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USDA Feed Outlook

15 April 2013

USDA Feed Outlook - April 2013USDA Feed Outlook - April 2013

The National Agricultural Statistics Service (NASS) Grain Stocks report estimated March 1 corn stocks at 5,399 million bushels, sending futures down more than $1.00 per bushel in the week following the release.
Feed Outlook

March 1 Corn Stocks Exceed Expectations

NASS also released the Prospective Plantings report on March 28, which indicated that, as of March 1, producers expected to plant 97.3 million acres, up slightly from last year’s actual plantings. Forecast 2012/13 feed and residual use of corn is lowered 150 million bushels and ending stocks are increased 125 million bushels to 757 million, compared to last month’s projections. In addition, exports are forecast down 25 million bushels and corn used for ethanol is increased 50 million bushels. Higher ending stocks and recent declines in cash prices result in a 20-cent reduction in the midpoint of the corn price forecast to $6.90 per bushel. Global coarse grain supplies for 2012/13 are increased this month, supported by Brazil’s increased corn production prospects. Projected world coarse grain use is cut with reduced growth in China’s meat production and consumption. Forecast world coarse grain ending stocks are increased 5 percent this month.

Change in Corn Planted Area from 2012 to 2013 (1,000 Acres) USDA Farm Production Regions

Domestic Outlook

Stocks Report Indicates More Corn Than Expected

In the March 28 Grain Stocks report, March 1 corn stocks were estimated at 5.4 billion bushels, 10 percent below March 1, 2012, yet higher than most analysts expected. The impact of the unanticipated additional stocks was apparent nearly immediately in the futures market where the May corn futures price slipped by more than $1.00 per bushel within days of the Grains Stocks report release. A total of 2.67 million bushels of corn was reported to be stored onfarm and 2.73 million bushels were stored at commercial facilities. The share of corn held on farms was very low, at 49 percent, compared with an average of 57 percent for the previous 10 years. The share of corn being used for ethanol likely played a factor as ethanol mills take delivery very shortly before use, whereas export and feed markets tend to have more corn on hand or in transit.

Projected U.S. feed grain supplies for 2012/13 at 318.9 million metric tons are up slightly from last month, with small increases projected for barley and sorghum imports. Supplies for 2012/13 are 11 percent below last year’s 358.5 million tons. Total use of the four feed grains is expected to be 297.1 million tons, 2.8 million tons below last month’s forecast. This will be the third consecutive year that total use declines, unprecedented since at least 1975/76.

The 2012/13 feed and residual use projection for the four feed grains plus wheat is lowered by 1.5 million tons from last month due to lower forecast feed corn and wheat use. At 124.9 million tons, it is projected 5.6 million below the 2011/12 total of 130.6 million. Grain consuming animal units (GCAUs) in 2012/13 are projected at 92.07 million units, less than a unit above last month’s projection. Feed and residual use per animal unit is 1.36 tons, slightly less than last month’s 1.41 tons and 0.05 tons per unit less than the 2011/12 marketing year, mostly due to lower residual use with the smaller crop.

Ethanol Boosts Corn Food, Seed, and Industrial Use

Food, seed, and industrial use (FSI) for 2012/13 is raised 50 million bushels with an increase in the projection for corn used for ethanol. The increase to 4,550 million bushels was based on year-to-date ethanol production and the prospect of lower corn prices contributing to already favorable margins for ethanol producers, spurring additional production. In spite of the projected increase, the implications of lower gasoline consumption and implicit restrictions in the volume of ethanol that can be blended into gasoline continue to constrain growth in ethanol production. On April 8, the Energy Information Agency (EIA) predicted gasoline production for the 2012/13 crop-year period at 133.0 billion gallons, compared with 133.2 billion for the 2011/12 crop year. EIA also forecast the lowest summer gasoline use in 12 years. However, weekly ethanol production during March advanced relative to previous months, indicating improved margins may be impacting production, and therefore, corn used for fuel.

Forecast Corn Exports Lowered, Brazil Exports Exceed U.S. Volumes

Sluggish sales and competitive corn prices in South America result in a 25-millionbushel decline in the corn export projection. U.S. corn prices, even at the reduced forecast, are still relatively high compared to trade competitors. In particular, March shipments from Brazil were strong, and shipments from Brazil and the Ukraine have proved competitive. In fact, Brazil corn exports are projected 14 percent higher than U.S. exports for the 2012/13 October-September trade year. Prospects for improved U.S. exports are limited by tight corn supplies that are diffused over a large area, which make it difficult to assemble exportable volumes.

Corn Feed and Residual Use Shrinks for Second Half of Marketing Year

Feed and residual use in the second half of the marketing year (March-August) is projected to be 1.2 billion bushels, which would represent 28.7 percent of the 4.4- billion-bushel marketing year total. In April 2012, USDA projected second-half feed and residual disappearance for 2011/12 at 26.3 percent of the marketing-year total and below trade expectations at that time. Once September 1 stocks and final use for other categories were known, second-half 2011/12 feed and residual use fell to 26.0 percent of the marketing-year total. This compares with 24.3 percent in 2010/11, the lowest share since at least 1975. Second-half feed and residual is projected at 1,264 million bushels, compared with 1,180 million last year.

In absolute terms, feed and residual use in the second half of the 2012/13 marketing year is expected to be 807 million bushels less than the 10-year average, and the fourth lowest since 1975, behind last year, 2010/11, and the drought year of 1983.

Ending stocks for 2012/13 are projected at 757 million bushels, 125 million above last month’s forecast and 232 million below 2011/12. The stocks-to-use ratio is now projected at 6.8, compared with 5.6 last month and 7.9 in 2011/12.

Corn Price Projection Slips on Higher March 1 Stocks

The forecast average price received by farmers for 2012/13 was lowered by 30 cents on the high end of the range and 10 cents on the low end of the range for a midpoint of $6.90 per bushel. Current planting progress indicates that last year’s early harvest will not be repeated this season. However, prospects for yields closer to trend and fewer acres used for silage or abandoned are expected to result in expanded production in 2013/14, relative to the current crop-year estimate. Expectations for a comparatively abundant new-crop corn harvest, in combination with March 1 stocks that were higher than market expectations, created downward pressure on old-crop prices and provides support for a downward adjustment in the projected season-average farm price.

Planting Intentions Signal Steady Acreage for 2012/13

According to the USDA-NASS Prospective Plantings report, as of March 1 U.S. farmers intend to plant 97.3 million acres of corn in 2013, an increase of 127,000 acres from last year. If realized, this will represent the highest planted acreage in the United States since 1936 when an estimated 102 million acres were planted.

Corn acreage is expected to increase the most in North Dakota, where producers intend to add 500,000 acres to last year’s record plantings. Record-high corn acreage is also expected in Arizona, Idaho, Minnesota, Nevada, and Oregon. Area in both Kansas and Nebraska, however, is expected to be down 100,000 acres.

Most States in the Corn Belt, which experienced severe drought in 2012, are expected to plant less corn. In the Corn Belt States (Illinois, Indiana, Iowa, Missouri, and Ohio), area is expected to be down 900,000 acres. Prospective plantings in Illinois were 600,000 acres below last season’s final plantings, and South Dakota and Missouri are expected to lose 250,000 and 200,000 acres, respectively. Indiana producers intend to plant 150,000 acres less than last year.

Sorghum Ending Stocks Lowered, Prices Reflect Corn’s Decline

U.S. 2012/13 sorghum supplies are expanded by 2 million bushes this month to 273 million, due to an equivalent increase in expected imports, primarily from Argentina. Sorghum feed and residual use is up 5 million bushels to 95 million, raising domestic use by the same amount. In response to high corn prices and scarce supplies, some livestock operations are augmenting feed rations to include more grain sorghum. Ending stocks are reduced by 3 million bushels, a reflection of adjustments in the feed/residual and import categories.

The USDA-NASS Grain Stocks report, released on March 28, indicates that 92 million bushels of grain sorghum were stored in all positions on March 1, 2013. This is a 15 percent decline relative to the March 1, 2012 figure and is further indicative of the tight stocks situation for feed grains. Disappearance from December 2012 to February 2013 was up 13 percent compared to the same period a year previous, reflecting strengthened demand for sorghum in export, livestock feed, and industrial markets.

Despite a reduction in on- and off-farm stocks, sorghum prices have followed corn’s lead and declined subsequent to the release of the Grain Stocks report. Prices received by sorghum farmers in 2012/13 are expected to average $6.60 to $7.10 per bushel, compared with $6.70 to $7.40 last month. The season-average midpoint price, at $6.85, remains the highest sorghum price on record and is well above the 2011/12 price of $5.99 per bushel.

Barley Use Prospects Raised Slightly

At 220 million bushels, domestic use is forecast to be up slightly (5 million bushels) relative to the March forecast. The rise is attributable to an expansion in third quarter barley feed and residual disappearance. Domestic supply is boosted by 3 million bushels due to higher estimated third-quarter imports and projected fourthquarter shipments. Ending stocks are drawn down slightly to 75 million bushels. Barley FSI and export categories are unchanged this month and are set at 155 million and 8 million bushels, respectively.

On March 1, 2013 on- and off-farm barley stocks totaled 116 million bushels, up 24 percent relative to the March 1, 2012 estimate, reflecting the larger production year to year. December 2012-February 2013 disappearance was 8 percent below the same period a year ago but higher than previous expectations, boosting projected 2012/13 feed and residual use.

The midpoint barley price forecast of $6.40 per bushel is unchanged this month while the price range is narrowed by $0.05 on both ends to $6.30-$6.50 per bushel.

Oats Feed and Residual Use Increased

Total use in 2012/13 is forecast at 177 million bushels, an increase of 10 million from last month. The rise is attributable to increased December-February feed and residual disappearance, which likely reflects greater use of oats in livestock rations. Ending stocks are projected down 10 million bushels, at 32 million; carryout is forecast at the lowest level on record. Prices received by farmers are projected at $3.75 to $3.85 per bushel with a midpoint of $3.80. These prices compare with last month’s $3.70-$3.90 per bushel and $3.49 in 2012/13.

Significant Increase in Sorghum Seeded Area Expected in 2013

According to the USDA-NASS Prospective Plantings report, U.S. farmers plan to increase seedings of sorghum by 22 percent in 2013 to 7.62 million acres. This increase comes despite concerns over seed availability following successive years of drought-diminished seed-sorghum crops.

Similar to previous seasons, Texas and Kansas collectively account for the majority of planted acres. For 2013, Texas and Kansas are expected to plant fully 77 percent of the sown sorghum area, nearly identical to 2012. Concerns over water availability in both States linger, favoring sorghum cultivation compared to most alternative crops. Export, feeding, and industrial use prospects—as well as the relative drought-hardiness of sorghum—have expanded the crop’s appeal in both States. In Texas, sorghum acres have increased at the expense of cotton acres. In Kansas, farmers are expected to shift some acres out of relatively water-intensive corn production in favor of sorghum.

Barley planted acreage is projected to remain at roughly 2012 levels, with 3.634 million acres expected to be seeded in 2013. This compares to 3.637 million acres planted in 2012. Of note is a 10-percent decline in North Dakota acres as farmers expand corn area. In Montana, an additional 100,000 acres of barley are expected to be seeded.

Acres seeded to oats in 2013 are expected to be up 5 percent to 2.901 million acres. Despite the year-to-year expansion in planted area, the projected figure is the third lowest on record and reflects record-low intended plantings in a number of States. If realized, this would be the second consecutive year of increases in oats planted acres, following record-low plantings of 2.496 million acres in 2011.

High hay prices during the 2012/13 crop year have not raised farmers’ intentions to harvest significantly more acres for the 2013/14 marketing year. Producers expect to harvest only about 160,000 more acres in the coming year, or about 0.5 percent more than last year. Concerns about water availability and competition from other crops contribute to a reduction in harvest area in several New England and Midwestern States, among others. These declines are offset by primarily modest expansions in harvested area in Arkansas, Wyoming, Illinois, Missouri, Montana, North Dakota, Delaware, Texas, and Washington. Soil moisture and precipitation levels will impact final harvested acreage figures as producers adapt plantings, cuttings, and harvest to changing production conditions.

International Outlook

Brazil and EU Corn Boost Global 2012/13 Production

World coarse grain production in 2012/13 is forecast up 1.1 million tons this month to 1,124.5 million, with increases for corn more than offsetting reduced prospects for sorghum and barley.

Brazil’s corn production is projected up 1.5 million tons to 74.0 million. The firstcrop corn harvest is ongoing, while second-crop planting is basically complete. On April 9, the Brazilian Government reported a reduction in first crop corn area harvested, with an increase in yields that boosted first-crop production. Also, second-crop corn area was increased, basically offsetting the first crop area reduction. Good moisture conditions were generally prevalent for second-crop plantings, with favorable early seeding in Mato Grosso Do Sul. However, the normal rainfall pattern across much of the second crop corn area, especially in Mato Grosso and Goias, is for a sharp drop in rainfall sometime during April or early May, truncating corn yields. This month the USDA forecast of Brazil’s corn yields are increased to reflect the first-crop yields revealed in Brazil’s Government surveys and confirmed by weather data and satellite imagery. However, average corn yields are projected to remain below a year earlier, when exceptionally good late rains boosted second crop yields to record levels.

Late upward revisions to 2012/13 corn production estimates for several EU countries boosted production 1.4 million tons this month to 56.1 million. Spain reported corn production up 0.5 million tons to 4.1 million, with harvested area 10 percent above the previous estimate and average yield boosted 4 percent. Hungary also reported corn production up 0.5 million tons from earlier estimates based on increased area harvested for grain and less for silage. Poland’s corn production is reported up 0.4 million tons to a record 4.0 million based on increased reported yields.

Russia’s corn production is boosted 0.2 million tons to a record 8.2 million based mostly on higher area included in final harvest reports. Ecuador’s corn production is up 0.1 million tons to 1.0 million, due more to area (up 9 percent) than yield (up 3 percent). Increased reported corn area boosted Thai corn production 0.1 million tons to 4.6 million. For Indonesia, good reported yields increased corn production 0.1 million tons to 9.0 million.

South Africa’s corn production prospects for 2012/13 are cut 0.5 million tons to 12.5 million. Persistent heat and below-normal rainfall in western and central corn areas more than offset increased irrigation in several States and favorable rains to the east. Based on information from the Foreign Agricultural Service (FAS) Post, Vietnam’s 2012/13 corn production is reduced 0.5 million tons to 4.8 million, with almost as large a reduction for 2011/12. Lower area and yields are reported for both years. Serbia’s 2012/13 corn crop is reduced 0.3 million tons to 3.5 million as damage caused by last summer’s drought is reportedly more severe than previously thought. Chile reported 2012/13 corn yields only matching the previous year, trimming production 0.1 million tons. The Philippines and Colombia have corn area down slightly, lowering production nearly 0.1 million tons each. There is a smaller decline reported for corn production in Japan.

World sorghum production for 2012/13 is reduced 0.6 million tons this month to 58.2 million tons. China’s sorghum area for 2011/12 and 2012/13 is down significantly from previous estimates, and yields are also reduced, cutting production in 2012/13 by 0.65 million tons to 2.0 million. There is also a small increase in area and production for Mexico. Global 2012/13 barley production is reduced slightly due to a 0.2-million-ton decline for Algeria and a small reduction for Serbia.

Increased Beginning Stocks Help Boost Supplies

World 2012/13 coarse grain supplies are forecast up 1.6 million tons this month, supported by a 0.5-million-ton increase in beginning stocks. South Africa’s corn beginning stocks are up 0.3 million tons to 3.7 million as 2011/12 corn exports failed to reach previous expectations. For Serbia, increased 2011/12 corn production and reduced industrial and food use combine to boost 2012/13 beginning stocks 0.2 million tons. Colombia’s corn imports are revised up slightly each year back to 2006/07, reflecting Paraguay’s export data and boosting 2012/13 beginning stocks 0.1 million tons. Turkey’s 2011/12 corn feed use is trimmed 0.1 million tons, boosting stocks. There are smaller increases in 2012/13 beginning stocks for Argentina, Chile, Venezuela, and Paraguay. Partly offsetting these increases are reduced 2012/13 beginning stocks for China’s sorghum, Vietnam’s corn, and Brazil’s corn.

Corn Leads Drop in Projected Coarse Grain Use

Global 2012/13 coarse grain disappearance is projected down 5.9 million tons this month to 1,135.9 million. While the drop in forecast U.S. corn feed use is the largest single change, it is partly offset by increased U.S. industrial use prospects. The combined cuts in foreign countries’ coarse grain consumption total 3.8 million tons, with the reduction in China’s use prospects bigger than the U.S. change.

China’s 2012/13 coarse grain use is forecast down 3.3 million tons this month to 215.7 million tons. Food, seed, and industrial (FSI) use is cut 1.7 million tons, with sorghum reduced 0.7 million tons due to lower production and supply, and corn down 1.0 million tons, reflecting the Beijing FAS Post’s analysis of China’s demand. China’s projected coarse grain feed and residual use is down 1.6 million tons (1.5 million corn and 0.1 million sorghum) due to slowing growth in production and demand for meat in China. Problematic disposal of pigs killed by disease and a new avian influenza are reducing meat demand and meat prices, making feeding corn to pigs and poultry less profitable.

Corn feed use in Egypt is cut 0.5 million tons to 8.7 million because tight foreign exchange is limiting imports. Mexico’s coarse grain feed use is trimmed 0.4 million tons as the slow pace of corn imports is only partly offset by increased sorghum feed use. Serbia’s corn feed use is forecast down 0.4 million tons because of lower production and a smaller decline in projected ending stocks for 2012/13. India’s sorghum feed use is trimmed 0.2 million tons due to increased exports. There are reductions this month of 0.1 million tons in forecast 2012/13 corn feed use for Ukraine and Vietnam, with FSI down 0.2 million tons for Ukraine and 0.1 million tons for Vietnam.

EU 2012/13 coarse grain consumption is projected up 0.75 million tons this month to 151.3 million. Corn feed use is up 1.5 million tons, supported by increased reported production and reduced wheat and barley feeding. Expected barley feed use is cut 0.9 million tons to support strong exports, limit the drop in ending stocks, and boost barley FSI 0.1 million. There is also a small increase this month for EU sorghum imports and feed use.

There is a small increase (up 0.15 million tons) in projected corn use for Turkey, with smaller increases for Argentina and Chile.

Increased Supply and Lower Use Boost Projected Ending Stocks

With forecast 2012/13 global coarse grain supplies up 1.6 million tons and projected use down 5.9 million, ending stocks are expected to reach 153.3 million, up 7.6 million this month. World corn stocks are up 7.8 million tons to 125.3 million, but oats are down 0.2 million tons, mostly in the United States.

The increase in projected foreign corn ending stocks is 4.6 million tons, with China up 3.2 million to 63.3 million. This leaves China with more than half the world’s projected corn ending stocks. It is not clear which entities in China are holding what portions of these corn stocks, nor is it clear under what conditions the stocks would move into use and be reflected in prices. Corn market prices in China are generally above prices in the rest of the world, leaving the size of China’s corn stocks without much influence on prices outside China.

Brazil’s corn ending stocks are forecast up 0.9 million tons to 11.5 million as production increases are much larger than growth in domestic use. Port congestion and priority given to soybeans are limiting corn exports from the world’s top exporter. When and under what conditions Brazil’s corn will move into the export market will be important for global price discovery.

Corn stocks are projected up 0.3 million tons in Indonesia, as increased imports and production are expected to maintain corn ending stocks at near the level of beginning stocks.

Corn ending stocks for South Africa are up 0.3 million and for Serbia up 0.2 million as these exporters limit stock reductions during the year, despite production problems. Turkey’s corn stocks are up 0.2 million tons as imports increase to maintain stock levels. Smaller increases in several countries’ forecast corn stocks and reductions for other countries are mostly offsetting.

U.S. Corn Export Prospects Erode

U.S. export prospects for the October-September 2012/13 trade year are reduced 0.5 million tons this month to 22.0 million (down 25 million bushels to 800 million for the September-August marketing year). While projected world corn trade is virtually unchanged this month at 96.4 million tons, the U.S. share is reduced. U.S. sales and shipments remain sluggish despite recent dramatic declines in domestic corn prices. While U.S. corn prices have dropped some compared to competitors, Argentina’s export quotes remain significantly lower than U.S. prices. Census corn export data for October 2012 through February 2013 total 7.4 million tons, only 40 percent of the previous year’s level. March 2013 corn export inspections were 1.8 million tons, down 41 percent from a year ago. At the end of March outstanding export sales were 4.3 million tons, only 43 percent of a year earlier. Trade-year exports for 2012/13 are forecast at 57 percent of the previous year, so an increase in sales and shipments of U.S. corn is expected in coming months as Brazilian exporters shift from corn to soybeans.

There are several significant offsetting changes to forecast corn imports and exports for 2012/13. Brazil’s corn exports for the trade year are increased 0.5 million tons to a record 25.0 million. Corn production prospects are increased, corn prices in Brazil are relatively low, and export shipments of corn in March 2013—at 1.6 million tons—were larger than expected. At this time of year, soybean shipments are expected to get priority at ports, limiting corn exports into the coming months. However, Brazil’s corn exports are expected to pick up again in July, August, and September.

Ukraine’s 2012/13 corn exports are projected up 0.5 million tons to 13.5 million based on the strong pace of shipments to the EU and other markets. Serbia’s exports are forecast up 0.1 million to 0.5 million. Despite drought devastated production, shipments to the EU have exceeded previous expectations.

South Africa’s corn export prospects are cut 0.5 million tons to 2.0 million due to reduced production. The pace of China’s corn shipments to neighboring countries that show up in trade statistics has been sluggish recently, reducing 2012/13 forecast exports 0.15 million tons to 0.05 million.

Corn import prospects for 2012/13 are cut 0.5 million tons to 4.0 million for Egypt as economic problems and foreign exchange difficulties limit corn imports. Mexico’s corn imports are forecast down 0.5 million tons to 8.0 million based on the pace of imports, purchases, and sluggish meat production. Colombia’s corn import prospects are trimmed 0.3 million tons to 3.2 million mostly because increased sorghum imports are replacing some corn imports. Russia’s corn imports are cut 0.15 million tons to 0.05 million due to record production and the very sluggish pace of imports. Corn import forecasts are trimmed 0.1 million tons each for Ecuador, due to increased production, and for the Philippines because of the slow pace of purchases.

China’s 2012/13 corn imports are boosted 0.5 million tons to 3.0 million based on the pace of imports and purchases. Corn prices in China are far enough above world prices to encourage imports from the United States. Vietnam’s corn import prospects are up 0.3 million tons this month because of reduced production and stocks. Chile’s corn import prospects are boosted 0.25 million tons to 0.8 million due to reduced production. Indonesia’s corn imports are raised 0.2 million tons to 1.7 million as imports are on a pace to maintain normal stock levels. Turkey’s corn imports are raised 0.2 million tons to 0.7 million, reflecting increased feed demand.

While 2012/13 world corn trade is virtually unchanged this month, coarse grain trade is up 0.6 million tons to 124.7 million, with increases for barley and sorghum. Global barley trade is up 0.3 million tons to 18.8 million, with EU exports up 0.2 million tons to 4.0 million and India’s up 0.1 million to 0.2 million;, while barley imports are raised slightly for Algeria, Tunisia, the United States, and Uruguay.

World sorghum trade in 2012/13 is forecast up 0.3 million tons this month to 6.9 million. Export prospects are increased 0.2 million tons for Argentina and slightly for India based on the pace of shipments. Colombia’s imports are boosted 0.2 million tons to 0.8 million based on purchases from Argentina. U.S. and EU sorghum imports are raised slightly. U.S. sorghum imports for the trade year are forecast at a record 0.1 million tons, based on imports to date and additional shipments leaving Argentina. In the past, U.S. sorghum imports were so small and occasional that they were not forecast before they occurred.

April 2013

Published by USDA Economic Research Service

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