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Writer

John Kruse

The outlook for corn prices is more positive because corn is likely to experience a significant downward supply shock. Not only will planted area be reduced, but the yields will also likely be significantly lower.

Suppose only 85 million acres of corn are planted, and yields fall to 170 bushels per acre. Adjusting for 92% harvested leaves a crop size of 13.3 billion bushels, down 1.7 billion bushels from the U.S. Department of Agriculture’s May production forecast. A similar production estimate can be obtained with 87.5 million acres planted and 165 bushel-per-acre yields. The 1.7 billion bushels of lost production would likely push the farm price up to $4.15 per bushel and corn prices at the Chicago Board of Trade to nearly $4.50 per bushel. Continued speculation on the production impacts from delayed planting will likely keep the market volatile and will likely present some marketing opportunities for those who have been able to plant this year. Market participants have already pushed the March 2020 corn futures above the $4.50-per-bushel level.

May 2019 U.S. corn supply and use update
Time frame 2017/18 2018/19 2019/20 2020/21
Data Units WASDE WASDE WASDE FAPRI % change from
2019/20
Area planted mil ac 90.2 89.1 92.8 92.7 -0.1%
Area harvested mil ac 82.7 81.7 85.4 85.2 -0.3%
Yield bu/ac 176.6 176.4 176 175.9 -0.1%
Beginning stocks mil bu 2,293 2,140 2,095 1,629 -22.2%
Production mil bu 14,609 14,420 15,030 14,982 -0.3%
Imports mil bu 36 35 35 38 9.7%
Total supply mil bu 16,939 16,595 17,160 16,650 -3.0%
Feed and residual mil bu 5,304 5,300 5,450 5,378 -1.3%
Food, seed and industrial mil bu 7,056 6,900 6,950 7,247 4.3%
Ethanol and byproducts mil bu 5,605 5,450 5,500 5,756 4.7%
Total domestic use mil bu 12,360 12,200 12,400 12,624 1.8%
Exports mil bu 2,438 2,300/td> 2,275 2,325 2.2%
Total use mil bu 14,799 14,500 14,675 14,950 1.9%
Ending stocks mil bu 2,140 2,095 2,485 1,700 -31.6%
Farm price $/bu 3.36 3.50 3.30 3.82 15.8%

FAPRI projections as of March 2019

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