While Corn Belt crop producers look back at USDA’s March 28 reports and wonder “what happened here,” livestock feeders are doing “high-fives” with themselves.
Although the acreage projection was not unexpected it forecast the potential for increased production and subsequently lower prices for feed grains and soybean meal in the next marketing year. However, the quarterly grain stocks report contained surprises to the market that pushed prices down for the old crop and immediately lowered the cost of feed for livestock producers.
Not a bad way to begin the spring if you have a lot of mouths to feed.
USDA’s Feed Outlook is chock full of good news for livestock feeders, based on the increased availability of feed and lower prices. However, some spot shortages have raised cash prices and what has dropped on the futures market has been negated by an increased basis. Nevertheless, livestock producers foresee opportunities for profitability that were dimmed before the USDA’s two reports on March 28.
Livestock economists are now pointing to black in the near future.
The improved opportunities for the livestock producer can be traced directly to the grain stocks report that indicated nearly 400 million more bushels of corn existed—and should be available—for the market. Evenly split between on-farm and commercial storage, unpriced US corn stocks dropped $1 in value. However, finding deliverable supplies may be a challenge since the 2.7 billion bushels of corn held on farms was only 49 percent of the total supply, and at this point in the marketing year, farmers typically hold closer to 60 percent of the crop.
In feed terms, USDA says the projected supply of feed grains is 319 million metric tons (mmt). While that is 11 percent below the 358 mmt of 2012, higher sorghum and barley imports have added to the supply. And feed use has been declining for 3 consecutive years which has not occurred for 35 years.
In competition with livestock feeders for short corn supplies is the ethanol industry, which is projected to increase its use of corn by 50 million bushels, in large part to lower costs of corn. Exporters will not be taking advantage of the lower corn prices, since increased production in Brazil will help supply global demand. US corn prices remain above the price in Brazil and some other countries, which will tend to keep more of it for domestic use.
Due to the lower numbers of grain consuming animal units the feed use of corn is expected to shrink in the second half of the current corn marketing year. It is expected to be about 800 million bushels less than the 10-year average and the fourth lowest use of corn in a given second half of the marketing year since 1975.