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US Feed Outlook

13 November 2008

USDA Economic Research Service

All feed grains prices are lowered this month as financial and macroeconomic developments have combined with supply and demand fundamentals to reduce grain prices in 2008/09, reports the ERS USDA.

U.S. Corn Production and Exports Lower

Lower yields accounted for the decrease in corn production this month. The U.S. corn yield was down 0.1 bushel per acre to 153.8, pushing production down 13 million bushels to 12 billion. Sorghum yields were also lowered 0.9 bushel per acre, resulting in a 7-million-bushel reduction in sorghum production.

U.S. 2008/09 corn exports were reduced 50 million bushels this month to 1.9 billion. Stiff competition and reduced world corn trade prospects are expected to curtail U.S. exports. The delayed U.S. corn harvest has also contributed to the slow pace of early export shipments. At the end of October, outstanding export sales of U.S. corn were down sharply from a year ago. For many importers, recent declines in U.S. corn prices have been partly offset by a strengthening U.S. dollar.

Domestic Outlook

Feed Grain Production Lowered in 2008/09

U.S. feed grain production for 2008/09 is forecast at 323.6 million metric tons, down from 324.1 million last month and down from 350.9 million in 2007/08. The month-to-month decrease came from lower forecast corn and sorghum production; barley and oats are unchanged this month. There were no changes in beginning stocks or imports, so total supply is decreased the same amount as production.

Total 2008/09 feed grain utilization is projected at 338.8 million tons, down from 340.2 million last month and from 345.3 million in 2007/08. Feed and residual use is decreased for sorghum, slightly lowering domestic use to 286.4 million tons from 286.5 million last month, but up from 275.4 million in 2007/08. Exports are lowered this month to 52.4 million tons from 53.7 million, and down from 69.9 million in 2007/08. Forecast feed grain stocks are increased this month to 32.7 million tons, down from 45.1 million in 2007/08. Financial and macroeconomic developments have combined with supply and demand fundamentals to reduce grain prices in 2008/09.

On a September-August marketing year basis, feed and residual use for the four feed grains plus wheat in 2008/09 is projected to total 147 million metric tons, down from 163.2 million a year earlier. Corn is estimated to account for 91 percent of the total, down from 93 percent in 2007/08. The projected index of grainconsuming animal units (GCAU) in 2008/09 is 93.6 million, down from last year’s 94.9 million units. Feed and residual use per GCAU is estimated at 1.57 tons, down from 1.72 tons in 2007/08.

The year-to-year decrease in GCAUs occurred because production for all animal categories, except dairy, is expected to decrease in 2009. Total poultry production in 2009 was projected down 1.4 percent from 2008. Pork production in 2009 is down 1.6 percent from 2008 due to slower than expected pace of hog slaughter this quarter. Beef production is also forecast down slightly from 2008. Milk production in 2009 is expected to increase to 191.5 billion pounds, up from 189.8 billion pounds in 2008, due to increased milk-per-cow estimates.

Minor Changes Made to 2007/08 Marketing Year

The following changes were made to the 2007/08 balance sheets:

  • Corn. Imports are raised to 20 million bushels from 18 million; feed and residual use is lowered 25 million bushels to 5.974 billion; ethanol use is raised from 3 billion bushels to 3.026 billion.
  • Sorghum. Feed and residual use is raised 1 million bushels to 172 million; exports are lowered slightly based on actual August numbers, but not enough to affect the rounded number.

2008/09 Corn Crop Forecast Lowered Slightly

Corn production is forecast at 12 billion bushels, down 13 million from last month and down 8 percent from last year. Based on conditions as of November 1, yields are expected to average 153.8 bushels per acre, down 0.1 bushel from last month but 2.7 bushels above last year. If realized, this will be the second highest yield on record, behind 2004. Production will be the second highest ever, behind last year. Beginning stocks and imports are unchanged this month, resulting in projected total supply of 13.7 billion bushels, down from last year’s 14.4 billion.



The November 1 corn objective yield data indicate a record number of ears per acre for the 10 objective yield States combined (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin). Record high ear counts are forecast in all States except Kansas and Nebraska.

Total corn use for 2008/09 is decreased from last month as projected exports are lowered 50 million bushels to 1.9 billion. Other uses of corn are unchanged. Lower exports increase ending stocks to 1.,124 billion bushels, up 36 million from last month. Higher projected ending stocks, larger foreign grain supplies, and continued declines in cash and futures prices are reducing prospects for 2008/09 prices received by producers. The projected farm price is lowered on both ends of the range to $4.00-$4.80 per bushel, compared with the record $4.20 in 2007/08.

Sorghum Production Down in 2008/09

Sorghum production is forecast at 465 million bushels, down 7 million from last month and down from 505 million last year. The forecast sorghum yield is lowered to 63.0 bushels per acre, down 0.9 bushel from last month and down 11.2 bushels from last year. Beginning stocks are unchanged this month, so total supply is down 7 million bushels to 518 million.

Forecast feed and residual use is decreased 5 million bushels to 240 million this month due to the smaller sorghum crop. Food, seed, and industrial use and exports are unchanged. The changes in feed and residual use and production result in a 2- million-bushel decrease in ending stocks to 68 million bushels, up from 53 million in 2007/08. The projected price range is lowered to $3.40-$4.20 per bushel, compared with $4.08 per bushel in 2007/08.



Barley and Oat Prices Lowered

Barley and oats supply and use are unchanged this month. Prices received by farmers for barley are projected at $4.70-$5.30 per bushel, compared with $4.60- $5.60 last month. Oat prices are projected at $2.70-$3.10 per bushel, compared with $2.65-$3.35 last month.

International Outlook

2008/09 Supplies Boosted by Increased Beginning Stocks and Production

World coarse grains supplies in 2008/09 are projected up 5.6 million tons this month to 1.246 billion tons. Increased production accounts for 1.5 million tons of the increase with beginning stocks accounting for the other 4.1 million tons. While corn production is projected up slightly, beginning stocks are sharply higher. Global barley production is down slightly this month, but beginning stocks are increased. World sorghum production is also forecast down slightly this month, but mixed grain, rye, millet, and oats are forecast higher.



Global corn production is projected up 300,000 tons this month to 781.4 million as increases and decreases are mostly offsetting. The largest change is a 1-million-ton reduction for Argentina to 18.0 million. Dry soils in some areas and high production costs are expected to limit corn area, down 5 percent this month. The reduction in Argentina’s corn production prospects is more than offset by increases reported for some Northern Hemisphere producers based on harvest reports. Russia’s corn harvest in 2008/09 is increased 700,000 tons to a record 6.5 million. Weather has been generally favorable, with good rains and mild temperatures. At the end of October, two-thirds of the crop was harvested, with average yields up 32 percent over a year ago. Corn seed imports are likely helping to boost yields. Similarly, Ukraine’s corn production is up 500,000 tons this month to 9.5 million. EU-27 corn production is revised up 300,000 tons as a reduction for Italy is more than offset by increased production reported for France, Spain, Poland, Austria, Slovenia, and others. Favorable rains boosted projected corn production for Thailand slightly this month.

World barley production fro 2008/09 is reduced slightly this month to 153.3 million tons. Increases based on harvest reports in Russia and the EU-27 are offset by declines in prospects for the Southern Hemisphere. EU-27 production is up 1.0 million tons to 65.4 million. The largest increases were reported for Denmark and the UK, but several other EU-27 countries revised barley production estimates. Growing conditions were mostly favorable across the EU-27, and average yields are the second highest ever, boosting barley production to the largest in 11 years. Russia’s barley production is up 500,000 tons this month as spring barley yields have been reported higher than expected. These increases are offset by Southern Hemisphere reductions. Barley production prospects in Australia are down 1.0 million tons this month to 6.5 million due to September-October dryness in South Australia, Victoria, and parts of New South Wales. Barley prospects in Argentina are reduced 450,000 tons this month to 1.6 million as a dry winter extended into the spring in some areas, limiting barley area expansion. Barley production prospects in South Africa were reduced slightly this month. Revised yield and production data for China for 2006/07 and 2007/08 reduced the yield trend, trimming prospects for 2008/09 slightly.

World mixed grain, rye, and oat production are up this month due mostly to higher production reported in the EU-27. Russia’s millet production is also up this month.

Global corn beginning stocks are up 3.6 million tons this month to 126.5 million. There is a 3- million-ton increase for Brazil to 13.2 million. Based on trade data and input from USDA’s Foreign Agricultural Service post in Brazil, corn exports for the 2007/08 trade year are finalized down 1.1 million tons this month to 7.9 million. The local marketing year exports are reduced 500,000 tons to 7.0 million. Brazil’s corn feed use for 2007/08 is reduced 2.0 million tons and food seed and industrial use trimmed 500,000 tons. With a large dry-season, second crop in 2007/08, Brazil will carry in exceptionally large corn stocks at the start of 2008/09. Increased 2007/08 corn production for China and Argentina is boosting stock prospects by 500,000 and 400,000 tons, respectively. For South Korea, increased 2007/08 imports and reduced use are boosting 2008/09 beginning stocks by 700,000 tons. Reduced 2007/08 corn exports are boosting 2008/09 beginning stocks for Paraguay, but increased 2007/08 corn exports are trimming 2008/09 stock prospects for South Africa.

However, for the EU-27, an increase in estimated 2007/08 feed use of corn is reducing 2008/09 beginning stocks by 800,000 tons. EU-27 2008/09 barley beginning stocks are up 500,000 tons, due mostly to less estimated barley feed use for 2007/08. This boosts global barley beginning stocks for 2008/09.

World Coarse Grain Use Trimmed Slightly This Month

Global financial problems and slowing macroeconomic prospects contributed to a slight reduction in projected 2008/09 coarse grain use this month. Despite increased supplies, use is projected down 400,000 tons to 1.095 billion tons.

Increased production boosted projected coarse grain use for Russia, up 600,000 tons this month. Increased production in the EU-27 is also expected to raise consumption 300,000 tons. In Russia, the lack of sufficient storage and transportation facilities may result in some of this year’s very large crop disappearing as losses and waste which are included in feed and residual use.

Japan’s 2007/08 corn imports and use are revised up, boosting prospects for 2008/09 use by 400,000 tons. Nigeria has legalized corn imports, boosting use prospects slightly.

Reduced production prospects are expected to trim use projections for Australia, down 500,000 tons, and for Argentina, down 250,000 million tons. Canada is expected to export more barley and feed less of it to domestic animals, cutting use forecasts for coarse grains by 350,000 tons. Reduced prospects for the consumption of meat caused small declines in coarse grain use this month for Algeria, the Dominican Republic, Colombia, Thailand, and Morocco. Coarse grain consumption is also reduced for the United States, with small reductions in expected sorghum and rye feed use.

A large adjustment that did not affect total use was a shift of 2.0 million tons of corn use in China from feed use to the food, seed, and industrial use category. This reflects reports of strong industrial use.

Global Ending Stocks Increased This Month

World coarse grain ending stocks for 2008/09 are projected up 6.0 million tons this month to 150.9 million; however, global stocks for 2008/09 are expected to fall 3.2 million tons from 2007/08. Foreign coarse grains ending stocks, projected at 118.2 million tons in 2008/09, are expected to be 9.2 million tons larger than beginning stocks. U.S. coarse grain ending stocks, however, are projected to decline more than foreign stocks increase as U.S. coarse grain use rises and production falls in 2008/09.

The largest increase in projected 2008/09 ending stocks this month is a 3.0-millionton increase in corn stocks for Brazil. The increased beginning stocks of corn are expected to be carried through the year. Russia’s projected coarse grain ending stocks are up 900,000 tons to 6.0 million due to increased production prospects. South Korea, with beginning stocks revised up, is expected to carry out 700,000 tons more coarse grains in 2008/09, putting projected ending stocks at 2.1 million tons. The EU-27, with increased production of several coarse grains this month, is only expected to increase ending stocks 500,000 tons to 18.6 million as increased

use, increased exports, and reduced imports limit increases in projected ending stocks. For China, increased 2007 corn production boosted 2008/09 beginning stocks and in turn increased 2008/09 projected ending stocks 500,000 tons. Reduced corn exports estimated for Paraguay in 2007/08 boosted 2008/09 beginning stocks and increased projected ending stocks 500,000 tons. Ending stocks are also increased this month for Thailand, Algeria, Nigeria, and others.

Partly offsetting those increases are reductions in ending stock prospects for South Africa, down 600,000 tons due to increased 2007/08 corn exports and for Canada, down 600,000 tons due mostly to increased barley export prospects. Coarse grain ending stock prospects are also reduced this month for Ukraine, Argentina, and Morocco.

U.S. Corn Exports, World Corn Trade Reduced This Month

U.S. corn exports projected for 2008/09 (October-September) are reduced 1.5 million tons this month to 47.5 million. Stiff competition and reduced world corn trade prospects are expected to curtail U.S. exports. The delayed U.S. corn harvest contributed to the slow pace of export shipments during October 2008 reported by both Export Sales and Inspections. Moreover, at the end of October, outstanding export sales of U.S. corn were 10.2 million tons, down from 18.8 million a year ago. U.S. corn is facing tough price competition from Brazilian corn, EU corn, Ukrainian corn, and feed-quality wheat from the Black Sea. The strength of the U.S. dollar is offsetting part of the recent declines in U.S. corn prices.

EU-27 corn exports were increased 500,000 tons in the October 28, 2008, revisions that reduced U.S. exports based on corrections to the October Crop Production report. EU-27 corn exports are increased an additional 500,000 tons this month to 2.0 million. Corn from Romania, Bulgaria, and Hungary is expected to move into export channels through the Black Sea. In recent weeks, corn export licenses have increased rapidly.

Large corn supplies in Brazil and a weakening currency are expected to make Brazil’s corn exports very competitive. Projected 2008/09 October-September exports are up 500,000 tons this month to 9.5 million. However, with reduced production prospects, Argentina’s corn exports are trimmed 500,000 tons to 10.0 million.

Corn export prospects for Ukraine are up 500,000 tons to 3.5 million this month. With higher production, corn prices in Ukraine are expected to fall enough to spur increased exports.

World corn trade in 2008/09 is projected down 500,000 tons this month to 81.6 million. With ample production of feed grains and huge supplies of low-quality wheat, EU-27 corn imports are projected down 500,000 tons this month to 2.0 million. Serbia’s corn has access to the EU-27 market, and Spain and Portugal are expected to continue to import some corn from outside the EU as part of their accession agreement. Corn is expected to be exported by the EU through the Black Sea, with world imports and exports each projected to reach 2.0 million tons.

Partly due to tough financial and macroeconomic conditions, corn import prospects for 2008/09 are reduced slightly this month for Algeria, Colombia, the Dominican Republic, and Morocco. These reductions are offset by increases for Japan and Nigeria. Japan’s import prospects for 2008/09 are increased 400,000 tons to 16.5 million, based on increased imports and use estimated for 2007/08 when imports reached 16.6 million tons. Nigeria has reportedly just legalized corn imports, now expected to reach 200,000 tons.

With recent trade data, record corn trade estimates for 2007/08 are reduced 1.1 million tons this month to 95.9 million. Brazil’s exports are cut 1.1 million tons and Paraguay’s 500,000 tons. Increases for the United States, Argentina, Ukraine and Thailand are partly offsetting.

World Barley Trade To Grow in 2008/09

World barley trade in 2008/09 (October-September) is projected up 300,000 tons this month to 19.3 million. This would be the largest world barley trade in 17 years. Global barley production is forecast to be the largest in over a decade, so exportable supplies are ample. Barley export projections are reduced this month for Australia and Argentina due to lower production prospects. However, export prospects are raised for the EU-27 and Canada.

In world 2008/09 oats trade, Canada’s exports are increased this month and EU-27 exports reduced. Rye and sorghum trade projections for 2008/09 are unchanged.

November 2008

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