WORLD LIVESTOCK AND POULTRY INDUSTRIES FACING CUTBACKS AS U.S. CORN RUNS LOW
FOR IMMEDIATE RELEASE
Thursday, April 4, 1996
FACING CUTBACKS AS U.S. CORN RUNS LOW
Lester R. Brown
On Friday morning, March 29, 1996 the U.S. Department of Agriculture released its Grain Stocks report, indicating that on March 1 U.S. stocks of corn totalled 3.8 billion bushels. During the December-February quarter, domestic use plus exports totalled 2.31 billion bushels, down 7 percent from the 2.49 billion bushels for the same period a year earlier.
Many analysts had expected that the higher corn prices of recent months would reduce demand much more, both within the United States and in the corn- importing countries. But the livestock and poultry industries in the United States continued to go full tilt, and those in East Asia, the dominant destination for U.S. corn exports, continued to expand. China's recent emergence as a corn importer put further pressure on supplies.
If U.S. corn use and exports were to continue at the same rate in the months ahead (25.4 million bushels per day), as during the December-February period, U.S. corn stocks would be totally depleted by July 28--roughly 2 months before the next harvest begins.
Of course, this will not actually happen, because as depletion proceeds prices will climb, forcing adjustments. The question is, what adjustments will occur--and what will be the economic and political fallout? Will it lead to pressure within the United States to restrict exports, as happened in the mid seventies when grain was scarce and prices doubled? If this were to happen it could create acute shortages in the importing countries, such as Japan, South Korea, China, Malaysia, and Taiwan, whose livestock and poultry industries depend heavily on U.S. corn. Or will the adjustments come in the form of severe cutbacks in feedlot operations, dairy herds, hog feeding, and broiler production as feed supplies run low and prices climb?
Because the United States produces 40 percent of the world corn crop and supplies over 80 percent of all exports, the depletion of U.S. corn stocks means a tight supply for the entire world. Normally, harvest of the U.S. winter wheat crop, which begins at the end of May in the Texas panhandle, would help alleviate the shortage of corn. But this year wheat is also scarce and the drought-damaged winter wheat crop in the Southern Great Plains may be the worst in 60 years.
Because depleted U.S. corn stocks will affect meat, milk, and egg supplies and prices throughout the world, some advance thinking and planning are needed on how to deal with this situation as it unfolds. In an integrated world economy, an internationally coordinated response could help minimize the disruptions to the world's livestock and poultry industries that now appear to be inevitable.