Quarantines and shelter-in-place policies related to the COVID-19 pandemic have significantly reduced US automobile miles driven this year, depressing demand for gasoline and ethanol produced from corn. Assuming corn acreage will decline with demand, we are able to calculate the agricultural impact using US corn, ethanol, and crude oil price data on the Gro platform.
Auto insurance software firm CCC used sharply lower car accident data to estimate that the annualized hit to driving demand could be “as high as 10.1%.” We analyzed the impact this could have on corn acreage for three scenarios of declines in miles driven—5%, 10%, and 15%—because of the uncertainty concerning the length and severity of the shutdown. We make the assumption that gasoline and ethanol demand will fall in proportion to miles driven.
Crude oil prices have crashed along with global fuel use, from $51.59 per barrel on Jan. 1, down 65% to $17.90 on April 23 for the June contract. US gasoline demand is down more than 40%, falling from 8.9 million barrels per day at the end of December to 5.5 million barrels per day during the week ending April 17.
Putting those pieces together, and using the national average yield per acre, we arrive at 1.8 million unneeded corn acres under the most optimistic scenario of a 5% annual reduction in ethanol demand. The CCC scenario, which would result in about a 10% cut in 2020 ethanol demand, would translate to 3.5 million acres of superfluous corn. If ethanol demand drops 15%, that would correspond to 5.3 million unneeded acres of corn.
The USDA, in its March 30 Prospective Planting Report, projected 97 million acres of corn would be planted in the 2020/2021 crop season. This estimate, while fluid, will be revisited again during the June Acreage Report. Many will look for a switch between corn and soybean acreage, as demand, and ultimately changes in price, have occurred since initial planting intentions were reported.
We have been researching the impact of COVID-19 on agricultural markets since early in the crisis. Click on the chart below to interact with various Gro displays on COVID and ethanol.
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This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.