Feed Grains Production Up in 2009, Prices Weaken

The June 30 Acreage report showed planted and harvested area to be up from last year for corn, but down for sorghum and barley. Planted area for oats was down slightly but harvested area was up. Adjustments are made in 2008/09 use this month to reflect June 1 stocks.

The resulting changes raise 2008/09 ending stocks and 2009/10 supplies. Forecast 2009/10 prices for all four feed grains are lowered this month as feed grain ending stocks are projected higher. U.S. corn and sorghum exports for 2008/09 are increased this month based on strong recent sales. Corn export prospects for 2009/10 are also increased as lower expected prices enhance competitiveness.

Domestic Outlook

Feed Grains Production Prospects Up in 2009/10

U.S. feed grain production in 2009/10 is projected at 327.6 million metric tons, up 8.6 million tons from a month ago and up 1.7 million from 2008. The June 30 Acreage report showed planted acres increased from earlier intentions for corn, but decreased slightly for oats and barley. Sorghum planted area remains unchanged.

The first survey-based production forecast for barley is down 22 million bushels from the previous projection, which was based on trend yields and intended plantings. The lower barley production forecast reflects lower harvested area and yields. The first survey-based oats production forecast is up 1 million bushels from the June projection, reflecting slightly higher harvested area and yields. The U.S. Department of Agriculture (USDA) will make its first survey-based forecasts for corn and sorghum in the August 12 Crop Production report.

Feed grain supply in 2009/10 is projected at 379.9 million metric tons, up 12.7 million from last month and up 6 million tons from 2008/09. Feed grain imports are increased 100,000 tons from last month but are down by 22,000 tons in 2008/09. Beginning stocks in 2009/10 were increased 4.1 million tons this month to 49.4 million because of lower use in 2008/09.

Projected total use of feed grains in 2008/09 is decreased 4.1 million tons this month, reflecting lower-than-expected feed and residual use, food and industrial use, and ethanol production. Ending stocks for 2008/09 are projected at 49.4 million tons, up 4.1 million tons from last month and up 4.3 million tons from 2007/08.

Feed and residual use of all feed grains in 2009/10 is expected to total 139.4 million metric tons and account for 41 percent of total use. When converted to a September-August marketing year, feed and residual use for the four feed grains plus wheat is projected to total 144.3 million tons, down from the 2008/09 forecast of 146.6 million. Corn is projected to account for 92 percent of total grain feed and residual use, up from a forecast 91 percent in 2008/09.

The index of grain-consuming animal units (GCAUs) for 2009/10 is expected to be down 1.8 million units from the 2008/09 forecast of 92.9 million units. The grain used per GCAU would be 1.58 tons, unchanged from 2008/09. In the index components, GCAUs for all types of poultry are up, while those for the other categories are down slightly, with cattle on feed being down the most.

Cattle on feed in feedlots with capacity of 1,000 or more head totaled 10.4 million head on June 1, 2009. The inventory was 4 percent below June 1, 2008. Thus, current feed use by cattle in feedlots is expected to decline in 2010. Beef production in 2010 is forecast at 26 billion pounds, down from 26.3 billion in 2009. In addition, some of the feed needs may be satisfied by increased use of distiller’s spent grains produced by the expanding ethanol industry.

Pork production in 2010 is expected to decrease 1 percent from the 22.8 billion pounds expected in 2009. Hog farmers responding to the June 2009 survey intend to have 2.97 million sows farrow during the June-August 2009 quarter, down 3

percent from the actual farrowings during the same period in 2008, and down 5 percent from 2007. Intended farrowings for September-November 2009, at 2.96 million sows, are down 2 percent from 2008 and down 7 percent from 2007. This slower-than-expected decline in farrowing intentions and continued gains in pigs per litter result in larger supplies of slaughter hogs in 2010. In addition, lower forecasted feed prices, compared with last month, supports heavier carcass weights and increased feed use for 2009/10.

The broiler production forecast for 2010 is also raised as lower feed prices are expected to aid in producer returns. Broiler production in 2010 is expected to increase 1.5 percent from the projected 2009 production. Forecast turkey production in 2010 is up 2 percent from 2009. Egg producers are expected to produce 7.6 billion dozen eggs in 2010, up 1 percent from the projected 2009 output. Milk production in 2010 is forecast at 186.4 billion pounds down from 187.6 billion pounds expected in 2009. These forecast decreases in 2010 production will likely decrease feed use.

Corn Production To Increase in 2009/10

The projection for 2009/10 corn production was increased 3 percent from last month as a result of increased plantings. Producers increased plantings 2 million acres from their March intentions to 87 million acres, up from 86 million in 2008. Harvested area increased 2.3 million acres this month to 80.1 million acres. The largest increase was recorded in Nebraska where growers planted 600,000 more acres of corn than last year. Other notable increases were shown in Iowa, up 400,000 acres; Missouri, up 300,000 acres; and South Dakota, up 250,000 acres from a year ago.

The largest year-to-year decline occurred in North Dakota where corn planted acreage is down 650,000 acres. The national average yield projection remains unchanged from last month at 153.4 bushels per acre, down slightly from 153.9 bushels per acre in 2008/09. As of July 5, 71 percent of the corn crop was rated in good to excellent condition, up from 62 percent last year.

Projected corn use for 2009/10 is up 65 million bushels this month to 12.525 billion bushels. Feed and residual use was increased 50 million bushels to 5.2 billion this month, as lower corn prices and greater supplies help boost feed demand for 2009/10. Food, seed, and industrial (FSI) use of corn in 2009/10 is expected to total 5.375 billion bushels, down 35 million bushels from last month and representing 43 percent of total use. FSI use in 2009/10 is expected to decrease from last month as high fructose corn syrup, glucose and dextrose, and starch production are all projected lower as continued weakness in the economy limits demand for these products. Corn use projections for beverage and manufacturing, as well as, cereal and other products are unchanged from last month. Expected corn use for ethanol also remains unchanged this month. Exports for 2009/10 were increased by 50 million bushels to 1.95 billion bushels, as lower prices make U.S. corn supplies more favorable on the world market. As a result, 2009/10 ending stocks were projected 460 million bushels higher at 1.55 billion.

For 2008/09 projected corn use is down 170 million bushels from last month to 12.0 million bushels. Feed and residual is lowered 100 million bushels from last month to reflect lower-than-expected third-quarter (March-May) disappearance as indicated in the June 30 Grain Stocks report. FSI use is lowered 120 million bushels this month, which is mainly attributable to a 100-million-bushel decrease in corn used for ethanol production. The decline in corn prices have boosted ethanol producer margins. However, reduced production of gasoline blends with ethanol in May and June, based on the most recent weekly data, indicate lower-than-expected ethanol corn use. Exports were raised 50 million bushels based on recent increases in shipments and the high level of outstanding sales for the 2008/09 marketing year.

With 2009/10 ending stocks projected sharply higher this month, prices are projected lower. The marketing-year average farm price for 2009/10 is projected at $3.35 to $4.15 per bushel, down 55 cents on both ends of the range. The 2008/09 marketing-year average price is expected to be $3.95 to $4.15 per bushel, down from a record $4.20 per bushel in 2007/08.

Sorghum Prospects Down From Last Year

Sorghum production in 2009 is projected at 380 million bushels, which remains unchanged from last month but down 92 million bushels from last year, as producers in Texas decreased their planted area by 25 percent. Sorghum planted and harvested acreage is forecast at 7 million and 6 million acres, respectively. These estimates remain unchanged from the March intentions. The projected yield is decreased slightly from last month to 63.7 bushels per acre, reflecting rounding in the production projection. As of July 5, 50 percent of the sorghum crop was rated in good to excellent condition.

Sorghum supplies in 2009/10 are expected to decrease from last month because of decreased production. For 2009/10, total use was lowered 10 million bushels from last month because of decreased expected supplies. The decrease was reflected in feed and residual use.

For 2008/09, feed and residual was raised 10 million bushels because of increased use indicated by the June 1 stocks. Exports were also raised 5 million bushels to 135 million for 2008/09, as export prospects to Mexico remain favorable. As a result, ending stocks for 2008/09 are lowered 15 million bushels this month to 50 million bushels.

The forecast price for sorghum in 2009/10 is $2.85 to $3.55, which is 85 to 86 percent of the corn price. The season average farm price for sorghum, unlike corn, is not significantly impacted by forward contracting and thus is projected lower than corn for 2009/10. The projected price for 2008/09 is $3.10 to $3.30 per bushel.

Barley Production Down in 2009/10

The first survey-based forecast of 2009 barley production is 203 million bushels, down 22 million from the previous projection and down 36 million from the 2008 crop. Planted area was down 326,000 acres from earlier intentions and down 610,000 acres from 2008, as soggy field conditions in April and early May hampered barley seeding in the Northern High Plains area. Harvested acres are estimated at 3.1 million acres and are down 17 percent from 2008. Average barley yields are forecast at 64.7 bushels per acre, down from last month's trend-based projection of 65.4 bushels.

Total barley use in 2009/10 is projected to be down 15 million bushels from last month and down 5 million from 2008/09. Projected decreased use from last month is in feed and residual use, which is down 6 million bushels from 2008/09. Imports in 2009/10 were raised 5 million bushels this month as a result of lower production, but are up 1 million bushels from the prior marketing year. Small changes were made in 2008/09, reflecting the June 1 Grain Stocks, which finished the marketing year for barley. Imports were lowered 1 million bushels due to shipments to date. Feed and residual use was raised 1 million bushels and food, seed, and industrial use was lowered 1 million bushels. Ending stocks were reported at 89 million bushels, down from the earlier estimate of 90 million.

Prices received by farmers for barley in 2009/10 are expected to average $3.65 to $4.35 per bushel. The 2008/09 season average price for barley was raised 17 cents to $5.37 per bushel, due to historical revisions in monthly prices from the National Agricultural Statistics Service. The spread between malting barley and feed barley prices is projected to be larger in 2010, as contract prices for malting barley were relatively high this past spring. In 2008/09, the spread was $1.89 vs. -0.48 cents in 2007/08.

Oats Production To Decline in 2009

Oats production is forecast at 91 million bushels in 2009, according to the first survey results, down 1 million bushels from last month’s projection, but up 2 million from 2008. Planted acres are down 242,000 acres from the March intentions, and harvested acres are unchanged from last month’s projection. Yields are forecast at 64 bushels per acre, down 0.2 bushels from the trend yield used last month but up 0.5 bushels from 2008. As of July 5, 59 percent of the crop was rated in good to excellent condition.

Beginning stocks for oats are estimated at 84 million bushes for 2009/10, up 8 million bushels from last month based on June 1 stocks. With increases in supply, total use in 2009/10 was increased 5 million this month, resulting in 8 millionbushel increase in ending stocks.

For 2008/09, feed and residual use was lowered 11 million bushels to account for reported June 1 ending stocks, which raised ending stocks to 84 million bushels for 2008/09 this month. Oats farm prices were projected at $1.95 to $2.75 per bushel for 2009/10, which was lowered 35 cents on both end of the range, as prices for all feed grains have declined with increasing supplies. In 2008/09, the season average farm price for oats was $3.15 per bushel.

Harvested Hay Acreage To Increase

Producers expect to harvest 60.2 million acres of all hay in 2009, up slightly from 2008. Expected harvested area of alfalfa and alfalfa mixtures, at 21.0 million acres, is up 2,000 acres from 2008. The largest decreases are expected in Iowa, Minnesota, and North Dakota, all down 100,000 acres or more from last year. Expected area for harvest of all other types of hay totals 39.2 million acres, up slightly from 2008.

Harvested area for alfalfa and alfalfa mixtures is expected to increase or remain unchanged from last year in all States except New Mexico, North Dakota, and Oklahoma. However, the increases out West are nearly offset by scattered declines throughout the Eastern U.S. Compared with last year, area harvested for all other types of hay is expected to increase by 100,000 acres or more in Minnesota, Mississippi, Nebraska, Oklahoma, and Texas. However, large decreases of 200,000 acres or more are expected in Kentucky, Missouri, and North Dakota.

International Outlook

World Coarse Grain Production Increases Mostly on U. S. Corn

World coarse grain production for 2009/10 is projected up 8.9 million tons this month due to increased U.S. corn production, but foreign changes are mostly offsetting, boosting global coarse grain production only 0.3 million tons.

European Union (EU) coarse grain production is projected up 0.9 million tons to 149.0 million. Mixed grain production in the EU is up 1.2 million tons to 14.2 million mostly because of increased area and good growing conditions in Poland. EU rye production is projected up 0.4 million tons this month to 9.0 million mostly due to increased area reported for Poland and Denmark. EU barley is down 0.3 million tons to 60.7 million as increases for Denmark, France, and Finland are more than offset by declines in prospects for Germany, Hungary, Romania, Austria, Slovakia, and Spain. EU oats production is also down 0.3 million tons this month mostly because of lower area reported for Finland and others. EU corn is projected down slightly with mostly offsetting changes. A 1.2-million-ton increase for France based on increased planted area is more than offset by poor crop conditions in Italy, Romania, and others.

Coarse grain production the former Soviet Union (FSU) is raised slightly this month, with a 0.2 million-ton increase in forecast barley production in Ukraine based on increased reported area. Russia barley production is raised 0.5 million tons also on higher reported area, but a 0.5-million-ton reduction in expected corn production based on lower area is offsetting. In Kazakhstan, barley planted area was reported lower than expected, reducing production prospects slightly.

Partly offsetting the aforementioned increases are reduced production prospects for Canada and the Philippines. A cold dry spring, especially in Alberta, has reduced barley and oats production prospects in Canada, cutting projected 2009/10 coarse grains production 0.65 million tons to 23.7 million. Philippines corn area was reported slightly lower for both 2008/09 and 2009/10, slightly reducing production in both years.

Global coarse grains supplies for 2009/10 are boosted this month by increased beginning stocks, but the increase is concentrated in U.S. corn, with foreign coarse grains beginning stocks virtually unchanged at 137.2 million tons. However, foreign corn beginning stocks are up 1.0 million tons this month, while barley is down 0.5 million and oats are reduced 0.3 million. Corn beginning stocks are up 0.5 million tons for Brazil as reduced export prospects for 2008/09 more than offset a decline in production. China’s coarse grain beginning stocks for 2009/10 are up 0.5 million tons mostly because of an increase in estimated 2008/09 corn production. Barley beginning stocks for 2009/10 in Russia are down 0.6 million tons to 3.7 million due to the recent strong pace of exports. EU 2009/10 beginning oats stocks are reduced 0.3 million tons due to lower estimated 2008/09 production.

Consumption Projections Little Changed, Ending Stocks Increase

Global coarse grain use projected for 2009/10 is virtually unchanged this month at 1,091 million tons. Ukraine’s use is down 0.7 million tons as meat production prospects are weaker and exports increased. Canada expected use is reduced 0.3 million tons due to trimmed production prospects. Partly offsetting are small increases for the EU, Venezuela, and Russia.

World coarse grains ending stocks for 2009/10 are up 13.3 million tons this month to 179.0 million. Most of the increase is in the United States, with foreign ending stocks increased 1.7 million tons to 135.5 million. The largest increase is for Brazil, up 1.5 million tons to 9.2 million. Brazil’s corn export prospects are reduced for both 2008/09 and 2009/10 as U.S. corn prices are projected significantly lower, making it less attractive for Brazil to compete in export markets. Ukraine’s ending stocks are projected up 0.6 million tons this month as increased supplies and reduced domestic use more than offset increased export prospects. EU coarse grains ending stocks are up slightly. These increases are partly offset by reduced stocks prospects for Russia, Canada, Philippines, and Kazakhstan.

U.S. Corn Exports and World Coarse Grains Trade Increased for Both 2008/09 and 2009/10

Global coarse grains trade (October-September) forecast for 2008/09 is up 1.7 million tons to 106.2 million, and projected 2009/10 trade is increased 0.6 million tons to 107.4 million this month. Corn trade is increased 1.0 million tons for 2008/09 and 0.5 million for 2009/10.

Global barley trade for 2008/09 is up 0.5 million tons this month to 19.0 million, with increased exports by Russia. Barley imports are increased for Saudi Arabia and China.

World 2008/09 sorghum trade is increased 0.2 million tons this month to 5.6 million. Mexico’s imports are increase 0.2 million tons to 2.5 million, and U.S. exports are up a like amount to 3.5 million based on recent sales.

Corn imports for 2008/09 are increased for Mexico, up 0.4 million tons to 7.4 million, based on strong purchases from the United States. The pace of recent shipments also boosted import prospects for Venezuela, Kenya, and the Philippines.

July 2009