The Trump administration and its effect on trade, as well as competition from Argentina and Brazil, raise concerns
CHICAGO, Ill. (Reuters) — U.S. farmers and grain handlers may be stuck with a bigger-than-expected portion of the massive stockpile of corn and soybeans harvested last fall as uncertainty about trade policies under U.S. President Donald Trump threatens to upend exports.
Domestic demand tends to be relatively steady from year to year, so the typical escape hatch for an abundance of corn and soybeans is the export market. Overseas buyers turn to countries looking to unload supply gluts, hoping for cheaper prices.
A year ago, U.S. soybean exports came in 246 million bushels higher than the government’s initial view, and corn exports were raised by 198 million bu. after farmers reaped bumper harvests of both crops.
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So far, nearly half the U.S. soybean harvest and 15 percent of corn is expected to be sold on the export market this year, in line with 2015-16.
However, in addition to concern about trade under the Trump administration, U.S. exports should face stiff competition from Argentina and Brazil, huge suppliers where big crops have been forecast.
“Uncertainty is really the flavour of the month,” said Jon Marcus, a principal at brokerage Lakefront Futures and Options in Chicago.
“It is all going to depend on all these political chess games. All these things have really spooked the market.”
This year, any cutback below the U.S. Department of Agriculture’s current forecast in exports could add pressure to an already bearish price environment.
Chicago Board of Trade soybean futures have fallen 3.3 percent and corn futures have dropped two percent since Trump withdrew the United States from the Trans-Pacific Partnership trade deal and raised the prospect of re-negotiating NAFTA.
A surge in exports generally follows huge U.S. harvests, and the shipments often cut final ending stocks below the forecasts issued by the government at the start of the year.
The U.S. Agriculture Department is already forecasting that a record 2.05 billion bu. of soybeans will be exported, along with 2.225 billion bu. of corn.
Before 2016, the average cut to soybean ending stocks was 32 percent in the five years that saw the biggest quarterly addition to supplies during harvest, with stepped-up purchases from top importer China eating into the surplus. For corn, the average cut was 5.2 percent.
However, with big crops also on the horizon in South America, farmers in Argentina and Brazil expect overseas buyers to suck up their surpluses.
