OPINION. The erosion of US grain export dominance

The United States was once the world’s breadbasket, commanding global grain and oilseed trade by a wide margin.

The country still leads in corn exports. That title, however, has recently been threatened by Brazil, the same party that demoted US soybean exporters to the number two spot.

But the United States’ grip on global corn, soybean and wheat exports is as loose as it’s ever been.

US President Donald Trump on Wednesday announced sweeping reciprocal tariffs on all trade partners, a risk US farmers accepted when largely backing him in last year’s election.

Trade barriers could certainly chip away at US export relevance in a space it once overwhelmingly controlled.

Rival grain suppliers have padded both their crops and export capabilities over the decades, sometimes capitalizing on US misfortunes along the way.

On average over the last five years, the United States accounted for a record-low 31 per cent of annual global corn exports. Twenty years ago, the US portion was 61 per cent, though it had topped out at 80 per cent in the late 1970s.

The biggest drop-off was seen between the late 2000s and early 2010s, when the share went from 59 to 35 per cent. This period included the global financial crisis and a prominent string of US crop failures.

Number two corn supplier Brazil accounted for only five per cent of exports some 20 years ago, though its share is now up to 22 per cent.

The US portion of world soybean exports has plunged significantly, recently averaging a record-low 27 per cent. That was above 80 per cent through the 1970s, falling to 50 per cent by the turn of the century.

Brazil became the leading soy supplier in 2012-13, and its share has climbed. Brazil now accounts for 55 per cent of global soybean exports versus 39 per cent a decade ago, a period including the first US trade war with China, when Beijing reduced reliance on US beans.

The United States was the top wheat exporter until about 10 years ago, and today it is the number four supplier.

But US wheat export dominance was at its peak in January 1980 when then-President Jimmy Carter on live television cancelled 17 million tonnes of US grain export contracts with the Soviet Union due to the Soviet invasion of Afghanistan.

This became known as the US grain embargo.

At that time, the United States accounted for 44 per cent of global wheat exports. That share now sits at a record-low 11 per cent, down from 26 per cent some twenty years ago.

Carter’s speech echoed sentiments recently shared by Trump, including the desire to minimize harm to the American farmer and massively increase the volume of agricultural products used domestically.

US intelligence concluded in 1981 that the US embargo was substantially less harmful to Moscow’s grain stocks than intended because the Soviets were able to source more grain from other suppliers than the Americans had anticipated.

That should sound familiar to the soybean market, as Brazil in recent years has shipped more soybeans than traders and analysts previously thought possible.

In the early 1980s, the Soviet Union was the top wheat importer, accounting for more than 20 per cent of annual imports. Today, Russia is the top wheat exporter, supplying more than 20 per cent of annual shipments.

The United States is the leading producer of corn, number two in soybeans and number four in wheat. Similar to exports, the recent US production shares are also all-time lows.

The United States accounts for 31 per cent of global corn production, down from about 41 per cent some 20 years ago. The country accounted for more than half of global soybean production until about 1990, though the share now sits at 28 per cent.

US wheat accounted for about 15 per cent of global production in 1980, though today it accounts for six per cent. Unlike corn and soybeans, the US wheat crop is now generally smaller than it was decades ago.

But Russia has expanded its wheat crop by more than 70 per cent over the last decade, accounting for 11 per cent of world output. That compares with seven per cent a decade ago.

Brazil has increased its soybean production by about 85 per cent over the last decade and corn by around 55 per cent, taking advantage of market opportunities and upbeat profitability. Brazil grows 39 per cent and 10 per cent of global soy and corn output, respectively, up from 30 per cent and eight per cent a decade ago.

Not all global crops can infinitely expand from here, but the lesson should be clear. Significantly more grain is produced outside the United States versus decades ago, and those suppliers may be ready to act if Washington’s latest move backfires.