April WASDE shows impact of COVID-19

The U.S. Department of Agriculture released its April 2020 World Agricultural Supply and Demand Estimates report April 9 and  this the first report that shows the effects of the COVID-19 pandemic on United States and the world’s agricultural industries.

Wheat

The outlook for 2019-20 U.S. wheat is for lower exports at 26 million metric tons and reduced domestic use at 31 mmt, resulting in increased ending stocks of 26.4 mmt. The National Agricultural Statistics Service Grain Stocks Report from March 31 predicted less feed and residual disappearance for both the second and third quarters, even less than previous estimates. With total 2019-20 feed and residual use pegged at 135 million bushels, and wheat exports cut to 985 million bushels based on a slowing pace and uncompetitive prices on the international market, ending stocks for all wheat classes are predicted to be 970 million bushels.

Yet, despite the larger ending stocks number, the projected season-average farm price is raised by a nickel to $4.60 a bushel, based on updated NASS data, and the surging cash and futures prices from the global COVID-19 pandemic.

Global leaders are reducing wheat trade based on concerns about COVID-19. The 2019-20 global outlook is for slightly higher supplies, but reduced trade and utilization, the report stated. Global exports are expected to be lower by 0.9 million tons, led by a 1.5 million ton reduction for Russia, but that was offset by an equal increase for the European Union. The Russian government has imposed export restrictions in order to ensure a wheat supply for its domestic use. Aggregate world consumption was lowered by 5.1 million tons, so with supplies higher and use down, the projected global ending stocks for 2019-20 were raised in the report to a record high 292.8 million tons.

Corn

The WASDE Report expects reduced imports (2.93 mmt), greater feed and residual use (138 mmt), lower food, seed and industrial use (324 mmt) and therefore larger stocks of 57.92 mmt. Feed and residual use is expected to account for 5.675 billion bushels, based on the March 1 corn stocks report. With fewer motorists on the roads because of self-isolation from COVID-19, corn use for ethanol is lowered by 375 million bushels to 5.05 billion. However, it’s worth noting a partial offsetting of a forecast increase for the amount of corn used for alcohol, both for beverages and industrial use, particularly for hand sanitizers to fight the spread of COVID-19. The report predicts ending stocks to rise to 2.092 billion bushels, and it lowered the season-average marketing weighted corn price received by producers to $3.60 per bushel.

Globally, the April foreign coarse grain outlook is for larger production of 1.36 billion metric tons, lower trade, fractionally higher use and therefore larger stocks relative to March at 303.2 million tons.

Soybeans

The U.S. soybean supply and use situation follows the same lines as wheat and corn, with lower exports, seed use and residual use, with higher ending stocks predicted. Soybean exports were reduced in the report mainly on a strong competition from the Brazilian crop. The March 31 Prospective Plantings report indicated less soybean acres planted. The soybean crush, however, is raised based on a stronger soybean meal export environment and increased domestic disappearance. Domestic soybean meal use is expected to rise to fill the space left by reduced DDGs from lower ethanol production. Ending stocks were projected to rise by 55 million bushels to 480 million bushels. The report pegged the season-average soybean price at $8.65 per bushel, down a nickel.

Globally, soybean production is expected to drop to 338.1 million tons due to lower production in Argentina and Brazil. Argentina had a dry February and March in its main growing regions, and Brazil had drought in Rio Grande do Sul while its soybean crop was filling pods and maturing.

Cotton

The U.S. cotton supply and demand forecasts run the same lines as the grain forecasts–lower exports, lower consumption and therefore higher ending stocks compared to March. If a global economic slowdown does occur due to the COVID-19 global pandemic, the report predicts a significant reduction of global cotton demand and trade. The report predicts one of the largest one-month reductions in projected U.S. cotton exports ever—a drop of 1.5 million bales, down to 15 million bales. With 100,000 fewer bales consumed, ending stocks are now expected to reach 6.7 million bales, which, according to the report, is 37% of total disappearance. The projected marketing year average price for upland cotton was set at 59 cents per pound.

Consumption of cotton was 6.4% lower for every major country from last month, or down 7.6 million bales. World consumption of 110.6 million bales for 2019-20 is now projected to be 8.1% lower than last year, one of the largest annual declines on record, according to the report. World trade is down 3 million bales from March.

Livestock, poultry and dairy

The effects of COVID-19 on all sectors of the livestock sector will be felt throughout the rest of 2020, according to the report. Total red meat and poultry production for 2020 was reduced from March based on COVID-19’s affects on demand and economic uncertainty overall.

On the beef front, production is predicted to be lower, even with heavier carcass weights and higher cow slaughter.

Pork production was reduced from March in the WASDE report, even though the most recent Quarterly Hogs and Pigs report had relatively large supplies of hogs available for slaughter during most of 2020 and heavier hog carcass weights that would support increased production. Meanwhile, broiler producers are responding to weaker demand and lower broiler prices, and the production forecast showed that. Global demand for beef, pork and poultry is slowing and that will put pressure on prices.

The milk production forecast was reduced from March, based on slower growth in milk produced per cow and little change in cow inventory. There’s slowing international demand for nonfat dry milk, lactose, butterfat products and cheese. The WASDE Report forecast weak demand, large supplies and larger ending stocks, and therefore lower Class III and Class IV prices, with the all milk price to drop to $14.35 per hundredweight.

Jennifer M. Latzke can be reached at 620-227-1807 or [email protected].