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Thursday, September 20, 2007

The 2008 Feed Issue:  Supply and Price


When the Senate begins its consideration of new farm policy, livestock groups are expected to be vocal about the problems raised with policies that promote ethanol production and result in higher feed costs for livestock, whether intended or not. The Senate will have the latest USDA Feed Outlook handy and you do also.

USDA’s September analysis of feed supplies for livestock is headlined by the 13.3 billion bushel corn crop currently being harvested. It quickly notes that ethanol’s demand for corn has declined slightly and more corn is expected to be shifted to livestock channels. Combined with the other feed grains of sorghum, barley, and oats, the total 2007 production will be a record of 357 million metric tons, up 77 million from 2006. The total supply for the new marketing year is expected to be 392 million tons, up 55 million from last year, which is a 14% increase in supply.

Along with the increased availability of feed is the increased volume of livestock to eat it. Characterized as “grain-consuming animal units” the increase is up .1 million from last year, and resulting from ore hogs, poultry, and dairy cows, but few numbers of beef cattle.

The bulk of the feed supply is, of course, corn, and USDA says, “Feed and residual use of corn was raised 100 million bushels this month to 5.85 billion bushels because of higher yields, which are associated with increased residual use, and reduced availability of distillers’ grains. Distillers’ grains are expected to be lower than last month because of declining plant capacity utilization and sluggish startups of new ethanol plants.” USDA economists have calculated season average corn prices at $2.80 to $3.40 per bushel, compared to the $3.03 average for the marketing year just ended.

Sorghum production is estimated to be 495 million bushels for the current year, up 217 million from 2006 levels. Because of the higher production, USDA says there will be more available and used for feed. Sorghum prices averaged $3.30 per bushel in 2007, which was 109% of the price of corn, and the current marketing year price is expected to be $2.60 to $3.20 per bushel, which is 93% of the price of corn.

USDA’s barley and oat estimates will next be reported at the end of the month, but because of tight barley supplies in Europe, US exports are expected to increase. US is a net importer of oats, and because of the large Canadian crop, imports will increase, even with a 25¢ per bushel increase in price.

The US feed grain economy can be attributed, in part, to the lower global production and resulting increase in US export business. The largest international decline was in Europe, which suffered another drought. Argentine feed grain production also declined, but only because acreage shifted to oilseeds. For the imminent planting season in Argentina, feed grain acreage is expected to increase by 7%. Chinese corn production declined in the heat, and the Australian crop also diminished from warm, dry weather. Brazilian production of corn increased to 51 million tons with the help of strong export business with the European Union which wants non-GMO crops.

In the coming year, global consumption is expected to increase, and partly at the expense of wheat, which will be used less for feed because of expense.

More than 90 million tons of corn will enter the international export market and the US will contributed 57 million tons, which is the most in over a decade. In bushels that represents about 2.25 billion. Brazil will ship 8 million tons abroad.

For the livestock feeder concerned about the availability and price of feed grains, the USDA says substantial increases in corn and sorghum will help address the supply, and prices are expected to average about the same as the past year. There will be more mouths to feed from increased animal production, but the supply should be up to the task. Additionally, US corn growers will supply two-thirds of the world’s corn exports, and prices for corn will be comparable to 2006/2007 marketing year that just ended.

Posted by Stu Ellis on 09/20 at 01:44 AM | Permalink

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