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Livestock Producers Fed Friendlier Prices

by 5m Editor
3 August 2007, at 10:19am

US - Livestock producer organizations have pushed Congress for policy that protects them against high feed prices resulting from federal policies to promoted biofuels from typical feed grains and oilseeds.

Feed budgets have been hurt in the past 10 months by high corn prices, but once the extent of acreage in the new crop was established, corn prices have softened, and USDA now says record feed grain production will loosen the tight supplies.

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Increased production and feed use of distiller’s spent grains are expected to offset decreased feed and residual use of the four feed grains plus wheat.”

USDA economists Allen Baker

The official feed grains of corn, sorghum, barley and oats will be produced in a quantity unseen since the 1986-87 crop year. Although sorghum, barley and oats were over one third of the feed grain production 21 years ago, this year their share of the production will be closer to 15% of total production. USDA’s latest feed outlook indicates the total supply will be 378.2 million tons, up 41.2 million from the last crop year. Total use for feed, seed, and residual is expected to total 152.8 million tons which is about 45% of the total use. USDA economists Allen Baker and Edward Allen report that ethanol co-products are replacing corn in feed that ethanol refineries are taking out of the market, “Corn is estimated to account for 89 percent of the feed and residual use, down from 93 percent forecast for 2006/07. Increased production and feed use of distiller’s spent grains are expected to offset decreased feed and residual use of the four feed grains plus wheat.”

The number of livestock consuming the feed has changed little in the past year, holding at 91.8 million animal units. Cattle on feed and dairy cows are down slightly, but hogs and broilers are up. Beef production for the balance of the year is expected to weaken, and feed needs will be picked up in part by distiller’s grains. Pork production is on the rise, so feed for hogs will be up. Broiler, turkey, and egg production are also increasing, so poultry demands for feed will also increase. Food and industrial demands will consume 38% of the supply compared to 31% for last year.

For corn, production will be up, exports have decreased, and both beginning and ending stocks have been pushed upward. That softened prices, with the season average computed at $3.05 for producers.

For sorghum, acreage increased this year, and production is expected to rise by 430 million bushels with the help of a higher yield. New crop sorghum prices should be lower than the old crop, which averaged at $3.30 per bushel. The new crop is expected to range $2.40 to $3.00.

For barley, production is forecast at 231 million bushels, up 51 million from last year. Imports are up to bolster the domestic supply, and to help meet the increased demand. Barley prices are expected to be $2.75 to $3.35 for the new crop, compared to $2.85 for the 2006 crop.

For oats, production is forecast at 100.9 million bushels, down 7.2 million from 2006 on fewer acres, but even with a higher yield than last year. The overall supply will be down, even with higher beginning stocks. Oat production will be about 20% of what it was in 1985-86. Oat prices for the producer are expected between $1.60 and $2.20, compared to a $1.87 average last year.

Worldwide, coarse grain production will be 1.066 billion tons. A 9 million ton increase results from increased US corn production, and negates a 2 million ton global decrease. That is because many parts of the world are having weather problems from either being too wet or too dry. Comparatively, global use is projected at 1.059 billion tons. Global ending stocks are estimated at 137 million tons. With the recent slowdown in US corn exports, USDA has also lowered its estimate of new crop exports to about 2.1 billion bushels.

Summary:

The hot domestic market for corn in the past year cooled off some US export business, because of the same high prices that caused many US livestock producers to rethink their expansion plans. With the feed grain market trying to find equilibrium between the ethanol and the livestock and export industries, the market will be supplied with an abundant crop that will soften prices for the near future. Livestock producers who’ve been challenged with high feed grain prices will benefit from the current dynamics and still have the lesser priced distiller’s grains as an alternate source.

5m Editor