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US Feed Outlook

by 5m Editor
13 June 2008, at 12:00am

Allen Baker, Edward Allen, and Heather Lutman, ERS USDA. This monthly report examines supply, use, prices, and trade for feed grains, including supply and demand prospects in major importing and exporting countries. Focuses on corn; also contains information on sorghum, barley, oats, and hay.

Higher Feed Grain Prices Expected

Projected U.S. 2008/09 corn production was decreased 390 million bushels this month to 11.7 billion. The decline reflects lower expected yields due to slow planting progress, slow crop emergence, and persistent, heavy rainfall across the Corn Belt. Lower supplies are expected to boost prices and lower feed and residual use, exports, and ending stocks. World coarse grains production is expected to be down, with increased foreign production prospects offsetting about two-thirds of the U.S. drop. Because of increased foreign beginning stocks, world coarse grains supplies for 2008/09 are up this month. USDA’s National Agricultural Statistics Service will release the first surveybased estimates of 2008/09 crop acreage at the end of June and barley and oats production in July.

Figure 1
Feed grain crop conditions in 2008 not as good, so far, as in 2007
Source: USDA, National Agricultural Statistics Service, Weekly Weather and Crop Bulletin.

Domestic Outlook

Feed Grains Use Declines

Forecast total feed grains use for 2007/08 was decreased 1.5 million metric tons to 350 million, this month, as a result of lower corn and sorghum exports. Projected domestic use in 2007/08 increased 200,000 metric tons this month due to increased sorghum feed and residual use. The total supply of feed grains remains unchanged in 2007/08.

Figure 2
U.S. corn and sorghum average farm prices
Sources: USDA, World Agricultural Outlook Board, WASDE and USDA, Economic Research Service, Feed Grains Database.


Figure 3
U.S. barley and oats average farm prices
Sources: USDA, World Agricultural Outlook Board, WASDE, and USDA, Economic Research Service, Feed Grains Database.

Projected total supply was decreased 8.3 million metric tons in 2008/09, due to a forecast decrease in feed grain production, offset slightly by an increase of 1.5 million metric tons in beginning stocks. Total domestic use in 2008/09 is forecast at 281.2 million tons, up 1.1 million from 2007/08. Expected total use in 2008/09 is decreased 6.1 million metric tons this month as a result of lower exports and feed and residual use. A smaller projected corn crop and higher prices are anticipated to reduce corn feed and residual use.

2008/09 Corn Yield Projected Lower

Lower yield prospects have led to a reduction of 390 million bushels in projected U.S. corn production this month to 11.7 billion bushels. Very wet weather has delayed planting and crop emergence in many parts of the Corn Belt this spring. As a result, the 2008/09 projected corn yield was reduced 5 bushels per acre to 148.9 bushels per acre.

As of June 1 , 95 percent of the intended acreage was planted in the 18 major growing states, compared with an average of 98 percent in the previous 5 years and 99 percent in 2007. Corn emergence is also delayed with only 74 percent of the corn crop emerged in the 18 major growing states as of June 1. This compares with an average of 89 percent in the previous 5 years and 92 percent last year.

Yields are expected to be reduced due to delays in planting and extremely heavy rainfall across the Corn Belt. Recurring torrential rainfall can be expected to reduce nitrogen availability and plant populations, especially for corn planted after mid- May. Growers planting after mid-May often switch to shorter season varieties that also have lower yield potential. In general, later plantings increase the risk of heat stress at pollination, along with the risk of early frosts. Weather over the rest of the growing season will be the most critical factor in determining actual yields, but this year’s crop has gotten off to an unusually bad start. With plantings in many areas delayed beyond usual completion dates, there will be a wide range in the stages of crop development this season which increases the potential for variability in yields.

Corn exports for the 2007/08 marketing year were lowered by 50 million bushels this month to 2.45 billion, due to a slower export pace in recent weeks. This change increased ending stocks by a like amount, therefore raising 2008/09 beginning stocks to 1.43 billion bushels.

Tighter supplies and record corn prices are forecast to lower feed and residual use in 2008/09 by 150 million bushels to 5.15 billion. Food, seed, and industrial use (FSI) for 2008/09 is unchanged this month at 5.36 billion bushels. FSI remains at record levels due to increased ethanol production, currently forecast to utilize 4.0 billion bushels of corn in 2008/09, up 1.0 billion bushels from 2007/08. Exports in 2008/09 were reduced 100 million bushels to 2.0 billion due to expected higher foreign production. Ending stocks are expected to drop to 673 million bushels, the lowest since 1995/96 ending stocks of 426 million bushels.

Season average farm prices for corn are projected higher this month. The projected range for 2007/08 was raised to $4.25 to $4.45 per bushel compared with $4.10 to $4.40 per bushel. The 2008/09 farm price is projected at $5.30 to 6.30 per bushel, up 30 cents on both ends of the range.

Sorghum Exports to Decrease in 2007/08

Due to a slowing pace of export sales and shipments in recent weeks, expected sorghum exports for 2007/08 were reduced 20 million bushels this month to 265 million. Ending stocks and feed and residual use are expected to both increase by 10 million bushels due to the reduction in exports. As a result, 2008/09 beginning stocks increased to 62 million bushels, up from of 32 million in 2007/08. Feed and residual use was also increased 10 million bushels in 2008/09 to 200 million. There is no change this month in 2008/09 exports, although total use increases 10 million bushels to 420 million, down from 475 million in 2007/08. Ending stocks for 2008/09 are unchanged at 57 million bushels.

Marketing year average prices received by farmers for sorghum are projected higher this month. For 2007/08, the price range is projected at $4.10 to $4.30 per bushel compared with $3.95 to $4.25 per bushel. The 2008/09 price is also expected higher at $4.95-$5.95 per bushel, up 25 cents on both ends of the range.

Barley and Oats Prices Increased for 2008/09

Prices received by farmers for barley in 2008/09 were projected higher this month at $5.75 to $6.75 per bushel, up 5 cents on both ends of the range. This compares with $4.00 per bushel in 2007/08. The increase in barley farm prices is limited by contracting for malting barley.

Oats prices for 2008/09 were also raised and are projected at $3.70 to $4.70 per bushel, up 20 cents on both ends of the range, and up sharply from $2.60 per bushel in 2007/08.

Supply and demand estimates were unchanged this month.

Feed and Residual Use

The 2008/09 feed and residual use for the four feed grains plus feed wheat on a standardized September-August marketing year is projected at 142 million metric tons, down 3 million from last month and 26 million from the previous year. Feed and residual use per grain consuming animal unit (GCAU) is projected at 1.52 tons in 2008/09, down from 1.78 tons in 2007/08, in part reflecting expected higher feed prices and the year-to-year increase in feeding distillers’ grain. Total GCAUs for 2008/09 are projected to remain the same as last month at 93.5 million.

International Outlook

Increased Foreign Production Prospects Offset Much of the U.S. Decline

World coarse grains production projected for 2008/09 is down 3.1 million tons this month to 1,067.6 million tons, with increased foreign production prospects offsetting about two-thirds of the U.S. drop. Forecast production increased significantly this month for Ukraine, Russia, and China.

Ukraine’s coarse grains production is projected up 2.5 million tons this month to 22.2 million. Corn production is up 2.0 million tons to 10.0 million as favorable planting weather and attractive prices boosted corn area. Barley production prospects increased 0.5 million tons to 10.5 million due to excellent growing conditions for winter barley that boosted yield prospects.

Russia’s coarse grains production prospects for 2008/09 increased 2.0 million tons this month to 33.6 million. Favorable planting conditions and attractive prices have boosted corn area 0.4 million hectares to 1.8 million. Corn production is forecast up 1.5 million tons this month to 6.8 million. The projection is up 72 percent from last year’s drought-stressed crop. Russia’s barley production is projected up 0.5 million tons this month to 17.5 million as favorable growing conditions have enhanced yield prospects.

China’s coarse grains production is up for 2006/07, 2007/08, and 2008/09 based on newly released official statistics. Revisions to 2006 production accompanied the publication of 2007 data, and these boosted production levels enough to change prospects for 2008. The revisions raised coarse grains production by 5.6 million tons in 2006/07, 5.4 million for 2007/08, and 1.7 million for the 2008/09 projection.

Figure 4
China corn production and use
Source: USDA, Foreign Agricultural Service, Grain: Word Markets and Trade (Grain Circular).

Increases for corn were partly offset by reductions in other coarse grains. Increased corn area and a small increase in yield boosted 2006/07 corn production 6.1 million tons to 151.6 million. Increased yields boosted 2007/08 estimated corn production 6.8 million tons to 151.8 million. Corn yield prospects for 2008/09 are up this month, with an increase in recent history and generally favorable planting conditions boosting forecast production 3.0 million tons to 153 million. China’s production of sorghum, barley, and millet was revised downward for 2006/07 and 2007/08. Reduced recent yields trimmed the trend and cut prospects for 2008/09.

Philippines’ corn production for 2007/08 was reported up 0.75 million tons to 7.25 million, and with increased area and a higher expected yield for 2008/09, projected production increased 0.7 million this month to 7.3 million.

Colombia’s coarse grains production was revised from 2003/04 through the 2008/09 projection, based on official government statistics, with corn increases partly offset by reductions (in most years) of other coarse grains. Projected 2008/09 coarse grains production is up 0.4 million tons this month to 1.8 million.

Turkey reported a reduction in barley area, dropping projected 2008/09 coarse grains production 0.3 million tons to 10.3 million. EU-27 rye area for 2008/09 was reduced slightly, trimming coarse grains production 0.2 million tons to 149.2 million.

Brazil’s estimated corn production for 2007/08 was increased 2.0 million tons this month to a record 58.0 million. Both area and yield increased due to strong corn prices and good rains that extended into the dry season in Mato Grosso, boosting yields for second-crop corn.

Figure 5
Global corn ending stocks
Sources: USDA, Foreign Agricultural Service, Production, Supply and Distribution (PS&D), and USDA, Grain: World Markets and Trade (Grain Circular).

Increased Global Beginning Stocks This Month

Revisions to beginning stocks have contributed to higher world coarse grains supplies in 2007/08 and 2008/09. Historical revisions for coarse grain production in Colombia and China boosted 2007/08 beginning stocks. Global 2007/08 beginning stocks was revised up 4.7 million tons this month to 139.5 million. For 2008/09, beginning stocks are projected higher this month for China, Brazil, and Colombia due to 2007/08 production revisions, and for the United States because of prospects for reduced 2007/08 corn exports. World coarse grains beginning stocks for 2008/09 were revised up 11.4 million tons this month to 146.4 million.

The increase in 2008/09 global beginning stocks is much larger than the 3.1- million-ton decline in world production, leaving the projected supply of coarse grains up significantly this month despite the large cut in U.S. corn production.

Increased Global Use Projected This Month

Feed grains use for 2006/07 was revised up 1.5 million tons for China to 153.7 million, with increased corn feed use, as well as increased corn food, seed, and industrial use. Philippines’ 2006/07 corn use increased and smaller revisions combined to boost global coarse grains use 1.9 million tons to 1,010.8 million.

The forecast for 2007/08 global feed grains use was increased 3.2 million tons this month to 1,064.8 million. The largest increase, 1.6 million tons, was for China, with most of the increase for feed. Even with blue ear disease in hogs and the May 12, 2008, earthquake disrupting the feed-livestock industry in Sichuan Province, coarse grain feed use in China is expected to increase in 2007/08. An increase in China’s corn food, seed, and industrial use for 2007/08 was mostly offset by reductions for sorghum, barley, and millet. Philippines’ use of corn is up 0.6 million tons to 7.2 million tons. EU-27 food, seed, and industrial use of barley is up 0.5 million this month boosting 2007/08 feed grains use. There is also increased corn use this month for Colombia and Canada, as well as smaller changes in coarse grains use for other countries.

Projected 2008/09 world coarse grains use is up 3.9 million tons this month to 1,079.5 million. Foreign increases more than offset the U.S. decline. China’s projected coarse grains use is up 5.8 million tons this month to 165.3 million, with nearly all of the increase in feed use. China’s meat production is expected to rebound in 2008/09 from the 2007/08 previous year’s problems, and coarse grains feed use is projected to grow 7 percent. EU-27 barley feed use is projected up 0.5 million tons this month, boosting EU-27 coarse grains use to 148.7 million tons. Increased use is also projected this month for Colombia, Philippines, and Ukraine, with smaller changes for some others.

Projected 2008/09 World Coarse Grains Ending Stocks Up This Month

Projections for world coarse grains ending stocks for 2008/09 were raised 4.1 million tons this month to 131.3 million. Foreign increases more than offset the U.S. decline. China’s coarse grains stocks are up 3.9 million tons to 35.0 million as increases in production and beginning stocks more than offset increased use prospects. Increased production is expected to help Russia’s government increase intervention stocks, boosting coarse grains stocks 1.6 million tons to 3.9 million. Projectinos of Colombia’s 2008/09 coarse grains ending stocks were raised 0.8 million tons to 1.4 million. Changes to several other countries are smaller and mostly offsetting.

World Coarse Grains Trade Trimmed

Estimates of world 2007/08 coarse grains trade were reduced 0.8 million tons this month to 123.6 million. Canada’s corn imports were increased 0.5 million tons to 2.6 million based on the strong pace of recent shipments. U.S. imports of barley (up 125,000 tons) and corn (up 25,000 tons) were increased for the October- September international trade year, but not for the local marketing year. Sorghum imports by Mexico and Japan were reduced.

World coarse grains trade projected for 2008/09 was reduced 0.8 million tons this month to 119.3 million. Brazil’s corn imports were cut 0.7 million tons to 0.5 million as record production and ample stocks make imports from Paraguay less attractive.

U.S. Export Prospects Cut, Competitors’ Increased

Prospects for a reduced U.S. 2008 corn crop, increasing U.S. prices, and increasing competitors’ supplies of both coarse grains and feed-quality wheat are limiting U.S. export prospects. U.S. corn exports for 2008/09 were cut 3.0 million tons to 50.0 million. Tight U.S. supplies and increased prices are expected to turn importers to alternative origins. Increased 2007/08 second-crop corn in Brazil will be available for export in the 2008/09 October-September international trade year, boosting projected exports 1.0 million tons this month to a record 12.0 million. Increased corn production in Ukraine is supporting a 1.0 million ton increase in projected corn exports to 3.5 million.

Figure 6
Monthly U.S. corn exports
Sources: Bureau of the Census, USDC, http://www.usatradeonline.gov/ and USDA, Economic Research Service, Feed Grains Database.

The forecast for U.S. corn exports for 2007/08 was reduced 1.0 million tons this month to 62.0 million. This still represents a record level of U.S. corn exports. Despite very large outstanding export sales, U.S. corn shipments during April (Census data) and especially May (according to both grain inspections data and Export Sales shipments) were significantly slower than for earlier months in the marketing year. The pace of U.S. corn exports during the remainder of 2007/08 is not expected to match the robust pace of 2005/06. The large amount of outstanding export sales is partly the result of importers buying further ahead to assure the flow of imports, not necessarily the result of an increase in the amount imported. This is expected to result in an increase in 2007/08 outstanding sales carried into 2008/09. Additional U.S. corn export sales during the summer of 2008 may be limited by foreign barley and wheat harvests in the Northern Hemisphere and large corn supplies in the Southern Hemisphere.

U.S. 2007/08 sorghum export prospects were cut 0.5 million tons this month to 6.5 million. While U.S. export shipments to the EU-27 have remained robust, sales and shipments to both Mexico and Japan have been slow. With sorghum imports by Mexico and Japan cut this month, U.S. exports were reduced accordingly.

Further Reading

More information - You can view the full report, including tables, by clicking here.


June 2008