Posted by: usset001 | January 25, 2011

The Balance Sheet Part II: Demand

The demand side of the equation is in two main parts: domestic and export demand.

In corn, the single largest piece of demand has been feed demand – corn used in the livestock and dairy industries. Not anymore! The 2009/2010 crop year was a watershed year in the corn market. It is the first year that food and industrial demand – primarily ethanol and corn sweeteners – surpassed feed demand.

In soybeans, crush demand is the largest part of domestic demand. Soybean crushers process the beans into soybean meal and oil. The balance sheet for soybeans doesn’t stop here. Soybean oil and soybean meal have their own balance sheets.

In wheat, food demand is wheat processed into flour for bread and other baked goods.

Crush demand for soybeans, food and industrial demand for corn, and wheat demand for flour are regularily measured by the U.S. Census Bureau, which surveys processors and reports the results quarterly. Oddly enough, the largest (make that the second largest now) piece of corn demand – feed – is the one part of corn demand that is not measured in a rigorous statistical manner.

total demand = domestic demand (food/crush + feed + seed) + exports

The U.S. exports a large portion of its total grain production. The U.S. exports about 2 billion bushels of corn each year, a figure that has been fairly stable (with an occassional spike up or down) over the past two decades. 2 bb represents about 15% of corn production. Soybean exports continue to trend upward, approaching 40% of total production. As a percent of production, wheat exports are stronger than corn and soybeans – we regularily export about 50% of our wheat production each year.

The USDA tracks exports closely in the Weekly Export Sales Report of the Foreign Agricultural Service (part of the USDA). This report is released every Thursday, and serves as a timely early warning system on the possible impact of exports on U.S. supplies and prices.

Next up, we can look at the bottom line of every balance sheet: ending stocks.


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