Corn farmers are facing a myriad of challenges this season. From the normal aggressors such as Mother Nature, weeds and insects, to all-new challenges from COVID-19 fallout, 2020 is shaping up to be a lower-than-forecasted profit year for the golden grain.
“[Losses are estimated at] $59 per acre in 19' and we know that there’s more than that in certain areas,” says Kevin Ross, president of the National Corn Growers Association. “And $89 per acre in 2020, so we have work to do. We have a lot of crop to chew through and we have to make sure farmers get the support they need.”
The pre-COVID numbers compared to the post-COVID numbers are of course just estimates, but they’re pretty stunning. The $89 per acre expected drop for 2020 is actually an optimistic look, too.
“The estimate of pre-COVID revenue for 2020 is $662 per acre based on a 179 bu. per acre national yield and a $3.70 MYA price,” said Gary Schnitkey and Jonathan Coppess in a report prepared for the National Corn Growers Association. “A reduction in price to $3.20 results in a revenue estimate of $572 per acre, a decrease of -$89 from the pre-COVID scenario.”
Prices could decline lower than that $3.20 benchmark listed. Recent World Agricultural Supply and Demand Estimates are predicting a U-shaped economic recovery, using 2020 projections at: 5,200 million bu. used for ethanol, feed and residual use at 6.650 million bu. and ending stocks at a record 3,318 million bu.
However, USDA in today’s WASDE report trimmed ethanol use by 50 million bu. Signaling there could be higher stocks and less use than originally assumed in the U-shaped recovery.
According to Schnitkey and Coppess, a U-shaped recovery is not a foregone conclusion. If use doesn’t reach the levels the U-shaped recovery estimates there will be higher ending stocks and therefore, lower prices. A lower ethanol use scenario, at 4,950 million bu. puts feed and residual use higher to account for fewer distillers’ grains at 3,478 million bu. results in an estimated price of $3.10 per bu.
Higher-than-anticipated yields could also cause prices to plummet. A national increase to 180 bu. per acre would increase total production to 16,128 bu. per acre—putting ending stocks at 3,521 million bu. and an average price of $3.00 per bu.
If a combination of lower ethanol use and higher yield happens, farmers could see 2020 prices below $3.00 per bu. The best ‘hope’ for prices is lower ending stocks, which is easiest achieved with a reduction in corn acres and below trend yield. With 2 million fewer harvested acres and yield at 174 bu. per acre, experts estimate prices would average $3.40 per bu. with 2,475 million bu. ending stocks.
Read more details and check out charts here.
