Kernels of hope: Exports feeding, fueling the world

BLOOMINGTON, Ill. — Agricultural exports are vital to the financial success of U.S. farmers, particularly corn growers.

The United States is the world’s largest producer and exporter of corn. But that global market — and corn superpower status — is not guaranteed.

Andrew Brandt, director of trade policy for the U.S. Grains and BioProducts Council, discussed how international trade decisions impact farmers in the latest IL Corn TV podcast hosted by Shane Gray.

What are some real-world ways that the work you do with USGBC impacts corn farmers in central Illinois and beyond?

I like to say trade policy doesn’t make the world go round — it’s what decides what goes around the world. We’re going to export, anywhere in a given year, 15% to 25% of our crop.

With No. 2 yellow corn, we’re in a commodity market which typically has thin margins. And if we lose 20% to 25% of our demand, and we just roll that over into ending stocks, the price is going to go down pretty quickly.

That is why trade is very important from the farmer’s bottom-line perspective. But I think there’s also the humanitarian piece, not that we’re giving this corn away.

But the United States — Illinois, Iowa, Indiana, parts of Missouri — we need to move this corn around to places of the world that need it to feed their livestock so they can have access to protein like we’ve become used to here.

Obviously, we want farmers to be profitable and be able to make a living for themselves and their family.

But there’s also just the mechanics of being able to move the grain from the Midwest, which is God’s gift to corn farming, you might say, to the parts of the world that have burgeoning livestock industries where they are trying to improve themselves and create more protein at a lower price point so more of their people can have access to that.

Right now, which export markets are probably the biggest opportunities for U.S. corn?

There’s two countries with a billion people, China and India. And India actually, by a lot of accounts, overtook China as the world’s most populous country a year and a half to two years ago.

So, China, we’ve got a strained relationship there, I’ll say. And China actually is pretty good at producing corn themselves and have kind of taken that up as one of their strategic initiatives of they want to basically no longer buy corn — not only from the United States, but basically they would prefer not to buy corn from anywhere. So, China is a complicated matter.

As far as we look at the future, I think it’s Southeast Asia. Southeast Asia has been the apple of Washington, D.C.’s eyes for about 20 to 30 years.

We went through the TPP, the Trans-Pacific Partnership. Now President Donald Trump is negotiating the individual agreements on reciprocal trade, or ARTs.

A lot of that is with the Southeast Asia countries because they have pretty high populations and a growing middle class. I think that is kind of the immediate opportunity for a lot of potential new growth.

And then, longer term, I think you look to India and Africa. There are lots of challenges in India with some of their policies, and they’re typically a fairly protectionist country, well known for that.

Africa has the population growth. There’s just additional hurdles there — the infrastructure, the roads, the rails to move the grain once you unload it, financing issues. So, I think Africa is the long-term opportunity, but it comes with a plethora of problems that need solutions yet.

I think, hopefully, we’ll start to see some grain going to Africa. I just don’t think it’s going to be an immediate game changer as some people might think it will be if they just look at the population growth rates over the next decade.

It seems like markets in the past were traditionally about feeding the world, whereas now some of the grain markets have become really about fueling the world. What is your perspective of food versus fuel?

Last year we set all-time records for corn and ethanol exports. I do think increasingly we are seeing interest in ethanol usage. That can be a combination of wanting a diversity of energy supplies to wanting cleaner-burning fuels in some of these megacities.

Ethanol replaced methyl tertiary-butyl ether here to create cleaner-burning fuel. Everybody talks about the Renewable Fuel Standard, but the alternative to not having ethanol is you have to go back to MTBE, which is a carcinogen.

So, there’s kind of that dual environmental approach as well as the economic diversity of energy sources, and it’s good for jobs in rural America as well as some of these other countries.

There was a lot of talk about sustainable aviation fuel and now it seems like maybe it’s taken a backseat to maritime ethanol use. What are your thoughts on that?

Two years ago, it was SAF, SAF, SAF. I don’t think people have given up on it. I do think, with the new administration, there could be some policy incentives that might get rearranged a little bit.

The marine fuel is for the big cargo ships, whether they’re the tankers exporting natural gas or oil or the container ships or the dry bulk ships carrying coal and corn and soybeans.

They essentially run a bunker fuel now, which is known as the bottom of the distillate column, which is the dirtiest fuel, but it’s also very energy intensive and it’s also very cheap because there’s nowhere else they can go with it.

So, these ships have been burning bunker fuel, which is a very energy-dense fuel, but is also very, very dirty.

As some of these countries pass regulations and want to have a better environmental footprint, certainly ethanol and greener fuels are being looked at by these companies. There’s a lot of potential there.

What’s the biggest long-term threat that USGBC sees as far as competitiveness?

The rise of Brazil. I think probably a lot of farmers have learned the word Brazil. A lot of farmers now know safrinha, which is the second crop, which is their massive corn crop that’s been coming on.

We have a rising global population, so we have all-time record demand, but we have seen from Brazil and Argentina — and I respectfully refer to them as kind of our frenemies, because in one way they’re farmers like us, they have a lot of the same problems of regulations, biotech adoption, things like that; on the other hand, they are a very worthy competitor in these global markets.

I graduated college in ‘06 and back then we knew about Brazil and everybody said, go down to the Mato Grosso and you can develop a thousand acres and it’s really cheap, but then good luck getting it to market. “The grain can’t get to market.” And I feel like we heard that for 10, 15 years. And you still hear some people, “Well, they can’t get it to market.”

It’s kind of like Jurassic Park: “Life finds a way.” Brazilian grain is finding its way onto the world market. It shows up in the data.

They are already a formidable competitor and they’re going to continue to be a formidable competitor with the amount of land they can still bring into production.

That kind of gets to a lot of philosophical discussions of their safety net versus ours, and are they cutting down the Amazon to develop these lands? There’s a lot of debate to be had there. All fair, but I can tell you the amount of grain they’re putting on the market certainly is impacting us.

What’s something that you wish farmers knew about how their checkoff and trade organizations help open global doors?

If we look at USGBC, we have 10 offices around the world. The relationship that our local office people and the footprint we can create to then open doors is immensely important to farmers.

The checkoff is more like a long-term market development. It takes a long time. In farmer terms, I describe it as we’re very loyal to our paint.

Some of these countries we go into and compete and they’ve been used to corn from a certain part of the world. It’s equivalent to trying to get a farmer to switch paint colors. It it takes a long time. It takes a lot of hand-holding. You’ve got to prove yourself.

And then you’ve got to deliver a product. So, if we have one shipment that has a lot of BCFM, broken corn and foreign material, that’s no different than if you buy a steak that turns out to be rancid when you get home from the store. Well, I’m not buying a steak from that store for another year or two. I’m going to try everyone else in town.

So, we deal with a lot of relationship building and do a lot of soft-power type of diplomacy to maintain these relationships, which is not as exciting as, you know, Congress sends you a check and you see the money. But it is very, very important to maintaining these markets for U.S. production long term.