U.S. Production Projections Up, Supply Ready for Global Markets

By Ken Hobbie, president and CEO

As we look at the increasing need for meat, milk and eggs for all countries to feed their growing populations, we remain convinced that the demand for U.S. feed ingredients will remain strong and critical in securing a safe and affordable food supply for many countries. Despite the economic uncertainties seen in 2008 and 2009, we have seen that food demand remains resilient. When the cycle of economic growth returns, food demand will be even stronger, and trade in agricultural and food products will be vital in meeting that demand.

In 2008, we saw record feed grains exports that surpassed 2007 numbers in a big way. U.S. corn exports totaled 59.9 million metric tons (2.36 billion bushels), up 300 million bushels from last year. U.S. sorghum exports totaled 6.1 million tons (240 million bushels), nearly doubling from 2007’s 3.3 millions tons (129 million bushels). This year will not yield record exports, but considering the changing market dynamics, they will remain relatively strong. U.S. corn exports for the 2009 marketing year stand at 34.7 million tons (1.4 billion bushels) compared to 51.2 million tons (2 billion bushels) for the same period last year. Sorghum exports are at 2 million tons (78.7 million bushels), down from 5 million tons (196.8 million bushels) in 2008, largely due to the European Union recovering from last year’s severe drought conditions. Barley’s marketing year began last month and exports total 1,600 tons (73,500 bushels) compared to 5,400 tons (248,000 bushels) last year. USDA is projecting U.S. coarse grain exports to total 48.1 million tons, down from 67.5 million tons last year.

Cold, wet weather has delayed planting of the U.S. crop, and yet USDA projects the second-largest planted corn acreage since 1946. USDA projects 87 million acres of corn (3.4 billion bushels), up 1 percent from 2008. World demand for coarse grain imports is also up, coupled with the U.S. government mandate for increased use of corn-based ethanol. Specifically, we know the U.S. renewable fuel standard requires an increase in biofuels use each year, and over the next several years, that mandate can be met only with corn-based ethanol. Corn use for ethanol will increase from 94 million metric tons this year to 104 million tons in 2009/2010. In 2015, the United States will consume 15 billion gallons of corn-based ethanol, requiring 5 billion bushels or 127 million metric tons of corn. With this information at hand, will the United States has enough coarse grains to go around? The answer is without a doubt – Yes. Along with an increase in U.S. corn production comes development of the U.S. ethanol industry, which translates into a greater supply of distiller’s dried grains with solubles (DDGS), a co-product of U.S. ethanol production. This high-quality feed ingredient provides global end-users a price competitive product that may displace some corn in global feed rations. Last year, the U.S. ethanol industry produced 19.2 million metric tons of distiller’s grains. That product replaced roughly the same amount of corn in livestock rations both in the United States and abroad.

Although the U.S. ethanol industry slowed and went through some restructuring this year as a result of a staggering U.S. economy, DDGS exports still increased nearly 6 percent compared to this time in 2008. U.S. DDGS exports to-date stand at 1.35 million tons, compared to 1.27 million tons at the same period last year. Mexico remains the largest buyer in 2009 at 441,094 tons, up from 360,849 tons in the first three months of 2008. Mexico’s total imports of U.S. DDGS last year were 1.2 million tons. Canada followed in second-place at 771,797 tons. In order to sustain profit margins at ethanol plants and keep corn prices competitive with other demand sectors DDGS needs to be valued competitively with other substitute feed ingredients. The export market is far from saturated, thanks in part to the work of the U.S. Grains Council and our members’ investments, we have raised export demand to 4.5 million tons of distiller’s grains in 2008, almost double the amount we exported in 2007. By 2015 the United States will produce almost 36 million tons of distiller’s grains, and could export as much as 14 million tons. In other words we are reaching only about 30 percent of our estimated marketing potential for DDGS globally.

I will close by simple saying U.S. farmers will continue to respond to demands in the domestic and global marketplace. The productive capacity of U.S. agriculture ensures an abundant supply of high-quality, safe and affordable coarse grains that can satisfy demand for domestic feed use, ethanol production and exports. The marketplace works, and U.S. and global agriculture are resilient in responding to new areas of demand.