22 November 2010

16 minute read

Lower forecast corn yields this month reduce US corn production 124 million bushels to 12.54 billion. Fractional changes are made in sorghum, barley, and oats because of late harvests. Corn used for ethanol production is raised. Corn used domestically for feed and residual and for export are both lowered. These supply and use changes reduce projected ending stocks 75 million bushels. As projected, 2010/11 ending stocks would be the lowest since 1995/96 and represent a carry-out of 6.2 per cent of projected usage. Price prospects for corn and sorghum are up this month. Foreign corn production is projected higher, with increased corn production in China. Rising foreign consumption combines with the smaller US crop to leave global corn stocks at a four-year low.

DOMESTIC OUTLOOK

Feed Grain Production Prospects Lowered in 2010/11

US feed grain production for 2010/11 is forecast at 332.2 million metric tons, down from 335.4 million last month and down from 349 million in 2009/10. The month-to-month decrease results mostly from lower forecast corn production. Downward revisions for barley and oats production and a small increase for sorghum are all very small. There are no changes in imports, therefore, total supply is decreased about the same amount as production.

Total 2010/11 feed grain utilization is projected at 357.7 million tons, down from 359.0 million last month but up from 350.2 million in 2009/10. Feed and residual use was lowered 2.5 million tons this month to 139.9 million tons. Food, seed and industrial (FSI) use increased 2.5 million tons this month to 164 million because of increased ethanol production. Exports are lowered this month to 53.9 million tons from 55.1 million last month and down from 54.8 million in 2009/10 as a result of lowered corn exports. Forecast feed grain ending stocks are decreased this month to 24.6 million tons, down from 26.5 million last month. Price prospects for corn and sorghum are up this month for 2010/11.

Minor changes were made for the 2009/10 marketing year for feed grains as a result of final ethanol production numbers and exports, which raised corn FSI use but lowered exports and resulted in lower corn feed and residual use. Total feed grain feed and residual use decreased 193,000 tons, to 137.6 million for 2009/10.

Feed Use

On a September-August marketing year basis for 2010/11, feed and residual use for the four feed grains plus wheat is projected to total 144.95 million tons, up 3.4 million from the adjusted total of 141.55 million tons in 2009/10. Corn is estimated to account for 93 per cent of feed and residual use in 2010/11, the same as in 2009/10.

The projected index of grain-consuming animal units (GCAU) in 2010/11 is 92.3 million units, up from the adjusted unit of 91.6 million in 2009/10. Feed and residual per GCAU in 2010/11 is estimated at 1.57 tons, up from 1.54 tons in 2009/10. In the index components, GCAUs are increased this month for cattle on feed and broilers.

Despite higher prices forecast for feed grains this month, total US meat production is raised for 2010 and 2011. Egg production was reduced slightly for 2010 and unchanged for 2011, and milk production was unchanged for 2010 and reduced slightly for 2011.

Beef production is raised largely due to a higher-than-expected number of cattle placed on feed lots during the third quarter of 2010. USDA's 22 October Cattle on Feed report indicated placement numbers up eight per cent in September from last month and three per cent above 2009. In addition, the total inventory of cattle and calves on feed for slaughter market in October was up six per cent from last month and three per cent from 2009. In the trade side, export of beef is raised in 2010 and 2011 on stronger growth to Asian markets. Continued strong demand for cattle in 2010 and 2011 is expected to result in higher demand of feed despite higher grain prices.

Pork production is raised largely due to exceptional gains in carcass weights. USDA's 22 October Livestock Slaughter report indicated federally inspected average dressed weight of hogs at 202 pounds in September, up one per cent from the month before but the same as last year. Pork production is forecast higher in early 2011, as some of the weight gains seen in late 2010 are expected to carry into 2011. Feed use demand is expected to remain strong for the remainder of 2010, but higher feed costs are anticipated to moderate the increase in carcass weights by mid-2011 and lower exports.

Forecast milk production for 2010 is unchanged from last month. However, 2011 production is lowered from last month as forecast cow numbers are reduced from last month. Milk per cow is adjusted slightly higher in early 2011. This forecast is supported as historical trends show a decline in the number of milk cows and an increase in productivity per cow. On the trade side, exports in 2010 and 2011 are forecast higher due to continued global economic recovery and favorable exchange rates. Nevertheless, higher feed prices and lower forecast milk prices are expected to limit the rate of growth and the amount of feed use, especially in 2011.

Broiler hatchery data from USDA's 3 November Broiler Hatchery report points toward continued gains in broiler production as the number of broiler-type eggs set is up eight per cent and broiler-type chicks placed is up five per cent from the comparable week a year earlier. Moreover, based on USDA's 25 October Poultry Slaughter report, broiler production is up one per cent from last month and up five per cent from last year, which led to higher production forecast in 2010 and 2011. Higher than expected feed costs are expected to slow the rate of expansion and feed use of the broiler sector later in 2011.

USDA's 22 October Chickens and Eggs report showed pullets added to the layers on hand flock in the month of August was down 11 per cent from last year but pullets on hand on 1 September were up one per cent from last year. As a result, the egg production forecast is lowered this month for 2010 but unchanged for 2011. Egg prices for 2010 are forecast higher as prices recovered from their late summer decline but the 2011 forecast is unchanged. With reduced egg production and rising feed costs, feed use is expected to be lower.

USDA's 15 October Turkey Hatchery report indicated that eggs in incubators on 1 October were down four per cent from a month ago. In addition, turkey poults hatched and net poults placed during September were down four per cent each from a month ago. The Poultry Slaughter report also showed a three-per-cent decline in total turkey live weight. The rate of decline in 2010 turkey production is slower than last month's forecast, while 2011 production forecast is unchanged. With declining eggs in incubators, poults hatched and placed, and rising feed costs, producers are expected to slow down feed use.

Minor Changes Made to 2009/10 Marketing Year

Corn FSI use is raised 8.2 million bushels this month, as corn used for ethanol is raised by the same amount. This change is based on ethanol production data from the US Energy Information Administration. Corn exports were also lowered based on trade data from the Bureau of Census for August. As a result of these adjustments, feed and residual use is lowered 7.5 million bushels to 5,159 million bushels for 2009/10.

2010/11 Corn Crop Forecast Lowered

US corn production is forecast at 12.540 billion bushels, down 124 million from last month but still the third largest on record. Based on conditions as of 1 November, yields are expected to average 154.3 bushels per acre, down 1.5 bushels from last month and 10.4 bushels below last year.

Despite the drop from October, this yield, if realized, would be the third highest on record. Beginning stocks and imports are unchanged this month, resulting in projected total supply of 14.257 billion bushels, down from last month's 14.382 billion. The 1 November corn objective yield data indicate the second highest number of ears per acre for the combined 10 objective yield states (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin), behind the record year of 2009. Record-high ear counts are forecast in Iowa, Ohio and Wisconsin.

Favourable weather conditions during the month of October led to the rapid harvesting of this year's corn crop. As of 31 October, 91 per cent of the corn acreage was harvested, 67 percentage points ahead of last year and 30 percentage points ahead of the five-year average. Harvest was ahead of the normal pace in all 18 major producing states, with Illinois, Indiana and Kansas all having less than five per cent of the crop remaining in the field. Harvest was complete in Kentucky, North Carolina and Tennessee by month's end.

Feed and residual use is projected 100 million bushels lower with the smaller forecast crop and higher prices expected to reduce feeding. Exports are lowered 50 million bushels as higher prices trim export demand. Corn use for ethanol is raised 100 million bushels with record October ethanol production indicated by weekly Energy Information Administration data and favorable ethanol producer margins. Ethanol prices continue to track higher with corn prices, supporting returns for ethanol producers. Although small relative to domestic usage, higher ethanol exports and lower imports are also expected to add to corn use for ethanol, with high sugar prices limiting the availability of ethanol from Brazil.

Corn ending stocks for 2010/11 are projected 75 million bushels lower. At 827 million bushels, ending stocks would be the lowest since 1995/96 and represent a carryout of 6.2 per cent of projected usage. In 1995/96, carry-out dropped to five per cent of estimated usage. Lower projected ending stocks and strength in futures prices raise prospects for 2010/11 prices received by farmers. The projected season-average price is raised 20 cents on both ends of the range to $4.80 to $5.60 per bushel, compared with $3.55 in 2009/10. Since many farmers likely forward priced some of their crop before prices rose sharply this fall, prices received by farmers are expected to remain below cash prices.

Sorghum Price Prospects Raised in 2010/11

Sorghum production increased slightly this month, raising total supply 390,000 bushels from last month to 378.9 million for 2010/11. This increase resulted in a corresponding increase in ending stocks to 38.9 million bushels. Reflecting a higher expected corn price and strong marketings to date, the projected price range for sorghum is raised to $4.90 to $5.70 per bushel, up 10 cents on both ends of the range, compared with $3.22 per bushel in 2009/10.

Barley and Oats Prices Lowered

Barley yield is estimated at 73.1 bushels per acre, down 0.5 bushels per acre this month; barley production for 2010/11 is lowered 2 million this month to 180 million bushels. Total use remains unchanged this month at 225 million bushels for 2010/11. As a result, ending stocks are forecast at 86 million bushels, down one million. The projected price range is lowered five cents on the low end of the range and 15 cents on the high end of the range at $3.75 to $4.25 per bushel, compared to $4.66 per bushel last year.

Oats yield is estimated 0.3 bushels per acre lower to 64.3 bushels this month. Oats production for 2010/11 is lowered one million bushels to 81 million bushels. The projected price range is lowered to $2.15 to $2.55 per bushel, down five cents on the low end of the range and down 15 cents on the high end of the range, compared with $2.02 per bushel last year.

This month's reduction in the projected price ranges for barley and oats is made to reflect prices received to date by producers. Although cash prices are expected to remain supported by rising corn prices over the coming months, a large share of barley and oats crops have already been sold since the marketing year began on 1 June. Portions of both crops, particularly malting barley, are also contracted further limiting future gains in their season-average prices for 2010/11.

INTERNATIONAL OUTLOOK

World Coarse Grain Production: Mostly a US Reduction

Global coarse grain production for 2010/11 is projected down 3.6 million tons this month to 1,085.2 million. Foreign production is trimmed 0.4 million tons to 752.8 million, with increases nearly offsetting reductions. Foreign corn production is up 2.0 million tons to a record 500.0 million, mostly due to an increase for China. Foreign sorghum is up 0.25 million tons to a record 55.0 million, as good rains and soil moisture in eastern Australia provide for favorable sorghum prospects there. However, these increases are more than offset by reductions in oats, down 1.3 million tons; barley, reduced 0.8 million tons; rye, cut 0.3 million tons and millet and mixed grain, each trimmed 0.1 million tons.

China's corn production forecast for 2010/11 is increased 2.0 million tons to a record 168.0 million as recently published data for 2009/10 indicate higher-than-expected corn area. Growing conditions and harvest weather were mostly favourable, so the projected yield is nearly unchanged this month. Corn production estimated for 2009/10 was increased 3.0 million tons to 158.0 million based on the higher reported area. However, the yield reported by the National Bureau of Statistics is hard to reconcile with the unfavourable weather in key growing regions, and USDA is maintaining a lower estimated yield. The current 2009/10 estimate and 2010/11 forecast implies a year-to-year production increase of 10 million tons, and these yield levels reflect the improved weather.

This month's numbers reflect information lowering China's oats area back to 2005/06. There are also smaller reductions to barley and millet area. Barley yields for 2010/11 are also reduced, cutting production 0.7 million tons to 2.4 million. China's oats production projection is reduced 0.2 million tons to 0.4 million, and millet is trimmed 0.1 million, to 1.5 million. The reduction in other feed grains offsets about half the increase in corn.

Australia's coarse grain production for 2010/11 is forecast up 0.6 million tons to 11.5 million. Good yields in eastern Australia are expected to more than offset drought in the west, boosting barley production 0.3 million tons this month to 7.9 million. Good soil moisture boosts prospects for sorghum yields, increasing production 0.25 million tons to 1.95 million.

Moldova reported excellent corn yields for 2010/11, though area was nearly unchanged from the previous year, boosting production 0.2 million tons to 1.4 million.

Russia's coarse grain production is reduced 1.4 million tons this month to 17.3 million. Harvest reports indicate drought reduced yields for oats and rye, cutting oats production 1.0 million tons to 3.5 million and rye production 0.4 million to 2.1 million.

Based on small revisions to several member country harvest reports, EU coarse grain production is reduced 0.4 million tons this month to 138.8 million as 0.1- million-ton reductions each for barley, corn, mixed grain and oats more than offset a small increase for rye. Belarus barley yield was reported lower than expected, reducing production 0.2 million tons to 1.4 million. Chile reported coarse grain production down 0.1 million tons to 1.7 million, with small declines for corn, oats, and barley. Also, Ukraine reported a slight reduction in millet production based on lower area.

Foreign coarse grain beginning stocks for 2010/11 increased 0.3 million tons to 150.9 million, offsetting a small portion of the production decline. More complete trade data for 2009/10 boosted imports and ending stocks for several importing countries, and EU production for 2009/10 was revised up slightly. These increases more than offset a 0.8-million-ton decline for Argentina, where increased corn feed use is estimated for 2009/10, cutting expected stocks.

Changes in Global Coarse Grain Use Nearly Offsetting This Month

World coarse grain use projected for 2010/11 is down 0.2 million tons to 1,124.0 million, as changes for different countries mostly offset each other. The largest increase in projected use is for China, with coarse grain use up 1.5 million tons. Forecast corn feed use is boosted 2.0 million tons this month based on increased production, but reduced use of barley and oats is partly offsetting. Argentina's 2010/11 corn feed use is up 0.5 million tons to 5.5 million as high meat prices boost feed prospects for both 2009/10 and 2010/11. There are small increases this month in projected coarse grain use for Saudi Arabia, Malaysia, Australia, Moldova and Morocco.

Russia's projected 2010/11 coarse grain use is cut 1.3 million tons this month to 20.4 million. Oats feed use is reduced 0.75 million tons due to lower production, and food seed and industrial use is cut a combined 0.55 million for oats and rye. EU coarse grain feed use is projected 0.65 million tons lower this month mostly due to reduced prospects for corn as more is expected to be exported. Corn feed use in the Philippines is reduced 0.3 million tons to 5.0 million as meat imports limit the growth in corn feed use. Corn use in South Korea is reduced 0.3 million tons to 9.1 million as a 0.5-million-ton reduction in corn feed use due to increased feed-quality wheat imports is partly offset by an increase in expected food and industrial use. There are smaller declines in expected coarse grain use for Israel, Chile, Belarus and Ukraine.

World 2010/11 Coarse Grain Ending Stocks Prospects Reduced

Global coarse grain stocks are projected down 3.1 million tons to 160.2 million, the lowest since 2006/07. This sum of local marketing year ending stocks equals 14 per cent of projected 2010/11 use, down from 18 per cent a year earlier.

The largest reduction in projected coarse grain stocks is for Argentina, down 1.3 million tons to 1.6 million. Most of the decline, 1.2 million tons, is in corn, with increased domestic feed use. Serbia is projected to reduce corn stocks 0.5 million tons to 1.2 million as strong prices are expected to encourage exports and reverse the stock buildup that occurred in 2009/10. With reduced production, ending stocks of coarse grain in Russia and Belarus are lowered 0.2 million and 0.1 million tons, respectively. There are also small reductions this month in projected ending stocks for Chile, China and Jordan.

Increased coarse grain ending stocks for 2010/11 are projected this month for a number of countries, but the increases are small. Australia is up 0.4 million tons to 2.6 million because of increased sorghum and barley production. The EU is increased 0.2 million tons to 10.7 million as feed use is reduced more than exports are increased. Increased beginning stocks boost ending stocks 0.1 million tons for both Malaysia and South Korea. There are smaller increases this month for Moldova, Saudi Arabia, Israel, the Philippines, Ukraine, Switzerland and Tunisia.

US Corn Export Prospects Reduced

US corn exports for trade year 2010/11 (October-September) are reduced 1.5 million tons to 50.0 million, virtually the same as the previous year. (The September-August local marketing year is cut 50 million bushels to 1.95 billion bushels, down two per cent from the previous year.) Strong US prices are expected to limit importers' purchases and encourage some other countries to export.

US export shipments are starting 2010/11 at a modest pace, partly due to strong competition for logistics, especially through Pacific Northwest ports, caused by strong soybean exports. Corn exports during October at 3.4 million tons (Inspections) are well below the pace needed to reach the forecast. However, at the end of October, outstanding export sales were 12.8 million tons, up from 10.1 million a year ago.

Global corn trade is reduced 0.5 million tons to 93.2 million. Corn import prospects for South Korea and Philippines are each reduced 0.3 million tons this month. South Korea is importing more feed-quality wheat and less corn. Rains have damaged some wheat in Australia and Canada, and discounted feed-quality wheat provides an attractive substitute for relatively high priced corn. In the Philippines, meat imports are expected to tone down the rate of growth of meat production and corn feeding, limiting the need to import corn.

Strong corn prices are expected to increase some foreign exporters to boost shipments. EU corn exports are increased 0.5 million tons to 1.0 million as the large corn crops recently harvested in Romania and Bulgaria are in a good position to be shipped to non-EU destinations. Export licences reflect increasing corn export activity. Serbia's corn export prospects are boosted 0.5 million tons this month to 2.5 million as beginning stocks and good production provide ample supplies. Strong prices provide an incentive to overcome logistical problems.

As corn trade data for 2009/10 becomes more complete, estimated trade has increased, up 0.8 million tons this month to 92.5 million. World corn trade in 2009/10 is up 10 per cent from the previous year but down six per cent compared to the 2007/08 record. Recently released export data indicate stronger-than-expected corn exports from Brazil, up 0.4 million tons to 8.6 million, and for India, up 0.3 million to 1.3 million. Imports for Malaysia are boosted 0.3 million tons to 2.8 million, and Egypt is increased 0.2 million to 5.5 million.

Barley trade projected for 2010/11 (October-September) was little changed this month but 2009/10 revisions boosted Ukraine exports and imports for Saudi Arabia. Sorghum trade for 2010/11 was increased slightly this month with increased exports for Australia and imports by the EU.

Further Reading

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