USDA Feed Outlook March 2012

USDA Feed Outlook

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14 March 2012

World 2011/12 coarse grain production and use are projected higher this month, but the increase in consumption is larger, trimming prospects for ending stocks.

Brazil’s corn production and exports are increased based on higher area for second-crop corn. Forecast EU corn feed use is increased, offsetting a reduction in expected wheat feeding. U.S. 2011/12 supply-and-use forecasts for feed grains are unchanged this month except for a small increase in oats imports and a corresponding increase in oats ending stocks. Projected ranges for 2011/12 farm prices for all feed grains are adjusted, but the midpoints of the ranges for corn and sorghum are unchanged. The midpoint of the projected price range for barley is lowered 5 cents per bushel and the range for oats is raised 5 cents per bushel.

World Coarse Grain Total Use and Ending Stocks

Domestic Outlook

U.S. Corn: Central Illinois Cash and Average Farm Price, Monthly

2011/12 Feed Grain Balance Sheet Nearly Unchanged

Projected U.S. feed grain supplies for 2011/12 edged up 86,000 metric tons this month on higher oats imports from Canada. The higher oats imports were reflected in projected supplies and ending stocks. Forecast feed grain supplies are 358.4 million tons, 0.1 million higher than last month’s projection but 22.1 million below 2010/11. The feed grain use forecast is unchanged from last month and is 12.8 million tons below 2010/11. At 22.9 million tons, ending stocks are forecast up less than 100,000 tons this month and are down 29 percent from 2010/11.

Feed and residual use for the four feed grains plus wheat on a September-August marketing year basis is unchanged again this month, remaining at 126.2 million metric tons. Grain-consuming animal units (GCAUs) are projected at 94.0 million this month, up slightly from last month's estimates due to an increase in projected broiler and turkey production that more than offsets lower beef production. The pork production forecast is unchanged from last month. The broiler production forecast is raised for the first half of the year based on January production data and stronger forecast prices. Beef production is lowered from last month. Steer and heifer slaughter is forecast lower but is partly offset by higher expected cow slaughter. Early year carcass weights are raised due to mild weather in much of the United States. Turkey production is forecast higher as higher prices are expected to encourage a more rapid expansion. Egg production is lowered slightly for 2012 as prices are forecast lower. Feed and residual use for the four feed grains plus wheat per animal unit is down slightly this month at 1.34 tons. This compares with 1.39 tons in 2010/11.

Forecast Oats Imports Raised 5 Million Bushels

There were no changes in U.S. corn, sorghum, or barley supply-and-use estimates this month. The strong pace of shipments from Canada is reflected in a 5-million bushel increase in U.S. oats imports. Oats use is unchanged and ending stocks are forecast 5 million bushels higher than last month.

The midpoint of the projected range for the 2011/12 corn price received by farmers is unchanged this month, but the range is narrowed by 10 cents on both the high and low ends to $5.90 and $6.50 per bushel. The projected range for the sorghum farm price is also narrowed by 10 cents on both the high and low ends to $5.80 and $6.40 per bushel. The high end of the barley price range was lowered 10 cents per bushel, resulting in a 5-cent decline in the midpoint to $5.35 per bushel. The lower end of the oats price range was increased 10 cents per bushel, resulting in an increase in the midpoint to $3.45 per bushel.

Ethanol Projection Unchanged

Projected U.S. corn use for fuel is unchanged this month at 5 billion bushels. Recent lower weekly ethanol production and higher stock levels, according to Energy Information Administration data, are consistent with last month’s projection. Current ethanol production has returned to levels close to those prior to last December's increase. The sluggish U.S. economy, high gasoline prices, and increased auto efficiency have reduced gasoline demand, lowering gasoline production. As ethanol blending nears practical limits at the 10-percent level (E10 blends), demand growth has slowed. Exports continue to play an important role in supporting domestic ethanol production; however, the E10 blend wall issue persists and prospects for long-term exports are uncertain. Currently tight sugarcane supplies in Brazil have curtailed ethanol production there and resulted in imports of U.S. corn-based ethanol. This situation has also enabled the United States to fill Brazil’s role as an ethanol supplier to the EU and other ethanol importers. As sugar prices decline, these markets may return to competitively priced Brazilian ethanol.

U.S. Corn Ending Stocks

March Planting Intentions and Stocks Report Are Keys to Price Prospects

Grain Stocks and Prospective Plantings are key reports that will be released by the USDA’s National Agricultural Statistics Service on March 30, 2012. The stocks report will show grain stocks as of March 1, 2012. Lower-than expected March 1 stocks would imply greater corn usage than expected in the quarter ending March 1 and would be bullish for prices. A higher-than-expected stock level could moderate prices somewhat. At the February 23-24, 2012, USDA Outlook Conference, corn plantings this spring were projected at 94 million acres. Prices will likely respond if planted acreage is substantially different than this projection. In the past 20 years, the March projection was below the final acreage estimate 8 times and above it 12 times.

U.S. Corn Exports

International Outlook

World Coarse Grain Production Prospects Increase

Global coarse grain production in 2011/12 is forecast up 1.5 million tons this month to 1,143.7 million. World corn production is up 0.9 million tons to a record 865.0 million. Barley, oats, rye, and mixed grain production prospects are virtually unchanged this month, but millet is up 1.5 million tons to 33.7 million, and sorghum is down 0.9 million tons to 59.8 million.

India reported revised production for harvests from the past monsoon season and reported planted area for some dry-season (mostly irrigated) crops. Millet production for 2011/12 is up 1.5 million tons to 12.5 million based on increased area estimated for both 2010/11 and 2011/12, as well as good yields again this year. The previous year’s millet production was revised up 0.7 million tons to 13.3 million. India’s corn area is also increased for both years and yields are raised for 2010/11, increasing production 0.5 million tons each year to 21.5 million tons for 2011/12 prospects and to 21.7 million for 2010/11. The same reports indicate lower sorghum area for both years but an increase in estimated yield for 2010/11 and reduced yield prospects for 2011/12. Sorghum production for 2010/11 is increased 0.3 million tons to 7.0 million, but 2011/12 is forecast down 0.7 million tons this month to 6.1 million.

Brazil’s corn production projected for 2011/12 is up 1.0 million tons this month to 62.0 million. Area is increased 0.3 million hectares to 15.3 million as prospects for second-crop corn plantings in Parana are supported by attractive prices. Average yield is reduced slightly as some first-crop corn has been damaged by above-normal temperatures and below-normal precipitation.

Argentina’s 2011/12 corn crop remains projected at 22.0 million tons as recent good rains have stabilized yield prospects, especially for late-planted corn. However, an analysis of 2010/11 supply and demand reveals corn production was larger than previously estimated, up 1.3 million tons this month to a record 23.8 million tons, based on increased area. Chile’s 2011/12 corn production is projected up 0.1 million tons to 1.6 million based on higher reported area and yield. There are small increases this month for corn production in Australia, Kyrgyzstan, and Azerbaijan.

Partly offsetting are reduced 2011/12 corn production prospects for South Africa and Ecuador. South Africa reports larger-than-expected corn area, as prices have been attractive, but spotty rains and above normal temperatures have cut yield prospects. Corn production is projected down 0.5 million tons to 12.0 million. For Ecuador, excessive rains have reduced both area and yield prospects, cutting production 0.3 million tons to 0.9 million. There is also a small reduction in corn production prospects for Uruguay.

For 2011/12 barley production prospects, a 0.1-million-ton reduction each for South Korea and China are offset by similar-sized increases for Azerbaijan and India. For sorghum, in addition to the India change, production prospects are reduced 0.2 million tons in Argentina to 4.2 million, with the effects of earlier drought reducing yield potential. There is also a small increase in sorghum production for Australia and a reduction for Uruguay.

Brazil's Corn Production and Yield

Global coarse grain beginning stocks forecast for 2011/12 are almost unchanged this month. World corn beginning stocks are up 0.2 million tons to 129.1 million, mostly due to an increase for Argentina caused by a significant increase in estimated 2010/11 production. Sorghum and millet beginning stocks for 2011/12 are up slightly due to increased 2010/11 production in India. However, global 2011/12 barley beginning stocks are down 0.3 million tons this month, mostly because of reduced 2010/11 production for China.

Increased World Coarse Grain Consumption Projected

Global coarse grain consumption in 2011/12 is projected up 2.2 million tons this month to 1,152.0 million, with feed and residual use up 1.9 million tons to 664.7 million. Corn total use is forecast up 1.9 million tons, with feed increased 1.4 million. World and India’s millet consumption is up 1.2 million, with feed increased 0.6 million. Global sorghum use is cut 0.5 million tons, nearly all food use in India. World barley use is down 0.6 million tons as reductions for Australia, China, and South Korea more than offset increased use forecast for Azerbaijan and Iran.

Corn use in the EU for 2011/12 is projected up 1.0 million tons to 65.9 million as corn is being priced competitively into feed rations compared to feed-quality wheat. EU wheat feeding is forecast down 1.0 million tons this month to 55.5 million. India’s corn feed use is projected up 0.4 million tons to 9.7 million, with increased corn production and dynamic demand for eggs and poultry meat. Corn feed use is forecast 0.1 million tons higher for Chile and Peru, with smaller increases for South Africa, Australia, and Kyrgyzstan. However, Malaysia’s corn feed use is reduced 0.3 million tons to 2.9 million because poultry production is relatively flat. Corn food, seed, and industrial use is forecast down 0.1 million tons each for India and the Philippines but increased slightly for Peru and South Africa.

Projected 2011/12 World Ending Stocks Reduced

Global coarse grain ending stocks for 2011/12 are projected down 0.6 million tons this month to 157.9 million, as increased forecast use exceeds the production increase. Corn stocks are forecast down 0.8 million tons to 124.5 million, sorghum is down 0.2 million to 4.2 million, oats are down 0.1 million tons to 3.5 million. Rye stocks are down slightly, but millet is up 0.4 million tons to 0.9 million and barley is up 0.2 million tons to 22.2 million.

EU corn ending stocks are reduced 0.5 million tons this month due to increased feed use. South Africa’s corn ending stocks are also cut 0.5 million tons and Ecuador’s stocks are trimmed 0.1 million mostly due to reduced production prospects. Peru’s expected corn ending stocks are reduced 0.1 million tons as reduced beginning stocks and strong use more than offset increased imports. Partly offsetting are increased corn stocks expected this month for Argentina, up 0.25 million tons, and for India, up 0.2 million, based on higher beginning stocks.

Sorghum 2011/12 ending stocks are reduced slightly this month for Sudan, with reduced beginning stocks on lower 2010/11 imports; for Australia, with increased exports; for India, due to lower production; and for Colombia, with lower beginning stocks. Oats stocks in Canada are trimmed by increased exports. Large millet production in India is boosting expected stocks. Most of the increased global barley stocks are in Iran, which is appears to be increasing imports to boost stocks.

Global 2011/12 Coarse Grain Trade Projected Higher

World 2011/12 coarse grain trade is forecast to reach 121.4 million tons, up 1.3 million this month. Corn trade accounts for about half the increase, up 0.7 million tons this month to 96.3 million, the highest in 4 years. Barley trade is up 0.4 million tons to 17.4 million, and oats trade is up 0.2 million to 2.2 million.

EU corn imports are increased 0.5 million tons to 4.5 million based on the pace of imports to date and import licenses for future imports. Developing dryness for winter crops in Spain may be contributing to the recent pace of corn import buying. Peru’s 2011/12 corn imports are increased 0.2 million tons to 1.8 million as revisions to 2010/11 imports and feed use indicate larger imports are needed to sustain poultry production. Ecuador’s imports are forecast up 0.1 million tons to 0.4 million, as imports replace a portion of reduced production. There is a small increase in corn imports by Ukraine based on trade data. However, Malaysia’s projected corn imports are reduced 0.2 million tons to 3.1 million as corn feed demand appears to be flat since 2009/10. Philippines corn import prospects are reduced 0.1 million tons this month as the pace of purchases has been sluggish and alternative supplies of feed-quality wheat are abundant.

Brazil’s 2011/12 (October-September) corn exports are increased 0.5 million tons to 9.5 million. With increased second-crop production, export prospects are enhanced as that is the crop that mostly receives government subsidies for transportation and arrives at ports when loading capacity is not being monopolized by soybeans. India’s corn exports are raised 0.2 million tons to 2.4 million based on the recent pace of shipments. Corn exports are projected up slightly for Australia and Malaysia but reduced for Ecuador.

U.S. corn exports are unchanged this month at 43.5 million tons. Based on Census shipments from October 2011 through January 2012, and February Inspections data, actual shipments to date exceed the previous year’s pace. However, as of March 1, 2012, outstanding export sales are down 20 percent, so U.S. corn exports in the second half of 2011/12 are projected to be significantly slower than a year ago.

Global barley trade is increased 0.4 million tons to 17.4 million. Based on recent reported purchases, Iran’s imports are increased 0.3 million tons to 0.7 million and China’s imports are up 0.2 million to 2.0 million. Australia, with ample domestic supplies of feed-quality wheat, is projected to feed less barley and export more, boosting exports 0.4 million tons to 4.0 million.

Oats trade is increased 0.2 million tons to 2.2 million. Based on the recent pace of shipments, Canada’s exports and U.S. imports are each raised 0.2 million tons.