The grain glut is not going away anytime soon
Sector at a Glance
The major feed grains are corn, sorghum, barley, and oats. Corn is the primary U.S. feed grain, accounting for more than 95 percent of total feed grain production and use.
- More than 90 million acres of land are planted to corn, with the majority of the crop grown in the Heartland region.
- Most of the crop is used as the main energy ingredient in livestock feed.
- Corn is also processed into a multitude of food and industrial products including starch, sweeteners, corn oil, beverage and industrial alcohol, and fuel ethanol.
The United States is a major player in the world corn trade market, with between 10 and 20 percent of its corn crop exported to other countries.
USDA – Feedgrains Sector at a Glance, August 20th
Forget Malthus and all his catastrophe hype; global as well as domestic grain production continues to flood the markets. How do we know? Just look at how much of the U.S. corn production is devoted to ethanol production.
As much as 40% of all corn grown in the United States goes into ethanol production, and both the car manufacturers and farmers prefer it this way. By promoting gasoline/ethanol blends (as much as 15% of volume) the Feds are conciliating the farmers, while appealing to the wishes of car manufacturers. Since ethanol is corrosive to car engines and shortens their lifespans, car manufacturers will always support ethanol production.
Domestic Soybean output drops slightly, but global output is flat
Biodiesel makes up 25 percent of soybean oil used in the U.S. Biodiesel is a renewable substitute for petroleum diesel made from soybean oil. The fuel reduces greenhouse gas emissions, increases energy efficiency and provides a 15 percent price support for soybeans.
Despite the sound and fury of this past Spring’s weather-related planting problems, soy production remained fairly consistent on a global basis.
This is just a friendly reminder to those who are banking on higher grains prices over the shorter-term. The supply continues to climb as interest rates fall and growing technology advances. The developing nations are also becoming more important players and their planting costs and overhead are usually much lower than in the U.S., Canada, and E.U.
If the governments weren’t trying to support the corn and soy markets via fuel production, prices would be even lower. Despite a growing global population, prices cannot seem to get any momentum.