Pre-March Corn Stock Update - The Saudi/Russia Feud And Covid-19 Remain Clouds Over Corn

Market Analysis

The corn market’s focus will be split on March 31 between the USDA’s reports and the current state of the Covid-19’s impact on the US and World economies. The government will be releasing their quarterly stocks and 2020’s US prospective plantings updates. Traditionally, the first US survey-based planting intentions get more attention, but the USDA’s quarterly stocks are important mile-stones on how our US domestic demands are progressing.

After a slow fall, US FSI (ethanol) demand ramped up to 1.725 billion bu. during this past quarter. This strengthens the US 1st half biofuel demand to slightly higher than last year. However, the combo of the coronavirus cloud and the Saudi/Russian oil feud pressing crude prices to low $20 per barrel have left little margin for biofuel processing. This has ethanol plants reducing their 3rd quarter corn usage and output forecasts. February’s 50 million bu. higher USDA biofuel corn outlook could be reduced going forward.
2019’s US crop concerns prompted overseas buyers to switch their purchases to S. America. This has reduced US export shipments by 47% during in the first six months of 2019/20. However, US corn shipments have picked up with this quarter’s total at 325 million bu. To achieve the USDA 1.725 billion forecast, weekly shipment need to average 25 million bu. This is similar to the 2017/18 year, but Brazil had a late-season drought cut its safrina crop that year.

This year‘s higher US cattle feedlot inventories & strong hog and broiler slaughter rates suggest a robust second-quarter feed demand. Quality issues surfacing in the WCB late corn harvest possibly adds some bushels, too. However, last fall’s dramatic feed jump makes us cautious about a big quarterly increase vs. last winter’s polar vortex conditions that keep livestock producers using inventories. We are looking for 40 million bu. feed rise to 1.235 billion bu. This suggests a March 1 US corn stocks at 8.115 billion bu., down 498 million from 2019.

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What’s Ahead

The upcoming March stocks will provide more insights into the size & usability of the 2019 US corn crop. Another smaller-than-expected level would bring back questions about this year’s crop size. A Saudi/Russia deal and/or the calming of the Coronavirus pandemic will be more important to ag prices than the numbers. Move 10% of 2019/20 supplies at $3.63-3.67 in May for short-term cash. Hold balance.