The outlook for the supply of feed grains in the United States is improving, which could help support future corn demand, according to USDA’s recent Feed Outlook report.
Feed and residual use for the four feed grains plus wheat for the September 2012 through August 2013 period is expected to total 114.4 million tons, up from the previous-month estimate of 114 million metric tons but still 16.2 million tons below the 2011-12 marketing year. Corn will account for 92% of feed and residual use, up from 88% the previous marketing year due to lower feeding of wheat.
USDA lowered its projected price range for corn of $7.10 to $8.50/bu. down to $6.95 to $8.25/bu. That lowers the average midpoint farm price from $7.80 to $7.60 per bushel.
The number of animals being fed is dropping. USDA’s projected index of grain-consuming animal units (GCAU) is 91.3 million, down from 92.6 million in 2011-12. Total U.S. meat production is also expected to be lower due to a thinning of both the cattle and swine herds.
"It takes the beef industry about two or three years to rebound," says Mike Krueger, president and founder of The Money Farm, Fargo, N.D. "The pork herd can rebuild in about six to nine months. If we have cheaper corn prices, these herds will rebound pretty quickly."
If corn prices remain around $7/bu., though, Krueger does not expect the beef or swine herds to recover anytime soon, but if prices drop into the $5/bu. range, feed demand should recover pretty quickly, he says.
Production estimates for both corn and sorghum continue to increase, while the output for barley and oats remains unchanged. U.S. corn production for the current crop year is now forecast at 10.725 billion bushels, an increase of 19 million bushels from USDA’s October forecast.
USDA raised sorghum production by 4 million bushels to 256 million bushels due to improved yields in Texas, Nebraska, and Mississippi. Like corn prices, the projected marketing year price range for sorghum was lowered to $6.55 to $7.85, which is 15 cents lower on the low end of the range and 25 cents lower on the high end.
Production of barley and oats was unchanged in November. Barley production of 220 million bushels is up a strong 41% over the 2011-12 marketing year. Likewise, production of oats at 64 million bushels was unchanged from the previous month’s projection but up a strong 19% from the previous marketing year. The average seasonal farm price for barley was lowered a nickel to $6.45, while the projected average 2012-13 farm price for oats was lowered a dime to $3.80/bu.
"Cash barley and oats prices are expected to continue to be supported by comparatively high corn prices in the coming months; however, a significant portion of the barley and oats crops has already been marketed and a large share of production, especially malting barely, is produced and sold under contract at set prices. This combination of market features limits the potential for future average farm price escalations," notes USDA.
Severe to exceptional drought is still plaguing a large portion of both the high plains and the southern plains as well as parts of the Midwest. "We can’t afford another poor production season in 2013 on any of these crops," says Krueger.