If you are confused about the apparent conflict between high prices and high export demand, that’s understandable. Usually foreign buyers try to purchase US grain at bargain basement prices, but record export volumes are being set at the same time that prices are at record high levels. The keys to the conundrum are scarce global grain supplies and the foreign currency exchange rate prices US grain at those bargain basement levels. So where will the corn and beans you’ve been harvesting be exported to in coming months?

USDA’s latest coarse grain review forecasts global trade in coarse grains (such as corn, barley, and sorghum) to be 117 million tons this year, which is a record, and the US will be exporting 92 million tons of that. This amount of land office business results from improved prospects for the US crop, diminished foreign competition, and tight global supplies. It occurs despite $166 per ton corn prices ($4.22/bu.), and is helped by a five fold increase in sorghum exports compared to last year; and that is the highest volume in 15 years for sorghum exports. One of the reasons is the fact that European markets want livestock feed that is free of GMO content and are buying US sorghum instead of US corn.

1) US corn exports will match the prior record set in 1989/90 because it is attractively priced to foreign buyers.
2) Chinese corn exports have been cut in half to the smallest level in a decade because of low production and high feed demand.
3) Argentina will be exporting about 550 million bu of corn which is a record level.
4) Brazil will be exporting 300 million bu. of corn, particularly to Europe.

USDA’s latest report on wheat indicates that the Central Asian republic of Kazakhstan has become a world wheat power, exporting 300 million bu. to neighboring countries and Eastern Europe. That compares to the 1.1 billion bu. being exported by the US and the 400 million bu. by Russia. However, USDA says there will be some buyers with strict quality standards that will prefer more expensive US wheat.

1) There was strong demand for wheat worldwide during September, even though world prices rose $40 to $60 per ton, depending on class of wheat.
2) The Australian drought cut its wheat exports to 300 million bu, compared to the 400 million bu last year, which was also reduced by drought.
3) Argentina will export 380 million bu. with the help of improved crop prospects.

USDA’s October report on oilseeds provides another bullish forecast for exports, and the 1.1 billion bu. of soybeans expected to be shipped abroad in the current fiscal year would be a record level, even in the wake of farmgate prices of $7.85 to $8.85. But USDA says foreign buyers really don’t see that price, “One element of the price rallies this year comes from the appreciation of foreign currencies against the U.S. dollar. Since January 1, the exchange rates for many countries have appreciated between 5 and 15 percent. Thus, the improving purchasing power of importers enables them to bid more strongly for dollar-denominated U.S. supplies.” USDA says meal exports for 2006/07 will surpass 2005/06 by 10% and 2006/07 soybean oil exports will reach a four year high. Exports of meal and beans in the current marketing year are expected to see higher competition from South American and volumes may be trimmed.

1) Brazilian soybean prices are 40% higher than last year and farmers have forward contracted large amounts of production, with more acreage and more production expected compared to last season.
2) Chinese soybean production estimates have been cut because of drought, but consumption with be increased with the help of imports.
3) A bumper crop of soybeans is being produced this year in India and many of them will be shipped to China.

Summary:
Despite high prices for corn, soybeans, and wheat world commodity buyers are knocking at the door of the US farmer. Short supplies, higher demand, and a favorable exchange rate have combined to create incomparable demand that is expected to remain throughout the balance of the marketing year. However, there have been some alternatives that have appeared on the scene. Kazakhstan has stepped in to supply wheat. India will be exporting large supplies of soybeans to China. And US sorghum will be a popular feed grain in Europe for farmers not wanting GMO corn.