WASHINGTON (DTN)--Analysts remain confused that the U.S. Department of Agriculture, in its supply/demand reports Jan. 13, lowered corn feed usage but raised beef production.

The higher beef production would be based on a larger cattle herd, but the lower feed use is based on a smaller herd.

In its monthly supply-demand reports Jan. 13, USDA lowered 2002-2003 domestic corn feeding by 75 million bushels, to 5.6 billion. But 2003 beef production was raised to 25.81 billion pounds, from 25.76 billion pounds projected last month.

"Who's kidding who here," Allendale analyst Joe Victor told DTN. He said feed usage should have been lowered only 25 to 50 million bushels, at most.

"It's conflicting information when you say the beef production will go up and feed usage down, unless there are clear signals," said Victor, based in McHenry, IL.

In 1995, USDA had a similar situation when it went through a reduction in feed usage like this, he notes.

"However, corn prices hit $2.80 per bushel and cattle producers were saying they couldn't afford to feed at that price, sparking the USDA to reduce beef production not raise it," said Victor. "But right now, cash cattle value between $69 to $70 is not threatening livestock producers. I think it would take corn prices to get to $2.60 to $2.70 per bushel to spark that fear."

Meanwhile, Prudential analyst Shawn McCambridge thinks the USDA 5.6-billion feed usage figure may take some time to prove, as it's down sharply from 5.877 billion last year.

USDA also lowered wheat feeding today, to 100 million bushels, from 150 million last month and 194 million last year.

"These figures are achievable in the short term, but it will depend on demand to see if they prove to be correct," the Chicago analyst told DTN.

"First-quarter feed usage didn't support the December estimate of 5.675 billion bushels," said McCambridge, when asked how USDA would justify lowering feed usage so much Jan. 13.

"I think grain-stocks figures in the third and fourth quarters will confirm the liquidation in the livestock industry," he said.

But McCambridge suggests there are signals out there that could prove the USDA feed-usage figures wrong.

"For instance, the latest cattle on-feed report indicated higher placements. Also, as current cash-cattle prices at $78 push up to the $83 to $84 level, there could be some improvement in animal numbers. That would start moving feed usage higher," said McCambridge.

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