FEED YEARBOOK -- SUMMARY April 26, 1999 April 1999, ERS-FDS-0499 Approved by the World Agricultural Outlook Board ------------------------------------------------------------------------------ This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete text of FEED YEARBOOK will be available electronically in about 2 weeks following this summary release. ------------------------------------------------------------------------------ Abundant Feed Grain Supplies, Low Prices Spur Larger Use in 1998/99 U.S. feed grain production rose 4 percent in 1998/99 to 271 million metric tons, the highest since 1994/95. Total feed grain supply is forecast at 312 million tons, up about 8 percent and also the highest since 1994/95, reflecting a sharp increase in carryin stocks as well as the larger crop. Carryin stocks of feed grains are up 41 percent from 1997/98 to 38 million tons. Feed grain use is projected up 4 percent, led by higher exports. Corn's dominance of the feed grain sector continues to increase, with corn's share of total use expected to exceed 90 percent, up from 89 percent in 1997/98. Corn accounted for 91 percent of total production in 1998, reflecting gains in corn relative to the other feed grains. Acreage planted to the other feed grains is trending down, and yield growth has been subdued compared with corn. Prospective Plantings for 1999 indicates that plantings of sorghum and barley will be the lowest on record, and oats will remain close to the alltime low. U.S. corn production in 1998 was the second highest ever. Ending stocks are projected to increase for the third straight year as gains in supply outstrip increased corn use in 1998/99. Domestic disappearance is expected to set another record because of large supplies, low prices, and a buoyant economy, while exports increase as competitor shipments decline. Corn prices are projected to be the lowest since 1987/88. Low market prices triggered large use of the marketing loan program, especially the loan deficiency payment (LDP) option in 1998/99. Use of loan deficiency payments has been widespread in the first half of the year, indicating prices in many locations were below the local loan rate. As of mid-April, total LDPs made on the 1998 corn crop had almost reached $950 million, and more than $150 million were made for sorghum, barley, and oats combined. Acreage of corn derived through biotechnology increased sharply in 1998 and is expected to continue expanding in 1999. The leading type of new corn is Bt corn, which provides protection from the European corn borer, a major insect pest. Another category of biotech or genetically modified corn gaining popularity features herbicide resistance. U.S. exports of corn to the EU have been disrupted because of the slow pace of EU approvals of genetically modified corn. The EU has been importing corn from other suppliers that grow only non-biotech corn or biotech varieties that it has approved. Virtually all biotech corn currently grown features input traits. Biotech corn with value-enhanced output traits to enhance various end uses is expected to reach the market in the next few years. Plantings of specialty corn from conventional breeding, such as high-oil corn and white corn, are also increasing, but collective acreage remains under 5 percent of all corn. Sorghum use is down 16 percent in 1998/99 because of a lower crop. Despite lower prices, all sorghum uses are expected to drop. The largest decline will occur in feed and residual use, which is projected to fall 25 percent to 275 million bushels. If realized, this would be the lowest since the late 1950's. Sorghum exports are forecast to drop 13 percent to 185 million bushels, the lowest in more than a decade. Barley production in 1998 was down 2 percent from 1997. Although yields were higher, acreage declined. Harvested acres, at 5.9 million, were the lowest since 1902. Feed and residual use in 1998/99 has strengthened relative to 1997/98, but exports are expected to decline sharply. Oats supplies in the 1998/99 marketing year are greater than the previous year because of larger carryin stocks and higher expected imports. Production in 1998 was 167 million bushels, the same as in 1997. Although planted acreage fell 4 percent to 4.9 million acres, harvested acres were unchanged from 1997. The 1998 crop was the third smallest since records were first kept in 1866. The record low was recorded in 1995 at 153 million bushels. Hay stocks on farms on December 1, 1998, totaled 1.5 tons per roughage consuming animal unit (RCAU), compared with 1.4 tons in the prior 2 years. Prices for hay in 1998 had been weakening relative to a year earlier, even with the drought in the southern Plains, because many cattlemen reduced their herds rather than buy hay. The index of grain consuming animal units (GCAU's) for 1998/99 is expected to be nearly the same as 1997/98's 88 million. The grain used per GCAU in 1998/99 is expected to be 1.86 tons, down slightly from 1997/98's 1.87 tons. Relatively low prices for feed grains would be expected to encourage livestock production. However, large inventories of meat and weak prices have forced cutbacks or slowdowns in meat production. Food, seed and industrial (FSI) use of corn in 1998/99 is expected to total 1,860 million bushels, up from 1,782 million in 1997/98. Corn use is expected to be up for high fructose corn syrup (HFCS), ethanol, cereals, and other products, but down for glucose, dextrose, starch, beverage alcohol, and manufacturing alcohol. Foreign coarse grain production in 1998/99 is forecast to decline 2 percent, a drop of 14 million tons. Meanwhile, U.S. coarse grain production is estimated up 11 million tons and the world total will show little change. Foreign coarse grain consumption is forecast to decline slightly. World coarse grain stocks are expected to increase slightly in 1998/99 for the third straight year. World corn trade is expected to remain relatively flat in 1998/99, but U.S. corn exports are forecast to increase 20 percent because of reduced competition. The sharpest decline is expected in Argentina, the second largest corn exporter, because of a 25-percent decline in production. A special article is included that examines strategies to deal with low returns from crop sales when yield and/or price falls substantially below expectations. The article focuses on crop insurance and forward pricing, which are widely used methods for reducing within-year risks in crop production. Printed copies of the Feed Yearbook will be available in about 2 weeks. For more information, contact Pete Riley (202) 694-5308 or Allen Baker (202) 694-5290. Text of the full report may be accessed electronically via the ERS website at www.econ.ag.gov. END_OF_FILE