U.S. crop export prices are at their lowest levels in more than six years, as uncertainty from the trade war with China mounts.
According to the U.S. Labor Department, agricultural export prices fell by nearly 5% in July, the largest monthly price drop since October 2011.
Front-month soybean prices in Chicago are down 7.5% year-over-year to $8.67 USD per bushel, the fallout from last Friday’s bearish WASDE report continues.
Despite the burden of heavy grain stocks going forward, the USDA expects that American grain exports for the 2017/18 crop year will set a new record. The drop in U.S export prices likely contributed to the record-breaking export pace. During the first 10 months of the marketing year, the U.S exported 98.3 MMT of grain, up 2% year-over-year.
USGC chief economist Mike Dwyer predicts that grain exports could exceed 116 MMT by the end of 2017/18 . This figure would also be up nearly 2% compared to last year’s 114 MMT.
Achieving a new record despite uncertainty in global trade would indicate a sign of the strength of U.S grains in terms of price competitiveness.
Although the bump in total grain exports is good news for U.S agriculture, sentiment may be hindered by the profit-loss reality for many U.S farms.
A study conducted by the USDA Economic Research Service (ERS) said that in 2015, out of the roughly 2 million U.S farm households, over 50% have reported negative income from their farming operations in 2015.  Furthermore, the latest Purdue AgBarometer survey indicates that ag producer sentiment during the month of July experienced the largest one-month decline since November 2016. 
Despite higher grain exports, analysts should remember that ethanol exports are owning a significant stake in grain exports. Year-to-date, ethanol exports are up nearly 22% at 1.36 billion gallons (12.2 MMT), compared to the same point a year ago. Corn exports are up 2% year-over-year to 52.2 MMT.
However, compared to this time last year, soybean exports are down 2.4% to 53.4 MMT.
While the agreement is on the ropes, U.S. grain exports to NAFTA trade partners Mexico and Canada could exceed 31 MMT (1.22 billion bushels).
Marketing year-to-date, Mexican grain purchases from the U.S have increased by nearly 4%. Corn exports to the south are up almost 9% to 12.4 MMT (488 million bushels). Meanwhile, Canadian grain purchases have increased 12.6% year-over-year, driven by a nearly 50% increase in corn exports, sitting now at 1.25 MMT (49.2 million bushels).
With grain prices at their lowest levels in six years, it’s more essential than ever to explore a wide range of grain marketing channels, including direct export.
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