By Doug Tenney, Leist Mercantile
On May 12, USDA will publish their first estimate of supply and demand tables for 2020-2021 crops. With the March 31 planting intentions report estimating 2020 corn acres at 97 million acres, it is easy to assume ending stocks for the new crop year at a number not seen for several years. Ending stocks for Aug. 31, 2021 will reach at least 3 billion bushels in coming months. Some are already indicating it could reach 3.5 billion bushels or even higher with trend line yields and higher acres. Demand destruction seen in recent weeks further increases ending stocks as well.
U.S. corn acres for 2020 were estimated on March 31 to reach 97 million acres. Since then, prices for new crop December 2020 corn reached the $3.40 mark last month. Prices fell from the $3.88 average seen during the month of February 2020 which is when crop insurance revenue prices were calculated for corn. Higher ending stocks for the 2019 crop year contributed to that price decline along with less demand for corn and higher acres for 2021 compared to 2020.
Midwest 6 to 10 day forecasts the third weekend in April indicated normal to below normal temperatures with normal rainfall. Earlier in the month, for much of the Midwest, temperatures were below normal, some as much 10 to 20 degrees below normal. Ground temperatures had to decline as a result of many nights reaching lows near freezing. Numerous counties had freeze warnings. Producers across Ohio were busy double-checking equipment with the vast majority of seed corn staying in the bag.
Last month the corn for ethanol number declined 375 million bushels, which was not a surprise. Since early March, many ethanol plants in the U.S. reduced production or even shuttered their plants with zero ethanol production. Corn producers in much of Ohio had basis levels fall 30 to 45 cents into the basement in four weeks. Often, basis declines were nickels and dimes within just a few days. Further examination of the Weekly Ethanol Production reports revealed for the week ending March 20, 100.7 million bushels of corn were used in ethanol production. March 27, 83.8 million bushels; April 3, 66.7 million bushels; and April 10 had more declines with 56.3 million bushels used. Don’t be surprised to see declines in upcoming Weekly Ethanol Production reports.
The March U.S. monthly crush of soybeans of 181 million bushels set a new March record, also a new all-time high for any month. U.S. soybean crushers have seen excellent margins in recent months when they crushed four of the largest monthly totals in history the past six months. Ohio soybean basis levels have been strong for much of 2020 as numerous Ohio locations had a positive basis during that time.
OPEC and Russia finally agreed on a daily crude oil production cut of nearly 10 million barrels mid-April. Crude oil prices briefly moved higher on this agreement but the higher prices did not hold. Reduced driving worldwide as a result of the coronavirus implies a daily demand destruction of 20 million to 24 million barrels of crude oil. In early March, June crude oil was $49 a barrel. It was the indecision by Russia to detail a production cut which led to the drastic action by Saudi Arabia of increasing crude oil production. Those two events produced the March 9 price decline of over $13 a barrel. Mid-April, June WTI crude oil prices were $25.
In coming weeks, U.S. corn acres will likely not reach the 97 million acre projection of March 31. Then again, they won’t fall below last year’s 89.7 million acres.