Feed Outlook July 2011

Higher Stocks and Production Boost Feed Grain Supply

The June Grain Stocks report indicated lower- than-expected March-May corn use for 2010/11, boosting projected corn carryin for 2011/12 by 150 million bushels. The June Acreage report increased planted acreage relative to March intentions and the previous months projection, boosting 2011/12 projected corn production 270 million bushels. Corn supplies for 2011/12 are projected 420 million bushels higher. Forecast 2011/12 prices were lowered for all four feed grains. With corn price prospects reduced, domestic use is projected up 145 million bushels as increased feed and residual and ethanol use more than offset small reductions for starch and high fructose corn syrup (HFCS). US corn exports are increased 100 million bushels, mostly due to increased demand from China. Increased US corn supplies more than offset higher use, leaving projected 2011/12 ending stocks up 175 million bushels.

Domestic Outlook

Feed Grain Supply Prospects Raised for 2011/12

US feed grain supplies for 2011/12 are projected higher for July, reflecting higher beginning stocks and production for corn. US feed grain production for 2011/12 is projected at 382.6 million tons, up 9.6 million tons from a month ago and down 2 million tons from the 2010/11 estimate. The June 30 Acreage report showed planted acreage increased relative to intentions for corn and decreased for the other feedgrains. Corn beginning stocks are raised 150 million bushels reflecting changes in 2010/11 use. Corn production for 2011/12 is projected 270 million bushels higher based on harvested and planted area reported in the Acreage report.

The first survey-based production forecast for barley in the July 12 Crop Production report lowers output 2 million bushels from the June projection as lower harvested acreage more than offsets an increase in yield. Barley beginning stocks are reduced 3 million bushels due to increased 2010/11 use revealed by the June 1 stocks estimate. The first survey-based production forecast for oats is 15 million bushels lower than the June projection, reflecting a decline in projected harvested acres and expected lower yield. Oat imports are projected 5 million bushels lower than last months projection but 7 million bushels above the 2010/11 estimate. USDA will make its first survey-based forecasts for corn and sorghum production in the August 11 Crop Production report.

June 1 Stocks Estimate Eases Stocks Situation

The Grain Stocks report, issued by USDAs National Agricultural Statistics Service on June 30, 2011, showed higher-than-expected June 1 corn stocks indicating a lower-than-expected March-May disappearance during 2010/11. This months changes to 2010/11 corn usage raise carryin for the 2011/12 crop year 150 million bushels over last months projection, but beginning stocks remain down dramatically, at 52 per cent of the 2010/11 estimate. June 1 stocks for sorghum raise indicated March-May disappearance, lowering expected ending stocks for 2010/11. June 1 stock estimates reduce barley 2010/11 ending stocks 3 million bushels and raise oats 2010/11 ending stocks 2 million bushels. Ending stocks for 2010/11 are down year to year for all four of the feed grains.

Corn ending stocks for 2011/12 are raised 175 million bushels from last months projection based on higher production and carryin. Sorghum, barley, and oats ending stocks are down 5, 6, and 8 million bushels, respectively, as projected supplies tighten this month.

There is no change this month in the 2011/12 corn import projection of 20 million bushels. Estimated imports of corn for 2010/11 are raised 5 million bushels to 30 million bushels on continued strong shipments from Canada.

Corn feed and residual use for 2011/12 is increased 50 million bushels as lower prices encourage feeding. The 2010/11 feed and residual use forecast is lowered 150 million bushels based on lower-than-expected March-May disappearance as indicated by the June 1 stocks. Continuing high prices are expected to limit corn use for feed with increased supplies of soft red winter wheat priced to substitute for corn in livestock feed this summer. June-August corn feed and residual use, however, is expected to be up from last year as delayed planting in eastern and southern portions of the Corn Belt limit early availability of new-crop corn. Feed and residual use in the second half of the marketing year is estimated at 1,364 million bushels, or only 27 per cent of the 5,000 million bushels projected for the year. This would be lower than any year since at least 1975, both in absolute and per centage terms.

Sorghum feed and residual for 2011/12 is projected 10 million bushels lower at 80 million bushels as reduced plantings lower supplies especially in Texas and Kansas where drought is adversely affecting this years crop. For 2010/11, sorghum feed and residual use are increased 5 million bushels based on indications from the June 1 stocks. The July projection for barley feed and residual use is unchanged for 2011/12 and increased 3 million for 2010/11, reflecting the lower ending stocks estimate. For oats, the July 2011/12 projection for feed and residual use is lowered 10 million bushels, reflecting lower production. For 2010/11, ending stocks are estimated 2 million bushels lower, reflecting the June 1 stocks.

Grain consuming animal units (GCAUs) are increased for July. For 2011/12, higher inventory numbers for cattle on feed and hogs boosted GCAUs from 94.2 to 94.3. For 2010/11, GCAUs increased from 92.7 to 92.9 on higher poultry inventory.

Corn Used for Ethanol Increased, Sorghum Decreased

Projected corn use for ethanol is raised 100 million bushels for 2011/12 and 50 million for 2010/11. Continued expansion in the ethanol sector as reported by Energy Department weekly data for recent months, favorable margins for refiners, and long-term trends in fuel consumption resulted in the increase to 5,150 million bushels in 2011/12 and 5,050 million in 2010/11. Sorghum food, seed, and industrial use is lowered 5 million bushels for 2011/12, with this months 25-million-bushel reduction in projected supplies and likely sharp production declines in the Southern Plains, due to the ongoing drought.

Projected food, seed, and industrial use of corn for 2011/12 advance 95 million bushels, with increases in corn for ethanol partly offset by lower expected use for HFCS, reflecting slower shipments to Mexico. For 2010/11, food, seed and industrial use increases 30 million bushels as corn use for starch and HFCS is reduced 20 million bushels, partly offsetting the higher projected corn use for ethanol.

Corn export projections for 2011/12 are increased to reflect increased demand from China. Projections of sorghum exports are lowered 5 million bushels to reflect tighter supplies. For 2010/11, corn exports are lowered 25 million bushels to reflect slower shipments in recent months.

Price projections for 2011/12 are lowered for the four feed grains. The season average farm price for corn is projected at $5.50 to $6.50, a 50-cent reduction in both the high and low ends of the range compared with Junes projection, but still a record with a midpoint of $6.00. The projected sorghum upper and lower price ranges are lowered 50 cents per bushel to $5.10 to $6.10. The upper and lower ends of the projected ranges are lowered 30 cents per bushel for barley and 40 cents per bushel for oats, resulting in projections of $5.65 to $6.75 and $3.20 to $3.80, respectively.

For the 2010/11 corn price estimate, the upper end of the range is lowered 15 cents and the lower end lowered 5 cents. Sorghum is reduced 5 cents on the lower end of the range and 15 cents on the upper end. Final estimates for barley and oats are increased slightly.

The June 30 Acreage report forecasts 2011 harvested acres of all hay at 57.6, down 2.3 million from last year. This would be the lowest all hay area on record going back to 1919. Harvested area of alfalfa and alfalfa mixtures is forecast at 19.3 million acres, down 627,000 million from 2010. Area for harvest of all other types of hay is expected to total 38.3 million acres, down 1.6 million acres from 2009. Harvested area for alfalfa and alfalfa mixtures is expected to the lowest since 1949 and harvested area for all other hay is expected to be the lowest since 2000. At 5- year average yields, all hay production would be 138 million tons, down 7 million from 2010 and the lowest since 1988.

Harvested acres of all hay are expected to be below or equal to last year for most States in the Corn Belt, Great Plains, Pacific Northwest, and the Rocky Mountain region. Record low harvested acreage is expected in Iowa, Nebraska, Minnesota, Maine, Pennsylvania, and Wisconsin while record high acreage is expected in Arkansas. Record high acres of alfalfa and alfalfa mixtures are expected to be harvested in Montana. In Arkansas, record low acreage is expected for alfalfa and alfalfa mixtures in contrast to the record-tying high harvested acreage of other hay that is expected.

Corn Used for Dry Mill Fuel Ethanol Production and Distillers Grain By-Products

As corn-based fuel ethanol production has risen over the past decade, there has been interest in the volume of distillers grains produced. Distillers grains are a by-product from dry-mill ethanol plants and can be used in livestock rations, particularly by ruminants such as beef and dairy cattle. Since most of the expansion in fuel ethanol production has been in corn-based dry mill plants, production of distillers grains has shown a rapid expansion as well.

Figure 7 provides an indicator of the growing importance of distillers grains by showing estimates of the amount of corn utilization that produces distillers grains from dry mill fuel ethanol production. Calculations are based on data provided in Hoffman and Baker, Market Issues and Prospects for US Distillers Grains Supply, Use, and Price Relationships, USDA-ERS Outlook Report No. FDS-10K-01, December 2010.

To arrive at the estimates for corn that produces distillers grains from dry mill fuel ethanol production, two steps are made in the calculations. First, the volume of corn used in dry mill fuel ethanol (and by-products) production is separated from the volume used for all ethanol (and by-products) production. This share has risen from 30-35 per cent a decade ago to about 90 per cent in 2010/11. Second, since about 17.5 pounds of distillers grains are typically produced from each bushel of corn used in dry mill ethanol production, 31.25 per cent (17.5 lbs. distillers grains per each 56 pound corn bushel) of the corn used in dry mill ethanol production was allocated to the production of distillers grains. Based on these assumptions, the amount of corn that produces distillers grains from dry mill fuel ethanol plants is expected to account for about 11 per cent of total corn utilization in 2010/11.

Allocation of corn to the production of other ethanol byproducts, such as corn gluten feed and corn gluten meal from wet-mill ethanol plants, are not separated in this depiction. For more information regarding the breakout of these categories, see the Hoffman and Baker report cited above.

International Outlook

US 2011/12 Corn Export Prospects Boosted, 2010/11 Trimmed

Increased US corn supplies and more competitive prices are supporting US corn export prospects for 2011/12. This month, trade year (October-September) exports are increased 2.0 million tons to 48.0 million while local marketing year (September-August) exports are projected up 100 million bushels to 1.9 billion. World corn trade is boosted 1.2 million tons to 93.7 million as lower corn prices encourage additional imports, especially by China. Competing corn export prospects are reduced 0.8 million tons this month mostly due to tight supplies in a few minor exporting countries.

Canadas corn export prospects are cut 0.5 million tons to 0.5 million because of reduced supplies. Canadas 2011/12 corn beginning stocks prospects are reduced 0.5 million to 1.1 million due to strong corn use for ethanol in 2010/11. Canadas corn production prospects for 2011/12 are reduced 0.2 million tons to 11.3 million because not all the intended corn acres got planted.

Mexicos 2011/12 corn exports are cut 0.2 million tons this month to 0.1 million, mostly due to reduced production for both 2010/11 and 2011/12. Russias corn exports are also trimmed 0.2 million tons as the planned area increase is reported to have fallen short of expectations, reducing production prospects 0.5 million tons to 5.5 million. These declines are partly offset by a small increase in export prospects for Belarus, where corn area increases are reportedly greater than expected, boosting production prospects 0.2 million tons to 1.2 million.

Chinas corn imports for 2011/12 are increased 1.5 million tons to 2.0 million. On July 7, USDA announced a sale of 0.54 million tons to China for delivery in 2011/12. Moreover, some of the unusually large corn sales to unknown destinations for both 2010/11 and 2011/12 are rumored to be for China. High corn prices in China make imports attractive, and growth in pork prices and hog numbers support prospects for continued strong corn prices in China.

Algerias corn imports for 2011/12 are increased 0.1 million tons to 2.6 million, reflecting strong demand driven mostly by increasing poultry production. Based on recent trade data, the countrys 2010/11 corn imports are raised 0.3 million tons to 2.7 million. Similarly, Perus corn imports for 2011/12 are raised 0.1 million tons to 1.5 million, while 2010/11 imports are boosted 0.2 million tons to 1.7 million.

Partly offsetting is Syrias 2011/12 corn imports, which are reduced 0.2 million to 2.0 million, while 2010/11 imports are trimmed 0.3 million tons to 1.7 million. Also, there is a 0.1-million-ton reduction in 2011/12 corn import prospects for Taiwan, to 4.6 million tons. The slow pace of corn purchases and shipments caused a reduction of 0.3 million tons to 4.3 million for 2010/11 imports.

Other changes to forecast of 2010/11 imports based on the pace of ongoing sales and shipments include: an increase of 0.3 million tons to 7.3 million for the EU, based on the pace of shipments and import licenses; a reduction of 0.1 million to 0.2 million for Russia; and an increase of 0.15 million tons to 0.75 for US trade year imports (the local marketing year imports are raised 5 million bushels to 30 million) due to shipments from Canada.

This month, US corn exports for 2010/11 are reduced 0.5 million tons to 48.0 million, (trimmed 25 million bushels to 1.875 billion for the local marketing year). The pace of sales and shipments in recent weeks has fallen below expectations. Census exports for October 2010 to May 2011 reached 30.3 million tons, down 4 per cent from the previous year, and June 2011 corn grain inspections were only 3.9 million tons, down 5 per cent. Moreover, at the end of June, outstanding export sales for shipments in the old marketing year were 8.3 million tons, down 16 per cent from a year ago. Corn export shipments during summer 2011 are no longer expected to support a year-over-year decline in exports of 4 per cent as forecast last month for the local marketing year and 3 per cent for the trade year.

Changes to projected 2010/11 corn exports for other countries based on the pace of shipments include a 0.1-million-ton increase for Thailand and a smaller boost for Moldova.

US sorghum export prospects for 2011/12 are limited by reduced production prospects. Exports are reduced 0.2 million tons this month to 3.3 million (cut 5 million bushels to 130 million for the local marketing year). An offsetting change is made for Argentina, with sorghum exports up 0.2 million tons this month to 1.7 million. Sorghum trade changes for 2010/11 include an increase of 0.2 million tons to 1.8 million for Argentinas exports, based on the strong pace of sales and shipments, and a reduction of 0.2 million tons in imports for Mexico, due to a reported increase in production and the pace of imports and purchases.

Global barley trade in 2011/12 (October-September) is projected down slightly this month at 13.1 million tons. Production changes support reduced export prospects for Ukraine, offset by increases for Argentina and Turkey.

Ukraine reported lower barley area planted and spring dryness followed by excessive rains in June trimmed yield prospects. Production for 2011/12 is reduced 1.0 million tons this month to 7.5 million. The reduced production during summer 2011 is projected to reduce 2011/12 exports 0.6 million tons to 2.9 million, and 2010/11 exports 0.4 million tons to 2.1 million.

Argentinas barley area and production are up this month for both 2010/11 (up 0.6 million tons to 2.9 million) and 2011/12 (up 0.2 million to 2.7 million). The production increases and the strong pace of recent sales and shipments support increased exports forecast for 2010/11 (up 0.3 million tons to 1.6 million) and 2011/12 (up 0.4 million to 1.5 million).

Turkeys barley yields are projected higher this month as a wet cool spring delayed crop development but boosted yields. Production in 2011/12 is projected up 0.8 million tons to 6.5 million. While the slow pace of old-crop exports is dropping the 2010/11 export forecast 0.1 million tons to 0.05 million, the increased production prospects support an increase in 2011/12 exports, up 0.1 million tons to 0.15 million.

Australias 2010/11 barley export pace has been slow, reducing the forecast 0.3 million tons to 4.0 million. Global barley trade in 2010/11 is reduced 0.5 million tons this month to 13.8 million, the lowest in 13 years. Import changes for 2010/11 include: Syria, down 0.4 million tons to 0.2 million; Israel, down 0.1 million to 0.25 million; China, up 0.1 million to 1.6 million: and Algeria, up 0.075 million to 0.075 million.

Import changes for 2011/12 mostly follow adjustments for the previous year, with Syria and Israel each down 0.1 million tons, while China is up 0.1 million and Algeria is up slightly. Turkeys 2011/12 imports are trimmed slightly.

Oats area planted in Canada is reduced this month due to extended rains throughout the planting season in southwest Manitoba and into southern Saskatchewan. Production for 2011/12 is down 0.4 million tons to 2.9 million. Canadas beginning stocks for 2011/12 are reduced slightly this month because of the pace of 2010/11 exports (up 0.05 million tons to 1.4 million). Beginning stocks are forecast to be down more than 40 per cent from the previous years level. Exports prospects for 2011/12 are reduced 0.1 million tons to 1.45 million. This is reflected in a reduction in US imports, down 0.1 million tons to 1.5 million (local marketing year imports are reduced 5 million bushels to 90 million).

World coarse grain production for 2011/12 is projected up 6.5 million tons this month to 1,150.3 million, but foreign changes are mostly offsetting, netting an increase of 0.4 million tons to 795.8 million. Production changes not previously noted in the trade section include: Russias barley up 1.0 million tons to 15.5 million due to good preliminary yield reports; Ukraine corn up 0.5 million tons to 15.5 million with an increase in area planted; EU barley up 0.4 million tons to 52.1 million due to good yields in Spain; small increases in oats in Australia and barley in Georgia; and small reductions for corn in Kazakhstan and Australia and rye in Canada.

Global coarse grain consumption in 2011/12 is projected up 6.3 million tons this month to 1,158.4 million. Foreign use is up 3.2 million tons to 852.1 million. Chinas use is up 1.6 million tons to 190.6 million, with increased corn imports and strong demand for meat supporting use. Russia is up 0.8 million tons to 27.3, with increased barley production and increasing meat production. Turkey is up 0.6 million tons to 11.4 million, supported by increased production. Other changes are small.

While world coarse grain ending stocks for 2011/12 are projected up 4.0 million tons to 149.2 million, foreign stocks are down 0.1 million to 124.4 million. Canadas ending stocks are reduced 0.5 million tons this month with reduced production. Mexicos corn crop reductions trim ending stock prospects for coarse grain 0.4 million tons. Argentinas increased barley exports more than offset increased production, leaving coarse grain ending stocks reduced 0.2 million tons. Lower barley imports trim Syrias coarse grain stock projection 0.2 million tons. These and smaller reductions are offset by increased stocks prospects for: EU stocks, up 0.4 million tons supported by barley production; Australia, up 0.3 million due to reduced 2010/11 barley exports; Turkey, up 0.2 million, and several smaller increases in other countries.

Further Reading

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