DTN Fundamentally Speaking

As we have noted before, the impact on the corn market from the coronavirus situation has been severe with nearby corn futures having traded recently at their lowest levels seen since 2009.

Forward values could fall even more should the planting intentions figure of 97 million be realized and demand cut sharply due to COVID-19.

2020/21 ending U.S. corn stocks could be highest since the 1987/88 year at well over 3.3 billion bushels (bb).

The stocks-to-use ratio would be the largest since 1992/93 if one were to take the USDA demand figure of 14.740 bln they gave at their February 2020 Ag Outlook Forum which now seems very high at 640 million above their revised 2019/20 carryout projection.

We think that the situation could be even more bearish and have actually seen ending stocks figures for next year in excess of 4.0 bb.

This graphic shows the USDA May WASDE projections for the current marketing year and the new marketing year for U.S. corn ending stocks in million bushels (mb) on the left hand axis.

May is when the USDA issues its first supply-demand projections for the new marketing year starting September 1.

On the right hand axis, the net projected year-to-year change in ending stocks is reported along with the actual year-to-year change in final ending stocks, also in mb.

As an example, in the May 2018 WASDE report USDA indicated that for the 2017/18 season ending stocks would be 2.182 bb and in their first projection for the 2018/19 season they estimated ending stocks at 1.682 bb.

In other words, USDA was predicting ending stocks to fall 500 mb from one marketing year to the next.

As it turned out, final 2017/18 ending corn stocks were 2.140 bb and final 2018/19 ending corn stocks were 2.220 bb, actually 80 mb higher than the prior year.

The point here is USDA could easily show ending stocks for next year over 1.0 bb higher than what they are currently projecting for this year which is 2.092 bb.

According to our records, this has only happened twice, in back-to-back May WASDE reports.

In the May 2012 WASDE, USDA pegged 2011/12 ending stocks at 851 mb and in its first estimate for the 2012/13 season estimated ending stocks for that year at 1.881 bb, a rise of 1.030 bb.

2011/12 ending stocks actually finished higher at 989 mb.

Ending stocks for the 2012/13 year, due to the 2012 drought, actually fell to 820 mb, down 169 mb.

In the May 2013 WASDE, USDA pegged 2012/13 ending stocks at 759 mb and in its first estimate for the 2013/14 season estimated ending stocks for that year at 2.004 bb, a rise of 1.245 bb.

2012/13 ending stocks actually finished up at 820 mb and ending stocks the following year, due to the 20120 drought, actually came in at 1.231 bb, a rise of only 411 mb.

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