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USDA Feed Outlook

15 December 2014

USDA Feed Outlook December 2014USDA Feed Outlook December 2014

Feed Outlook

Sorghum Prices Projected to Match Corn in 2014/15

The U.S. season average sorghum farm price projection for 2014/15 is raised 5 cents on each end, with the midpoint of the range at $3.50 per bushel, the same as the projected corn price. While large supplies limit corn prices, sorghum prices are supported by strong export demand, particularly from China. Feed grain supply-and-demand forecasts are mostly unchanged this month. However, a 10-million-bushel increase in corn industrial use reflects an increase in corn used to produce glucose and dextrose. The increased use trims projected corn stocks slightly below the 2-billion-bushel mark. Global coarse grain production is projected slightly higher this month, led by an increase in China’s corn crop. However, EU coarse grain use is forecast higher, and the increase in projected use is larger than increased production, trimming global stocks prospects slightly


Forecast Feed Grain Supplies Unchanged From Last Month

This month’s balance sheets for feed grains have minimal changes. Forecast U.S. feed grain supplies are projected at 418.7 million metric tons for 2014/15, unchanged from last month’s forecast and 22.9 million over the 2013/14 estimate of 395.8 million. Forecast U.S. feed grain use is up 0.3 million metric tons this month at 365.1 million, on higher food, seed, and industrial (FSI) use of corn. Total use is 3.7 million metric tons higher than the 2013/14 estimate of 361.4 million. The higher projected use leaves this month’s carryout down 0.2 million metric tons at 53.7 million, about one and one-half times last year’s estimated carryout of 34.4 million tons.

Feed and Residual Use Steady

On a September-August marketing year basis for 2014/15, U.S. feed and residual use for the four feed grains plus wheat is projected to total 146.6 million tons, up 0.3 million tons from last month due to higher wheat feed and residual use and up 9.7 million from 2013/14’s 137.0 million. Corn is expected to account for 93 percent of feed and residual use, compared with 95 percent last year. The projected index of grain-consuming animal units (GCAU) in 2014/15 is 90.7 million, 0.8 million below last month and 0.4 million above last season’s 90.3 million. Feed and residual per GCAU is estimated at 1.62 tons, up from 1.52 tons in 2013/14. For the major index components, GCAUs are increased for dairy cows and reduced for beef cattle and broilers.

Food, Seed, and Industrial up on Small Gain in Sweetener Use

Corn forecast FSI for 2014/15 is raised 10 million bushes to 6,545 million. The only change in FSI use is a 10-million-bushel increase in corn used for glucose and dextrose, due to higher exports early in the marketing year. No other changes in FSI are made this month. Forecast carryout is lowered by 10 million bushels to 1,998 million as a result of increased FSI disappearance. Carryout in 2013/14 is estimated at 1,236 million bushels, unchanged from last month.

Forecast Corn Price Unchanged

Mirroring the very limited changes in the corn balance sheet, the forecast 2014/15 corn farm price is unchanged at $3.20 on the low end of the range and $3.80 on the high end, for a midpoint of $3.50 per bushel. At the midpoint, this is 96 cents per bushel lower than the 2013/14 estimate of $4.46 per bushel.

Sorghum Price at Parity With Corn

Due largely to continued strength in the export market, the high and low ends of the sorghum price range are each raised $0.05 per bushel to $3.20 to $3.80 per bushel. The projected midpoint of the price range is increased $0.05 to $3.50 per bushel and is at parity with corn prices. In the past 10 years, sorghum-corn price ratio has averaged 93.6 percent. However, sorghum prices rose above corn in 2006; a rise in sorghum prices to corn price levels, and potentially beyond, is not without precedent. With no changes in beginning stocks, production, and imports this month, all U.S. sorghum supply categories remain unchanged and combine for a total supply of 442 million bushels.  All sorghum use categories, including ethanol production and exports, also remain unchanged this month. Food, seed, and industrial use categories are left unchanged at 80 million bushels and compare to the 2013/14 estimate of 70 million bushels.

All Barley Price Holds Steady

All barley supply and use categories are unchanged this month. With the majority of the U.S. barley crop already marketed, sustained strength in malt barley prices supports maintenance of the season-average farm price at the previously forecast level. Declines in feed barley prices have arrested, and Minneapolis No. 2 feed prices have posted weekly increases since the fourth week in November, when prices increased from $2.45 to $2.51 per bushel. The midpoint of the projected allbarley season-average farm price is $5.15 per bushel, which compares with the 2013/14 farm price of $6.06 per bushel.

Oats Price Range Tightened

There are no supply and use changes for U.S. oats this month. The forecast oats price range for 2014/15 is increased by $0.05 on the low end and lowered $0.05 on the high-end to $3.05 to $3.45 per bushel. The midpoint of the projected range for 2014/15 is $3.25 per bushel and compares to the 2013/14 farm price of $3.75 and to the 5-year average of $3.13 per bushel.

U.S. Hay Exports to China Slow

Following the discovery of trace amounts of genetically modified alfalfa, U.S. shipments to China have declined each month since July. Exports of alfalfa hay to China in October were down 10.4 percent (6,147 metric tons) from the same month in the previous year. China is considered a growth market for U.S. alfalfa and hay exports. In 2008, China accounted for less than 1 percent of all U.S. hay exports. In 2013, China accounted for 20 percent of all U.S. hay exports and more than 29 percent of U.S. alfalfa exports. Preliminary November all hay prices declined $9.00 per ton from $173 to $164, as compared to the October estimate. Alfalfa prices dropped $10 per ton from October to November and have been on a steady, seasonal decline since the season-high price of $225 per ton in May. Between May and November 2014, alfalfa prices declined $41 per ton; prices dropped $31 per ton during the same period in 2013.

International Outlook

World Coarse Grain Production Up Modestly This Month

Global coarse grain production for 2014/15 is forecast 1.6 million tons higher this month to 1,275.3 million. Increases for China, the EU, Russia, Vietnam, and Canada more than offset a significant reduction for Argentina. World corn production is increased 1.3 million tons to 991.6 million, rye is boosted 0.5 million to 15.1 million, and oats is increased 0.2 million to 22.5 million. However, global barley prospects are cut 0.4 million tons to 139.4 million, and small reductions are forecast for mixed grain, sorghum, and millet. China’s National Bureau of Statistics released 2014/15 corn production estimates based on survey data. These indicate corn area increased more than expected, about 2 percent from a year earlier, to 37.0 million hectares, producing a crop of 215.5 million tons, up 1.5 million this month. The crop is down 1 percent from the record reached a year ago, as hot dry weather in some provinces reduced yields.

Corn prices and returns for producers are strong enough to continue to expand corn area, mostly replacing soybeans in the northeast and cotton further south. China’s Government has begun intervention purchases to support corn prices at the same level as those of the previous year. EU 2014/15 coarse grain production is raised 0.6 million tons this month to 167.7 million, mostly due to additional reports of large production in France. Corn harvested area and yield for France are both forecast up from previous projections, increasing production 0.4 million tons to 17.4 million. French barley is up 0.1 million tons to 11.7 million, but mixed grain is reduced slightly. Increased corn production for Spain and Portugal more than offset a decline for Bulgaria, where flooding and excess moisture has affected harvesting. EU corn production is up 0.5 million tons this month to 73.6 million. Russia’s rye production is increased 0.5 million tons this month to 4.0 million. This brings the rye yields into line with earlier reported yield increases for winter wheat and winter barley, reflecting generally favorable growing conditions for winter grains. Increased corn area is reported for Vietnam, boosting 2014/15 production 0.2 million tons to 5.6 million.

Demand for corn in Vietnam is increasing, and high corn prices in nearby China may provide some indirect support to corn growers in Vietnam. Statistics Canada reported survey-based production for 2014 crops, with dramatic increases for wheat and canola but only minor revisions for coarse grains, up 0.2 million tons to 21.9 million. Oats production is raised 0.2 million tons to 2.9 million and small increases are reported for mixed grain and rye, but barley is reduced 0.1 million tons to 7.1 million. Argentina’s coarse grain production for 2014/15 is projected down 1.4 million tons this month to 29.2 million. Heavy rains have affected both winter barley harvesting and corn planting. Barley yields are dampened, reducing production 0.4 million tons to 3.0 million.

While corn plantings are delayed by excess rains in some areas, more crucial factors may be the economics and politics making corn a less attractive cropping alternative than soybeans. Prices and cost of production favor soybeans over corn. Moreover, Argentina’s Government continues to limit corn export quotas, making it risky to plant and market corn. Corn harvested area is projected at 3.0 million hectares, down from 3.4 million from the previous year. Growers have a strong agronomic incentive to rotate corn with soybeans at least occasionally because continuous soybeans depletes soil fertility and encourages diseases in crops. Small downward production revisions are forecast for sorghum and millet in Yemen and for barley in Lebanon.

Reduced Beginning Stocks Partly Offset the Production Increase

World coarse grain beginning stocks for 2014/15 are reduced 0.5 million tons this month to 209.5 million. This partly offsets the increased production, leaving projected global coarse grain supplies up 1.1 million tons to 1,484.8 million. Numerous revisions to 2013/14 supply-and-demand estimates are caused by more complete data on supply, use, and trade. The largest reduction in coarse grain stocks is for the EU, down 0.4 million tons to 15.0 million. EU corn imports for 2013/14 came in 0.2 million tons less than previously estimated. Also, 2013/14 barley and mixed grain food seed and industrial use (FSI) are each raised 0.1 million tons. Argentine barley exports for 2013/14 are raised 0.1 million tons based on reported shipments, with the increase coming out of stocks. The pace of Russia’s 2013/14 corn exports was stronger than expected, trimming stocks 0.1 million tons. Smaller reductions in 2014/15 beginning stocks due to 2013/14 revisions are forecast for corn in Peru and sorghum in Sudan, Colombia, India, and some other countries. Partly offsetting these reductions are small increases in 2014/15 beginning stocks caused by 2013/14 revisions for Serbian corn, Mexican corn and barley, Turkish corn, and others.

Global Coarse Grain Use Projected Higher

World coarse grain disappearance for 2014/15 is projected up 2.5 million tons this month to 1,257.7 million. The largest increase is for the EU, where grain supplies are abundant and strong wheat exports are shifting feed and residual use to more coarse grains. EU coarse grain total use is projected up 2.9 million tons to 163.5 million. Feed and residual is increased 3.0 million tons to 121.4 million, with an increase of 1.5 million for barley, 1.0 million for mixed grain, and 0.5 million for corn. EU FSI is increased 0.1 million tons for mixed grain but cut 0.2 million for barley. China’s 2014/15 sorghum feed and residual use is forecast up 0.4 million tons based on increased imports. Russia’s rye FSI is projected up 0.3 million tons with increased production. Smaller consumption increases are forecast for U.S. corn, Saudi barley, and others. Partly offsetting the increases in projected coarse grain use is a reduction in global disappearance caused by a small decline in world local marketing year exports compared to a small increase in forecast 2014/15 imports. Also, reduced coarse grain use is projected this month for some countries. Japan’s sorghum feed and residual is trimmed 0.3 million tons as import prospects are dimmed by high prices relative to other feed grains. Feed and residual use is reduced slightly for Canadian barley, Australian corn, Indian barley, and a few others.

World Ending Stocks Forecast Is Reduced

Global coarse grain ending stocks for 2014/15 are projected down 1.5 million tons this month to 227.2 million. The dominant reduction is for the EU, cut 2.9 million tons to 15.8 million. Increased feed use cuts stocks prospects 1.5 million tons for barley, 1.3 million for mixed grain, and 0.1 million for corn. There are smaller reductions this month for the United States, Argentina, and others. Partly offsetting these declines are increased stocks prospects for China, up 1.0 million tons due to increased corn production; Saudi Arabia, increased 0.3 million because of increased barley imports; Canada, up 0.2 million due to increased oats production; Russia, up 0.1 million with an increase in rye (caused by production) partly offset by a reduction for corn (caused by exports); and some other countries, up by smaller amounts.

Global Corn Trade Trimmed

World corn trade for the October-September 2014/15 trade year is projected down 0.3 million tons this month to 114.8 million. Argentina’s smaller corn crop limits export prospects, down 0.5 million tons to 12.0 million. Half of that reduction is offset by increased corn exports for Vietnam, which is shipping more corn to neighboring countries (up 0.2 million tons to 0.4 million), and a small increase in corn exports from Australia. Projected corn imports are unchanged except for China, down 0.5 million tons to 2.0 million. With U.S. corn shipments effectively blocked by GMO approval issues, imports from other origins have been increasing slowly. U.S. corn exports for 2014/15 remain projected at 44.5 million tons (1.75 billion bushels for the local marketing year). Corn exports started stronger than a year earlier in October 2014 (and in September for the local marketing year), but corn grain inspections for November at only 2.4 million tons were sluggish, partly because of heavy soybean exports and lingering logistical issues. Outstanding sales of corn at the end of November 2014 are 13.5 million tons, down from 17.9 million a year earlier, but are increasing.

U.S. corn export prices for delivery in 2015 are becoming more competitive, and U.S. corn sales are expected to increase as competition from Brazil is expected to drop from February to June 2015 as Brazilian ports concentrate on moving a record soybean harvest. There were several small adjustments this month to estimated 2013/14 corn exports and imports based on complete or nearly complete reported data. Vietnam’s 2013/14 exports are doubled, from 0.2 million tons to 0.4 million. Russia’s corn exports are increased 0.1 million tons to a record 4.2 million, so Russia emerges as a significant corn exporter, the world’s fifth largest corn exporter in 2013/14. On the other hand, South Africa’s corn exports are estimated down 0.2 million tons this month to 2.1 million, stagnant at about the average of the previous 5 years, despite attractive world prices. These and several smaller changes are mostly offsetting, leaving estimated 2013/14 corn trade nearly unchanged. The largest revision to estimated corn imports is for the EU, down 0.2 million tons to 15.8 million. However, these record-large corn imports verify the EU as the world’s largest corn importer in 2013/14, 5 percent larger than Japan.

Trade Year U.S. Sorghum Exports Projected Higher

U.S. sorghum exports for the October-September 2014/15 trade year are projected up 0.2 million tons this month to 5.8 million. However, the September-August local marketing year export forecast remains unchanged at 230 million bushels. The change reflects a view of likely developments in September 2015 compared to September 2014. With very large outstanding sales during marketing year 2014/15, some of those outstanding sales are expected to “slop over” into the beginning of 2015/16, supporting export shipments during September 2015 when the new crop supplies become available. This implies that September 2015 sorghum export shipments could approach the heavy volume reached in 2014. Previous projections assumed September 2015 would be significantly smaller than 2014.

For both the trade year and local marketing year in 2014/15, exports will be constrained by the size of U.S. supplies and the amount used domestically. The December stocks report, released in January, and the January NASS production estimate should provide additional information on U.S. supplies and domestic use. With increased U.S. exports, world sorghum trade in 2014/15 is projected up 0.2 million tons to 8.4 million. China’s imports are projected up 0.4 million tons to 5.0 million based on the pace of shipments and sales. However, with China bidding up sorghum prices, Japan’s imports have slowed, with projected imports cut 0.3 million tons this month to 1.2 million. Saudi Arabia’s 2014/15 sorghum import prospects are raised slightly based on the previous year’s revised import estimate.

World Barley Trade Projected Down Slightly

Reduced barley production in Argentina will limit export potential, with forecast exports down 0.4 million tons this month to 1.6 million. Saudi Arabia reportedly has large barley stocks and incentives to shift away from feeding as much barley to sheep and goats as was done in the past. The October-September 2014/15 Saudi Arabia trade year import forecast is reduced 0.5 million tons this month to 7.0 million. World barley trade in 2014/15 is projected to reach 21.8 million tons, down 8 percent from the previous year.

Published by USDA Economic Research Service

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