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By Dylan Frerking, New Baden, Illinois.

Ryan LeGrand, president and CEO of U.S. Grains Council, said in a webinar, March 31, agriculture and ag infastructure are essential operations.

“Your work and ours will continue,” LeGrand said.

USGC has been receiving questions from customers and governments around the world about the continuity of operations of the U.S. grain export system.

“We have spoken with port operators in New Orleans and in the P&W. We've spoken with container loaders throughout the country. We've spoken with groups such as the Waterways Council,” LeGrand said. “The reports that we're hearing are that business continues largely as normal.”

LeGrand is not hearing of any slow downs in the United States, and USGC has put out a letter to customers around the world in an attempt to ensure port operations will continue through the pandemic.

“Around the world, we're hearing reports from ports that they too are largely operational,” he said. “Maybe some slowdowns in the receipt of vessels as they check crews and such. If there are any coronavirus connections there amongst the crew they would take additional measures at those foreign ports.”

LeGrand said he’s heard some Chinese vessels entering other countries are getting extra scrutiny right now.

“Around the world everything is operating, pretty much, normally when it comes to the shipment and the receipt of grains,” LeGrand said. “Our regular buyers have been in the market for corn—Japan, Korea, Mexico and Colombia have been active recently.”

Japan bought 113,000 metric tons of corn and recent corn shipments were at an 11-month high.

“Seeing that uptick in corn shipments is a bright spot,” LeGrand said. “Amongst all of the bad news that we're seeing and hearing around the world.”

China

The U.S. recently signed the phase one agreement with China, and LeGrand is not sure how the next phases will be affected by the current pandemic.

“I'm sure it will be slowed down, but you know China made some serious commitments to the United States and to the world,” he said. “In this phase one and going forward we expect them to make drastic changes on their acceptance and approval of new biotech traits.”

LeGrand said China has agreed to give an average of 24-month turnaround on any approvals of new events.

“If that holds, that is going to be a sweeping change for one of the largest consumers in the world, and it will benefit us greatly,” he said. “Provided that China continues to comply with this phase one throughout the year.”

LeGrand said there’s a lot of purchases they’ve heard about, but these purchases have little or no details as they’re intentionally kept from the public eye.

“But we expect and we have seen an uptick in grain purchases by China,” he said. “We expect them to be in the market for distillers grains from the United States, and when the economics come back into play. We expect them to be in the market for U.S. ethanol.”

About 10 days ago, the Chinese made a very large purchase—756,000 metric tons of corn or just short of 30 million bushels—bought in one single purchase.

“That's the largest purchase on record from what we've seen in the last seven years by China,” he said. “There have been some larger purchases by Mexico. They make a million ton purchase about every year.”

LeGrand said it’s promising.

“Last week and this week we saw a total of 250,000 metric tons, or about 9.8 million bushels of corn sold to unknown destinations,” he said. “We do suspect that is China taking advantage of the dip in the market.”

China typically classifies those as unknown destinations for two reasons—one to hide the trade and two to make a decision depending on circumstances at the time of shipment.

“Over 1 million metric tons of sorghum has been sold to China recently, and we expect that there's more behind that,” LeGrand said. “China is working to register the United States’ ethanol plants. That's a work in progress.”

It’s something that needs to happen—resumption of dried distillers grains exports there. The Chinese have the potential to import over 5 million metric tons.

“This is a market where we need to continue to operate,” LeGrand said. “They currently have an anti-dumping and countervailing duty case on our distillers grains. But the export of DDGs to China was a requirement in the purchases agreed upon in the phase one deal.”

LeGrand expects to see some exemptions to duties that have been levied on distillers grains as a result of the anti dumping and countervailing duty case.

“So hopefully there's more good things to come with trade, China, and in other things, and other nations,” he said.

Ethanol

Ethanol has been the fastest growing U.S. ag export over the past 10 years.

“So we're focusing our efforts on exporting this value added product but we cannot forget about the fact that 66% of the exports are attributed to feed grains and distillers dried grains,” LeGrand said. “We will continue to put an emphasis on the promotion of these products as well.”

Why is China not buying U.S. ethanol right now and why the delay? Especially since they’re about 90 cents a gallon.

“We're seeing gasoline prices unfortunately much lower than that,” LeGrand said. “If you look back historically ethanol is consistently priced below that gasoline price, below aromatics price, below MTBE which is still an oxygen, that's used outside of the United States, but that relationship has reversed.”

Hence the cheap, cheap gasoline prices.

“It's making it very difficult for ethanol to compete,” he said.

When the demand for gasoline and ethanol return, there are a couple of markets that have the potential to import the most ethanol.

“Canada and Brazil are our top two markets. So we would expect to continue to see strong shipments there,” LeGrand said. “India is a big market for us on the industrial side, and we are working on the ground in India, to try and get them to include fuel ethanol in their tenders when they buy ethanol from the international markets, but they’re our third or fourth, depending on the year, largest importer.”

Colombia continues to take more and more ethanol every year and Peru has increased their ethanol shipments from the U.S.

“There's some bright spots out there,” he said. “We just need the gasoline demand to come back.”

Positive news

LeGrand sees a couple positives out there regarding export markets. Last week’s corn inspections were at an 11-month high.

“We have China and others in the market that continue to buy,” he said. “In one piece of information that we're hearing from around the world, is that there is certainty. In the end, there's confidence in the U.S. grain export system.”

Because of that, buyers in North Africa who are typically buying South American corn are looking more and more to the U.S. as an origin because they have confidence in the supply flow.

“They're worried about Argentina. About 10 days ago Argentina briefly shut down their Rosario port, which is their main grain exporting hub,” LeGrand said. “It was opened very quickly after that, but the fear is there, that Argentina and other grain exporting ports around the world could shut down their operations, and that fear isn't quite as strong with the United States.”

USGC is seeing the same development in Taiwan.

“Buyers are looking to book premiums in some instances just because they know that the grain they bought from the United States is going to arrive on time, at their port,” he said.

When asked if U.S. farmers should worry about the second crop of corn from South America and Brazil in the June-July time frame as competition, LeGrand said it is concerning.

“Every year as Brazil continues to improve their efficiencies and we have to do the same here in the United States,” he said. “We need to continue to improve efficiencies, such as the waterways and other infrastructure products that are sorely needed to continue to be the leader in terms of price and shipments around the world.”

Brazil and Argentina have come on in a major way in recent years, and USGC is looking at plenty of exploitable supplies from them heading into the summer.

“We're facing headwinds in on the currency side as well as the world during this pandemic,” he said. “The world has flocked to the world's two strongest currencies being the U.S. dollar and the Japanese yen so we've seen considerable strength in both those currencies.”

And it’s come at the cost of currencies from Brazil and Argentina.

“We will continue to keep an eye on throughout the summer,” LeGrand said.

Kylene Scott can be reached at 620-227-1804 or kscott@hpj.com.

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