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October 22, 2020 | FBN Insights | Kevin McNew

Australia Crops Increase

Australia’s wheat production and exports are expected to nearly double from last year

Ethanol Production Down 

  • U.S. ethanol production, for the week ended October 16, declined to 913,000 barrels/day from 937,000 the week prior.
  • It marks the lowest run rate in three weeks.
  • Production was 8.3% below the 996,000 barrels/day in the same week last year.
  • This was the largest percentage production decline in two months.
  • Last week’s production used approximately 93 million bushels of corn, roughly 6 million bushels less than the same week last year.
  • The average annualized corn usage rate so far in 2020/21 is 4,830 million bushels.
  • Ethanol stocks fell last week to 828 million gallons from 840 million gallons in the week before.
  • Last week's gasoline demand fell off significantly to 8.3 million barrels/day from 8.6 million the week prior, the lowest outright demand in 18 weeks.

FBN’s Take On What It Means: The diminished corn usage is due to the slow recovery from Covid-19 and stagnating domestic use due to lower gasoline demand. At this point, ethanol production will need to run around 6% above year ago levels through the end of the marketing year in order to reach the USDA's 5,050 million bushel annual corn for ethanol usage estimate. This may be a problem going into the winter months amid a potential recurrence of a coronavirus slowdown. 

Australia Crops Increase 

  • The USDA ag attaché in Australia projects the wheat crop at 28 million tonnes, slightly below the USDA’s last projection of 28.5 million.
  • If realized this will be the largest crop in four years and the 3rd largest on record.
  • Australia’s wheat exports are forecast to be up sharply to 18.5 million tonnes in 2020/21 from 9.5 million last year. 
  • Barley production is projected at 10.3 million tonnes, up from last year’s 9.0 million, with exports up 1 million tonnes to 4.2 million. 
  • Sorghum production is forecast to increase sharply to 1.7 million tonnes from last year’s 300,000 tonnes, with exports of 600,000 tonnes.

FBN’s Take On What It Means: The attaché’s forecasts are slightly below the last USDA projections due to ongoing drier conditions in Western Australia. Still, Australia’s wheat production and exports are expected to nearly double from last year. The vast majority of Australia’s wheat exports go to Asian and Southeast Asian markets so competition to those destinations will be difficult.  

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