June 19, 2008

     

US feed corn use to drop due to expected supply crunch

With the USDA's World Agricultural Outlook Board lowering its expectations for the size of the 2008 US corn crop, a corresponding decline in US consumption is expected.

 

Given historical patterns, reduced consumption will likely come from the domestic feed and residual categories, said Darrel Good, an extension economist at the University of Illinois. Citing seven years in which tight supplies and high prices led to reduced consumption in the domestic feed and residual categories, Good said rationing of the 2008 US corn crop likely will follow suit.

 

The USDA's World Agricultural Outlook Board recently lowered its expectations for the size of the US corn crop from 12.125 billion bushels in May to 11.735 billion in June. Consumption of US corn during the 2008-09 marketing year will have to be lessened as a result, said Good.

 

The projected total of US corn consumption during the current marketing year stands at 12.96 billion bushels. Extensive flooding in the Midwest could force a further decline in production potential, Good added.

 

In the seven years cited by Good, feed and residual use declined by an average of about 11 percent from use during the previous marketing year. The World Agricultural Outlook Board currently projects feed and residual consumption declining by 16.3 percent for the 2008-09 marketing year.

 

The USDA predicts this reduction will be accomplished in a number of ways, including a decline of 1.1 million grain-consuming-animals units, or about 1.2 percent.

 

As corn production is down, feeding of soymeal is expected to increase by nearly 1 percent, while feeding of DDGS grains would be up 32 percent. 

 

Good said the combined figures from the USDA projections and his own estimate suggest total feed and residual use of grain and protein will decline by 8.5 percent while the use-per-animal unit will decline by nearly 8 percent.

 

For the current marketing year, about 221.2 million tonnes of grains, soymeals and distillers grains would be used, Good estimated, but only 202.3 million tonnes for the next upcoming year.

 

Good stressed that these figures are preliminary and that the extent of US corn rationing will be better known once the USDA's annual acreage report is released June 30. The USDA's quarterly Hogs and Pigs report will also illuminate the extent of future rationing.

 

Good has also been looking at historical patterns of US corn exports during years with high prices and tight supplies. In the 1993-94 marketing year, there was a 20 percent decline in US corn exports, Good said. In the 2002-03 marketing year, there was a decline of 17 percent. Both of those years were characterized by extremely large coarse grain crops in the rest of the world.

 

"Right now, it looks like we do have much larger (corn) crops in the rest of the world than we did last year," Good said. "One would believe that the demand for US corn will decline somewhat this year."

 

Good issued his findings in the Weekly Outlook, a joint publication produced by the University of Illinois and Purdue University.