Department of Agriculture officials dropped corn used to produce ethanol by 375 million bushels in this month’s World Agricultural Supply and Demand Estimates report released Thursday, while raising corn, soybean, and wheat ending stocks.
Corn use for ethanol was dropped from last month’s projection of 5.42 billion bushels to 5.05 billion bushels this month; the number had been left alone in the March report, signaling the entirety of the change happened in the last month.
“USDA took a big haircut to ethanol, probably not as big as maybe it's ultimately going to be, and that pushed ending stocks up on the corn side, more so than folks thought,” American Farm Bureau Chief Economist John Newton told Agri-Pulse.
Newton called USDA’s move to reduce corn use for ethanol “aggressive” but said it was much needed.
Ethanol plants are continuing to cut or fully idle production as fuel prices drop. Energy Information Administration data is showing a sharp decline in ethanol production and gasoline consumption as a result of COVID-19.
Allendale Broker Nathan Cardwell told Agri-Pulse it’s too soon to understand the ramifications of shutting down ethanol plants.
“We do have overstocked supplies and we are storing production. Some are saying we could have over 600 million bushels of lost demand that needs to be replaced,” Cardwell said.
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Cardwell said feed and residual use was increased by 150 million bushels, but corn ending stocks were still raised.
Corn ending stocks are 200 million bushels higher than last month at 2.09 billion bushels. The average trade guess had corn ending stocks pegged at 2 billion. This month’s projection for corn ending stocks is lower than 2018/2019’s estimate of 2.22 billion bushels.
Officials raised soybean ending stock projections from 425 million bushels to 480 million bushels; the average trade guess for soybeans was 430 million bushels.
USDA raised wheat ending stocks from 940 million bushels last month to 970 million this month. The number is still lower than last year’s estimate of 1.09 billion bushels. The 2019/20 outlook for wheat is lower for exports and reduced domestic use. Traders had wheat ending stocks 940 million.
Moving forward, traders will have their eyes in the field as U.S. farmers begin corn and soybean planting in the weeks ahead.
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