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CME: How Much Corn is Available for Livestock Feed?

06 October 2016

US - Grain inventories in the US as of September 1 were in line with market expectations, according to data released by the USDA-NASS late last week, according to the latest Daily Livestock Report published by Steiner Consulting Group.

Corn inventories at the end of the September-August crop year were unchanged from a year earlier, at 1.7 billion bushels.

Soybeans, which have the same crop year, expanded 3 per cent over the course of the 2015-2016 crop year.

Wheat inventories on September 1 were up 20 per cent from a year earlier. Since the majority of wheat is harvested three months before corn and soybeans, its crop year is measured on a June-May basis.

Oats and barley have similar crop years to wheat, and inventories of these grains were down 16 per cent and up 5 per cent, respectively from twelve months earlier.

The implied usage of grain during the June-August quarter, based on grain supplies on hand at the beginning and end of the quarter is a more interesting story than the absolute volume of inventory on September 1.

The difference between corn inventories on June 1 and September 1 was 3.0 billion bushels. A year earlier, disappearance during those months was only 2.7 billion bushels. The bulk of the 300 million bushel increase in disappearance (or implied usage) can be accounted for by exports that were up 170-180 million bushels during this June-August, versus a year ago.

Alcohol, sweetener and other industrial usage of corn was down 2 per cent from a year earlier during the March-May quarter and usage this summer is not expected to be too much different. That implies that the amount of corn available for livestock and poultry feed was up about 120 million bushels from the summer of 2015, or more than a 20 per cent increase.

Whether this volume of corn has actually been consumed or is still in livestock short-term grain storage facilities or feed bunks is fodder for conjecture.

The amount of corn falling into the livestock feed and residual usage category for the June-August quarter was the biggest for this quarter since 2009. There are some similarities to 2009 this year. The 2009 corn harvest was record-large, by a hair-width, from the 2007 crop.

During 2009, nearby corn futures prices averaged $4.12 in June and proceeded to fall to $3.22 in September. This year, nearby corn futures averaged $4.10 in June and averaged $3.29 in September. During the fall (autumn) of 2009, corn nearby futures prices rose to $3.95 in December, with the majority of the gain coming by way of a 50 cent gain in October.

Total corn supply in late 2009 was a 2.1 billion bushel carry-in from the prior year and 13.1 billion bushels of production. This year it is a 1.7 billion bushel carry-in and 15.1 billion bushels of production.

Relative to the supply and usage balance, this matches up with exports in late 2009 of 467 million bushels and food/industry usage of 1.38 billion bushels. This fall, exports are on a course to be 700 million bushels and food/industrial usage should be 1.6 billion bushels.

The supply to usage ratio in late 2009 was 8.22 while the ratio this year is 7.30. Nearby corn futures prices have moved up 20 cents since the day before USDA-NASS released the September 1 grain inventory estimates, so the 50 cent gain in October 2009 is looking more possible than it was a week ago.

Corn price trends in the country may not mirror the increases in the futures, however, based on past tendencies. In 2009, futures prices went up 73 cents, but Omaha prices only went up 50 cents. Even with exports and food/industrial use increasing, corn available for livestock could also be up by 10 per cent or more.

TheCattleSite News Desk

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