Demand for Grain, Competition for Exports Driving Decisions by U.S. Grain Handlers

Soaring worldwide demand for grains, especially from China, is driving many of the trends in the U.S. grain industry today, but competition from other grain exporters is a concern, as well.

“We’re not the big dog any more,” said Greg Beck, senior vice president for the Grain Division at Consolidated Grain & Barge (CGB), Covington, LA, in a keynote address Feb. 10 at the annual convention of the Grain and Feed Association of Illinois (GFAI), held online due to the COVID-19 pandemic. Beck is currently first vice chairman of the National Grain and Feed Association (NGFA).

During his presentation, Beck listed a number of trends in the grain industry and also a list of concerns. Among the trends:

• Consolidation in the U.S. grain industry will likely continue. Due to low returns on assets, companies are more interested in exiting, vs. acquisition growth, for only growth’s sake. New companies to the U.S. Gulf market may emerge as multinational companies seek to grow in area where they do not have assets today.
• Among potential merger partners, grain companies are showing more interest in value-added firms, including food manufacturers and technology providers.
• Exporters at the Gulf are expanding. Zen-Noh Grain, a parent company of CGB, has seen volumes grow by 50% at its export terminal in Convent, LA and recent expansion provides for a future ship loading berth.
• Global demand for grains is growing, especially from China. “China has shown a remarkable rebound from a year ago, and nobody saw this coming,” Beck said.
• Tech companies like FBN, Indigo, Corteva, and DTN are looking for ways to engage with our customers directly. John Deere also is investing heavily in IT systems and has been investing heavily in farm technology.

Among the concerns, Beck cited:

• “China is still China.” The Chinese will look after their own interests without much regard for the United States or any other exporter.
• Consumer preferences may become a driving force in grain markets. Millennials now outweigh Boomers in economic clout, with Gen Z not far behind. Hence, growing interest in electric cars, “healthy” organic foods, and plant-based meats.
• The upcoming 2023 farm bill may not be so accommodating to agriculture as earlier bills. Among the concerns here are a push for a larger conservation reserve (CRP) and issues related to climate change.
• The U.S. share of exports is shrinking. Many importers think Brazil has higher quality grain. The United States has become a residual supplier, the last place you go when you can’t find grain anywhere else. This isn’t entirely bad – the U.S. infrastructure for grain storage and transportation makes it a very reliable supplier of last resort. The inland waterways system makes it one-third cheaper from U.S. suppliers to ship to China compared to Brazil.

Grainnet

Tags: grain, Greg Beck, Consolidated Grain & Barge (CGB), Grain and Feed Association of Illinois (GFAI), grain demand