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FEED OUTLOOK

Feed Grain Exports Dropped From Last Month

(December 14, 2000) U.S. feed grain exports in 2000/01 are projected at 62 million metric tons, down 1.8 million from a month ago but up 5.6 million from 1999/2000. Ending stocks are expected to total 49.1 million tons, up from last months 47.2 million, and up 300,000 from 1999/2000.

On a September-August marketing year, feed and residual use for the four feed grains plus wheat in 2000/01 is virtually unchanged from last month and last year. The projected index of grain consuming animal units (GCAUs) for 2000/01 is 90.0 million units, down 100,000 units from last month but up 1 percent from 1999/2000. Feed and residual used per GCAU in 1999/2000 is 1.85 tons, down 1 percent from 1999/2000. In the index components for 2000/01, GCAUs for poultry were down slightly. Poultry production in 2000 is reduced due to the slowing pace of broiler-type eggs set and lower turkey slaughter.

Corn Exports Lowered This Month

U.S. corn exports in 1999/2000 are projected at 2,200 million bushels, down 75 million from last month but up 263 million from 1999/2000. Prospective exports are reduced because of smaller global imports and increased competition. The lower exports reduced total use this month and increased ending stocks. Ending stocks are expected to total 1,754 million bushels, up 75 million from last month, and 39 million above last year. The projected price for 2000/01 is $1.65-$2.05 per bushel, down from $1.70-$2.10 last month. In 1999/2000, the season-average price received by farmers was $1.82.

Barley Exports Increased, Feed And Residual Lowered

Barley exports were estimated at 45 million bushels, up 5 million from last month and up 15 million from last year. Strong export sales thus far in the marketing year suggested stronger exports for the year. With less barley available for domestic feeding, feed and residual was lowered to reflect the strong exports. Prices received by farmers were not changed because of plentiful supplies of other feed grains. The projected price received by farmers in 2000/01 is $2.10-$2.40 per bushel, unchanged from last month. In 1999/2000, barley prices received by farmers averaged $2.13 per bushel.

LDPs Support Feed Grain Farmers' Income

The 1996 Farm Act contained key policy tools to assist farmers when market prices are low. The key provisions are the nonrecourse marketing assistance loans and loan deficiency payments (LDPs). Producers that entered into Production Flexibility Contracts with USDA are eligible to participate in these programs.

The nonrecourse marketing assistance loans provide interim financing to eligible producers of feed grains and other commodities covered by the program. Producers pledge their feed grains as collateral and obtain a loan equivalent to the loan rate established in their county by the Farm Service Agency of USDA. The loan proceeds can cover short-term cash needs. As of December 6, 2000, feed grain producers had outstanding loans on 744 million bushels of 2000-crop corn, 12 million bushel of sorghum, 14 million bushels of barley, and 1.6 million bushels of oats.

The loans may be forfeited to the Commodity Credit Corporation at maturity or repaid at the loan repayment rate at or before maturity. The loan repayment rate may actually be less than the loan rate (plus interest) if the local price-- called the posted county price (PCP)-- falls below the local loan rate (plus interest). The PCP-- calculated each day the Federal Government is open-- is based on terminal market prices and a fixed differential to each county, largely reflecting transportation and other marketing factors. When a farmer repays the loan at a lower PCP, the difference between the loan rate and the PCP is called a marketing loan gain. If the PCP is under the county loan rate on the day the producer repays the loan, accrued interest on the loan is waived. As of December 6, 2000, 120.9 million bushels of corn had been repaid, with a market gain value of $42.8 million or 36 cents per bushel. For sorghum, 5.5 million bushels had been repaid, with a market gain of $1.6 million or 32 cents per bushel. Total barley loans repaid for the 2000 crop was 5.3 million, at a gain of $1.2 million or 26 cents per bushel. For oats, 317,000 bushels had been repaid, with a market gain of $104,000 or 33 cents per bushel.

If the PCP is below the county loan rate, eligible producers may opt for an LDP in lieu of securing a loan. The LDP rate is the amount by which the county loan rate exceeds the PCP on the date the application is made. The feed grain cannot be placed under loan once an LDP is paid. If producers take the LDPs and immediately sell their crop and if the PCP accurately reflects local prices, they effectively receive a per-unit revenue equal to the loan rate, partly from the market and partly from the government. After an LDP is accepted, the farmer can sell the crop and avoid storage expense or hold it in the expectation of a price rally later in the marketing season.

As of December 6, 2000, eligible producers collected $1,707 million in LDPs covering 5,281 million bushels of 2000-crop corn or 53 percent of the 2000 crop harvested as grain. (LDPs are also paid on the grain equivalent of crops made into silage or hay.) The average payment rate was 32 cents per bushel.

For the 2000 crop, sorghum producers have collected $72.9 million in LDPs covering 255 million bushels or about 55 percent of the crop harvested as grain. The average payment rate was 29 cents per bushel. For barley, producers have collected $61 million in LDPs covering 221 million bushels or 70 percent of the crop. The average payment rate was 28 cents per bushel. Oats producers have collected $37 million in LDPs covering 124 million bushels or 83 percent of the 2000 crop. The average payment rate was 30 cents per bushel.

Forecast Global Corn Consumption Reduced This Month

World corn consumption forecast for 2000/01 was reduced 3 million tons this month. South Korea's consumption was reduced 0.5 million tons because of larger expected imports of wheat for feeding, and Japan is expected to use more sorghum and less corn, partly because of a larger-than-expected sorghum crop in Australia. Canada's corn consumption forecast dropped 0.6 million tons because of a lower corn crop and increased supplies of barley and wheat. Consumption in Eastern Europe was reduced because crops in Romania and the former Yugoslavia were each reduced by 0.5 million tons because the affect of extended drought was greater than anticipated. These reductions in corn consumption more than offset small increases in Egypt and Brazil. In Brazil corn production prospects for 2000/01 increased by 1.0 million tons because of increased planted area, while the 1999/2000 crop was revised down 0.4 million tons.

Global coarse grain production for 2000/01 was up minutely, as increased sorghum in Australia and a larger barley crop in Canada offset lower corn production. However, with reduced consumption forecast this month, world ending stocks are expected to rise, with most of the increase in the United States.

U.S. Corn Export Forecast Cut Argentina Up

The U.S. 2000/01 corn export forecast was cut this month by 1.5 million tons to 55.5 million (reduced by 75 million bushels to 2.2 billion on a September/August marketing year). Increased competition from Argentina was the largest factor. Argentina's 1999/2000 crop was revised up and sales have been strong in recent months. Because Argentina is in the Southern Hemisphere their 1999/2000 crop is marketed in competition with the second half of the U.S. 1999/2000 crop and the first half of the U.S. 2000/01 crop. So this revision to Argentinas corn crop increased the supply competing with U.S. corn exports for 2000/01.

Also contributing to the decline in expected U.S. corn exports was reduced corn imports for South Korea and Japan. South Korea is expected to increase purchases of feed wheat because of larger global supplies. Extensive rains during harvest in the eastern part of Australia reportedly reduced wheat quality severely. However, these same rains provide excellent moisture for summer crops, and sorghum area is expected to be up more than previously thought. Also recently, government estimates were revised up for the 1999/2000 Australian sorghum crop. Japan is expected to import some of the additional sorghum produced in Australia instead of U.S. corn.

U.S. corn exports in 2000/01 are projected to increase by 12 percent compared with the previous year. Global corn trade is expected to be down slightly, so the increased exports depend on the U.S. market share increasing. China' corn exports are forecast at less than half the previous year, and Eastern Europe' exports will be minimal due to a drought-reduced crop. Although Argentina and South Africa are expected to increase corn exports in 2000/01, most of the market share lost by China is expected to go to the United States. Early in the 2000/01 marketing year China has continued to export corn, mostly from large stocks, but that pace is expected to drop as the year progresses. According to U.S. Export Sales, as of November 30, outstanding corn sales were down more than 2 million tons compared with a year ago. In coming months, the pace of U.S. corn sales will increase.

December 14, 2000

Economic Research Service

USDA, Washington, D.C.

202-219-0515

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