US corn exports are being dampened by stiff competition from Argentina and cheap feed wheat, with the government expected to scale its sales target back further, traders and analysts said on Tuesday. Although there has been a slight pick up in demand in the last two weeks following a slump in US cash prices, shipments from the world's top exporter have been lagging the year-ago pace. "There is some improvement in demand. The Japanese are buying a little bit more but we are still not able to get the buyers who make a difference," said analyst Dan Basse of Chicago-based research firm, AgResource Company.
He said those buyers included South Korea, Malaysia and Indonesia. "That business seems to be pretty much locked away by cheaper prices in Argentina," he added.
Traders said Argentina is selling corn for March shipment at about $14 per tonne less on a free-on-board basis, which excludes freight costs, than the United States.
The US Agriculture Department last week raised its forecast of Argentine corn exports this year by 500,000 tonnes to 13 million tonnes, while cutting its estimate of US exports by 1.3 million tonnes to 48.26 million.
"I expect the USDA to make further cuts to the export number," said analyst Bill Nelson of A.G. Edwards.
"I think they'll gradually reduce it to 1.8 billion bushels (from 1.9 billion bushels)," he added.
He said high ocean freight rates were a key reason for the sluggish demand for US corn, adding that although rates have declined they remain much higher than 2003 levels.
Freight on the benchmark US Gulf to Japan route was around $58.50-$59 per tonne on Tuesday after hitting a high of $75 a tonne last year, but remained well above the $30-$35 a tonne range typical before the surge.
Shawn McCambridge of Prudential Securities said abundant supplies of feed wheat from the Black Sea region in Europe last year dented demand for US corn.
"Although feed wheat supplies have now come down, the damage has been done," he added.
He said corn importers like the Philippines and South Korea turned to cheaper feed wheat last year and "Argentina is also going to have some additional corn to ship," he said.
Still, traders said a 20-percent decline in corn prices in the US cash market in the past three weeks was helping draw some export demand.
"In January things were very, very slow," an exporter said. "Since the basis (prices) set back last a couple of weeks, we are starting to see a few more inquiries, primarily from the Mediterranean countries like Turkey, and Egypt," he added.