A look at USDA’s record corn demand for 2025

By Jon Scheve

Last week, I noted that the national corn yield estimates were still inconclusive based on early harvest reports. After another week of results, there’s still no clear indication of what the national yield will be.

While supply remains uncertain, attention should probably also focus on the demand side. The USDA is projecting record corn production for 2025 but also record demand.

Ethanol demand

According to USDA data, next year’s ethanol demand is estimated to match the highest production ever produced.

Low-priced corn should keep ethanol production profitable. If overseas demand remains strong, then the USDA’s forecast probably is attainable.

Export demand

U.S. corn exports set a record last year, and the USDA is projecting another record this year.

Lower prices are helpful in gaining market share. Add to that a decrease in world corn stocks, and another record year for exports seems possible.

My only concern with export potential is that the three largest corn producers (Brazil, China, and the US) are all expected to have record crops. Plus, Argentina and Ukraine will likely have nearly average-sized crops. This means the five main countries that produce and/or export corn will have a lot of supply, which could make competition for U.S. corn difficult if prices rally, and make current USDA estimates unachievable.

Feed demand

The USDA is forecasting a 7.5% increase in feed demand over last year, or an additional 425 million bushels used in animal feed.

This seems difficult to achieve, given that animals on feed are up only 1% from last year. Some market participants will say that cheaper corn leads to more demand, and other products will be displaced in the feed channels.

But that raises the question, where will these displaced feed alternatives go? They’ve lost value too and still compete in rations. Plus, if this reasoning is correct, then why didn’t feed demand increase last year from the previous year when prices were some of the lowest seen in several years? 

Old crop

I think it’s possible that last year’s national corn crop yield was underestimated. Corn basis values throughout the U.S. have been very low leading up to harvest. For a crop that is supposed to have one of the tightest carryouts in the last 10 years, something doesn’t feel right about the cash markets for corn.

There is a chance the quarterly stocks report on September 30th could show more corn left in bins than the market believes. If that happens, carryout could increase for the 2025 crop marketing year.

However, I suspect the more likely outcome will be that if the USDA does need to make an old crop stocks change, they will “kick the can down the road” to the January report when they can adjust both stocks and the finalized 2025 corn yield and new crop demand all at once. 

Sorghum

I am also skeptical of the USDA’s forecast of 225 million sorghum export bushels, which is 10 million below where it was two years ago and 130 million more than last year. With China being the main buyer of sorghum for the last few years, it’s possible the export target for sorghum won’t get hit unless there is some kind of trade deal put in place. If the crop isn’t exported, it will displace corn in feed and ethanol rations to get rid of it. That could mean at least another 100 million corn demand bushels lost. 

Bottomline

As I suggested last week, the market could be trading a yield under 183, versus the USDA’s September 12 estimate of 186.7. If the yield drops to 180, it would mean a 650 million bushel drop in production.

But the USDA rarely cuts production without also reducing a significant portion of that value in demand somewhere in the equation. Feed demand had a sudden increase of 425 million bushels from last year, and sorghum may have another 100 million bushels that will need to find a feed home. That means carryout might only decrease from the current 2.1 billion to somewhere still above 1.9 billion bushels, which is considerably higher than the previous crop year’s 1.3 billion bushel carryout, assuming no adjustments need to be made to old crop.

At 1.9 billion bushels of carryout, corn may not be able to sustain a rally without some kind of surprise.

Please email jon@schevegrain.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, Neb. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans, and other grains for the last 25 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 15 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential, and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

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