An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2016-2017 price prospects following the USDA’s April 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).
Following is a summary of the article on U.S. Grain Sorghum & World Coarse Grain Market Outlook – with the full article and accompanying analysis available on the KSU AgManager website at the following web address:
Recent Grain Sorghum Price Trends in Central Kansas
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on April 12th, grain sorghum cash bids at export terminals and country elevators near Hutchinson, Kansas have been “volatile”. After first trending $0.20-$0.22 per bu. higher through April 20th, cash prices then dropped $0.32-$0.34 lower in two days on April 22nd. However, sorghum prices then trended higher again – up $0.19-$0.20 by April 29th – before trending lower through Tuesday a.m., May 3rd, with area cash bids ranging from $3.07 to $3.27 /bu – depending on the individual elevator. At the same time a cash bid of $3.41 per bu. for grain sorghum was offered by an ethanol plant in the central Kansas area. New crop forward contract bids for October-November 2016 delivery were in the range of $3.17-$3.45 /bu depending on location.
Overall, grain sorghum market prospects for spring-summer 2016 and for the “next crop” 2016/17 marketing year depend largely on the planting and growing conditions for the U.S. 2016 feedgrain crops along with the ongoing strength of U.S. grain sorghum usage. To date in its preseason projections the USDA has assumed that there will be no serious crop production problems in the summer of 2016, and has projected larger ending stocks-to-use and a continuation of low prices for U.S. grain sorghum in “next crop” MY 2016/17. However, prospects for U.S. feedgrain prices have improved since early April – with CME MAY 2016 corn futures contracts rising from a low of $3.47 ¼ on April 1st, to highs of $4.02 on April 21st and $3.92 on April 29th, to a close of $3.90 ¼ on May 2nd. “New Crop” CME DEC 2016 corn futures also rose from a low of $3.64 on April 1 up to a high of $4.09 on April 21st before settling after some volatile market swings at $3.96 ½ on May 2nd.
Production & Market Uncertainties: Feedgrain production concerns in parts of South America, concerns about wet soil conditions and delayed plantings in parts of the U.S. western Corn Belt, and an increase in U.S. feedgrain exports have recently provided support for U.S. grain sorghum and corn prices. That said, there are several key crop production and market factors that will impact U.S. feedgrain market price direction and volatility during the remainder of year 2016. First, increasing prospects for a transition from the recently prevalent El Nino weather system to a La Nina weather pattern with an increased likelihood of hot, dry crop production conditions in the U.S. Corn Belt in the summer of 2016 could bring about swift, dramatic change in U.S. grain market supply-demand and price prospects, and improve prospects for grain sorghum prices and profitability (in areas of the U.S. not impacted by drought!). Second, total use of U.S. grain sorghum has been relatively high in “current crop” MY 2015/16 as low sorghum prices have helped domestic U.S. feedgrain-using industries to lower their input costs and to improve their profitability (if not limit their financial losses).
Over time the combination of both a) lower production in response to low profits and/or crop production problems, and b) increased grain sorghum use supported by low grain prices for livestock feed, exports and grain processing use, are likely to work together to bring about a change in the current prevailing “large crop – low price” market scenario in U.S./World coarse grain markets.
Given current market information, it seems fair to judge that absent any change in this projected “large supply / low price” scenario, U.S. grain sorghum cash prices are unlikely to rise very far from current levels (which are in the $3.00-$3.40 per bushel in much of Kansas). Major concerns about U.S. and/or foreign feedgrain crop production prospects will be required for U.S. grain sorghum prices to move up to $4.00-$4.50+ during late spring-summer 2016.
USDA Estimate for “Current Crop” MY 2015/16
The USDA made several changes in its projected U.S. grain sorghum supply-demand balance sheet for “current crop” MY 2015/16. While 2015 U.S. sorghum production of 597 mb, total supplies of 620 mb, and total use of 555 mb are unchanged, adjustments were made in several usage categories. Food, alcohol and industrial use is projected at 124 mb – up 25 mb from March, and offsetting decreases in exports (315 mb – down 10 mb), and feed and residual use (115 mb – down 15 mb). Ending stocks are forecast at 65 mb (11.71% S/U) – up from 18 mb (4.0% S/U) in “old crop” MY 2014/15, and 34 mb (9.1% S/U) in MY 2013/14. The forecast of U.S. grain sorghum average cash prices is lowered to the range of $3.10-$3.30 /bu. ($3.20 midpoint – down $0.10) in “current crop” MY 2015/16, versus $4.03 in “old crop” MY 2014/15, $4.28 in MY 2013/14, and $6.33 (record high) in MY 2012/13.
USDA Forecast for “Next Crop” MY 2016/17
On December 14, 2015 the USDA released preliminary estimates of its USDA Agricultural Outlook Forum projections on February 25-26, 2016. The March 31st Prospective Plantings report provided an updated forecast of 2016 U.S. sorghum planted acreage. These KSU-adjusted USDA forecasts for “next crop” MY 2016/17 account for updated grain sorghum planted acreage estimates and associated production and stocks adjustments.
The USDA projected 2016 U.S. grain sorghum plantings of 7.216 million acres (ma) – down 1.243 ma or 14.7% from 2015. Forecast 2016 harvested acres of 6.046 ma would be down 1.805 ma or 23.0% vs 2015. With projected yields of 65.1 bu/ac, 2016 U.S. grain sorghum production is forecast to be 394 mb – down sharply from 597 mb in 2015, but comparable to 433 mb in 2013, and 392 mb in 2012. With forecast “next crop” MY 2016/17 total use of 415 mb (down from 555 mb in “current crop” MY 2015/16), and projected ending stocks of 44 mb (10.6% S/U), U.S. sorghum prices are projected by the USDA to be $3.40 /bu – down $0.05 from the USDA corn price projection of $3.45 /bu for “next crop” MY 2016/17, but up from the $3.20 /bu midpoint estimate for U.S. grain sorghum “current” MY 2015/16. By KSU estimates, this scenario has a 50% likelihood of occurring in “next crop” MY 2016/17.
KSU Forecast for “Next Crop” MY 2016/17
Two alternative KSU-Scenarios for U.S. grain sorghum supply-demand and prices are presented for “next crop” MY 2016/17, with both assuming a 216,000 acre downward adjustment in 2016 U.S. grain sorghum planted area from the USDA’s March 31st Prospective Plantings report:
A) “Normal Crop” KSU-Scenario A (Lower Acres & Trend Yield) (40% probability) assumes for “next crop” MY 2016/17: 7.000 ma planted, 5.865 ma harvested, 67.3 bu/ac yield, 395 mb production, 460 mb total supplies, 385 mb total use, 75 mb ending stocks, 19.5% S/U, & $3.15 /bu U.S. grain sorghum average price; and
B) “Short Crop” KSU-Scenario B (Lower Acres & Low Yield) (10% probability) assumes for “next crop” MY 2016/17: 7.000 ma planted, 5.865 ma harvested, 55.0 bu/ac yield, 323 mb production, 388 mb total supplies, 341 mb total use, 47 mb ending stocks, 13.8% S/U, & $4.70 /bu U.S. grain sorghum average price.
Potential KSU 2016 U.S. Sorghum and Corn “Short Crop” Scenario – 12.600 Billion Bu U.S. Corn Crop
If significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in approximately a 12.607 bb corn (150.0 bu/ac yield on 84.044 ma harvested), then all else being equal, ending stocks of U.S. corn for “next crop” MY 2016/17 could decline to 1.137 bb (8.5% S/U), with U.S. corn prices likely to increase to $4.50-$5.50 per bushel. Grain sorghum prices in the U.S. would likely in the $4.25 to $5.25 per bushel range for “next crop” MY 2016/17. At this time by KSU estimates there is a 10% likelihood of this occurring – similar to “short crop” KSU Scenario B above.
World Coarse Grains Supply-Demand
World total supplies of 1,505.0 million metric tons (mmt) are projected for “current” MY 2015/16, down marginally from 1,514.8 mmt in “old crop” MY 2014/15, but up from 1,443.9 mmt in MY 2013/14. Projected World coarse grain ending stocks of 245.1 mmt (19.5% S/U) in “current crop” MY 2015/16 are up marginally from 243.7 mmt (19.2% S/U) in “old crop” MY 2014/15, and from 211.4 mmt (17.1% S/U) in MY 2013/14.
Grain sorghum field with an ethanol plant near Oakley-Campus, Kansas (Source of image: http://ksgrainsorghum.org/ethanol/)
Harvesting Grain Sorghum in Western Kansas in 2014 (Gove County) (Source of image: http://www.kansasagland.com/news/stateagnews/)