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World Agricultural Supply and Demand Estimates - February 2009

by 5m Editor
9 February 2009, at 12:00am

Total US meat production for 2009 is forecast lower this month based on reductions of both red meats and poultry, according to the latest World Agricultural Supply and Demand Estimates (WASDE) from the United States Department of Agriculture.

Livestock Poultry and Dairy

The January 30 Cattle report estimated lower cattle inventories, including the lowest beef cow inventory since 1963, lower retained heifers, and a smaller 2008 calf crop. Although the number of cattle outside feedlots is slightly higher than last year, the base is lower, reflecting downward revisions in historical inventories and calf crops.

As a result, fewer numbers of cattle are forecast to be placed on feed leading to lower beef production in 2009. There is a slight offset due to a higher cow slaughter forecast, reflecting dairy herd reductions in the latter part of the year.

Pork production is forecast lower than last month as the pace of hog slaughter during the first quarter has been slower than expected. Broiler production forecasts are lowered as hatchery data point to continued reductions in eggs set and chicks placed. Turkey producers are also reducing hatchery flocks at a more rapid pace than previously expected. Egg production is forecast higher as producers respond to recent high prices.

Export forecasts are reduced for most major species meats. Economic uncertainty continues to weigh on foreign demand, and exports to most major markets are expected to remain relatively weak.

Cattle and hog price forecasts are reduced, reflecting weakness in red meat demand which more than offsets the price-supporting effects of tighter animal supplies. Broiler and turkey price forecasts are unchanged from last month as the forecast production declines are expected to largely offset weakness in demand.

Milk production forecasts for 2009 are lowered from last month. The January 30 Cattle report estimated that dairy cow inventories on January 1, 2009, were almost 1 percent above a year earlier and only fractionally fewer heifers were being retained for addition to dairy herds.

Assuming no significant herd reductions in the first part of the year, producer returns are expected to be heavily pressured resulting in a relatively sharp reduction in inventories during the latter part of the year. Output per cow is unchanged from last month. Both domestic and export demand is forecast to remain weak due to economic uncertainty. Commercial export forecasts for 2009 are reduced from last month as weak international demand and expected competition from recently announced subsidized EU-27 exports limit opportunities for commercial exports.

Conversely, lower international prices are expected to result in slightly higher U.S. imports of dairy products, primarily cheese. Fat basis ending stocks are forecast lower as supplies tighten later in the year on lower milk production, but skim-solids stocks are raised as exports of non-fat dry milk (NDM) are limited and supplies burden the market. Sales of butter and NDM to the CCC are forecast higher.

Milk and dairy product price estimates for 2009 are reduced as first-half product prices are expected to be pressured by the confluence of weak demand and burdensome supplies. As milk production is reduced, especially in the latter part of the year, tighter milk supplies are expected to help lift second half prices from their midyear lows. However, weaker forecast exports and continued weakness in domestic demand keep prices later in the year lower than forecast last month. As a result, the annual average product and Class prices are forecast below last month. The all milk price is also forecast lower, $10.95 to $11.65 per cwt in 2009.

Estimates for 2008 have been revised to reflect actual data. Milk production estimates are raised slightly based on December milk production. Based on trade data to date, exports are estimated lower than last month and imports, primarily on a fat basis, are forecast higher. Ending stocks are adjusted to reflect December data and revisions to NDM stocks.

Wheat

US wheat supply, use, and stocks projections for 2008/09 are unchanged this month. The season-average price received by producers is projected at $6.70 to $6.90 per bushel, up 20 cents on the bottom end of the range reflecting continued strength in reported farm prices. Global 2008/09 wheat production is nearly unchanged from last month at 682.8 million tons.

Reductions for Argentina and EU-27 are nearly offset by increases for Russia, Ukraine and Australia. Production is lowered 1.1 million tons for Argentina as drought affected yields have proven even lower than previously thought. EU-27 output is reduced 0.2 million tons on official government revisions for the United Kingdom and Hungary. Russia and Ukraine production are raised 0.7 million tons and 0.4 million tons, respectively, on the latest government indications. Production is raised 0.2 million tons for Australia on higher yields. Australia production is also raised 0.8 million tons for 2007/08 in line with upward government revisions to area and yields.

World wheat imports for 2008/09 are nearly unchanged this month. Imports are lowered 1.0 million tons for Brazil and reduced 0.2 million tons each for Morocco, Nigeria, and Vietnam. Reductions of 0.1 million tons each are projected for Taiwan and Venezuela. Imports are raised 1.0 million tons for Iran, 0.3 million tons for Pakistan, 0.2 million tons each for Syria and Turkey, and 0.1 million tons for Israel. Import changes mostly reflect the pace of shipments to date and indications of purchasing by these countries. Exports are lowered 0.8 million tons for Argentina, 0.5 million tons for China, and 0.4 million tons for Brazil. These reductions are partly offset by increases of 0.5 million tons each for Turkey and Ukraine and 0.2 million tons each for India and Paraguay.

World wheat consumption is lowered 1.5 million tons mostly reflecting lower expected food use in Argentina, Morocco, Nigeria, Venezuela, and Vietnam. The reduction in Argentina reflects lower available supplies with reduced production. Reductions for the other countries reflect lower expected imports. World wheat feed and residual use is down slightly this month with a 2.0- million-ton reduction for EU-27 mostly offset by increases of 0.7 million tons for Russia, 0.4 million tons each for Syria and Ukraine, 0.3 million tons for Canada, and 0.1 million tons for Israel. Increased barley feeding in EU-27 offsets the reduction in wheat. Higher wheat production in Russia and Ukraine is expected to increase handling and storage losses which are accounted for as higher feed and residual use. Global ending stocks are increased 1.6 million tons with increases for EU-27, Iran, Australia, China, and Pakistan partly offset by reductions for Turkey, Ukraine, Brazil, Canada, Syria, Argentina, and India.

Coarse Grains

There are no changes this month to the US corn balance sheet. Sorghum food, seed and industrial use is projected 40 million bushels higher based on indications of increased sorghum use by ethanol plants in the Southern and Central Plains. Sorghum prices are well below those for corn in these areas and supplies are plentiful with this year=s slower export pace. Ethanol blender and producer margins have recently improved and weekly production of gasoline blends with ethanol has risen. Sorghum feed and residual use is lowered 10 million bushels leaving projected ending stocks down 30 million bushels. Barley food, seed, and industrial use is raised 10 million bushels on strong exports of barley malt. Barley feed and residual use is lowered an offsetting amount.

The projected season-average farm price range for corn is narrowed 10 cents on each end to $3.65 to $4.15 per bushel. The price range for sorghum is narrowed 15 cents on each end to $3.05 to $3.35 per bushel. The oats farm price is raised 10 cents on each end of the range to $3.00 to $3.20 per bushel based on reported prices to date.

Global coarse grain supplies for 2008/09 are lowered 0.9 million tons this month with reductions in corn production for South America and India only partly offset by increases for FSU-12 coarse grains, increases for Australia barley and sorghum, and higher barley beginning stocks in Australia based on revisions to 2007/08 production.

World corn production for 2008/09 is lowered 4.6 million tons. Argentina production is lowered 3.0 million tons as continued drought and heat during late January further reduced prospects for yields and harvested area in key central growing areas. Brazil production is lowered 2.0 million tons reflecting a return to dryness in late January that limited soil moisture during grain fill in drought-affected southern growing areas. Corn production is also lowered 0.8 million tons in adjacent Paraguay which experienced similar weather problems this season. Corn production is lowered 0.5 million tons for India as lower yields more than offset an increase in harvested area. Production is lowered 0.2 million tons for Russia, but increased 1.4 million tons for Ukraine on the latest government indications.

Other coarse grain production changes partly offset lower world corn output. Barley production is raised 0.6 million tons for Russia and 0.1 million tons for Ukraine on the latest government estimates. Oats production is raised 0.4 million tons for Russia and 0.2 million tons for Ukraine on the same indications. Australia barley production is raised 0.5 million tons mostly on higher harvested area and sorghum production is raised 0.4 million tons on higher expected yields.

World coarse grain imports and exports for 2008/09 are both lowered this month mostly on lower projected corn trade. World corn imports are lowered 2.0 million tons with reductions for South Korea, Mexico, Saudi Arabia, Tunisia, Chile, and Peru as feed use is projected lowered for most of these countries. Corn feeding is lowered 3.0 million tons for Brazil, 0.8 million tons for Argentina, and 0.2 million tons for India. Sorghum imports and feeding are raised 0.3 million tons for Mexico, partly offsetting reductions for corn. Globally, corn feeding is projected down 5.8 million tons this month. Increases in barley and oats feeding of 3.0 million tons and 0.6 million tons, respectively, are only partly offsetting. Despite the drop in world corn production this month, ending stocks for 2008/09 are projected 0.6 million tons higher on lower expected global consumption.

Oilseeds

Projected US soybean ending stocks for 2008/09 are reduced to 210 million bushels, down 15 million from last month as increased exports more than offset lower crush.

Soybean exports are raised 50 million bushels to 1.150 billion as export shipments continue to exceed earlier projections, primarily for China. Soybean crush is reduced 35 million bushels to 1.650 billion reflecting a continuation of the weak domestic soybean meal disappearance that began during the summer of 2008. Soybean oil stocks are projected higher this month as reduced production is more than offset by lower use. Domestic soybean oil disappearance is reduced mainly due to lower projected use for biodiesel production. The soybean oil export projection is also reduced this month reflecting weak sales and shipments through the first 4 months of the marketing year.

The US season-average soybean price range for 2008/09 is projected at $8.75 to $9.75 per bushel, up 25 cents on both ends of the range. The soybean meal price is projected at $265 to $305 per short ton compared with $250 to $310 last month. The soybean oil price is projected at 31 to 34 cents per pound, down 1.0 cents on both ends of the range.

Global oilseed production for 2008/09 is projected at 408 million tons, down 8.3 million tons from last month. Lower soybean and sunflower seed production more than offsets increases for rapeseed and peanuts. Global soybean production is reduced 9.1 million tons to 224.1 million tons. The reduction is due to South American crops which have been affected by hot, dry weather during critical parts of the growing season. Soybean production for Argentina is projected at 43.8 million tons, down 5.7 million from last month as drought conditions and heat in the central growing area has resulted in lower projected harvested area and yields. Soybean production for Brazil is projected at 57 million tons, down 2 million due to dry conditions especially in the southern producing areas. Paraguay soybean production is reduced to 4 million tons, down 1.6 million, also due to hot, dry weather. Global sunflower seed production is projected lower due to reductions for Argentina and EU-27. Global rapeseed production is raised this month due to larger projected crops for India and Ukraine. Other changes include higher peanut production for India, and higher sunflower seed production for Ukraine.

Global oilseed stocks are projected at 61.6 million tons, down 3.8 million tons. Most of the decline is due to lower soybean stocks in the US, Brazil and Argentina.

Further Reading

- You can view the full report by clicking here.

February 2009