Pre-June US Corn Stock Update - Domestic and Foreign Demand & the Coronavirus Remain Factors

Market Analysis

The corn market’s focus will be split on June 30 between the USDA’s quarterly stocks report and 2020’s US acreage report, which will be both released on that day. New-crop plantings always get plenty of buzz, but the impact of this past spring’s US Covid-19 pandemic on corn’s two main domestic demand levels remains highly important to this number 1 US feed grain. The impact of March to May stay-at-home orders on US energy and ethanol demand along with the coronavirus blow to the meatpacking industry and the US slaughtering paces on corn’s livestock feed demand will be important components of corn’s June 1 stocks.
After a sharp plunge in output in late March and April, US ethanol production has rebounded over 55% from its low point to 841,000 average daily barrels per day (just 22% lower than last year’s pace). Overall, ethanol’s 3rd quarter corn usage appears to be 940 million bu., down 30% from 2019. This summer’s US driving level will determine if this demand will need a further adjustment going forward.
This past quarter’s overseas corn demand strengthen to 602 million bu. as Brazil switched its export to soybeans and its new-crop shipments don’t normally begin until late summer. 2019/20’s US corn sales seem attainable, but the 550 million bu. in shipments this summer to reach the USDA’s 1.775 billion level could be a challenge.
Since corn is fed both on and off-the-farm, this important domestic demand can only be quantify by comparing corn’s quarterly stocks levels from one quarter to the next. Cattle feedlot and poultry numbers have slipped this past quarter while pork numbers have remain higher than 2019. However, Covid-19 has sickened US meat processing workers and reduced firm’s slaughtering levels. The impact of long-er feeding periods and higher weights has us expecting 1.1 billion bu 3rd quarter feed level, similar to last year. Overall, June’s US corn stocks are expected to be 5 billion bu. this year, down 200 million from 2019.

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What’s Ahead

After this year’s previous stocks have been 290 million below the trade’s expectations, this update will be another check on the size/yield of 2019/20 US corn crop. Last year’s poorer quality may have also required larger bushels to produce the same US ethanol and meat supplies. Use strength to $3.44-46 to move old-crop sales to 90% and $3.55-58 to increase your new-crop Dec hedge to 25%.