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.
“It’s put a bad taste in growers’ mouths,” said
“It’s put a bad taste in growers’ mouths,” said Mr. Byrd, 72 years old, who raises corn, soybeans and peanuts on 1,200 acres. “We’ve got grain running out of our ears in the U.S., and seeing this grain displace ours, to me, that’s just mind boggling.”
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.
Farmers like Mr. Byrd say cheap overseas corn flowing into the region from nearby ports is depressing some local grain prices when farm incomes are already projected to be at their lowest level in more than a decade.
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.
A divergence in shipping costs has further amplified the appeal of overseas grain.
Weak demand coupled with a growing number of new seafaring vessels has pushed down ocean freight rates, according to grain traders. But rates for U.S. railroads, the main mode of cross-country transport for U.S. grain, have remained stubbornly high, they say.
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.
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