COVID drops corn and cotton; soybeans stable and rice gets stronger
The COVID-19 pandemic has slowed demand in the energy and textiles sectors, prompting sharp declines in cotton and corn markets, according to a report from economists with the University of Arkansas System Division of Agriculture.

Alavaro Durand-Morat, assistant professor for the Division of Agriculture and co-author of the report, said that both corn and cotton have seen a significant decrease in global demand due to the pandemic.

As countries around the world have imposed varying forms of “lockdown” or “stay-at-home” ordinances, both local and international travel have been reduced to a trickle, Durand-Morat said.

“The ethanol industry made up roughly 40 percent of U.S. corn production,” he said. “This year, the Renewable Fuel Association estimated that biofuel demand will be down 20-25 percent in the short term, which translates into a large drop in demand for corn.” “In this last week, the markets have found a new equilibrium, but at much lower prices,” Durand-Morat said.

“In the case of cotton, it’s the same idea,” he said. “The demand for clothing has decreased as the drop in gross domestic products decrease around the world, which is putting a lot of pressure on cotton prices, which, at some point, were down 25 percent. Year-to-date, I think the prices have stabilized, but with significant losses.”

The Division of Agriculture report highlights positive export sales announcements earlier this week, as December cotton futures gained about 2 cents per pound, trading at about 57 cents per pound. According to the report, China announced plans to add about 1 million tons of cotton to its reserves, the majority of which would be imported from the United States and contributing to its fulfillment of the Phase 1 trade deal signed earlier in the year.

Soybeans, despite suffering a 50 cent drop in bushel prices overall last week, may end
up looking like the safer alternative to corn acreage.

“The United States has actually seen increasing exports in soybeans due to Chinese demand, while Argentina, and to some extent Brazil, are having COVID-related export restrictions,” Durand-Morat said. “So I think the soybean market is surprisingly resilient, although prices are lower, year-to-date, it hasn’t been as bad as cotton and corn.”

Spring rains have made early planted rice rare throughout the month of March, and are continuing to give Arkansas growers an uphill battle going into May. But the

commodity’s performance under pressures of global trade in the time of COVID-19 may prove to be its finest hour.

“The rice market has actually remained quite steady, and in the international market, things are actually looking up for U.S. producers, due to C19’s impact on some other exporting countries,” Durand-Morat said.

Exports from several rice exporting countries, including Cambodia, Myanmar and Pakistan have been suspended due to concerns over the COVID-19 pandemic. U.S. rice exports remain uninterrupted, however, with short supply driving prices.

In addition to the cotton purchases mentioned above, China has announced it will also add about 10 million tons of soybeans and 20 million tons of corn to its state reserves. Going forward, Durand-Morat said that while the drop in ethanol demand may lead some Arkansas growers to swap corn for soybeans, other changes in planned acreage would likely hinge less on global markets in the near term, and more on weather coping strategies.

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