Fundamentally Speaking

Corn Feed Demand

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst

In the October world agricultural supply-demand report (WASDE), the USDA lowered 2013/14 corn feed usage by 50 million bushels to 5.125 billion bushels based on the higher than expected September 1 quarterly corn stocks.

Interestingly despite the negative connotations this would have for corn feed utilization this year, the USDA did increase its feed estimate for the 2014/15 marketing season by 50 million bushels to 5.375 billion.

This was based on larger supplies, increased meat production and forecasted lower prices.

There are those who feel this move was premature given feed demand that has fallen short of expectations over the past number of years, cheaper alternative products such as feed wheat and distiller's grain and just a modest increase in animal numbers vs. last year of 1.1% when feed demand is projected 4.9% higher.

The accompanying graphic shows U.S. corn fed per grain consuming animal units vs. the average farm price.

Certainly the inverse relation is expected with high corn fed per animal the lower the price and vice versa.

The yellow diamond on the logarithmic trendline has not only a very good fit as evidenced by the high r squared but this year's feed estimate per animal is right on the line.

The trade will have to wait for the first quarterly stocks report of the2014/15 marketing year on January 12, 2015 to see how well feed demand is tracking the USDA projection.



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Freeport IL
11/3/2014 | 1:21 PM CST
Feed and residual use estimated use of corn has dropped two times: July; 125 million bushels and October; 50 million bushels, for the 2013-14 marketing year that ended August 31, 2014. Most of that change might be attributed to PEDV in the swine herd. Ten percent pigs lose because of the virus has been projected and reported. That level of loss could make up most of the 175 million bushel decline. One comes up with 5,300 bushel use, if the 175 million bushels is added to 5,125 million bushels of corn that is estimated to have been fed in 2013-14. These 5,300 million bushels might have been the level of corn use if the death loss had not occurred. USDA is estimating 5,375 million bushel of corn being fed and residually used (still not 100% sure how that works) for 2014-15. That is a 1.4% increase from the no death number of 2013-14. USDA is projecting a 1.2% increase in red meat and poultry production along with a 2.1% increase in eggs and a 3.4% increase in milk. So from here, USDA projections look doable if PEDV can be controlled. They might be 175 million bushels too high if PEDV is not controlled and the percent losses are similar to this year's. It is also rare to see feed consumption per animal unit below 1.5 when the hog to corn price ration is above 16. The ratio points to something like 23 this coming year. Freeport, IL