Assessing Corn Feed Use
This year USDA has put in a lofty goal for feed use, with their latest forecast at 5,500 MB versus the previous marketing year tally of 5,298 MB. Certainly, livestock numbers are expanding and have been doing so since the drought year of 2012. But, when you look across the livestock classes, the growth is not uniform.
USDA’s next big report cycle is the February 8th WASDE report which will feature all of the missing data from the key January reports including final crop production numbers as well as the quarterly stocks data. The stocks data is the central figure that helps USDA peg quarterly feed use. Unfortunately, when it comes to USDA forecasting annual feed use in their early season WASDE reports, they have missed the mark of late.
The chart below illustrates the difference between final feed use numbers and early season projections based on the December WASDE report. Red bars denote years when USDA’s feed use forecast in December was too high relative to the final number.
Certainly, the long-term trend is reasonable with 48% of the past 30 years being too high while 52% of the time USDA was too low in their December forecast. But what is disturbing here is the more recent period. The last 10 years has seen 9 out of 10 years where the USDA forecast for feed use has been too high relative to the final feed use estimate. Only the drought impacted year came back as too low.
Hogs and cattle on feed numbers have outpaced poultry growth. This is important because those two classes of livestock are heavy consumers of DDGs while poultry is not.
Indeed, the growth in DDG supplies in the last 15 years has worked to curtail corn feed use. The chart above illustrates the swings in Grain Consuming Animal Unit (GCAU)–a rough proxy for feed demand–and the corresponding disappearance of corn and DDGs. In 2007, GCAU numbers had a temporary peak, and in that year corn used for feed was 5.9 billion bushels. The most recent year showed solidly higher GCAU values as compared to 2007, but corn used for feed was off to only 5.3 billion. Clearly, DDG is displacing corn in the livestock ration.
With a backdrop of abundant DDGs, milo and soymeal, it seems like a challenging year for corn feed use numbers to expand rapidly as USDA is pencling in. This first quarterly stocks figure to be released on Feb. 8 will give the first glimmer of Q1 feed use. This could be a disappointment to the trade, and we might see carryout continue to expand.
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