Grain markets in the Southeastern United States have changed dramatically in recent decades, with declining acreages in grain crops and an increasing demand for animal feed.
“Everyone knows we have a feed-grain deficit in the Southeast,” said Charles Curtis, Clemson University Extension economist, speaking at the Georgia Corn Short Course in Tifton. “We feed more mouths than we grow food to feed them. To understand how the grain markets have changed, it's important to look at how our crops have shifted, how our animal numbers and types have shifted, and what this has meant for grain demand in the Southeast.”
Looking at grain crop acreages in North Carolina, South Carolina and Georgia since the 1960s, Curtis says corn acreage peaked at just under five million acres harvested in the mid-1970s.
“Since then, we've had a relatively precipitous decline in corn production in the Southeast, and we're now down to just over two million acres. Our corn acreage has been cut by three-fifths from its peak. We ended 2001 with about 150 million bushels of corn in the Southeast,” he says.
Wheat acreage increased markedly in the three states in the early 1980s due to two factors, says the economist. “The shift was due to high soybean prices and a dramatic increase in soybean acreage. The increase also was due to the introduction of double-cropping as a routine practice. We saw a huge spike, particularly in Georgia in 1980-81.
“Acreage has fallen off somewhat, with a production of about 50 million bushels this past year. It's my understanding that a lot of wheat production has gone into feeding, for chickens, turkeys and hogs. In monogastric feeding, you can use up to about 40 percent of the ration in wheat and still get away with it. And, if wheat gets within 110 percent of the corn price, it's economical to consider feeding wheat,” says Curtis.
Wheat is harvested in the Southeast in late May to mid-June, when local corn supplies usually are exhausted, he adds.
Turning to soybeans, Curtis says more than six million acres were harvested in North Carolina, South Carolina and Georgia in the early 1980s. South Carolina had 1.2 million acres of soybeans and Georgia had nearly two million acres, he says.
“Of the three states, Georgia has had the biggest decline in soybean acreage. Soybean production has declined, and we have seen a reduction in crushing capacity in the Southeast,” notes the economist.
Cotton has returned as “king” in the Southeast, says Curtis, and Georgia usually ties with Mississippi each year for the second largest acreage in the United States behind Texas.
“The Southeast really has gone to cotton, especially since boll weevil eradication. Our boll weevil eradication occurred in the mid-1980s, and it was probably easier for us than it will be for the Delta and Texas, for no other reason than because our acreage was at an historic low during eradication. It was easier to take control of the pest when we didn't have a lot of host ground for it.”
Looking at animal numbers in the Southeast, Curtis says there has been a dramatic reduction in dairy in South Carolina. “South Carolina almost is out of the dairy business. We had more than one million dairy animals in 1960, and all three states now are down to about 400,000 dairy animals.”
Fed cattle numbers have trended relatively sideways, with a slight surge up in the early 1970s. In some years, says Curtis, beef cattle is a profitable enterprise in the Southeast, where grass can be grown well in non-drought years.
“Broiler numbers have exploded, especially in Georgia. Layer numbers have been mostly flat compared to earlier periods. Turkey numbers have exploded in North Carolina and increased in South Carolina. There has been a dramatic increase in hog numbers in the Southeast, with virtually all of it coming in eastern North Carolina, with the big five hog producers. That poses an interesting issue because they're all compacted geographically, and the feed needs are concentrated heavily in that area.”
The Southeast animal numbers, says Curtis, can be converted to calculate how much grain is consumed in a given year. A concept called grain-consuming animal unit (GCAU) is based on feeding data from the early 1970s, he explains. The basis for GCAU's is one dairy cow. In the early 1970s, one dairy cow was eating 4,300 pounds of grain in a year.
“In a year's time, about four hogs will consume the same amount of feed as one diary cow, or one grain-consuming animal unit.
“About 20 head of beef cattle will equal one grain-consuming animal unit. Using these calculations, we can see how much all animals eat, and we can try and determine the demand for grain in the Southeast.”
Since 1980, the demand for feed in the Southeast has almost doubled, says Curtis. In 1960, dairy cows were consuming about 30 percent of all feed grain consumed in the Southeast, he adds.
“Turkeys were a minor factor and broilers weren't even in the picture. If we jump to 1998, we see that broiler numbers have exploded while dairy numbers have slumped, and hog numbers are hanging in there with an increase. Turkeys have increased dramatically. Poultry and hogs now are consuming most of our grain.”
During a peak year of grain production in the Southeast — in 1976 — the three states of North Carolina, South Carolina and Georgia produced just below 60 percent of the grain being consumed in the states, says Curtis. In 1998, when data was last collected, the region was producing less than 10 percent of its grain needs, he says.
Drought affected grain crops in the Southeast in 1998, 1999 and 2000, says Curtis. “If we look at the trend throughout the 1990s, we're probably providing about 15 percent of the feed grain consumed in our area. Where is the other 85 percent coming from?
“It could come from three sources — from the Midwest by rail, through ocean-going vessels and from international locations. We have to bring it in from someplace else. Most of it now is coming in through railroad. The railroads have been attempting to capture all of the feed demand of some of our big feeder operations.”
Corn bases in the Southeast, says Curtis, are better than they were in the 1970s and 1980s. “Prices are even or above basis at harvest. If we can acquire short-term storage, you'll see farmers getting good contracts at 30 and up. In 1995, when corn prices increased, producers were getting 55 cents over basis in North Carolina.
“But how much can they pay you for your corn, before it becomes just as advantageous for them to bring it in from some other place? The upper bound on basis will be Midwest plus freight costs down to the Southeast. Look at the Evanston or Toledo price, add 55 cents in freight and 15 cents in handling, and that's about as good as your basis gets. If you start seeing 30 or 35 over in south-central Georgia, it doesn't have to get too much stronger before it starts paying to bring it in by rail.”
More wheat now is being fed to hogs and poultry, says Curtis, primarily because producers don't have to worry about quality issues as they would if they were selling to a mill.
“Pricing on our wheat may very well become the July corn contract. Our cash prices for corn are strong in July. If we're out of corn in the Southeast, and if our wheat starts going into the feed market, we're pricing it off of corn.”
The “big five” hog producers in North Carolina, says Curtis, have built an importation facility in Wilmington. “They did it for their own safety. They'll need alternative sources of feed grain if there's a railroad strike.”
Southeastern producers, he says, need to begin thinking “outside the box.”
“In the Southeast, we've benefited from stronger cash prices and from feed grain deficits. But if we continue to shrink in the amount we're producing relative to need, we could find ourselves marginalized. If the railroads or other entities back up the big feeders and become their exclusive provider of grain, then you may not have a market for your corn.
“We need to consider working with firms that will assist Southeastern producers in pooling their supplies, and maybe consider pooling with other imported supplies to insure some market share, and to provide alternative sources of feed to large animal industries in the Southeast.”