Feed Outlook: U.S. feed grain supplies raised on strength of corn, sorghum stocks

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Farm Forum

U.S. feed grain supplies for 2014/15 are increased 2.2 million metric tons this month. The gain is based, in large part, on expanded corn and sorghum stocks estimates following the release of the June Grain Stocks report. The production forecast for the four feed grains was collectively lowered due to declines in corn and barley production that were not offset by more modest gains in sorghum and oats production forecasts. Reduced corn and barley feeding contributes to a reduction in total U.S. feed grain feed use projections for 2014/15.

In addition to gains in U.S. corn stocks, estimates for Brazil and China are boosted this month and underpin a world corn beginning stocks projection that, at 173.42 million metric tons, is the largest in 15 years. World production, domestic feeding, and exports are trimmed. World ending stocks absorb much of the gain in carryin and are increased to 188.5 million metric tons, up from the June forecast of 182.65.

U.S. Feed Grain Production Edges Lower

U.S. feed grain production for 2014/15 is marginally lower this month and reflects reductions in production for corn and barley, which are only partially offset by smaller gains in sorghum and oats production. Total U.S. feed grain production is projected at 367.7 million tons, down 758,000 tons from a month ago and down 1.6 million tons from the 2013/14 estimate. The June 30 Acreage report, issued by USDA’s National Agricultural Statistics Service (NASS), shows planted acreage increased by 0.9 percent relative to intentions for all feed grains. Planted acreage increased from intentions for sorghum and oats, while projected corn and barley acreage is lower than intentions. Projected feed grain beginning stocks are up 3.0 million tons this month. Corn beginning stocks are raised 100 million bushels, reflecting increased carryout from 2013/14 due to lower feed and residual use.

Feed and residual use for the four feed grains plus wheat on the September-August 2014/15 marketing year basis is lowered by 0.3 million tons this month to 142.6 million. This decrease stems from reduced projected feeding of wheat and barley offset by modest increases in corn, sorghum, and oats feed and residual projections. For 2013/14, the U.S. total feed grain and wheat feed and residual forecast is lowered to 136.5 million tons, down from last month’s 142.7 million, reflecting lower corn and wheat feed and residual uses as indicated by the June 30 Grain Stocks report.

Grain-consuming animal units (GCAUs) for 2014/15 are projected at 90.2 million units this month, up from 90.1 million last month due to increases in forecast broiler and pork production and revisions of inventory numbers based on NASS numbers released earlier this year. GCAUs for 2013/14 are projected at 89.3 million, down from 89.7 million in last month’s forecast.

Corn Supplies Slip on Lower Harvested Acreage

Following the release of the Acreage report, U.S. corn planted acres for 2014/15 are forecast at 91.6 million acres, a 4-percent decrease from the 2013/14 estimate of 95.4 million acres and 50,000 acres lower than March producer intentions. Corn for grain harvested area was forecast at 83.8 million acres, down 461,000 acres from the June WASDE. Favorable early July crop conditions and weather support an outlook for record yields across most of the Corn Belt; however, for much of the crop, the critical pollination period will be during middle and late July. The national average yield projection, based on a weather-adjusted trend model that assumes normal July growing conditions, is unchanged at 165.3 bushels per acre. As a result, this month’s corn production forecast is lowered by 75 million bushels relative to the June forecast, to 13,860 million.

Lower corn production is more than offset by the 100-million-bushel increase in carryin from the 2013/14 crop. Projected supplies of 15,136 million bushels are 25 million above last month’s projection.

Corn feed and residual use for 2014/15 is lowered 50 million bushels, as sluggish meat production limits feeding and lower production reduces residual disappearance. Corn ending stocks for 2014/15 are raised 75 million bushels from last month’s projection, based on higher carryin and reduced feed and residual use. The projected stocks-to-use ratio is 13.5 for 2014/15, compared with 9.2 for 2013/14.

June 1 Stocks Estimate Indicates Reduced 2013/14 Corn Use

The Grain Stocks report, issued by NASS on June 30, 2014, reduced estimated corn disappearance in March-May and boosted supplies for the final quarter of the 2013/14 corn marketing year. Feed and residual use for 2013/14 is lowered 125 million bushels to 5,175 million bushels. The reduced feed and residual use is partly offset by a 25-million-bushel increase in forecast ethanol use. Projected food, seed, and industrial (FSI) use of corn for 2013/14 is raised this month to 6,460 million bushels on increased ethanol production based on recent weekly Energy Information Administration statistics and favorable margins for refiners. Corn exports for 2013/14 and for 2014/15 are projected unchanged at 1,900 and 1,700 million bushels, respectively. Ending stocks for 2013/14 are raised 100 million bushels from last month’s projection.

The estimated farm price for corn in 2013/14 is reduced 10 cents on both the high and low end, giving a midpoint price of $4.45 per bushel on reduced domestic use and late-season price weakness. The projected price range for 2014/15 is lowered 20 cents per bushel on both the high and low ends for a midpoint price of $4.00 per bushel and reflects increases in total feed grain supply.

For the week ending July 6, 75 percent of the 18-State corn crop was rated good to excellent, identical to the same time in 2013. Wet weather in the northern Corn Belt delayed some planting, but corn in the ground is progressing well in most areas.

Slight 2014/15 Oats Production Increase Nearly Offsets Cut in Carryin

Based on the Grain Stocks report, which indicates that 24.7 million bushels of oats were stored in all positions on June 1, 2014, the 2013/14 ending stocks figure is reduced by 4.2 million bushels, relative to the June forecast. The current ending stocks projection is 32 percent below the figure reported in 2013 and provides further substantiation of tight domestic oats supplies. March-May disappearance totaled 42.6 million bushels, up from 35.9 million bushels in 2013.

Oats imports for 2013/14 are revised upwards by 4.1 million bushels this month to 97.3 million. The resulting increase in supply contributes to an 8.3-million bushel boost to feed and residual. U.S. Census Bureau data indicate a slight increase in 2013/14 exports. The 2013/14 season-average farm price estimate for oats is $3.75 per bushel, a $0.02 increase over the June forecast.

For the 2014 crop year, 3.03 million acres are projected to be seeded to oats. This is a slight increase over the 2013 planted area estimate. In the new crop year, oats harvested area is projected at 1.15 million acres, a 12-percent increase over the previous crop year though on pace to be the fourth lowest harvest acreage on record, behind the 1.05 million harvested in 2012. Yields are increased by 1 bushel per acre this month to 65.5 bushels and determined using the same procedure as barley yield estimates. These increases combine to raise forecast production by 4.5 million bushels to 75.5 million. With reduced carryin and increased production, the net change to total supply is slight. Other 2014/15 balance sheet changes include a 10-million bushel increase in oats feed and residual and a near-equivalent reduction in ending stocks. Oats prices for the new crop year range from $2.65 per bushel on the low end to $3.25 on the high end, with a midpoint price of $2.95 per bushel.

All Hay Harvested Area Projected Down in 2014

The June Acreage report indicates producers’ intentions to harvest slightly less hay in 2014 relative to the previous year as well as slightly less hay than reported in the March Prospective Plantings report. Across all hay types, 57.6 million areas are expected to be harvested, down from the 58.3 million acres harvested in 2013 and the 58.3 million acres projected in the March forecast. Of note is a 2-percent projected year-to-year increase in alfalfa and alfalfa mixture harvested area.

Dry conditions have reduced hay harvested acreage forecasts in some States, including California. While in the Upper Midwest and Northern Plains, timely spring precipitation is credited with expanding regional hay production. Industry sources report that recent wet weather in sections of the Midwest, including Wisconsin, Minnesota, and Missouri, have delayed harvests, potentially leading to increased yields, though at the expense of hay quality.

For the week ending on July 7, fully 56 percent of U.S. pastures and ranges were rated as good to excellent. This compares with 49 percent in 2013. In California, New Mexico, and Arizona, where soil moisture is lacking due to drought conditions, between 58 and 75 percent of pasture and ranges are rated as poor to very poor. Demand for dairy hay in California and sections of the Southwest is likely to place pressure on local supplies, encouraging movement of hay from the Midwest to these areas and providing support for robust alfalfa prices.