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Corn producers see $50/acre revenue declines amid COVID-19

Reduced ethanol and livestock demand deals corn producers double blow.

Cash corn prices have declined by 16% on average since March 1, with several regions experiencing declines of more than 20%, as a result of the COVID-19 pandemic, according to an analysis released by the National Corn Growers Assn. (NCGA). The analysis projects a $50-per-acre revenue decline for the stored 2019 corn crop.

“The COVID-19 pandemic is being felt across all sectors of our economy,” NCGA president Kevin Ross said. “This analysis clearly illustrates its impact on corn growers and will be beneficial as we work to ensure they have the resources needed to navigate these very difficult times.”

NCGA commissioned the economic analysis, conducted by Dr. Gary Schnitkey of the University of Illinois, as part of the organization’s efforts to better understand the economic impact of the global pandemic on the corn industry and work to create solutions to help corn farmers and their customers recover from the financial impacts of this crisis.

During January and February, cash corn prices averaged $3.68/bu. From April 1 to April 15, prices averaged $3.15/bu., down 63 cents from January to February, or a 17% decrease.

In February, the U.S. Department of Agriculture’s Office of the Chief Economist, estimated that marketing year average corn prices for 2019 were $3.85/bu., while post-COVID-19 prices were estimated at $3.55/bu.

An estimate of the revenue decline can be found by multiplying the price decline by the yield produced in 2019. The national yield was 168 bu. per acre. A 30-cent decline in price would result in a revenue decline of $50 per acre. Revenue declines will vary across producers, depending on yield and the percentage of crop remaining to be marketed. This estimate does not include any hedging done with future contracts but would include forward contracting.

The revenue decline for soybeans was estimated at $11 per acre. Wheat revenue increased by $5 per acre. Cotton declined by $29 per acre. Compared to the other corps, corn has a much larger revenue decline of $54 per acre. “Ethanol and livestock use predominate as uses for corn, both of which are having great difficulties in the current environment. These difficulties then lead to corn having the highest price and revenue decline,” the analysis explained.

The analysis was based on cash corn prices as of mid-April, and estimated losses will likely increase through the rest of the marketing year. Further analysis is already underway for the 2020 crop year, with losses anticipated to be higher than those in 2019.

“Corn will be one of the most impacted crops, as its two largest uses – livestock feed and ethanol – are under pressure. Impacts of reduced livestock demand are just beginning to come to bear in the market as livestock processing plants are beginning to be disrupted,” Schnitkey wrote.

An average Price Loss Coverage (PLC) program payment of $17 per base acre is projected for corn, which would fall short of covering 2019 revenue losses, hence underscoring the need for the assistance provided by USDA's Coronavirus Food Assistance Program.

NCGA said it will continue to work closely with members of Congress and federal agencies on ways to mitigate the pandemic’s impact and help farmers recover. Learn more about these efforts at ncga.com/covid-19.

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