Will there be enough corn to last until the next harvest?
With high use of domestic stocks in the first quarter of the year, there must be reduced feeding of stocks in subsequent quarters, but how much? Wisner says the 12% increase identified in the first quarter will have to be correlated with a feed reduction in the balance of the year. But he says that means there will have to be a larger reduction in livestock numbers than is now indicated. The only choice would be a reduction in cattle on feed, (and USDA just indicated January cattle on feed was only 96% of that from 2012.)
Rationing for the rest of the year
Wisner expresses concern about the need for rationing corn for feed throughout the balance of the marketing year.
- If feed use is up for the second quarter, then use will have to be down 49% for the last two quarters compared to year earlier numbers, which he says has crisis implications for livestock producers and will create stress on the ethanol industry.
- If feed use is up for the second quarter by only 2%, then the feed use of corn for the balance of the marketing year will have to be down only 28% than year earlier numbers, which would still bring stress on all corn users.
- If feed use for the second quarter is down by 9% from year earlier numbers, then there would only need to be a 15% reduction for the balance of the year, which will still mean a major challenge for all users of corn.
Wisner notes that USDA statisticians reduced their estimate of corn exports to only 950 million bushels for the current marketing year in the January 11 supply-demand report, which would be the least in 40 years, and would mean a 36% cut from 2011. And he says if the estimate falls short of the 950 million, more corn would be available for domestic use.
To date, exports are about 50% below prior year levels, and the 539 million bushels exported by early January would put the year total at 749 million bushels if the pace was retained. With lower exports and more available for feed, Wisner’s feed use scenarios would not be as stressful. He says the need for rationing would not be negated, but the feed reductions would be more modest.
But will exports continue to languish? Wisner says reaching the USDA projection would only require 411 million more bushels to be exported between now and the end of August. Based on the past year’s export pace for the balance of the marketing year, the export pace would need to slow by nearly 16%.
US corn exporters have been facing stiff competition from feed wheat in several countries along with corn from the Ukraine, and second crop corn in Brazil that have been priced under the US corn market. Those supplies will not last, and many have already diminished to the point that foreign exporters have closed down. Southern Hemisphere feed wheat, just now being harvested, is down about 25% in yield in production, and the European Union is expected to be in the market buying substantially more feed grains than usual. However, the EU will not buy US corn to avoid biotech issues.
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