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Farm Projections Not Cast in Stone

(West Lafayette, IN) - Tight corn supplies remain in the latest forecast by USDA but potential factors exist that could sway the projections in the coming weeks and months.


That’s according to Jim Mintert, a farm economist at Purdue University in response to USDA’s latest World Supply and Demand Estimates released on May 12.


Mintert said one source of uncertainty is what impact closing the Mississippi River to barge traffic might have corn prices and supply.


The river was closed to barge traffic at Memphis on May 11 because of a huge crack in a bridge on Interstate 40 over the channel.


Immediately, Mintert said markets reacted negatively to the uncertainty triggered by the closure of a major transportation hub for exports.       


Mintert said there were 29 million bushels of corn and four million bushels of soybeans on barges waiting to resume travel to the Gulf of Mexico.


“The big impact is on corn.  The reason is we still have one-third of the 2020 crop export projections remaining to be shipped and the bulk of that was to go through the Port of New Orleans.


Mintert said the impact will be less if hold up in barge travel is not prolonged but how long the shutdown lasts was not clear.


“That shutdown really brings to a halt the major export outlet for all ag commodities, truthfully, but especially for corn and soybeans,” he said.


According to the USDA report, predicted corn exports increased by 100 million bushels from the previous projections.


The forecast also reduced the amount of corn in storage from 2020 by 95 million bushels.


Mintert said the 8.5 percent carry over in corn from last year is similar to 2011-2013 when growers from tight supplies commanded high prices before markets plummeted until last year.


USDA also increased its projected average price of corn by five-cents to $4:35 per bushel.


Mintert said the price would have been higher but a good portion of the crop has already gone to market.


“Those numbers look kind of low but that’s because so much of the crop was sold early. As a result, even though prices have been much higher recently, it’s difficult to raise that market year average very much,” he said.


USDA is still forecasting a record yield for corn at 179.5 million bushels per acre.


The report also predicts a five-percent increase in ethanol use from the previous year.


Mintert said ethanol consumption which dropped dramatically from stay at home orders at the start of the pandemic has rebounded nicely but is still running at “seven to eight percent below where we were in 2019.”


He said ethanol use could rise above projections now that COVID-19 restrictions are easing and more people get back to traveling.


“Whether we can get those numbers back to where we were a few years ago it’s going to be kind of interesting,” he said.


USDA is also forecasting a 12-percent reduction in corn exports from 2020.


Mintert said the reduction is probably from expectations of a stronger crop this year in Brazil, which is also a major exporter.


USDA is also predicting ending stocks for corn this year at 11-percent.


Mintert said tight supplies would loosen only slightly if ending stocks finish at that level.


He also said early projections sometimes end way off their original mark.


“Last year the production forecast during the course of the year changed dramatically.  There’s still a lot of uncertainty out there with respect to the size of this crop and what that means for ending stocks,” he said.

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