US soybean dominance leaves logistics ‘problem’ for corn exports

A huge export programme for the US soybean harvest is already pushing up elevation costs at key export hubs - despite expectations that the US will land one of the largest corn crops in history - and is likely to leave US corn less competitive, trade sources have told Agricensus.

Line-ups for the 2020/21 marketing year are stuffed with bean loadings, leaving less space for other commodities to load at key export hubs such as the Pacific Northwest and the US Gulf.

“Indeed, we have a problem on our hands. [There are] huge export program of soybeans but also a decent programme for corn, sorghum and, to a lesser extent, wheat, but the margins are definitely driven by soybeans,” a US-based broker said.

This dominance could force corn exporters to use other outlets such as less utilised ports or container-based exports, which will probably increase the basis costs for corn while it seeks to compete to “buy the berth” back from soybeans.

“The other commodities loaded at similar ports need to command the same margin or more in order to ‘buy the berth’ back from the soybean trader,” the source said, warning that this is “a very expensive game to play”.

“Certainly, elevation margins will increase to reflect the soy lift,” a second source said. “No doubt the corn carryout will be substantial even with some haircut for last week’s derecho damage in Iowa. The deciding factor will simply be (CBOT) board carry.”

The USDA’s August update to its influential Wasde report put the US corn crop production outlook at 15.3 billion bu (388 million mt), although the update came ahead of a fast-moving wind phenomenon known as a derecho that damaged millions of acres of crops across Iowa.

While that is set to pare what would have been a record crop if realised, strong yields in other parts of the Midwest are likely to compensate for acreage lost to the storm in Iowa, leaving the US still on course for one of its biggest corn crops in history.

That has boosted expectations that the US will be a competitive origin for corn exports in the new marketing year. The USDA is also calling for 2.22 billion bu (56.5 million mt) in 2020/21 exports, potentially making it the third-busiest marketing year in US history.

China has racked up sizeable corn and soybean sales for the new marketing year - weekly USDA net sales data also show 5.7 million mt of corn sales for the new marketing year, along with 10.2 million mt of soybean sales.

“I suspect soy will dominate export lift through December, then give way to corn. If a buyer needs corn in the fourth quarter, they will be forced to pay up,” a trader said.

The USDA currently forecasts a record corn harvest of 388 million mt of corn in the 2020/21 marketing year, while ending stocks are projected at an exceptional 70 million mt.