Every livestock producer is widely aware of the critically low supply of livestock feed and the high prices that are prevalent across the nation for grains, forage, and any other commodity that might be considered as livestock feed. But the domestic availability is mirrored overseas, where many nations are coming to the U.S. and purchasing significant amounts of grain for their own livestock. Will there be enough to go around?
From July to August, 2.2 billion bushels of corn disappeared. If that had happened on Wall Street, someone would be answering to Congress and subjected to investigations, lawsuits, and potentially criminal prosecution. But a drought cannot be prosecuted and end users of that amount of feed will have to make do elsewhere. That is easier said than done, but in the USDA’s big balance sheet for livestock feed there has to be a safety valve. But where?
The USDA’s recently issued Feed Outlook began with the dire observation that domestic corn and sorghum supplies were dropping further. Although the US supplies many nations, they may be lining up at Brazilian ports where a good corn crop was being harvested. China, which has been a 200 million bushel market for US corn, will have a record crop of its own. Those crops will take off some of the pressure on export demand. Domestically, total feed grain stocks are down 11% from last year. While corn is down, sorghum production is up, along with barley and oats. The total supply projected to be available is 318.7 million tons, down by 39.7 million from 2011 (12%).
The total demand for feed grains in the marketing year that begins September 1 is projected to be 30.2 million shorter than 2011—so the shortfall is 9.5 million tons. Because of the drought, the use of corn will be restricted for other end users, including food, seed, and industrial. In the latter category, ethanol production is down 13% from last year. Exports will be down 5.2 million tons. For total feed grains, the additional supply of sorghum will allow that category to increase. But while we are exporting feed grains, more are being imported, with a projected increase of 1.4 million tons, and particular increases for oats and barley.
While feed grains are coming in and going out, the number of animals to consume them is declining. Measured in grain consuming animal units, and generally reflective of a steer on feed, GCAU will be projected lower in the new marketing year compared to the one coming to a close. At the same time, the amount of feed being consumed per animal is also down as reflected in lower cattle carcass weights and lower hog numbers because of the feed expense.
Total corn use is forecast to be down from 2011 by 1.495 billion bushels, with a 725 million bushel cut in feed and residual estimates. USDA says that reflects high prices, but it would also reflect lesser feed per animal. Sorghum production is projected at 248 million bushels, some 33 million above last year. The crop would have been larger, but hot and dry weather in Texas, Kansas, and Oklahoma reduced crop prospects. Total sorghum use is forecast at 250 million bushels, with feed and residual cut by 30 million bushels to 70 million.
Barley production for the coming year is forecast at 221 million bushels, up 65 million from last year, due to the low production in 2011. Total supply is estimated at 306 million, and use is projected at 235 million. Gains in supply will more than offset higher use, with 60 million bushels of carryout. Feed prices for barley are expected to increase largely in line with higher prices for corn and sorghum. However, the oat crop will be smaller, due to hotter weather in the early summer. The total crop is forecast at 67 million bushels, the same at 2011, and the second smallest on record. Planted acreage was up 16% from last year, but consistent with a 30 year decline in oat acreage. Oat imports are forecast at 95 million, to boost the total supply to 217 million bushels. Total use will be 164 million bushels.
The prolonged drought has cut hay production in the US to some of the lowest levels since 1953. The current year’s forecast is 120.3 million tons, and prompted the USDA to open CRP acres to emergency baling and grazing. The average yield is expected to be 2.09 tons per acre, down from 2.36 in 2011. The ten year average is 2.42 tons per acre.
USDA says for the sixth consecutive year there is a decline in the number of animals consuming roughage RCAU. With hay production dropping significantly, available supplies per RCAU also declined from 1.94 tons in 2011/12 to 1.79 tons in 2012/13. This is the lowest hay supply per RCAU ratio in more than 25 years. Scarce supplies have driven prices higher, with the July price of $184 per ton up from the $170 high of 2011.
Global competition for feed will be high as well, because world coarse grain production is down 62 million tons due to adverse weather, but acreage has also increased, and if that had not happened, supplies will be lower. Beginning stocks for global coarse grains are up because of the larger corn crop in Brazil. USDA says, “Estimated global coarse grain use has increased for each of the last 9 years, and it will take record-high prices to reverse that growth in 2012/13.”
While US supplies of feed grains have fallen, that does not necessarily mean that other countries will be feeding less grain. USDA says the shortfall is muted by several factors:
- Several countries, such as China and Brazil, have domestic production and stocks that cushion their domestic market from the full impact of international prices,
- Some countries, such as China, have tariff barriers and import quotas that limit the transmission of international prices,
- Economic growth and increased incomes is some countries support increased meat demand despite higher prices,
- For the past several years, sustained, relatively high grain prices have encouraged importers to diversify the countries they import from, and
- Foreign export competitors have increased production and market share, leaving importers less dependent on U.S. corn.
Feed grain production in the US declined rapidly because of the drought, and accounting for more than 90% of the decline in global grain production. While US corn production will be down substantially, sorghum and barley production are up slightly offsetting a small part of the shortfall. Hay production is down also due to the drought. Along with the shortfall of grain and forage production, is a decline in the number of animals consuming grains and roughage.
Source: FarmGate blog