US govt supports more farm exports

WASHINGTON: Cargill Inc, Archer Daniels Midland Co and Bunge Ltd are benefiting from the most government support for farm exports since 1992 as the US steps up loan guarantees for foreign buyers unable to get credit.

About $4.35 billion was allocated to countries from Jamaica to Turkey through April 6 in the year that started Oct 1 under the Export Credit Guarantee Program to underwrite loans that foreign banks grant for the purchase of corn, wheat and other US farm products, government records show. That's 40 percent more than in all of fiscal 2008 and almost triple 2007's total.

The US is supporting exports after the Department of Agriculture predicted farm shipments will drop 17 percent in the current fiscal year because of falling commodity prices. Profit declined 68 percent at Cargill and 98 percent at ADM in the most recent quarter, as the recession curbed demand for everything from fertilizer to livestock feed.

The export-guarantee program is "the perfect tool for tight credit", said Erick Erickson, an economist for the US Grains Council, a trade group. It "allows the US to satisfy some import needs that would otherwise go to other countries".

The economy of South Korea, the program's largest customer, rose 0.1 percent in the first three months of 2009 after declining 5.1 percent in the final quarter of last year, according to government data. Russia's government is revising its current forecast for a 2.2 percent decline in gross domestic product this year as its economic crisis worsens.

Slowing demand helped send US wheat, corn and soybean prices down at least 28 percent from records reached last year. US farm exports, which reached a record $115.5 billion in the year ended Sept 30, will fall to $95.5 billion this year, according to USDA projections.

As of April 13, about $2.8 billion of the $4.35 billion allotment had been used for specific sales, according to government records obtained by Bloomberg under the Freedom of Information Act.

Three benefit most

Cargill, the largest privately held US company, had benefited from $546.1 million in loan guarantees, 67 percent more than in 2007 and on pace to surpass its 2008 total.

White Plains, New York-based Bunge has had its exports backed by $293.2 million in loan guarantees, more than nine times last year's total. The company announced a quarterly loss of $195 million on April 23.

While the program will cover only about 5 percent of this year's expected shipments, they are useful to help keep importers buying US products, said Deb Seidel, a Bunge spokeswoman. "It provides importing countries the credit they need to purchase food," Seidel said.

Illinois-based Archer Daniels, the world's largest grain processor, was helped by $390.5 million in credits as of mid-April, behind the pace of $1 billion in guarantees last year.

Nations close to exhausting their credits as of April 6 include Russia, which had used $321.6 million of its $400 million allocation, and Mexico, which used $99.9 million of its $125 million limit.

US competitors, including Brazil, have objected to the program.

Bloomberg News

(China Daily 06/01/2009 page11)