March 30, 2020

Crude Oil Makes New Low, Ethanol Tumbles & is Corn too High

That new #crudeoil low is not good for #ethanol or #corn. I did two interviews on this at the end of last week. One with Eric Mosbey during Commodity Week and one with Geoff Cooper from @EthanolRFA @ScottIrwinUI & @jt_hubbs wrote an @farmdocDaily article, too.


The price of crude oil has reached a new contract low below $20 a barrel.

The ethanol industry is struggling under the weight of #COVID19 and the crude oil price war. I spoke with Geoff Cooper, President and CEO of the Renewable Fuels Association about the situation. He says with crude in the $20s, corn is too high priced for ethanol production.



The estimated reductions in #ethanol use are 143 million gallons in March, 391 mln in April, and 207 mln in May, for a total reduction of 741 million gallons or 256 mln bushels of read-reduction-estimate-with-caution #corn write @ScottIrwinUI & @jt_hubbs.

link to @farmdocDaily article

Lincolnland Agri-Energy’s Eric Mosbey explains how #COVID19 and the low price of #crudeoil is affecting #ethanol plants like the one he runs. He also discusses what it means for #corn and feed coproducts.


March 30, 2020

Trump Extends COVID-19 Guidelines

President Trump Sunday extended the 15 days social distancing #COVID19 guidelines until the end of April. He made the announcement during a Rose Garden Coronavirus Task Force press conference.


Mr. Trump went on later in the press conference to say he, at this point, would not consider relaxing the guidelines for different regions sometime in April. The President mentioned parts of the corn belt as an example during this exchange. 

Here is a link to the federal COVID-19 guidelines.


March 11, 2020

Profitability & IL Corn/Soybean Acreage Shifts

by Gary Schnitkey, ILLINOIS Extension
link to farmdocdaily article

At its recent Agricultural Outlook Forum, the U.S. Department of Agriculture (USDA) released estimates of 2020 planted acres in the United States, with both corn and soybean acres increasing from 2019 levels (see Grain and Oilseed Outlook, February 21, 2020). When compared to 2018 plantings, USDA is projecting a 2020 shift to more corn acres and fewer soybean acres across the United States. Projecting this shift across the U.S. seems reasonable. However, most of those shifts likely will occur outside of the corn belt. Estimated 2020 profitability in Illinois suggests relatively even acres of corn and soybeans in Illinois.


A University of Illinois agricultural economist says corn is likely to be more profitable than soybeans this year across the state. However, as Todd Gleason reports, historical relationships do not suggest large acreage shifts in the state.

Projected Acreage Shifts in the U.S. For corn and soybeans, USDA is projecting higher acreages in 2020, partly because 2019 acres were reduced because of prevented plantings (see Figure 1). Corn acres are expected to increase 4 million acres from 90 million acres in 2019 to 94 million acres in 2020. Soybean acres are projected to increase by 9 million acres from 76 million in 2019 to 85 million in 2020. Wheat acres are projected to remain the same in 2019 and 2020 at 45 million acres.



Given the prevalence of prevented planting acres in 2019, comparing acreage shifts from 2018 to 2020 provide a better illustration of recent trade difficulties impacts on expected acreage. These trade difficulties lowered soybean prices while corn prices remained roughly the same. National Market Year Average (MYA) prices for soybeans reported by the National Agricultural Statistical Service (NASS) were $9.47 per bushel in 2016 and $9.33 per bushel in 2017, the two years immediately preceding trade difficulties. Soybean prices are not projected to average above $9.00 from 2018 through 2020: $8.66 per bushel in 2018, a projected $8.70 in 2019, and a projected $8.80 in 2020.

While soybean prices decreased, corn prices increased. MYA prices for corn were $3.36 per bushel in both 2016 and 2017. MYA price averaged $3.55 in 2018 and are projected at $3.80 in 2019 and $3.60 in 2020. These price changes caused corn returns to increase relative to soybean, leading to incentives to plant more corn acres. Between 2018 and 2020, corn acres are projected to grow 5 million from 89 million in 2018 to 94 million in 2020. Soybean acres are projected to decrease 4 million from 89 million acres in 2018 to 85 million acres in 2020.

Illinois Corn and Soybean Acres Because of prevented plantings, both corn and soybean plantings in Illinois were down in 2019 from 2018 levels. Corn plantings were 10.5 million acres in 2019, down from 11.0 million in 2018. Soybean planted were 10.0 million acres in 2019, down from 10.8 million acres in 2018.

Except for 2019, total acres in corn and soybeans in Illinois have remained about the same since 1990 at about 21.7 million acres. Prevented plant acres reduced this total in 2019 by 1.2 million acres. While total acres in corn and soybeans have remained the same, shifts in corn and soybean acres have occurred over time.

From 1998 to 2003, corn and soybean acres were relatively near one another, with corn acres exceeding soybean acres by less than 1 million acres (see Figure 2). During the 2007–2014 period, corn use in ethanol increased, resulting in higher corn prices relative to soybean prices, increasing the profitability of corn relative to soybeans, leading to more corn acres and fewer soybean acres. From 2007 to 2012, corn acres exceeded soybean acres by at least 2.0 million acres, with the largest difference of 4.9 million acres occurring in 2007. The build of ethanol capacity ended in the mid–2010s, while Chinese demand for soybeans continued to grow until 2018. Corn profitability fell relative to soybeans, and farmers switched acres from corn to soybeans. In 2018, 11.0 million corn acres were planted in Illinois, only 200,000 acres more than 10.8 million acres of soybean plantings. In 2019, corn acres were 10.5 million, 500,000 more than the 10.0 million of soybean planting. USDA has not projected state levels of corn and soybean production for 2020.



Profitability of Corn and Soybean in Illinois Historical shifts in corn and soybean acres in Illinois have been related to the relative profitability of corn and soybeans. Figure 3 shows corn returns minus soybean returns from Central Illinois farms having high-productivity farmland enrolled in Illinois Farm Business Farm Management (FBFM). Positive values indicate that corn was more profitable than soybeans. Conversely, negative values indicate that soybeans are more profitable than corn.



From 2000 to 2002, corn and soybean returns were roughly the same (see Figure 3). Corn-minus-soybean returns were $30 per acre in 2000, $13 in 2001, and -$6 in 2002. During this period, corn and soybean acres were relatively near one another.

From 2003 to 2012, corn returns exceeded soybean returns in all years, except 2009 (see Figure 3). Corn returns were over $50 higher than soybean returns in 2006, 2007, 2008, 2011, and 2012. During this period, corn acres in Illinois grew while soybean acres declined.

From 2013 to 2018, soybeans were more profitable than corn (see Figure 3). Soybean returns exceeded corn returns by more than $50 per acre in 2016, 2017, and 2018. During these years, farmers switched acres back to soybeans.

In 2019, corn was more profitable than soybeans by $34 per acre. Responses to 2019 profitability differences are somewhat clouded because of late and prevented planting. Both corn and soybean acres were down in 2019. In a late planting year, one expects soybean acres to increase relative to corn acres because soybeans traditionally have lower yield declines than corn in a late planting year. In 2019, corn acres may have declined more had not there been expectations of higher corn prices in June.

In 2020, corn is projected to be $21 per acre higher than soybeans. This difference between corn and soybean profitability is not large, suggesting that large acreage shifts will not occur. The $20 per acre projected difference in 2020 is roughly the same as realized differences from 2000 to 2002. During those years, corn acres exceeded soybean acres by only a small margin. Given 21.7 million acres of corn and soybean plantings in Illinois, having 11.0 million acres of corn and 10.7 acres of soybeans seems reasonable.

Summary At this point, corn is projected to be more profitable than soybeans in Illinois. However, historical relationships do not suggest large acreage shifts in Illinois. Corn and soybean acres in Illinois likely will be near one another. Major shifts in acres to corn from soybeans across the United States likely will come from outside the corn belt.

References U.S. Department of Agriculture. “Grains and Oilseeds Outlook.” Agricultural Outlook Forum 2020. Released February 21, 2020. https://www.usda.gov/oce/forum/2020/outlooks/Grains_and_Oilseeds.pdf


March 09, 2020

The Pace of Soybean Use

by Todd Hubbs, Agricultural Economist - ILLINOIS Extension
Iink to farmdocdaily article

USDA’s soybean ending stocks forecast of 425 million bushels for the marketing year may show little if any change in the upcoming WASDE report. Despite the recent strength in soybean crush, the current focus is squarely on the impacts of the coronavirus and the implications for both crush and exports as the disease continues to evolve.


University of Illinois ag economist Todd Hubbs discusses the impact coronavirus is and may have on the use of soybeans across the planet.

Soybean crush in January saw a record total for the month of 188.78 million bushels. Thus far this marketing year, crush set monthly records in October, December, and January. Even with those monthly records, the crush pace during the first five months of the marketing year, at 897 million bushels, equaled last year’s pace. The USDA’s current projection for crush indicates a 13 million bushel increase over last year. To reach the crush forecast, crush needs to total 1.2075 billion bushels over the remainder of the marketing year. Soybean crush at that level comes in higher than last year’s 1.194 billion bushel total over the same period. The recent strength in crush led many market observers to raise the prospects for soybean crush totals. The implementation of higher export taxes on soybean products in Argentina helped to bolster this narrative. While soybean crush may see an increase in marketing year use, the prospect of coronavirus issues hurting meat demand may limit the upside potential later in 2020.

Soybean meal prices in Decatur rallied from the low $290 per ton range in early February to settle near $305 last week, which coincides with the marketing year average price put forth in the February WASDE report. The forecast for domestic soybean meal use sits at 36.8 million short tons, up 708 million tons over last year. Plentiful livestock on feed supports strong domestic soybean meal use this marketing year. However, the spread of the coronavirus around the world may put a damper on meat consumption. The prospect of lower meat consumption in the U.S. remains a serious concern. At 13.2 million short tons, the forecast for soybean meal exports came in 354 million tons lower than last year. Soybean meal exports weakened significantly in January and put the pace of exports through January seven percent behind last year’s export total at 4.576 billion short tons. Total commitments through February 27 sit a little over six percent behind last year’s pace. If the expansion of export tariffs on soybean meal in Argentina impact exports, the pace of meal exports could increase.

Soybean oil prices in Decatur fell back to levels seen last September in recent weeks at between 28 and 30 cents per pound. Vegetable oil prices remain under pressure from the impacts of coronavirus spreading around the world. As Chinese crushers come back online, an expectation of growth in world soybean oil stocks over the short term seems a forgone conclusion. Weaker biodiesel production led to a decrease of 300 million pounds in the February WASDE report to 8.2 billion pounds. Through December, the EIA biodiesel production report put soybean oil use at 1.625 billion pounds, down 545 million pounds from the first quarter last year. Biodiesel production from soybean oil needs to increase by fifteen percent over last year for the remainder of the marketing year to hit the USDA’s forecast. Soybean oil exports continue to exhibit strength and provide a counterbalance to relatively weak domestic demand. At 1.9 billion pounds, the USDA’s forecast for soybean exports seems well within reach this marketing year. Census Bureau soybean oil exports through January came in at 809 million pounds. To reach the projection, soybean oil exports need to total 1.09 billion pounds over the rest of the marketing year, 110 million pounds less than the total over the same period last year and hints at an increase to the forecast for soybean oil exports this marketing year in the next WASDE report.

The large Brazilian soybean crop and the potential for expanded Chinese buying continue to be the main factors shaping the potential for soybean exports. USDA projections for soybean exports total 1.825 billion bushels. Estimates of soybean exports from the Census Bureau are available through January. Soybean exports came in at 1.02 billion bushels. As of March 5, cumulative export inspections for the current marketing year totaled 1.107 billion bushels. By using the relationship between Census Bureau data and export inspections, soybean exports total 1.153 billion bushels for the marketing year. Soybean exports need to equal 672 million bushels, approximately 26.3 million bushels per week, during the remainder of the marketing year to reach the USDA forecast. Over the last four weeks, export inspections averaged 26.1 million bushels per week.

A Brazilian crop near 4.6 billion bushels looks in the offing this year. A large crop in combination with a Brazilian real that depreciated almost fifteen percent against the dollar since the turn of the year promise competition from Brazilian soybeans in 2020. Chinese buying of U.S. soybeans remains the key to hitting export projections. For now, Chinese total commitments (export sales and accumulated exports) through February 27 sit at 449 million bushels, up from 344 million bushels over the same period last year. Census Bureau data through January showed soybean exports to China at 431 million bushels thus far this marketing year. The small growth in exports since January highlights the low level of buying from China since the onset of the coronavirus. The recent exemptions on U.S. soybean tariffs granted for some crushers in China provide support to the notion of China attempting to meet its commitments to the Phase 1 trade deal.

Uncertainty about the impacts of coronavirus looks to set market expectations over the near term. Soybean prices will reflect this uncertainty. Volatility appears set to remain high and developments in soybean product export markets seem destined to determine ending stocks this year.


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