U.S. Ethanol and Biodiesel Markets and Profitability – Losses for Ethanol, Breakeven for Biodiesel for September 1-22, 2020

Ethanol and Biodiesel Market Trends & Profitability Through September 22, 2020

Daniel O’Brien, Extension Agricultural Economist – Kansas State University

September 22, 2020

A. Ethanol Price and Profitability Trends

Using an Iowa State University model and applying price estimates from Kansas State University, ethanol plants in Iowa and other Midwest states were operating at estimated losses on average of $0.03 /gallon for September 1-22, 2020.   These ethanol plant operating loss estimates have continued for 26 months since August 2018 – with average operatinglosses of -$0.15 per gallon – ranging from of -$0.01 to -$0.26 per gallon over the August 2018 – mid-September 2020 time period.

During the September 1-22, 2020 period, corn input purchase prices for Iowa ethanol plants are estimated to have averaged near $3.44 /bu – compared to $3.04 in August, $3.09 in July, $3.10 in June, $2.95 /bu in May, and $2.93 in April 2020. During the October 2019 through March 2020 period corn input purchase prices at Iowa ethanol plants averaged near $3.71 /bu following the corn production problems of year 2019.

Selling prices of distillers dried grains (DDGS) (10% moisture) averaged near $138.27 per ton during the September 1-22 period, up from $125.42 in August, $116.93 per ton in July, $127.49 in June 2020, $143.33 in May, and $192.05 in April 2020.

The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants is estimated to have averaged near $1.32 / gallon during the September 1-22, 2020 period, being up from $1.19 in August, $1.27 /gallon in July, $1.19 in June, and $1.00 in May 2020.

The cost of production of a representative ethanol plant in Iowa is estimated to be near $1.35 / gallon during the September 1-22 period, up from $1.25 in August, and the range of $1.01 to $1.29 during April through July 2020, and comparable to $1.33 in March, and the range of $1.45 – $1.51 per gallon during the October 2019 through February 2020 period.

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B. Ethanol Production & Stocks Trends

During the “old crop” 2019/20 marketing year (MY) for U.S. corn ending August 31, 2020, U.S. ethanol production averaged 0.929 million barrels per day (mb/d) – with a range of 537 (on April 24th) to 1,095 mb/d (on January 10th) over the 52 week period.  During the first two weeks of “new crop” MY 2020/21 (ending September 4th and 11th) U.S. ethanol production averaged 0.934 million barrels per day (mb/d). At this average pace throughout the remaining 50 weeks of “new crop” MY 2019/20, U.S. ethanol production would reach 14.310 billion barrels in “new crop” MY 2019/20.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), a total of 5.057 billion bushels (bb) of feedgrains would be used for ethanol production in “new crop” MY 2020/21.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on September 11, 2020 have a forecast in “new crop” MY 2020/21 of 5.100 bb of U.S. corn would be used for ethanol production, and that 40 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production. Estimating 2 mb in other FSI usage for U.S. grain sorghum for non-ethanol uses (i.e., seed & other), total U.S. feedgrain usage for ethanol production in “current” MY 2019/20 would equal 5.138 bb, or 101.6% of the KSU projection of 5.056 bb.

United States’ ethanol stocks have averaged 22,642,000 barrels per week during “old crop” MY 2019/20, i.e., in early September 2019 – through August 2020.  After reaching highs of 27.1-27.7 million barrels during the COVID-19 affected 1st three weeks of April, ethanol stocks declined approximately 25% down to an average of 20.329 million barrels during July-August 2020.  During the first 2 weeks in “new crop” MY 2020/21 U.S. ethanol stocks declined further to 19,896,000 barrels per week.

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C. Biodiesel Price & Profitability Trends

The estimated profitability of Iowa Biodiesel plants first increased and then declined during the January-June 19, 2020 period.

By Kansas State University estimates, during the September 1-22, 2020 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $27.20 per cwt – up from $25.59 in May, $26.97 in April.

The selling price of Biodiesel at Iowa Biodiesel Plants is estimated to have averaged $3.17 /gallon during the September 1-22 period, comparable to $3.06 in August, $2.83 /gallon during July, $2.71 in June, and $2.58 in May 2020,

Also during the September 1-22 period, the cost of production at representative biodiesel plants in Iowa is estimated to have averaged $3.16 per gallon – up from $3.06 in August, and comparable to $2.82 in July, $2.69 in June, $2.58 in May, and $2.61 in April 2020.

As a result, net returns of this representative soy biodiesel plant in Iowa during September 1-22, 2020 were estimated to be nearly breakeven at $0.01 per gallon producedThis is comparable to a 3 month average of +$0.01 /g during June-August 2020.

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Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends, which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

U.S. Soybean Market Analysis – Alternative U.S. Soybean Supply-Demand-Price Scenarios for “New Crop” MY 2020/21

The following article provides “U.S. Soybean Market Analysis”, assessing the “Prospects for Alternative U.S. Soybean Market Scenarios in “New Crop” MY 2020/21″.  Soybean supply-demand and price information for this analysis comes from the September 11, 2020 USDA information, including the USDA NASS Crop Production report, the World Agricultural Supply and Demand Estimates (WASDE) report, and other market price information through September 21, 2020.

Kansas State University Extension Agricultural Economist Daniel O’Brien has written this article which is also presented on the www.AgManager.info website – sponsored by the Agricultural Economics Department of Kansas State University.

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U.S. Soybean Market Outlook in September 2020

Prospects for Alternative U.S. Soybean Market Scenarios in “New Crop” MY 2020/21

Daniel M. O’Brien, Extension Agricultural Economist – Kansas State University

Soybean Market Perspective

Prices in U.S. and World the soybean market have trended decidedly higher over the last month.  Chicago Mercantile Exchange (CME) NOV 2020 soybean futures had risen as high as $10.46 ¾ per bushel on Friday, September 18th, before closing down to $10.22 ½ on Monday, September 21st.  The high of $10.46 ¾ on 9/18/2020 is up $1.81 ½ /bu. from the low of $8.65 ¼ /bu. on August 10, 2020 – a gain of 21% in 28 market days since the day of the August 2020 USDA reports.  Moderately lower 2020 U.S. soybean production prospects, a weaker U.S. dollar, and surging Chinese soybean imports from the U.S. and South America are key factors recently supporting soybean market prospects.

In its September 11, 2020 Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, the USDA projected 2020 U.S. soybean production of 4.313 billion bushels (bb).  Projected 2020 U.S. production of 4.313 bb is up 21.4% from 3.552 bb in 2019, but down 2.6% from 4.428 bb in 2018.  

Large U.S. soybean total supplies of 4.903 bb in the “new crop” 2020/21 marketing year (MY), which started on September 1, 2020 are up 9.5% from 4.477 bb in “old crop” MY 2009/20, but only up 0.5% from 4.880 bb in MY 2018/19.

Projected U.S. soybean use of 4.442 bb in “new crop” MY 2020/21 is up 13.8% from 3.903 bb in “old crop” MY 2019/20, and up 11.9% from 3.971 bb in MY 2018/19. 

Strong U.S. soybean exports are the key positive market driver to date in “new crop” MY 2020/21.  The USDA projected that U.S. exports of 2.125 bb are up 26.5% from 1.680 bb in “old crop” MY 2019/20, and up 21.3% from 1.752 bb in MY 2018/19.  U.S. domestic crush of 2.180 bb is up 0.5% from 2.170 bb in “old crop” MY 2019/20, and up 4.2% from 2.092 bb in MY 2018/19.  Prospects for U.S. exports in “new crop” MY 2020/21 (2.125 bb) may improve still more IF crop production problems develop in South America in early 2021 – forcing China to purchase more soybeans from the United States.

U.S. soybean market price gains to date in “new crop” MY 2020/21 have been “moderated” by ending stocks being “tighter”, but not “extremely scarce”.  The USDA projected U.S. soybean ending stocks of 460 million bushels or ‘mb’ in “new crop” MY 2020/21, was down 20% from 575 mb in “old crop” MY 2019/20, and down 49.4% from 909 mb in MY 2018/19.   Similarly, projected percent (%) ending stocks-to-use of 10.36% in “new crop” MY 2020/21 are down from 14.73% in “old crop” MY 2019/20, and from 22.89% from MY 2018/19. 

The USDA projected the U.S. soybean average farm price of $9.25 per bushel in the September 11, 2020 USDA WASDE report – raised $0.90 /bu. or 10.8% from $8.35 in the August 10th WASDE report.  This USDA projection of $9.25 /bu. for “new crop” MY 2020/21 is up 8.2% from $8.55 /bu in “old crop” MY 2019/20, and up 9.1% from $8.48 /bu. from MY 2018/19.

Coming USDA report dates in which important soybean market USDA in terms of USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will be released on October 9th, November 10th, December 10th, and in early January, 2021.

  

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Prospects for U.S. Soybean Supply-Demand & Prices in “New Crop” MY 2019/20

Following is the USDA forecast of U.S. Soybean supply-demand balances and prices for the “new crop” 2020/21 marketing year, supplemented with Kansas State University estimates of alternative price outcomes for the same period.  This author has taken the liberty to estimate the probability of each of these scenarios occurring in the “new crop” 2020/21 marketing year which began on September 1, 2020.

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USDA Scenario #1 – 4.313 bb Crop, U.S. Exports = 2.125 bb, $9.25 /bu (40% probability KSU)

On September 11th the USDA projected that U.S. corn production would be 4.313 billion bushels (bb) in year 2020, with total supplies of 4.903 bb in “new crop” MY 2020/21 (Tables 1a-b)

This supply-demand scenario predicts increases in all use categories over a year earlier, including, a) domestic crush at 2.180 bb (up 10 mb or .5% from the previous marketing year), and b) exports of 2.125 bb (up 445 mb or 26.4%) for “new crop” MY 2020/21, with total use of 4.442 bb – up 539 mb or 13.8% from 3.903 bb in “old crop” MY 2019/20.

Ending stocks of 460 mb (down 20.0%) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 10.36% (vs. 14.73% a year ago), and U.S. average cash soybean prices of $9.25 /bu. (up $0.70 or 8.2% vs last year). 

This USDA forecast is given a 40% probability of occurring by KSU.

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KSU Scenario #2 – 4.313 bb Crop, U.S. Exports = 2.225 bb, $9.75 /bu (35% probability KSU)

An alternative KSU Scenario #2 to consider for “new crop” MY 2020/21 involves unchanged 2020 U.S. soybean production (4.313 bb), and total supplies (4.903 bb) (Table 1b).

This supply-demand scenario also predicts increases in all use categories over a year earlier, including, a) domestic crush at 2.180 bb (up 10 mb or .5% from the previous marketing year), and b) exports of 2.225 bb (up 545 mb or 32.4%) for “new crop” MY 2020/21, with total use of 4.542 bb – up 639 mb or 16.4% from 3.903 bb in “old crop” MY 2019/20.

Ending stocks of 360 mb (down 37.4%) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 7.95% (vs. 14.73% a year ago), and U.S. average cash soybean prices of $9.75 /bu. (up $1.20 or 14.0% vs last year). 

This KSU forecast scenario is given a 35% probability of occurring.

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KSU Scenario #3 – 4.313 bb Crop, U.S. Exports = 2.325 bb, $11.00 /bu (15% probability KSU)

An alternative KSU Scenario #3 to consider for “new crop” MY 2020/21 also involves unchanged 2020 U.S. soybean production (4.313 bb), and total supplies (4.903 bb) (Table 1b).

Again, this supply-demand scenario also predicts increases in all use categories over a year earlier, including, a) domestic crush at 2.180 bb (up 10 mb or .5% from the previous marketing year), and b) exports of 2.325 bb (up 645 mb or 38.4%) for “new crop” MY 2020/21, with total use of 4.642 bb – up 639 mb or 16.4% from 3.903 bb in “old crop” MY 2019/20.

Ending stocks of 260 mb (down 45.2%) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 5.60% (vs. 14.73% a year ago), and U.S. average cash soybean prices of $11.00 /bu. (up $2.25 or 28.7% vs last year).  

This KSU forecast scenario is given a 15% probability. 

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KSU Scenario #4 – 4.063 bb Crop, U.S. Exports = 2.125 bb, $12.25 /bu (10% probability KSU)

KSU Scenario #4 for “new crop” MY 2020/21 involves a 250 mb decline in forecast 2020 U.S. soybean production to 4.063 bb (down 250 mb or 5.8% from the September 11, 2020 USDA estimate for year 2020).  This decline is due to U.S. soybean yields declining to 48.3 bu/ac – down 3.5 bu/ac from the USDA’s September projection (Table 1b)

U.S. soybean total supplies in “new crop” MY 2020/21 would decline to 4.653 bb – down 250 mb from the USDA’s September 11, 2020 projection.

Even with the projection of lower 2020 U.S. soybean production, this supply-demand scenario also predicts increases in all use categories over a year earlier, including, a) domestic crush at 2.180 bb (up 10 mb or .5% from the previous marketing year), and b) exports of 2.125 bb (up 445 mb or 26.4%) for “new crop” MY 2020/21, with total use of 4.442 bb – up 639 mb or 16.4% from 3.903 bb in “old crop” MY 2019/20.

Ending stocks of 211 mb (down 63.3%) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 4.75% (vs. 14.73% a year ago), and U.S. average cash soybean prices of $12.25 /bu. (up $3.70 or 43.3% vs last year).

This KSU forecast scenario is given a 10% probability of occurring. 

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U.S. Corn Market Analysis – Alternative U.S. Corn Supply-Demand-Price Scenarios for “New Crop” MY 2020/21

The following article provides “U.S. Corn Market Analysis”, assessing the “Prospects for Alternative U.S. Corn Market Scenarios in “New Crop” MY 2020/21″.  Corn supply-demand and price information for this analysis comes from the September 11, 2020 USDA information, including the USDA NASS Crop Production report, the World Agricultural Supply and Demand Estimates (WASDE) report, and other market price information through September 14, 2020.

Kansas State University Extension Agricultural Economist Daniel O’Brien has written this article which is also presented on the www.AgManager.info website – sponsored by the Agricultural Economics Department of Kansas State University.

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U.S. Corn Market Outlook in September 2020

Prospects for Alternative U.S. Corn Market Scenarios in “New Crop” MY 2020/21

Daniel M. O’Brien, Extension Agricultural Economist – Kansas State University

Corn Market Perspective

The current consensus in the corn market is that there will be a large 2020 U.S. corn production of 14.750-15.000 billion bushels (bb), with large U.S. corn total supplies of 17.000-17.250 bb in the “new crop” 2020/21 marketing year (MY), which started on September 1, 2020.  Along with large supplies, there are positive prospects for U.S. corn usage in “new crop” MY 2020/21, with at least moderate strength in corn use for a) ethanol production (5.100 bb), non-ethanol feed, seed and industrial (FSI) use (1.425 bb), and feed and residual use (5.825 bb).  Prospects for U.S. exports in “new crop” MY 2020/21 (2.325 bb) have improved, and may improve still more because of recent crop production problems in China and elsewhere in the World.

The key issue that has been moderating any corn market price gains to date in “new crop” MY 2020/21 have been continued expectations for historically large U.S. corn ending stocks (2.503 bb) and percent (%) ending stocks-to-use (17.06%), with a projected U.S. average farm price of $3.50 per bushel, which are similar to the last to U.S. corn marketing years.

In MY 2018/19, U.S. corn ending stocks were 2.221 bb, with 15.54% ending stocks-to-use, and U.S. farm prices for corn averaged $3.61 /bu.  Then similarly in “old crop” MY 2019/20, U.S. corn ending stocks were 2.253 bb, with 16.53% ending stocks-to-use, while U.S. farm prices for corn averaged $3.60 /bu.  So, now in “new crop” MY 2020/21, with projections of larger U.S. ending stocks (2.503 bb), 15.54% ending stocks-to-use, and $3.50 /bu U.S. farm prices, corn market traders see a supply-demand balance and price situation quite similar to the pervious two marketing years.

These market expectations have led to CME DEC 2020 Corn futures prices closing at $3.69 ½ on Monday, September 14th – following the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports released on Friday, September 11, 2020.  

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Prospects for U.S. Corn Supply-Demand & Prices in “New Crop” MY 2019/20

Following is the USDA forecast of U.S. corn supply-demand balances and prices for the “new crop” 2019/20 marketing year, supplemented with Kansas State University estimates of alterative price outcomes for the same period.  This author has taken the liberty to estimate the probability of each of these scenarios occurring in the “new crop” 2020/21 marketing year which began on September 1, 2020.

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USDA Scenario #1 – 14.900 billion bu. (bb) Crop @ 178.5 bu/ac., $3.50 /bu                    (40% probability KSU)

On September 11th the USDA projected that U.S. corn production would be 14.900 billion bushels (bb) in year 2020, with total supplies of 17.178 bb in “new crop” MY 2020/21 (Tables 1a-b)

This supply-demand scenario predicts increases all use categories, including, a) corn use for ethanol at 5.100 bb (up 5.0% from the previous marketing year), b) non-ethanol food & industrial use of 1.393 bb (up 1.0%), c) exports of 2.325 bb (up 31.7%), and feed & residual use (5.825 bb – up 4.0%) for “new crop” MY 2020/21.

Ending stocks of 2.503 bb (up 11.1%) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 17.06% (vs. 16.53% a year ago), and U.S. average cash corn prices of $3.50 /bu. (down $0.10). 

This USDA forecast is given a 40% probability of occurring by KSU.

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KSU Scenario #2 – 14.500 bb Crop @ 176.1 bu/ac., $3.60 /bu                                              (25% probability KSU)

An alternative KSU Scenario #2 to consider for “new crop” MY 2020/21 involves lower U.S. corn yields (176.1 bu/ac), lower 2020 corn production (14.700 bb), and lower total supplies (16.978 bb) (Table 1b).

This scenario assumes no changes in either total usage (14.675 bb) or within specific usage categories – including corn ethanol @ 5.100 bb, non-ethanol FSI @ 1.393 bb, seed use at 32 million bushels (mb), exports at 2.325 bb, and feed & residual use @ 5.825 bb.

Lower production results in tighter ending stocks (2.303 bb), smaller percent ending stocks-to-use (15.70%), and marginally higher U.S. average farm prices ($3.60 /bu) than the USDA’s forecast. 

This KSU forecast scenario is given a 25% probability of occurring.

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KSU Scenario #3 – 14.500 bb Crop @ 173.7 bu/ac., $3.70 /bu                                              (25% probability KSU)

Another alternative, KSU Scenario #3, to consider for “new crop” MY 2020/21 involves still lower U.S. corn yields (173.7 bu/ac), much less 2020 corn production (14.500 bb), still less total supplies (16.778 bb), and no changes in total use (14.675 bb) (Table 1b).

Even smaller 2020 corn production leads to still tighter ending stocks (2.103 bb), still tighter percent ending stocks-to-use (14.33%), and again marginally higher U.S. average farm prices ($3.70 /bu) than the USDA and previous KSU Scenario #2 forecast.  This KSU forecast scenario is given a 15% probability. 

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KSU Scenario #4 – 14.700 bb Crop + 200 mb Total Use, $3.72 /bu                                     (15% probability KSU)

KSU Scenario #4 for “new crop” MY 2020/21 takes Scenario #2 a step farther by considering a 200 mb increase in total useKSU Scenario #4 for “new crop” MY 2020/21 involves the same 2020 corn production as KSU Scenario #2, with unchanged U.S. corn yields (176.1 bu/ac), 2020 corn production (14.700 bb), and total supplies (16.978 bb) (Table 1b)

However, with 200 mb higher total use of 14.875 bb (i.e., +100 corn ethanol use, +50 mb exports, and +50 mb feed & residual use), then compared KSU Scenario #3, ending stocks (2.103 bb) are unchanged while percent ending stocks-to-use (14.13%) is slightly less.  As a result, projected U.S. average farm prices ($3.72 /bu) are marginally higher than $3.70 /bu in the KSU Scenario #3 forecast. 

This KSU forecast scenario is given a 15% probability of occurring. 

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KSU Scenario #5 – 14.500 bb Crop + 400 mb Total Use, $4.00 /bu (5% probability KSU)

Finally, KSU Scenario #5 for “new crop” MY 2020/21 involves the same 2020 corn production as KSU Scenario #3 with unchanged U.S. corn yields (173.7 bu/ac), 2020 corn production (14.500 bb), and total supplies (16.778 bb) (Table 1b)

However, with 400 mb higher total use of 15.075 bb (i.e., +200 corn ethanol use, +100 mb exports, and +100 mb feed & residual use), then ending stocks (1.703 bb) are down considerably from 2.103 bb in KSU Scenario #3, while percent ending stocks-to-use (11.30%) is markedly less than 14.33% in KSU Scenario #3. These results lead to $0.30 /bu. higher U.S. average farm prices ($4.00 /bu.) than $3.70 /bu. in the KSU Scenario #3 forecast. 

This KSU forecast scenario is given a 5% probability of occurring. 

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KSU Weekly Grain Market Review (7/24/2020) – “Docile” Grain Futures, **BUT** Dynamic Local Basis Trends in Kansas Corn, Sorghum, Soybeans, and Wheat Markets

The Weekly Grain Market Review for Friday, July 24, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with this presentation available on the www.AgManager.info website at the following web address:

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

A recording of the interview between Eric Atkinson and Daniel O’Brien can be seen at the following address on the www.AgManager.info website later on the afternoon of Friday, July 24th:

https://www.agmanager.info/news#recent-videos

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The KSU Agriculture Today Radio Program was aired on Friday, July 24, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this grain market update is on the following issues: 

1.  Corn Market Issues: A moderately “spotty” crop soil moisture situation now exists across the U.S. Corn Belt.  The July 21st U.S. Drought Monitor map indicates that dry areas exist in eastern Nebraska – western Iowa, parts of southeast and western Kansas, western North Dakota and South Dakota, western Oklahoma and the Texas Panhandle, Indiana, Ohio, Wisconsin, and Southern Missouri.   However, overall the U.S. corn market remains optimistic about the size of the 2020 U.S. Corn crop, as shown by DEC 2020 Corn futures at harvest time trading near $3.35 per bushel on Thursday-Friday, July 23-24, 2020.  Recent sizable U.S. corn export sales to China and other have provided some support for the market cash market via local basis bids – even though Corn Futures have only been minimally responsive to this news thus far.

  • Ethanol Plant Corn Basis bids in Kansas are currently the strongest in the United States with bids on July 23rd ranging from $3.42 1/2 to $3.67 1/2 per bushel, with basis bids of +$0.15 to +$0.40 per bushel over SEPT 2020 Corn futures.  Ohio is the next closest with a range of basis bids of +$0.05 to +$0.25 per bushel over SEPT 2020 Corn futures.  Strong basis bids at Kansas ethanol plants are indicative of a return toward financial health of the U.S. ethanol demand in general and the Kansas ethanol industry in particular.
  • Selected major grain elevator / terminal basis bids for Kansas corn are generally strong, especially in the western 1/3 and southeast Kansas. 
    • In Garden City in southwest KS cash prices on 7/23 were $3.43 /bu, basis = $0.15 over SEPT 2020 Corn futures.
    • In Columbus in southeast Kansas, cash prices were $3.43 /bu, basis = $0.15 over SEPT 2020 Corn futures.
    • In Colby in northwest KS cash prices were $3.26 /bu, basis = $0.02 under SEPT 2020 Corn futures.
    • In Atchison in northeast KS cash prices were $3.26 /bu, basis = $0.02 under SEPT 2020 Corn futures.
    • In Hutchinson in south central KS cash prices ranged from $3.09 to $3.16 /bu, basis = $0.19 to $0.12 under SEPT 2020 Corn futures.
    • In Salina in north central KS cash prices ranged from $2.96 to $3.03 /bu, basis = $0.32 to $0.25 under SEPT 2020 Corn futures.

2. Grain Sorghum Market Issues: Just as for corn, in the central and southern plains states where Grain Sorghum is a competitive crop enterprise, 2020 grain sorghum prospects are still uncertain due to dry conditions in parts of the central and southern plains states.  A key supportive factor to farm level grain sorghum basis and cash bids has been the improved pace of U.S. grain sorghum exports to China that has occurred in 2020.  However, political tensions between the U.S. and China adds uncertainty to future U.S. grain sorghum export prospects.

  • Ethanol Plant Grain Sorghum Basis bids in Kansas on July 23rd were listed as one statewide reported bid of $3.37 1/2 per bushel, with a basis bid of +$0.10 per bushel over SEPT 2020 Corn futures.  If Chinese grain sorghum export demand was not as strong as it is, then it is likely that ethanol production in the western Corn Belt would take a much larger share of available U.S. grain sorghum supplies.  As it is, when U.S. sorghum export demand is strong, grain sorghum ethanol and other domestic uses become “crowded out”, being reduced in favor of sorghum export demand.
  • Selected major grain elevator / terminal basis bids for Kansas grain sorghum are now EXTREMELY STRONG across the state of Kansas. 
    • On Thursday, July 23rd, in Hutchinson in south central KS, cash prices were $3.51-$3.73 /bu, basis = $0.23-$0.45 over SEPT 2020 Corn.
    • Similarly, in Salina in north central KS, cash prices were $3.51-$3.63 /bu, basis = $0.15 over DEC 2020 Corn futures, and $0.25 over SEPT 2020 Corn futures, respectively.
    • Grain sorghum basis bids at major grain elevator / terminals across the rest of the state were all “par” futures, i.e., cash $ = futures $ as their weakest to a strong or “narrow” as $0.30 over SEPT 2020 corn.

3. Soybean Market Issues: Similar weather and crop progress conditions that have affected or may affect the 2020 U.S. corn crop may also impact the 2020 U.S. soybean crop.  And as with corn and grain sorghum, recent Chinese export purchases have provided support for soybean futures.  Kansas soybean basis levels have been “strong” across the state except for northeast where they have been only average in comparison to the 2016-2019 period.

  • Selected major grain elevator / terminal basis bids for Kansas soybeans are the strongest they have been since and including year 2016 at selected locations in the state.
    • In Atchison in northeast KS cash prices on 7/23 were $8.68 /bu, basis = $0.32 under NOV 2020 Soybean futures (equivalent to $0.38 under AUG 2020 Soybean futures).
    • In Salina in north central KS cash prices on 7/23 were $8.61 /bu, basis = $0.45 under AUGUST 2020 Soybean futures.
    • In Columbus in southeast Kansas, cash prices were $8.58 /bu, basis = $0.48 under AUGUST 2020 Soybean futures.
    • In Hutchinson in south central KS, cash prices on 7/23 ranged from $8.43 to $8.50 /bu, basis = $0.63-$0.56 under AUGUST 2020 Soybean futures
    • In Garden City in southwest KS cash prices were $8.11-$8.16 /bu, basis = $0.95-$0.90 under AUGUST 2020 Soybean futures.
    • In Colby in northwest KS cash prices on 7/23 were $8.06 /bu, basis = $1.00 under AUGUST 2020 Soybean futures.

4. Wheat Market Issues:  With the 2020 Kansas Hard Red Winter wheat harvest completed, the attention of the U.S. wheat market turns to the coming spring wheat harvest in the northern states, and the white wheat harvest in the Pacific Northwest and northern Mountain states.  Some wheat supply-demand challenges have occurred in competitive World wheat exporting countries, helping to support U.S. wheat exports and wheat futures and cash markets. 

  • Kansas wheat cash prices at major terminals / elevators around the state generally have better than average basis levels but not stronger than usual except in the southeast part of the the state.
    • In Hutchinson, Salina and Topeka in the south central, north central, and northeast sections of KS, cash wheat prices on 7/23 were all $4.31 /bu, basis = $0.10 under SEPT 2020 Kansas HRW wheat futures.
    • In Columbus in the southeast part of KS, cash wheat prices on 7/23 were near $4.31-$4.33 /bu, basis = $0.08-$0.10 under SEPT 2020 Kansas HRW wheat futures.
    • In Garden City in the southwest part of KS, cash wheat prices on 7/23 were $4.11 /bu, basis = $0.30 under SEPT 2020 Kansas HRW wheat futures.
    • In Colby in northwest KS, cash wheat prices on 7/23 were $4.04 /bu, basis = $0.37 under SEPT 2020 Kansas HRW wheat futures.

Concluding Thoughts

We are in a time in the grain markets where the attention of traders seems to be exclusively on “aggregate” 2020 summer crop production prospects. And since at this time there are not recognizable, immediate threats to the size of U.S. fall harvested crops, grain trader’s narrative consensus seems focused on CME DEC 2020 corn and NOV 2020 soybean futures likely now to either stay low or decline into fall harvest.
 
However, we have these other emerging grain supply-demand factors that are effecting even the Kansas grain markets – as they are driving and/or forcing agribusinesses who make their livings in the cash markets to either buy or sell, use or store or transport grain, etc. If the grain futures are not representing or reflecting these other important market factors, that leaves the agribusinesses with their choice of grain basis bids as the remaining tool available to market participants to use as they to go into their local / regional grain markets and “make things happen”.
 
Given the apparent attention of the broader grain markets on 2020 crop production issues, and the resulting pretty much sideways-to-lower movements in corn, soybean and wheat futures, then basis is left to the local market competitors to reflect and account for these other grain market supply-demand factors.
 
And that is what appears to be happening in the Kansas grain markets – as basis is reflecting the dynamics of broader grain supply-demand issues while the futures markets are at least temporarily focused largely on 2020 grain production prospects in the U.S..

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Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

KSU Weekly Grain Market Review (7/17/2020) – Do DEC 2020 Corn and NOV 2020 Soybeans now slide into Fall Harvest, and HRW Wheat Harvest-Market Prospects

The Weekly Grain Market Review for Friday, July 17, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with this presentation available on the www.AgManager.info website at the following web address:

https://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

A recording of the interview between Eric Atkinson and Daniel O’Brien can be seen at the following address on the www.AgManager.info website:

https://www.agmanager.info/news/weekly-grain-market-outlook-dan-obrien

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The KSU Agriculture Today Radio Program was aired on Friday, July 17, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this update is on the following issues: 

  1. Corn Market Issues: Corn market topics discussed include current production outlook for the U.S. corn crop – after accounting for acreage reductions in the June 30th USDA Acreage report, improved U.S. fuel and ethanol demand helping corn usage, recent corn export business to China, changes in the July 10th U.S. corn supply-demand balance sheet, and U.S. corn price prospects from now through fall harvest 2020. 
    • The key point discussed was that absent a surprise to the market in the form of hot temperatures during pollination in July, lower than anticipated harvested acres, or emerging production shortfalls in the western Corn Belt states or in the eastern Corn Belt in Iowa, Indiana and/or Ohio – it is likely that DEC 2020 Corn futures would end up at its current levels of $3.35-$3.40 /bu or less would occur at the 2020 fall harvest.
  2. Soybean Market Issues: Soybean market topics addressed include current production outlook for the U.S. soybean crop – also after accounting for acreage results in the June 30th USDA Acreage report, seasonally strong U.S. soybean crush demand helping soybean usage, recent soybean export business to China, changes in the July 10th U.S. soybean supply-demand balance sheet, and U.S. soybean price prospects from now through fall harvest 2020. 
    • Similar to the corn market, the key point discussed for the soybean market was that absent a surprise to the market in the form of hot temperatures during flowering in August, lower than anticipated 2020 harvested acres, or emerging production shortfalls in the western Corn Belt states or in the eastern Corn Belt in Iowa, Indiana and/or Ohio where dry / drought conditions – it is likely that NOV 2020 soybean futures would end up at its current levels of $8.90-$9.00 /bu or less would occur at the 2020 fall harvest. 
  3. Wheat Market Issues:  Topics addressed include the test weight and protein levels of the 2020 Kansas & U.S. Hard Red Winter Wheat crop harvest – including disparities in test weights and protein levels between HRW wheat harvested in the central versus western part of the state.  U.S. Wheat Associates data on U.S. wheat exports in total and by class on a country-by country basis is shown, as well as developing concerns in the Black Sea Region for Russia are examined.

 

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Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

KSU Weekly Grain Market Review (7/3/2020) – Analyzing Corn and Soybean Market Ramifications from the 6/30 USDA Acreage Report

The Weekly Grain Market Review for Friday, July 3, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with this presentation available on the www.AgManager.info website at the following web address:

https://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

A recording of the interview between Eric Atkinson and Daniel O’Brien can be seen at the following address on the www.AgManager.info website:

https://www.agmanager.info/news/weekly-grain-market-outlook-dan-obrien

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The KSU Agriculture Today Radio Program was aired on Thursday, July 2, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this update is on the ramifications of the June 30th USDA Acreage and Grain Stocks reports on U.S. corn and soybean supply-demand and price prospects for the remainder of calendar year 2020.

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Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

KSU Weekly Grain Market Review (6/26/2020) – Feedgrain and Soy Futures Reflecting “Large Crop” Scenario – HRW Wheat Markets “Decent” in spite of Harvest Pressure

The Weekly Grain Market Review for Friday, June 26, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with this presentation available on the www.AgManager.info website at the following web address:

https://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

A recording of the interview between Eric Atkinson and Daniel O’Brien can be seen at the following address on the www.AgManager.info website:

https://www.agmanager.info/news

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The KSU Agriculture Today Radio Program was aired on Friday, June 26, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this update is on current trends in terms of a) dry western Corn Belt grain markets, b) Kansas grain basis trends, and other issues involving U.S. and World corn, sorghum, hard red winter wheat, and soybean markets.

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Grain Market Comments for Friday, June 26, 2020

With recent rainfall across parts of the U.S. Corn Belt, grain futures are reflecting an assumed “large crop” scenario for Summer 2020 for feedgrains and oilseeds.  In the midst of the 2020 Hard Red Winter Wheat harvest, Kansas HRW Wheat futures prices have held up “decently” due to U.S. export sales and shipments of late. 

 

A. Corn Market Trends

Chicago Mercantile Exchange (CME) Corn futures prices have declined to $3.18 per bushel for the “old crop” JULY 2020 contract, and $3.28 1/4 for “new crop” DEC 2020 the morning of Friday, June 26th – which is down 21.4% and 18.9%, respectively, from highs of $4.04 1/2 – $4.04 3/4 per bushel on January 2, 2020.   In past years when grain markets perceive that US. corn crop prospects are progressing well without threat, corn futures prices have began declining – moving toward what is anticipated to be harvest lows in September-October-November.  Still though, there are Summer growing season weather & crop production risks to be dealt with over the July-August-September period.  It is not a foregone conclusion that there will be a large U.S. corn crop – but historical frequencies would indicate approximately a 20% probability of a “short” U.S. corn crop occurring in year 2020 given current crop conditions.

On Thursday, June 25th, Kansas corn basis levels at major terminals in Central and Eastern Kansas are ranging from $0.27 under to $0.07 per bushel over JULY 2020 Corn futures – with the strongest bids in Atchison and Topeka.  Most corn basis levels in Western Kansas grain markets are ranging from $0.15 under to $0.10 over JULY 2020 Corn futures – with the strongest bids in Dodge City, Garden City, Sublette, Syracuse and Ulysses.   Ethanol plant bids for corn ranges from $0.10-$0.28 over JULY 2020 corn futures.  These Kansas corn basis levels are stronger than seen in most recent years for this time of the marketing year, and indicate support for corn use in throughout most of the state.

Trade projections for 2020 U.S. corn planted acres to be reported in the USDA Acreage report on Tuesday, June 30th are for 95.207 million acres (ma) planted, with a range of estimates from 93.000 to 97.100 ma.  This compares to the USDA’s projection of 2020 U.S. corn plantings of 96.990 ma in the March 31st USDA Prospective Plantings report, and 89.700 ma in corn plantings in year 2019. 
 
If the USDA projects 2020 U.S. corn planted acres to be 95 ma or less it would provide support for “new crop” DEC 2020 corn prices.
 

B. Grain Sorghum Market Trends

On Thursday, June 25th, Kansas grain sorghum basis levels at major terminals in Central and Eastern Kansas are ranging from $0.15 to $0.49 per bushel over JULY 2020 Corn futures – with the strongest bids in Hutchison, followed by Salina and Topeka.  Most grain sorghum basis levels in Western Kansas grain markets are ranging from $0.05 to $0.15 over JULY 2020 Corn futures – with strong basis bids being fairly uniform throughout the area.   Ethanol plant bids for grain sorghum was estimated to be $0.10 over JULY 2020 corn futures.  These Kansas grain sorghum basis levels are definitely stronger than seen in most recent years for this time of the marketing year, and indicate support for grain sorghum use stemming from increased U.S. grain sorghum exports to China.

Trade projections for 2020 U.S. grain sorghum planted acres to be reported in the USDA Acreage report on Tuesday, June 30th are for 5.881 million acres (ma) planted, with a range of estimates from 5.600 to 6.150 ma.  This compares to the USDA’s projection of 2020 U.S. grain sorghum plantings of 8.820 ma in the March 31st USDA Prospective Plantings report, and 5.265 ma in grain sorghum plantings in year 2019. 
 
If the USDA projects 2020 U.S. grain sorghum planted acres to be 5.500-5.600 ma or less it would provide support for grain sorghum basis bids and cash prices.
 

C. Soybean Market Trends

Chicago Mercantile Exchange (CME) Soybean futures prices have declined to $8.66 per bushel for the “old crop” JULY 2020 contract, and $8.64 1/2  for “new crop” NOV 2020 the morning of Friday, June 26th – which is down 12.0% and 11.7%, respectively, from highs of $9.84 1/4  – $9.78 3/4 per bushel on January 2, 2020.   Just as for the corn market, in past years when grain markets perceive that US. corn crop prospects are progressing well without threat, soybean futures prices have began declining – moving toward what are anticipated to be harvest lows in September-October-November. And just as with the corn market, there are Summer growing season weather & crop production risks to be dealt with over the July-August-September period for the soybean market.  It is not a foregone conclusion that there will be a large U.S. soybean crop – but historical frequencies would indicate approximately a 20% probability of a “short” U.S. soybean crop occurring in year 2020 given current crop conditions.

On Thursday, June 25th, Kansas soybean basis levels at major terminals in Central and Eastern Kansas are ranging from $0.65 to $0.20 per bushel under JULY 2020 Soybean futures – with the strongest bids at major export terminals in Atchison and Topeka.  Most soybean basis levels in Western Kansas grain markets are ranging from $1.10 to $0.80 under JULY 2020 Soybean futures with the strongest bids in Ulysses and Protection.   Ethanol plant bids for corn ranges from $0.10-$0.28 over JULY 2020 corn futures.  These Kansas corn basis levels are stronger than seen in most recent years for this time of the marketing year, and indicate support for corn use in throughout most of the state.
 
Trade projections for 2020 U.S. soybean planted acres to be reported in the USDA Acreage report on Tuesday, June 30th are for 84.716 million acres (ma) planted, with a range of estimates from 83.500 to 85.600 ma.  This compares to the USDA’s projection of 2020 U.S. soybean plantings of 83.510 ma in the March 31st USDA Prospective Plantings report, and a wet field condition limited 76.100 ma in corn plantings in year 2019. 
 
If the USDA projects 2020 U.S. soybean planted acres to be 84 ma or less it would provide support for “new crop” NOV 2020 soybean prices.
 
 

D. Hard Red Winter Wheat Market Trends

Chicago Mercantile Exchange (CME) Kansas HRW Wheat futures prices have declined to $4.26 per bushel for the “new crop” JULY 2020 contract, and $4.46 3/4  for “post harvest” DEC 2020 the morning of Friday, June 26th – which is down 17.9% and 16.9%, respectively, from highs of $5.19 – $5.37 3/4 per bushel on January 15, 2020.   Considering that the 2020 U.S. Hard Red Winter wheat harvest is occurring now in Kansas, these price levels indicate at least moderate support for U.S. wheat prices – driven to some degree by positive U.S. wheat export activity.

On Thursday, June 25th, Kansas wheat basis levels at major terminals in Central and Eastern Kansas are ranging from $0.30 to $0.05 per bushel under JULY 2020 KS HRW wheat futures – with the strongest bids at major export terminals in Salina, Topeka, Great Bend, Hutchinson, and Wichita.  Most wheat basis levels in Western Kansas grain markets are ranging from $0.40 to $0.25 under JULY 2020 KS HRW Wheat futures with the strongest bids in Syracuse and Ulysses.
 
Trade projections for 2020 U.S. winter wheat planted acres to be reported in the USDA Acreage report on Tuesday, June 30th are for 30.849 million acres (ma) planted, with a range of estimates from 30.400 to 31.600 ma.  This compares to the USDA’s projection of 2020 U.S. winter wheat plantings of 30.775 ma in the March 31st USDA Prospective Plantings report, and U.S. winter wheat plantings of 31.159 ma in year 2019. 
 
IF the USDA projects 2020 U.S. Winter Wheat planted acres to be 30.400 ma or less, it would provide support for “new crop” JULY-SEPT 2020 Kansas HRW Wheat. 
 
Plantings of U.S. spring wheat in 2020 are likely to be more of a market influence in the upcoming Acreage report. Trade projections for 2020 U.S. spring wheat planted acres to be reported in the USDA Acreage report on Tuesday, June 30th are for 12.551 million acres (ma) planted, with a range of estimates from 12.150 to 12.810 ma.  This compares to the USDA’s projection of 2020 U.S. spring wheat plantings of 12.590 ma in the March 31st USDA Prospective Plantings report, and U.S. winter wheat plantings of 12.660 ma in year 2019. 
 
IF the USDA projects 2020 U.S. Spring Wheat planted acres to be 12.150 ma or less, it would provide support for “new crop” SEPT 2020 Minneapolis Spring Wheat futures prices.

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U.S. Ethanol and Biodiesel Markets and Profitability – Moderation in Losses for Ethanol, Breakeven for Biodiesel for June 1-19, 2020

Ethanol and Biodiesel Market Trends & Profitability Thru June 19, 2020

Daniel O’Brien, Extension Agricultural Economist – Kansas State University

June 23, 2020

A. Ethanol Price and Profitability Trends

Using an Iowa State University model and applying price estimates from Kansas State University, ethanol plants in Iowa and other Midwest states were operating at estimated losses on average of $0.09 /gallon for June 1-19, 2020.   These ethanol plant operating loss estimates have continued since August 2018 – averaging monthly operating losses ranging from of -$0.02 to -$0.17 per gallon over the August – December 2019 time period, -$0.12-$0.28 per gallon in January-May, 2020.

During the June 1-19, 2020 period, corn input purchase prices for Iowa ethanol plants are estimated to have averaged near $3.07 /bu – compared to $2.94 in May, $2.91 in April, $3.45 in March, $3.76 /bu in February, and $3.81 in January.

Selling prices of distillers dried grains (DDGS) (10% moisture) averaged near $127.18 during the June 1-19 period, down from $143.75 in May, a high of $194.66 per ton in April, $147.05 in March 2020, and $143.00 in February.

The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants is estimated to have averaged near $1.19 / gallon during the June 1-19, 2020 period, being up from 1.0575 in May, 0.794 /gallon in April, and $1.07 per gallon in March, while being down from $1.24 per gallon in January-February 2020.

The cost of production of a representative ethanol plant in Iowa is estimated to be near $1.28 / gallon during the June 1-19 period, up from $1.18 in May, and $1.01 in April, but down from $1.35 in March, and the range of $1.45 – $1.51 per gallon during the October 2019 through February 2020 period.

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B. Ethanol Production & Stocks Trends

Since the beginning of the “new crop” 2019/20 marketing year (MY) for U.S. corn on September 1, 2019, U.S. ethanol production through June 12, 2020, has averaged 0.931 million barrels per day (mb/d) – with a range of 537 (on April 24th) to 1,095 mb/d (on January 10th) over the 41 week period.  At this average pace throughout the remaining 11 weeks of “new crop” MY 2019/20, U.S. ethanol production would reach 14.274 billion barrels in “new crop” MY 2019/20.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), a total of 5.043 billion bushels (bb) of feedgrains would be used for ethanol production in the current marketing year.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on June 11, 2020 have a forecast in “new crop” MY 2019/20 of 4.900 bb of U.S. corn would be used for ethanol production, and that 70 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production. Estimating 2 mb in other FSI usage for U.S. grain sorghum for non-ethanol uses (i.e., seed & other), total U.S. feedgrain usage for ethanol production in “current” MY 2019/20 would equal 4.968 bb, or 98.5% of the KSU projection of 5.043 bb.

During the April 3-May 15 period when COVID-19 mitigation efforts had such a dire, damaging impact on the U.S. economy, motor fuel use, and the U.S. ethanol market, U.S. ethanol production had fallen to an average of 603,000 barrels per day.  The April-May average of 634,000 barrels per day average is 61% of the pre-COVID-19 February through March 20th average of 1,041,000 barrels per day – which is consistent with ethanol industry reports of U.S. ethanol production cutbacks during that time period.   However, for the weeks ending June 5th and 12th, U.S. ethanol production averaged 837K and 841K barrels per day, respectively – recovering to approximately 80.6% of February-March 20th production levels. 

United States’ ethanol stocks have averaged 23,250,000 barrels per week since the beginning of the “new crop” MY 2019/20k, i.e., in early September 2019 – through June 12, 2020.  After reaching highs of 27.1-27.7 million barrels during the COVID-19 affected 1st three weeks of April, ethanol stocks have declined approximately 22% down to 21.35 million barrels by the week ending June 12th. 

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C. Biodiesel Price & Profitability Trends

The estimated profitability of Iowa Biodiesel plants first increased and then declined during the January-June 19, 2020 period.

By Kansas State University estimates, during the June 1-19, 2020 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $27.20 per cwt – up from $25.59 in May, $26.97 in April.

The selling price of Biodiesel at Iowa Biodiesel Plants is estimated to have averaged $2.70 /gallon during the June 1-19 period, comparable to $2.58 in May, $2.70 /gallon during April, $3.01 in March, $3.10 in February 2020, and the 26 month high of $3.16 /gallon in January.

Also during the June 1-22 period, the cost of production at representative biodiesel plants in Iowa is estimated to have averaged $2.70 per gallon – up from $2.58 in May, and comparable to $2.61 in April, $2.67 in March, $2.88 in February, and $3.12 in January 2020.

As a result, net returns of this representative soy biodiesel plant in Iowa during June 1-19, 2020 were estimated to be breakeven at $0.00 per gallon producedThis is comparable to a small loss of -$0.01 /g in May, and to profits of $0.09 /g in April, $0.34 in March, $0.21 in February, and $0.04 /g in January 2020.

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Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends, which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

KSU Weekly Grain Market Review (6/18/2020) – Dry Conditions in the Western Corn Belt and Kansas Grain Basis Trends

The Weekly Grain Market Review for Friday, June 18, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with this presentation available on the www.AgManager.info website at the following web address:

https://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

A recording of the interview between Eric Atkinson and Daniel O’Brien can be seen at the following address on the www.AgManager.info website:

https://www.agmanager.info/news/recent-videos/agriculture-today-grain-markets-june-19-2020

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The KSU Agriculture Today Radio Program was aired on Friday, June 18, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this update is on current trends in terms of a) dry western Corn Belt grain markets, b) Kansas grain basis trends, and other issues involving U.S. and World corn, sorghum, hard red winter wheat, and soybean markets.

Grain Market Comments for Friday, June 18, 2020

Recent hot, dry, and windy conditions in western Kansas and the other parts of the western Corn Belt have impacted the prospects for the 2020 Kansas Hard Red Winter Wheat crop harvest, and at least temporarily have affected the starting development of 2020 spring planted crops. Moisture is forecast for this region over the next few days.

But, if the amount of rainfall received is not substantial, and if hot dry conditions return, then by July 1st the corn, sorghum, and soybean markets will likely need to reassess 2020 crop prospects in western Corn Belt and figure how much a drought damaged crop their could affect the aggregate total U.S. crop supply-demand balance sheets and price prospects for “new crop” MY 2020/21 beginning on September 1, 2020.

Basis trends for corn, sorghum, HRW wheat and soybeans in Kansas are all at least relatively strong to date in year 2020. This is especially true for grain sorghum with its resurgence in export business to China. Corn basis bids are also at least average to strengthening across the state except for a few locations. Wheat basis bids have not weakened appreciably or at all to date in Kansas – but may do so as the full press of HRW wheat harvest occurs in the next few weeks. Soybean basis bids in most Kansas locations are at or near the strongest levels seen since at least year 2016.
 
So, in Kansas there are relatively strong if not exceptional grain basis bids, while Chicago Mercantile Exchange (CME) Corn, HRW Wheat and Soybean futures have been trending moderately higher for corn (still a low price relative to recent years), HRW Wheat futures have been declining sharply in recent weeks, and soybean futures are higher relative to levels of a month ago. This phenomena likely signals at least stronger local / regional demand for these crops in Kansas than is seen elsewhere in the U.S.. It could also be indicative of relatively pessimistic grain futures prices relative to cash market supply-demand realities.

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KSU Weekly Grain Market Review (6/8/2020) – “Green Shoots” Emerging in U.S. and Kansas Grain Markets

The Weekly Grain Market Review for Monday, June 8, 2020 is provided by KSU Extension Agricultural Economist Daniel O’Brien – with a June 4th edition of this presentation available on the www.AgManager.info website at the following web address:

https://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

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The KSU Agriculture Today Radio Program was aired on Friday, June 5, 2020 and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

The focus of this update is on current trends in grain markets, focusing on developments in the U.S. and Kansas corn, sorghum, hard red winter wheat, and soybean markets.

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