OUTLOOK

LESS THAN EXPECTED, MORE THAN ENOUGH

Ideal growing conditions and optimal yields should provide a silver lining for the 2020-’21 corn crop following lower than expected planting numbers. By Luke Geiver

This season’s corn crop has had its ups and downs. Early planting intentions by U.S. growers created the possibility for more than 97 million acres of corn to be planted in the 2020-’21 season. As of late summer, the United States Department of Agriculture and others in the corn forecasting sector predicted planted acreage would come in at roughly 92 million acres, with 84 million of those acres harvestable.

In March, the economic impact of COVID-19—which spurred reduced driving, food processing shutdowns and global grain demand uncertainty—was already clear to economists Scott Irwin and Todd Hubbs from the University of Illinois’ Department of Agriculture and Consumer Economics. A review of corn data by Irwin and Hubbs in late June helped them explain to regional and national parties connected to the agriculture sector where the current crop was headed, despite early projections. Although weather and planting conditions played an important role in this spring’s planting numbers, Irwin says COVID-19 provided an important basis for the actions growers ultimately took.

Less-than-ideal economics—a direct result of COVID-19—played a large part in the reduction of the total corn crop by 5 million acres. Along with the economic factors of the pandemic, Hubbs says many farmers made the choice to pursue preventative planting instead of forcing a corn crop. “Incentives and experience pushed farmers toward prevent-plant,” Hubbs says. After 2019, many farmers in the Corn Belt gained experience in how to properly plant, grow and utilize fiscal incentives associated with prevent-plant practices.

Although the 5-million-acre pullback for corn was a surprise when USDA released the data showing planted acres were 92 million and not 97 million, Hubbs says it was probably a good thing. “We didn’t need 97 million acres and thankfully we didn’t get them,” he says. A crop that comes in closer to 92 million acres— or even less—would help to drive up the price of corn in his estimation. As for overall volume, the 2020-’21 season will still yield massive results. At 92 million planted acres, U.S. growers will plant nearly 3 million more acres of corn this year compared to 2019. The number of corn acres harvested is expected to reach 84 million, up nearly 3 million acres from the previous year as well. Also up this year is the total production yield. The USDA believes the

BROAD VIEW: Despite ideal planting conditions and a healthy crop, market forecasts are still dependent on the lingering impact of a global pandemic. PHOTOS: USDA

average bushels per acreage for the U.S. this a major accomplishment for corn planters, year will be 178.5. considering that by May 15 planting con

Across the major corn growing states, ditions were good before, he says, “everythere are major discrepanthing got really wet.” cies in corn acres planted Those early planting efthis season, compared to last. forts meant that compared South Dakota (+24.1), Indito 2019, 2020 growers were ana (+8), Wisconsin (+5.3), nearly 30 percent above the Illinois (+3.8), Minnesota prior year’s planting rate, and (+3.8) and Iowa (+3.7) all roughly 4 percent higher than showed increases in the perthen the five-year average. By centage of corn acres planted June 28, despite a warmer than this year versus last. North Hubbs average month for most of the Dakota (-31.4), Kansas (-4.7) Corn Belt, nearly two-thirds of and Nebraska (-3), conversely, all planted corn was rated by showed drops. Issues related USDA as good to excellent. to lingering 2019 harvest isThere are a handful of sues and untimely precipitapockets where drought could tion amounts were the main become a nuisance or a potencauses for those states showtial yield issue for corn growers ing a drop in corn acres plantin the U.S., but topsoil moised compared to the previous ture levels in nearly every corn year. Irwin state are all at surplus levels.

In most of the main Weather temperatures have corn-growing regions, the planting season also been within 5 to 10 percent of historiand mid-summer growing conditions have cal numbers, research from USDA shows. been a positive. According to USDA, by At the beginning of August, 92 percent of May 31, producers had 93 percent of the the nation’s corn acreage was at or past the corn crop in. According to Hubbs, that is silking stage (20 percent ahead of 2019’s pace and 5 percent ahead of the five-year average). Corn conditions in August largely mirrored July, and is also considered good to excellent. The pace of the dough stage— when the kernels dent and develop the deep yellow tone—was also above last year’s pace and the five-year average. During the dough stage, corn is very susceptible to heat stress and harsh weather conditions.

Because of the growing conditions and moisture levels in key corn growing areas, Irwin believes the 178.5 bushel per acre estimate, along with the total poundage of corn bushels harvested, could be low. “The potential for higher harvest is there,” he says, “if we continue to get rain throughout the Corn Belt, the potential is higher.”

Corn Used For Ethanol

The USDA’s June World Agriculture Supply and Demand Estimates report indicated that the 2020-’21 outlook for corn used for ethanol would total roughly 5.4 billion bushels. (30.2 million corn acres). After bottoming out in early May, ethanol production has risen from a low point of 567,000 barrels per day to 932,000 b/d produced as of early August. Regardless of the fluctuation in daily production, ethanol continues

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a basic trend line in regard to the link between corn volumes used for ethanol. For the last three years, the volume of corn used in ethanol production has remained in a steady range between 29 percent to roughly 40 percent, according to USDA data on corn supply, disappearance and volume of corn used for ethanol.

For the third quarter of the fiscal year, (which started in May and ended in August) the amount of corn used for ethanol was down sharply when compared to the previous quarter. But, Irwin says, so was the amount of all corn bushel volume usage—because of COVID-19. Corn used for ethanol typically does decline in the third quarter of every year, however. For the past three fiscal years, the amount of corn usage related to ethanol production has been in the mid-30s percentile range.

For ethanol producers looking for a margin gain from increased demand for biofuel gallons, it may be unclear when that will happen. There is a possibility that a record corn crop in 2020-’21 could secure corn prices in the $3.40 to $3.60 per bushel range by keeping the supply part of the curve higher than the demand portion. While both Hubbs and Irwin are focused on the continuing impact of the virus, both have thoughts on major variables facing the 2020-’21 corn crop.

“The election doesn’t have a strong bearing on the economic outlook for corn,” Irwin says. “It is all about the virus.”

Hubbs believes that although there may be short-term market turmoil with corn pricing during and immediately following the election, the outcome will not have a long-term impact on pricing. Farm and agriculture policy is a different story, however. For Hubbs, the election is important because it will play a role in future farm policy, most notably, the farm bill. Should corn prices fall to low levels again, both Hubbs and Irwin believe the U.S. will review or reinforce the use of the Conservation Reserve Program (CRP). Irwin says CRP acres will go up because the U.S. can use the program (right or wrong) as a supply control arm. A dramatic uptick in corn demand isn’t likely until the pandemic subsides, both economists believe, but it isn’t out of the question depending on virus-related activity around the world. Can weather move us to $4 corn? Irwin is clear in his answer. “Absolutely.” The USDA forecasts that corn prices for 2021 will be around $3.60 per bushel. The Illinois economists believe the number is $3.40.

Author: Luke Geiver Associate Editor, Ethanol Producer Magazine 701.738.4944 lgeiver@bbiinternational.com

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