Corn production is projected to increase in the 2020/2021 season to approximately 1,186.86 MMT, a 6.47% increase compared to last season’s production figure which was approximately 1,114.75 MMT globally. The increase in production is mainly attributed to an increase in corn acreage in major corn-growing countries. If planting prospective is realized, corn production in the 2020/2021 season will be record-high globally. In this article, I will discuss the increase in production from major corn-growing countries. I will also discuss how demand is projected to recover in the 2020/21 season. Investing in Teucrium Corn Fund (CORN) is a way for investors to track corn futures higher and lower without the need for a futures account.
Projected Production in Major Corn-Growing Countries
In the 2020/21 season, corn production in the U.S is projected to increase to approximately 15,995 million bushels, an increase from last season’s estimate which was approximately 13,663 million bushels. The increase in production is mainly attributed to an increase in corn acreage from the major corn-growing states. In the 2020/21 season, the area planted for corn is projected to increase to 97.0 million acres, while projected harvesting area is projected to stand at approximately 89.6 million acres, thus leading to a higher yield per acre, compared to last season’s planted area which was approximately 89.7 million acres, therefore resulting in a lower output.
Corn planting in some of the key growing states is already underway and is almost two-thirds completed, despite the coronavirus pandemic, most farmers were busy planting corn and soybeans. Favorable weather conditions have also played a role in planting progress. In Iowa 91% of the expected corn crop has already been planted, 3 weeks ahead of last year, and at least 2 weeks ahead of the 5-year average, 82% of the corn planted has emerged. In Illinois 82% has been planted, a higher percentage compared to last year, and the 5-year average and 69% have emerged. In Nebraska, 97% has been planted and 77% emerged, and finally, in Minnesota, 98% of corn has been planted and 80% has emerged. Focusing primarily on the four states, planted area is ahead of last years’ average and the 5-year average.
In the 2020/2021 season, corn production in Brazil is projected to increase to approximately 103 MMT, an increase from the 2019/2020 season where production is pegged at approximately 101 MMT, a 3% increase. The increase in production is mainly attributed to a decrease in cotton acreage, resulting in more acres allocated to corn and soybeans. Area harvested is projected to increase to approximately 1.85 MHa, a slight increase compared to last season. Corn production in the European Union, China, and Argentina is projected to decrease in the 2020/2021 season. The decrease in production will probably not have a major impact on global supply, as this will probably be offset by the increase in production from the U.S and Brazil.
Corn Demand projected to recoup in the 2020/21 season
Corn demand is projected to recover in the 2020/2021 season, as demand has been negatively affected in the 2019/2020 season due to the impact of the coronavirus. The virus has caused massive disruptions in supply chains, trade flows, and economies, bringing a lot of uncertainty around feed demand, thus hurting the global livestock sector. Global lockdowns, social distancing measures, and market closures have led to massive disruptions in supply chains. The impact of the virus is felt greatly by farmers, as most slaughterhouses have had to temporarily suspend operations, and even though operations have resumed in some of the slaughterhouses, most are struggling to implement proper health safety standards for their workers, leading to logistical constraints and labor shortages. Such disruptions are an example of how demand has been impacted by the virus.
The effects of the virus also rippled through ethanol demand, as corn demand for FSI has been lowered down by 110 million bushels in the U.S, due to an ongoing collapse of the motor fuel demand thus eroding ethanol production and use. Ethanol production in Brazil has not been spared by the pandemic, as of April the price of hydrous ethanol dropped to 40%, signaling a drop in demand for both ethanol and corn, from consumers and corn-based ethanol plants in Brazil respectively.
In the 2020/21 season corn demand in the U.S is projected to recover from the impact of the virus. Feed and residual uses are projected to increase to approximately 6,050 million bushels, a 350 million bushel increase compared to the 2019/20 season. FSI is projected to increase to approximately 6,600 million bushels, a 240 million bushel increase compared to last season. Corn domestic disappearance is projected to recover to 12,650 million bushels, a slightly higher figure compared to last season.
China’s 2020/21 corn demand is projected to increase, as feed and residual use is projected to increase by 8.1 million tons to 212.7 MMT, a 4% increase compared to last season’s figure. In China, feed demand is projected to increase due to an increase in poultry production, as well as a projected recovery and restocking in swine hog from the ASF. Corn demand in China as an ingredient in livestock feed is projected to increase to 190 MMT, a 10 MMT increase compared to the previous season.
Corn demand in Brazil is also projected to increase to approximately 69 MMT, on the expectation of market recovery and returned demand for corn-based ethanol and other fuels. Feed and residual uses are projected to increase to approximately 58 MMT an increase compared to last season’s figures, as FSI consumption is projected to increase to approximately 11 MMT. Most economies, supply chains, and trade flows are being negatively impacted by the coronavirus, I believe with time a solution will be found, and economies, supply chains and trade flows will recover, thus I believe demand will be higher than the expected projections.
Corn production is projected to increase in the 2020/2021 season, as production is expected to increase from the U.S and Brazil. The increase in production will not cause a major shift in corn futures, as demand is projected to recover.