KSU Weekly Grain Market Review (February 7, 2021) – Futures Technicals + CFTC Trader Positions ahead of 2/9/2021 USDA WASDE Report

The Weekly Grain Market Review for Friday, February 5, 2021 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 listened at the following address on the www.AgManager.info website: https://www.agmanager.info/news#ksrn-radio-interviews. Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

 

Grain Market Comments on February 6, 2021

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

The whirling dervish action of the last month in the grain markets has moderated within the last week+ – raising questions about what price trends to expect in coming weeks. With the following events anticipated in U.S. grain markets over the next 2 months, markets are likely to stay volatile (both up and down) in coming weeks.

These factors are:

a) South American Soybean supplies coming in a matter of weeks that will compete with U.S. soybean exports,

b) indications of strong HRW wheat feeding occurring in Kansas-Oklahoma-Texas in response to strong feedgrain prices,

c) the first official USDA grain market supply-demand and price projections for 2021 due out with the USDA Outlook Conference on February 18-19, 2021,

d) U.S. Hard Red Winter wheat to break dormancy in March during a time of dry weather in the U.S. central and southern plains,

e) the USDA Prospective Plantings and Grain Stocks reports both to be released on March 31st,

f) the ongoing export demand activity of China and other countries for U.S.,

g) limits on wheat exports by Black Sea Region countries to protect domestic supplies and try to control domestic food price inflation, and

h) other anticipated factors affecting U.S. and world grain markets (South American labor strikes affecting exports, etc., etc., …).

When South American soybean supplies come available for China to purchase, it may be the first bit of market information that will lead to a moderation in soybean and grain prices overall – until other supply-demand factors emerge. The March 31st USDA Prospective Plantings and Grain Stocks reports have the potential to impact grain markets significantly, especially for new crop DEC 2021 Corn and NOV 2021 Soybean futures IF sizable increases in 2021 U.S. corn and soybean acreages are projected.

The March 31st USDA Grain Stocks reports for corn and wheat will be ESPECIALLY critical for “current crop” MY 2020/21 U.S. grain market supply-demand and price prospects. IF corn and/or wheat feeding is markedly stronger than anticipated, THEN corn and wheat ending stocks projections and % stocks/use projections could tighten up considerably, and cause extreme corn and wheat price volatility through spring planting and early summer 2021.

It is shaping up to be a volatile time in the grain markets from now through at least May-early June 2021.

 

 

KSU Weekly Grain Market Review (January 29, 2021) – Grain Futures Technicals + CFTC Trader Position Graphics

The Weekly Grain Market Review for Friday, January 29, 2021 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 listened at the following address on the www.AgManager.info website: https://www.agmanager.info/news#ksrn-radio-interviews. Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

KSU Weekly Grain Market Review (January 22, 2021) – U.S. Corn, Wheat and Soybean Scenarios for MY 2020/21

The Weekly Grain Market Review for Friday, January 22, 2021 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

Grain Market Analysis

Daniel O’Brien, Extension Agricultural Economist

Kansas State University Department of Agricultural Economics

January 24, 2021

 
Trends in grain futures markets since the January 12th USDA World Agricultural Supply and Demand Estimates (WASDE) report have been first up and then down. The key question now is what are prospect for corn futures markets in the short run (i.e., the week of January 25-29th), and in the intermediate run through – say – the key March 31, 2021 USDA Grain Stocks and Prospective Plantings reports. And also, whether corn, soybean, and/or Kansas hard red winter (HRW) wheat futures have been more or less impacted by the post-WASDE report downturn in prices.
 

A. Corn Futures Market Trends & Analysis

 
Regarding the corn market, CME MARCH 2021 Corn futures opened at $4.91 1/2 /bu on January 12th before the USDA report release, trading up to a high of $5.17 1/2 that same day, and then up to as high as $5.41 1/2 on 1/13/2021 before closing at $5.24 1/2 in that day’s trading. After volatile action in a range of $5.12 3/4 to $5.36 1/2 afterwards and a close of $5.24 1/4 on 1/21/2021, prices dropped $0.23 3/4 to $5.00 1/2 /bu on Friday, January 22nd. So, after starting at $4.91 1/2 /bu pre-report on 1/12/2021, CME MARCH 2021 Corn futures prices firt rose and then fell to $,.00 1/2 per bushel on 1/22/2021.
 
In the following KSU Weekly Grain Market Review through Friday, January 22nd, probability-weighted projections of U.S. corn market scenarios for “new crop” MY 2020/21 are included – generally acknowledging the impact of high U.S. cash corn prices on corn use in the U.S domestic ethanol, wet corn milling and livestock feeding industries, and projecting a moderation in corn futures and U.S. cash corn prices from current levels for the remainder of this marketing year through August 31, 2021 barring other unforeseen issues such as U.S. corn crop production problems in Spring 2021.
 
This weekly review also contains a preliminary projection of the U.S. corn supply-demand for “next crop” MY 2021/22 based on estimates. The first alternative to consider is the impact of no change in U.S. corn planted acres (90.819 million acres or “ma”) in year 2021 from 2020 levels. This scenario is compared to a 2.5% increase in U.S. corn planted acres up to 93.089 ma. Under the “no change” scenario, U.S. corn production with 5 year U.S. average corn yields of 173.4 bu/acre is projected to be 14.393 billion bu (bb). Under the +2.5% scenario, 2021 U.S. corn production is forecast to be 14.753 bb. This three million acre difference in 2021 U.S. corn planted acres is projected to be the difference between $4.40-4.45 /bu and $3.87 /bu in “next crop” MY 2021/22 season average U.S. corn prices in the U.S. for “next crop” MY 2021/22.
 

B. Soybean Market Trends & Analysis

 
Regarding the soybean market, CME MARCH 2021 Soybean futures opened at $13.72 1/2 /bu on January 12th before the USDA report, trading up to a high of $14.28 1/4 that same day, and then up to as high as $14.36 1/2 on 1/13/2021 before closing at $14.06 1/4 in that day’s trade. After two days of sideways trading, the MARCH 2021 soybean contract then trended lower, down to a close of $13.70 1/4 on 1/21/2021, and then a further decline of $0.58 1/2 on Friday, January 22nd down to a close of $13.11 3/4 that same day. So, after starting at $13.72 1/2 /bu before the USDA report release on 1/12/2021, prices first rose and then fell to below that level down to $13.11 3/4 on 1/22/2021. Although both MARCH 2021 corn and soybean futures have followed a similar pattern in the post-January 12, 2021 USDA WASDE report period, corn futures have “held up” better than has soybeans relatively speaking. It is possible that with strong Chinese import demand for U.S. soybeans that soybean futures may have “over bid” the post-January WASDE price rise more so than for corn futures.
 
In the following KSU Weekly Grain Market Review through Friday, January 22nd, probability-weighted projections of U.S. soybean market scenarios for “new crop” MY 2020/21 are included – focusing exclusively on the impact of varying U.S. soybean export outcomes on the soybean market for the remainder of the current marketing year. U.S. soybean market prices would likely “swing sharply” on outcomes of either a 30 million bushel (mb) up to 2.260 bb, or a 60 mb increase up to 2.290 bb in projected U.S. soybean exports from the USDA January 12th WASDE projection level for “new crop” MY 2020/21. Conversely, a decrease of 150 mb down to 2.080 bb in the U.S. soybean export figure for “new crop” MY 2020/21 for whatever reason would have a significant negative impact on U.S. soybean market price prospects. This scenario could occur if there is a larger and/or earlier harvested 2021 South American soybean crop than is now anticipated by the USDA.
 

C. Hard Red Winter (HRW) Wheat Market Trends & Analysis

 
In the hard red winter (HRW) wheat market, the CME MARCH 2021 Kansas HRW Wheat futures contract opened at $5.96 1/4 /bu on January 12th before the USDA report, trading up to a high of $6.26 1/2 that same day, and then up to a high as $6.60 on 1/15/2021 before closing at $6.43 on the 15th. After trading sideways to lower for a couple days, the MARCH 2021 Kansas HRW wheat contract closed at $6.35 3/4 on 1/21/2021, and then declined $0.22 1/2 on Friday, January 22nd down to a close of $6.13 1/4. Taken all together, after starting at $5.96 1/4 /bu prior to the USDA report on 1/12/2021, prices first rose and then fell to a close of $6.13 1/4 on 1/22/2021. In comparison to MARCH 2021 corn and soybean futures, Kansas HRW Wheat has followed a similar pattern to corn in the post-January 2021 USDA WASDE report period, more-so than has soybeans.
 
In the following KSU Weekly Grain Market Review through Friday, January 22nd, probability-weighted projections of U.S. wheat market scenarios for “current crop” MY 2020/21 are included – focusing exclusively on the impact of varying U.S. wheat export outcomes on U.S. wheat prices for the remainder of the current marketing year. U.S. wheat market prices would likely “swing sharply” on outcomes of either 50 million bushel (mb) increases or decreases in U.S. wheat exports from the USDA January WASDE projection of 985 million bushels (mb) for “new crop” MY 2020/21 ending on May 31, 2021. Such changes could lead to a $0.30 swing in U.S. wheat season average prices from the USDA’s projection of $4.85 /bu in the January 12, 2021 USDA WASDE report.

*****

A recording of the interview between Eric Atkinson and Daniel O’Brien can be listened at the following address on the www.AgManager.info website: https://www.agmanager.info/news#ksrn-radio-interviews. Following are the supportive working slides and notes for the Weekly Grain Market Review from Kansas State University:

U.S. Grain Sorghum and World Coarse Grain Markets

The following article provides an analysis of “U.S. Grain Sorghum and World Coarse Grain Markets” based on grain market information available through December 31, 2020.  Information for this analysis comes from the December 10, 2020 USDA information, including the USDA NASS Crop Production report, the World Agricultural Supply and Demand Estimates (WASDE) report, and other available market price information through Thursday, December 31, 2020.

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

*********************

 

U.S. Grain Sorghum & World Coarse Grain Markets

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

********************

Grain sorghum prices in the U.S. have trended sharply higher from mid-August to late-December 2020.  Strong Chinese demand for U.S. grain sorghum exports have been the primary driver in this market.

 

A. Strength in Kansas Grain Sorghum Cash Bids & Basis

The strength of current demand for U.S. grain sorghum is evident in cash bids and extremely positive basis bids at Kansas country elevator and grain terminal locations – with the state of Kansas being a predominant U.S. sorghum production area.  Over the 3 year 2018 – 2020 period, Kansas accounted for 62.6% of U.S. grain sorghum production on average:

  • % KS Sorghum Production of U.S. = [224,853,333 bu.KS 2018-2020 avg Prodn] ÷ [359,072,000 bu.S 2018-2020 avg Prodn]

At both the Garden City Coop grain elevator in Southwest Kansas, and the Canton Terminal elevator affiliated with the Mid Kansas Coop in Central Kansas, grain sorghum cash bids on 12/31/2020 were $6.14 per bushel, equaling a basis of $1.30 /bu. over MARCH 2021 Corn futures closing @ $4.84 /bu.  These grain sorghum cash bids compare to corn bids of $5.14 /bu (basis = $0.30 over) at Garden City, and $4.67 /bu (basis = 0.17 under at Canton) the same day. 

 

B. “New Crop” 2021 Forward Contracts for Sorghum

Along with stronger cash bids for grain sorghum, stronger “new crop 2021” forward contract bids for sorghum for delivery to local Kansas grain elevators and terminals in fall 2021 are likely to encourage farmers to increase grain sorghum planted acreage in spring 2021. 

On Thursday, 12/31/2020, “new crop” 2021 grain sorghum harvest forward contract bids in Garden City of $4.72 per bushel (basis = $0.37 over DEC 2021 Corn futures) compared to $4.65 (basis = $0.30 over) in Canton.   These “new crop” bids compared to corn forward contract bids of $4.35 (basis = $0.00 or “even par” with DEC 2021 Corn Futures) in Garden City, and $4.10 ($0.17 under) in Canton.     

 

C. Key Grain Sorghum Market Factors in Late 2020-Early 2021

  • Factor #1: Sorghum Supply-Demand vs Price Trends:

Although U.S. grain sorghum prices have trended sharply higher since summer 2020, only moderate changes have occurred in aggregate USDA U.S. grain sorghum supply-demand & price estimates for “current” MY 2020/21 (MY).   

However, percent (%) ending stocks-to-use has declined significantly from 19.05% in MY 2018/19 (an 8 year low in U.S. grain sorghum export), to 7.71% in “old crop” MY 2019/20 to 8.11% in “current” MY 2020/21 (Table 1, Figures 8ab).

  • Over the course of their July through December 2020 USDA World Agricultural Supply and Demand Estimates (WASDE) reports, increases by the USDA in their projection of U.S. sorghum exports have been offset by decreases in ethanol use in the Food, Seed & Industrial use category, while forecast feed & residual use has remained unchanged (Table 1, Figures 5a, 6a, 7ab).
  • Kansas ethanol plants have not listed a public bid offer for grain sorghum purchases during much of the September-December 2020 period according to USDA Agricultural Marketing Service reports. The strength in U.S. sorghum export demand has bid grain sorghum prices “out of” the ethanol input market relative to the lower price of corn.

As part of the U.S. feedgrain and World coarse grain complex, U.S. grain sorghum markets are usually affected by price trends in the much larger U.S. corn market.  Over the July-December 2020 period, USDA forecasts of U.S., World & World-Less-China corn ending stocks and % stocks-to-use for “current” MY 2020/21 actually DID decline appreciably – resulting in increasing U.S. corn prices, which helped to also support U.S. grain sorghum prices (Figure 8a).

The Key Point: In recent marketing years when Chinese demand for U.S. grain sorghum exports has been stronger, U.S. sorghum cash prices and basis levels have somewhat “separated” or “distinguished” themselves from corn market prices.  Restated, during times of strong U.S. grain sorghum exports to China, U.S. sorghum market prices have behaved somewhat independent of the corn market.  These situations contrast with other marketing years of more “average” Chinese import demand for U.S. sorghum, where sorghum markets have operated in a competitive export pricing environment with corn focusing on feed and ethanol use (Table 1, Figure 8ab).

  • Factor #2: “Good” Sorghum Export Shipments & Strong Forward Sales:

Cumulative U.S. sorghum export shipments strong but not record high in “current” MY 2020/21 when compared marketing years since MY 2012/13.  However, forward sales of U.S. grain sorghum exports have been “bullish” through 12/24/2020 (Table 1, Figure 7ab)

Shipments of U.S. grain sorghum of 125.5 mb through 12/24/2020 included 90.4 mb to known export destinations (99.99% to China), with an additional 35.1 mb shipments to “unknown destinations” in “current” MY 2020/21.

  • Of the 74.8 mb of U.S. Sorghum forward sales that are yet to be shipped, 97% have been made to China interests. The USDA has acknowledged the strength of U.S. grain sorghum exports by raising its U.S. export forecast to 275 million bushels (mb) in “current” MY 2020/21, up from 93 mb in MY 2018/19 and from 204 mb in “old crop” MY 2019/20 in its WASDE reports (Table 1).
    • This level of U.S. grain sorghum exports would be the largest since 352 mb in MY 2014/15 and 342 mb in MY 2015/16.
    • During the weeks ending 12/17/2020 and 12/24/2020, the U.S. shipped 5.1 mb and 6.4 mb of grain sorghum, respectively, compared to the average pace of 5.7 mb per week to meet USDA’s projection of 275 mb by August 31, 2021, the end of “current” MY 2020/21.

 

  • Factor #3: “Cross-Market Effects” on U.S. Grain Sorghum Prices

Grain sorghum cash market prices have been affected in a “cross-market” manner by broader trends in the U.S. corn markets – particularly by trends in corn futures from which grain sorghum basis adjustments are made. Then as movements in soybean and/or wheat futures would impact corn futures, then grain sorghum prices would be affected as well “across grain markets”

            Consequently, the strong uptrends that have occurred in U.S. and World soybean, corn and wheat futures markets during the August-December 2020 period have impacted grain sorghum markets through corn futures – from which basis adjustments are made to determine grain sorghum cash prices.

 

D. A Futures-Based Forecast of U.S. Grain Sorghum Prices for the “Current Crop” 2020/21 Marketing Year

Marketing year average U.S. farm prices for grain sorghum are projected to be $5.09 per bushel using a combination of 2021 CME corn futures contract prices, U.S. monthly cash grain sorghum prices and basis estimates available through December 31, 2020 (Figure 1bc)

This Kansas State University projection of $5.09 /bu for “current” MY 2020/21 U.S. grain sorghum average farm prices compares to the USDA’s projection of $4.40 /bu in the December 10, 2020 World Agricultural Supply and Demand Estimates (WASDE) report (Table 1, Figures 1bc, 8ab, 9a).  Corn futures prices have moved sharply higher since the December 10th WASDE report – raising expectations for how the USDA may adjust its grain sorghum price projection in the upcoming January 12, 2021 WASDE report.

In the following table are calculations used in to generate this KSU $5.09 /bu projection of U.S. grain sorghum average farm prices for the “current crop” 2020/21 marketing year.  “Current crop” MY 2020/21 started on September 1, 2020 and will last through August 31, 2021.   

 

 In the table above, actual USDA reported monthly cash prices for September through November 2020 are used, along with corn futures contract closes for MARCH 2021, MAY 2021, JULY 2021, and SEPTEMBER 2021 as of 12/31/2020. 

  • Basis estimates for September – November 2020 are based on monthly average lead futures contract prices less cash prices. The most recent November 2020 calculated U.S. grain sorghum basis is used for December 2020 through August 2021 projections in combination with corn futures closing prices on December 31, 2020. 
  • USDA monthly weighted average cash grain sorghum marketing percentages are used to calculate a weighted average U.S. grain sorghum farm price for the “current crop” MY 2020/21 marketing year ending on August 31, 2021.

A weakness of this method is that it does not account for potential seasonal changes in grain sorghum basis that may occur in coming months, in this case from December 2020 through August 2021. And to the degree that current corn futures prices are either accurate or inaccurate predictors of their own future price levels, this forecast approach is inaccurate as well. 

  • However, given the difficulty of making accurate forecasts of future market supply-demand outcomes for grain sorghum and other grains as well, this corn futures-based forecast using the most current market information available seemingly has some merit.

 

D. World Coarse Grain Supply-Demand Prospects

World coarse grain production of a record high 1,447.82 million metric tons (mmt) is projected for “current” MY 2020/21, up 2.6% from 1,411.46 mmt in “old crop” MY 2019/20, and up 3.6% from the 1,397.60 mmt in MY 2018/19 (Figure 10).  The “new crop” 2020/21 marketing year began on September 1, 2020 and will continue through August 31, 2021.  

World coarse grain total supplies of 1,779.37 mmt in “current” MY 2020/21 are forecast to be up 1.2% from 1,758.29 mmt in “old crop” MY 2019/20, and up 0.7% from 1,767.78 mmt in MY 2018/19.  World-Less-China” total supplies of 1,280.45 mmt are projected for “current” MY 2020/21, up 0.06% from 1,279.69 mmt in “old crop” MY 2019/20, and up 11.3% from the 1,311.00 mmt in MY 2018/19 (Figure 10).

World coarse grain exports of 226.90 mmt are projected for “current” MY 2020/21, up 9.1% from 208.06 mmt in “old crop” MY 2019/20, and up 6.6% from 212.81 mmt in MY 2018/19 (Figure 10). 

Projected World coarse grain ending stocks of 318.78 mmt, and 21.83% ending stocks/use in “current” MY 2020/21 are 6 and 7 year lows, respectively.   These projections for “new crop” MY 2020/21 are down from 331.51 mmt (23.2% S/U) in “old crop” MY 2019/20, from 346.86 mmt (24.4% S/U) in MY 2018/19, from 370.66 (27.0% S/U) in MY 2017/18, and from the record highs of 386.06 mmt (27.9% S/U) in MY 2016/17 (Figures 10-11)

Projected World-Less-China” coarse grain ending stocks are estimated to be an 8 year low of 126.44 mmt (10.96% ending stocks/use) in “new crop” MY 2020/21, being down from 130.56 mmt (11.54% S/U) in “old crop” MY 2019/20, and down from 136.44 mmt (12.03% S/U) in MY 2018/19 (Figures 12-13).

 

Corn Market Outlook – The Late-December 2020 Market Situation and USDA-KSU Market Scenarios for Jan-May 2021

The following article provides “U.S. Corn Market Analysis in Late-December 2020”, assessing the “Current Corn Market Situation, and Prospects for Alternative U.S. Corn Market Scenarios in “Current” MY 2020/21 & “Next Crop” MY 2021/22″.  Wheat supply-demand and price information for this analysis comes from the December 10, 2020 USDA information, including the USDA NASS Crop Production report, the World Agricultural Supply and Demand Estimates (WASDE) report, and other available market price information through Tuesday, December 29, 2020.

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

*********************

 

Corn Markets in Late-December 2020

The Present Market Situation & Prospects for Alternative U.S. Corn Market Scenarios in “New Crop” MY 2020/21 & “Next Crop” MY 2021/22

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

********************

I. Trends in the U.S. Corn Market in “Current” MY 2020/21

From August-September through December 2020, prospects for supply-demand balances and prices in the U.S. corn market have changed dramatically toward “tighter supplies & higher prices”.  These corn market expectations have led to CME MARCH 2021 Corn futures prices closing at $4.66 per bushel on Tuesday, December 29th, and DECEMBER 2021 Corn closing at $4.30 ¼ the same day.     

Key questions in late December 2020 for the U.S. corn market are a) whether the price gains in late 2020 are at least sustainable or are a base to be built upon for higher prices through January-April 2021, and b) how 2021 U.S. corn planted acres may be impacted by these higher prices.

The next USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will be released on Friday, January 12, 2021 which have potential to cause another round of significant price volatility in the U.S. corn market.

 

Ia. Declines in 2020 U.S. Corn Production & MY 2020/21 Total Supplies

Prospects for 2020 U.S. corn production changed from August-September 2020 USDA forecasts of 15.278 and 14.900 billion bushels (bb), respectively, down 2.6%-to-5.0% to 14.507 billion bushels (bb) in December 2020.  Crop damage from a late summer 2020 windstorm in Iowa and lower than expected production from North Dakota and other locations contributed to this decline (Table 1, Figure 7).

Similarly, projected “current crop” 2020/21 marketing year (MY) U.S. corn total supplies of 17.531 and 17.178bb in the August-September WASDE reports, respectively, declined 3.8%-to-5.7% to 16.527 bb in December 2020.  A decline in MY 2020/21 U.S. corn beginning stocks from 2.228-2.253 bb in August-September down to 1.995 bb in December 2020 was a key factor in this reduction in projected MY 2020/21 U.S. total corn supplies (Table 1).

 

Ib. Corn Market Driven by Increased U.S. Corn Exports & Total Use

Along with declining U.S. corn supplies, prospects for U.S. corn usage in “current crop” MY 2020/21 have improved – particularly for U.S. corn exports.  USDA projections for “current crop” MY 2020/21 U.S. corn exports in 2.225-2.325 bb in August-September have increased 14.0%-to- 19.0%  up to 2.650 bb in December 2020 (Table 1, Figures 8ab, 11abc).  

Chinese corn production problems in 2020 and resulting import demand from the U.S., followed by U.S. export sales to Mexico, Japan, Columbia, South Korea and other countries have provided support for corn market prices (Figure 11c)

 

Ic. Higher Corn Prices Lead to “Level” FSI & “Lower” U.S. Corn Ethanol & Feed Use

As U.S. corn prices have increased in response to stronger export prospects, projected corn usage in other categories have been “level to lower”.  

Non-ethanol feed, seed and industrial (FSI) use for MY 2020/21 has remained unchanged at 1.425 bb from August-September through December 2020. 

Forecast U.S. corn ethanol usage in “current” MY 2020/21 has declined from projections of 5.100-5.200 bb in August-September down to 5.050 bb in December 2020.  Ethanol profitability and production in the U.S. has declined in late 2020 as a result of higher corn prices, “high but level” distillers grains prices in December, and particularly by late November-December declines in ethanol sales prices.

Projected U.S. feed and residual use for “current” MY 2020/21 has declined from projections of 5.925 bb in August 2020, 5.825 bb in September, down to 5.700 bb in the December 2020 WASDE report (Table 1, Figures 8ab, 9abc, 10)

 

Id. “Tighter” Ending Stocks & % Stocks-to-Use in MY 2020/21

The declines in projected “new crop” MY 2020/21 total supplies from August-September through December 2020 combined with net increases in MY 2020/21 U.S. corn total usage caused projected U.S. corn ending stocks to decline from 2.756 bb in August and 2.503 bb in September down 32%-to-38% to 1.702 bb in December 2020 (Table 1, Figures 12ab).    

USDA projections of percent (%) ending stocks-to-use for MY 2020/21 declined from 18.65% in August to 17.06% in September down to 11.48% in December 2020.  This is the lowest projected estimate of U.S. corn percent (%) ending stocks-to-use in seven (7) years, since the drought-affected lows of 7.41% in MY 2012/13 (drought of 2012) and 9.41% in MY 2013/14 (recovery year following 2012 drought) (Table 1, Figures 12ab)

 

Ie. “Stronger” U.S. Corn Farm Price @ $4.00 /bu in MY 2020/21

With tighter U.S. corn percent (%) ending stocks-to-use of 11.48% in “current” MY 2020/21, the USDA projected the U.S. corn farm price to be $4.00 per bushel in December 2020.  This is up sharply from earlier USDA projections of $3.10 /bu (@ 18.65% S/U) in August and $3.50 /bu (@ 17.06% S/U) in September 2020.  

This is the lowest projected U.S. corn farm price ($4.00 /bu) in seven (7) years, since the drought-affected price record high of $6.89 /bu in MY 2012/13 (drought of 2012) and $4.46 in MY 2013/14 (recovery year following 2012 drought) (Table 1, Figures 13ab & 14 ab).

**********************************************************************

 

II. U.S. Corn Market Prospects in “Current” MY 2020/21

Focus on U.S. Corn Export, Ethanol & Feed Use Changes

Following is the USDA forecast of U.S. corn supply-demand balances and prices for the “new crop” 2020/21 marketing year, supplemented with probability-weighted Kansas State University estimates of alterative price outcomes for the same period (Table 2, Figures 131b)

This author has estimated the probability of each of these scenarios occurring in the “new crop” 2020/21 marketing year which began on September 1, 2020, and which will last through August 31, 2021.

 

IIa. USDA Scenario #1 MY 2020/21, Dec. 10, 2020 WASDE

– 85.527 mln. ac. harvested, 14.507 billion bu crop, 1.702 bb ending stocks @ 11.48% stocks/use, and a $4.00 /bu U.S. farm price (50% probability KSU)

On December 10th the USDA projected that U.S. corn production would be 14.507 billion bushels (bb) in year 2020, with total supplies of 16.527 bb in “current crop” MY 2020/21 (Tables 1-2)

This supply-demand scenario predicts for “current” MY 2020/21 that there are increased exports and ethanol use from “old crop” MY 2019/20, and lower non-ethanol food-seed-industrial (FSI) and feed & residual use.  In particular for “current crop” MY 2020/21,….

a) U.S. corn use for ethanol is forecast to be 050 bb (up 150 mb or 4.1% from 4.852 bb in the previous marketing year),

b) U.S. non-ethanol food & industrial use of 425 bb (down 5 mb from 1.430 bb),

c) U.S. exports of 650 bb (up 872 mb or 49.0% from 1.778 bb a year earlier), and

d) U.S. feed & residual use of 700 bb (down 127 mb or 2.2% from 5.827 bb in “old crop” MY 2019/20).

Projected ending stocks of 1.702 bb (down 293 mb or 14.7% from 1.995 bb in “old crop” MY 2019/20) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020.  Projected percent (%) stocks-to-use of 11.48% (vs. 14.37% a year ago), and U.S. average cash corn prices of $4.00 /bu. (up $0.44 /bu from $3.56 /bu a year ago) indicate a much “tighter supply-demand balance” and “higher price” marketing year in “current” MY 2020/21 than a year earlier.  This USDA forecast is given a 50% probability of occurring by KSU. 

 

IIb. KSU Scenario #2 MY 2020/21 (150 mb Lower U.S. Ethanol Corn Use)

  • 4.900 bb ethanol corn use, 1.852 bb ending stocks @ 12.62% stocks/use, and a $3.75 /bu U.S. farm price (15% probability KSU)
  • An alternative KSU Scenario #2 to consider for “current” MY 2020/21 involves lower U.S. ethanol corn use (4.900 bb – down 150 mb from USDA), lower total usage (14.675 bb), larger ending stocks (1.852 bb), larger % ending stocks-to-use (12.62% S/U), and lower U.S. average farm prices ($3.75 /bu) than the USDA’s forecast.  This KSU forecast scenario is given a 15% probability of occurring. 

 

IIc. KSU Scenario #3 MY 2020/21 (150 mb Lower U.S. Feed & Residual Corn Use)

  •  5.550 bb feed use, 1.852 bb ending stocks @ 12.62% stocks/use, and a $3.75 /bu U.S. farm price (10% prob. KSU)
  • Another alternative KSU Scenario #3 to consider for “current” MY 2020/21 involves lower U.S. corn feed & residual use (5.500 bb – down 150 mb from USDA), lower total usage (14.675 bb), larger ending stocks (1.852 bb), larger percent ending stocks-to-use (12.62% S/U), and lower U.S. average farm prices ($3.75 /bu) than the USDA’s forecast.
  • The net result to total use, ending stocks, percent ending stocks-to-use, and prices of this scenario is identical to KSU Scenario #2 above, but with a lower probability of occurring. This KSU forecast scenario is given a 10% probability of occurring. 

 

IId. KSU Scenario #4 MY 2020/21 (125 mb Higher U.S. Corn Exports)

  • 2.775 bb export use, 1.577 bb ending stocks @ 10.55% stocks/use, and a $4.15 /bu U.S. farm price (25% probability KSU)
  • A final alternative KSU Scenario #4 to consider for “current” MY 2020/21 involves higher U.S. exports (2.775 bb – up 125 mb from USDA), higher total usage (14.950 bb), smaller ending stocks (1.577 bb), smaller percent ending stocks-to-use (10.55% S/U), and higher U.S. average farm prices ($4.15 /bu) than the USDA’s forecast. This KSU forecast scenario is given a 25% probability of occurring. 

**********************************************************************

 

III. U.S. Corn Market Prospects in “Next Crop” MY 2021/22   

Focus on U.S. Corn Planted Acres in Spring 2021

Considering the direction that the U.S. corn market may take in fall 2021 once the 2021 U.S. corn crop is harvested, the first key issue to be decided is how many acres of corn will be planted in the U.S. in spring 2021 (Table 2, Figures 131b).  

Following are two very preliminary forecasts from Kansas State University of U.S. corn supply-demand balances and prices for the “next crop” 2021/22 marketing year – focusing on two potential corn planted acreage scenarios that may occur.  The “next crop” 2021/22 marketing year (MY) begins on September 1, 2021 and runs through August 31, 2022.

 

IIIa. KSU Scenario #5 “Next Crop” MY 2021/22 – (100% of Year 2020 Planted Acres in 2021)  

90.978 mln. ac. planted, 83.123 mln. ac. harvested, 174.2 bu/ac. yield, 14.480 billion bu crop, 1.782 bb ending stocks @ 12.35% stocks/use, and a $3.75 /bu U.S. farm price (50% probability KSU)

Assuming that 2021 U.S. corn plantings will be the same as in 2020 at 90.978 million acres, and the following assumptions:

  • 2021 Planted Acres = 90.978 million acres (100% of 2020 U.S. planted acres)
  • 2021 Harvested Acres = 83.123 million acres (91.37% 5YA harvested-to-planted acre)
  • 2021 U.S. Corn Yield = 174.2 bu/ac. (5 year average U.S. corn yield)
  • 2021 U.S. Corn Production = 14.480 billion bushels (bb)
  • 2021/22 U.S. Corn Supplies  = 16.207 bb
  • 2021/22 U.S. Corn Exports = 2.250 bb
  • 2021/22 U.S. Corn Total Use = 14.425 bb
  • 2021/22 U.S. Corn End Stocks = 1.782 bb
  • 2021/22 U.S. Corn % Stocks/Use = 12.35%
  • 2021/22 U.S. Corn Farm Avg Price = $3.75 per bushel

This USDA forecast is given a 50% probability of occurring by KSU. 

 

IIIb. KSU Scenario #5 “Next Crop” MY 2021/22 – (102.5% of Year 2020 Planted Acres in 2021)  

93.252 mln. ac. planted, 85.202 mln. ac. harvested, 174.2 bu/ac. yield, 14.842 billion bu crop, 2.422 bb ending stocks @ 14.86% stocks/use, and a $3.47 /bu U.S. farm price (50% probability KSU)

Assuming that 2021 U.S. corn plantings will be 102.5% (up 2.5%) from year 2020 at 93.252 million acres, and the following assumptions:

  • 2021 Planted Acres = 93.252 million acres (102.5% of 2020 U.S. planted acres)
  • 2021 Harvested Acres = 85.202 million acres (91.37% 5YA harvested-to-planted acre)
  • 2021 U.S. Corn Yield = 174.2 bu/ac. (5 year average U.S. corn yield)
  • 2021 U.S. Corn Production = 14.842 billion bushels (bb)
  • 2021/22 U.S. Corn Supplies = 16.569 bb
  • 2021/22 U.S. Corn Exports = 2.250 bb
  • 2021/22 U.S. Corn Total Use = 14.425 bb
  • 2021/22 U.S. Corn End Stocks = 2.411 bb
  • 2021/22 U.S. Corn % Stocks/Use = 14.86%
  • 2021/22 U.S. Corn Farm Avg Price = $3.47 per bushel 

**********************************************************************

 

IV. The Relation of U.S. Corn % Stocks-to-Use to U.S. Corn Prices

  • Over a 21-year period since MY 2000/01 there has been a -0.75 correlation coefficient between changes in S. corn prices and U.S. corn percent (%) ending stocks-to-use. The sign and magnitude of this correlation measure is consistent with economic theory – where tighter relative % ending stocks-to-use is associated with higher prices, and vice-verse.
  • Over the last decade (since at MY 2011/12) there has been a strong connection (correlation coefficient of -0.89) in the inverse relationship between S. corn season average prices and changes in U.S. corn percent (%) stocks-to-use (Table 1, Figures 14ab).  
    • Over the last 10 marketing years (from MY 2011/12 through “current” MY 2020/21 to date) – in seven of those marketing years a negative relationship between U.S. corn % ending stocks-to-use & S. corn average prices resulted (MY 2011/12-MY 2016/17, & MY 2020/21), with one neutral relationship (MY 2016/17). A positive relationship occurred in the two other years (MY 2018/19 & MY 2019/20).  
    • For the last 10 marketing years, S. corn percent ending stocks-to-use and U.S. corn season average prices have had simultaneous annual changes as follows:
      • MY 2011/12: 92% S/U (r =  –0.73%) @  $6.22 /bu (r = +$1.04)
      • MY 2012/13: 41% S/U (r =  –0.51%) @  $6.89 /bu (r = +$0.67)
      • MY 2013/14: 16% S/U (r =  +1.75%) @  $4.46 /bu (r = –$2.43)
      • MY 2014/15: 59% S/U (r = +3.43%) @   $3.70 /bu (r = –$0.76)
      • MY 2015/16: 71% S/U (r = +0.12%) @   $3.61 /bu (r = –$0.09)
      • MY 2016/17: 65% S/U (r = +2.94%) @   $3.36 /bu (r = –$0.25)
      • MY 2017/18: 46% S/U (r = –1.19%) @   $3.36 /bu (r =   $0.00)
      • MY 2018/19: 54% S/U (r = +1.08%) @  $3.61 /bu (r = +$0.25)
      • MY 2019/20: 37% S/U (r = –1.17%) @  $3.56 /bu (r = –$0.05)
      • MY 2020/21: 48% S/U (r = –2.89%) @  $4.00 /bu (r = +$0.44)
      • Interpreting These Results:
        • In MY 2017/18 through MY 2019/20, the inconsistency of this theoretical negative relation between S. corn % ending stocks-to-use and U.S. corn average prices is evidence of how other factors besides U.S. corn stocks-to-use may have effected U.S. corn farm prices.
        • During “current” MY 2020/21 cross market spillover effects from strong soybean markets and other international grain market factors are likely impacting U.S. grain prices in addition to conventional U.S. corn supply-demand balances.

*****************************************************************

 

V. World Corn Supply-Demand Prospects

  • World corn production of a record high 1,143.56 million metric tons (mmt) is projected for “current” MY 2020/21, up 2.45% from 1.116.21 mmt in “old crop” MY 2019/20, and up 1.80% from the 1.123.37 mmt in MY 2018/19 (Figure 15).  The “new crop” 2020/21 marketing year began on September 1, 2020 and will continue through August 31, 2021. 
  • World corn total supplies of 1,446.98 mmt in “current” MY 2020/21 are forecast to be up only 0.8% from 1,436.05 mmt in “old crop” MY 2019/20, but down 1.2% from 1,464.13 mmt in MY 2018/19.  World-Less-China” total supplies of 985.45 mmt are projected for “current” MY 2020/21, up 2.1% from 965.01 mmt in “old crop” MY 2019/20, and up only 0.1% from the 984.43 mmt in MY 2018/19.
  • World corn exports of 185.97 mmt are projected for “current” MY 2020/21, up 8.6% from 171.25 mmt in “old crop” MY 2019/20, and up 2.3% from 181.71 mmt in MY 2018/19 (Figure 15).  The top 10 importers of U.S. corn to date in “current” MY 2020/21 – ranked by their shipments with forward purchases included – are shown below (in metric tons or “mt”) (Figure 11c) (Source: USDA Foreign Agricultural Service U.S. Export Sales Report, December 17, 2020).

 

Rank      Country           Shipments **    Future Sales      % U.S.                   Total                      % U.S

China                 4,253,600 mt       7,310,400 mt     24.9%                11,564,000 mt    27.4%

Mexico               3,686,900 mt      6,002,600 mt     20.6%                  9,689,500 mt    22.9%

Japan                1,459,900 mt       3,773,200 mt     12.9%                  5,233,100 mt    12.4%

Columbia              985,300 mt         960,200 mt       3.3%                  1,945,500 mt      4.6%

South Korea          338,300 mt         721,500 mt       2.5%                  1,059,800 mt      2.5%   

Guatemala            318,500 mt         479,600 mt       1.6%                   1,040,000 mt     2.5%

Cost Rica              233,200 mt         234,600 mt       0.8%                     467,800 mt     1.1%

Honduras             203,700 mt         182,300 mt       0.6%                     386,000 mt     0.9%

Taiwan                 197,000 mt          628,900 mt       2.1%                    825,900 mt     2.0%

Canada                187,300 mt          255,800 mt       0.9%                    443,100 mt     1.0%

Rest of World    1,025,400 mt        8,693,000 mt      29.6%                 9,586,300 mt    22.7%

Total World     12,888,900 mt      29,342,100 mt    100.0%               42,231,000 mt   1

 

  • China, Mexico, and Japan are the predominant U.S. corn export shipment destinations and forward sales buyers so far in “current” MY 2020/21, with Columbia, South Korea, and Guatemala have also been important U.S. corn export sales market participants, as have Cost Rica, Honduras, Taiwan, Canada and other countries. That said, the “Rest of the World” countries beyond the top ten (10) shipment destinations to date in “current” MY 2020/21 have accounted for 7.9% of U.S. corn export shipments, but a much larger 29.6% of future U.S. corn sales.
  • That said, U.S. corn exports so far in “current” MY 2020/21 are very “concentrated” and “focused” on the top 3 major buyers, i.e., China, Mexico and Japan. Together these three countries account for 72.9% of corn shipments, 58.4% of futures sales, and a combined 62.7% of aggregate shipments plus futures sales. 

For “current” MY 2020/21, projected World corn ending stocks of 288.96 mmt are a six (6) year low, and 24.95% % ending stocks/use is a seven (7) year low.   These projections for “new crop” MY 2020/21 are down from 303.4 mmt (26.8% S/U) in “old crop” MY 2019/20, down from 319.8 mmt (27.95% S/U) in MY 2018/19, down from 340.8 mmt (31.2% S/U) in MY 2017/18, and down from the record high of 352.2 mmt in MY 2016/17, and the 33 year high (since MY 1987/88) of 33.13% S/U in MY 20106/17 (Figures 15-16)

From a World-Less-China” perspective (i.e., excluding China from World demand and ending stocks numbers), the World corn supply-demand balance situation supportive of World corn market prices (Figures 17ab & 18).  Projected World-Less-China” corn ending stocks are estimated to be 97.45 mmt (11.17% ending stocks/use) in “current crop” MY 2020/21 – with the ending stocks figure of 97.45 mmt being a seven (7) year low. The 11.17% S/U estimate is an eight (8) year low – with World-Less-China ending corn stocks-to-use being below the range of 12.04%-15.98% that occurred since MY 2013/14.

Together, Figures 15-18 show that a true picture of the relative scarcity of World corn supply-demand balances should account for both World-less-China calculated ending stocks and percent (%) ending stocks to use along with total World aggregate corn supply-demand across the globe.   This relatively “tighter” view of World corn ending stocks prospects is providing support for the recent strength in corn market prices during the last ½ of year 2020. 

 

**********************************************************************

Wheat Market Outlook – The Late-December 2020 Market Situation and USDA-KSU Market Scenarios for Jan-May 2021

The following article provides “U.S. Wheat Market Analysis in Late-December 2020”, assessing the “Current Wheat Market Situation, and Prospects for Alternative U.S. Wheat Market Scenarios in “Current” MY 2020/21″.  Wheat supply-demand and price information for this analysis comes from the December 10, 2020 USDA information, including the USDA NASS Crop Production report, the World Agricultural Supply and Demand Estimates (WASDE) report, and other available market price information through Wednesday, December 24, 2020.

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

*********************

 

Wheat Markets in Late-December 2020

The Present Market Situation & Prospects for Alternative U.S. Wheat Market Scenarios in “New Crop” MY 2020/21

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

********************

A. Wheat Market Perspective

World and U.S. wheat market prices have trended decidedly higher from mid-August to October 2020 – and have continued to trade at those high levels through November to late-December 2020.  With only moderate changes in USDA supply-demand balance projections for the U.S. and foreign wheat markets during this time in the “current” 2020/21 marketing year, it is likely that wheat markets have been affected by cross-over price strength from corn and especially soybean markets in late 2020. 

From August 7th to October 21st, MARCH 2020 Kansas Hard Red Winter (HRW) Wheat futures rose by $1.53 ¼ /bu (up 35%) – from a low of $4.32 ¾ /bu (8/7/2020) to a high of $5.86 (10/20/2020).  During the 10/7 through 12/23 period, CME MAR 2020 KS HRW Wheat traded in a $0.50 /bu range from lows near to $5.30 to highs near $5.86-$5.93 /bu – closing at $5.89 on December 24, 2020 (Figure 1).    

Key Wheat Market Factors

  • Supply-Demand vs Price Trends: Although wheat cash and futures market prices have trended higher only moderate changes have occurred in USDA S. wheat supply-demand & price estimates for “current” MY 2020/21 (MY) in their July through Dec 2020 WASDE reports.  However, percent (%) ending stocks-to-use has declined significantly from 49.21% in “old crop” MY 2019/20 to 40.81% in “current” MY 2020/21 (Table 1, Figures 11-12).
    • USDA forecasts of World & World-Less-China wheat ending stocks and % stocks-to-use for “current” MY 2020/21 did NOT decline appreciably during July-Dec 2020 while prices increased.
  • Dry Conditions in Foreign Wheat Areas: During July-Dec 2020, there have been periodic concerns about dry conditions impacting 2021 wheat production prospects in the Black Sea region and in S. HRW wheat production areas – providing support for wheat market prices.
  • Strong U.S. Export Shipments – Just “OK” Forward Purchases: Cumulative U.S. wheat export shipments have been as strong in “current” MY 2020/21 as at any time since MY 2012/13. However, forward sales have been “moderate” rather than “bullish” through 12/17/2020.  Lower U.S. dollar exchange rates have also supported U.S. wheat exports (Table 1, Figures 10abc).
  • Cross-Market Effects: Given that USDA’s projections of U.S. and Foreign wheat supply-demand have NOT tightened during July-Dec 2020, it seems more likely that cross-market effects from strong CME soybean and corn futures have had cross-market effects on CME KS HRW Wheat.

**********************

 

B. Trends in U.S. Wheat Supply-Demand & Prices in the December 10th WASDE Report

In the USDA’s December 10, 2020 USDA World Agricultural Supply & Demand Estimates (WASDE) report, U.S. wheat supply-demand balances for “current” MY 2020/21 were reduced marginally from the November 2020 WASDE report, with prices left unchanged at $4.70 /bu.  “Current” MY 2020/21 began on June 1, 2020 and will conclude on May 31, 2021.

  • U.S. Wheat Production: In its December 10, 2020 Crop Production and WASDE reports, the USDA projected 2020 U.S. wheat production to be 1.826 billion bushels (bb) – down 106 mb from 1.932 bb in 2019, and comparable to 1.885 bb in 2018, 1.741 bb in 2017, 2.309 bb in 2016, and 2.062 bb in 2016 (Table 1, Figure 8).
  • U.S. Wheat Supplies: The USDA projected historically large U.S. wheat total supplies of 2.974 bb in “new crop” MY 2020/21. This USDA forecast is down from 3.117 bb in “old crop” MY 2019/20, and is comparable to 3.119 bb in MY 2018/19, 3.080 bb in MY 2017/18, 3.402 bb in MY 2016/17, 2.927 bb in MY 2015/16, and the seven (7) year low of 2.768 bb in MY 2014/15
  • U.S. Wheat Export Use: The USDA raised its projection of U.S. wheat exports by 10 mb up to 985 mb in “current” MY 2020/21. This 10 mb increase in projected U.S. wheat exports is due to a 20 mb increase in projected U.S. white wheat exports combined with a 10 mb decrease in exports of U.S. HRW wheat (Table 1, & Figures 9 & 10abc).

Projected U.S. wheat exports of 985 mb in “current” MY 2020/21 are up 20 mb from U.S. exports of 965 mb in “old crop” MY 2019/20, comparable to 937 mb in MY 2018/19, 906 mb in MY 2017/18, the seven (7) year high of 1.051 bb in MY 2016/17, the seven year low of 778 mb in MY 2015/16, and 864 mb in MY 2014/15.

The USDA Foreign Agricultural Service (FAS) reported that the U.S. export shipments totaled 13.5 mb of wheat for the week ending 12/17/2020. This compares to a weekly rate of 21.2 mb shipped to meet the USDA projection of 985 mb during “new crop” MY 2020/21.

U.S. wheat export shipments through 12/17/2020 in “new crop” MY 2020/21 totaled 497.1 mb, equaling 50.5% of the USDA’s projection of 985 mb with 55.8% of the marketing year completed (29/52 weeks).

In addition to shipments, total forward purchases of U.S. wheat for export total 239.3 mb on 12/17/2020. Combined U.S. wheat export shipments & forward purchases on 12/17/2020 for the “new crop” MY 2020/21 period equal 736.4 mb – 74.8% of the USDA’s projection of 985 mb with 29 or 52 weeks (55.8%) of the marketing year completed – which is a moderate-to-positive pace of U.S. wheat exports in the current marketing year.

For U.S. Hard Red Winter (HRW) Wheat exports, the USDA projected exports of 395 mb in “current crop” MY 2020/21 – down 10 mb from the November WASDE, compared to 376 mb in “old crop” MY 2019/20. For the week ending 12/17/2020, U.S. wheat export shipments totaled 5.75 mb, compared to 8.5 mb/week needed to meet the USDA’s projection of 395 mb in “current” MY 2020/21.   Forward purchases of U.S. HRW Wheat totaled 61 mb for “current” MY 2020/21 (Figure 10b).

Combined shipments and forward purchases for “new crop” MY 2020/21 totaled 259.7 mb on 12/17/2020, equaling 65.7% of the USDA projection of 395 mb, with 55.8% of the marketing year completed (29/52 weeks completed).

  • U.S. Wheat Food Usage: The USDA left unchanged its projection of U.S. wheat food use at a record high of 965 bb in “current” MY 2020/21 in the December 10th WASDE. This compares to U.S. wheat food use of 962 mb in “old crop” MY 2019/20, 954 mb in MY 2018/19, 964 mb in MY 2017/18, and 949 mb in MY 2016/17 (Table 1, Figures 9abc).
  • U.S. Wheat Total Use: The USDA projected U.S. wheat total use of 2.112 bb in the “current” MY 2020/21 marketing year (MY). This amount of total usage of U.S. wheat compares to 2.089 bb (up 23 mb or 1.1%) in “old crop” MY 2019/20 (ended on May 31, 2020), 2.039 bb in MY 2018/19, 1.981 bb in MY 2017/18, and 2.222 bb in MY 2016/17 (Table 1, Figures 9abc).
  • U.S. Wheat Ending Stocks: The December 10, 2020 USDA WASDE report projected moderately tighter U.S. wheat supply-demand ending balances (i.e., ending stocks) of 862 million bushels (mb) for the “new crop” 2020/21 marketing year (MY) (Table 1, Figures 11ab & 12ab).
    • The USDA projection of 862 mb in U.S. wheat ending stocks in “current” MY 2020/21 is down 166 mb (down 16%) from 1.028 bb in “old crop” MY 2019/20, from 1.080 bb in MY 2018/19, 1.099 bb in MY 2017/18, 1.181 bb in MY 2016/17, 976 mb in MY 2015/16, and 752 mb in MY 2014/15, and the eight (8) year low of 590 mb in MY 2013/14. During MY 2011/12 – MY 2014/15 U.S. wheat ending stocks ranged from 590 mb to 752 mb (Table 1).
  • U.S. Wheat Percent % ending stocks-to-use is estimated to be 40.8% in “current” MY 2020/21 – which is down from 41.7% the November WASDE report, and down sharply from 49.21% in “old crop” MY 2019/20, 52.97% in MY 2018/19, and the 34 year high of 55.5% in MY 2017/18 (Table 1, Figures 11ab & 12 ab).
    • The longterm low U.S. wheat percent (%) ending stocks-to-use was 24.24% S/U in MY 2013/14, with highs of 97.16% S/U in MY 1985/86 and 82.92% S/U in MY 1986/87.
  • U.S. Wheat Season Average Prices: The USDA also forecast the U.S. average wheat price in “new crop” MY 2020/21 to be $4.70 per bushel, up from $4.58 /bu in “old crop” MY 2019/20, but down from $5.16 /bu in MY 2018/19 (Table 1, Figures 11ab & 12 ab).

**********************

 

C. The Relation of U.S. % Ending Stocks-to-Use to U.S. Season Average Prices

  • Over the last decade (since at MY 2011/12) there has been a loose connection in the inverse relationship between S. wheat season average prices and changes in U.S. wheat percent (%) stocks to use (Table 1, Figures 12ab).
  • Over a 21-year period since MY 2000/01 there has been a -0.62 correlation coefficient between changes in S. wheat prices and U.S. wheat percent (%) ending stocks-to-use. The sign and magnitude of this correlation measure is consistent with economic theory – in which tighter supply-demand balances (lower relative % ending stocks-to-use) are associated with higher prices, and vice-verse.
  • Over the last 10 marketing years, S. wheat percent ending stocks-to-use and U.S. wheat season average prices have had simultaneous annual changes as follows:
    • MY 2011/12: 33.35% S/U (chg =   –3.02%)   @  $7.24 /bu (chg = +$1.54)
    • MY 2012/13: 29.90% S/U (chg =   –3.45%)   @  $7.77 /bu (chg = +$0.53)
    • MY 2013/14: 24.24% S/U (chg =   –5.66%)   @  $6.87 /bu (chg = –$0.90)
    • MY 2014/15: 37.33% S/U (chg = +13.09%)   @  $5.99 /bu (chg = –$0.88)
    • MY 2015/16: 49.99% S/U (chg = +12.66%)   @  $4.89 /bu (chg = –$1.10)
    • MY 2016/17: 53.14% S/U (chg =   +3.15%)   @  $3.89 /bu (chg = –$1.00)
    • MY 2017/18: 55.48% S/U (chg =   +2.34%)   @  $4.72 /bu (chg = +$0.83)
    • MY 2018/19: 52.97% S/U (chg =   –2.51%)   @  $5.16 /bu (chg = +$0.44)
    • MY 2019/20: 49.21% S/U (chg =   –3.76%)   @  $4.58 /bu (chg = –$0.68)
    • MY 2020/21: 40.81% S/U (chg =   –8.40%)   @  $4.70 /bu (chg = +$0.12)
  • Over the last 5 years – in three of those marketing years a negative relationship between U.S. wheat % ending stocks-to-use & S. wheat average prices resulted (MY 2016/17, MY 2018/19, & MY 2020/21). A positive relationship occurred in the two other years (MY 2017/18 & MY 2019/20).  
  • Interpreting These Results:
    • Since MY 2016/17, the inconsistency of this theoretical negative relation between U.S. wheat % ending stocks and U.S. wheat average prices is evidence of how other factors besides ending stocks-to-use impact U.S. wheat prices.
    • During “current” MY 2020/21 cross market spillover effects from other major grains and other international wheat market factors are likely impacting U.S. grain prices in addition to conventional U.S. wheat supply-demand balances.

********************

 

D. Prospects for U.S. Wheat Supply-Demand & Prices in “New Crop” MY 2020/21

Following is the USDA forecast of U.S. wheat supply-demand balances and prices for the “new crop” 2020/21 marketing year, supplemented with Kansas State University estimates of alterative price outcomes for the same period (Table 1a, Figure 11b).  This author has taken the liberty to estimate the probability of each of these scenarios occurring in the “current” 2020/21 marketing year which began on June 1, 2020

USDA Scenario #1 2.974 bb U.S. Supplies, 985 mb Exports, 862 mb. Ending Stocks, 40.81% Stocks/Use, $4.70 /bu U.S. Average Cash Price (50% probability KSU)

On December 10th the USDA projected that U.S. wheat production would be 1.826 billion bushels (bb) in year 2020, with total supplies of 2.974 bb in “new crop” MY 2020/21 (Tables 1 & 1a).  This supply-demand scenario predicts, a) domestic food use at 965 bb (up 3 mb from the previous marketing year), b) exports of 985 mb (up 10 mb from a month ago, and up 20 mb vs “old crop” MY 2019/20), c) seed use of 62 mb, and d) feed & residual use of 100 mb for “current” MY 2020/21.

Ending stocks of 862 mb (down 166 mb or 16%) are forecast for the “current” 2020/21 marketing year which began June 1, 2020, with percent (%) stocks-to-use of 40.81% (vs. 49.21% a year ago), and U.S. average cash wheat prices of $4.70 /bu. (up $0.12 /bu or 2.6%).  This USDA forecast is given a 50% probability of occurring by KSU.

This USDA forecast is given a 50% probability of occurring by KSU.

KSU Scenario #2 2.974 bb U.S. Supplies, 935 mb Exports, 912 mb. Ending Stocks, 44.23% Stocks/Use, $4.45 /bu U.S. Average Cash Price (25% probability KSU)

An alternative KSU Scenario #2 to consider for “new crop” MY 2020/21 involves lower U.S. wheat exports (935 mb), lower total use (2.062 bb) (Table 1a). Lower exports result in larger ending stocks (912 mb), larger percent ending stocks-to-use (44.23%), and lower U.S. average farm prices ($4.45 /bu) than the USDA’s forecast. 

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

KSU Scenario #3 2.974 bb U.S. Supplies, 1.035 bb Exports, 812 mb. Ending Stocks, 37.56% Stocks/Use, $5.00 /bu U.S. Average Cash Price (10% probability KSU)

Another alternative KSU Scenario #3 to consider for “new crop” MY 2020/21 involves higher U.S. wheat exports (1.035 bb), higher total use (2.162 bb) (Table 1a). Higher exports result in smaller ending stocks (812 mb), smaller percent ending stocks-to-use (37.56%), and higher U.S. average farm prices ($5.00 /bu) than the USDA’s forecast. 

This KSU forecast scenario is given a 25% probability. 

****************

 

E. World Wheat Supply-Demand Prospects

  • World wheat production of a record high 773.66 million metric tons (mmt) is projected for “current” MY 2020/21, up 1.1% from 764.50 mmt in “old crop” MY 2019/20, and up 5.85% from the 730.90 mmt in MY 2018/19 (Figure 13).  The “new crop” 2020/21 marketing year began on June 1, 2020 and will continue through May 31, 2021. 
  • World wheat total supplies of 1,074.29 mmt in “current” MY 2020/21 are forecast to be up 2.4% from 1,048.61 mmt in “old crop” MY 2019/20, and up 5.4% from 1,018.86 mmt in MY 2018/19.  World-Less-China” total supplies of 786.60 mmt are projected for “current” MY 2020/21, up 1.5% from 775.26 mmt in “old crop” MY 2019/20, and up 4.0% from the 756.24 mmt in MY 2018/19.
  • World wheat exports of 193.65 mmt are projected for “current” MY 2020/21, up 1.1% from 191.46 mmt in “old crop” MY 2019/20, and up 11.2% from 173.67 mmt in MY 2018/19 (Figure 13).  The top 10 importers of U.S. wheat to date in “current” MY 2020/21 – ranked by their shipments with forward purchases included are shown below (in metric tons or “mt”) (Figure 17).

Rank      Country        Shipments **  % U.S. Future Sales % U.S.     Total                 % U.S

  • Philippines        1,702,100 mt      6%.   828,500 mt   12.7%     2,530,600 mt     12.6%
  • Mexico             1,692,300 mt      5%    968,100 mt   14.9%     2,660,400 mt     13.3%
  • China               1,553,200 mt      5%    645,000 mt     9.9%     2,198,200 mt     11.0%
  • Japan               1,396,100 mt      3%    536,500 mt     8.2%    1,932,600 mt       9.6%
  • South Korea        726,100 mt      4%    686,700 mt   10.5%     1,412,800 mt       7.0%   
  • Nigeria               725,900 mt      4%    283,500 mt     4.4%     1,009,400 mt       5.0%
  • Taiwan                686,400 mt      1%    170,900 mt     2.6%       857,400 mt       4.3%
  • Brazil                  529,200 mt      9%              0 mt     0.0%       529,200 mt      2.6%
  • Italy (EU)             451,400 mt      3%      82,800 mt     1.3%       534,200 mt      2.7%
  • Vietnam              377,000 mt      8%      12,700 mt      0.2%      389,700 mt      1.9%
  • Rest of World   5,062,100 mt      4%3,338,800 mt    51.3%   8,400,900 mt     41.9%
  • Total World     13,529,000 mt      0%6,513,500 mt  100.0% 20,042,500 mt    100.0%

 

  • The Philippines, Mexico, China, Japan, South Korea, Nigeria, and Taiwan are the predominant U.S. wheat export shipment destinations and forward sales buyers so far in “current” MY 2020/21, with Brazil, Italy and Vietnam also active U.S. wheat export sales market participants.  United States’ wheat exports are “diverse” and “dispersed” as shown by the large proportion of shipments to date to the “Rest of the World” countries beyond the top ten (10) shipment destinations to date in “current” MY 2020/21.
  • Projected World wheat ending stocks of 316.5 mmt, and 41.8% ending stocks/use in “current” MY 2020/21 are both record highs.   These projections for “new crop” MY 2020/21 are up from 300.6 mmt (40.2% S/U) in “old crop” MY 2019/20 (both being 2nd highest on record), from 284.1 mmt (38.7% S/U) in MY 2018/19, and from 288.0 mmt (38.9% S/U) in MY 2017/18 (Figures 14ab).
  • However, on a World-Less-China” basis (i.e., excluding China from World demand and ending stocks numbers), the World wheat supply-demand balance situation is not as overwhelming (Figures 15ab, 16 & 18).  Projected World-Less-China” wheat ending stocks are estimated to be 155.3 mmt (24.90% ending stocks/use) in “new crop” MY 2020/21 – with the ending stocks figure of 155.3 mmt being the 2nd highest on record. Conversely, the 24.9% S/U estimate would be only the 18th highest amount since MY 1973/74 (in 48 marketing years) – with World-Less-China ending wheat stocks-to-use being over 25% for the recent MY 2014/15 through 2017/18 period, before two years of 23.67%-23.95% levels in MY 2018/19-MY 2019/20.
  • Together, Figures 14ab, 15ab, 16 and 18 show that a true picture of the relative scarcity of World wheat supply-demand balances should account for both World wheat-less-China calculated ending stocks and percent (%) ending stocks to use along with total aggregate wheat supply-demand across the globe.   This relatively “tighter” view of World wheat ending stocks prospects is likely also providing support for the recent strength in wheat market prices during the last ½ of year 2020.  

Soybean Market Outlook – Mid-Dec 2020 Market Situation and USDA-KSU Market Scenarios

The following article provides “U.S. Soybean Market Analysis”, assessing the “Current Soybean Market Situation, and 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 December 10, 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 Friday, December 18, 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.

******

Soybean Markets in Mid-December 2020

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

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

A. Soybean Market Perspective

Prices in U.S. and World the soybean market have trending decidedly higher in response to a combination of weather and logistical problems in Brazil and Argentina, and resulting strong U.S. export shipments and forward purchases.

Chicago Mercantile Exchange (CME) JAN 2020 soybean futures had risen to trading highs of $11.94 – $12.00 per bushel during the November 20th – 30th period, before declining to lows near $11.42 ½ – $11.45 ½ on December 2nd & 8-9th. Since then prices have moved higher again – to as high as $11.95 – $12.24 ¾ during December 16-18th before closing at $12.20 on the 18th. The JAN 2020 Soybean futures high of $12.24 ¾ on 12/18/2020 is up $3.53 /bu. (up 40%) from the low of $8.71 ¾ /bu. on August 10, 2020 – the day of the USDA World Agricultural Supply and Demand Estimates (WASDE) report.

Since the August 2020 USDA reports there have been number of factors that have dramatically “tightened up” prospects for U.S. soybean supply-demand balances through mid-December 2020. These are….

a) A moderate reduction in 2020 U.S. soybean production prospects
b) Development of a La Nina weather pattern bringing drought to key soybean production areas in Argentina and Brazil
c) Recent export port labor / logistic problems in Argentina
d) Surging Chinese soybean imports first from South America and then from the U.S. once available Brazilian supplies for exports dwindled and/or became threatened, and
e) A weaker U.S. dollar in currency markets which encouraged U.S. soybean exports.

*******

B. Positive Trends in U.S. Soybean S-D in the December 10th WASDE Report

The December 10, 2020 USDA World Agricultural Supply and Demand Estimates (WASDE) report projected the tightest U.S. soybean supply-demand balances for the “new crop” 2020/21 marketing year (MY) since the historically “tight supplies / high prices” period of MY 2012/13 – MY 2013/14. The USDA’s forecast of U.S. average soybean prices in “new crop” MY 2020/21 have been raised to the highest levels since that earlier period, but are still $1.45-$2.85 per bushel less than those previous highs during MY 2012/13 – MY 2013/14.

  • U.S. Soybean Production: In its December 10, 2020 Crop Production and WASDE reports, the USDA projected 2020 U.S. soybean production of 4.170 billion bushels (bb) – down 143 million bushels (mb) from the USDA September WASDE report, while being up from 3.552 bb in 2019 – but down from the record highs of 4.296 bb in 2016, 4.412 bb in 2017, and 4.428 bb in 2018.
  • U.S. Soybean Supplies: The USDA projected historically large U.S. soybean total supplies of 4.709 bb in the “new crop” MY 2020/21 marketing year (MY), which started on September 1, 2020. This is down 194 mb from the September WASDE forecast, but up from 4.476 bb in “old crop” MY 2019/20 (ended on August 31, 2020). This is comparable to total supplies of 4.296 bb in MY 2016/17, 4.735 bb in MY 2017/18, and the record high of 4.880 bb in MY 2018/19.
  • U.S. Soybean Export Use: In what was a surprise to grain market analysts, the USDA left its projection of U.S. soybean exports unchanged at a record high of 2.200 bb in “new crop” MY 2020/21. This compares to U.S. exports of 1.676 bb in “old crop” MY 2019/20, 1.752 bb in MY 2018/19, 2.134 bb in MY 2017/18, and the previous record high of 2.167 bb in MY 2016/17.
  • The USDA Foreign Agricultural Service (FAS) reported that the U.S. exported 94.9 mb of soybeans for the week ending 12/10/2020. This compares to a weekly rate of 27.2 mb shipped to meet the USDA projection of 2.200 bb during “new crop” MY 2020/21. Seventy two percent (72%) of these shipments to date in this marketing year have gone to China.
  • With competitive Brazilian soybean export supplies likely to be available in February 2021 (i.e., in 6-10 weeks) and the requisite decline in U.S. soybean exports likely to occur at that time, this rate of weekly shipments (94.9 mb for the week ending 12/10/2020) is still more than double the 52-week shipment rate (i.e., 2 x 27.2 mb/week = 54.4 mb/week).
  • In addition to shipments, total forward purchases of U.S. soybeans for export total 787 mb on 12/10/2020. Combined shipments and forward purchases on 12/10/2020 for the “new crop” MY 2020/21 period equal 1.978 bb – 89.9% of the USDA’s projection of 2.200 bb with 15 or 52 weeks (28.8%) of the marketing year completed.
  • Although these forward purchases of U.S. soybean exports are subject to cancellation risk, still with production problems in key soybean production regions in South America, the likelihood of such cancellations are less this year than previously. China has accounted for from 37% on the low end up to 57%. It is likely of that these forward purchases are near the upper end of this range at 57% depending on the proportion of “unknown” purchases that China is involved with.
  • U.S. Soybean Crush Usage: The USDA raised its projection of U.S. soybean crush by 15 mb up to a record high of 2.195 bb in “new crop” MY 2020/21 in the December 10th WASDE. This compares to U.S. soybean crush of 2.165 bb in “old crop” MY 2019/20, 2.092 bb in MY 2018/19, 2.055 bb in MY 2017/18, and 1.901 bb in MY 2016/17.
  • Underlying domestic disappearance of U.S. soybean meal has been trending higher in support of domestic crush, with soybean meal exports remaining consistently in near a year ago levels. Soybean meal markets have been strong to date in “new crop” MY 2020/21, with the USDA projected prices to be $370.00 per short ton up sharply from $299.50 in “old crop” MY 2019/20 and $308.28 in MY 2018/19.
  • Biodiesel use from U.S. soybean oil has also been trending moderately higher, with both domestic use and exports remaining consistent from levels of the last 2 years. Soybean oil prices have also been strong, prices are projected to be $0.36 per pound in “new crop” MY 2020/21, up sharply from $0.2965 per pound in “old crop” MY 2019/20 and $0.2826 per pound in MY 2018/19.
  • U.S. Soybean Total Use: The USDA projected record high U.S. soybean total use of 4.534 bb in the “new crop” MY 2020/21 marketing year (MY), which started on September 1, 2020. This is up 581 mb (up 15%) from 3.953 bb in “old crop” MY 2019/20 (ended on August 31, 2020). This is comparable to total use of 4.214 bb in MY 2016/17 (3rd highest), 4.297 bb in MY 2017/18 (2nd highest), and 3.971 bb in MY 2018/19.
  • U.S. Soybean Ending Stocks & Percent (%) Ending Stocks-to-Use: As a result of these supply-demand balance sheet changes, the USDA projected ending stocks of 175 mb (3.86% Ending Stocks-to-Use) in “new crop” MY 2020/21, down 15 mb from a month earlier. This amount of ending stocks is down sharply from 523 mb (@ 13.23% S/U) in “old crop” MY 2019/20, from 909 mb (@ 22.89% S/U) in MY 2018/19, and 438 mb (@ 10.20% S/U) in MY 2017/18.
  • This decline in ending stocks and % stocks-to-use to 175 mb (@ 3.86% S/U) in “new crop” MY 2020/21 is comparable to ending stocks in the range of 92 – 197 mb and % stocks-to-use of 2.65% – 4.99% during the MY 2012/13 to MY 2015/16 time period.
  • U.S. Soybean Season Average Prices & % Ending Stocks-to-Use: In its December 10th WASDE report, the USDA projected that U.S. soybean season average prices would equal $10.55 per bushel in response to “tight” supply-demand balances estimated to be 3.86% S/U in “new crop” MY 2020/21. This USDA price projection is up $0.15 from a month earlier.
  • The U.S. soybean price of $10.55 (@ 3.86% S/ is up sharply from $8.57 (@ 13.23% S/U) in “old crop” MY 2019/20, $8.48 (@ 22.89% S/U) in MY 2018/19, and $9.33 ((@ 10.20% S/U in MY 2017/18.
  • This increase in U.S. season average soybean prices to $10.55 in response to declining % stocks-to-use @ 3.86% S/U in “new crop” MY 2020/21 is comparable to U.S. soybean prices in the range of $13.00 – $14.40 per bushel in with % stocks-to-use of 2.65% – 4.52% during the MY 2012/13 to MY 2013/14 time period.

*******

C. Summarizing U.S. Soybean Market Trends in “New Crop” MY 2020/21

In summary, the key issues that have been driving the U.S. soybean market higher are a combination of strong soybean demand from China because of 2020 weather problems, more weather-focused worries about the adequacy of Spring 2021 soybean supplies out of South America, a moderation in the USDA projections of 2020 U.S. soybean crop size and supplies, and the export enhancing trend lower in the value of the U.S. dollar relative to other world currencies.

There continues to be legitimate prospects for sharply higher soybean futures prices during late December through February 2020. IF Chinese soybean import demand continues AND South American soybean supplies are either moderately or sharply reduced due to weather – production problems in the next two months, THEN it is likely that soybean market prices will move significantly higher than current levels, which are already at highs not seen since the MY 2012/13 – MY 2013/14 period. At that time when U.S. soybean ending stocks-to-use declined to 2.65% – 4.52%, supporting U.S. soybean season average prices in the range of $13.00 – $14.40 per bushel. So, in “new crop” MY 2020/21 with ending stocks-to-use projected to be 3.86% (in the 2.65% – 4.52% S/U range in that earlier period), U.S. soybean prices are projected to be $10.55 per bushel – down 19% to 27% from the previous price levels that occurred at similar that earlier high priced period.

It begs the question of “why the price difference between the two period exists?” The reasons could be the following…..

  1. The drought of 2012 that tightened U.S. soybean supplies in MY 2012/13 with a carryover effect on MY 2013/14 occurred at the same time that Chinese import demand from both South America and the United States was growing sharply. While Chinese import demand is very strong in “new crop” MY 2020/21, U.S. soybean crop production in 2020 has been adequate, although the availability of South American supplies is in question (a key supporting market factor).
  2. United States’ ethanol use and demand for U.S. corn had been growing and competing with U.S. soybeans for planted acres. In that market environment the need for adequate U.S. soybean acres for exports and crush usage had a crossover, indirect effect on U.S. soybean prices. Ethanol usage and associated U.S. corn demand is anticipated to still be strong – but not growing in “new crop” MY 2020/21 as it was back then.
  3. It is possible that the market is not confident that all of the soybeans that have been bought in the market that have not yet have not been shipped (i.e., 787 mb as of the USDA FAS 12/10/2020 Grain Exports report) will come to fruition in the market. In particular, if Chinese firms are the owners of those purchase contracts, then any possible geopolitical conflict between the U.S. and China could result in cancellations of these purchases. The soybean market may be taking a “show me” attitude on forward purchases of U.S. soybeans before South American soybean supplies become available in quantity in late February – early March 2021.

*******

D. Prospects for U.S. Soybean Supply-Demand & Prices in “New Crop” MY 2020/21

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.

***

USDA Scenario #1 – 2.200 billion bu. Exports, 175 mb. Ending Stocks, 3.86% Stocks/Use, $10.55 /bu U.S. Average Cash Price (50% probability KSU)

On December 10th the USDA projected that U.S. soybean production would be 4.170 billion bushels (bb) in year 2020, with total supplies of 4.709 bb in “new crop” MY 2020/21 (Tables 1 & 1a). This supply-demand scenario predicts increases all use categories, including, a) soybean crush at 2.195 bb (up 30 mb from the previous marketing year), b) exports of 2.200 bb (up 524 mb or 31%), and seed & residual use (103 mb & 35 mb for a total of 138 mb – up 22 mb) for “new crop” MY 2020/21.

Ending stocks of 175 mb (down 348 mb or 67%) are forecast for the “new crop” 2020/21 marketing year which began September 1, 2020, with percent (%) stocks-to-use of 3.86% (vs. 13.2% a year ago), and U.S. average cash corn prices of $10.55 /bu. (up $1.98 or 23%).

This USDA forecast is given a 50% probability of occurring by KSU.

***

KSU Scenario #2 – 2.250 billion bu. Exports, 125 mb. Ending Stocks, 2.73% Stocks/Use, $12.00 /bu U.S. Average Cash Price (30% probability KSU)

An alternative KSU Scenario #2 to consider for “new crop” MY 2020/21 involves higher U.S. soybean exports (2.250 bb), and higher total use (4.584 bb) (Table 1a). Higher exports result in tighter ending stocks (125 mb), even smaller percent ending stocks-to-use (2.73%), and sharply higher U.S. average farm prices ($12.00 /bu) than the USDA’s forecast.

This KSU forecast scenario is given a 30% probability of occurring.

***

KSU Scenario #3 – 2.300 billion bu. Exports, 75 mb Ending Stocks, 1.62% Stocks/Use, $13.25 /bu U.S. Average Cash Price (10% probability KSU)

Another alternative KSU Scenario #3 to consider for “new crop” MY 2020/21 involves even higher U.S. soybean exports (2.300 bb), and requisite higher total use (4.634 bb) (Table 1a). Higher exports result in tighter and likely minimum ending stocks (75 mb), minimum reasonable percent ending stocks-to-use (1.62%), and even higher U.S. average farm prices ($13.25 /bu) than the USDA’s forecast.

This KSU forecast scenario is given a 10% probability. 

***

KSU Scenario #4 – 2.000 billion bu. Exports, 211 mb Ending Stocks, 4.75% Stocks/Use, $9.40 /bu U.S. Average Cash Price (10% probability KSU)

KSU Scenario #4 for “new crop” MY 2020/21 takes the starting USDA Scenario #1 backwards in terms of lower exports, examining the supply-demand and price impact of a 200 mb increase in U.S. exports. Specifically, this scenario involves lower higher U.S. soybean exports (2.000 bb), and requisite lower total use (4.333 bb) (Table 1a). Lower exports result in larger ending stocks (211 mb), and higher percent ending stocks-to-use (4.75%), and lower U.S. average farm prices ($9.40 /bu) than the USDA’s forecast.

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

***

E. World Soybean Supply-Demand Prospects

World soybean production of a record high 362.05 million metric tons (mmt) is projected for “new crop” MY 2020/21, up 7.6% from 336.47 mmt in “old crop” MY 2019/20, and up 0.2% from the 361.04 mmt in MY 2018/19 (Figure 14). It is important to note that the “new crop” MY 2021 includes the uncertainty of the USDA’s forecast of South American soybean production to be harvested in Spring-Summer 2021. The “new crop” 2020/21 marketing year began on September 1, 2020 and will continue through August 31, 2021.

World soybean total supplies of 457.51 mmt in “new crop” MY 2020/21 are forecast to be up 7.7% from 449.19 mmt in “old crop” MY 2019/20, but down 0.5% from 459.87 mmt in MY 2018/19. “World-Less-China” total supplies of 413.21 mmt are projected for “new crop” MY 2020/21, down 1.9% from 421.64 mmt in “old crop” MY 2019/20, and down 1.8% from the 420.84 mmt in MY 2018/19.

World soybean exports of a 168.48 mmt are projected for “new crop” MY 2020/21, up 2.4% from 164.57 mmt in “old crop” MY 2019/20, and up 14.1% from 147.71 mmt in MY 2018/19 (Figure 14). China is expected to continue to be the key World soybean importer in the coming marketing year, with a USDA forecast of 100 mmt in “new crop” MY 2020/21 – which is 60.1% of world total soybean imports. This is up from 98.53 mmt in “old crop” MY 2019/20 (59.6% of world imports), and 82.54 mmt in MY 2018/19 (56.6% of world imports).

Projected World soybean ending stocks of 85.64 mmt in “new crop” MY 2020/21 are a 5 year low, while 23.16% Stocks/Use are a 7 year low. These projections for “new crop” MY 2020/21 are down from 95.46 mmt (26.92% S/U) in “old crop” MY 2019/20, from 112.72 mmt (32.75% S/U) in MY 2018/19, and from 98.83 mmt (29.21% S/U) in MY 2017/18 (Figures 14 & 17a).

On a “World-Less-China” basis (i.e., excluding China from World demand and ending stocks numbers), projected “World-Less-China” soybean ending stocks are a 7 year low of 58.84 mmt (23.32% Stocks/Use) in “new crop” MY 2020/21. These amounts of “World-Less-China” ending stocks are down substantially from 68.66 mmt (27.97% S/U) in “old crop” MY 2018/19, 93.27 mmt (38.52% S/U) (both being the highest on record) in MY 2017/18, and 75.77 mmt (32.66% S/U) in MY 2016/17 (Figure 17b). Together, Figures 14 and 17a-b show the sharp decline in World soybean ending stocks that has occurred outside of China – which is a key factor in supporting the recent strength of World soybean market prices.

KSU Weekly Grain Market Review (11/13/2020) – Tighter Supply-Demand Outlooks for U.S. Corn and Soybeans, with support for Sorghum and Wheat

The Weekly Grain Market Review for Friday, November 13, 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:   https://www.agmanager.info/news#ksrn-radio-interviews

******

The KSU Agriculture Today Radio Program was aired on Friday, November 13, 2020 and can be found at the following web address:

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

******

Key Points of Grain Market Analysis following the November 10th WASDE Report

The keys results of the November 10, 2020 WASDE Report were the following:

A. Corn Supply-Demand & Price Results

  • For the U.S. corn market, the November 10, 2020 USDA Crop Production & WASDE reports caused significant changes in the “new crop” Marketing Year (MY) 2020/21 supply-demand balances and price expectations.  These changes in “new crop” Marketing Year (MY) 2020/21 were due in part to a 215 mb reduction in projected 2020 corn production – down to a forecast of 14.507 bb.  
  • These changes in the MY 2020/21 U.S. corn balance sheet were also due to a 325 mb increase in projected U.S. corn exports – up to 2.650 bb.  Projected corn feed and residual use for MY 2020/21 was decreased by 75 mb – down to 5.700 bb.
  • U.S. Corn ending stocks were projected to decline to 1.702 billion bushels (bb) in “new crop” Marketing Year (MY) 2020/21 – down 465 million bushels (mb) from the October projection of 2.167 bb, and down from 1.995 bb in “old crop” MY 2019/20, and down from 2.221 bb in MY 2018/19.  
  • U.S. Corn percent (%) ending stocks-to-use were also projected to decline to 11.48% in “new crop” Marketing Year (MY) 2020/21 – down from the October projection of 14.87%, and down from 14.37% in “old crop” MY 2019/20, and down from 15.54% in MY 2018/19.
  • As a result of these corn market factors, U.S. Corn Average Farm Prices were projected to increase to $4.00 per bushel in “new crop” Marketing Year (MY) 2020/21 – up $0.40 from the October projection of $3.60 /bu, and up from $3.56 in “old crop” MY 2019/20, and up from $3.61 in MY 2018/19.
  • The “New Crop” 2020/21 marketing year (MY) for corn lasts from September 1, 2020 through August 31, 2021.

B. Soybean Supply-Demand & Price Results

  • For the U.S. soybean market, the November 10, 2020 USDA Crop Production & WASDE reports ALSO caused significant changes in  “new crop” Marketing Year (MY) 2020/21 supply-demand balances and price expectations.  These changes in “new crop” Marketing Year (MY) 2020/21 were partly due to a 98 mb reduction in projected 2020 soybean production – down to a forecast of 4.170 bb.   There were other small changes in the U.S. soybean balance sheet for MY 2020/21 U.S. soybean balance sheet in the Seed and Residual categories.
  • U.S. Soybean ending stocks were projected to decline to 190 million bushels (mb) in “new crop” Marketing Year (MY) 2020/21 – down 100 mb from the October projection of 290 mb, and down from 523 mb in “old crop” MY 2019/20, and down from 909 mb in MY 2018/19.  
  • U.S. Soybean percent (%) ending stocks-to-use were also projected to decline to 4.20% in “new crop” Marketing Year (MY) 2020/21 – down from the October projection of 6.20%, and down from 13.23% in “old crop” MY 2019/20, and down from 22.89% in MY 2018/19.
  • As a result of these soybean market factors, U.S. Soybean Average Farm Prices were projected to increase to $10.40 per bushel in “new crop” Marketing Year (MY) 2020/21 – up $0.60 from the October projection of $9.80 /bu, and up from $8.57 in “old crop” MY 2019/20, and up from $8.48 in MY 2018/19.
  • The “New Crop” 2020/21 marketing year (MY) for soybeans lasts from September 1, 2020 through August 31, 2021.

C. Wheat Supply-Demand & Price Results

  • In the U.S. Wheat market, the November 10, 2020 USDA Crop Production & WASDE reports DID NOT cause significant changes in the “new crop” Marketing Year (MY) 2020/21.  Other than a small increase in U.S. food use of wheat of 5 mb up to 965 mb total, there were only minimal changes elsewhere for “new crop” Marketing Year (MY) 2020/21.  U.S. Wheat production is forecast at 1.826 bb in year 2020, down from 1.932 bb in 2019, and from 1.885 bb in 2018. Seed use of wheat was increased marginally (1 mb) in the current marketing year up to 62 mb. 
  • U.S. wheat exports are projected to by 975 mb in “new crop” MY 2020/21 (unchanged from October), UP from 965 mb in “old crop” MY 2019/20, and up further from 937 mb in MY 2018/19.
  • U.S. Wheat ending stocks were projected to decline to 877 million bushels (mb) in “new crop” Marketing Year (MY) 2020/21 – down 6  mb from the October projection of 883 mb, and down from 1.028 bb in “old crop” MY 2019/20, and down from 1.080 bb in MY 2018/19
  • U.S. Wheat percent (%) ending stocks-to-use were also projected to decline to 41.72% in “new crop” Marketing Year (MY) 2020/21 – down from the October projection of 42.13%, and down from 49.21% in “old crop” MY 2019/20, and down from 52.97% in MY 2018/19.
  • As a result of these wheat market factors, U.S. Wheat Average Farm Prices were projected to be unchanged at $4.70 per bushel in “new crop” Marketing Year (MY) 2020/21 – up from $4.58 in “old crop” MY 2019/20, but down from $5.16 in MY 2018/19.
  • The “New Crop” 2020/21 marketing year (MY) for U.S. wheat lasts from June 1, 2020 through May 31, 2021.

D. Grain Sorghum Supply-Demand & Price Results

  • In the U.S. Grain Sorghum market, the November 10, 2020 USDA Crop Production & WASDE reports DID NOT cause significant changes in the “new crop” Marketing Year (MY) 2020/21 other than an increase in projected prices that was similar to that of corn.  U.S. Grain Sorghum production is forecast at 371 million bushels (mb) in year 2020, up from 341 mb in 2019, and from 365 mb in 2018.
  • U.S. Grain Sorghum exports are projected to by 260 mb in “new crop” MY 2020/21 (unchanged from October), UP from 204 mb in “old crop” MY 2019/20, and up further from 93 mb in MY 2018/19.
  • U.S. Grain Sorghum ending stocks were projected to decline to be 30 million bushels (mb) in “new crop” Marketing Year (MY) 2020/21 – unchanged from the October projection, and up 1 mb from 29 mb in “old crop” MY 2019/20, while down from 64 mb in MY 2018/19
  • U.S. Grain Sorghum percent (%) ending stocks-to-use were projected to be 8.11% in “new crop” Marketing Year (MY) 2020/21 – unchanged from the October projection, while up marginally from 7.71% in “old crop” MY 2019/20, but down sharply from 19.05% in MY 2018/19.
  • As a result of these Grain Sorghum market factors, U.S. Grain Sorghum Average Farm Prices were projected to be sharply higher at $4.05 per bushel in “new crop” Marketing Year (MY) 2020/21 – up $0.45 /bu from October, and up from $3.34 in “old crop” MY 2019/20, and from $3.26 in MY 2018/19.
  • The “New Crop” 2020/21 marketing year (MY) for grain sorghum lasts from September 1, 2020 through August 31, 2021.

Topics addressed in this document include:

  1. Closing CME Corn, Soybean, and Hard Red Winter Wheat futures prices on Friday, 11/13/2020
  2. Soybean / Corn futures price ratios & HRW Wheat / Corn & Sorghum/Corn cash price ratios in Garden City, KS on 11/13/2020
  3. U.S. Ethanol Plant prices for corn, distillers grains, and ethanol on 11/13/2020
  4. U.S. & Global weather map graphics and reports – current info
  5. U.S. Corn & Sorghum exports, supply-demand data, and DEC 2020 Corn futures price graphics with technical-graphic analysis
  6. USDA World Agricultural Supply and Demand Estimates (WASDE) from the November 10, 2020 report – focusing on U.S. and World Corn – with KSU Supply-Demand Scenario forecasts (weighted by probability of occurring)
  7. U.S. Wheat & Hard Red Winter Wheat exports, supply-demand data, and DEC 2020 HRW Wheat futures prices with technical-graphic analysis
  8. USDA WASDE estimates from the November 10, 2020 report – focusing on U.S. and World Wheat – All Classes Combined
  9. U.S. Soybean exports, supply-demand data, and JAN 2021 Soybean futures price graphics with technical-graphic analysis
  10. USDA WASDE estimates from the November 10, 2020 report – focusing on U.S. and World Soybeans

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

 

 

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 October 9, 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 October 28, 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.

******

U.S. Corn Market Outlook in Late-October 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 consensus in the U.S. corn market is that there will be large 2020 U.S. corn production of 14.722 billion bushels (bb), with large U.S. corn total supplies of 16.742 bb in the “new crop” 2020/21 marketing year (MY), which started on September 1, 2020.  The fall 2020 U.S. corn harvest is estimated by the USDA to be 72% complete through October 25th – compared to 56% on that date during the 2015-2019 period.  Corn harvest delays during the week of October 25-31 will likely slow progress – but are not expected to cause significant yield – production losses.

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 (5.050 bb), non-ethanol feed, seed and industrial (FSI) use (1.425 bb), and feed and residual use (5.775 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 and resultant import demand from China and elsewhere in the World.

To restate, the key issue that has been supporting corn market price gains over the last few weeks in “new crop” MY 2020/21 have been expectations of foreign crop production problems (China & parts of South America), and likely narrowing of U.S. corn ending stocks (2.167 bb) and percent (%) ending stocks-to-use (14.87%).  U.S. average farm prices for “new crop” MY 2020/21 are projected to be $3.60 per bushel, which is nearly unchanged from the last few U.S. corn marketing years.

Prospects for U.S. corn market supply-demand balances have tightened up and provided positive support and prospects for corn prices.  For context, 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 are estimated to be 1.995 bb, with 14.37% ending stocks-to-use, while U.S. farm prices for corn averaged $3.56 /bu.

Since the USDA August 9, 2020 Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, U.S. Corn supply-demand balance prospects in “new crop” MY 2020/21 have “tightened” considerably.   The evidence for this “tightening” is found with projections of U.S. corn ending stocks as they have declined from 2.756 bb in August, to 2.503 bb in September, down to 2.167 bb in October.   Similarly, U.S. corn percent ending stocks-to-use forecasts have declined down from 18.65% in August, to 17.06% in September to 14.87% in October.   As a result, projected U.S. farm prices of corn in “new crop” MY 2020/21 have risen from $3.10 per bushel in August, to $3.50 in September, and to $3.60 in October.  If market expectations are fulfilled and U.S. corn exports increase appreciably – all else being equal – ending stocks could decline 250-750 million bushels, with supply-demand balances tightening considerably, leading to stronger U.S. corn cash prices in “new crop” MY 2020/21.

These market expectations have led to CME DEC 2020 Corn futures prices closing at $4.16 per bushel on Tuesday, October 27th.  Following the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports released on Friday, October 9, 2020, U.S. corn export purchases have increased.

  

*****

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” 2020/21 marketing year, supplemented with Kansas State University estimates of alterative price outcomes for the same period.  This author has estimated the probability of each of these scenarios occurring in the “new crop” 2020/21 marketing year which began on September 1, 2020.

*****

USDA Scenario #1 – 82.527 mln. ac. harvested, 14.722 billion bu crop, 2.167 bb ending stocks @ 14.87% stocks/use, & $3.60 /bu U.S. farm price (35% probability KSU)

On October 9th the USDA projected that U.S. corn production would be 14.722 billion bushels (bb) in year 2020, with total supplies of 16.742 bb in “new crop” MY 2020/21 (Tables 1-2)

This supply-demand scenario predicts increases from the previous year in all use categories, including, a) corn use for ethanol at 5.050 bb (up 4.0% from 4.852 bb in the previous marketing year), b) non-ethanol food & industrial use of 1.395 bb (down 0.3% or 4.1 mb), c) exports of 2.325 bb (up 30.8% from 1.778 bb), and feed & residual use (5.775 bb – down 0.9% from 5.827 bb in “old crop” MY 2019/20) for “new crop” MY 2020/21.

Ending stocks of 2.167 bb (up 8.6% from 1.995 bb in “old crop” MY 2019/20) are forecast for the “new crop” 2020/21 marketing year beginning September 1, 2020, with percent (%) stocks-to-use of 14.87% (vs. 14.37% a year ago), and U.S. average cash corn prices of $3.60 /bu. (up $0.04 in from $3.56 /bu a year ago).  This USDA forecast is given a 35% probability of occurring by KSU.

*****

KSU Scenario #2 – 82.027 mln. ac. harvested, 14.634 bb crop, 2.079 bb ending stocks @ 14.26% stocks/use, & $3.65 /bu U.S. farm price (20% probability KSU)

An alternative KSU Scenario #2 to consider for “new crop” MY 2020/21 involves lower U.S. corn harvested acres (82.027 ma), lower 2020 corn production (14.634 bb), and lower total supplies (16.654 bb) (Table 2).

This scenario assumes no changes in either total usage (14.575 bb) or within specific usage categories – including corn ethanol @ 5.050 bb, non-ethanol FSI @ 1.393 bb, seed use at 32 million bushels (mb), exports at 2.325 bb, and feed & residual use @ 5.775 bb.

Lower production and supplies result in tighter ending stocks (2.079 bb), smaller percent ending stocks-to-use (14.26% S/U), and marginally higher U.S. average farm prices ($3.65 /bu) than the USDA’s forecast. 

This KSU forecast scenario is given a 20% probability of occurring.

*****

KSU Scenario #3 – Plus 250 million bu. U.S. exports, 1.917 bb ending stocks @ 12.93% stocks/use, $3.75 /bu (20% probability KSU)

Another alternative, KSU Scenario #3, to consider for “new crop” MY 2020/21 involves the same projections of 2020 corn production (14.722 bb), and total supplies (16.742 bb).  United States corn exports for “new crop” MY 2020/21 are projected to be 2.575 bb – up 250 mb from the USDA’s forecast. 

With other U.S. corn use categories assumed to be unchanged for “new crop” MY 2020/21 from the USDA’s projection, total use is projected to be 14.825 bb (up 250 mb) (Table 2).

These changes result in “tighter” ending stocks (1.917 bb), still tighter percent ending stocks-to-use (12.93% S/U), and also marginally higher U.S. average farm prices ($3.75 /bu) than the USDA and previous KSU Scenario #2 forecast. This KSU forecast scenario is given a 15% probability. 

*****

KSU Scenario #4 – Plus 500 million bu. U.S. exports, 1.667 bb ending stocks @ 11.06% stocks/use, $4.18 /bu (15% probability KSU)

KSU Scenario #4 for “new crop” MY 2020/21 takes Scenario #3 a step farther by considering a 500 mb increase in U.S. corn exports and total useKSU Scenario #4 for “new crop” MY 2020/21 involves the same 2020 corn production as USDA Scenario #1, with 2020 corn production (14.722 bb), and total supplies (16.742 bb) (Table 2)

However, with 500 mb higher exports of 2.825 bb (up 500 mb from USDA) & total use of 14.875 bb (also up 500 mb from USDA) in “new crop” MY 2020/21, projected ending stocks of 1.667 bb and percent ending stocks-to-use of 11.06% are down sharply from the USDA’s projections.  As a result, projected U.S. average farm prices are projected to be $4.18 /bu – up from the USDA’s forecast of $3.65 /bu.   

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

*****

KSU Scenario #5 – Plus 750 million bu. U.S. exports, 1.417 bb ending stocks @ 9.25% stocks/use, $4.60 /bu (5% probability KSU)

Finally, KSU Scenario #5 for “new crop” MY 2020/21 involves the same 2020 corn production as the USDA Scenario #1 with unchanged 2020 corn production (14.722 bb), and total supplies (16.742 bb) (Table 2)

However, with 750 mb higher exports of 3.075 bb (up 750 mb from USDA) & total use of 15.325 bb (also up 750 mb from USDA) in “new crop” MY 2020/21, projected ending stocks of 1.417 bb and percent ending stocks-to-use of 9.25% are down sharply from the USDA’s projections.  As a result, projected U.S. average farm prices are projected to be $4.60 /bu – up from the USDA’s forecast of $3.60 /bu. 

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

*****

Ethanol and Biodiesel Market Trends and Profitability

Bioenergy Market & Profit Calculations Through October 1-23, 2020

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

October 27, 2020

A. Ethanol Price and Profitability Trends

During October 2020 to date, corn input purchase prices for Iowa ethanol plants have averaged $3.72 ½ per bu, compared to $3.51 in September, and the range of $2.95-$3.09 during the April-August period. Distillers dried grains (DDGS) (10% moisture) averaged $156.64 per ton during the October 1-23 period, up from $138.15 in September, the range of $117.83 to $127.49 during June-August, $143.33 in May, and $192.05 in April 2020.

The cost of production of a representative ethanol plant in Iowa is estimated to be near $1.36 / gallon during the October 1-23 period, up marginally from $1.35 in September, $1.27 in August, and the range of $1.01 to $1.29 during April through July 2020.

The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants averaged $1.36 / gallon during the October 1-23, 2020 period, up from $1.30 in September, and comparable to $1.18 in August, $1.28 /gallon in July, $1.19 in June, and $1.00 in May 2020.

Using an Iowa State University model for instate ethanol plants, estimated losses of –$0.03 /gallon are projected for the October 1-23, 2020 period.   These estimated ethanol plant operating losses have continued for 27 months since August 2018 – with average operating deficits of -$0.15 per gallon – ranging from of breakeven to -$0.26 per gallon over the August 2018 – October 23, 2020 time period.

******

B. Ethanol Production & Stocks Trends

During the 6th and 7th weeks of the “new crop” 2020/21 marketing year for corn (ending October 9th and  16th) U.S. ethanol production averaged 0.918 million barrels per day (mb/d). At this average pace throughout the remaining 45 weeks of the marketing year, U.S. ethanol production would reach 14.075 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 4.974 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 October 9, 2020 have a forecast in “new crop” MY 2020/21 of 5.050 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 5.088 bb, or 102.2% of the KSU projection of 4.974 bb.

United States’ ethanol stocks have averaged 19,840,000 barrels per week so far during “new crop” MY 2020/21, i.e., from early September 2020 – through October 16, 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 19,840,000 barrels per week – down 28% from the high of 27,689,000 barrels the week of April 17, 2020.

******

C. Biodiesel Price & Profitability Trends

By Kansas State University estimates, during the October 1-23, 2020 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $34.07 per cwt – up marginally from $34.05 in September, $32.47 in August, and $29.61 in July.

The selling price of biodiesel at Iowa Biodiesel Plants is estimated to have averaged $3.00 /gallon during the October 1-23 period, comparable to $3.13 in September, $3.06 in August, $2.83 in July, $2.71 in June, and $2.57 in May 2020,

Also during the October 1-23 period, the cost of production at representative biodiesel plants in Iowa is estimated to have averaged $3.18 per gallon – unchanged from September, but up from $3.05 in August, and comparable to $2.84 in July, $2.70 in June, $2.55 in May, and $2.57 in April 2020.

Net returns of this representative soy biodiesel plant in Iowa during October 1-23, 2020 were estimated to be a loss of $0.18 per gallon produced.  This is comparable to the May-September 3-month average of -$0.003 per gallon.

**********

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/