December WASDE report review

Price increase for US feed crops forecast

By Aerin Einstein-Curtis contact

- Last updated on GMT

© iStock
© iStock
Strong usage and exports are supporting a slight price increase for US feed crops, despite the large harvest, says economist.

The US Department of Agriculture’s (USDA) most recent World Agricultural Supply and Demand Estimate (WASDE​) changed expectations regarding crop quantities, but supported strong domestic and international use, said Chad Hart, associate professor of economics, crop market specialist and extension economist at Iowa State University. “From the market side it’s just good to see that they maintained the record usage,”​ he added.

“Given the mass of crops, you would expect prices to be low, but instead we’ve seen a minor recovery based upon the usage of crops continuing to build,” ​he told FeedNavigator. “As we look at the markets I see cautious optimism and that demand continues to grow and catch up to supply.”

Looking forward into 2017, Hart said there also maybe shifts in the acreage of US feed crops planted and the potential for an adverse weather event in the US. 

“We really hit a bottom with this before this crop was harvested in late-August, early-September – the feed markets really hit their bottom,” ​he said. “I think we may approach it again as we start 2017, but I don’t think we’ll get as low as we were in August and September due to the growth in use.”

Corn and soy

Although the report did not alter production amounts for corn or soybeans, it did indicate an increase in prices for the feed ingredients and raise a few questions looking forward, said Hart.

“Demand has been helping pull prices higher for both corn and soybeans,” ​he said

On the corn side, sales are about 75% higher than last year’s pace at this point, he said. But there is a possibility that some sales would be canceled in January or February when more is known about crop yield in South America, said Hart.

Feed demand is growing based on increasing livestock use in the US and in international markets, he said. 

“Both crops are starting at phenomenal production, and record demand and exports hold the key to any large potential movement,”​ said Hart.

However, in recent years, early commitments to US corn exports were not indicative of final exports, said the USDA. And both corn and soybean crops are expected to face competition from South America.

But the expected range for season-average corn price was increased to $3.05-$3.65 per bushel stemming from early-season prices, the department said. The season average soybean price for 2016-17 was increased to a range of $8.70-10.20 a bushel while soybean meal remains unchanged at $305 to $345 a short ton.

Internationally, corn production for China, Brazil, Canada, Indonesia and Russia have been increased, said the USDA.

“Corn production for Brazil is raised this month on increases in both area and yield and if realized would be record-high,”​ said the USDA. “In the Center-West, first-crop corn has had a good start to the growing season while conditions for crop development in most of southern Brazil were generally favorable during the month of November. The latest information from the Government of Brazil also indications an areas level above previous expectations, and the soybean crop is progressing ahead of schedule in the Center-West.”

The global soybean supply also is expected to see higher production, exports and ending stocks, said the department. Production is predicted to reach 338m tons with increases from India and Canada.

Imports of soybeans have been boosted for the EU and ending stocks were raised to 94.6m tons, based on increased stock in Argentina and India, the department said. “Global 2016-17 soybean and product supply and use changes include increased soybean crush for the EU and India, increased soybean meal exports for India, and reduced soybean meals exports for Argentina, Brazil and the United States,”​ it added.

Supplemental feed grains

US wheat supply and use did not see much change, but the price range was narrowed by $0.20 per bushel to a range of $3.60 to $3.80, said the USDA.

Globally, production for 2016-17 was increased by 6.5m tons, based on increases for Australia, China, the EU and Brazil, reported the US agency. Exports were raised by 2.6m tons.

A larger area planted and fair weather account for the 4.7m ton production increase in Australia, said the USDA. The amount is an 18% increase over the previously predicted record yield.

Total wheat consumption in feed, food and residual use has been increased by 3.3m tons, noted the WASDE report. Ending stocks were boosted by 2.9m tons and remain record large.

The 2-16/17 estimates for grain sorghum use were increased, with ending stocks lowered 5m bushels, the department said. Prices in 2016/17 are expected to average $2.80 to $3.30 a bushel, a drop on the high end.

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