In its first assessment since the coronavirus was declared a pandemic, the government forecast lower prices for U.S. crops and livestock as a worldwide economic slowdown, the result of aggressive efforts to squash the virus, weakens the global appetite for food. The notable exceptions are wheat and rice, where panic buying has driven up prices for the food grains, said the USDA on Thursday.
Normally staid USDA analysts spoke of “an unprecedented decline” in demand for corn ethanol as stay-at-home orders slash domestic gasoline consumption and made “one of the largest one-month reductions in projected U.S. cotton exports ever” — 9 percent.
All told, the USDA forecast lower corn, soybean, cotton, cattle, hog, chicken, and milk prices in the monthly World Agricultural Supply and Demand Estimates (WASDE) report. Accompanying the lower prices were forecasts of larger commodity stockpiles. With the planting season at hand, larger “carry-in” stocks bring the threat of price-depressing gluts if U.S. farmers harvest large crops this fall. Farmers have signaled they will plant enough corn for a record-setting crop.
“Sobering to see it in print,” said Seth Meyer, associate director of the FAPRI think tank at the University of Missouri. Meyer pointed in particular to markdowns in pork and corn prices. Farm-gate prices for corn could average $3.35 a bushel into the fall, he said. A month ago, the USDA estimated the 2019 crop would sell for an average of $3.80 a bushel.
“Hard to know where to start,” said Joe Glauber, former USDA chief economist, who cited the sudden pile-up of cotton stocks and the plunge in ethanol use. The USDA slashed its estimate of corn-for-ethanol by 375 million bushels, or 7 percent, from April. More than 5 billion bushels of corn are used annually in making the biofuel.
“I saw some talking about a billion-bushel drop in corn grind for calendar 2020,” said Glauber, so the USDA’s May projections of corn-for-ethanol “are going to be very interesting as well.” Some ethanol industry leaders say ethanol production might be halved because Americans are staying home. “No fix for ethanol until folks start driving,” said Meyer.
In May, the USDA will make its first estimate of the winter wheat crop and issue projections of the corn, soybean, and cotton harvest in the fall.
“In the wake of Covid-19, concerns have emerged over food security. Some countries have placed trade-restrictive measures while others have issued tenders for more purchases. Consequently, prices have rallied for both wheat and rice, even though global supplies are at record levels and the share of stocks to consumption is historically high,” said the Grain: World Markets and Trade report, a companion to WASDE.
While the USDA raised its forecast of season-average prices for wheat and rice, it lowered its forecast for corn by 20 cents a bushel, soybeans by 5 cents a bushed, cotton by 1 cent per pound, cattle by $3.50 per 100 pounds, pork by $8 per 100 pounds, broilers by 9 cents per pound, and milk by $3.90 per 100 pounds.
With weakening demand for U.S. commodities, the corn carry-over would exceed 2 billion bushels for the fourth year in a row. The soybean carryover was forecast at 480 million bushels, which would be the third largest ever.
The WASDE report is available here.
To read Grain: World Markets and Trade, click here.