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Summary of the Economic Research Service Situation and Outlook Report (October 15, 2018)

Core Content

This report provides an overview of the U.S. and global outlook for corn, sorghum, barley, and oats for the 2018/19 marketing year, including updates on supply, demand, and prices. It also highlights the impact of international production and trade dynamics, particularly focusing on Russia.

U.S. Corn Outlook

• Yield: The third survey-based yield forecast for the 2018/19 U.S. corn crop was reduced by 0.6 bushels per acre to 180.7 bushels per acre, resulting in a total crop of 14.778 billion bushels, 48.9 million bushels below the previous forecast.
• Production: Despite the yield reduction, the total production is still projected to be a record high.
• Supply and Use:
  • Feed and Residual Use: Projected at 5.550 billion bushels, 25 million bushels lower than the previous month, due to a smaller crop size and lower expected prices.
  • FSI Use: Unchanged at 7.130 billion bushels.
  • Exports: Projected to increase by 75 million bushels to 2.475 billion, supported by improved prospects due to lower Russian production.
  • Ending Stocks: Projected at 1.813 billion bushels, up 39.1 million from the previous month, but 8.5 million below the 2017/18 level.
• Price: The season-average price received by farmers is unchanged at $3.50 per bushel.

U.S. Sorghum Outlook

• Yield: Increased by 3.9 bushels per acre to 75.0 bushels per acre, resulting in a 5.4-million-bushel increase in production to 381.9 million bushels.
• Supply and Use:
  • Total Supply: Projected at 416.8 million bushels, down 9.0 million from the previous projection.
  • Total Use: Unchanged at 380.0 million bushels.
  • Exports: Reduced by 25 million bushels to 75.0 million bushels.
  • Ending Stocks: Projected at 36.8 million bushels, down 9.0 million from the previous month.
• Price: Revised down to $3.22 per bushel.

U.S. Barley Outlook

• Supply: Projected at 262.6 million bushels, down 3.4 million from the previous projection.
• Use: Increased by 5.0 million bushels to 146.4 million bushels, driven by a rise in feed and residual use.
• Ending Stocks: Reduced by 8.35 million bushels to 87.6 million bushels.
• Price: Projected season-average price is $4.65 per bushel, down $0.05 from last month.

U.S. Oats Outlook

• Supply: Reduced by 9.5 million bushels to 192.1 million bushels due to smaller area and lower yield.
• Use: Reduced by 5.0 million bushels to 156.0 million bushels.
• Ending Stocks: Reduced by 4.5 million bushels to 36.1 million bushels.
• Price: Projected season-average price is $2.70 per bushel, down $0.10 from the previous range.

International Outlook

• Global Coarse Grain Production: Projected down by 3.8 million tons to 1,343.4 million tons.
• Foreign Coarse Grain Output: Reduced by 2.5 million tons to 953.9 million tons, down 22.8 million tons from the previous year.
• Russia's Corn Prospects:
  • Production: Projected at 11.0 million tons, down 2.2 million from the previous year.
  • Yield Decline: Due to reduced planted area and dryness in key regions.
  • Impact: The decline in corn area and yield in high-yield regions (Central and Southern Districts) is expected to sharply reduce total output.
  • Reasons for Decline: Producers shifted to oilseeds due to yield volatility and government efforts to encourage crop rotation.
  • Oilseed Growth: Soybeans, rapeseed, and sunflowerseeds showed better yields, leading to a shift in area.
  • Rotation Efforts: Government and regional officials have promoted crop rotation to curb oilseed expansion.

Key International Insights

• Sub-Saharan Africa (SSA):

  • Total grain production fell by 5.4 million tons in two consecutive years (2017/18 and 2018/19) due to drought in Central and Eastern Africa.
  • Grain imports increased to offset the deficit, reaching a record 25% of total grain consumption.
  • Corn production in SSA countries is projected to decrease slightly after a bumper crop in 2018.

• Global Trade Dynamics:

  • U.S. corn exports are expected to increase due to lower Russian production.
  • U.S. distillers' dried grains with solubles (DDGS) exports reached a record high in 2017/18, with major destinations including Mexico, South Korea, and Turkey.
  • Ethanol exports in 2017/18 increased by 19%, with Brazil, Canada, and India being the top recipients.

Conclusion

The U.S. corn market remains strong with record-high supplies and competitive export prospects, supported by lower production in Russia. Sorghum and barley show smaller but notable changes in production and use, while oats experience a decline in both supply and use. International trade dynamics, particularly in Russia and Sub-Saharan Africa, highlight the importance of global supply and demand shifts in shaping the outlook for coarse grains.