Feed Grain Outlook: Lower Corn for Ethanol Reduces 2019/20 Use

Corn harvest. Photo: Kostic Dusan, 123rf

2019/20 corn production is projected down 45.4 million bushels on reductions to harvested area and estimated yield. Diminished supply is largely offset by a 50-million-bushel decrease in corn for ethanol this month, for a market year total of 4,900 million bushels. The 50-million-bushel decrease in corn food, seed, and industrial use leaves 2019/20 projected disappearance at 13,780 million bushels. Carryin for 2020/21 is raised 4.6 million bushels. There were a few other minor changes to the feed grains balance sheets and prices are steady from last month.

Domestic Outlook

Corn Planting Continues at Brisk Pace

The 2020/21 crop was 97 percent planted, based on surveys released in the National Agricultural Statistics Service (NASS) Crop Progress report for the week of June 7. This compares favorably with last year at this time, when plantings reached only 78 percent due to excessive moisture and is higher than the 5-year average of 94 percent.

Dry, mild weather conditions in Minnesota enabled plantings to be completed, while North Carolina and Iowa planted 99 percent of their crops. Illinois, South Dakota, and Texas crops were 98 percent planted. North Dakota was the only major corn producing State with less than 90 percent in the ground.

Emergence followed the same pattern—with North Carolina, Iowa, Minnesota, and Texas leading.

Planted area for 2020/21 is projected unchanged from last month at 97.0 million acres, which, if realized, would produce a record-high corn crop of 15,995 million bushels at the projected weather-adjusted trend yield of 178.5 bushels per acre.

This assumes normal planting progress and summer growing season weather, and the historical relationship between planted and harvested area. The NASS Acreage report will be released on June 30, providing the first survey-based area estimate for the 2020/21 corn crop, based primarily on data collected in the first 2 weeks of June.

Supplies at this level of production would be 18,123 million bushels, given a projected carryin of 2,103 million bushels and imports of 25 million.

There is no change in projected use for 2020/21. The 4.6-million-bushel reduction in carryin from 2019/20 is passed through to ending stocks of 3,323 million bushels. The season average price received by farmers is unchanged from last month at $3.20 per bushel.

The 2019/20 crop is estimated 45.4 million bushels lower. Yield is lowered 0.4 bushels per acre to 167.4 million bushels. Resulting supply is 15,883 million bushels.

Social Distancing Restrictions Continue to Crimp 2019/20 Fuel Demand

Continued restrictions on commercial activity eroded fuel demand, and thus corn for ethanol in 2019/20. A slower than expected rebound in Energy Information Administration (EIA) weekly gasoline use and ethanol production took 50 million bushels from corn for ethanol to 4,900 million bushels, lowering total use by that amount. Vehicle miles driven plunged to 5,258 million miles per day in April (according to EIA estimates), compared with pre-COVID levels of 8,179 million in January.

May ethanol production, based on weekly EIA data, is estimated just under 30 million gallons per day, compared with 24 million gallons per day in April, still historically low levels. May 2019 saw 44 million gallons per day.

Export Markets for Corn Co-products and Ethanol Lag

Ethanol exports were sharply lower (according to U.S. Commerce Department, Bureau of the Census data) in April, as Brazil cut imports due to increased domestic production and China remained essentially absent. Other countries—notably India, Mexico, South Korea and Canada—made up some of the slack in April. Exports for April totaled 99.4 million gallon, of which 23.8 million were purchased by Brazil, the lowest level since October 2019.

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For the 2019/20 marketing year to date, ethanol exports total 1,051.6 million gallons, compared with 1,076.5 million during the same period in 2018/19.

Dried Distillers Grain (DDG) exports also fell compared with last year, as prices rose due to limited ethanol production. For the first 8 months of the marketing year, DDG shipments are 4 percent lower at 7.7 million short tons. However, April shipments were 17 percent lower than April last year at 0.84 million short tons.

Although China was previously a major buyer of U.S. DDGs, they pulled out of the market in 2016, leaving it to Mexico and protein-hungry Southeast Asian countries including Vietnam, South Korea, and Indonesia. The EU is also a major buyer.

U.S. Feed Grain Use Lowered

U.S. feed grain disappearance for 2020/21 is projected at 391.6 million metric tons, 25.8 million above 2019/20. Feed and residual use, projected at 158.1 million tons, is 8.9 million higher than the 2019/20 estimate. FSI use, at 173.2 million tons, is 7.1 million higher than the revised 2019/20 projection—which accounts for a 1.3-million ton decrease in corn for ethanol. Exports, at 60.3 million tons, are unchanged from last month. Total feed grain disappearance in 2019/20 is estimated at 365.8 million tons.

Grain Consuming Animal Units

Grain consuming animal units (GCAU) for 2020/21 are projected at 102.43 million units, 1.81 million lower, largely due to a drop in forecast cattle on feed inventory and to a lesser extent lower layers and turkey numbers relative to last month. For 2019/20, the estimate of about 102.00 million units is essentially unchanged from last month.

Feed and Residual Use: Four Feed Grains and Wheat

On a September-August basis, feed and residual use for the four feed grains and wheat in 2020/21 are projected at 160.5 million metric tons. This is 0.3 million below last month’s forecast and 7.2 million higher than last year’s estimate of 153.3 million. The month-to-month decline is due to lower forecast wheat feeding.

Few Changes in Sorghum, Barley, and Oats Balance Sheets

Projected sorghum supplies for 2020/21 are lowered 5 million bushels, to 381.2 million on lower carryin due to increased exports in 2019/20. With all use categories unchanged, ending stocks are lowered a corresponding 5 million bushels to 26.2 million bushels. 2019/20 sorghum exports are projected up 10 million bushels to 210 million due to continued strong demand from China.

As a result, feed and residual use and ending stocks are lowered 5 million bushels each to 95.0 million and 30.2 million bushels respectively. The sorghum season average price received by farmers is unchanged at $3.25 per bushel and $3.20 per bushel for 2019/20 and 2020/21 respectively.

There are no changes in the barley balance sheet from last month for both 2019/20 and 2020/21. The projected season average price received by farmers for barley is unchanged at $4.70 per bushel and $4.30 per bushel in 2019/20 and 2020/21 respectively.

Projected oat supply for 2019/20 is increased 3 million bushels on larger imports from Canada, bringing supplies to 185.0 million bushels. The increase in supply is offset by a 3-million bushel increase in feed and residual use to 73 million bushels. Total use is now projected at 156.0 million bushels, leaving ending stocks unchanged. The projected season average price received by farmers for oats is unchanged at $2.85 per bushel and $2.50 per bushel in 2019/20 and 2020/21 respectively.

Full report.




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