Feed Grain Outlook: Corn Production Declines, Prices Stay Weak

    Based on planting intentions from USDA’s NASS Prospective Plantings report and a weather-adjusted trend yield, corn production for 2015/16 is projected down 4 percent from 2014/15. The rapid pace of spring plantings–75 percent planted in the 18 major corn-producing States as of May 10 as compared to 55 percent in the previous year–is not expected to be a major factor in yield determination.

    Rather, summer weather has historically played a larger role in the variation in observed yields. Sorghum, barley, and oats production are projected to be up modestly for the 2015/16 marketing year. Sorghum exports in 2015/16 are anticipated to remain strong at 335 million bushels.

    Despite planting delays in Texas, early new-crop sorghum supplies are expected to be adequate to augment available 2014 old-crop supplies and support the 2014/15 export projection of 350 million bushels.

    Domestic Outlook

    Projected 2015/16 Corn Production Down 4 Percent

    U.S. corn planted area for 2015/16 is expected at 89.2 million acres, 1.4 million acres less than 2014/15 sown area, based on planting intentions published by USDA’s National Agricultural Statistics Service (NASS) in the March 31 Prospective Plantings report. If realized, this will be the third consecutive year of acreage decline and the lowest planted acreage in the United States since 2010. Harvested acreage is projected at 81.7 million acres, 2 percent less than 2014/15 and 92 percent of intended planted acres.

    Yields for 2015/16 are based on a weather-adjusted trend yield. At 166.8 bushels per acre, projected yields are 4.2 bushels per acre below the 2014 record of 171.0 bushels per acre. The weather-adjusted trend yield assumes average planting progress as of mid-May and normal summer weather.

    The yield is not adjusted for this spring’s rapid planting progress since summer weather plays a larger role in determining yields. Production for 2015/16 is projected at 13.6 billion bushels, 586 million bushels below the 2014/15 estimate.

    As of May 10, 75 percent of the corn crop had been planted in the 18 major corn-producing States included in the NASS Crop Progress survey. This share is up 55 percent from the same date last season and well ahead of the 2010-14 average of 57 percent.

    Nine of the 18 corn-producing States surveyed had year-to-year increases in planting progress of over 20 percent. In the northern belt, planting progress was 50 percent or more over last year for a number of States.

    Likewise, corn emergence is also ahead of last year. In the 18 States surveyed by NASS, 29 percent of the crop planted had emerged, compared with 16 percent for the 2014 crop at this point. Average emergence for 2010-14 was 24 percent at this point. In Illinois, one of the largest corn-producing States, emergence was 10 percent greater than last year at 42 percent.

    Corn Supply Forecast up for 2015/16

    Production, the largest component of the U.S. corn supply, is projected at 13,630 million bushels, 586 million below the record crop in 2014/15, and would be the second-highest ever. Corn supplies, at 15,506 million bushels in 2015/16, are forecast 33 million bushels higher than the previous year. Although production is expected lower than in 2014/15, beginning stocks at 1,851 million bushels add 619 million bushels to supply.

    Corn Use Forecast up on Higher Feed and Residual, Exports, and Food, Seed, and Industrial Use

    Both domestic use and export forecasts for 2015/16 increase compared to 2014/15. Total use in 2015/16 is projected at 13,760 million bushels. Feed and residual use is projected up 50 million bushels year-to-year. Within food, seed, and industrial (FSI) use, ethanol is forecast unchanged from 2014/15 at 5,200 million bushels, sweeteners are steady at 750 million bushels, and starch is forecast up 10 million bushels to 240 million on higher expected use for construction and packaging. Total forecast FSI use is 6,560 million bushels, 13 million higher than 2014/15.

    For 2014/15, FSI is reduced 48 million bushels to 6,547 million due to reduced corn used for high fructose corn syrup and starch, as indicated by year-to-date shipments. Corn used for glucose and dextrose was raised 10 million bushels this month.

    Competitive U.S. prices and growth in global demand support 2015/16 export prospects of 1,900 million bushels, 75 million bushels over the 2014/15 projection. For 2014/15, exports are raised 25 million bushels this month to 1,825 million based on the strong pace of recent inspections and shipments. Japan and Mexico remain the top destinations, but Colombia and Peru are up significantly year-to-year.

    Ending Stocks Projected Below 2014/15 Level

    At 1,746 million bushels, ending stocks for 2015/16 are projected 105 million below the 2014/15 forecast. For 2014/15, disappearance was lowered this month, boosting stocks by 24 million bushels.

    Corn Price Projected Lower With Higher 2014/15 Stocks

    The high end of the corn farm price forecast range in 2014/15 is lowered by 10 cents for a new midpoint of $3.65 per bushel, compared with $4.46 per bushel in 2013/14. Recent weakness in cash price bids and higher domestic ending stocks are behind the lower price outlook.

    The corn farm price range for 2015/16 is projected at $3.20 to $3.80 per bushel, for a midpoint of $3.50 per bushel. Few opportunities have been available in 2015 to forward price 2015 crop corn at prices above $4.00 per bushel.

    Feed Grain Supply and Use

    U.S. feed grain production for 2015/16 is forecast at 362.6 million metric tons, 14.3 million less than a year earlier, reflecting decreased corn production. Planted area for the four feed grains is projected down just slightly from 2014, with increases for sorghum, barley, and oats mostly offsetting the reduction in corn plantings.

    Feed grain yields per harvested acre are expected 3 percent lower than last year at 3.93 tons per acre, with an assumed return to trend yields. Combined with increased beginning stocks and slightly reduced forecast imports, supplies are projected at 415.2 million tons, 1.0 million higher than 2014/15.

    Total feed grain use in 2015/16 is projected at 368.2 million tons, 3.7 million above forecast use in 2014/15 due to expected higher use for feed and residual, FSI, and exports. Total disappearance in 2014/15 is forecast 0.5 million tons lower this month as reduced domestic use more than offsets increased exports.

    Feed and Residual Use

    On a September-August marketing year basis for 2015/16, U.S. feed and residual use for the four feed grains plus wheat is projected to total 144.3 million tons, up 2.6 million from the revised total of 141.8 million tons in 2014/15. Corn is forecast to account for 93 percent of feed and residual use, down from 94 percent in 2014/15.

    The projected index of grain-consuming animal units (GCAU) in 2015/16 is 94.7 million, up 1.5 million from 93.2 million in 2014/15. Feed and residual per GCAU is estimated at 1.52 tons, nearly unchanged from 2014/15. In the index components, GCAUs are increased for beef and dairy cattle, poultry, and pork.

    The forecasts for total meat and poultry production for 2015 are raised from last month, and 2016 is projected higher than the current year. For both 2015 and 2016, beef placements are higher due to larger calf crops boosting cattle placements in 2015 and 2016. Moderate increases in farrowings and increases in pigs per litter are projected to boost pork production in late 2015 and early 2016.

    Broiler production in 2015 is set to increase, and turkeys decline from last month’s projection. However, in 2016, both broilers and turkey production are forecast higher. Egg production is lowered for 2015 this month but expected higher for 2016 as problems with avian influenza are expected to be outweighed by favorable egg prices and moderate feed costs.

    Sorghum Production up Slightly for 2015/16

    An 11-percent increase in sorghum planted area, as reported in the March Prospective Plantings report, supports a modest year-to-year increase in total U.S. sorghum production for 2015/16. Sorghum production is anticipated to reach 435 million bushels, up just slightly from the 2014/15 estimate of 433 million bushels.

    The relatively small gain in production, despite the more substantial gain in planted area, is attributable to a projected decline in yields. The 2015/16 yield estimate is based on average yields for 1990-2014, excluding years that are more than one standard deviation from the mean for the period.

    Abundant topsoil and subsurface moisture in Texas, where much of the U.S. sorghum crop is cultivated, is likely to boost regional yield prospects and may lift the national average above the current projection. If dry conditions, similar to those experienced in the 2012/13 marketing year, return to the major sorghum-producing States of Texas and Kansas, lower yields may result.

    From 2010 to 2014, the national yield averaged 60.5 bushels per acre, with a standard deviation of 8.3 bushels, indicative of a high degree of year-to-year yield variability and sensitivity to underlying horticultural variables.

    The 2015/16 trade forecast is supportive of robust and ongoing trade with China. In the new marketing year, fully 335 million bushels of the estimated 452-million-bushel sorghum supply, or 74 percent, is anticipated to be used for export. Industry sources have recently speculated that China is increasing inspections of U.S. sorghum at Chinese ports, thereby raising the probability of a phytosanitary issue being reported, potentially resulting in a rejected shipment.

    However, as speculation that the likelihood of such actions has increased, U.S. shipments to China have continued mostly apace, supporting a continued outlook for robust 2015/16 trade.

    In the forthcoming marketing year, sorghum feed and residual is projected to be equal to the 2014/15 figure at 85 million bushels. Likewise, FSI use, including for fuel ethanol, are unchanged from the current marketing year projection of 15 million bushels. Expectations of strong export market demand, coupled with abundant corn supplies, are poised to support use patterns in 2015/16 that mimic those of 2014/15.

    As in the present marketing year, the sorghum season-average farm price is anticipated to exceed the corn price; a 30 cent sorghum premium is projected for 2015/16. The average sorghum farm price range for 2015/16 is $3.40 to $4.20 per bushel with a midpoint of $3.80 per bushel. This sorghum price is 108.6 percent of the projected corn price and is slightly lower than the 2014/15 price ratio of 109.5 percent.

    According to the most recent NASS Crop Progress report, sorghum planting progress is behind last year’s pace in Texas, where field days have been limited by rains and saturated soils. For the week ending May 10, 2015 (week 19), Texas growers had planted 64 percent of the 2014 acreage; this compares to the previous week’s 63 percent; the May 10, 2014, planting progress of 79 percent; and the 5-year average of 74 percent.

    From all angles, progress in Texas is relatively slow and has not been accelerating in recent weeks. Post-week 19 planting in 2014 and 2013 averaged increases in progress ranging from 1 to 8 percent, with the average weekly gain 2.4 and 4.6 percent, respectively. With 7.5 weeks remaining in the normal Texas planting season, planting progress akin to the 2013 and 2014 averages will support plantings equivalent to 82 and 98 percent of the 2014 area.

    If not offset by increased yields, reduced plantings will ultimately reduce the size of the Texas crop and the amount of new crop sorghum available to export before the September 1 start of the 2015/16 marketing year.

    Gains in Planted Area Support Barley Production Boost

    Undeterred by last season’s crop-damaging-weather nationwide, growers indicate intensions to plant nearly 10 percent more acres to barley in 2015 as compared to 2014. Producers in key barley-growing States Idaho, North Dakota, and Minnesota intend to increase planted area by 4 percent, 45 percent, and 20 percent, respectively; Montana barley planted area is expected to be identical to the 2014 estimate at 920,000 acres and account for 28 percent of total U.S. planted area in 2015.

    Gains in planted area, and resultant harvested area, combine with yields based on the 1990-2014 trend to return a production projection of 198 million bushels. If realized, the 2015/16 crop will be 22 million bushels, or approximately 12 percent larger than the 2014/15 crop.

    Planting of the 2015 barley crop is rapidly nearing completion with the five States reporting 88 percent of the crop in the ground as of the week ending May 10, 2015 (week 19). On the same date in 2014, just 54 percent of the crop was planted, slightly behind the 5-year average of 58 percent.

    Earlier planted barley has a lower risk of being frost damaged as harvest approaches. Notably, North Dakota barley is 76 percent planted, as compared to 6 percent planted by the same date in 2014. Late planted barley in North Dakota was damaged by adverse weather conditions in August and September 2014.

    On the 2015/16 balance sheet, production gains and imports (up 1 million bushels) are partly offset by reduced carry-in (down 5 million bushels), contributing to a total supply of 301 million bushels, up 18 million from 2014/15. Feed and residual use in 2015/16 is projected 20 million bushels larger than the 2014/15 forecast, with higher expected production.

    FSI use is projected up slightly from the 2014/15 estimate, largely based on the increasing proportion of malt-intensive craft beer production. Use of imported malt and malt products slightly reduces the projected impact of craft expansion on malt barley demand.

    Prices received by farmers for barley in 2015/16 are expected to average $4.10 to $4.90 per bushel, with a midpoint of $4.50 per bushel. This compares to the 2014/15 average of $5.30 per bushel and mostly reflects lower year-to-year contract prices for malting barley. For comparison, North Dakota State University’s Farm Management Planning Guide indicates that the simple average price for malting barley in 2015/16 is anticipated to be $4.69 per bushel, with variation by region.

    Oats Production up Slightly in 2015/16

    The March Prospective Plantings report indicates that area seeded to oats in 2015 is expected to be up 8 percent to 2.931 million acres. Gains in key dairy States Wisconsin and California combine with slight increases in many other States. Modest gains are offset somewhat by sizable year-to-year reductions in Iowa, Texas, Oregon, and Wyoming.

    Record-low plantings are anticipated for the latter three States. Harvested area for 2015/16 is set to increase to 1.10 million acres, up from 1.03 million for 2014/15 and, once multiplied by trend (1990-2014) yields of 65.5 bushels per acre, result in anticipated production of 72 million bushels.

    Total U.S. oats supply for 2015/16 is projected at 210 million bushels. Total oats use in 2015/16 is projected at 174 million bushels, up from 164 million in 2014/15. At 95 million bushels, feed and residual use is 10 million bushels higher than the previous year’s forecast.

    FSI use is projected at 77 million bushels, identical to the 2014/15 forecast and reflective of stagnant demand for oats for use in food manufacturing. Exports of oats are projected at 2 million bushels.

    A slight increase in 2014/15 imports this month boosts supply by 4 million bushels to 201 million; exports are reduced by 300,000 bushels and ending stocks are raised by the aggregated difference, 4.3 million bushels to 37.7 million, now the fourth-lowest ending stocks on record, including the 2015/16 projection. Ending stocks are expected to be 35.7 million bushels in 2015/16, a slight decrease from the 2014/15 carry-out projection and the second-lowest carryout on record.

    A significant decline in the season-average oats price is forecast for the 2015/16 marketing year. The decline follows multiple years of relatively high oats prices, driven, in part, by logistics between Canada and the United States. Recently, oats futures prices have dropped significantly and the oats price outlook puts oats prices more in line with historical relationships between oats and other feed grains.

    A year-to-year decline in corn and other grain prices puts downward pressure on the oats prices, now projected at $2.00 to $2.60 per bushel, with a midpoint price projection of $2.30 per bushel.

    Hay Stocks Report Indicates More Abundant 2015 Supplies

    The May 12 NASS Crop Production report indicates that U.S. hay stocks on farms on May 1, 2015, totaled 24.5 million tons, a 28-percent increase over the 2014 figure of 19.2 million. With December 1, 2015, stocks reported at 92.0 million tons, the implied December-May disappearance is 67.5 million, down from a disappearance of 70.1 million reported for the same period in 2013/14.

    Improved weather conditions in 2014 supported increased hay production, with some notable exceptions observed in areas of the Northeast where production was delayed due to winter-like weather that persisted through early spring. For 2015, producers intend to harvest 57.093 million acres of all types of hay, nearly identical to the area harvested in 2014. Prices for the 2014/15 marketing year are $180 per ton for all hay, up from the 2013/14 price of $176.

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