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Grain and Flour Market in U.S.

04 March 201418 min reading
Agriculture industry in U.S. has an important production potential when evaluated on a global scale. In the country, which is the world’s largest wheat, corn and sorghum exporter today, it is expressed that there are about 170 mills and 24 of them have 94% of total production capacity. As one of the world’s largest global powers, U.S. has an important potential in agricultural product production and trade as well as in many other industries and products. Country is the world’s largest supplier of majorly wheat, corn and sorghum and many agricultural products. It is stated that in the country, which realizes 55-60 million tons of wheat, 35-40 million tons of corn and 3-4 million tons of sorghum export, there are about 170 mills belonging to 45 companies. Some of these companies that operate in US milling industry have significant activities in other regions of the world. GENERAL ECONOMIC OUTLOOK IN THE U.S. U.S. is one of the world’s important markets with its population exceeding 315 million and GDP exceeding 16 trillion Dollars. Besides its position as world’s largest exporter, it is the target market to which both developed and developing countries head towards for that the country is the world’s largest direct foreign capital source. As the U.S. economy has the power of affecting the world economy, it is an important and determinative economy. The crisis began in 2007 is the most severe and most profound crisis in U.S. since the great depression in 1929. Country struggled with both economic recession and increasing unemployment. In 2010, it switched to the tendency to overcome the crisis. In the U.S. economy that had a recovery with a rate of 2,5% the growth was around 1,8% due to European debt crisis and the pressure on the budget in 2011. Growing with a rate of 2,8% in 2012, U.S. economy is expected to grow with a rate of 1,7% in 2013. The average growth is estimated to be 2,5% in 2014-2017 period. Increasing 3,7% in 2012 compared to the previous year, industrial production is estimated to increase 2,4% in 2013 in the country. This increase is projected to be averagely 3,2% annually in 2014-2017 period. While government expenses decreased 1% in 2012, this decrease is expected to be 2,1% in 2013 and continue to decrease in 2014 as well. On the contrary to the decrease in the government expenditures, private consumption expenditures increased 2,2% in 2012. Regular increase expectation on private consumption expenditures and fixed investments decrease the concerns on the adverse effects of the decrease in government expenditures and tax increase. Consumer price inflation, which was realized as 2,1%, is estimated to be realized as 1,5% in 2013. Positive developments in employment, expansion in retail sales and stable increase in the consumer confidence in 2013 forms the impression of that U.S. economy wouldn’t be adversely affected due to the fiscal discipline. However; it is expressed by the experts that the changes in oil prices and instability in automotive sales would affect retail consumption expenditures adversely. Another important development in the economy is the positive effect of the increase in the stock market on especially in the upper income levels consumption and consumer confidence. Ranking 9th in the best working environment in 2008-2012 period, U.S. is estimated to rank 8th in 2013-2017 period. The first of the main factor having a key role on the American economy structurally is rich natural sources and the second one is skilled labor. U.S. has a very suitable environment in terms of providing economic growth with fertile soil, rich mineral deposits, favorable climatic conditions and other natural resources. As the growth engine of world economy, the trade and investment policies of U.S. are always closely and carefully followed by both developed and developing countries. AGRICULTURE IN THE U.S. Although it consists just a little amount of GDP like 1,1%, agriculture and livestock industry in U.S. has an important potential when evaluated on a global scale. In U.S., where there are 2,2 million farms and 920 million-acre agricultural land, mainly private sector operates in the agriculture and livestock industry. Decreasing 13,6% in 2011 and 3,7% in 2012, agriculture and livestock industry is expected to grow 2,1% in 2013. Agricultural product export of U.S. has an enormous share in total production. For instance, one-quarter of total grain production is exported. Corn, soybeans, wheat, tobacco, cotton, sorghum, potatoes, rice and oats are some of the major export products. U.S. producers realize 40% of the world corn and soybean production and 25% of world sorghum production. U.S. becomes world’s largest exporter in foodstuff and processes food products export with this strong production infrastructure, innovative food process industry and powerful brands. Agriculture/food products export realized by the country in 2012 was around 143,5 billion dollars. Decreasing 3,7% in 2012, U.S. agriculture industry is estimated to grow 2,4% averagely on annual basis in 2013-2016 period. GRAIN PRODUCTION AND CONSUMPTION Being one of the leading agricultural product manufacturers of the world; U.S. ranks first in world corn and sorghum production and third (if the EU does not count) in world wheat production. According the agricultural production data of U.S. Department of Agriculture (USDA); ranking third in world wheat production after China and India in 2012/13 season, U.S. realized 9,3% of world wheat production that was 656,3 million tons. When U.S. wheat production is reviewed by years; it is seen that the production, which was 43,7 million tons in 2002/03 season, reached to 68 million tons in 2008/09 season that was the highest level of the last 10 years. Decreasing in the following seasons, production remained at 61,6 million tons level in 2012/13 season. USDA projects that the wheat production will decline to 57,9 million tons by decreasing nearly 3 million tons in 2013/14 season. Wheat consumption of the country’s consumption is almost half of the production. Using 30 million tons of wheat for its domestic consumption every year, U.S. reached the highest consumption amount with 38,2 million tons in 2012/13 season. It is projected that U.S. wheat consumption will decrease 4 million tons and be realized as 34,9 million tons in 2013/14 season. Being world’s largest corn producer, in 2012/13 season U.S. realized 31,7% (273,8 million tons) of world corn production which was 861,6 million tons. When U.S. corn production is reviewed on year basis; it is seen that the production, which was 227,7 million tons in 2002/03 season, reached to the highest level of the last 10 years as 332,5 million tons in 2009/10 season. The country is expected to reach a record increase as 79,9 million tons in 2013/14 season. Total corn production is projected to reach to 353,7 million tons with this increase. U.S. uses an important part of the corn production for its domestic consumption. When the consumption data is reviewed; it is seen that U.S. corn production, which was 200,7 million tons in 2002/03 season, reached to the highest level of the last 10 years with 285,1 million tons in 2010/11 season, decreased slightly in the following years and was realized as 263,6 million tons in 2012/13 season. U.S. corn production is projected to increase significantly in parallel with the increase in the production and reach 297,1 million tons for 2013/14 season. Falling well behind the Asian countries in rice production, U.S. realized 1,3% of world rice production in 2012/13 season. When the rice production of the country is reviewed by years; it is seen that the country realizes around 6 million tons of production every year. U.S. reached the highest rice production amount of the last 10 years with 7,5 million tons in 2010/11 season. Being realized as 6,3 million tons in 2012/13 season country’s rice production is projected to be around 6,1 million tons in 2013/14 season. Rice consumption of the country is almost half of the production. Realized as 3,5 million tons in 2002/03 season, U.S. rice consumption reached to 4,3 million tons as the highest level of the last 10 years in parallel with the increase in the production. Decreasing in the following season, consumption was realized as 3,7 million tons level in 2012/13 season. Rice production is estimated to remain at 3,8 million tons level in 2013/14 season. Another product for which U.S. is a world leader in production is sorghum. Competing with Mexico, Nigeria and India in world sorghum production, U.S. succeeded to be on top for the last four seasons except for 2011/12 season. In 2012/13 season, country realized 10,9% of world sorghum production which was 57,3 million tons. When the sorghum production of the country is reviewed by years; it is seen that the production, which was 9,1 million tons in 2002/03 season, reached to the highest level of the last 10 years with 12,6 million tons in 2008/09 season. Decreasing significantly in the following season, U.S. sorghum production declined to 5,4 million tons in 2011/12 season. Reaching to 6,2 million tons in 2012/13 season, production is expected to increase significantly and reach to 9,8 million tons in 2013/14 season. U.S. uses an important part of the sorghum production for its domestic consumption. Realizing annually around 5 million ton of sorghum consumption averagely, U.S. reached to the highest level of the last 10 years with 8,3 million ton-consumption in 2008/09 season. Decreasing in the recent years, sorghum consumption declined to 3,9 million tons in 2011/12 season. Increasing to 4,7 million tons in 2012/13 season, the consumption is projected to reach 5,7 million tons in 2013/14 season. U.S. that does not have the same efficiency in barley, oat and rye production like in other products realizes 4 million tons of barley, 1,5 million tons of oat and 170 thousand tons of rye every year. Highest production amount in these three products belong to barley. When the barley production of the country is reviewed on yearly basis; it is seen that the production, which was 4,9 million tons in 2002/03 season, reached to 6 million tons in 2003/04 and 2004/05 seasons. However decreasing in the following seasons, U.S. barley production declined to 3 million tons in 2011/12 season. Increasing to 4,7 million tons in 2012/13 season, the production is projected to be around these levels in 2013/14 season. U.S. uses almost entire barley production for its domestic consumption. Realizing 1,5 million-ton production in oat (except for the last 2 seasons), U.S. consumes twice of this production. When the average oat consumption of U.S. in the last 10 years is reviewed; it is seen that consumption changes between 2,5 million and 3 million tons. FOREIGN TRADE IN THE U.S. U.S. is world's largest good importer with 2,3 trillion dollar-import and second largest good exporter with 1,5 trillion dollar-export after China. Being the largest importer and exporter in invisible items of trade, U.S. is on the top in total export and import (services and trade in goods total). While the country’s foreign trade volume decreased due to the decline in exports and imports in the crisis period, an upward trend has been seen in import and exports since 2010. U.S.’s total foreign trade volume (good in trade) reached to 3,5 trillion Dollars in 2008. Total good export was 1,3 trillion Dollars and increased 11,8% compared to 2007. Total good import increased 7,3% compared to 2007 and was realized as 2,2 trillion Dollars. Invisible items of trade reached to 535,2 billion dollars with an increase of 9,1% and services import reached to 403,4 billion dollars with an increase of 9,5% in 2008. Due to the effect of the global crisis in 2009, country’s both export and import decreased for the first time since many long years. Decreasing 18,7% compared to the previous year, export was realized as approximately 1,1 trillion Dollars in 2009. The decrease was more than the export in import and good import decreasing 26% compared to 2008 remained at 1,6 trillion Dollars level. On the other hand, services export was realized as 509,2 billion dollars with a decrease of 4,9% and services import was realized as 382,6 billion Dollars with a decrease of 5,2%. U.S. good export increased 20,9% in 2010 compared to the previous year and reached to the level of 2008 with approximately 1,3 trillion Dollars. Good export reached to 2 trillion Dollars level with increasing 22,8% but 2008 level couldn’t be reached. Services export reached to 553,6 billion Dollars with an increase of 8,7% and was realized over 2008 level. 5,4% increase was realized in services import and 2008 level of 403 billion Dollars level was reached. U.S.’s good import was realized as 2,3 trillion Dollars in 2011 by increasing 15,1% compared to the previous year. On the other hand, good export in 2011 was realized as approximately 1,5 trillion Dollars by increasing 15,9% compared to the previous year. While the services export reached to 606,0 billion Dollars by increasing 9,5% compared to the previous year, services import increased 6,0% and was realized as 427,4 billion Dollars. When 2012 trade in goods is reviewed; the lowest increase rates were obtained both in export and import in 2004-2012 period. Merchandise exports reached to 1,5 trillion dollars by increasing 4,5% and merchandise imports reached to 2,3 trillion Dollars by increasing 3,2%. In invisible items of trade, growth acceleration both in export and import since 2010 started to decrease. Services export reached to 640,3 billion dollars by increasing 5% and services import reached to 441,7 billion dollars by increasing 3%. Although U.S. is a country that always has a large amount of foreign trade deficit, Depreciation of the U.S. dollar against other currencies made export from U.S. attractive. In parallel with the increasing export , foreign trade deficit was realized as 855 billion Dollars in 2007 by decreasing 3,1% compared to 2006. In 2008, foreign trade deficit was realized as 865 billion Dollars by increasing 1,2%. In 2009, country’s foreign trade deficit decreased 39,7% and was realized as 545 billion Dollars. In U.S., where the economy had a tendency to overcome the crisis in 2010, foreign trade deficit was realized as 689 billion Dollars by increasing 26,4% compared to the previous year in parallel with the increase in imports. Being realized as 783 billion dollars in 2011 with an increase of 13,6% compared to the same period in the previous year, foreign trade deficit reached to 788 billion dollars by increasing 0,7% in 2012. Having a regular foreign trade deficit in invisible items of trade, U.S. is observed to have a surplus of 198,6 billion dollars in invisible items of trade in 2012. When it is about international trade, it is seen that U.S. has comparative advantages especially in capital and technology-intensive goods. These products consist the major export items of the country. Machinery, electrical equipment, mineral fuels, automotive, aerospace industry, medical devices, precious stones and jewelry, plastic industry are among the prominent industries in U.S. export. According to the foreign trade volume; U.S.’s most important trade partners are ranked as Canada (616 billion dollars), China (536 billion dollars), Mexico (494 billion dollars), Japan (216 billion dollars) and Germany (157 billion dollars). Since 1994, when North American Free Trade Agreement (NAFTA) entered into force, the export to Canada and Mexico increased consistently. As a result of the policies of U.S. government for China, it became one of the major trade partners of U.S.. Another important countries in U.S. foreign trade are Britain, South Korea, Brazil, Saudi Arabia and France. As world’s largest importer, U.S. make imports over 5 billion dollars from 47 different countries. While Far East, NAFTA members and Europe are prominent suppliers; China, Canada, Mexico, Japan and Germany are the top five suppliers respectively. THE PLACE OF GRAIN IN FOREIGN TRADE Being on the top in grain trade as well as world in grain production, U.S is on the top in exports although the country produces some products in less amounts than its competitors. Wheat is among those products. Although U.S. is behind China and India in wheat production, the country is the world’s largest wheat exporter. Competing with Australia, Canada and Russia in world wheat export, the country succeeds to leave behind these products even in the seasons with low production. The country got 18,8% share from world wheat export with 27,6 million-ton export amount. When U.S.’s wheat export is reviewed by years; it is seen that the export, which was 23,1 million tons in 2002/03 season, reached to 36 million tons in 2010/11 season. Decreasing to 28,1million tons in 2011/12 season and 27,6 million tons in 2012/13 season, U.S.’s wheat export is projected to increase 31,5 million tons in 2013/14 season. The wheat import of the country changes between 2 and 4 million tons. Reaching the highest import amount of the last 10 years with 3,4 million tons in 2008/09 season, U.S. is estimated to import 4,5 million tons of wheat in 2013/14 season. Just like in corn production, U.S. is on the top of world corn trade. Although corn export amount of the country seems to be significantly low compared to the total production, it represents almost one third of the world corn production all by itself. However, it is hard to say the same for 2012/13 season. Exporting 35-40 million tons of corn every year, U.S. realized the lowest amount of corn export of the last 10 years with 18,2 million tons in 2012/13 season. Being on the top in seasons before 2012/113 season, the country ranked 3rd after Argentina and Brazil with this decrease. When corn export is reviewed by years; it is seen that the export, which was 40,3 million tons in 2002/03 season, reached to the highest level of the last 10 years with 61,9 million tons in 2007/08 season. Having a fluctuating course in the recent years, U.S. corn export is projected to reach 41 million tons in 2013/14 season. Rice foreign trade of U.S. is very low compared to corn and wheat. Asian countries leave U.S. behind in also trade just like production. When rice export is reviewed by years; it stands out that there is not much change. The country realizes averagely 3,5 million tons of rice export every year. Another agricultural product for which U.S. has a voice in world trade is sorghum. Ranking second in world sorghum trade after Argentina in 2012/13 season, U.S. realized 29,4% of world export that was 7,2 million tons in the same season. When sorghum export of the country is reviewed by years; it is seen that the export, which was 4,6 million tons in 2002/03 season, reached to the highest level of the last 10 years with 7 million tons in 2007/08 season. Decreasing in the following seasons, the export declined to 1,5 million tons in 2011/12 season. Increasing to 2,1 million tons level in 2012/13 season, U.S. sorghum export is estimated to reach 4 million tons in 2013/14 season. U.S.’s corn, rice, sorghum and barley import is significantly low compared to the country population and export capacity. The most important product in which export is low and import is high is oat. The country realizes 1,5-2 million tons of oat import every year. MILLING AND GRAIN PROCESSING INDUSTRY According to the study of former Chairman and CEO of North American Millers’ Association (NAMA) John C. Miller titled as “American Flour Milling”; there are 170 mills belonging to 45 companies with daily 80 thousand-ton capacity. The production of these mills constitutes 95% of the total industry production. When the mills are evaluated in terms of capacity; 68 of the mills in the country has daily processing capacity over 454 tons, 44 of them between 228 and 453 tons, 33 of them between 46 and 227 tons, 10 of them between 19 and 45 tons and 14 of them under 18 tons. The largest three companies operating in the milling industry has 56% of the total milling capacity in the country. While the milling capacity of 10 largest companies is 83%, total capacity of 24 large companies is around 94%. In other words, 94% of the total milling capacity of U.S. milling industry is met by these 24 companies. It is stated that the largest flour mill in the country is North Dakota Mill with 1.828 tons daily capacity. Established in partnership with Cargill and CHS companies, Horizon Milling LLC is considered as the second largest mill but it is expressed that Horizon is the largest company in U.S. in terms of the daily capacity. Announced in 2013 but stuck with the anti-trust laws in U.S., Ardent Mills will be the largest flour mill in U.S. by incorporating Horizon Milling if the agreement is reached with the current conditions. The agreement is expected to be completed during this year for Ardent Mills planned to be established with the merge of Cargill, CHS and ConAgra Foods’ milling businesses. The companies plan to shut down some of their mills in order to the completion of the Ardent Mills agreement. When the flour production between 1989 and 2009 is reviewed; it is seen that the highest level was reached in 2000 with 19.1 million tons and 18.8 million tons of flour production was realized in 2009.
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