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FEED OUTLOOK
Highlights
–Corn production forecast up 47 million bushels, sorghum drops slightly
–Projection of 1997-98 corn ending stocks raised
–Corn export forecast reduced 100 million bushels, barley exports up again
Feed Grain Outlook
Lower Export Prospects Boost Carryout
Stocks
U.S. feed grain supplies are forecast at 295 million metric tons for 1997-98, up 1 million from last month due to higher corn production. Total use of feed grains is projected at 267.3 million tons, down 2.4 million tons from a month ago primarily because of lower corn exports. Expectations for domestic use are largely unchanged except for a small decline in barley feed and residual use. Ending stocks of feed grains are projected at 27.8 million tons, an increase of 3.5 million tons, and up slightly from the carryin level.
Although U.S. stocks of feed grains will remain relatively low in 1997-98, they are expected to increase slightly from the previous year. With most of the harvest complete, supply side concerns are largely limited to shipping delays stemming from rail transportation congestion, along with storage problems in some areas. Overall demand prospects are strong, particularly for domestic feeding and industrial use. On the international side, U.S. corn is continuing to face stronger than expected export competition from China. In addition, large exportable supplies of feed quality wheat from Europe are also eroding U.S. prospects, and there are indications that growing economic problems will reduce Southeast Asia s corn import demand from earlier expectations.
Corn Crop Forecast Raised To 9,359 Million Bushels
U.S. corn production in 1997 is forecast at 9,359 million bushels, based on conditions as of November 1, up 47 million bushels from the October forecast and 66 million higher than 1996. If realized, this would be the third highest crop on record. Yields are expected to average 126.4 bushels per acre, up 0.6 bushel from last month but down 0.7 bushel from last year. As of November 2, the harvest was 75 percent complete in the major producing States, ahead of the 5-year average of 64 percent.
Expected yields increased in Wisconsin, Ohio, Minnesota, and Kansas this month, outweighing reduced prospects in Illinois, the second largest producing State. Harvest results continue to reveal a large amount of variability across the Corn Belt this year. USDA does not issue a corn production forecast in December, and the final crop estimate will be released on January 13.
Corn Ending Stocks Raised 147 Million Bushels For 1997-98
The increase in corn production and a reduction in prospective exports account for a rise in projected 1997/98 ending stocks to 928 million bushels. This is also higher than 1996/97's 884 million bushels. Forecast corn exports were reduced 100 million bushels to 1,925 million, but still 8 percent larger than 1996-97. Total use of corn is projected at 9,325 million bushels in 1997-98, second to the 1994-95 record of 9,405 million.
There were also some small revisions made in 1996-97 disappearance this month. The final corn export total was 1,795 million bushels, up 5 million from the prior estimate. A slight increase in August ethanol production raised corn for ethanol use marginally to 429 million bushels, and total food, seed, and industrial (FSI) use is estimated at 1,691 million bushels for the year. Feed and residual use of corn thus slipped to 5,362 million.
Sorghum Crop Forecast Nearly Unchanged
Grain sorghum production in 1996 is forecast at 659 million bushels in 1997, down 5 million from a month ago, and down sharply from the bumper 1996 crop of 803 million. Yields are expected to average 69.2 bushels per acre, a drop of 0.7 bushel from last month, mainly reflecting poorer results in Texas.
The pace of harvest is about average, with 76 percent complete as of November 2. Damage from the late October snow in the Plains is expected to be small, although there are concerns in Kansas where a great deal of the crop is temporarily stored on the ground because the large grain harvest has taxed storage facilities.
Barley Export Forecast Up Again As Sales Boom
U.S. barley exports continue to sizzle, and forecast exports were lifted another 20 million bushels to 90 million in 1997/98, marking the fourth consecutive monthly increase. Exports are expected to about triple from 1996-97. Sales to Japan continue strong, and the U.S. has captured a large portion of recent tenders by Saudi Arabia, the world's largest barley importer, due to competitive prices even without the Export Enhancement Program.
Barley sales by the European Union (EU), the largest exporter, have started slowly, reflecting policy decisions by officials in the EU's administered export system. The EU commission has only been awarding limited export restitutions, and with reduced supplies available from Canada and Australia, the U.S. has been the cheapest source of barley to meet some optional origin contracts.
U.S. 1997-98 Corn Export Prospects Sharply Lower This Month
The U.S. corn export forecast dropped this month by 100 million bushels to 1,925 million, reflecting increased competition from China's corn and European feed wheat, along with reduced demand from Southeast Asia.
China has continued to market corn aggressively, selling for delivery in the first quarter of 1998, despite sharply reduced production. Earlier reports of an export shutoff appear to have been unfounded. China's 1997-98 corn exports are now projected to reach 4.0 million tons, up 1.5 million from a month ago, and up slightly from the previous year. China's forecast corn consumption is unchanged from last month, but up sharply from the year before. China is expected to maintain growth in corn consumption and exports despite a sharply reduced crop by drawing down its huge stocks by more than half. The large wheat crop harvested this summer, and procured by the State, has likely provided an incentive to clear corn out of storage facilities, and move it into export channels. In the corn surplus areas of northern China, corn prices have not increased as much as in other parts of the country.
South Korea's corn imports are forecast down 1.25 million tons this month. The world's second largest corn importer has recently made large purchases of feed wheat, mostly from Europe. Very competitive freight rates from the Black Sea to Korea have helped to make European feed wheat competitive with corn in Korea. Extensive heavy rains late in the growing season and during harvest damaged wheat in Europe, increasing feed wheat supplies dramatically in 1997-98. Eastern Europe, Russia, and even Ukraine have large supplies of feed wheat that will compete with U.S. corn in some international markets. Lower animal numbers in recent years have reduced the demand base for feed wheat in Russia, Ukraine, and Eastern Europe.
Corn imports by Malaysia, Indonesia, and the Philippines are projected down 800,000 tons, or 18 percent, this month because the regional economic slowdown is expected to erode demand for meat. Slower growth in meat production will reduce the need for corn imports, even as shifting exchange rates make imports more expensive. However, 1997-98 corn production in the region is expected to decline, as weather patterns have been disrupted by El Nino, and corn imports by these three countries are expected to nearly match last year.
Feed Grain Price Forecasts Reduced
Forecast season average farm prices for all the feed grains were lowered this month. This mainly reflects changes in the outlook for corn that heavily shape price expectations for the other feed grains. In addition, prices received to date for barley and oats have been somewhat weaker than expected.
The farm price of corn is forecast at $2.45-2.85 per bushel in 1997-98, down 10 cents from last month. This is based on lower export prospects and higher stocks. The ratio of stocks-to-use is now projected at 10 percent, up from last month and equal to 1996-97. The price for this year is expected to be slightly lower because there was no large early-season premium like 1996-97 to boost the average.
Futures prices for nearby corn contracts have remained around $2.80-2.90 per bushel in recent weeks, and some deferred contracts have been around $3.00. Models based on futures prices imply a slightly higher season average. However, the amount of corn already priced by farmers is unknown. Although the seasonal lows for corn generally occur around harvest in the fall, heavy sales by farmers after the beginning of the new year often drop prices in January or February.
The forecast of the price of sorghum received by farmers was cut 15 cents to $2.15-2.55 per bushel. This would pull the price of sorghum relative to corn down to 89 percent, slightly below the historical average, as the market encourages use of sorghum in areas where competing grain supplies are fairly abundant.
The season average price of barley is forecast at $2.25-2.55 per bushel, down 10 cents on the high end of the range. Despite the strong pace of exports, prices to date have been relatively low. This is partly explained by the quality of the crop, as a large portion has apparently been sold for feed rather than malting. The forecast price of oats was also trimmed 10 cents on the high end to $1.55-1.65 per bushel. Prices for both barley and oats will decline significantly from 1996-97 when they benefitted from very high early season prices before new-crop corn was available to replenish very tight supplies.
November 12, 1997Economic Research Service
USDA, Washington, D.C.
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