An early look at crop budgets for 2020 indicates a shift back toward greater corn production is likely, suggesting acreage could be pushed back above 90 million, said Purdue University agricultural economist James Mintert and Purdue associate professor Mindy Mallory in a 2020 outlook.
Combined with a possible return to trend-line yields this year, that implies a substantial boost to US and world corn supplies is likely, pushing carryover up substantially and putting pressure on prices, the economists said.
However, much can happen between now and early spring when planters start rolling, they said. Uncertainty about total 2019 US production, weather in South America and uncertain trade prospects affecting corn and soybean demand still could alter the economics for corn versus soybean plantings significantly.
HIGHER PRICES REWARD 2019 PRODUCERS
After enduring many planting and harvest headaches last year, US corn and soybean farmers were at least rewarded with a modest improvement in crop prices, the outlook said. The 2019 season average corn price now is expected to average $3.85 a bushel, its highest since 2013 and 7% more than in 2018.
The national average corn yield for 2019 is expected to be 5% lower than last year and 2% below trend at 167 bushels per acre, according to the USDA’s November Crop Production report. The result is a crop projected to total 13.7 billion bushels, which will be the smallest since 2015.
It’s possible the 2019 crop estimate will be revised down even further, depending on yield reductions and acreage abandonment, Mintert and Mallory said.
PRODUCTION DIP LIKELY OFFSET BY USAGE DIP
Although corn production declined 800 million bushels last year, the decline likely will be offset partially by an anticipated usage decline of more than 500 million bushels, compared with the 2018/2019 crop year, the outlook said.
The combination of smaller production and usage is expected to produce a modest drawdown in corn carryover of about 200 million bushels, helping to support this year’s prices, the economists said.
Although corn used for ethanol this year is expected to hold steady, reductions in feed usage and smaller exports could take total usage down by nearly 560 million bushels, they said. Recent weeks have shown signs of strength in exports and prospects for feed demand based on livestock placements, however, according to USDA reports.
ETHANOL MARGINS RISE
Ethanol margins have improved to at least breakeven levels, which should keep existing capacity online, the outlook said. This, coupled with the E10 blend wall will keep corn demand for ethanol linked to gasoline demand.
Rulemaking for the 2020 and 2021 blending requirements, as well as the judicial review of the Small Refinery Exemption of the Renewable Fuel Standard could affect prospects for the ethanol-use category in 2020 and 2021.
The anticipated decline in US corn ending stocks marks the third straight reduction in ending stocks. The stocks-to-use ratio is expected to come in at 13.7%, down from 14.6% last year.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at $124 to $125 per cwt on a live basis, up $2 to $3 from the previous week. Dressed-basis trade happened at $198 to $200 per cwt, up $3 to $4.
The USDA choice cutout Thursday was up $0.46 per cwt at $209.96, while select was up $0.15 at $206.68. The choice/select spread widened to $3.28 from $2.97 with 135 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was not available. Thursday’s Jan contract settlement was $146.92, up $0.10.