Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Friday 11/30/12

Avg Sep-Nov Dec Corn Price vs. Corn Feed Use

The USDA will release a number of reports January 11th including the annual crop production, the first 2013 U.S. winter wheat seedings, the monthly supply-demand figures, and the quarterly grain stocks report as of December 1st.

Of these, the quarterly corn stocks report may be of the most interest for this will be the first time the trade will be furnished information on how corn feed demand is faring for the 2012-13 season.

Abysmal weekly export sales and flagging ethanol production levels show how record high corn prices have pared demand in those two sectors but feed use can only be monitored via these quarterly reports.

Reports of poor feeding margins amid falling animal and bird numbers suggest a drop in Sep-Nov corn feed use relative to past years and this is already reflected in the USDA’s feed projection for this year at 4.150 billion bushels, the lowest figure since the 1988-89 season.

Note the Sep-Nov 2011 corn feed use at 1.823 billion bushels was the lowest since 1.778 billion bushels were consumed in the Sep-Nov 1995 period.

Over the past ten years, the percent of annual corn feed use in this period consumed ranged from 35.3 to 43.1% averaging 38.5%.

This graphic is a scatter plot showing the average amount of corn fed per grain consuming animal unit (GCAU) vs. the average Sep-Nov December corn futures price in $/bushel.

The USDA has estimated the 2012-13 GCAU numbers at 91.31 million, the lowest total since the 2004/05 season.

With feed use projected at 4.150 billion bushels this works out to 45.5 bushels of corn fed/GCAU.

This is the lowest figure we have in our database and goes hand in hand with the record high December corn futures seen in the just passed Sep-Nov quarter.

In fact, the logarithmic trend-line shows a very defined inverse relation between corn feed use/GCAU and prices with a high R squared of 91%.

Rearranging terms to solve for x results in a corn fed/GCAU figure of 43.5 which if multiplied by this year’s GCAU of 91.31 million yields an annual feed figure of 3.975 billion bushels, 175 million less than what the USDA is projecting.


Posted at 7:51AM CST 11/30/12
Comments (1)
Let's not get too bearish on cornâ?™s feed and residual number. It looks like your chart may be picking up the dynamics of less corn being fed with the increased use of ddgs. A comparison between 2011-12 and 2012-13 shows GCAU decreased 1.4%. Non-corn processed feeds -projected by USDA- declined 10.7%. That decline is probably in the 6.7% range when an estimated ddgs feeding level is factored in. If grain protein feeds: gluten meal, gluten feed and distillerâ?™s, are fed at the same level as last year, USDAâ?™s corn balance sheet, as it stands now, is 500 million bushels short of feed. Another shock to the feed and residual line of the corn balance sheet could still come from the early corn harvest this past fall. A larger then normal percentage of corn inventories should be in commercials hand. So the time of reckoning, if it occurs at all, will more than likely come earlier than later. These issues along with a disappearance of harvested acres may have one wanting to see what factors/conditions are needed to justify planting an early hybrid that could possibly capture the potentially very tight corn supplies late this coming summer/early fall. These factors may be enough to trump the very weak corn exports
Posted by Freeport IL at 1:12AM CST 12/04/12
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