Processing or Exports: Which Path for U.s. Grain? Is Domestic Corn and Soybean Use Increasing?

Iowa is the center of the world’s most productive corn and soybean region. Along with Illinois and Indiana to the east, Minnesota and South Dakota to the north, Nebraska to the west, and Missouri to the south, this region produces an abundance of low-cost feed that when used by the highly efficient U.S. meat and dairy sectors provides consumers with low-cost food. The traditional view of agriculture in this region is one in which domestically produced grain is fed to domestically produced livestock that is slaughtered for domestic consumption. The surplus grain is then exported to support domestic livestock sectors in other countries. The current reality of midwestern agriculture is far different from this traditional organization. Under NAFTA, the livestock sectors of Canada, Mexico, and the United States have become much more integrated, with increased trade in feed, meat, and live animals. Meat exports outside of North American have also increased dramatically, as countries comply with international trade agreements and open their borders to lower-cost imports. Minnesota provides a hint that we may continue this trend away from reliance on exports markets for our surplus grains. The Minnesota Corn Growers Association has a longterm goal of not exporting any unprocessed corn, soybeans, or wheat outside the state’s borders. Expanded soybean crushing facilities, new ethanol plants, and increased support for livestock operations are all part of Minnesota’s plan to achieve this objective. Other states are also pushing for increased utilization of grain as a means of adding income, jobs, and opportunities in rural America. But increased domestic utilization is not a certainty. Opposition to modern livestock operations in many parts of the Corn Belt could drive the domestic livestock industry out of the region or even out of the country. Incentives for biofuels or other value-added processes may disappear. As is often the case, the future direction of Corn Belt agriculture will depend in part on markets and technology and in part on government policy. A domestic emphasis on grains processing and utilization has many policy implications; a review of recent trends helps set the stage for evaluating some of these choices.