Feed Grain Outlook: Corn Crop Reduced by 379Mln Bushels

Corn harvest. Photo: Texas A&M AgriLife

As a result of a re-survey of harvested corn acres in Iowa, the National Agricultural Statistics Service’s (NASS) September Crop Production drastically lowered expectations for the 2020/21 corn crop. U.S. production is lowered 379 million bushels, resulting in a U.S. crop of 14.9 billion bushels. Yield is lowered 3.3 bushels per acre to 178.5 bushels. Feed and residual and food, seed and industrial (FSI) use are each reduced by 100 million bushels, while exports are raised 100 million. The projected price is raised $0.40 per bushel this month to $3.50.

A shift in corn exports is projected for Ukraine, the EU (mainly by Romania), and Russia in favor of the United States and Brazil. For the United States, corn exports projections for 2020/21 got a boost, despite lower supplies, based on price-competitiveness going forward, reduced supplies in competitor countries, and high outstanding sales. U.S exports are reduced for 2019/20, reflecting a slowdown in sales in August.

Domestic Outlook

Projected 2020/21 Corn Crop Slashed Due to Derecho Damage in Iowa

The 2020/21 U.S. corn crop is projected 378.6 million bushels lower due to damage caused by the severe thunderstorm derecho, which tore through Iowa on August 10. A re-survey of harvested acres by NASS to access conditions as of September resulted in a 550 million-acre reduction in projected corn harvested acres to 83.5 million acres. Yields are lowered 11 bushels per acre to 191.0 bushels.

The production forecast for the largest corn producing State in the nation is lowered 254 million bushels to 2.483 million, the lowest since 2009. In addition to wind damage, extremely dry August weather affected large parts of the southern corn belt. This includes Iowa, where the drought is the worst since September 2013 and has forced producers to harvest corn earlier than optimal.

Nationally, the National Agricultural Statistics Service (NASS) Crop Production projects 2020/21 corn yields at 178.5 bushels per acre, 3.3 bushels below last month’s forecast. States in the upper Midwest (Minnesota, North Dakota, South Dakota, and Wisconsin) saw yield increases, while most other major corn-producing States have declining yields. Production is projected lowered 378.6 million bushels from last month to 14,900 million bushels.

With carryin up 25 million bushels on lower 2019/20 use (mostly due to a lower export forecast), total supplies are projected at 17,178 million bushels, 353.6 million below last month. With less corn to go around, use is projected down 100 million bushels. Feed and residual are lowered based on the smaller crop and higher expected prices. Corn for ethanol is lowered on reduced prospects for a revival of gasoline consumption in 2020/21.

Exports are projected up 100 million, based on opportunities due to reduced supplies in competitor producers. As a result, total disappearance is lowered 100 million bushels to 14,675 million bushels and ending stocks are lowered 253.6 million bushels to 2,502.6 million.

Corn Season Average Price Gets a 40-Cent Boost

The tight balance sheet lifts the projected corn season average price by $0.40 per bushel to $3.50, as the stocks-to-use ratio falls from 18.7 to 17.1.

Grain consuming animal units (GCAUs) are projected 0.4 million units lower this month at 102.1 million, as higher cattle on feed is more than offset by lower broiler numbers.

Feed and Residual for the Four Feed Grains and Wheat Projected Lower

Feed and residual for the four feed grains (corn, sorghum, barley, and oats) and wheat is projected lower for 2020/21 at 154.6 million tons, down from 157.1 million tons. The smaller crop is the main cause for the decline.

Brazilian Tariff Rate Quota (TRQ) on U.S. Ethanol Imports

The United States exported 1.5 billion gallons of ethanol, valued at $2.4 billion, in 2019. This was a 13 percent decline from the record 1.7 billion gallons set in 2018, and the first annual volume decline since 2013. Export value dropped a similar percentage with little change in prices. With no change in exportable supply in 2019, weaker Brazilian demand and higher China tariffs accounted for most of the 2019 export decline.

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Brazil is the main market for U.S. ethanol exports. Under the tariff rate quota currently in place, Brazil allows duty-free entry of 750 million liters (200) million gallons) of ethanol from the United States. A 20 percent tariff is applied to volumes above that level. The TRQ is set to expire in September and Brazilian officials have suggested it should be extended, to the detriment of U.S. export competitiveness.

Shipments from the U.S. to Brazil go generally to the northeast part of the country, where seasonal shortages of ethanol often occur. As of September 14, Brazil extended the tariff free regime for 90 days, limited to 187.5 million liters of U.S. ethanol imports.

At the same time, Brazilian shipments of ethanol to California have surged. Brazilian ethanol meets California’s low carbon fuel standard and enters the U.S. duty free. During the first half of 2020, ethanol imports from Brazil reached 176 million liters, slightly ahead of the same period in 2019, but 30 times higher than the same period in 2018.

Larger Stocks and Higher Prices Projected in 2020/21 for Sorghum

Sorghum production is lowered 13 million bushels to 358 million on a lower yield forecast. Total supply is down month over month by 8 million bushels, due to a partly offsetting increase of 5.0 million bushels in beginning stocks. Sorghum, commonly used as an alternative to corn, is projected to have an average farm price for the season of $3.50 per bushel. This price is up $.40 per bushel over prior estimates and equal to the season-average price received for corn, based on expectations of strong demand from China.

Crop progress, as reported by NASS in the September 8 crop progress report, is in line with the five-year average for coloring, and slightly ahead of last year. The six-states surveyed include Colorado, Kansas, Nebraska, Oklahoma, South Dakota, and Texas—which account for 100% of the 2019 sorghum acres.

When it comes to the percentage of the crop that is mature, NASS reports that 29% of the crop, on average across the six states as of September 6, is mature. Texas has already harvested 73% of their sorghum acres and Oklahoma has harvested 1%. This results in 21% of the total sorghum acreage for 2020/21 being harvested as of September 6.

Barley harvest slightly ahead of last year

NASS reports in their September 8th Crop Progress Report that 85% of the barley harvest is complete as of September 6. This takes into consideration the five states which accounted for 85% of the 2019 barley acreage: Idaho, Minnesota, Montana, North Dakota, and Washington. NASS reported that 79% of the crop was harvested last year at this time, with 90% being harvested in the five-year average, suggesting that 2020 production is ahead of last year and slightly behind the average.

Oat Harvest Slightly Ahead of Last Year, in Line with Five-Year Average

NASS estimates that 96% of the oat harvested acres in the nine states surveyed (Iowa, Minnesota, Nebraska, North Dakota, Ohio, Pennsylvania, South Dakota, Texas, and Wisconsin) have been harvested. These nine states represent 74% of the 2019 oat acreage. Last year at this time, NASS reported 88% being harvested, while the five-year average for the states is 94%. This suggests that harvesting is marginally ahead of last year and the average.

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