Global Grain Buyers Examine Options

By CnAgri2012-09-21 19:32:56 Print

Despite an expected lower crop this year, the United States remains open for business to international customers. The U.S. Grains Council understands the challenges faced by international customers due to the short crop and is working aggressively to help customers through a challenging year.

According to Daniel O'Brien, an extension agricultural economist with Kansas State University, "it is likely that grain buyers will weigh the net cost of grain buying plus logistical procurement costs across a full spectrum of grains they could buy to accomplish their goals," whether that is for feeding livestock, food use or building up grain stocks. As for strategies for buyers to lower costs, the options are relatively few -- simply because grain futures and markets have already adjusted to the expected smaller U.S. corn crop.

Darrel Good, an economist at the University of Illinois, said buyers can work to reduce the quantity of grains they may need at this time by purchasing substitutes, operating more efficiently or by scaling back. "Alternatives are always an option, especially in the feed sector," Good said. "Finding additional sources for protein or starch that are cheaper are key, but markets are pretty efficient and those kinds of options don't stay available for long."

Buyers may also be able to lower costs by delaying purchases. "Prices for deferred contracts are lower than current pricing," he said, "yet that only works for those who don't need grain now." It is likely grain prices will remain high at least through the end of the calendar year, Good said, with few chances for price breaks.

If there are any price breaks, they are likely to be met with eager buyers in world export markets, O'Brien said. "Overall, it will be a 'raucous year' of hand-over-hand competition to procure needed grain supplies in world grain markets," O'Brien said, "at least until we are fortunate enough to have some larger world feed grain, wheat and/or oilseed crops and begin to rebuild world stocks."

Despite these challenges, however, the U.S. stands ready to serve all customers. "Markets work," said USGC President Tom Sleight, "and the markets are already sorting out this situation. As long as markets remain open, buyers will be served."