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USDA Feed Outlook

15 September 2014

USDA Feed Outlook - 15 September 2014USDA Feed Outlook - 15 September 2014

Feed Outlook

Higher Forecast Yields Boost Record Corn Crop

The September survey-based forecast for the 2014/15 corn crop raises the U.S. corn yield 4.3 bushels per acre from last month to a record 171.7 bushels. Harvested area remains unchanged at 83.8 million acres. Excellent growing conditions in most areas are expected to help production reach 14,395 million bushels, 470 million higher than the previous record in 2013/14. Seventy-four percent of the crop was rated good to excellent in early September, up 18 percentage points from last year and the highest late-summer rating since 2004. Supplies are projected at a record 15,607 million bushels. This month’s 2014/15 total disappearance is projected up 170 million bushels, with increases in feed and residual use; corn food, seed, and industrial use, including ethanol; and exports. Ending stocks are expected to be 194 million bushels higher, and the price received by farmers is reduced by 40 cents at the mid-point of the projected range.

Sorghum production in 2014/15 is increased by less than 1 million bushels this month to 430 million due to a slight increase in yields driven by gains in Texas and despite a slight yield decline in Kansas. Strong trade activity and prospects support a 10-million-bushel boost to export projections in both 2013/14 and 2014/15.

Reduced foreign coarse grain production prospects offset much of the U.S. increase, leaving global production up modestly. Reduced foreign projected ending stocks offset much of the U.S. increase, leaving 2014/15 world coarse grain stocks projected up less than 1 percent this month.

Domestic Outlook

Record Corn Yields Boost Crop Forecasts

USDA’s National Agricultural Statistics Service (NASS) September 11 Crop Production report boosted the forecast yield for the 2014/15 U.S. corn crop by 4.3 bushels per acre to 171.7 bushels. This record high stands 22 bushels above the 5-year average, and 7 bushels above the previous high of 164.7 bushels in 2009/10. Yields increased in all but two States for which State-level data are available. Major corn-producing States saw the largest increases. The crop has been favored by adequate moisture and advantageous temperatures as evidenced by crop condition ratings of 74 percent in the good-to-excellent range, compared with 56 percent last year as of early September.

Both planted and harvested acreage forecasts are unchanged this month. With the higher forecast yield, corn production is expected to be a record 14,395 million bushels, 363 million bushels above last month’s projection and 470 million bushels above the 2013/14 estimate.

Corn Supplies Forecast Higher, Use Increases

U.S. corn supplies for 2014/15 are forecast at 15,607 million bushels this month, with the larger crop as carryin and imports virtually unchanged. Projected feed and residual is raised 75 million bushels as the larger crop boosts residual disappearance and the lower price outlook encourages increased feed use. Food, seed, and industrial (FSI) is raised 70 million bushels as forecast use of corn for ethanol is raised 50 million bushels. Low corn prices are expected to encourage additional blending of ethanol, both for the domestic and export markets. Among other FSI categories, corn usage for sweeteners is raised 20 million bushels.

Forecast exports for 2014/15 are increased 25 million bushels to 1,750 million bushels. Lower corn prices are expected to increase demand for U.S. corn despite large foreign supplies. Total disappearance is projected up 170 million bushels this month to 13,605 million.

Balance Sheet Changes for 2013/14

With the 2013/14 marketing year ending September 1, minor changes were made to the balance sheet to accommodate recent, nearly complete data. Projected corn FSI is lowered about 5 million bushels. A 5-million bushel increase in corn for ethanol use is offset by a reduction in usage for starch and an increase of 15 million bushels in usage for glucose and dextrose as refiners shifted production from starch (lowered 25 million bushels) to sweetener products. Corn for ethanol was projected higher on higher-than-expected weekly production reported by the Energy Information Administration (EIA) in August. There are also slight changes in cereals and other products. Projected exports are raised 5 million bushels to 1,925 million bushels supported by Census data through July and indications from August export inspections. Projected total disappearance is nearly unchanged month to month, up by only 49,000 bushels with the same-sized reduction in 2013/14 ending stocks. 

EIA made revisions in historical data for calendar 2013 that resulted in slight changes in estimated corn for ethanol use for 2012/13. There are also minor revisions to FSI use for 2011/12 and 2012/13, with small adjustments made to corn use for sweeteners and starch.

Feed Use

U.S. feed and residual use for the four feed grains (corn, sorghum, barley, and oats) plus wheat in 2014/15 is projected at 145.8 million metric tons, 1.7 million over last month’s forecast. Corn use and barley use increase, and sorghum use declines. Oats and wheat feed and residual use remain steady. Corn is projected to account for 93 percent of feed use in 2014/15, down from 96 percent in 2013/14 due to increased wheat feeding.

The projected index of grain-consuming animal units (GCAUs) for 2014/15 is 89.90 million, up slightly from 89.32 million for 2013/14. Feed grain use per GCAU is expected at 1.62 tons, up from 1.54 tons in 2013/14. In the month-over-month index components, dairy cattle increase, cattle decrease, hogs are steady, and poultry increase slightly.

Forecast Corn Price Reduced

The projected season-average farm price for U.S. corn is lowered 35 cents at the low end of the range and 45 cents at the high end of the range for a midpoint decline of $0.40 to $3.50 per bushel, due to the larger crop higher projected carryout. The current projection is the lowest marketing year price for farmers since the 2006/07 marketing year, when corn brought $3.04 per bushel. For the 2013/14 crop, the price is unchanged at $4.45 per bushel.

Sorghum Exports Surge, New Crop Production Expands Slightly

Based on September 1 conditions, the U.S. sorghum yield forecast for 2014/15 is increased by a modest 0.1 bushels per acre to 67.2, resulting in an 850,000-bushel increase in production. This additional new-crop production provides a small offset to the reduction in 2014/15 beginning stocks resulting from a drop in 2013/14 ending stocks. Changes in 2013/14 feed and residual and exports result in a near 5-million-bushel reduction in ending stocks after a slight increase in imports is taken into account.

At 20 million bushels, sorghum ending stocks for 2013/14 are at the third lowest level on record, behind the 15 million estimated for 2012/13 and the 18 million estimated for 1995/96. Ending stocks reductions for both 2013/14 and 2014/15 parallel increases in projected exports of sorghum. This month, export projections for both marketing years are increased by 10 million bushels and are attributable to strengthening sales and shipments to China in the fourth quarter. Large outstanding export sales indicate a continued strong pace of exports into the new-crop year.

Demand from the export market is buoying sorghum prices at Texas Gulf ports where the grain has been selling at a premium to corn. Demand from the export market insulates U.S. sorghum prices somewhat from downward pressure due to falling corn prices. The 2014/15 season-average farm price is reduced by 35 cents to a range midpoint of $3.30 per bushel, whereas the 2014/15 season-average farm price for corn is reduced by 40 cents to a range midpoint of $3.50 per bushel. In light of the large corn crop, sorghum will face significant competition in both livestock feed and ethanol markets, where sorghum’s lower relative nutrition and starch content generally indicates a price discount. As projected, the season-average sorghum price is 94.3 percent of the corn price.

Well-timed rains in Kansas during the first week of September are expected to aid development and potentially boost starch content as the crop enters the final phases of maturation. Increased starch content will enhance the appeal of sorghum for use in ethanol production. For the week ending September 7, 54 percent of the Kansas crop was rated good to excellent and 9 percent was rated mature, as compared to the 5-year average of 6 percent. Heavy rainfall throughout Texas may benefit sorghum in northern regions of the State; however, with 86 percent of the crop having reached maturity by the week ending September 7, the moisture will provide relatively fewer yield and quality benefits than if it had arrived earlier in the season.

Wet Weather Woes for Barley

U.S. barley and oats production figures were not revised in the September Crop Production report. The NASS Small Grains report, due out at the end of the month, will report any area and production revisions. Ahead of the Small Grains report, industry sources are reporting damage to the barley crops in Idaho, Montana, and North Dakota, the result of ill-timed and heavy rains in late August. Descriptions of the damage include lodging and sprouting, among other related quality concerns.

A significant share of the Nation’s malt barley is grown in the affected regions. Once sprouted in the field, malt barley is generally no longer considered to be fit for malting purposes, though it may be fed to livestock. The Idaho Barley Commission (IBC), in partnership with the University of Idaho College of Agricultural and Life Sciences, has issued guidance to Idaho malt barley growers experiencing “higher than acceptable” sprout damage. In this notice, the IBC recommends that producers “(t)ry to avoid dumping your barley as feed at harvest as the commercial feed barley prices have been dropping rapidly.”

Wet conditions are reported to have increased incidence of lodging or knock-down via culm or stalk deterioration. While the impact on barley yields has not yet been quantified by NASS surveys, lodging in small cereal grains is associated with grain quality declines via the reduction of extractable malt levels, higher drying costs, and slower harvests. When lodging occurs, especially under wet conditions, barley grains can be exposed to greater humidity and are at increased risk of fungal infections that lead to mycotoxin contamination such as vomitoxin (VOX). Industry sources indicate higher-than-normal detection of VOX in harvested grain samples. Contaminated grain can be blended with clean grain and fed to livestock, though safe handling precautions are urged. Infected grain is typically sold for a discount.

Growers appear to be working to quickly get the grain out of the field and to avoid further damage to the barley crop as evidenced by an acceleration of the pace of harvest between August 31 and September 7. The 5-year (2009-13), 5-State, average week-to-week gain in harvested area for the comparable period of time is 14 percent. This year, fully 23 percent of the barley crop was harvested between the week ending on August 31 and September 7. During this 7-day period, more than a quarter of the barley crop in Idaho and Montana was harvested.

For the week ending on August 3, 2014, 66 percent of the 5-State barley crop was listed as good to excellent. By August 31, that share had dropped to 52 percent. Further, the share of the crop rated as poor to very poor increased over the 4-week period from 4 to 14 percent. The deterioration of the U.S. barley crop is likely to increase reliance on imported Canadian malt; however, the Southern Prairies, including sections of Southern Saskatchewan and Southern and Central Manitoba, experienced significant rainfall concurrent with the storms that affected barley production in mainly Eastern Idaho, Montana and North Dakota.

Reflective of market developments, including higher-than-expected prices for malt barley, the 2014/15 all-barley season-average farm price is increased 10 cents and forecast at $4.45 per bushel on the low-end of the range and $5.25 per bushel on the high-end of the range. The 2014/15 oats price is increased by 10 cents on either side of the range to $2.75 to $3.35 per bushel and is also reflective of higher-than-expected prices during the summer months. For the 2013/14 marketing year, the season-average farm price for barley and oats are estimated at $6.06 and $3.75 per bushel, respectively. U.S. oats supply and demand for 2013/14 and 2014/15 are unchanged this month.

International Outlook 

Foreign Drop Partly Offsets Increase in U.S. Coarse Grain Production

World coarse grain production projected for 2014/15 is increased 1.4 million tons this month to 1,269.2 million, as reductions in foreign countries, especially China and Argentina, are more than offset by the U.S. increase. Foreign coarse grain production is cut 7.9 million tons to 887.1 million, with most of the decline in corn, down 7.1 million tons to 621.9 million. Foreign sorghum production is trimmed 0.7 million tons, millet is reduced 0.5 million, and oats decline slightly, but barley is raised 0.5 million.

The largest reduction in expected production is for China’s corn, down 5.0 million tons to 217.0 million tons. Rainfall across nearly all important corn-producing regions in China is less abundant than the previous year when record yields were achieved. In some provinces, especially Henan, the dryness was severe, while in other provinces, such as Heilongjiang, rainfall totals were adequate but not as high as a year ago. The projected yield is cut 2 percent to 5.9 tons per hectare. Corn area harvested is unchanged this month and is up year over year, as prices and returns for domestic corn are more attractive than those for other crops. The projected crop is still the second largest ever, slightly below the record set in the previous year.

Argentina’s projected 2014/15 coarse grain production is cut 4.1 million tons to 31.1 million. Winter crop planting was delayed by excessive rains, and the drop in barley area is reported to be stronger than earlier forecast. As summer crop plantings commence, it is clear that relative returns and risk favor a switch to soybeans and out of coarse grains. With the economy in recession, inflation accelerating, and the country technically in default on foreign debt, the risk associated with exchange rates and government policy adds to the normal yield risk of growing crops. Soybeans, with relatively low input costs, no quantitative restrictions on exports, and more flexible flowering are perceived by producers as less risky than grains. Corn area and sorghum area are projected to decline year over year instead of increasing as previously forecast. Corn production prospects are cut 3.0 million tons to 23.0 million, sorghum reduced 0.6 million to 4.2 million, and barley is down 0.5 million to 3.4 million. Late planting and excessive rains delayed the harvest of 2013/14 corn in Argentina. Recent production reports support a 1.0-million-ton increase in Argentina’s estimated 2013/14 corn production to 25.0 million.

Algeria’s 2014/15 barley production is down 0.6 million tons to 1.1 million based on government reports. Barley is often grown on marginal land in Algeria. The harvest was completed months ago, but dryness and heat hurt yields and reduced harvested area more than previously expected.

India’s 2014/15 millet production is forecast down 0.5 million tons this month to 10.5 million. The delayed onset of monsoon rains delayed and finally prevented the planting of some millet. The forecast millet area of 8.8 million hectares is the lowest in the USDA database going back to 1960.

Russia’s 2014/15 corn production prospects are reduced 0.5 million tons this month to 12.5 million. Planted area is reported up from the previous year, especially in the Central District (north of Ukraine), but the increase is less than expected, trimming forecast area harvested by 0.1 million hectares to 2.5 million. There has been dryness in July and August from the North Caucasus, across the Southern district around Rostov, and into the Central District. However, preliminary harvest results indicate good yields, especially around Krasnodar. Increased use of imported high-yielding corn seed also supports yield prospects that are unchanged this month.

Ukraine’s forecast coarse grain production is reduced 0.2 million tons this month to 36.3 million. Corn production prospects are cut 1.0 million tons to 26.0 million. The State Statistical Committee reported corn area planted down from the previous year’s record level. Harvested area for 2014/15 is projected at 4.6 million hectares, down 0.1 million this month. Dryness and excessive heat in southern corn areas in July expanded northward in August. Corn yield prospects are trimmed 2 percent this month. Offsetting most of the decline in projected corn production is an increase for barley, up 0.8 million tons this month to 9.0 million. Harvest reports indicate the highest barley yields in 6 years. There are also small declines in 2014/15 coarse grain production this month for Australia, Azerbaijan, Syria, North Korea, Morocco, Ecuador, and Saudi Arabia.

Increased coarse grain production is forecast this month for the EU, up 2.1 million tons to 158.0 million. Barley harvest reports boost expected production 0.8 million tons to 57.0 million. Increased reported area harvested supports barley production this month in Poland and the UK. EU corn production prospects are up 1.3 million tons to 68.3 million, as abundant rains and moderate temperatures across most countries support yield prospects, especially for France, Hungary, and Romania. Outside the EU, but in the region with favorable yield prospects, Serbia’s corn production prospects are raised 0.3 million tons to 6.9 million.

Brazil’s 2013/14 second-crop corn harvest is still wrapping up, and area and yield are reported higher than earlier forecast. Corn production is estimated up 1.3 million tons to 79.3 million. Corn area in 2014/15 is projected to decline 4 percent from the previous year, but with the previous year’s area estimated higher, the corn area for 2014/15 is up this month. Corn production for 2014/15 is projected up 1.0 million tons to 75.0 million. There are small increases this month in projected coarse grain production for Canada and Peru.

Increased 2014/15 Beginning Stocks Support Supplies

World coarse grain beginning stocks in 2014/15 are raised 2.7 million tons this month to 210.1 million as a result of adjustments to estimated 2013/14 supply and use. The EU accounts for most of the increase, up 2.4 million tons to 16.0 million. EU 2013/14 corn imports and production are raised, boosting supply 0.7 million tons, and feed and residual use is cut 1.0 million, leaving estimated corn stocks up 1.7 million. EU barley revisions for 2013/14 highlight reduced feed and exports, increasing stocks 0.7 million tons. Revisions to other countries are mostly offsetting. Global coarse grain production in 2014/15 and beginning stocks combine to increase world supplies 4.0 million tons this month to 1,479.3 million.

World Coarse Grain Use Projected Higher

Global coarse grain use is forecast up 2.3 million tons this month to 1,255.5 million, a modest increase. While U.S. coarse grain use is projected higher, foreign disappearance is down 1.3 million tons to 940.8 million. Foreign corn use is projected down 1.7 million tons to 669.6 million, millet use is cut 0.4 million tons to 30.0 million, sorghum use is reduced 0.3 million to 57.0 million, and oats use is trimmed 0.2 million to 20.1 million. However, projected 2014/15 foreign barley use is raised 1.2 million tons to 134.0 million.

China’s 2014/15 corn use is forecast down 2.0 million tons to 220.0 million, with the reduction in projected feed use. The wheat-to-corn price ratios in China are expected to encourage a shift to feeding more wheat.

Ukraine’s coarse grain feed and residual use is reduced 0.8 million tons, with corn feed use cut 1.0 million tons to 8.5 million, but barley feed use is increased 0.2 million tons to 4.0 million.

India’s coarse grain projected use is reduced 0.6 million tons to 37.2 million. Millet use is cut 0.4 million tons due to reduced production, with a decline of 0.3 million in food, seed, and industrial use (FSI) and 0.1 million in feed. India’s corn exports in 2013/14 are increased this month, trimming 2014/15 beginning stocks and resulting in a 0.2-million-ton decline in projected corn feeding.

Japan’s 2014/15 corn feed use is reduced 0.3 million tons this month, reflecting sluggish meat production. Canada’s projected coarse grain use is down 0.3 million tons, with a decline of 0.2 million for corn. Morocco’s 2014/15 barley feed use is trimmed 0.2 million tons, with growth from a reduced base estimated for 2013/14.

EU 2014/15 coarse grain use is forecast up 1.1 million tons this month to 159.0 million. EU corn feed is boosted 1.0 million tons, with a sharp increase in supplies, and barley food and industrial use is increased 0.2 million, but oats feed is trimmed 0.1 million. Argentina’s coarse grain use is increased 0.3 million tons, with corn use up 2.0 million and sorghum feed use up 0.2 million but partly offset by a 0.1-million-ton reduction in sorghum FSI use.

Other country changes are smaller and mostly offsetting. However, world coarse grain disappearance also reflects the difference between global exports and imports, with exports normally bigger than imports, partly due to exporters in the USDA database shipping to destinations not included in the database. For most countries, imports are based on exporters’ data, but for some countries it is judged that importers’ data are a more accurate measure of actual imports. Trans-shipments and sales of cargoes in transit make destinations hard to track. For example, for Vietnam, exporters’ data recently are showing more corn shipped to Vietnam than has been reported by Vietnam as its actual destination. One of the places the data discrepancies appear is in the “unaccounted” line in imports in the FAS Grain Circular trade tables. This month, the 2013/14 unaccounted imports increased 1.7 million tons to 5.9 million, while 2014/15 unaccounted imports are projected up 1.6 million to 5.4 million.

Global Stocks Up Slightly, Foreign Decline Offsets Much of the U.S. Increase

World 2014/15 coarse grain ending stocks are projected up 1.7 million tons this month to 223.8 million, with U.S. stocks increasing significantly but foreign stocks prospects down 3.1 million tons to 170 million, partly offsetting the U.S. increase. Most of the foreign decline, 2.8 million tons, is for corn.

The largest decline in projected coarse grain ending stocks is for China, down 3.0 million tons to 78.9 million, due to reduced corn production. While down significantly this month, projected stocks in China are still huge and virtually unchanged from beginning stocks.

Argentina’s 2014/15 coarse grain ending stocks are forecast down 2.1 million tons to 4.4 million as reduced production prospects and tighter beginning stocks constrain supplies. Reduced corn production prospects in Russia and Ukraine cut projected coarse grain ending stocks 0.5 million tons and 0.3 million, respectively. Smaller reductions this month are forecast for Algeria, Australia, Serbia, India, Ethiopia, and Saudi Arabia.

Increased 2014/15 coarse grain ending stocks are projected this month for Brazil, up 1.3 million tons to 17.7 million; for the EU, up 1.1 million to 15.9 million; and for Canada, up 0.5 million to 3.6 million. Each of these countries has increased beginning stocks and production. South Korea’s stocks are boosted 0.3 million tons due to strong late-season 2013/14 corn imports. Smaller increases in projected stocks this month are forecast for Morocco, Taiwan, Kenya, Peru, and Syria.

U.S. Corn Export Prospects Increased This Month

Global corn trade projected for 2014/15 (October-September) is unchanged this month at 117.1 million tons. However, as the 2013/14 trade year nears completion, accumulated trade data indicate robust shipments, boosting forecast trade 4.3 million tons to a record 127.0 million. U.S. corn exports for both years are raised 0.5 million tons this month to 49.5 million for 2013/14 and 44.5 million for 2014/15.

U.S. corn export prospects for 2014/15 are increased this month because increased production and reduced price prospects are expected to increase U.S. competitiveness. However, U.S. corn exports are projected lower than those of a year earlier because of large foreign supplies and intense competition among exporters. While the U.S. corn price falls, it is partly offset by a strong dollar. Ongoing logistical problems, especially for railroads, are making it difficult to move record corn and soybean crops. As of September 4, 2014, near the beginning of the local marketing year, corn outstanding sales were 11.7 million tons, down from 12.6 million a year earlier.

Several adjustments are made this month to competitor’s 2014/15 corn exports, mostly due to developments in Argentina. Argentina’s exports are forecast down 1.5 million tons to 13.5 million, partly due to reduced production prospects for the corn crop just now beginning to be planted. However, the recent shipment pace and the lineup at ports for September loading is greater than expected, shifting old-crop exports previously expected to be shipped after October 1, 2014, into the 2013/14 trade year. Argentina’s 2013/14 corn exports are forecast up 1.5 million tons this month to 12.5 million. Developments in Paraguay are like those in Argentina, but smaller. The recent pace of shipments boosts corn exports for 2013/13 by 0.3 million tons to 2.3 million, but reduced exports are projected for 2014/15, down 0.2 million to 1.9 million. With reduced competition from Argentina, Brazil, the EU, and United States are each projected to increase corn exports 0.5 million tons to 22.5 million, 2.5 million, and 44.5 million, respectively. Also, exports by Serbia are increased 0.2 million tons to 2.5 million, supported by a larger crop.

Corn imports projected for 2014/15 are reduced for several countries. EU import prospects are cut 1.0 million tons to 10.0 million as internal supplies are abundant. Japan’s corn import prospects are reduced 0.3 million tons to 15.7 million as meat production prospects are sluggish. Algeria’s and Taiwan’s corn import prospects are trimmed 0.2 million tons each to 3.4 million and 4.2 million, respectively, as strong late-season 2013/14 imports boost beginning stocks for 2014/15. Syria’s forecast corn imports are reduced 0.1 million tons to 0.4 million due to logistical problems associated with war. There is a very small increase in projected corn imports for Tunisia. The reductions in projected imports for specific countries are offset by an increase in the “unaccounted” import category. The trade data for 2013/14 indicate an increase in corn exports with a destination outside the accounted for importers (discussed above under consumption). These corn exports are expected to persist in 2014/15.

Corn imports for 2013/14 are increased for several countries based on shipment data. Algeria is up 0.6 million tons to 4.2 million; the EU is up 0.5 million to a record 16.0 million; South Korea is up 0.3 million to 10.3 million; and Indonesia, Malaysia, Morocco, and Tunisia are each up 0.2 million. There are 0.1-million-ton increases for Israel and Saudi Arabia. Declining international corn prices after several years of tight supplies provided a strong incentive for importers to buy corn in 2013/14.

Corn exports forecast for 2013/14 are raised for Argentina and Paraguay, as mentioned earlier, and also for Brazil, up 1.5 million tons to 22.0 million; for Canada, up 0.2 million to 1.7 million; for India, up 0.2 million to 3.7 million; and for Russia, up 0.1 million to 4.1 million. The U.S. export increase is supported by strong exports in recent months. Census data from October 2013 to July 2014 reach 42.4 million tons, with export inspections in August of 4.3 million. However, the pace of U.S. corn exports in September is expected to slow because competitors’ prices have been maintained at a discount for many weeks. Brazil’s exports are expected to accelerate in September. 

Published by USDA Economic Research Service

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