WEST LAFAYETTE — Corn prices could take a bigger hit from the COVID-19 pandemic than soybean prices, two Purdue experts said this week.
The difference is that corn prices depend heavily on ethanol production, which is likely to suffer from weak gasoline demand due to the pandemic.
Ethanol plants have been using 35%-40% of U.S. corn, about 5.5 billion bushels per year, the experts said.
This year, use of corn for ethanol could drop by 4 billion bushels, leaders of the Purdue University Center for Commercial Agriculture predicted. They said ethanol production plants are losing money due to depressed gasoline prices, with a number of plants on the verge of closing.
James Mintert, director, of the Center for Commercial Agriculture, and Michael Langemeier, associate director, spoke this week in a webinar about the corn and soybean outlook for 2020.
“It looks like soybeans are slightly more profitable than corn,” Langemeier concluded, adding, “I personally think there’s a lot more downside on corn price.”
Before COVID-19, projections for Indiana showed intentions to plant 5.8 million acres of corn and 5.4 million acres soybeans.
“I would not be surprised if that came closer to 50-50,” Langemeier said.
However, he added that planting soybeans in a field for two consecutive years would be “not that much more profitable” than rotating to corn.
Beyond ethanol, exports and livestock feeding are the other key influences on grain prices.
Export commitments for corn are down by 28%, Mintert said, adding, “The odds of catching up are essentially zero.”
On the positive side, Mintert said, “We do have record large meat production in the U.S. in 2020.”
Forecasts show a livestock feed demand for 5.5 billion bushels of corn. While that is higher than in recent years, it does not approach the record of 6.16 billion bushels in 2004. Mintert chalks up that to efficiency.
“We’re doing a better job of converting feed into meat than we used to,” he said.
With meat production as the only bright spot for corn demand, “That’s not going to be enough” to help prices, Mintert said.
Feed demand for soybeans also is “probably going to remain pretty strong based on those livestock numbers,” Mintert said.
“It’s tough to get optimistic about the soybean export numbers,” with commitments down 14% through mid-March, he said.
In spite of a gloomy outlook for prices, the Purdue experts are expecting huge harvests in 2020.
Their estimate of 15.76 billion bushels of corn in 2020 would set an all-time record. Trends show a record yield of 177 bushels per acre.
The soybean estimate of nearly 4.1 billion bushels this year would fall short of the record 4.4 billion bushels in 2018. However, it would far surpass last year’s 3.5 billion bushels, a figure depressed by a wet planting season.
Trends predict a soybean yield of 49.6 bushels per acre, not a record level.
This year’s corn planting intentions are pegged at 97 million acres, near the record 97.3 million acres planted in 2012 and far above last year’s weather-depressed 89.7 million planted acres.
Soybean planting intentions for this year are set at 83.5 million acres, below record levels but above last year’s actual 76.1 million acres.
Reports show the 2019 marketing year average for corn prices at $3.60 per bushel or a little below, the experts said. The corresponding price for soybeans wold be $8.50 per acre.
The futures market shows little incentive to continue storing corn or soybeans, hoping for higher prices, so farmers should take advantage of any price rallies typically seen during spring planting, the Purdue experts advised.
“I don’t want to be Dr. Doom here, but there’s some potential for below $3 corn” this year, Langemeier concluded.
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