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KBIA's ongoing coverage of the midwest's worst drought in half a century.

Drought spells tough times for US corn exporters

While the U.S. remains the world’s biggest supplier of corn, American farmers will lose a portion of the global corn market this year.

The Midwest drought devastated the normally robust corn harvest, which has led to higher corn prices and plummeting corn stocks. In a normal year, the U.S. exports more than 1 billion bushels of corn to markets worldwide, but with low domestic supply it’s a tough year for corn exporters – the USDA predicts U.S. corn exports will be at a 40-year low this year.

The Upper Mississippi usually transports more than half of the country’s grain exports. But with many grain exporters struggling to fill their orders and low river levels thanks to the drought, many fewer barges are making the trip.

On a recent day, Tyler Banicki, the burly first mate of a towboat called the R. Clayton McWhorter, cleared ice off the top of a 200-foot long steel container covered with a white fiberglass top. Sitting just south of St. Louis, Mo., on the Mississippi River, the boat is a corn barge and one of 20 barges full of commodities like soybeans, shredded rubber and metallic ore that his company, Ingram, will push down to the Gulf of Mexico. There, it will be loaded onto ships that set sail for corn importers in Asia.

"It’s about even to the top of the combing rails on this barge, so you figure it’s at least 13 feet of product straight down from the surface here ... and then it’s about 30 feet wide," Banicki said, opening the container’s hatch.

Farmers with corn to sell are getting more than $7 per bushel domestically, so they don’t need to sell to corn exporters like CHS Inc. That’s put the export market in a tough spot.

"Normally, we’d originate all the corn that needs to be loaded at the Center Gulf along the river system, meaning the Mississippi, the Illinois, the Ohio, all the way down to the Gulf," said Rick Dusek, vice president of North American grain marketing for CHS. "And this year, there just simply isn’t enough corn to supply the export pipeline out of those areas so we’ve got to bring corn from the outside."

The Inver Grove Heights, Minn., company isn’t the only American grain exporter that is buying corn from foreign countries like Brazil, Argentina and Ukraine. Ag giants like Cargill are getting in on the action too.

"In South America, we have a presence where we can buy and store grain as well as process it. Also in Europe, in Eastern Europe, Australia and North America,” said Mark Klein, who works for Cargill in Minneapolis, Minn. “So as a team, we all work together to keep track of where there are adequate supplies, where there are deficits and working with our customers to get them the products that they need when they need it."

But most U.S. exporters do not have such a global reach. The Scoular Company of Omaha, Neb., is able to buy some corn from other countries, but in its Overland Park, Kan. office, Chief Operating Officer Bob Ludington says the domestic shortage is still hurting their bottom line.

"Our forecast is to be down slightly from the past several years and that’s really due to our elevators where we will handle less grain due to the drought," Ludington said.

Ludington says they’ll eventually find the corn they need to fill their orders, but it will be more expensive and will take them more time and effort. The company is now hoping for a bumper crop next year.

"Next year we’ll probably be [saying] 'Where are we going to put it all? Where are we going to put it all?'” Ludington said. “We’ll be scraping off dirt to pile grain on the ground – that’s what we’re all hoping for."

Clarence, Mo.-based Premium Ag Products, a smaller exporter, doesn’t have facilities in South America and cannot afford the transportation costs associated with buying foreign corn. The head of the company, G.W. Dimmit, says they will probably be able to fill current orders but may not be able to supply any new customers.

"The only problem is we had some other new business we were trying to develop that hadn't developed yet,” Dimmit said. “If it does, we may be in a difficult situation to be able to meet those bushels."

Pat Westhoff, the director of the Food and Agricultural Policy Research Institute in Columbia, Mo., says even with a good crop next year customers could get used to buying corn elsewhere. The U.S. used to be the only place China imported corn from. But this year, China finalized agreements to do business with Argentina and Ukraine.

"When we see these shifts in export patterns occurring, it means that we’ve lost some market share in the near-term," Westhoff said. "If that creates new habits of users around the world it could mean lower market shares for the U.S. in the future."

But those trading patterns will be dependent on future corn harvests and yields around the world. Since globally the amount of grain in storage is smaller than it has been in years past, exporters will be watching the yields and prices for the next big corn crop coming in -- South America’s corn crop early next year.

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