Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Thursday 03/13/14

U.S. Corn Feed Use
This graphic shows the Sep-Nov feed usage as a percent of the USDA January WASDE feed estimate, Dec-Feb feed use as a percent of the April WASDE feed projection, and finally first half feed use (Sep-Mar) as a percent of the April WASDE feed estimate.[Read Full Blog Post]
Posted at 9:36AM CDT 03/13/14 | Post a Comment
Comments (6)
USDA's feed and residual use of corn has seemed doable for all the reasons noted in this post. Even after Purdue projected a 3% drop in the number of hogs going to market because of PED, it seemed heavier hogs could eat the feed left by fewer numbers. That may have changed with some folks talking about a 13% drop in the number of head going to market this summer. It seems unlikely that drop in the number of head going to market can be made up by heavier weights because of the loss in carcass quality - to much fat. (There is also an issue of large hogs dragging on the floor when placed on the rail in some slaughter plants.) We might be loosing over 10 million bushels a month from PED even with heavier weights if the level of PED damage is as advertised. Freeport, IL
Posted by Freeport IL at 10:26AM CDT 03/14/14
Strong first quarter corn feed use was just refilling of an empty pipeline from 2012 drought, not actual consumption. No way corn feed use increases 22 percent with cattle and hog numbers this low and an increase in ddgs production. Adjustments will be made later and corn for feed will be cut sharply with this years ending stocks pushed above 2 billion bu. and $3.50 corn by summer. With a good corn crop this year next years ending stocks will rise above 3 billion and $3.00 corn
Posted by Jason Billenstein at 9:15AM CDT 03/16/14
Corn end stocks have only been above 2B twice in the past 20+ years! Your 3B number should take corn to the lowest price in over 20 years! It was also the coldest winter on record in lots of places! Live animals needed more energy to survive that!
Posted by Roger Cooper at 9:22AM CDT 03/17/14
We feed a lot of hogs on our operation all in temperature controlled barns as most are today and this winters cold hadno iimpact on feed efficiency. Also, due to much improved genetics we can raise our hogs to 300lbs with less corn than it took to get them to 250 twenty years ago. And they maintain the same leanness whether we market them at 300 or 250. I agree that cattle take more feed in cold weather, but that's offset by fewer animals. If corn feed increases a more realistic 10% ending stocks easily go to 2b.
Posted by Jason Billenstein at 3:26PM CDT 03/18/14
Next year's carryover could go to 3b if we have a record crop this year it would be about the same stocks to use ratio as twenty years ago and $3 would be about the same price in today's dollars.
Posted by Jason Billenstein at 3:35PM CDT 03/18/14
What is the likelihood, from the fundamental point of view, the CME's Dec 2015 corn price (two years out) will be under the current level of $4.85 per bushel at the expiration of the contract? Many assumptions are needed to make this WAG (wild ass guess). The first assumption is ending corn stocks of 1.45 billion bushel will hold the Dec 2015 contract at expiration to a $4.85 price. (The March 2014 corn contract showed the error in that assumption. The contract price has been $0.40 lower to $0.05 higher from that $4.85 level with about same projected ending position.) Corn acres planted for both years needs to be assumed. Ninety two (92) million acres was used for 2014-15 and a sliding level from 88 to 97 million acres was used for 2015-16 depending on 2014-15 ending balance. The lower the 2014-15 ending balance becomes the higher 2015-16 planted acres are assumed. A relationship between planted and harvested acres needs to be established. Corn use for 2014-15 and 2015-16 needs to be assumed. The higher the level of use that is inputted the greater the chance of higher prices. A level of 13.5 billion bushels for 2014-15 and 13.6 billion bushels for 2015-16 was used. A forty year detrended US corn yields is assumed to represent the potential corn yields for both years. The highest chance (as the level of inputted 2014-15 production changes, the 2015-16 projections change) of CME's Dec 2015 contract closing out above $4.85, with these assumptions, is less than 20% (1 in 5). That does not mean prices will not be higher between now and December 2015. In fact there appears to be about a 35% chance of December 2014 closing above this level. Frayne Olson's, North Dakota State University agricultural economist, advice maybe wise given these projections. He is quoted as saying; "Producers need to start thinking about marketing more than one crop year during price spikes." If the above calculations and assumption are close to reality, the greater than 80% (4 in 5) chance of the Dec 2015 CME contract closing out below $4.85 might be additional motivation to move to Olson way of thinking. Those following his advise will want to be mindful of input cost. Freeport, IL
Posted by Freeport IL at 9:51AM CDT 03/25/14
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