission remains the same.
“We’re continuing operations in this new world that we are all living in,” LeGrand said. “We’re working behind the scenes to make sure grains continue to flow.”
The Grains Council reports:
• There is still strong demand for corn among our regular, large corn customers with Japan, Mexico, South Korea and Colombia buying U.S. corn in recent weeks. South Korea, which also buys corn from South America, has increased the percentage it buys from the U.S., primarily as a result of the U.S.-Korea Free Trade Agreement (KORUS).
• China’s economy is starting to come back to life, and implementation of the Phase 1 trade deal is beginning to kick in. On March 19, China made its largest purchase of U.S. corn since July 2013, and also purchased wheat and sorghum.
• Many major Chinese importers have applied for Section 301 tariff exemptions to purchase U.S. corn, sorghum and distillers grains, with at least one exemption application for ethanol.
• The Grains Council has made it a priority to make sure U.S. ethanol plants that want to export distillers dried grains with solubles (DDGS) to China are now registered. China has approved 88 companies for shipping of DDGS. Strasser said because of the Phase 1 trade deal, China is inquiring about buying more DDGS.
• The Grains Council also has worked to help Chinese feed millers obtain GMO processing licenses so they are able to import and use U.S. corn.
• There’s also some good news out of Indonesia as the state-owned oil corporation is now allowing ethanol up to 10%. Indonesia imports roughly 50% of its gasoline demand and this could lead to 290 million gallons of new demand annually.
• Japan will soon finish a reassessment of its gasoline baseline, which could provide an opportunity for U.S. ethanol to more than double from its current 44% market share to 95%—a 200-million-gallon market.
The Grains Council staff also has been in steady contact with the 25 largest feed grain importers in Mexico, who are concerned about the 25% devaluation of the Mexican peso and any disruption to the U.S. supply chain including loading of railcars, barges and vessels.
Before the coronavirus outbreak, global exports of U.S. ethanol were picking up. Ethanol exports topped 140 million gallon in December and 151 million gallons in January, which were increases of 10% and 18% respectively over totals for those same months in 2018.
In Colombia, the outcome of a countervailing duty lawsuit could determine how much U.S. ethanol that country purchases.
“We’re optimistic about Colombia,” Strasser said. “That’s a potential 290-million market. Colombia is the sixth-largest buyer of U.S. ethanol, and we had been able to export ethanol tariff-free until that country tacked on a 9.36% duty last year. The U.S. is fighting that duty in court and a decision is expected in April.”
The U.S. Meat Export Federation (USMEF), another South Dakota Corn partner, also has been affected by the coronavirus pandemic, but reports that red meal sales have remained strong, especially in the Asia Pacific region.
In Hong Kong, the USMEF implemented a promotion for chilled U.S. pork at 105 outlets. In Japan, McDonald’s restaurants added pork patty and pork loin sandwiches to their menus, utilizing 100% U.S. pork. In South Korea, sales of U.S. beef have grown substantially through e-commerce and home-shopping programs since coronavirus hit the country. And as soon as the United States-Mexico-Canada Agreement (USMCA) goes into effect, the USMEF expects pork exports to Mexico to increase.
These are challenging times, but there are opportunities on the horizon.