The drought in various sections of the nation's mid-section the past two years has hurt U.S. corn yields and hindered exports, according the U.S. Department of Agriculture and industry officials.
The Agriculture Department reported this month that corn production was down a quarter last year from 2012 and stocks are down a third, which is putting pressure on prices for meat, milk and other items produced with corn feed, according to the St. Louis Post-Dispatch
The U.S. is losing market share because producers such as Brazil and Argentina have had strong crops and lower prices, experts say.
The spread between South American and U.S. corn prices is beginning to narrow as growing world demand exacerbates infrastructure constraints in those countries that make it difficult to get grains from farms to ports, which themselves are often ill-equipped to efficiently handle modern cargo vessels, Kevin Roepke, manager of global trade at the US. Grains Council, said in an interview.
The low-level of the Mississippi River is also making bulk exports of corn more difficult and costly, he noted. The U.S. Army Corps of Engineers has released water from some reservoirs to maintain water levels and removed a dangerous formation of underwater rocks at Thebes, Ill., to preserve barge traffic, but many barges are still light-loading to get by the 9-foot draft in many places.
Roepke said the recent cold snap has not helped matters because it is causing ice jams to the north that reduces the downstream flow of water.
Growers have the option of using rail to send grain to the West and Gulf coasts, but it costs about $13 per ton more to use that mode instead of barge, he said.
The Union Pacific is providing some secondary capacity for export grain products, but would have preferred more rain because that would have meant better crop production and higher agricultural volumes on its network, Matt Bosch, senior agriculture product manager for marketing and sales, said in response to a question during a session at the Transportation Research Board conference in Washington last week.
The domestic corn situation has led to a big increase in corn imports this year. The Agriculture Department estimates the United States imported 100 million bushels in 2012 compared to 29 million bushels the year before. Roepke said it's cheaper for poultry and swine producers in the Mid-Atlantic region, for example, to import corn from Brazil than bring it by rail from the Midwest. - Eric Kulisch