The U.S. Department of Agriculture provided its final 2014 crop estimates with the January World Agricultural Supply and Demand Estimates (WASDE) report issued on Monday, January 12. For corn, yield estimates were trimmed by 2.4 bushels per acre down to 171 bushels per acre. That equates to about 191 million fewer bushels, despite a slight upward revision on acres harvested. To access the full report, click here.
Ethanol use of corn is projected up about 25 million bushels from last month’s estimates, based on projected greater fuel demand from low gasoline prices. Feed and residual use estimates are down 100 million bushels based on the rate of use in September through November and the amount of remaining stocks in December 2014. That is a net reduction of 75 million bushels and results in an increase in USDA’s estimated season average price by $0.15 one each end of the $3.35 to $3.95 range.
This week’s WASDE report confirms that the food versus fuel struggle is alive and well. The crux of the food versus fuel issue is that the nation’s ethanol mandate, known as the Renewable Fuel Schedule (RFS), effectively linked corn prices to the energy markets. When gasoline prices went up, ethanol producers could afford to bid corn prices higher and pass along the costs to motorists under the RFS mandate.
With the past five to six years of high crude oil and gasoline prices, this has meant higher corn prices – and higher feed costs for poultry and livestock producers. Now that crude oil prices have dropped, and the national average gasoline prices is nearing $2.00 per gallon, it would be expected that corn should be headed down as well.
But that is not the case, according to USDA’s latest projections in the January WASDE report, which states “corn used to produce ethanol is raised 25 million bushels” over previous estimates. The reason? Higher demand for gasoline means more mandatory use of ethanol blended into the fuel supply under the RFS.
The 2014-15 U.S. season-average farm price for soybeans is projected at $9.45 to $10.95 per bushel, up 20 cents at the midpoint based on prices reported to date. Soybean production is estimated at 3,969 million bushels, up 11 million bushels despite a drop of 0.3 million harvested acres from the December forecast. Yields, however, on the 83.1 million harvested acres are up 0.3 bushels per acre to 47.8 bushels per acre, to increase the total production estimate. Based on October to December shipments, exports are estimated to increase 10 million bushels, but ending stocks are left unchanged at 410 million bushels. Soybean meal is estimated to see increases in both exports and domestic consumption. Exports are up to 12.8 million short tons, and domestic use up to 30.2 million short tons. That’s an increase of 100,000 tons total use which is offset by reduced imports. The average price of soybean meal is estimated to be $340 to $380 per short ton.
Broiler production for 2015 is now forecast at 39.630 billion pounds, the same as last month’s forecast, while the year ending 2014 estimate was raised 100 million pounds to 38.586 billion pounds. USDA’s estimated 2015 broiler production is a 2.7-percent increase over 2014, which was up 1.9 percent over 2013.
USDA lowered its price outlook for broilers by one cent on the top end, with a new range of 100 to 107 cents per pound, based on the pressure of “increasing supplies of competing meats.” Stronger broiler prices are projected for the first half of the year – especially the second quarter – then tailing off one to two percent in the fourth quarter.
Compared with last month’s report, USDA raised its beef production forecasts for 2015 by 150 million pounds, but that total is still 419 million pounds less than 2013. Pork production estimates were increased 275 million pounds over last month’s report, and are now projected 4.6 percent higher than 2014. Total red meat production for 2015 is up over last month’s forecast to 48.058 billion pounds, total poultry production is left the same as last month’s forecast at 45.675 billion pounds.
