Jim Mintert and Michael Langemeier examine market factors impacting corn and soybeans, livestock, farm income and cash rents monthly. Their conversations were rather bleak in April and May. By mid-June, there were glimmers of hope.

“More than anything, we pointed to a lot of uncertainty and unanswered questions,” says Mintert, Purdue University Extension ag economist and director of the Purdue Center for Commercial Agriculture. Langemeier is also a Purdue Extension ag economist and associate director of the center.

Here’s a closer look:

Ethanol picture. While still off pace from 2019, ethanol demand crept up from serious lows in mid-May. When oil prices went negative temporarily, ethanol demand tanked. Many plants shut down or cut back production, Langemeier says. By early June, the industry was reporting positive return over variable costs per gallon produced, although it was about half what it had been before the pandemic. And that doesn’t begin to cover return to fixed costs.

“We still see that as a positive for ethanol and potential corn demand,” Mintert says.

Basis in markets. The eastern Corn Belt had enjoyed a favorable basis, primarily due to strong ethanol demand, until the pandemic unfolded.

“We’re starting to see that come back somewhat for corn,” Mintert says. It’s not as strong as it was, but it could help add to market prices if it holds.

Meanwhile, basis for soybeans, although weaker than before the pandemic, remained above the most recent three-year average in mid-June.

Export picture. USDA sees some hope in recovering exports, but the Purdue ag economists think the jury is still out. It’s too soon to tell how many soybeans China will buy from the U.S. and what will happen with pork exports. The export market has become extremely important for pork.

Carryout stocks. If there is light at the end of the tunnel, it could be from a train, and the train might be huge carryout stocks at the end of the 2020 marketing year, especially for corn. This is one big uncertainty, Mintert notes. If farmers planted as much corn as reported in the USDA March intentions report, carryout stocks could end up at very high levels.

“We don’t know if some people switched to soybeans when budgets began favoring soybeans in April or not,” Langemeier says. “That is one of the uncertainties.”

The carryout potential for soybeans, while high, is likely less imposing than for corn. That is one reason why the ag economists see more potential for more favorable soybean prices.

Government payments. While government payments likely won’t offset budget decreases in income caused by lower-than-expected prices, they could be significant. There will be a payment from the COVID-19 relief bill, plus there will likely be Agriculture Risk Coverage-county payments for soybeans and Price Loss Coverage payments for corn. Many growers chose those options for 2019 and 2020 in the farm bill sign-up.

“At this time, there is no Market Facilitation Program payment scheduled, so that is another unknown,” Langemeier says. In his west-central Indiana case farm example, which is on a corn-soybean rotation, right now projected government payments in 2020 would still be about $20 per acre less than in 2019, without an MFP payment.

Feed usage. Livestock producers still haven’t backed off numbers significantly, Mintert says. If that holds through most of 2020, it could mean large feed usage again this year. That would be a plus for corn and soybean demand.