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USDA Feed Outlook

14 January 2014

USDA Feed Outlook - 14 January 2014USDA Feed Outlook - 14 January 2014

Feed Outlook

Lowered estimated corn and sorghum production dampened supplies by 61 million and 27 million bushels, respectively, for 2013/14. Harvested area for corn is raised 436,000 acres, but the estimated yield is lowered 1.6 bushels per acre to 158.8 bushels. Ending stocks are lowered 161 million bushels for corn and 12 million bushels for sorghum with feed and residual use projected higher for both based on indications of September-November disappearance from the December 1 stocks. Corn feed and residual use is forecast up 100 million bushels to 5,300 million. Corn food, seed, and industrial use is unchanged as a 50-million-bushel-higher forecast for corn used for ethanol production is offset by lower corn use for the production of sugars and starches. The midpoint of the forecast farm price range for corn is unchanged at $4.40 per bushel while the sorghum range is increased $0.10 at the midpoint to $4.20 per bushel.

China’s 2013/14 corn imports are reduced 2.0 million tons to 5.0 million due to the rejection of some U.S. shipments, but U.S. corn export prospects are unchanged because of reduced competition from Argentina and stronger demand from Mexico.

Domestic Outlook 

Feed Grain Supplies Slip on Lower Corn and Sorghum Production

The January 10 Crop Production: Annual Summary from USDA’s National Agricultural Statistics Service (NASS) indicates slightly increased U.S. corn acreage is offset by a 1.6-bushel-per-acre reduction in yields, which results in a 64- million-bushel cut in production, lowering 2013/14 production to 13.9 billion bushels. Sorghum production is also cut; lower harvested acreage in combination with lower yields reduces sorghum production by 27 million bushels to 389 million. Total feed grain supplies slipped 2.2 million metric tons to 395.8 million this month. Feed grain beginning stocks are 23.5 million tons, with a small downward revision in September 1 stocks. Feed grain feed and residual use for the current marketing year is projected 3.0 million tons higher at 140.7 million, compared with 115.5 million for 2012/13.

Feed and residual use for the four feed grains plus wheat converted to a September- August marketing year is forecast higher this month as a 1.2-million-ton reduction in wheat feed and residual is offset by a combined 3.25-million-ton increase in corn, sorghum, and oats feed and residual use. Barley feed and residual use for the September-August marketing year is projected 0.2 million tons lower. Grainconsuming animal units are forecast at 90.77 million units, compared with the December forecast of 91.39 million. Inventories of layers, broilers, and turkeys for 2013/14 are lower. For 2013, production is raised for beef but reduced for pork, broilers, and turkey. The forecast for 2014 is reduced as lower production of pork and turkey more than offsets increased production of beef.

Projected feed and residual use per animal unit is 1.58 tons this month, up from 1.55 tons per unit in December. Estimated feed and residual for corn is raised 100 million bushels to 5,300 million and sorghum feed and residual gains 25 million to a projected 125 million. These revisions are in response to the December 1 stocks reported in the January 10 NASS Grain Stocks report. Feed and residual use for 2013/14 is reduced 10 million bushels for barley and increased 5 million for oats, also based on indications from the December 1 stocks.

Corn Harvested Acreage Edges up, Yield and Production Estimates Are Lowered

The January 10 Crop Production: Annual Summary raises projected U.S. corn planted acreage slightly while increasing harvested acreage by nearly 0.5 million acres. Despite the area-related gains, a yield reduction of 1.6 bushels per acre reduces estimated production 64 million bushels from the previous figure and results in a final production estimate of 13,925 million. Most of the increase in harvested area from the previous forecast was in the Northern Plains and Western Corn Belt. Most of the production decline was in the Western Corn Belt, where yields dropped 4 bushels per acre for Iowa and Minnesota from the November forecast.

The NASS Crop Production: Annual Summary reports that objective yield surveys for 2013 in the 10 objective yield States showed corn ears per acre ranged from 30,850 in Minnesota to 22,200 in Kansas. In the 2012 drought year, the highest ear count per acre for the objective yield States was for Minnesota at 29,400 and the lowest was for Kansas at 20,550.

Corn food, seed, and industrial use (FSI) is unchanged this month for 2013/14. However, a 50-million-bushel increase in forecast corn for fuel ethanol use is offset by a 10-million-bushel decline in corn use for high-fructose corn syrup (HFCS), a 10-million-bushel reduction in corn use for glucose and dextrose, and a 30-millionbushel reduction in corn use for starch. HFCS exports have slipped as sugar has become more price competitive in some markets, such as Mexico. Starch production has been affected by continued sluggish economic growth reflected in the slower pace of new home construction and other industrial demand. Also, substitutes for domestic starch, including imports, have taken some of the market. The decline in glucose and dextrose is based on the year-to-date pace. Corn for ethanol use is increased as fuel consumption data indicate increased current use and support forecast increases in demand. Reduced sorghum use for ethanol also supports prospects for corn use. Margins for ethanol producers, while not at their recent highs, are still robust and attributable to lower corn prices and strong, albeit declining, prices for distillers’ dried grains (DDGs). Motor gasoline consumption forecasts from the U.S. Energy Information Administration were raised this month for the January-August period, also contributing to higher expected ethanol use.

Projected corn feed and residual use for 2013/14 is raised 100 million bushels to 5,300 million. December 1 stocks indicated a higher-than-expected September- November feed and residual estimate at 2,429 million bushels, up 347 million from the same quarter in 2012/13.

U.S. corn exports for 2013/14 are unchanged from last month, leaving total use 100 million bushels higher than last month’s projection. Corn ending stocks for 2013/14 are projected at 1,631 million bushels, 161 million below last month’s projection but nearly double last year’s carryout of 821 million bushels. The stocks-to-use ratio is projected at 12.4, compared with 13.7 last month and 7.4 a year earlier.

The midpoint of the projected range for corn prices received by producers is unchanged at $4.40 as the production decrease and higher projected use reduce expected carryout, and a sizable proportion of this year’s crop has been already been marketed at prices above the projected season average. The 2013/14 projected price is $2.49 per bushel lower than last season’s record average of $6.89 per bushel.

Estimated corn feed and residual use for 2012/13 was raised 2 million bushels, reflecting a 2-million-bushel reduction in estimated September 1 stocks in the Grain Stocks report.

Sorghum Yield Cut Leads to Tightened Supply, Reduced Ending Stocks

Lower yields and harvested area serve to reduce estimated U.S. sorghum production for 2013/14 to 389 million bushels, down 27 million from last month’s forecast but a 58-percent increase over the 247 million bushels grown in 2012/13. The month- to-month output reduction combines with a 25-million-bushel increase in feed and residual use to tighten the sorghum supply-and-demand balance sheet.

NASS’s January Crop Production: Annual Summary indicates that 7,000 fewer acres were planted and 148,000 fewer acres of sorghum were harvested, relative to the November 1 forecast. Total planted and harvest acres for 2013/14 are estimated at 8.06 million and 6.53 million, respectively. This month, yields are reduced by 2.6 bushels per acre to 59.6 bushels, an increase of 9.8 bushels per acre over the 2012/13 yield estimate.

Despite the recent downward-revision of the national yield figure, significant yearto- year yield increases were realized in Kansas, where approximately 42.5 percent of the 2013/14 U.S. crop was grown. Yield increases are noted for a total of 10 of the 14 major sorghum-growing States. In Kansas alone, yields are forecast to have increased by fully 20 bushels per acre to 59 bushels, up from the 39 bushels producers realized during the drought-affected 2012/13 crop year. Texas is among the notable exceptions where yields declined in 2013/14. However, increases in planted and harvest acres in the State combined with the relatively small, 3-bushels- per-acre drop in yields to produce 16.7 million more bushels than in 2012/13.

The latest NASS Grain Stocks report results in several balance sheet changes this month. Beginning stocks are revised up 0.119 million bushels. The December 1 stocks estimate also indicates September-November 2013 disappearance from all positions at 176 million bushels, up 34 percent from the same period in 2012. This higher first quarter disappearance supports a 25-million-bushel increase in feed and residual use for 2013/14. Increased corn use for ethanol combines with tighter available sorghum supplies for the remainder of the marketing year to reduce the outlook for 2013/14 sorghum use for ethanol by 20 million bushels. Total domestic use is increased 5 million bushels this month.

Reductions in supply and increases in domestic use cut the amount of grain available for exports and ending stocks, with exports reduced by 20 million bushels from the December forecast. Reduced availability of sorghum for export to Mexico contributes to the decline; strong demand from China has previously been accounted for and is apparent in the significant year-to-year increase in exports.

Reflecting tightened supply and increased domestic demand, sorghum ending stocks are projected lower this month. The revised forecast is 12 million bushels lower than last month’s projection of 31 million. At 19 million bushels, the current ending stocks forecast is the third lowest on record, just slightly ahead of the 18.4 million bushels realized for the 1995/96 crop year and approximately 4 million bushels higher than the record-low ending stocks estimated for 2012/13.

The revised supply-and-consumption outlook supports a $0.10 increase in the average sorghum farm price to a midpoint of $4.20 per bushel, or approximately 95 percent of the average corn price forecast. The low end of the sorghum price range is raised $0.15 to $3.90 per bushel; the high end is raised $0.05 to $4.50 per bushel.

Slight Reduction in Barley Feed and Residual

The 2013/14 estimate for U.S. barley production is unchanged this month. Total supplies are forecast at 320 million bushels, a 6-percent increase relative to the 2012/13 estimate. Sizable year-to-year declines in barley production in North Dakota and Minnesota, where cool weather and poor field conditions delayed plantings, contrasts with modest gains in Idaho, Montana, and several other States. On the whole, 5 million fewer bushels of barley are estimated to have been grown for malting and feed purposes in 2013/14.

The NASS Grain Stocks report indicates that disappearance between September- November 2013 is 31-percent lower than that for the same period in 2012 and provides support for a 10-million-bushel reduction in marketing year feed and residual. Total use this month is lowered by an equivalent amount; ending stocks absorb the additional supply and are increased to 90 million bushels.

With a significant proportion of the barley crop already marketed, no changes are made this month to the midpoint barley price of $6.00 per bushel. The price range is narrowed to $5.75 to $6.25 per bushel, with a $0.05 reduction on the high end and a $0.05 increase on the low-end.

Oats Feed and Residual Increased, Ending Stocks Lowered

The 2013/14 estimate for U.S. oats production is unchanged this month. The current crop year production is estimated at 65.9 million bushels, up 3 percent from the previous year but still the third lowest on record. Yields are up by 2.7 bushels per acre relative to the 61.3 bushels estimated for the previous year. Harvested acres are the second lowest on record at 1.03 million acres, with record-low acres harvested in nine States, including Minnesota, Idaho, and Wisconsin.

The Grain Stocks report indicates that 48.0 million bushels were stored in all positions on December 1, 2013; 34 percent below the stocks on December 1, 2012. September-November total use is forecast at 43.5 million bushels and provides support for a 5-million-bushel increase in the 2013/14 feed and residual projection. The slight increase in total use reduces projected ending stocks to 33.2 million bushels. If realized, this will be the lowest ending stocks on record.

The oats price is unchanged this month as a large proportion of the crop has already been marketed and tight supplies have been accounted for in prior forecasts. The current average farm price of $3.60 is the second highest on record, behind the record-setting 2012/13 price of $3.89. As projected, the oats price is 82 percent of the corn price, the highest proportion since 1988/89 when oats prices were slightly higher than those for corn.

Hay Production Rebounds, Prices Adjust Downward

NASS’s January Crop Production: Annual Summary provides the first updates for U.S. production since the August 2013 forecast. All hay production for 2013 is estimated at 135.9 million tons, a 3-percent decline relative to the August 1 forecast but a 13-percent increase from the drought-impacted total in 2012. At 57.6 million tons, alfalfa production is down 4 percent from the August 1 forecast and up 11 percent from 2012. Other hay production totaled 78.4 million tons, down 2 percent from the August forecast and up 16 percent from the previous year.

Many States experienced minor gains in production attributable to generally improved yields. Significant increases in production are noted for the Dakotas, Kansas, Kentucky, and Missouri. Incidences of alfalfa winterkill were reported  early in 2013 for sections of Wisconsin, Minnesota, the Dakotas, and Iowa. Growers in these States are noted to have seeded more acres to alfalfa and alfalfa mixtures in 2013 relative to 2012.

The January Crop Production report indicates that hay stocks on farms totaled 89.3 million tons on December 1, up from 76.5 million for the same date in 2012. While the 2013 figure is an improvement over the 2012 estimate, which was affected by early feeding due to poor grazing conditions on a significant proportion of pasture and rangelands, the current forecast is nearly 12 million tons below the 10-year average (2003-12) of 101.1 million tons stored on farms on December 1. With 14.2 million tons of hay stored on farms on May 1, 2013, implied May-December disappearance is 60.798 million tons, down from 64.712 million during the same period in 2012. The 10-year average May-December disappearance (2003-12) is 65.310 million tons; the below-average disappearance in 2013/14 is partially attributable to improved conditions on pasture and rangeland, which supported relatively more grazing.

NASS’s December Agricultural Prices report indicates slight declines for all categories of hay, relative to the November estimates. However, the December allhay price at $168 per ton is $47 higher than the 10-year average (2003-12) of $121 per ton. The December alfalfa price, at $187 per ton, is $30 lower than the comparable 2012 price; however, the current price forecast is $55 above the 10-year average price of $132 per ton. According to data available in USDA-ERS’s Farm Income and Wealth Statistics report, strong prices are projected to support annual cash receipts for hay totaling $8.64 billion for 2013 up from $7.26 billion in 2012.

Roughage-consuming animal units (RCAU) in 2013/14 are estimated at 67.08 million, down slightly from 67.22 in 2012/13. Increased hay supplies, as reflected in the December 1 stocks figure, in combination with reduced RCAUs, serve to increase available stocks per unit from 1.14 tons per unit in 2012/13 to 1.33 tons per unit in 2013/14.

Significant Expansion of Corn and Sorghum Silage Production

U.S. corn silage production is estimated at 117.9 million tons in 2013, up 4 percent from 2012. This is the fourth-highest level of production on record and the highest since 1981, when production also totaled 117.9 million tons. Area harvested for corn silage is estimated at 6.3 million acres, down 15 percent from last year’s estimate of 7.4 million acres. Average per-acre yield, at 18.8 tons, is 22 percent higher than the 15.4 tons per acre harvested in 2012.

Sorghum silage production is estimated to have experienced impressive year-toyear gains. Production of sorghum silage is 5.4 million tons for 2013, up 31 percent from the 4.1 million tons estimated for 2012. Area harvested for silage was 5 percent higher than in 2012; however, a significant increase in yield per acre, 11.4 tons in 2012 to 14.3 tons in 2013, is the primary driver of the production expansion.

Corn and sorghum silage production totals 123.3 million tons. Silage available per RCAU is 1.84 tons per unit, up from 1.75 tons per unit in 2012. Increased availability of roughage via hay and silage sources provided additional options to livestock producers facing tightening grain supplies during the summer and early fall of 2013.

International Outlook

China’s Corn Boosts World Coarse Grain Production

Global coarse grain production in 2013/14 is projected up 3.1 million tons this month to 1,259.2 million mostly due to sharply higher corn production in China. World corn production is forecast up 2.6 million tons to 966.9 million as the increase in China more than offsets declines for the United States, Argentina, and Russia. Global barley production is boosted 1.6 million tons this month to 144.7 million, while millet, rye, and oats are reduced slightly. U.S. sorghum production is reduced this month, but foreign production is unchanged.

China’s corn crop is raised 6.0 million tons this month to a record 217.0 million. China’s National Bureau of Statistics has not published a corn production number, but a total grain number was released. Information on 2013 grain crops and a review of growing conditions reveal that corn in China benefited from increased area, good rainfall, and favorable temperatures across most growing areas, but especially in the northeast, where corn production is concentrated. Corn yields are estimated at a record 6.0 tons per hectare. In 2012/13, corn production was slightly larger than rice production (rough basis), but in 2013/14, corn is forecast 7 percent larger. Area expansion across the northern states of Heilongjiang and Inner Mongolia has been crucial, with corn moving onto soybean land in Heilongjiang.

Argentina’s corn production prospects are cut 1.0 million tons this month to 25.0 million. Dryness delayed planting in some areas, with some switching to alternative crops. In some areas, episodes of sustained high temperatures during December severely stressed early planted corn entering reproduction, reducing yield prospects. The forecast yield is reduced slightly more (2.5 percent) than area (1.4 percent). However, most of the crop is just entering critical growth stages, so weather during the rest of January and into February will be important. Argentina’s 2013/14 barley production is raised 0.5 million tons this month to 4.8 million. Harvest reports indicate more area was planted to barley and less to wheat than previously thought. Moreover, reported barley yields are good, approaching the high levels reported for 2010/11 and 2011/12.

Russia’s statistical agency published preliminary final harvest reports that revised production forecasts for several crops. Barley production for 2013/14 is up 0.4 million tons to 15.4 million as more area was harvested for grain. However, corn production is down 0.5 million tons this month to 11.0 million, mostly due to yields, which though record high due to exceptionally good growing conditions failed to meet earlier forecasts. Millet production is cut 0.2 million tons to 0.4 million, mostly because of reduced area harvested. There are smaller reductions in rye and oats production caused by yields not reaching earlier expectations. Also, in the former Soviet Union, Tajikistan and Armenia reported increases in their relatively small barley crops.

Several EU countries revised coarse grain harvest reports, with barley production increased 0.7 million tons to 59.8 million tons. Denmark, Spain, and Finland boosted barley estimates. However, France trimmed its corn production estimate 0.3 million tons, and Finland reported rye down slightly and oats up fractionally.

Much of the 3.1-million-ton production increase for 2013/14 world coarse grains is offset by a 1.9-million-ton reduction in forecast beginning stocks. Brazil’s 2013/14 beginning stocks of corn are cut 2.0 million tons to 14.0 million as the March-February 2012/13 local marketing year corn exports are increased 3.0 million tons to a record 25.0 million based on the strong pace of recent shipments and the line-up of vessels waiting to load corn. While Brazil’s corn exports have been strong, domestic feed use has been sluggish and is forecast down 1.0 million tons this month.

Increased Coarse Grain Use Projected This Month

World coarse grain use in 2013/14 is forecast up 4.2 million tons this month to 1,227.7 million, with the United States accounting for more than half the increase. Foreign coarse grain use is projected up 1.7 million tons to 917.1 million. The largest increase is for the EU, up 1.0 million tons to 158.1 million. The EU barley crop is large, and export demand has recently softened, while wheat export demand has been strong. This supports a 1.0 million-ton increase in barley feeding, offsetting a reduction in wheat feed use. For China, with increased sorghum imports, feed use is boosted 0.5 million tons. Coarse grain feed use is projected up 0.1 million tons for Iran (barley) and the Philippines (corn), with smaller increases for Australia and Brazil. Partly offsetting are reductions in coarse grain use for Russia, down 0.4 million tons, with production declines in several coarse grains; and for India, trimmed 0.3 million tons due to increased barley exports leaving reduced supplies for domestic use.

World Coarse Grain Ending Stocks Prospects Reduced, Foreign Stocks Up

World coarse grain ending stocks for 2013/14 are projected down 3.0 million tons this month, with the U.S. changes dominating. Foreign coarse grain ending stocks are projected up 1.3 million tons to 149.6 million. China’s coarse grain ending stocks are up 4.0 million tons to 72.4 million as the increased corn production swells stock prospects. There are also small increases in projected coarse grain ending stocks this month for the Philippines, Nigeria, and Armenia. However, reduced ending stocks are forecast for Brazil, down 2.0 million tons, due to reduced beginning stocks of corn. Argentina coarse grain ending stocks are lowered 0.5 million tons as a decrease for sorghum with higher projected exports is only partly offset by a small increase in barley stocks. There are small reductions in projected coarse grain ending stocks for Russia, Mexico, Iran, the EU, and several other countries.

Projected 2013/14 Coarse Grain Trade Reduced This Month

World coarse grain trade in 2013/14 (October-September) is expected at 139.0 million tons, down 1.4 million this month, with the entire reduction in corn. While projected global corn trade is reduced this month, it remains record large at 109.4 million tons.

For Argentina and Brazil, corn exports are changed for the March-February local marketing years and the 2013/14 October-September trade year. For Argentina, with reduced corn production, the 2013/14 local marketing year (March 2014 –February 2015) exports are reduced 1.0 million tons to 25.0 million. For the 2013/14 trade year (October 2013-September 2014), Argentina’s corn exports are cut 2.0 million tons to 14.0 million, implicitly raising exports expected from October 2014 to February 2015 by 1.0 million. For Brazil, local marketing year 2012/13 (March 2013-February 2014) is raised 3.0 million tons to a record 25.0 million based on the pace of recent shipments, vessels waiting to load corn, and sluggish domestic demand. However, the 2013/14 trade year is only increased 0.5 million tons to 21.0 million. This implicitly reduces Brazil’s expected corn shipments during March 2014-September 2014 by 2.5 million tons and increases expected corn exports for October 2014-February 2015 by 2.5 million.

The adjusted 2013/14 trade year export forecasts for Brazil and Argentina reduce world corn trade 1.5 million tons, but this is partly offset by a small increase in Mexico’s expected corn exports, boosted 150,000 tons to 0.3 million, partly reflecting the increase in corn trade to nearby countries during the past 2 years.

China’s 2013/14 corn import prospects are cut 2.0 million tons this month to 5.0 million due to the rejection of some U.S. shipments because of the detection of a genetically modified corn variety that is not yet approved by China. The record large corn crop in China reduces pressure to import corn, and rejection of some import shipments could help the government sustain high internal corn prices.

Mexico’s corn import forecast is raised 0.5 million tons to 11.0 million based on the torrid pace of purchases and the lack of available U.S. sorghum. Mexico’s sorghum imports are cut by a like amount. Corn imports by the Philippines are increased 250,000 tons to 0.3 million as corn imports are replacing some higher priced feed wheat imports.

U.S. 2013/14 corn imports are forecast up 50,000 tons to 0.8 million (up 5 million bushels to 35 million for the local marketing year) based on the pace of imports in recent months and abundant supplies in Canada.

Tight Supplies Sink U.S. Sorghum Export Prospects

U.S. 2013/14 sorghum export prospects are cut 0.5 million tons to 4.0 million due to tight supplies (local marketing year exports are reduced 20 million bushels to 160 million). U.S. production is cut this month, and the stocks report indicates larger-than-expected domestic use during the September-November 2013 quarter. While there are large outstanding sales to China and unknown (also possibly China), the pace of actual shipments has been relatively sluggish. During October-November 2013, Census exports were below the previous year’s slow pace, and according to inspections, December exports, while larger than a year earlier, remained below 0.2 million tons. To reach the reduced export forecast, the pace of shipments is expected to increase. Sorghum in an export position is priced at a premium to corn, limiting additional sales.

Offsetting the U.S. export reduction is an increase of 0.5 million tons to 2.0 million for Argentina, where high-tannin sorghum remains abundant and competitively priced. Moreover, Argentina has been making sales to Japan. China’s sorghum import prospects are increased 0.5 million tons to 2.5 million, based on strong purchases from the United States and Australia. This implies that Japan will acquire more sorghum from Argentina and less from Australia. Mexico’s sorghum imports are cut 0.5 million tons to 1.0 million as China has bought so much of the U.S. exportable supply.

Global barley trade for 2013/14 is unchanged this month at 19.6 million tons, but EU exports are trimmed 0.4 million to 4.1 million based on a recent slowdown in export licenses. Offsetting is a 0.4-million-ton increase to 3.0 million for Argentina, supported by increased production.

Published by USDA Economic Research Service

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