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13 February 2013

USDA Feed Outlook - February 2013

In trade year 2012/13 (October 2012 through September 2013) Brazil is projected to export more corn (24.5 million tons) than the United States (24.0 million). This is a dramatic change from the historical norm for the last century, when the US share of world corn trade reached over 80 percent in 1979/80 and often exceeded two-thirds. In 2012/13, the US share is forecast to fall to 24.6 percent while Brazil is forecast to increase to 25.1 percent.

Brazil Projected To Be World’s Largest Corn Exporter in 2012/13

In the first four months of the trade year (October-January), Brazil has exported 13.75 million tons of corn, more than double US shipments of 5.9 million. Brazil’s corn exports are expected to slow significantly in coming months as soybean exports limit the transportation and port capacity available to move corn exports. However, over the last 8 months of the year, corn exports need to average only 1.3 million tons per month to reach the 24.5 million annual forecast. US corn exports need to increase to an average 2.3 million tons per month to reach the projected 24.0 million. This is a relatively slow pace compared with recent years, but as of January 31, 2013, corn outstanding export sales were 5.5 million tons, down from 10.3 million a year earlier. Based on these figures, US export sales and shipments of corn are expected to increase significantly in coming months.

US corn use for 2012/13 is adjusted slightly this month to reflect diminished export prospects but higher food, seed, and industrial use. Corn ending stocks are projected higher. The projected corn price for 2012/13 is lowered $0.05 per bushel on the low end of the range and $0.35 per bushel on the high end of the range to $6.75 to $7.65 per bushel.

Domestic

Feed Grain Balance Sheet Adjusted for Smaller Export Pace and Higher FSI Use

The US feed grain supply for 2012/13 remained unchanged from last month’s projection at 318.3 million metric tons. Supplies are projected 11 percent below the 2011/12 marketing year level of 358.5 million tons. Feed grain use is lowered slightly this month. At the projected 299.4 million tons, feed grain use is 9 percent below 2011/12 and the lowest since the 2004/05 marketing year. Carryout is projected at 18.9 million tons, 32 percent below 2011/12 and the lowest since 1995/96. Usage is projected to exceed supply as lower corn production more than offsets higher production for sorghum, barley, and oats.

Feed and residual use for the four feed grains plus wheat on a September-August marketing year basis is virtually unchanged this month at 126.5 million tons. Reduced sorghum feed use is offset by increased prospects for wheat feed and residual during the March-May quarter. Grain-consuming animal units (GCAUs) are projected at 91.7 million units this month, up slightly from last month due to increases in forecast beef, pork, broiler, and turkey production. Feed and residual per animal unit in 2012/13 is unchanged this month at 1.38 tons per GCAU, compared with 1.41 tons in 2011/12.

Forecast Corn Exports Lowered and Sweetener Use Bumped Up

Forecast US corn exports were lowered 50 million bushels this month based on the year-to-date pace of sales and shipments and stronger expected competition, particularly from Brazil. Corn production is forecast up this month for Brazil and Ukraine, and high US prices have enabled those countries to usurp some markets previously supplied by the United States. This month’s 2012/13 export projection of 900 million bushels is 42 percent below last season’s 1,543 million and the lowest since 1971/72.

Projected ending stocks for 2012/13 of 632 million bushels are up 30 million from last month. The projected stocks-to-use ratio at 5.6 percent is up from 5.3 percent last month and still the lowest since 1995/96.

The projected season-average corn price for 2012/13 was lowered $0.05 per bushel on the low end of the range and $0.35 per bushel on the high end of the range to $6.75 to $7.65 per bushel. The range is lowered 20 cents at the midpoint to $7.20 per bushel. Prices were lowered based on recent market trends and the volume of corn marketed to date. This compares to the previous record of $6.22 per bushel in 2011/12.

March Planting Intentions and Weather Are Keys to Price Prospects

Given the low stocks-to-use ratio projected for corn, increasing market prices are likely to ration demand for the balance of the year. The projected 5.6 percent stocks-to-use ratio translates into a 20.5-day supply of old-crop corn available for use at the beginning of the 2013/14 marketing year; however, some new-crop corn will be harvested and available for use before the September 1 start of the new marketing year.

Sorghum Feed and Residual Lowered, Ethanol Use Increased

Market developments result in modifications to all categories of sorghum domestic use this month. Sorghum feed and residual is cut 25 million bushels to 100 million in response to multiple industry reports of lower-than-expected sorghum feeding. Despite this reduction, the 2012/13 estimate is 41 percent larger than the 2011/12 feed and residual figure. Season-to-season gains may obscure the fact that sorghum feed and residual for 2012/13 is the second-lowest since 1975 with 2011/12 being the lowest at 71 million bushels. Forecast sorghum food, seed, and industrial use is increased 20 million bushels to 80 million, a reflection of revised sorghum ethanol production estimates. On net, total domestic use is lowered 5 million bushels to 180 million.

Sorghum exports for 2012/13 are increased by 5 million bushels to 70 million based on the pace of exports to date. Exports are forecast to account for approximately 28 percent of total disappearance; this is the lowest proportion since 1996/97 when exports accounted for approximately 27 percent of total disappearance. The 2012/13 import figure is raised slightly to 1.088 million bushels following the release of trade data by the US Census Bureau. Further marketing year imports of sorghum are expected to be negligible.

The reduced outlook for corn prices contributes to a $0.15-reduction in the sorghum average farm price to a midpoint of $7.15 per bushel. The projected range of prices received by farmers in 2012/13 is reduced by $0.30 on the high-end resulting in a sorghum price range of $6.70 to $7.60 per bushel.

Slight Reduction in Barley Exports

The updated barley supply-and-use balance sheet reflects a modest downward revision to the export forecast. US Census Bureau trade data indicate a slightly slower-than projected pace of shipments abroad and supports a 1-million-bushel cut in barley exports from 10 to 9 million. Total use and ending stocks are updated in accordance with this change. The low-end of the barley price range is increased by $0.05 to $6.15 per bushel, and the high-end of the range is reduced by $0.05 to $6.65 per bushel. The average farm price midpoint is unchanged at $6.40 per bushel. No changes to the oats supply and use forecasts or to the oats price forecast are made this month.

Hay Prices and Stocks per RCAU up Slightly

The January 2013 Feed Outlook reports that stocks of all US hay stored on farms totaled 76.5 million tons on December 1, 2012, down 15.6 percent from a year ago. Based on livestock data available at that time, hay stocks per roughage-consuming animal unit (RCAU) were calculated to be 1.137 tons, compared with 1.336 tons last year. Revised livestock inventory figures have since been released and the recalculated RCAU is now projected to be slightly lower at 67.27 million units. Using the updated RCAUs, hay stocks per RCAU are forecast to be 1.138 tons per RCAU in 2012/13, up very slightly from the previous estimate. With only a modest reduction in RCAUs, hay supplies are likely to remain tight in the near future.

The most recent USDA-NASS Agricultural Prices report indicates that the January 2013 preliminary all hay price is $191 per ton, down $1 from the previous month and up 11 percent relative to the January 2012 estimate of $172 per ton. The alfalfa price forecast at $217 is unchanged from December and is $24 per ton higher than January 2012. The January other hay price at $144 is $2 higher than the previous month’s estimate and is up 9 percent from the January 2012 price of $132 per ton. In the short term, tight supplies are likely to support continued high prices for each type of hay.

Year-to-year price increases across all hay categories are a consequence of significant, drought-related declines in production. However, price increases are not uniform across all States. Michigan, Minnesota, Nebraska, Wisconsin, and a handful of other States have estimated January 2012 to January 2013 per ton price increases in the range of $100 for some types of hay. Other States in the Pacific Northwest and Southwest, including Arizona, California, Idaho, Oregon, and Texas, report year-to-year price declines for select hay varieties.

International

Brazil Takes Over As Top Corn Exporter in 2012/13

In trade year 2012/13 (October 2012 through September 2013), Brazil is projected to export more corn (24.5 million tons, up 2.0 million from last month’s forecast) than the United States (24.0 million, down 2.0 million this month). This is a dramatic change from the historical norm for the last century, when the US share of world corn trade reached over 80 percent in 1979/80 and often exceeded twothirds. In 2012/13, the US share is forecast to fall to 24.6 percent while Brazil’s share increases to 25.1 percent.

In the first 4 months of the trade year (October-January), Brazil has exported 13.75 million tons of corn, with shipments peaking in November at 3.9 million tons. Brazil’s corn exports are expected to slow significantly in coming months as soybean exports limit the transportation and port capacity available to move corn exports. However, over the last 8 months of the year, corn exports need to average only 1.3 million tons per month to reach the 24.5 million annual forecast.

US Census corn export data for October to December 2012 and corn export inspections for January 2013 sum to 5.9 million tons, less than half the pace of Brazil’s exports. US corn exports need to increase to an average 2.3 million tons per month to reach the projected 24.0 million. This is a relatively slow pace compared with 3.3 million tons per month for all of 2011/12, or 3.9 tons for 2010/11. As of January 31, 2013, corn outstanding export sales were 5.5 million tons, down from 10.3 million a year earlier. Based on these figures, US export sales of corn are expected to increase significantly in coming months.

US export sales of corn have been limited by prices that are higher than those of most competitors. These relatively high prices reflect tight US corn supplies due to 3 consecutive years of below-trend yields, with the current year’s crop devastated by drought. Moreover, sustained relatively high corn prices have encouraged foreign producers to grow additional corn for the international market. Brazil and Ukraine have emerged as major corn exporters, with Brazil surpassing Argentina as the largest alternative source for corn exports.

Structural Changes and Good Yields Boost Brazil’s Supply

Several short- and long-term developments have combined to enhance Brazil’s corn export competitiveness. Favorable rainfall has boosted corn yields above trend both for second-crop corn in 2011/12 and for first-crop corn in 2012/13. The global corn trade year (October-September) reflects most production, consumption, and trade in the Northern Hemisphere. The 2012/13 trade year straddles Brazil’s local marketing years for both 2011/12 (March 2012 through February 2013) and 2012/13 (March 2013 through February 2014). Brazil’s production in both years is crucial to determining export supplies.

Within each local marketing year, Brazil’s corn production is divided between firstcrop corn, mostly grown in the Southern and Eastern regions in competition with soybeans, and “safrina” (little crop) corn grown as a second crop mostly after soybeans in Mato Grosso and other parts of the Center-West. Attractive returns for soybeans have limited the growth in first-crop corn area. However, in recent years most of the expansion in Brazil’s soybean area has been in the Center-West where corn is often grown as a second crop following soybeans. This means that instead of getting less corn area due to high soybean prices, Brazil is sowing more secondcrop corn when soybeans prices are attractive and new land is cropped. This longterm structural shift became especially important in 2011/12, when the safrina corn harvest was larger than the first-crop corn for the first time. In 2011/12, the firstcrop corn in the South suffered from hot dry growing conditions, reducing yields and boosting corn prices in Brazil. Farmers in the Center-West responded by planting shorter-season soybeans and more second-crop corn after soybeans. When rains extended into the dry season, safrina yields were spectacular, exceeding firstcrop yields for the first time and boosting corn production to a record 73.0 million tons, up 25 percent from the previous record in 2007/08.

The large 2011/12 safrina corn crop was produced in a location far from the center of internal demand for corn because most of the poultry and pork production in Brazil is in the South (Parana and Santa Caterina). Furthermore, with much of the soybean crop already exported, transportation and port facilities were available to move corn into exports beginning in July 2012, just as the US drought boosted global prices.

High corn and soymeal prices combined with limited export opportunities for Brazilian broilers in 2012 to put the brakes on the expansion of poultry production in Brazil, which reportedly declined slightly. This month, corn feed use in Brazil is reduced 2.0 million tons for both 2011/12 and 2012/13. The slack domestic demand contributes to ample supplies for export.

Strong soybean prices in August through October 2012 limited corn area for firstcrop Brazilian corn in 2012/13. However, rainfall and temperatures have been favorable in most areas, and yield prospects are excellent as harvest approaches (March 2013). Also, area being planted for the safrina crop in Mato Grosso is reported up as expected. Brazil’s 2012/13 corn crop is projected up 1.5 million tons this month to 72.5 million, reflecting the above trend first-crop corn yield. This nearly matches the previous year’s record crop, but the rains that will determine the safrina corn yield are not expected to be as favorable as those of a year earlier.

The large 2012/13 corn crop in Brazil will support ample supplies of corn in the country. However, exports are expected to slow because much of the corn and soybeans are grown far from ports. Soybeans, being twice as valuable per ton, are expected to get priority for storage, transport, and port infrastructure. Brazil will be harvesting a record soybean crop and be moving record soybean exports. Severe port congestion with ship line-ups and demurrage costs are inevitable. Also regulations have changed, limiting how many hours truckers can drive, potentially causing problems getting corn and soybeans to ports. Ultimately, the size of Brazil’s 2012/13 trade-year corn exports will be constrained primarily by how much can be squeezed through ports rather than by the size of domestic corn supplies.

Ukraine has also emerged as a major corn exporter in recent years and with final harvest reports indicating increased production, Ukraine’s corn exports are forecast up 0.5 million tons this month to 13.0 million. The pace of early-season exports has been strong, with the EU as a major buyer. Trade year corn exports by Israel are increased slightly, reflecting ongoing shipments revealed in 2011/12 trade data.

World Corn Trade Projected Higher

Global corn trade in 2012/13 is forecast up 0.5 million tons this month to 97.5 million. EU corn imports are raised 2.0 million tons to 10.0 million, reflecting the strong pace of import licenses. The EU has been exporting wheat while using less domestically for feed and is replacing wheat in feed rations with corn. China’s corn imports are projected up 0.5 million tons to 2.5 million based on the pace of recent imports. Corn prices in China remain above internationally prices, making imports attractive for entities with access in import quotas. The pace of Jordan’s corn imports and feed use supports an increase in forecast imports for 2012/13 of 0.05 million tons to 0.45 million.

Projected corn imports are reduced this month for some countries with economic and political problems. Egypt’s corn imports are cut 1.0 million tons to 4.5 million as poultry production stumbles and port discharge and transportation is becoming problematic. Syria’s corn import forecast is cut in half by 0.7 million tons to 0.7 million as civil war disrupts commerce.

Mexico’s corn imports for 2012/13 are reduced 0.5 million tons this month to 8.5 million due to increased prospects for corn and sorghum production coupled with larger sorghum import prospects. Saudi Arabia’s corn imports are trimmed 0.2 million tons to 1.9 million as feed use is trimmed by a like amount for both 2011/12 and 2012/13.

Global Barley and Sorghum Trade Boosted

World barley trade projected for 2012/13 is increased 0.4 million tons this month to 18.3 million. Strong recent purchases boost import prospects for Saudi Arabia, up 0.5 million tons to 7.5 million; Turkey, up 0.20 million tons to 0.25 million; and Tunisia, up 0.15 million tons to 0.3 million. Ample pasture and favorable new-crop prospects are trimming Morocco’s 2012/13 barley import forecast 0.2 million tons to 0.5 million. Export prospects are increased 0.2 million tons each for Canada and the EU, increased 0.1 million for Russia, and decreased 0.1 million for Turkey.

Global sorghum trade is boosted 0.5 million tons this month to 6.2 million. US sorghum export prospects for 2012/13 are increased 0.3 million tons this month to 1.7 million (up 5 million bushels to 70 million for the September-August local marketing year). Export sales have been stronger than expected despite tight US supplies. Argentina’s sorghum exports are forecast up 0.2 million tons this month to 3.2 million. Export price quotes for high tannin Argentine sorghum are much lower than for most alternative feeds. Mexico’s sorghum import prospects are raised 0.3 million tons to 1.8 million, and Japan is increased 0.15 million tons to 1.60 million.

World Coarse Grain Production Higher This Month

Global coarse grain production is forecast 2.9 million tons higher this month at 1,124.2 million tons. Corn production is boosted 2.1 million tons to 854.4 million, barley is up 0.4 million to 130.2 million, sorghum is increased 0.2 million to 59.3 million, oats and rye are each nudged up 0.1 million, and millet and mixed grains are increased slightly. The changes for barley, oats, rye, and millet are the result of final harvest data reported for Russia, Ukraine, and Belarus. The sorghum increase results from Mexico reporting increased area, boosting production 0.4 million tons to 6.8 million. That increase is partly offset by a 0.2-million-ton reduction for Australia, to 2.2 million, caused by extreme high temperatures and some flooding in Eastern Australia.

The largest increase in corn production prospects this month is for Brazil, covered in the previous explanation of corn export projections. Mexico’s 2012/13 corn production is projected up 0.8 million tons this month to 21.5 million. Mexico’s ministry of agriculture reported summer crop area to be larger than previously estimated, more than offsetting a slight reduction in yields. India’s corn production is forecast up 0.6 million tons to 20.6 million as area planted for the Rabi crop has exceeded expectations. Ukraine’s final harvest report revealed increased corn production, up 0.4 million tons to 20.9 million. While final area harvested was reduced slightly, the late-harvested crop in northern zones had much better yields than areas to the south and east that were more stressed by heat and dryness. There is also a tiny increase this month for corn production in South Korea.

Reduced corn production is projected this month for Argentina, down 1.0 million tons to 27.0 million. Corn yield prospects have been reduced by an extended dry spell, with above normal temperatures centered in northern Buenos Aires province, extending into nearby Santa Fe and Cordoba. The dryness extended through the entire month of January and followed excessive rains during previous months. The wetness delayed plantings in some areas, resulting in variable crop development and crop conditions and complicating yield forecasts.

Corn production in Laos is revised lower for several years due to reduced area. Production prospects for 2012/13 are reduced 0.25 million tons this month to 1.15 million. Russia’s corn production is revised down slightly due to lower reported yields.

Tighter Beginning Coarse Grain Stocks Limit 2012/13 Supplies

Changes made to previous years’ supply-and-demand estimates trim 2012/13 global coarse grain beginning stocks 0.9 million tons, to 164.4 million, partly offsetting the increase in production this month. Most of the decline is for corn, down 0.8 million tons to 131.0 million. Brazil’s corn beginning stocks are cut 0.5 million tons to 9.6 million as 2011/12 local marketing year exports are increased 2.5 million, more than offsetting the 2.0-million decline in estimated feed use. Paraguay’s corn beginning stocks are cut 0.4 million tons to 0.5 million due to reduced 2011/12 estimated production. There are also small reductions in corn beginning stocks this month for Mexico, Turkey, Indonesia, and Jordan. The reductions are partly offset by increases for Moldova, up 0.2 million tons to 0.5 million based on a larger reported 2011/12 crop, and small increases for Egypt, Syria, Israel, India, Saudi Arabia, and Uruguay.

Projected 2012/13 Global Coarse Grain Use Unchanged

Forecast world 2012/13 coarse grain use is virtually unchanged this month at 1,142.3 million tons, with changes to individual countries offsetting. Increased US use is offset by a small reduction in foreign countries. Foreign corn use is projected down 1.3 million tons to 604.8 million. The largest reduction is for Brazil, down 2.0 million tons as reduced poultry production for 2012 calendar year decreases the base demand for corn expected in 2012/13. Egypt’s corn use is cut 1.0 million tons as economic and logistical problems limit corn imports and demand for poultry. Syria’s corn use is cut 0.6 million tons because of the civil war. Argentina’s corn use is trimmed 0.4 million tons due to reduced production and deteriorating economic prospects. There are smaller reductions this month for Saudi Arabia and Laos. The reductions are partly offset by increased corn use projected for the EU, up 2.0 million tons as less wheat is used for feed; China, up 0.5 million with high prices reflecting strong demand; and India (food), Moldova, Paraguay, and Jordan, each up by a small amount.

World barley use in 2012/13 is projected 0.3 million tons higher to 133.1 million. Strong recent imports by Saudi Arabia indicate a shift toward feeding more barley, up 0.4 million tons this month. Turkey’s imports are also reflected in growth in feed demand, up 0.3 million tons, with smaller increases for Ukraine, Tunisia, and Brazil. However, barley use is trimmed 0.2 million tons each for the EU and Morocco. Foreign sorghum use is up slightly this month with increases for Mexico, Japan and Taiwan partly offset by a reduction in Australia.

World Coarse Grain Ending Stocks Prospects Boosted

Global coarse grain ending stocks for 2012/13 are forecast up 2.1 million tons this month to 146.3 million, with corn accounting for the change. The largest increase is for Brazil’s corn, up 1.5 million tons to 10.9 million. Corn supplies in Brazil for 2012/13 are relatively abundant, up this month with increased production more than offsetting reduced beginning stocks caused by record local marketing year 2011/12 exports. Moreover, for 2012/13 domestic prospects are cut by more than exports are increased, supporting relatively abundant stocks prospects. India’s corn stocks are forecast up 0.4 million tons this month and Mexico is up 0.2 million, both supported by increased production. There are also small increases in projected ending stocks for Egypt, Moldova, and Saudi Arabia. Reduced ending stocks are predicted this month for Paraguay, down 0.5 million tons mostly due to reduced beginning stocks; for Argentina, down 0.1 million because of reduced production; and for Ukraine, Syria, Turkey, Indonesia, and Russia, each down by small amounts.

February 2013

Published by USDA Economic Research Service

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