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USMEF Feedgrain and Oilseed Caucus Report

by Bruce Schmoll

Bruce Schmoll

The USMEF Feedgrain and Oilseed Caucus met Nov. 6 during the USMEF Strategic Planning Conference. I was pleased to chair the meeting on behalf of committee co-chairs John Hagenbuch and Jay Lynch, who were not able to attend.

Among the topics examined by the committee were the outlook for the U.S. grain and livestock industries, global trends in demand for corn and soybeans and the slow pace of this year’s U.S. harvest. It was noted that lower cattle and hog supplies in 2014 will continue to support higher prices – but despite these tight supplies, demand for red meat remains resilient. Both fed cattle and hog prices peaked in July, but hog prices have since moderated. In 2015, beef production is expected to decline, but at a slower rate than this year. Pork production is projected to show steady growth next year.

John Anderson, deputy chief economist with the American Farm Bureau Federation, provided a 10-year perspective on corn prices. He noted that feed and residual use is trending higher, while ethanol usage will likely be flat in the near term. Lower oil prices are a major factor impacting ethanol production, as well as global competition from sugar cane-based ethanol. He also noted that grain exports face a challenging environment due to the rising strength of the U.S. dollar versus the currencies of key customers and competitors.

USMEF staff reported on the increase in competition, especially in Asian markets, from European pork. This is largely the result of the closure of the Russian market – traditionally the largest export destination for EU pork –to pork imports from the EU for the past nine months due to African swine fever. With Russia also now imposing an import ban on most meat imports from the EU, the U.S., Canada and Australia due to political unrest in Ukraine, this impasse is not likely to end anytime soon. In addition, the European economy is weighed down by a number of factors, including inflation, currency devaluation and high unemployment rates.

Despite these factors, demand for U.S. beef remains robust in Europe. But USMEF is concerned about the EU’s duty-free beef quota reaching capacity due to growing shipments from suppliers – especially Australia and Uruguay. This may reduce the U.S. industry’s ability to further grow this market.

Don Hutchens, who recently retired as executive director of the Nebraska Corn Board, reported on a joint USMEF-U.S. Grains Council trade mission conducted earlier this year by a delegation of state corn industry representatives. More details from this trade mission were reported in the June 27 edition of the Export Newsline.

In Mexico, USMEF’s demand development campaign is showing signs of success in helping to increase overall pork consumption. In the three years since the campaign’s inception, Mexico’s annual per capita consumption has increased about 3 percent per year and is now at 16 kilograms. Major retail chain Soriana reported that its pork sales nationwide have steadily increased over the same period, and consumer attitudes toward pork are also improving. U.S. pork exports to Mexico are on a record pace through September, reaching 503,614 metric tons valued at $1.16 billion. With an entire quarter’s results still unreported, that’s just 5 percent short of the value record established last year for an entire calendar year ($1.22 billion) .

United Soybean Board (USB) representative Philip Lobo concluded the meeting by stressing the importance of animal agriculture, noting that red meat exports are critical to the profitability of U.S. livestock producers and are therefore a key component of the U.S. soybean industry’s growth strategy. USB has a solid history of supporting USMEF programs in this regard, with investments in Japan, South Korea and Mexico averaging $1.2 million over the past three years. Lobo added that animal agriculture contributes tremendously to the U.S. economy, supporting nearly 2 million jobs last year.

Lobo also reported on the soybean industry’s commitment to sustainability, noting that more than 70 percent of soybean farmers practice conservation tillage every production cycle. Soil erosion per bushel has been reduced by 60 percent since 1980, and the industry has made significant strides in reducing irrigation water usage, energy usage and greenhouse gas production.

As a final note I would like to recognize the excellent support USMEF has received over the years from Marsha Stanton, director of industry affairs for Monsanto, our meeting sponsor. Marsha will be retiring soon, so this was her last USMEF conference.

If you have questions regarding this meeting of the Feedgrain and Oilseed Caucus, please email John Hinners or call 303-623-6328.