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dfp-adismukes-cotton-after-harvest.JPG Alaina Dismukes
"Cotton has been the most affected by the buyer's pandemic in the market downturn. Cotton prices are down by nearly 25%," William Maples said.

Row crop market update

William Maples updates row crop markets in light of recent events such as the COVID-19 pandemic, the China trade deal, and low ethanol prices.

Between the COVID-19 pandemic, the China trade deal, and ethanol prices going down, 2020 has seen a lot of market volatility within a few months.

William Maples, assistant professor in Agricultural Economics at Mississippi State University, gave a row crop market update during a webinar on April 9.

Market overview

One new aspect which is affecting the market is the COVID-19 buyer's pandemic.

"From the start of the year," Maples said, "the stock index dropped off at the low point to nearly 30% and is still down about 25% from where we were when we started, due to the pandemic.

"Cotton has been the most affected by the buyer's pandemic in the market downturn. Cotton prices are down by nearly 25%. Corn is down about 15%, and soybeans have been the least affected, down about 10%. However, soybeans were losing some ground back before the pandemic started."

On March 31, the USDA came out with the 2020-2021 prospective planting numbers. Examining the survey, producers planting intentions during the first two weeks of March were surprising to some people.

"Corn acres came in about 97 million acres this year, up 7.5% from last year. This is a pretty substantial number above trade estimates," Maples said. "Cotton acres surprised me. They are suggested to remain flat this year, down only 0.3%, when I thought we would see a decrease in cotton acres.

"Soybean acres came in at 83.51 million acres. We expected a rebound of soybean acres from the lows of last year, so they're up about 9%. Rice acres are up about 11%, and peanut acres are up about 6.6%."

For Mississippi, it looks like there will be a 10% increase in soybean acres for the 2020 year. Cotton will be down 7% to 7.5%, while corn will be up 7%.

"In 2019 in Mississippi, we planted 710,000 acres of cotton and 660,000 acres of corn, and this year we have swapped those two numbers," Maples said. "Rice is up about 22% at 150,000 acres, and peanuts will stay close to the same as last year at around 20,000 acres."

Ethanol prices and corn

The pandemic is affecting the corn market due to current gasoline prices.

"The effect on corn is through ethanol," he said. "Currently, all but about eight states in the United States have shelter in place orders, so the gasoline demand has gone down significantly due to a lack of travel. There has also been a huge decrease in the supply of gasoline over the past month, which led to less driving as well."

Field ethanol production is way down due to less travel.

"For 2020, we're down to about 680,000 barrels per day of production of ethanol," Maples said. "This is the lowest it's been since 2010, and ethanol plants have had it rough the last few years, which has not been good for corn and ethanol demand."

On April 9, the USDA's latest World Agricultural Supply and Demand Estimates (WASDE) gave a glimpse at how much corn for ethanol demand has been hurt.

"In March, corn for ethanol was about 5.4 billion bushels of corn," he said. "In the newest report, we've seen about a 320-million bushel decrease in corn demand for ethanol, which is what we expected, since we knew demand would be down."

On the latest WASDE number, supply has not changed at all and is set for the year.

"On the consumption side, feed and produce picked up some of the slack from the lost corn demand from ethanol," Maples said.

Looking ahead to 2020-21, the USDA came out with preliminary outlook numbers in their annual outlook forum before the pandemic, which puts corn at 97 million acres and total production for the upcoming marketing year at 15.4 billion bushels.

"If we do plant 97 million acres of corn," Maples said, "we're going to be swimming in corn next year, and this is going to be a huge amount of supply to try to sell and get through the system, which will drive our average farm prices down.

"We're starting to plant across the country, and with a forecast for a wet spring, that could potentially help rally prices a little to allow opportunities to market some grain. It's important to keep an eye on the market and take advantage of any opportunities you see."

Soybeans and China market

While soybeans aren't necessarily doing the best out of the row crops, they have not been affected as much by the current market concerns with COVID-19.

"Soybeans depend on the demand in China going into the next marketing year," he said. "How much are they going to stick to the phase one trade deal is the question that hangs in the market right now. There is optimism around the trade deal that China will stick to it, but right now, it's still a big unknown."

The futures markets were at around $8.70 as of April 9.

"Keep an eye open for future marketing opportunities," Maples said. "In the last few years, price uncertainty and variability have been high."

Cotton prices down

Cotton is the one crop probably the most affected by the COVID-19 pandemic.

"Cotton is a different crop than our grain crops since it's not going to food production," Maples said. "Cotton is a semi-durable and industrial input since it is made into goods such as jeans, clothes, fabrics for home furnishings, etc. People can put off buying an extra pair of jeans or new curtains if they come on hard times. Often when we see lost income or lost employment in the overall economy, cotton takes a hit."

Since February, 10% of the U.S. workforce had lost jobs, according to the latest unemployment numbers.

"Anytime we have an overall U.S. economic downturn, cotton's going to take the brunt of the impact. However, the fundamentals were there to support a 70-cent cotton price. The ripple effects of this pandemic across the global supply chain, though, is still something that people aren't sure about, so there is some uncertainty around the cotton market."

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