Coronavirus Eats Into U.S. Corn Consumption
April 09 2020 - 1:35PM
Dow Jones News
By Kirk Maltais
The economic slowdown stemming from the coronavirus pandemic
will sharply lower demand for American grains, according to the
U.S. Department of Agriculture.
In its monthly World Agricultural Supply and Demand Estimates
report released Thursday, the USDA forecast that U.S. corn
inventories would rise to roughly 2.1 billion bushels in the
2019/20 marketing year, up 200 million bushels from its projections
last month due to the havoc wreaked on the U.S. economy by the
pandemic.
"Corn used to produce ethanol is lowered 375 million bushels to
5.050 billion based on the latest indications from Energy
Information Administration data indicating an unprecedented decline
in ethanol production and motor gasoline consumption as a result of
Covid-19," the agency said.
The EIA's report Wednesday showed U.S. ethanol production
sliding to 672,000 barrels per day, the lowest level since the EIA
started reporting ethanol data in 2010. Stockpiles, meanwhile, are
up to 27.1 million barrels, also a record.
The uptick in corn inventories is more than traders had
expected, according to data compiled by The Wall Street Journal. On
average, traders were expecting corn stockpiles to rise to 1.99
billion bushels. However, the increase wasn't entirely unexpected,
said Doug Bergman, head of the agricultural trading desk at RCM
Alternatives.
"The USDA ripped off the Band-Aid," Mr. Bergman said.
However, indications that the usage of corn for animal feed and
other applications like alcohol would rise pushed up May corn
futures on the Chicago Board of Trade, with the contract up 1%
after the report's release.
The decrease in ethanol production in response to plummeting oil
prices in the past month is the chief factor eating into U.S. corn
consumption. However, news that Russia and Saudi Arabia have
reached an agreement in principle to cut oil production by 20
million barrels may serve to stop the slide of ethanol margins.
The USDA also forecast higher grain inventories for wheat and
soybeans, with wheat stockpiles rising by 30 million bushels to 970
million bushels in 2019/20, and soybean stocks rising 55 million
bushels to 480 million bushels.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
April 09, 2020 13:20 ET (17:20 GMT)
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