U.S. Ethanol and Biodiesel Market-Profitability Graphics through 4/25/2017 (via KSU AgManager)

Following are some graphics on price and profitability trends in the U.S. ethanol and biodiesel industries, which will soon be available on the KSU AgManager website: http://www.agmanager.info/    The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, April 25, 2017 and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/us-ethanol-and-biodiesel-market-situation

 

 

 

 

 

 

 

 

 

 

 

 

KSU Wheat Market Outlook in April 2017 – “Decent” U.S. HRW Wheat Exports and Possible Market Scenarios for MY 2017/18

An analysis of U.S. and World wheat supply-demand factors and 2016-2017 price prospects following the USDA’s April 11th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports, and the market actions that have followed those reports are available on the KSU AgManager website (http://www.agmanager.info/).

Following is a summary – with the full analysis-article for Wheat to be found at this web location:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

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Summary

Since the USDA’s April 11th World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat futures market prices first traded higher then turned lower.  CME MAY 2017 Kansas HRW Wheat futures gained $0.04 ¼ /bu to close at $4.29 ¾ on 4/11/2017 – the day of the report – but after trading higher for two days have since declined through Wednesday, April 19th – closing down to $4.16 ¾ that same day.

World Wheat Supply-Demand

For the “current crop” 2016/17 marketing year (MY), the USDA projected the following. First, World wheat total supplies of 993.1 million metric tons (mmt) and total use of 740.8 mmt – both at record high levels.  Second, that World wheat exports are continuing to trend higher to 180.7 mmt in the “current” marketing year – up from 172.8 mmt last year, and up from 164.45 mmt two years ago.  Third, World wheat ending stocks at a record high 252.3 mmt up from 241.7 mmt last year, and 217.6 mmt two years ago.  And fourth, World wheat percent ending stocks-to-use (S/U) of 34.05% – up from 34.0% last year, and from 30.85% two years ago –the highest since MY 2005/06.

For a perspective on how historically large World total wheat stocks and World wheat percent stocks-to-use now are, in MY 2007/08 the 34-year low in World wheat ending stocks of 128.1 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% stocks/use both occurred – the last major World wheat “short crop” marketing year.  The situation in MY 2007/08 compares to projections of 252.3 mmt ending stocks and 34.05% ending stocks-to-use projected for “current” MY 2016/17.  The present “large crop-over supply” situation in World and U.S. wheat markets have a prevailing negative influence on U.S. and World wheat prices.

However, the broader “large crop-over supply-low price” situation in the World wheat market may be “obscuring” at least a couple of other important market issues.  First, while the quantity of wheat available in the World is plentiful, the available supply of high protein milling wheat is less so.  This factor helps exports of both U.S. Hard Red Spring (HRS) wheat (higher protein – good quality) relative to World wheat export competitors.  Second, while the aggregate supply of wheat in World markets has grown, the supply of wheat in the “World Less China” is projected to have actually “contracted” or “diminished” in “current crop” MY 2016/17 compared to a year ago – down to the tightest supply-balances only marginally larger than existed in MY 2013/14.  If this “China factor” eventually leads to noticeably tighter available global supplies of exportable wheat to occur in coming months, it could have a positive impact U.S. wheat market prices in late-Spring 2017.

Even so, given the broader World wheat market’s current focus – it is likely that significant World wheat production problems and/or trade disruptions would need to occur in year 2017 in order to have wheat prices recover significantly by spring-summer 2017.  Ongoing strength in the U.S. dollar exchange rate is a serious negative factor limiting the competitive affordability of U.S. wheat exports.  These factors have resulted in higher U.S. wheat ending stocks and % ending stocks-to-use, and have caused U.S. and Kansas wheat cash prices to fall sharply – down near to and below the marketing loan rate in many Kansas locations.

USDA U.S. Wheat Supply-Demand Forecast for “Next Crop” MY 2017/18

On February 23-24, 2017 at the Agricultural Outlook Forum in Arlington, Virginia, the USDA released their grain market supply-demand and price projections for “next crop” MY 2017/18.  With additional acreage and usage information the March 31st USDA Prospective Plantings and Grain Stocks reports, and the April 11th USDA World Agricultural Supply and Demand Estimates (WASDE) report, the following projections for “next crop” MY 2017/18 are figured.

For “next crop” MY 2017/18, 2017 U.S. wheat plantings are projected to be 46.059 million acres (ma) – down from 50.154 ma in 2015.  Harvested acres for 2016 are forecast to be 39.050 ma – down from 43.890 ma a year ago.  Trendline 2017 wheat yields for 2017 are projected at 47.1 bu/a, down from the 2016 record of 52.6 bu/ac, while the adjusted 2017 U.S. wheat production forecast is 1.839 billion bushels (bb), down from 2.310 bb in 2015.  Projected “next crop” MY 2017/18 total supplies are 3.118 bb (down from 3.395 bb in “current” MY 2016/17), with total use of 2.191 bb (down from 2.236 bb in “current” MY 2016/17).

Given these numbers, the adjusted USDA projection of “next crop” MY 2017/18 ending stocks equals 927 million bushels (mb) (vs 1.159 bb a year ago), with percent ending stocks-to-use of 42.3% S/U (vs 51.8% last year and 50.0% the previous year).  United States’ wheat prices are projected to average approximately $4.25 /bu – up from $3.85 in “current” MY 2016/17, but down from $4.89 /bu in MY 2015/16, and $5.99 /bu in MY 2014/15.   It is assumed by Kansas State University that these adjusted USDA projections for “next crop” MY 2016/17 have a 50% probability of occurring.

Three Alternative KSU U.S. Wheat Supply-Demand Forecasts for “Next Crop” MY 2017/18

As an alternative to the USDA’s projection, three potential KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “next crop” MY 2017/18.

A. KSU Scenario 1) “Trend Yield” Scenario (25% probability) assumes for “next crop” MY 2017/18 that the following occurs.  It is assumed that there will be 46.059 ma planted, 39.334 ma harvested, 47.0 bu/ac trend yield, 1.849 bb production, 3.128 bb total supplies, 975 mb exports, 190 mb feed & residual use, 2.191 bb total use, 937 mb ending stocks, 42.8% S/U, & $4.20 /bu U.S. wheat average price.

B. KSU Scenario 2) “Higher U.S. Wheat Exports” Scenario (15% probability) assumes for “next crop” MY 2017/18 the following.  The following is forecast for “next crop” MY 2017/18, i.e., 46.059 ma planted, 39.334 ma harvested, 47.0 bu/ac trend yield, 1.849 bb production, 3.128 bb total supplies, 1.150 bb exports, 190 mb feed & residual use, 2.326 bb total use, 802 mb ending stocks, 24.10% S/U, & $4.90 /bu U.S. wheat average price;

C. KSU Scenario 3) “Short U.S. Wheat Crop” Scenario (10% probability) assumes for “next crop” MY 2017/18 that the following happens.  This scenario assumes 46.059 ma planted, 37.124 ma harvested, 40.0 bu/ac low yield, 1.485 bb production, 2.769 bb total supplies, 975 mb exports, 175 mb feed & residual use, 2.175 bb total use, 594 mb ending stocks, 27.31% S/U, & $5.50 /bu U.S. wheat average price.

Crop Production and Grain Stocks Trends in the U.S. and Kansas – Following from Abundant U.S. Grain Harvests

One of the factors causing U.S. grain prices to stay at their current moderate-to-low levels is the total quantity of U.S. corn, grain sorghum, wheat and soybeans available relative to commercial off-farm storage capacity.  This “strain” on storage capacity can be described as a “high demand for grain storage space.”  The net result of strong demand for limited U.S. grain storage capacity is a high real cost of storage – a factor that is influencing the U.S. hard red winter wheat market located in the central and southern plains states (Kansas, Oklahoma, Texas, Colorado, etc.).

The following slides are meant to illustrate this “oversupply relative to grain storage” situation as it exists in the U.S. and in the state of Kansas in the 2016/17 marketing year.  In summary, large crop supplies relative to available storage capacity characterize the U.S. grain storage and handling industry at this point in time.  Looking into the future the remedy for this current situation will come from either reduced grain supplies or increased grain usage.  The quickest remedy would seem be some sort of short crop/short supply situation in the U.S. in the coming months of year 2017.  Although it would be a surprise to the market, some combination of foreign crop production problems and increased U.S. grain export demand would also help to alleviate the current oversupply situation.

So, the grain market waits to see whether some combination of these supply – demand factors may reduce supplies relative available to grain storage capacity.  It is not too much of a “stretch” to say that we should know the answer to that question by August-September 2017!

 

 

KSU Weekly Grain Market Analysis: With Large South American Crops – Focus will shift to U.S. Prospects in May-August

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, April 14, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_04-14-17.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, April 14, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 14th recording will be available after the program airs at the KSU Agriculture Today website.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

KSU Weekly Grain Market Analysis: Anticipating the April WASDE + Kansas Crop Cost-Returns

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, April 7, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_03-31-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, April 7, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 7th recording is available at the KSU Agriculture Today website.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

Evaluating USDA Prospective Plantings and Grain Stocks Reports “By the Numbers”

Following are some extensive data tables representing a Kansas State University perspective on the USDA reports released today, i.e., the Prospective Plantings and Grain Stocks Reports.  Lower than expected 2017 planted acres intentions for U.S. corn, grain sorghum, and durum wheat, and more for soybeans.   Less than expected DEC-FEB 2017 feed usage of corn, wheat, and soybeans led to higher March 1, 2017 grain stocks for these same crops.   Following are tables from KSU comparing the results of these reports to prereport trade expections and the last 3 actual years.

 

USDA Grain Transportation Report – Overview of U.S. Grain Transportation and Exports in March 2017

The March 30th USDA Grain Transportation Report from the USDA Agricultural Marketing Service focuses focuses on grain transportation and export trends critical to U.S. grain markets.   The pace of U.S. grain exports in the “current” 2016/17 marketing years for U.S. corn and soybeans is evidenced in these numbers and their impact on the U.S. rail, river, truck, and ocean transportation systems.

This report also shows the amount of U.S. hard red winter wheat exports relative to other U.S. classes of grain, and also where and by what means grain is flowing in the U.S. (i.e., via the Mississippi and Missouri River System to the Gulf of Mexico, rail to the Pacific Northwest, and via the St. Lawrence Seaway)

This is great information to consider in trying to understand the factors affecting U.S. grain markets.   Following is a selection of the information in this report, with a full report provided at the USDA AMS website.