URBANA, Ill. — Crop tour estimates and derecho damage brought U.S. Department of Agriculture corn production forecasts for the 2020 crop under question.
While a lower domestic supply of corn supports corn prices, USDA projections of corn consumption in 2020-2021 under current economic conditions seem overly high, said University of Illinois agricultural economist Todd Hubbs.
“Corn exports showed strength over the near term and provided a bright spot for corn demand,” Hubbs said. “Outstanding sales of corn for the next marketing year sit at 512 million bushels. Driven mainly by Chinese buying (249 million bushels), sales are off to a strong start.”
The USDA projects corn exports in 2020-2021 at 2.225 billion bushels, up 430 million bushels from the current marketing year estimate.
While the strong start to the marketing year and low corn prices support reaching USDA’s projection, economic conditions in global markets and expanding foreign supply keep export potential uncertain, Hubbs said.
Global corn supply outside the U.S. appears set for expansion in 2020-2021, Hubbs said. Total foreign corn production in the August World Agricultural Supply and Demand Estimates came in at 30.8 billion bushels, up 648 million bushels from last year. Corn production for major exporters expanded by 330.3 million bushels over the previous marketing year to 8.9 billion bushels.
Brazil looks set for a large corn crop. At 4.2 billion bushels, the projection for the Brazilian corn crop encompasses almost half the major exporter production. Argentina is expected to hold corn production at 1.97 billion bushels next marketing year.
“Quite a bit of discussion on export potential focused on the changing fortunes of the dollar recently,” Hubbs said. “The Brazilian real sits down over 39% against the dollar since the turn of the year. The Argentinian peso sits down 23% over the same period.
“While the dollar is stronger than levels seen in June, the potential for continued dollar weakness against significant competitors seems limited as we move into 2021 due to various economic issues around the world. It is too early to assess production potential in South America, but larger crops seem in the offing and hold the potential for changes in U.S. export levels during 2021. Corn exports may reach USDA projections in 2020-2021, but it might require low prices to get there.”
The recent flattening of ethanol production levels creates some concern for corn demand in the short and long run, Hubbs said.
“The projection of corn used for ethanol production of 5.2 billion bushels for 2020-2021 indicates an increase of 350 million bushels over this marketing year. To meet the current USDA projection, an expansion in gasoline consumption or growth in ethanol export levels is necessary,” he said.
Weekly ethanol production came in at 926,000 barrels per day in the Energy Information Administration ethanol production report for Aug. 14. Since the end of July, ethanol production averages 925,000 barrels per day and appears to be the new normal. Current estimates place production capacity a little above 90% of typical capacity.
“Despite being in peak driving season in the U.S., little to no growth in gasoline consumption foreshadows further weakening as we enter the fall and place USDA’s current projection in question. Quicker economic recovery than looks feasible at present remains necessary,” Hubbs said.
Through June, ethanol exports for the marketing year sit well below last year’s pace by around 100 million gallons. Ethanol exports will see a second consecutive year of declining totals from the peak of 1.632 billion gallons during the 2016-2017 marketing year, Hubbs said.
“Lower exports to Brazil, down around 90 million gallons, contributed much of the market loss. Declining Brazilian exports seem inevitable and look to continue as they deal with coronavirus issues and build expanded domestic capacity,” he said.
“A resurgence of Chinese buying failed to materialize thus far. Chinese policy moving away from mandatory ethanol blending hurt prospects on this front. Ethanol exports, much like domestic ethanol consumption, appear weaker for the foreseeable future.”
The current projection for feed and residual use of corn sits 5.8% higher than the 2020-2021 marketing year. At 5.925 billion bushels, feed use requires a continuation of healthy livestock production into next year, Hubbs said.
The forecast for red meat and poultry production shows a 1.4% increase in 2021 from the current year. The new cattle-on-feed report supported higher supplies over the near term and into the fall. Hog supplies appear plentiful, as well.
Feed and residual use near the USDA projection for the next marketing year remains feasible. A quick economic recovery may be necessary to meet these totals.
“Total corn use in 2020-2021 comes in at 14.775 billion bushels, up 1.12 billion bushels from the present marketing year. Under the economic conditions associated with the coronavirus, corn use at this level may be near the high end of the range of possibilities,” Hubbs said.
“At present, ending stocks for 2020-2021 sit at 2.756 billion bushels. The corn market reflects this reality,” he said. “A loss of 500 million bushels in production due to lower corn yields and significant damage from the derecho places ending stocks near current marketing year levels under the current lofty use projections. Corn prices look to move higher on supply news over the near term. Demand issues for corn remain in place over the next marketing year.”
September 11, 2020 at 11:08PM
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Weekly Outlook: Looking at 2020-2021 corn consumption | agrinews-pubs.com - Agri News
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