US Corn Imports Surge -- April 14, 2016

This is pretty cool. What are the US railroads doing with all that excess capacity now that CBR is declining? The answer: apparently not shipping corn. The Wall Street Journal is reporting: corn imports surge in the US, despite record harvests at home. Moves in currencies, shipping fees, and railroad rates mean bringing in animal feed can be cheaper than getting it from the Midwest.

There is something unusual going on in the U.S. corn market.

Even as record harvests have left the U.S. awash in corn, imports of the crucial animal feed are surging. It is happening because moves in currencies, ocean shipping fees and railroad rates have combined to produce an unexpected result: Bringing in corn from places like Brazil and Argentina can be cheaper for poultry and livestock producers in the U.S. Southeast than buying it from the Midwest.

Wade Byrd sees the phenomenon in his own backyard. Increasingly, the truckloads of grain that rumble past his Clarkton, N.C., farm to nearby hog producers are carrying corn from thousands of miles away in South America rather than U.S. operations like his.
Imports remain a very small part of the market in the U.S., the world’s largest exporter of corn. Still, the notable surge is a telling indicator of how the commodity bust and strong dollar have distorted prevailing patterns of commerce.

The U.S. Agriculture Department projected Tuesday that buyers would import 50 million bushels of the grain this season, up 56% from last season, even as U.S. bins swell with grain. U.S. buyers haven’t imported that much corn since 2012-2013, when a severe drought slashed domestic production, sending futures prices to all-time highs.

The rise in imports follows a multiyear boom in American agriculture during which Midwestern farmers ramped up production to satisfy burgeoning demand from a growing biofuels industry at home and increasingly wealthy populations in emerging markets.

The rest of the world followed suit. Brazil, the second-largest corn exporter behind the U.S., is on track this season to harvest its second-largest corn crop on record, as is Argentina. Exporters in Argentina were offering corn at a roughly 6% discount to U.S. supplies for a period earlier this year, and Brazilian corn was cheaper than its U.S. counterpart for much of last year.

Rail:

In April, it could cost about $0.80 to $1.50 a bushel to ship corn from west to east in the U.S. by rail, while per-bushel costs to ship corn from South America to the U.S. recently have ranged from about $0.35 to $0.50.