A Billion Here, A Billion There…

Corn closeup

The latest USDA WASDE report continued to emphasize just how large the 2020 corn crop could be with “normal” weather the rest of the summer. In last week’s Bull Bear Banter podcast, I talked about the size of the estimated Ending Stocks for the summer of 2021.

You can find the podcast here:

If realized, at 3.323 billion bushels, this will be the largest in more than 30 years. In fact, the next closest, was the 2016/17 crop, which finished with just under 2.3 billion. This year will create an “extra” billion bushels of ending stocks compared to then. 

I think it’s also worth looking at the numbers for production and usage that are currently being used to create such a large Ending Stocks number. On the production side, 97 million planted acres isn’t a record, but if accurate, it would be the 2nd largest on record. Harvested acres, though, at 89.6 million, would be a record, same with the expected yield (178.5 bu./acre), and total production of 15.995 billion. It all adds up to just over 18 billion in total supply, another record, by just over 1 billion “extra” bushels, compared to previous record years of 2016/17 and 2017/18, that were just under 17 billion. 

On the demand side, none of the individual categories would become a record on their own, but the total of all of them would be, both domestically, and in total. U.S. feed usage, as projected by the USDA, would be just over 6 billion bushels, and slightly behind the record years of 2004/05 and 2005/06. The Food/Industrial/Seed category is projected to be the 5th largest, primarily due to continued issues for ethanol production, at least to start the year. Exports are expected to climb next year, but will only be the 4th largest in the past 15 years. It’s when I add up all categories, that I realize how aggressive the total usage number is. At 14.8 billion bushels, it just beats out a couple of previous years (2016/17 and 2017/18). However, they are projecting an “extra” billion more than the current year. 

Another item that really jumps off the page, compares ending stocks to usage. Currently estimated at 22.45% of use, you’d have to go back to 1992/93 to find a larger number. This is the one that really concerns me. What if production is somewhat better than expected? What if usage is somewhat less than expected? We will know more about the acreage numbers on June 30th, but the demand side will be somewhat in flux for a while, especially as we wrap up this crop year at the end of August. 

I have been expressing my concern about the current price of corn for a while now, and I continue to believe that they will erode as we get closer to harvest this year. The above information makes me even more confident that even those prices don’t look great right now, they might be the best we will see for quite some time. I continue to say that June is the time to finalize old crop sales. And if you haven’t already, now is also a good time to get some New Crop sales on the books.