USDA raises corn, soy, wheat supply outlook

Ending stocks expected up on slowing export demand

Chicago | Reuters — The U.S. Agriculture Department raised its outlook for domestic supplies of corn on Thursday on expectations for reduced usage by ethanol producers, as demand for the alternative fuel has been cratering due to the spread of the COVID-19 coronavirus.

The government also bumped up its wheat and soybean ending stocks view due to slowing demand for U.S. offerings on the export market. The dimming wheat export view reflects the price surge that stemmed from rising demand for pasta, bread and other baked goods at the grocery store from home-bound consumers.

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The government’s monthly report underscores the impact the coronavirus pandemic is having on the global food supply chain as traditional export flows are jumbled, ethanol plants are shuttered and livestock producers scramble to adjust their feed rations.

Corn ending stocks for the 2019-20 marketing year were seen at 2.092 billion bushels, up from USDA’s forecast of 1.892 billion bushels in March, and above trade expectations of 2.004 billion. Ethanol sector usage was cut to 5.05 billion bushels from 5.425 billion.

“We were expecting ethanol use to get drop-kicked and it did in a big way,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. “It was expected, but that tells you how serious it is for the industry.”

Chicago Board of Trade corn futures turned higher after the report was released, with traders expressing relief that the government factored in the all of the damage caused by the pandemic instead of making incremental changes.

“I think the market really appreciates the ‘rip the Band-Aid off’ approach that USDA took for this report,” said Ted Seifried, chief market strategist for Zaner Ag Hedge.

USDA pegged wheat ending stocks at 970 million bushels and soybean ending stocks at 480 million bushels. Analysts had been expecting soybean ending stocks of 430 million bushels and wheat ending stocks of 940 million bushels, based on the average of estimates in a Reuters poll.

USDA lowered its outlook for U.S. soybean exports by 50 million bushels and wheat exports by 15 million bushels. The cut to soybean exports was partially offset by increasing the amount of soybeans used by crushers by 20 million bushels.

The rising crush figure reflected increased soymeal demand from livestock producers who were seeking to replace distillers dried grains, a corn-based feed that is a co-product of ethanol production, in their animals’ diets.

— Mark Weinraub is a Reuters commodities correspondent in Chicago; additional reporting by P.J. Huffstutter and Karl Plume in Chicago.

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