KSU U.S. Sorghum Acres-Yield Scenarios and World Coarse Grain Markets in Mid-June 2019

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s June 11th USDA World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website  (http://www.agmanager.info/).

Following is a summary of the article on “U.S. Grain Sorghum and World Coarse Grain Market Outlook” with the full article and accompanying analysis on the KSU AgManager website available at the following web address:

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

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U.S. Grain Sorghum & World Coarse Grain Market Outlook

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

June 14, 2019

 

A. The Current U.S. Grain Sorghum Market Situation

Prospects for U.S. grain sorghum market prices have been greatly effected by U.S. corn planting problems and prospective production concerned that developed in May and early-June, 2019.  As evidence of this change, the USDA raised the projected price of U.S. grain sorghum in the “new crop” 2019/20 marketing year by $0.50 to $3.50 per bushel in the June 11th WASDE report.  It is notable that this projected price increase occurred with no changes to the U.S. grain sorghum supply-demand balance sheet for the “new crop” 2019/20 marketing year.  This indicates that major market cross-over impacts on U.S. grain sorghum supply-demand and price prospects are expected to happen as a result of dramatically declining 2019 U.S. corn production prospects. 

Planting delays and prevented planting choices, as well as figuring out the procedures and qualifiers for future Market Facilitation Payments (MFPs) have been some of the challenges in the U.S. feedgrain market in recent weeks.   Delayed plantings of U.S. corn until early-mid June have been severe and prevalent enough that crop insurance coverage has been sharply reduced for these late corn acres.  Also, the understanding from USDA public statements to date that crop acres must be planted to qualify for further USDA Market Facilitation Payments (MFP) have also factored into farmers crop production decisions.  These factors taken together seem likely to motivated U.S. farmers to plant more U.S. grain sorghum acres this year.

From a mid-June 2019 perspective, grain sorghum seems to have physiological production advantages over late-planted corn – including a shorter growing season and a later final planting date to qualify for full crop insurance coverage.  Individual ethanol plants and livestock feeders may be motivated to encourage grain sorghum production in their local areas in year 2019.  Increased year 2019 grain sorghum production in these areas could at least temporarily help compensate for significant anticipated shortfalls in their local 2019 corn supplies – to keep their ethanol plants and livestock feeding operations running with less disruption form limited supplies and/or extremely high feedgrain prices. 

 As a result of these factors, it seems likely that the USDA’s initial projection of 5.135 million acres planted in the U.S. in year 2019 will be raised in coming months.  This would lead to increased estimates of 2019 U.S. grain sorghum production, and increased usage of sorghum for bioenergy and livestock feed uses to compensate for short corn supplies.  The impact on U.S. grain sorghum exports is less certain, at least until U.S.-China trade conflicts find a resolution.   

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B. U.S. Grain Sorghum Supply-Demand for “New Crop” MY 2019/20

In the June 11th WASDE report, the USDA left unchanged its projection of 2019 U.S. Grain Sorghum plantings of 5,134,000 acres, down from 5.690 million acres (ma) in 2018, 5.629 ma in 2017, and 6.690 ma in year 2016 (Table 2, Figure 2a-b).  The pace of planting U.S. grain sorghum acres is moderately behind the average of the last five years (2014-2018), with 47% planted on June 9th relative to the 5-year average of 63% planted by that date (Table 1).  However, it is generally considered that there is adequate time before USDA Final Planting dates in late June – such as June 25th in Kansas for grain sorghum to be planted in time without declines in expected yields in year 2019.    

Harvested acres of U.S. grain sorghum in 2019 are projected to be 4,600,000 acres, down from 5.061 ma in 2018, 5.045 ma in 2017, and 6.163 ma in year 2016.   To date, U.S. grain sorghum plantings are moderately behind pace, the final planting date in Kansas for full crop insurance coverage is June 25th

U.S. yields in 2019 are forecast at 67.4 bu/ac, down from 72.1 bu/ac in 2018, 71.7 bu/ac in 2017, and the record high of 77.9 bu/ac in 2016 (Table 2, Figure 3a-b).  The USDA’s 2019 forecast would be the smallest U.S. grain sorghum yield since 59.6 bu/ac in year 2013, and 49.6 bu/ac in the drought ravaged year of 2012.

The USDA forecast that the 2019 U.S. Grain Sorghum production would be 310 million bushels (mb) – the smallest U.S. crop since 248 mb in drought year 2012, and 213 mb in year 2011 when percent harvested acres were well below average at 72.4% (Table 2, Figures 4a-b).   This amount is down from 365 mb in year 2018, 362 mb in 2017, 480 mb in 2016, and the 21-year high of 597 mb in 2015. 

KSU Commentary: There is a strong possibility that in future USDA reports U.S. grain sorghum planted and harvested acreage estimates for year 2019 will increase from this initial estimate of 5.134 ma.  The USDA 2019 yield forecast also appears conservative.  Taken together, these alternative scenarios point toward expectations of higher 2019 U.S. grain sorghum production than the USDA has projected.  These possible alternative scenarios will be discussed in below, and are presented in Table 3.

Total supplies of U.S. Grain Sorghum (i.e., beginning stocks + production + imports) are forecast to be 370 mb in “new crop” MY 2019/20, down from 400 mb in “old crop” MY 2018/19, 397 mb in MY 2017/18, 519 mb in MY 2016/17, and the 20-year high of 620 mb in MY 2015/16. 

KSU Commentary: With the possibility of higher 2019 U.S. grain sorghum production in the coming July, August, September, and November USDA WASDE and Crop Production reports, total supplies of U.S. sorghum are expected to increase (see Table 3).

Exports of U.S. grain sorghum are projected to be 100 mb in “new crop” 2019/20 (Tables 2-3, Figures 4a-b, 5a-b, & 6a-b).  Projected U.S. grain sorghum exports of 100 mb in “new crop” MY 2019/20 would be up from the USDA’s forecast of 85 mb in “old crop” MY 2018/19, but down from 205 mb in MY 2017/18, 342 mb in MY 2015/16 (2nd highest on record) and the record high of 352 mb in MY 2014/16. 

Trade disagreements between the United States and China have severely damaged U.S. grain sorghum exports since late-summer / fall of year 2018 (see Figures 7a-b).  At its current weekly pace through June 6, 2019, U.S. grain sorghum exports would end up at approximately 60 mb in the “old crop” MY 2018/19 – down 25 mb from the USDA projection of 85 mb.  A weekly pace of shipments of 3.1 mb would be needed over the last 13 weeks of “old crop” MY 2018/19 to reach the 85 mb forecast by the USDA in U.S. grain sorghum exports.  For the weeks ending May 30th and June 6th, there have been 2.36 mb and 1.96 mb actually shipped, respectively. 

KSU Commentary: It is likely that the USDA will need to reduce its forecast of “old crop” MY 2018/19 U.S. grain sorghum exports unless the export pace increases sharply – adding to projected ending stocks.   However, the set of broader U.S. grain market issues having to do with anticipated reductions in U.S. feedgrain supplies and rationing of feedgrain usage throughout the end of “old crop” MY 2018/19 on August 31, 2019 and on into “new crop” MY 2019/20 will be the  dominating factors in the U.S. grain sorghum market.

Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new crop” 2019/20.  This amount of projected FSI use in “new crop” MY 2019/20 is equal to 100 mb in “new crop” MY 2018/19, but up sharply from a 5-year low of 60 mb in MY 2017/18, and less than 115 mb in MY 2016/17 and the record high of 137 mb in MY 2015/16.  The 33-year low of 15 mb in FSI use came during the record high export year of MY 2014/15. 

KSU Commentary: With anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from ethanol plants in western Corn Belt areas for U.S. grain sorghum use. To the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic ethanol production.

Livestock feed & residual use is projected to be 125 mb in “new crop” 2019/20 – down from 155 mb in “old crop” MY 2018/19, up from 97 mb in MY 2017/18, and less than 133 mb in MY 2016/17 (Table 2, Figures 5a-b & 6a-b).

KSU Commentary: Just as for ethanol use of grain sorghum, with anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from livestock feeders in western Corn Belt areas for U.S. grain sorghum use.   And, also to the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic livestock feeding.

Total use of U.S. Grain Sorghum in “new crop” MY 2019/20 of 325 mb is forecast to be down from 340 mb in “old crop” MY 2018/19, from 362 mb in MY 2017/18, 485 in MY 2016/17, and from the 20-year high of 583 mb in MY 2015/16 (Table 2, Figures 5a-b & 6a-b).  Overall, the USDA projects that there will be a) no change in ethanol / FSI use, b) increased exports, and c) lower feed and residual use in “new crop” MY 2019/20 than in “old crop” MY 2018/19.  

Ending stocks of U.S. Grain Sorghum in “new crop” MY 2019/20 are projected to be 45 mb (13.85% Stocks/Use or ‘S/U’) – down from 60 mb (17.65% S/U) in “old crop” MY 2018/19, but up from 35 mb (9.67% S/U) in MY 2017/18 (Table 2, Figures 5a-b, 6a-b & 8a-b)

KSU Commentary: This projection in total use and ending stocks of U.S. grain sorghum in “new crop” MY 2019/20 is “subject to change” based on the final size of the 2019 U.S. sorghum crop, and the spillover effects on to domestic demand of sorghum are due to sharp reductions in 2019 U.S. feedgrain supplies. 

The season average price for U.S. Grain Sorghum in “new crop” MY 2019/20 is projected to be $3.50 – raised $0.50 /bu by the USDA in the June 11th WASDE from May 10th WASDE projections  (Table 2, Figures 8a-b & 9a-b)This USDA scenario for “new crop” MY 2017/18 is given a 20% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

KSU Commentary: The USDA raised the price of U.S. grain sorghum by $0.50 per bushel for “new crop” MY 2019/20 in the June 11th WASDE report while making no changes in the associated U.S. grain sorghum supply-demand balance sheet.  This is an indication that broader U.S. and World feedgrain market factors and coming adjustments are likely to impact U.S. grain sorghum prices to a significant degree.  It is likely that volatile feedgrain and grain sorghum prices will occur in what remains of “old crop” MY 2018/19 through August 31st, and on into “new crop” MY 2019/20.

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C. Alternative S-D & Price Forecasts for “New Crop” MY 2019/20

Given the reductions that have occurred in year 2019 U.S. corn planted and harvested acres through May-June – with associated reductions in 2019 U.S. corn production prospects, strong positive “demand-pull” market forces have been and are occurring in U.S. grain sorghum markets.  For the “new crop” 2019/20 marketing year beginning on September 1, 2019, these feedgrain market forces may lead to significant increases in U.S. grain sorghum planted acreage and production.  With reductions occurring in U.S. corn supplies in “new crop” MY 2019/20, high feedgrain prices are likely to force any additional U.S. grain sorghum supplies that are produced to be quickly used. 

The following alternative supply-demand scenarios for U.S. grain sorghum in “new crop” MY 2019 illustrate how a progression of higher U.S. grain sorghum acreage and production may work out in terms of supply-demand balances and prices. 

The first scenario represents the USDA projection for “new crop” MY 2019/20 from the May 10, 2019 WASDE report.  Alternative scenarios for 2019 U.S. grain sorghum acreage, yields, production, usage and prices are presented in Table 3. 

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  1. USDA June 2019 WASDE Forecast for “New Crop” MY 2019/20 – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               67.4 bu/ac

Beginning Stocks                                                   60 million bushels (mb)

2019 U.S. Sorghum Production                         310 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                370 mb

Food, Alcohol & Industrial Use                             99 mb

Seed Use                                                                   0.63 mb

Exports                                                                  100 mb

Feed & Residual Use                                            125 mb

Total U.S. Sorghum Use                                      325 mb

Ending Stocks                                                          45 mb

% Ending Stocks-to-Use                                      13.81%

U.S. Sorghum Season Avg. Farm Price                $3.50 /bu

Note: With the feedgrain planting problems that have occurred in the U.S. in April-May-June 2019, the June 11th WASDE market scenario for “new crop” MY 2019/20 has a low likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #1MY 2019/20-KSU: Same Planted Ac., 73 bu/ac Yield, 336 mb Crop – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year Average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         336 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 396 mb

Food, Alcohol & Industrial Use                           129 mb

Seed Use                                                                   0.63 mb

Exports                                                                    70 mb

Feed & Residual Use                                            150 mb

Total U.S. Sorghum Use                                      350 mb

Ending Stocks                                                          46 mb

% Ending Stocks-to-Use                                      13.14%

U.S. Sorghum Season Avg. Farm Price                $3.60 /bu

Note: This scenario is based on no changes in U.S. grain sorghum acres, but a more representative 5 year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.   This alternative KSU scenario for “new crop” MY 2019/20 also has a limited likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #2MY 2019/20-KSU: +250K Planted Ac., 73 bu/ac Yield, 352 mb Crop – 30% Probability:

Planted Acres                                                       5.385 million acres (ma)

Harvested Acres                                                   4.825 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         352 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 412 mb

Food, Alcohol & Industrial Use                           134 mb

Seed Use                                                                   0.63 mb

Exports                                                                    75 mb

Feed & Residual Use                                            165 mb

Total U.S. Sorghum Use                                      375 mb

Ending Stocks                                                          37 mb

% Ending Stocks-to-Use                                       9.87%

U.S. Sorghum Season Avg. Farm Price                $4.00 /bu (i.e., the lower end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 250,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (w/o a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This KSU scenario for “new crop” MY 2019/20 is estimated to have a 30% likelihood of occurring (30%KSU Est.).  See Table 3.

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Alt. Scenario #3MY 2019/20-KSU: +500K Planted Ac., 73 bu/ac Yield, 369 mb Crop – 20% Probability:

Planted Acres                                                       5.635 million acres (ma)

Harvested Acres                                                   5.049 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         369 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 429 mb

Food, Alcohol & Industrial Use                           139 mb

Seed Use                                                                   0.63 mb

Exports                                                                    80 mb

Feed & Residual Use                                            185 mb

Total U.S. Sorghum Use                                      405 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.93%

U.S. Sorghum Season Avg. Farm Price                $4.75 /bu (i.e., the mid-point of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 500,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 20% likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #4MY 2019/20-KSU: +1 million Planted Ac., 73 bu/ac Yield, 401 mb Crop – 10% Probability:

Planted Acres                                                       6.135 million acres (ma)

Harvested Acres                                                   5.497 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         401 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 461 mb

Food, Alcohol & Industrial Use                           151 mb

Seed Use                                                                   0.63 mb

Exports                                                                    90 mb

Feed & Residual Use                                            195 mb

Total U.S. Sorghum Use                                      437 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.49%

U.S. Sorghum Season Avg. Farm Price                $5.50 /bu (i.e., the top end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 1,000,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), less limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 10% likelihood of occurring (10%KSU Est.).  See Table 3.

KSU Commentary: In this 4th alternative KSU scenario, a 1 million acre increase in U.S. grain sorghum plantings will indicate just that much greater of a reduction in 2019 U.S. corn plantings and likely production in key areas of the U.S. Corn Belt.  The shortfall in U.S. corn acres and production potential is likely to support the high price for U.S. grain sorghum of $5.50 / bushel in “new crop” MY 2019/20.

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D. World Coarse Grain Supply-Demand – All Countries

WORLD Coarse Grain Percent (%) Grain Ending Stocks-to-Use is tightening to the most constrained level in five (5) years – since MY 2014/15.  This tightening of available World Coarse Grain supplies relative to use signals that stronger World use of coarse grains is expected to continue, and that more strength in U.S. and World coarse grain prices may occur in the coming year than the World Coarse Grain market now anticipates.

Total Supplies of WORLD Coarse Grains in the “new crop” 2019/20 marketing year (MY) are projected to be 1,741.14 million metric tons (mmt) – down from 1,763.53 mmt in “old crop” MY 2018/19, from 1,745.77 mmt in MY 2017/18, and the record high of 1,769.06 in MY 2016/17.  World “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains (Figure 10).

Forecast Total Use of WORLD Coarse Grains in “new crop” MY 2019/20 of 1,421.40 mmt is the highest on record.  This forecast compares to the previous record high of 1,411.87 mmt in “old crop” MY 2018/19, to 1,376.92 mmt in MY 2017/18, and to 1,382.36 mmt in MY 2016/17 (Figure 10).

Ending Stocks of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be 5-year low of 319.74 mmt – down 10.0% from 351.66 mmt in “old crop” MY 2018/19, down 15.4% from 368.85 mmt in MY 2017/18, and down 20.9% from 386.53 mmt in MY 2016/17 (Figure 10).  

Percent (%) Ending Stocks-to-Use of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be a 6-year low (the lowest since MY 2013/14) of 22.5% Stocks/Use (S/U).  This would be down vs 24.9% S/U in “old crop” MY 2018/19; and down from the range of 24.7% – 28.0% S/U over the MY 2014/15 – MY 2017/18 period (Figure 11)

KSU Commentary: IF there were to be a further reduction of 1 billion bushels (39.36 mmt) in U.S. feedgrain production in year 2019, then all else being equal, World coarse grain ending stocks would decline to near 280 mmt, with World coarse grain stocks-to-use falling to a 7-year low of 19.7% S/U. And this would be before any price-rationing of World coarse grain usage occurs. 

For comparison, in the record short crop year of MY 2012/13 World coarse grain supply-demand balances had fallen to 15.4% S/U, and had declined to 13.4% S/U for the two marketing years previous to that. 

The key point is that IF such a decline occurs in the U.S. in 2019 U.S. corn production – down from the current USDA projection of 13.68 billion bushels (bb) to 12.68 bb – THEN it is noteworthy to remember that historic minimums as occurred in the MY 2010/11 through MY 2012/13 period STILL would not likely have been matched.   High prices will have occurred, but the supply-demand conditions that led to record high U.S. grain sorghum prices of $6.33 per bushel will still not have been matched.

 

E. World Coarse Grain S-D – The “WORLD-Less-China” Perspective

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains have also tightened appreciably, but less so than for the aggregate WORLD coarse grain market as a whole.

Ending Stocks of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are projected to be 6-year low at 127.31 mmt – down 9.9% vs 141.25 mmt in “old crop” MY 2018/19.  This projection for “new crop” MY 2019/20 is also down from 145.47 mmt in MY 2017/18, and from 162.19 mmt in MY 2016/17 (Figure 12).   The record low of 62.60 mmt occurred in MY 1995/96, followed by 64.40 mmt in MY 1975/76, 77.51 mmt in MY 1983/84, and 83.91 mmt in 1996/97 – all years of relative price strength for U.S. feed grains in general and U.S. grain sorghum in particular.

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are also projected to be a 7-year low of 11.3% S/U.  This would be down vs 12.6% S/U in “old crop” MY 2018/19; and down from the range of 12.5% – 14.7% for the MY 2013/14 through MY 2017/18 time period (Figure 12)

Historically, “WORLD-Less-China” Coarse Grain percent (%) S/U has declined as low as 10.2% in MY 2012/13; 10.4% in MY 2011/12; 11.55% in MY 2010/11; 11.8% in MY 2006/07; 11.2% in MY 1996/97; and 8.7% in MY 1995/96.  These marketing years were generally high priced time-periods for U.S. feedgrains such as grain sorghum and corn.

 

 

KSU Corn Market Outlook in Late-May 2019: ‘Tight Supply-Demand & Higher Corn Prices in “New Crop” MY 2019/20’

An analysis of Corn Market Outlook in Late-2019 for “new crop” 2019/20 marketing years is provided in the following article from Kansas State University Department of Agricultural Economics.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) and other USDA reports on May 10, 2019, with info from the USDA NASS Crop Progress reports on May 26, 2019

A full version of this article is available on the KSU AgManager website http://www.agmanager.info/ at the following web address:

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

Following is a summary of the article on “Corn Market Outlook in Late-May 2019″

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U.S. Corn Market Outlook in Late-May 2019

‘Tight Supply-Demand & Higher Corn Prices in “New Crop” MY 2019/20’

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

May 29, 2019

 

1) The U.S. Corn Market Situation in Spring 2019

The serious and prolonged spring planting season problems during April-May 2019 for U.S. corn producers are leading to a sharp reduction in 2019 U.S. corn production prospects.  The likelihood of a U.S. corn production shortfall in year 2019 is bring about a classic “short crop” marketing year for U.S. corn markets in “new crop” MY 2019/20. The last major “short crop” for U.S. corn production occurred seven (7) years ago in year 2012 due to excessive summer heat.    

Concerns about delayed plantings or even the potential inability to plant corn or other crops this year have driven corn futures sharply higher in recent weeks.   “Old crop” JULY 2019 Corn futures prices have increased from a low of $3.43 /bushel on May 13th to a high of $4.38 on May 29th before closing at $4.18 ¾ that same day.  Similarly, “new crop” DEC 2019 Corn futures prices have increased from a low of $3.63 ¾ /bushel on May 13th to a high of $4.54 on May 29th before closing at $4.35 ¾ that same day (Figures 1a-b-c, & 2a-b).   With this rally in corn futures, managed money (specs) who had been holding record short or bearish positions have begun to buy back their short futures positions and instead build up the long or buy side of trade portfolios (Figures 3a-b-c-d).

The U.S. government is also planning to provide a second round of Market Facilitation Payments (MFPs) to U.S. crop producers, with the stipulation that crops have to be actually planted in year 2019 to collect these MFP funds.  The longer into June 2019 these U.S. corn planting delays go, the more difficult it may be for U.S. corn producers to keep with their original plans to plant corn this year, and not switch to other shorter season cropping options such as soybeans and grain sorghum.   

It is an oversimplification to say that the direction of the U.S. corn market for the remainder of “current” MY 2018/19 (ending August 31st) and the start of “new crop” MY 2019/20 (starting September 1st) will depend largely on the amount of U.S. corn acres planted over the coming few weeks through June 2019.  During that period U.S. farmers will likely be “under duress” as they make what may be difficult late season planting decisions.

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2) Status of Delayed U.S. Corn Plantings Through May 26th

The U.S. Corn Belt states that have been hardest hit by wet weather, flooding and planting delays so far in 2019 are Illinois, Indiana, Michigan, Ohio, South Dakota and Wisconsin (Tables 2a-b).  Significant wet soil conditions and planting delays have also occurred in Iowa, Kansas, Minnesota, Missouri, Nebraska, and Pennsylvania.   In these are other states many U.S. farmers who have not yet been able to plant all or part of their 2019 corn acreage are considering either late plantings of corn, switching to alternative shorter season crops such as soybeans, or possibly using Prevented Planting options from the USDA Farm Service Agency.

The USDA reported that 58% of the 2019 corn crop in the 18 major states had been planted as of May 26th in its latest USDA NASS Weekly Crop Progress report (Table 2a).  In these top 18 states this amounts to 49,131,600 acres planted out of 85,350,00 acres forecast in the March 28th USDA NASS Prospective Plantings report

Extended to the entire U.S., 58% planted on 5/26/2019 would equal 53,819,360 acres planted out of the USDA Prospective Plantings forecast for the U.S. of 92,792,000 acres of corn in year 2019.   Average corn plantings in the 18 major states on May 26th over the 5-year 2014-2018 period are 90%, with 5/26/2019 corn plantings being 32% and 27,844,900 acres behind in the 18 states and an estimated 29,693,440 acres behind in the U.S. in total.

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3) 2019 U.S. Corn Production Based on the May 26thS. Planted Acres Estimate

With only 58% or an estimated 53.8 million acres of U.S. corn planted to date, production prospects for the 2019 U.S. corn crop based on what is actually planted so far are down considerably.  In the USDA May 10, 2019 World Agricultural Supply and Demand Estimates (WASDE) report, forecast 2019 corn production in the U.S. to be 15.030 billion bushels (Tables 1a, 1b, & 2b). 

 This is based on the May 26th estimate of 58% of U.S. corn planted – amounting to 53.8 million acres (ma) planted of the 92.792 ma originally intended.  Of these 53.8 ma now planted, it is estimated that 49.460 ma would be harvested (equaling latest 3-year average harvested-to-planted in the top 18 corn producing states), with a 2019 U.S. average corn yield of 175 bu/ac, and that estimated corn production would equal 8.655 billion bushels (bb) (Table 2b). 

This estimate of 2019 U.S. corn production prospects to date can be criticized for several reasons. 

First, it is likely based on too high of an estimate of % harvested-to-planted acres due to flooding and excessive moisture – having been set equal to the most recent 2016-2018 3-year average. 

Second, it can also be criticized for having 2019 U.S. corn average yields set too high at 175 bu/acre.  With delayed plantings and excessively we soils it may be more prudent to consider an 8 bu/acre lower U.S. corn yield market of 167 bu/acre.  At 167 bu/ac yields, 2019 U.S. corn production on 53.819 ma planted and 49.460 ma harvested would be 8.260 bb – down substantially from the USDA’s May 10th WASDE projection of 15.030 bb. 

Third, these early projections for 2019 of U.S. corn planted acres of 53.819 ma, and of 8.260 bb in 2019 U.S. corn production do not account for the progress that will continue to be made in U.S. corn plantings from May 26th through the month of June.  In the “new crop” MY 2019/20 U.S. corn supply-demand and price projections by Kansas State University that follow in Table 1b, it is assumed that final 2019 U.S. corn planted acreage is either 82.792 ma or 77.792 ma.

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4) Prospects for Final 2019 U.S. Corn Planted & Harvested Acres

It is assumed in the following projections by Kansas State University Extension Agricultural Economist Daniel O’Brien that substantial amounts of additional U.S. corn acreage will be planted from now through June 2019 (Table 1b).  In this analysis it is assumed that these additional plantings will leave final U.S. corn planted acreage down 10-15 ma below the USDA’s Prospective Plantings report forecast on 3/29/2019 of 92.792 ma, but still up 24-29 ma from levels represented in the May 26th planting progress estimates.

  • U.S. Corn Planted Acreage Scenarios #1 & #2: “Down 10 ma 2019 U.S. Corn Plantings”:

As shown in Table 1b, IF 82.792 ma of corn is eventually planted in the U.S. in 2019, total corn plantings would be down 10 ma from initial USDA projections of 92.792 ma in the March 29th USDA Prospective Plantings report.  However, they would also represent an additional 28.973 ma yet to be planted in year 2019 from May 26th levels. 

Due to wet soils and flooded fields in many areas, the national percent harvested-to-planted is forecast to be 88.0%, just above the recent low of 87.9% in year 2002. Harvested acreage estimated to be 72.857 ma – down from 84.500 ma in the USDA’s May 10th WASDE report.

  • S. Corn Planted Acreage Scenarios #3 & #4: “Down 15 ma 2019 U.S. Corn Plantings”:

Also shown in Table 1b, IF 77.792 ma of corn is eventually planted in the U.S. in 2019, total corn plantings would be down 15 ma from initial USDA projections of 92.792 ma in the March 29th Prospective Plantings report.  However, they would also represent an additional 23.973 ma yet to be planted in year 2019 from May 26th levels. 

Also due to the prevalent wet soils and flooded fields in many areas, the national percent harvested-to-planted is forecast at 88.0%, with harvested acreage estimated to be 68.457 ma – down from 84.500 ma in the USDA’s May 10th WASDE report.

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

Given the KSU 2019 U.S. corn reduced planted and harvested acre projections in Table 1b, projected 2019 U.S. corn production is substantially lower than the USDA’s May 10th WASDE forecast of 15.030 bb.  For the “new crop” 2019/20 marketing year to begin on September 1, 2019, this leads to substantially reduced U.S. corn supplies, significant rationing of U.S. corn usage and tightening of ending stocks and stocks-to-use and much higher U.S. corn prices.  The first scenario represents the USDA projection for “new crop” MY 2019/20 from the May 10, 2019 WASDE report.

Alternative scenarios for 2019 U.S. corn acreage and yields are presented in Figures 5 & 6, with varying 2019 U.S. corn production scenarios in Figure 7.  Alternative U.S. corn ending stocks-to-use scenarios for “new crop” MY 2019/20 are presented in Figures 12-a-b, while the relationship that has existed between U.S. corn percent (%) ending stocks-to-use and U.S. Average Corn prices is shown in Figure 13

Scenario A. USDA May 2019 WASDE Forecast for “New Crop” MY 2019/20 – 0% Probability:

Planted Acres                                     92.792 million acres (ma)

Harvested Acres                                  85.400 ma

% Harvested-to-Planted                      92.0%

U.S. Average Corn Yield                       176 bu/ac

Beginning Stocks                                 2.095 billion bushels (bb)

2019 U.S. Corn Production                15.030 bb

Imports                                                  0.035 bb

Total U.S. Corn Supply                       17.160 bb

Ethanol for Fuel Use                            5.500 bb

Food & Industrial Use                            1.435 bb

Seed Use                                                0.030 bb

Exports                                                    2.275 bb

Feed & Residual Use                               5.450 bb

Total U.S. Corn Use                             14.675 bb

Ending Stocks                                          2.485 bb

% Ending Stocks-to-Use                       16.93%

U.S. Corn Season Avg. Farm Price           $3.30 /bu

Note: With the planting problems that have occurred in the U.S. in April-May 2019, the May 10th WASDE market scenario for “new crop” MY 2019/20 has virtually no likelihood of occurring.

 

Scenario #1MY 2019/20-KSU: Less 10 mln ac Planted, 172 bu/ac Yield, 12.531 bb Crop – 35% Probability:

Planted Acres                                     82.792 million acres (ma)                           (less 10 ma vs USDA)

Harvested Acres                                  72.857 ma                                                       (less 12.5 ma vs USDA)

% Harvested-to-Planted                    88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                    172 bu/ac                                                        (less 4.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              12.531 bb                                                        (less 2.499 bb vs USDA)

Imports                                                   0.035 bb

Total U.S. Corn Supply                     14.661 bb                                                       (less 2.499 bb vs USDA)  

Ethanol for Fuel Use                           5.250 bb                                                        (less    250 mb vs USDA)

Food & Industrial Use                         1.420 bb                                                          (less      15 mb vs USDA)

Seed Use                                                0.032 bb                                                        (up          2 mb vs USDA)

Exports                                                    1.709 bb                                                       (less    566 mb vs USDA)

Feed & Residual Use                            5.000 bb                                                          (less    450 mb vs USDA)

Total U.S. Corn Use                           13.411 bb                                                        (less  1.235 bb vs USDA)

Ending Stocks                                         1.250 bb                                                        (less  1.235 bb vs USDA)

% Ending Stocks-to-Use                         9.32%                                                        (less      7.61% vs USDA)

U.S. Corn Season Avg. Farm Price        $4.35 /bu                                                    (up  $1.05 /bu vs USDA)

Note: In this scenario, significant rationing of grain use occurs, with prices increasing to make that occur.   

******

 

Scenario #2MY 2019/20-KSU: Less 10 mln ac Planted, 167 bu/ac Yield, 12.167 bb Crop – 35% Probability:

Planted Acres                                     82.792 million acres (ma)                           (less 10 ma vs USDA)

Harvested Acres                                   72.857 ma                                                      (less 12.5 ma vs USDA)

% Harvested-to-Planted                       88.0%                                                            (less 4.0% vs USDA)

U.S. Average Corn Yield                    167 bu/ac                                                        (less 9.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              12.167 bb                                                       (less 2.863 bb vs USDA)

Imports                                                 0.035 bb

Total U.S. Corn Supply                    14.297 bb                                                       (less 2.863 bb vs USDA)  

Ethanol for Fuel Use                          5.225 bb                                                        (less    275 mb vs USDA)

Food & Industrial Use                         1.420 bb                                                         (less      15 mb vs USDA)

Seed Use                                             0.032 bb                                                         (up          2 mb vs USDA)

Exports                                                1.570 bb                                                         (less    705 mb vs USDA)

Feed & Residual Use                          4.950 bb                                                         (less    500 mb vs USDA)

Total U.S. Corn Use                        13.197 bb                                                        (less  1.478 bb vs USDA)

Ending Stocks                                         1.100 bb                                                      (less  1.385 bb vs USDA)

% Ending Stocks-to-Use                         8.34%                                                      (less      8.59% vs USDA)

U.S. Corn Season Avg. Farm Price    $5.45 /bu                                                     (up  $2.15 /bu vs USDA)

Note: In this scenario, further significant rationing of grain use occurs, with prices increasing to over $5.00 to make that occur on very limited supplies.  The implicit assumption in these supply-demand scenarios is that U.S. corn markets are likely to be reticent to allow U.S. corn ending stocks to move much below 1.0 bb.    

*****

 

Scenario #3MY 2019/20-KSU: Less 15 mln ac Planted, 172 bu/ac Yield, 11.775 bb Crop – 15% Probability:

Planted Acres                                     77.792 million acres (ma)                           (less 15 ma vs USDA)

Harvested Acres                                   68.457 ma                                                       (less 16.9 ma vs USDA)

% Harvested-to-Planted                       88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                      172 bu/ac                                                        (less 4.0 bu/ac vs USDA)

Beginning Stocks                                 2.095 billion bushels (bb)

2019 U.S. Corn Production             11.775 bb                                                        (less 3.255 bb vs USDA)

Imports                                                0.035 bb

Total U.S. Corn Supply                    13.905 bb                                                        (less 3.255 bb vs USDA)  

Ethanol for Fuel Use                          5.150 bb                                                        (less    350 mb vs USDA)

Food & Industrial Use                          1.400 bb                                                         (less      35 mb vs USDA)

Seed Use                                              0.033 bb                                                         (up          3 mb vs USDA)

Exports                                                 1.472 bb                                                         (less    803 mb vs USDA)

Feed & Residual Use                            4.850 bb                                                         (less    600 mb vs USDA)

Total U.S. Corn Use                          12.905 bb                                                        (less  1.770 bb vs USDA)

Ending Stocks                                       1.000 bb                                                         (less  1.485 bb vs USDA)

% Ending Stocks-to-Use                    7.75%                                                            (less      9.18% vs USDA)

U.S. Corn Season Avg. Farm Price      $5.70 /bu                                                     (up  $2.40 /bu vs USDA)

Note: In this scenario, with only 77.792 ma planted and production of 11.775 bb, ending stocks fall to 1.000 bb and prices increase to $5.70 /bu to ration usage.    

*****

 

Scenario #4MY 2019/20-KSU: Less 15 mln ac Planted, 167 bu/ac Yield, 11.432 bb Crop – 15% Probability:

Planted Acres                                    77.792 million acres (ma)                           (less 15 ma vs USDA)

Harvested Acres                                  68.457 ma                                                       (less 16.9 ma vs USDA)

% Harvested-to-Planted                    88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                    167 bu/ac                                                        (less 9.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              11.432 bb                                                        (less 3.598 bb vs USDA)

Imports                                                   0.035 bb

Total U.S. Corn Supply                     13.562 bb                                                        (less 3.598 bb vs USDA)  

Ethanol for Fuel Use                           5.100 bb                                                        (less    400 mb vs USDA)

Food & Industrial Use                         1.400 bb                                                         (less      35 mb vs USDA)

Seed Use                                                0.033 bb                                                       (up          3 mb vs USDA)

Exports                                                    1.379 bb                                                         (less    896 mb vs USDA)

Feed & Residual Use                            4.750 bb                                                         (less    700 mb vs USDA)

Total U.S. Corn Use                           12.662 bb                                                        (less  2.013 bb vs USDA)

Ending Stocks                                         0.900 bb                                                        (less  1.585 bb vs USDA)

% Ending Stocks-to-Use                         7.11%                                                          (less      9.18% vs USDA)

U.S. Corn Season Avg. Farm Price    $6.00 /bu                                                      (up  $2.70 /bu vs USDA)

Note: In this scenario, with only 77.792 ma planted and production of 11.432 bb, ending stocks fall below 1.000 bb down to 900 mb, with U.S. corn prices increasing to near $6.00 /bu to further ration usage.    

U.S. Ethanol and Biodiesel Markets and Profitability – Moderate Losses for Ethanol and Biodiesel in April to Date

A. Ethanol Price and Profitability Trends

By Iowa State University estimates, ethanol plants in Iowa and other Midwest states were operating at losses of $0.10 to $0.23 per gallon from September 2018 through March 2019 – with $0.14 /gallon losses in March 2019.  By Kansas State University calculations, these losses extended into the April 1-19 period, with losses of $0.12 / gallon.

During the April 1-19, 2019 period, corn input purchase prices for Iowa ethanol plants averaged $3.47 /bu – compared to 3.55 /bu in March.  Selling prices of distillers dried grains (DDGS) (10% moisture) averaged $138.17 /ton during April 1-19, up from $135.77 /ton a month earlier. The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.29 /gallon during April 1-19, down from $1.3086 /gallon in March.

Overall, during the April 1-19, 2019 time frame, the estimated cost of production of a representative ethanol plant in Iowa has averaged $1.41 per gallon – comparable to $1.45 per gallon in March, and $1.44 in February.  This has lead to an estimated average negative net return of minus $0.12 per gallon produced so far in April 2019, with is comparable to losses of $0.14 /gallon in March and losses of $0.23 /gallon in February 2019.

******

B. Ethanol Production & Stocks Trends

Since the beginning of the “current” 2018/19 marketing year (MY) for U.S. corn on September 1, 2018, U.S. ethanol production has averaged 1.026 million barrels per week over 32 weeks. At this average pace, U.S. ethanol production would reach 15.730 billion barrels in “current” MY 2018/19.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), at total of 5.558 billion bushels of feedgrains would be used for ethanol production in the current marketing year.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on April 9, 2018 seem to account for this.  In the April WASDE report the USDA projected that in current MY 2018/19 a total of 5.500 billion bushels (bb) of U.S. corn would be used for ethanol production, and that 100 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production.

However, the pace or weekly rate of U.S. ethanol production has slowed marginally during February – April 2019 (to date) compared to the September 2018 through January 2019 period.  For September 2018 through January 25, 2019, U.S. ethanol production averaged 1.034 billion barrels per week, while that rate slowed 3.1% to 1.004 per week for the weeks ending February 1st through April 12th.

At the same time U.S. ethanol stocks have remained at historically high levels – burdening the ethanol market and having a negative impact on U.S. ethanol prices.  To explain, for the “current” 2018/19 marketing year period from September 1, 2018 through the week ending April 12th, U.S. ethanol stocks have averaged 23.463 million barrels (mln brls) per week.  This compares to average end of week ending stocks for previous U.S. corn marketing years of 22.201 mln brls per week in “old crop” MY 2017/18; 21.259 mln brls per week in MY 2016/17; 20.846 mln brls in MY 2015/16; 19.466 mln brls in MY 2014/15; 16.618 mln brls per week in MY 2013/14; 18.104 mln brls per week in MY 2012/13; 19.569 mln brls per week in MY 2011/12; and 18.416 mln brls per week in MY 2010/11.  These data show the growing in U.S. ethanol stocks over the last few marketing years, and highlight the record size of U.S. ethanol supplies that burden the U.S. ethanol market at the present time.

C. Biodiesel Price & Profitability Trends

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although the losses are comparatively small relative to ethanol producing facilities during the April 1-19, 2019 period.

By Kansas State University estimates, during the April 1-19, 2019 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $28.40 per cwt – down from an average price $29.13 /cwt in March 2019.   This occurred while Biodiesel selling prices averaged $2.77 /gallon during 4/1-19/2019, being down from $2.87 /cwt in March.

Also during the April 1-19 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.81 per gallon – down from $2.86 per gallon March.  As a result, net returns of soy biodiesel product were down $0.05 /gallon, with a loss of $0.04 per gallon produced.  This is comparable to monthly average profits of $0.01-$0.02 /gallon during the January-March 2019 period. 

**********

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

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, April 23, 2019 and will be located at the KSU AgManager.info website – at the following web address:

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

 

Following are the graphics of this presentation.

U.S. Ethanol and Biodiesel Market-Profitability Graphics — Breakeven Operations But Flooding Disruptions in Places

Ethanol Price and Profitability Trends Through Late March 2019

By Kansas State University estimates, ethanol plants in Iowa and other Midwest states were operating at losses of $0.10 to $0.29 per gallon from September 2018 through February 2019, but were showing losses of $0.14 / gallon during the first three weeks of March 2019. A moderate increase in ethanol prices in March is the key factor causing the moderation in losses.

During the March 1-22, 2019 period, corn input purchase prices for Iowa ethanol plants averaged $3.53 3/4 /bu (compared from $3.57 /bu in February, and $3.54 in January).  Selling prices of distillers dried grains (DDGS) (10% moisture) have averaged $136.78 /ton during the March 1-22 period, down from $155 & $140 /ton in January and February, respectively). The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.31 /gallon, up from $1.17 & $1.21 /gallon in January & February, respectively.

During March 1-22, 2019, the estimated cost of production of a representative ethanol plant in Iowa has averaged $1.45 per gallon – comparable to $1.42 per gallon in January and $1.47 in February.  This has lead to an estimated negative net return of minus $0.14 per gallon produced so far in March 2019, with is comparable to losses of $0.24 /gallon in January and losses of $0.26 /gallon in February 2019.

 

Biodiesel Price & Profitability Trends Through Late-March 2019

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although they are still estimated to have in essence broken even during the March 1-22, 2019 period.

During March 1st to 22nd, soybean oil input purchase prices for Iowa biodiesel plants averaged $29.49 per cwt – down from $30.11 /cwt in February.   This occurred while Biodiesel selling prices averaged $2.90 /gallon during 3/1-22/2019, being down from $2.96 /cwt in February.

Also during the March 1-22 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.90 per gallon – down from $2.84 per gallon February.  As a result, net returns of soy biodiesel product were level, or breakeven, with a profit of loss of $0.00 per gallon produced.  This is comparable to profits of $0.02 /gallon in February, and breakeven in January. 

**********

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

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, March 26, 2019 and will be located at the KSU AgManager.info website – at the following web address:

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

 

Following are the graphics of this presentation.

   

2019 USDA Outlook Forum – “Grain and Oilseeds Market Outlook for 2019” (February 22, 2019)

The USDA is holding their 2019 Agricultural Outlook Conference in Arlington, Virginia on February 21-22, 2019.  On Friday morning of the conference the USDA provides its “Grain and Oilseeds Market Outlook for 2019”.  This report is prepared by members of the
Wheat, Feed Grains, Rice, and Oilseeds Interagency Commodity Estimates Committees in the U.S. Department of Agriculture

The public will be able to access this information at the following web address:

https://www.usda.gov/oce/forum/2019/At-A-Glance.htm

Following is the actual USDA Report of “Grain and Oilseeds Market Outlook for 2019”.

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

Agricultural Outlook Forum 2019

Released: Friday, February 22, 2019

GRAINS AND OILSEEDS OUTLOOK FOR 2019

Prepared by Members of the Wheat, Feed Grains, Rice, and Oilseeds Interagency Commodity Estimates Committees   (This paper includes contributions from the World Agricultural Outlook Board, the Economic Research Service, the FPAC-BC, and the Foreign Agricultural Service.)

U.S. Department of Agriculture

Planted Acreage Outlook for 2019 (Table 1)

This paper provides USDA’s projections of 2019/20 U.S. supply, demand and prices for wheat, corn, rice, soybeans and soybean products. Projections presented in this paper include implications of the February 8 NASS Winter Wheat and Canola Seedings report, which estimated winter wheat area declined 4 percent to the lowest level since 1909. The projections assume normal weather conditions for spring planting and summer crop development, and the continuation of tariffs by China on a number of U.S. agricultural products. These forecasts will be updated in the May 10 World Agricultural Supply
and Demand Estimates (WASDE) report. The May WASDE will incorporate farmers’ 2019 planting intentions as indicated in the March 29 NASS Prospective Plantings report and survey-based forecasts for winter wheat production, as well as global, country-by-country supply and demand projections.

Among the 3 major crops, this year’s outlook represents a dramatic change from prior years because of China’s imposition of tariffs on U.S. soybeans. Relative to a year ago, soybean cash prices have declined, with pronounced weakness in the Northern Plains and Western Corn Belt, two areas that are particularly exposed to variations in the export market. In contrast, soybean cash prices have shown relative strength in the Eastern Corn Belt. Offsetting a forecast decline in soybean acres are increases in spring wheat, corn, and cotton acres. The total of 3-crop plantings, at 224 million acres, would be down 2.1 million from final plantings in 2018. This largely reflects expectations of a return to a more typical level of prevented plant acres. Season-average corn prices received by producers are expected to reach $3.65 per bushel, up 5 cents from the 2018/19 forecast. Soybean prices are expected to rise to $8.80 per bushel while wheat prices are up to $5.20.

Wheat Supply, Demand, and Price Outlook for 2019/20 (Table 2)

The 2019/20 outlook for U.S. wheat is for reduced supplies, minimally lower use, and decreased ending stocks. U.S. wheat production is projected 1 percent higher from 2018/19 at 1,902 million bushels despite the NASS Winter Wheat and Canola Seedings report showing 2019 winter wheat planted area at the lowest level since 1909. Higher expected net returns for spring wheat compared to soybeans in the Northern Plains is anticipated to result in greater spring wheat plantings in 2019 with total wheat acreage projected at 47.0 million acres, down 2 percent from last year. The all-wheat yield for 2019/20 is projected slightly up from the previous year to 47.8 bushels per acre and is based on a linear trend. The higher yield coupled with increased harvested area at
39.8 million acres offsets reduced planted area to raise 2019/20 production from last year. Lower carryin stocks are still expected to result in reducing 2019/20 supplies by 2 percent to 3,052 million bushels.

Projected 2019/20 total use is down only slightly from a year earlier. Domestic use is up 2
percent, primarily due to modest increases in both food and feed and residual use to 1,133 million bushels. The higher domestic use is more than offset by lower projected exports for 2019/20 to 975 million bushels. Greater export competition is seen from Australia and the EU in 2019/20 as both recover from last year’s drought. Although 2019/20 total use falls slightly, reduced supplies will result in ending stocks declining by 7 percent to 944 million bushels. While stocks remain burdensome, stronger export competition is expected to result in a modestly higher season-average farm price (SAFP) at $5.20 per bushel, compared to the 2018/19 SAFP midpoint price of $5.15.

Corn Supply, Demand, and Price Outlook for 2019/20 (Table 3)

The U.S. corn outlook for 2019/20 is for increased production, domestic use, and exports, and lower stocks. The corn crop is projected at 14.9 billion bushels, 3 percent above a year ago as an increase in area more than offsets a lower yield. The yield projection of 176.0 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. Despite beginning stocks that are forecast down from a year ago, total corn supplies are up slightly on a larger crop.

Total U.S. corn use in 2019/20 is forecast to rise 1 percent from a year ago on increases to domestic use and exports. Food, seed, and industrial (FSI) use is projected unchanged at 7.0 billion bushels. Corn used for ethanol is unchanged from a year ago, based on expectations of flat motor gasoline consumption and a slight decline in ethanol’s inclusion rate into gasoline that is essentially offset by continued growth in exports. Feed and residual use is up 125 million bushels to 5.5 billion, with a larger crop and continued growth in grain consuming animal units. Corn exports are up 25 million bushels to
2.5 billion, reflecting expectations of modest growth in global trade and a slight decline in U.S. market share with competition from other exporters. Ending stocks are projected at 1.7 billion bushels, down 5 percent from 2018/19, supporting a 5 cent per bushel increase from a year ago in the expected season-average farm price to $3.65 per bushel.

Rice Supply, Demand, and Price Outlook for 2019/20 (Tables 4 & 5)

The 2019/20 outlook for U.S. rice is for reduced production, increased use, and lower ending stocks.  U.S. rice production is projected at 203 million cwt, down 9 percent from 2018/19. All of the production decrease is for long-grain as combined medium- and short-grain production increased nearly 2 million cwt. Rice planted area for 2019/20 totals 2.66 million acres, down 290,000 acres from the previous year. The long-grain area projection is down 300,000 acres but combined medium- short-grain rice is projected slightly higher. The all rice yield is projected up slightly from the previous year on byclass
trend analysis. Imports are projected to increase 0.3 million cwt to another record; aromatics are expected to continue to account for the bulk of U.S. rice imports. led especially by aromatic rice imports from Asia. Total 2019/20 U.S. rice supplies are down 3.2 million cwt from the previous year to 278.9 million cwt.

Total 2019/20 use is up 2 million cwt to 237 million all on higher exports, which are now projected at 102 million cwt. Long-grain accounts for the entire year-over-year export increase. Ending stocks for 2019/20 are down 5.2 million cwt from the previous year and below the 5-year-average of 43.5 million cwt. The all rice season average farm price is up $0.10 per cwt from the midpoint of the previous year to $12.20.

Soybean Supply, Demand, and Price Outlook for 2019/20 (Tables 6, 7 & 8)

The 2019/20 outlook for U.S. soybeans is for record supplies, higher crush and exports, and lower ending stocks. Soybean supplies are projected at 5.1 billion bushels, up 2 percent from 2018/19 with higher beginning stocks more than offsetting lower production. Soybean production is projected at 4.2 billion bushels, 8 percent below last year on lower harvested area and trend yields. The national average soybean yield of 49.5 bushels per acre is 2.1 bushels below last year. The yield forecast is based on a weather-adjusted trend assuming normal growing season weather.

Soybean domestic use is projected at 2.2 billion bushels, up 1 percent on higher crush. Crush is projected at a record 2.1 billion bushels as higher domestic use of soybean meal more than offsets lower exports. Lower soybean product exports reflect a recovery of Argentina’s crop after last year’s drought.  Soybean crush margins remain relatively strong with higher soybean prices mostly offset by small gains for soybean meal and soybean oil prices. Soybean meal prices are forecast at $320 per short ton.  Domestic use of soybean oil is projected up 2 percent for 2019/20 on gains for edible oil and biodiesel consumption. With lower projected soybean oil exports, soybean oil ending stocks for 2019/20 are projected at 2.04 billion pounds, down 3 percent from 2018/19. Soybean oil prices are forecast at 30.5 cents per pound, up slightly from 2018/19.

Soybean exports for 2019/20 are projected at 2.03 billion bushels, up 150 million from the 2018/19 forecast. With rising global demand and reduced supplies in Brazil this fall, some recovery in U.S. exports is expected despite continued import duties assumed for U.S. soybeans in China.

Soybean ending stocks for 2019/20 are projected at 845 million bushels, historically high, but down 65 million from 2018/19. With a smaller harvest and a 4 percent increase in total soybean disappearance, the ending stocks-to-use ratio is projected at 19.8 percent, down from 22.2 percent in 2018/19. The soybean season-average farm price is projected at $8.80 per bushel, up 20 cents from 2018/19.

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KSU Corn Market Outlook in Mid-February 2019: U.S. Corn Supply-Demand and Prices for 2019

An analysis of Corn Market Situation & Outlook in mid-February 2019 for the remainder of the “current”  2018/19 and “next crop” 2019/20 marketing years is provided in the following article from Kansas State University Department of Agricultural Economics.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) and other USDA reports on February 8, 2019.

A full version of this article is available on the KSU AgManager website http://www.agmanager.info/ at the following web address:

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

Following is a summary of the article on “Corn Market Outlook in Mid-February 2019″

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Corn Market Outlook in Mid-February 2019

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

February 13, 2019

1) Introduction – An Overview of the U.S. Corn Market & USDA Reports

1A – Corn Market Overview

While the U.S. and World corn market has adequate supplies at this time, ending stocks have been trending lower since the 2016/17 marketing year (MY).  Market projections from the USDA are for this “tightening up” to continue through “next crop” MY 2019/20 which begins on September 1, 2019 and will last through August 31, 2020.   By its’ behavior, it is evident that the U.S. corn market continues to have a group “narrative view” that supplies of U.S. corn will remain plentiful through at least mid-summer 2019. 

Unless a short crop develops in South America in coming months, or there are serious corn planting delays in April-May 2019 in the United States – this predominant market narrative that there are“more than adequate U.S. corn supplies” will continue to limit any major upward movement in U.S. corn prices throughout Spring, Summer and Fall 2019.

Corn market price expectations in year 2019 are heavily influenced by seasonal grain futures price patterns over the most recent years and decades.  Over the last 20 years the frequency of economically important price increases in DEC Corn futures from February to November is 25%.  This occurred in years 2002 (up $0.20 /bu), 2006 (up $0.44 /bu), 2010 (up $1.47 /bu), 2011 (up $0.31 /bu), and 2012 (up $1.82 /bu).   No such increase in DEC Corn futures from the preceding February to the following November has occurred in the last six (6) years – since the major U.S. drought and resulting short crop of year 2012.  Since year 2012, February averages of DEC Corn futures have been greater than average prices for the following month of November by $1.26 /bu in 2013, $1.13 in 2014, $0.32 in 2015, $0.37 in 2016, $0.47 in 2017, and $0.28 in 2018.           

Consequently (and conversely), 75% of the time over the last two decades the monthly average of DEC Corn futures during the previous February have been greater than during the following November just ahead of the DEC Corn futures closing month.  Taking all these things together, the “consensus narrative opinion” of the corn market at this time seems to be that there will NOT be significant corn production problems in either South America or the United States this year.  As a result, DEC 2019 corn futures prices are most likely to end up equal to or lower than current mid-February levels near $4.00 per bushel once we get to Fall 2019.

1B – U.S. Corn Market Factors “Taken Together”

Considering all these factors together, the outlook for U.S. corn markets in 2019 will continue to be conservative due to large domestic corn supplies, but with upward potential based on prospects for moderate strength in domestic use and exports due to tighter foreign corn supply-demand balances”.  

1C – The USDA’s Reports on February 8, 2019

On February 8, 2019 the United States Department of Agriculture (USDA) released a set of reports providing market information that had been “back-logged” since December 11, 2018 – the last USDA agricultural market information released before the recent U.S. Federal government shutdown. 

The World Agricultural Outlook Board (WAOB) released its World Agricultural Supply and Demand (WASDE) estimates (https://www.usda.gov/oce/commodity/wasde/) after cancelling the scheduled January 11th report due to the U.S. government shutdown.

Similarly, the National Agricultural Statistical Service (NASS) released the latest Grain Stocks report for December 1, 2018 U.S. grain stocks levels, the 2019 Winter Wheat & Canola Seedings report, the February 2019 Crop Production report, and the 2018 Annual Crop Production Summary report (https://www.nass.usda.gov/Publications/Calendar/reports_by_date.php

The USDA Foreign Agricultural Service (FAS) also released it’s February 2019 reports on World Agricultural Production, and separate reports on World Markets and Trade for Grain and Oilseeds (https://www.fas.usda.gov/data-analysis/scheduled-reports-2019).  

 

2) “Limiting” 2019 Corn Market Factors as of February 13, 2019

There are several corn market supply-demand factors that are major determinants in corn market price direction, and that at this time provide resistance to corn prices moving higher.  These include historically large 2018 U.S. corn production and total U.S. corn supplies in “current crop” MY 2018/19, and “moderating” but demand for U.S. corn ethanol use.

2A – U.S. Corn Production in Year 2018 & Expectations for Year 2019:

  • The most important “negative” or at least “limiting” corn market factor continues to be the projected size of the 2018 U.S. corn crop at 420 billion bushels (bb) – forecast to be the third highest on record behind 15.148 bb in 2016, and 14.601 bb in 2017 (Table 1 & Figures 5-7).
  • In the February 8, 2019 USDA Annual 2018 Crop Production Summary report the USDA lowered its’ projection of 2018 U.S. corn production by 206 million bushels (mb) down to 14.420 bb due to late harvest and other production limiting influences in parts of the United States. If this decline in 2019 U.S. corn crop size occurred by itself with no other supply-demand adjustments, it would be at least a moderately positive factor for U.S. corn market prices. 
  • However, in the February 8th WASDE report the USDA also made offsetting reductions in projected U.S. corn ethanol use, non-ethanol food-seed-industrial (FSI) use, and feed and residual use in its’ “current crop” MY 2018/19 supply-demand balance sheet. These projected reductions in U.S. corn usage in “current crop” MY 2018/19 offset nearly ¾ (i.e., 146 mb) of the reduction in year 2018 projected U.S. corn production and supplies.  As a result of hese offsetting changes, the  netted a 46 mb reduction in projected ending stocks in “current crop” MY 2018/19. 
  • The USDA’s updated preliminary forecast from its Long Term Agricultural Projections released in fall 2018 are for 2019 U.S. corn production to be 14.930 bb. This amount of U.S. corn production in 2019 would very likely cause a continuation of the “large supplies – moderate-to-large stocks” situation in the U.S. corn market that has existed since the drought that occurred in the 2012/13 marketing year.

2B – Total U.S. Corn Supplies in “Current” MY 2018/19 & “Next Crop” MY 2019/20

  • In addition to a 14.420 bb U.S. corn crop in 2019, the USDA projects total supplies of U.S. corn in the “current crop” 2018/19 marketing year (MY) to be 600 bb. Although this figure was reduced 211 mb in the February 8th WASDE report, it is still the third highest on record – continuing to provide downward pressure on U.S. corn prices.  Total supplies of U.S. corn in MY 2016/17 were a record high of 16.942 bb, and were only marginally lower at 16.939 bb in “old crop” MY 2017/18 which ended on August 31, 2018 (Table 1 & Figure 7).
  • The USDA’s preliminary forecast of S. total corn supplies for “next crop” MY 2019/20 are approximately 16.715 bb after accounting for recent changes in implied USDA beginning stocks projections. “Next crop” MY 2019/20 will begin on September 1, 2019.  These figures are available from the USDA’s updated Long Term Agricultural Projections released in fall 2018.

2C – U.S. Ethanol Use of Corn

  • According to Energy Information Administration (EIA) data, for the period of September 1, 2018 through February 7, 2019, S. ethanol production has averaged 1.034 million barrels per day (range of 0.967 to 1.069 mb/d). Assuming 42 gallons of ethanol per barrel, and 2.8 gallons of ethanol per bushel of either corn or grain sorghum used in the production process, this rate of U.S. ethanol production would result in 5.529 bb of U.S. feedgrain use for ethanol in “current” MY 2018/19. 
  • It is assumed here that approximately 80-100 mb of S. grain sorghum will be used for ethanol production in “current crop” MY 2018/19 (i.e., versus 110 mb in total food, seed & industrial use of U.S. grain sorghum in the February 8, 2019 WASDE report). As a result, at the current pace of usage there would be 5.430-5.450 bb of U.S. corn used for ethanol production over the same period. 
  • Projected S. ethanol use of 5.430-5.450 bb of corn would be down 125-145 mb from the USDA’s projection of a near record 5.575 bb use for ethanol for “current” MY 2018/19 (Table 1, Figures 9abc-10). The USDA lowered its February 8th WASDE projection of U.S. corn use in ethanol production in “current” MY 2018/19 by 25 mb to 5.575 bb due to operating losses in U.S. ethanol plants during the September 2018 through January 2019 period, and expectations by the USDA of lower ethanol production as a result.
  • The Environmental Protection Agency’s (EPA’s) recent action to approve the use of E-15 gasoline blends on a season-round basis in U.S. motor fuels may lead to increased feedgrain use for ethanol during the remainder of “current” MY 2018/19 and in coming years.

3) “Supporting” 2019 Corn Market Factors as of February 13, 2019

There are also neutral-to-positive factors providing positive support for U.S. corn supply-demand and price prospects – including “moderating” but still historically strong demand for U.S. corn ethanol use and exports, and the risk of lower 2019 South American corn acreage and production prospects.

3A – U.S. Corn Exports

  • United States’ corn exports have been strong to date in the “current crop” 2018/19 marketing year – with shipments at a seven (7) year high through early February 2019. The USDA forecast that U.S. corn imports would reach 450 bb in exports for “current” MY 2018/19.  For the weeks ending January 17th, 24th, 31st and February 7th, the U.S. had corn export shipments of 44.4 mb, 35.2 mb, 35.5 mb, and 29.3 mb, respectively.  These were behind the pace of 53.0 mb needed to meet the USDA forecast of 2.450 bb.  At the most recent 4-week average pace of 36.1 mb/week, U.S. corn exports would reach 1.961 bb by the end of the marketing year – down 489.4 mb or 20% from the February 8, 2019 USDA WASDE projection.
  • Accumulated U.S. corn export shipments of 732.3 mb as of December 27th (just prior to the recent U.S. government shutdown) were 29.9% of the 2.450 bb USDA projection for “current” MY 2018/19 with what at that time was 32.7% (i.e., 17 of 52 weeks) of the marketing year completed. Total shipments and forward sales as of 12/27/2018 were approximately 1.253 bb – equaling 51.1% of the USDA’s 2.450 bb projection with 32.7% (i.e., 17 of 52 weeks) of “current” MY 2018/19 completed (Table 1 & Figures 10-11)

3B – Uncertain 2019 Prospects for South American Corn & Soybean Production

  • 2019 Brazil Soybean Production: Dry conditions in key agricultural areas of Brazil have caused declines of 5% to 8% in projected 2019 soybean production in that country – from early season projections of 120-122 million metric tons (mmt) down to 112-115 mmt. With parts of the country farther north and closer to the Equator, the Brazilian soybean harvest typically begins in early January and lasts through the end of May.  So, the majority of the Brazil harvest remains, with more accurate information yet to come.  The 2019 soybean crops in Brazil and Argentina will be counted in the “current” MY 2018/19 marketing year which extends to August 31, 2019. 
  • 2019 Argentina Soybean Production: Growing conditions in Argentina are generally estimated to be “wet”, but with no major concerns about crop damage to date. Being farther south, the Argentina soybean harvest typically begins in early March and lasts through the end of May.  Just as for Brazil, the majority of the Argentina harvest remains, with more accurate information yet to come on actual 2019 production.
  • 2019 Brazil Corn Production: The same dry conditions that have affected Brazil soybean production MAY eventually impact 2019 Brazil corn production. However, the 2nd crop planting of corn in Brazil began which began in mid-January will continue through mid-March, with harvest beginning in early May and lasting through the end of August.  Therefore, it is still “too early” to make accurate forecasts of how 2019 crop conditions may affect the 2nd crop corn harvest in Brazil.  The first crop of corn in Brazil is typically planted from mid-August through the end of December, with harvest occurring from January through May.  Common practice has been to allocate the 1st crop of corn in Brazil for domestic uses, with the second crop being used more in the export market. 
    • To date, the USDA projects there to be a recovery in Brazil 2019 corn production up to 94.0 mmt – the 2nd highest on record. This would be up 15% from a drought affected low of 82.0 mmt in 2018, but still down 4.6% from the record high of 98.5 mmt in 2017.  But the final 2019 corn production amount for Brazil is “yet to be determined”
    • Just as for soybeans, 2019 Brazil corn production will be counted in “current” MY 2018/19 marketing year ending on August 31, 2019. However, a large portion of the Brazilian corn exports from this crop will occur and count within the “next crop” 2019/20 marketing year beginning on September 1, 2019 and extending through the following August.
  • 2019 Argentina Corn Production: The same wet conditions that have affected 2019 Argentina soybean production MAY eventually impact that countries’ corn production.  Being further south, Argentina corn plantings occur in during September-December for its one annual crop, while the associated harvest typically follows in early March and lasts through the end of May.  
    • As in Brazil, it is still too early” to make accurate forecasts of how 2019 crop conditions may affect the 2nd crop corn harvest in Argentina. To date, projections from the USDA are that Argentina will have record 2019 corn production of 46.0 mmt – but that outcome is “yet to be determined”.    

 

4) CME Corn Futures & Kansas Cash Corn Prices & Basis Bids

4A – Corn Futures Price Trends

Since the release of the USDA’s February 8th World Agricultural Supply and Demand (WASDE) report, “lead contract MARCH 2019 CME corn futures prices initially moved lower, but have since partially recovered.   On February 8th, the day of the report, MAR 2019 corn opened at $3.76 ½ – trading as low as $3.74 and as high as $3.81 ¾ during the day before closing down $0.02 ¼ to $3.74 ¼ /bu.  Since that day, MAR 2019 corn has trended first lower down to $3.71 ¾ and then back up to $3.78 ¾ before closing at $3.78 ¼ on Wednesday, February 13th (Figure 1).   Considering long term trends in monthly, continuous Chicago Mercantile Exchange (CME) corn futures, recent lows of $3.18 ¼ (on 10/1/2014), $3.01 (on 8/31/2016), $3.38 (on 9/1/2017), and $3.36 ¼ per bushel (on 9/13/2018) have occurred.  These are comparable to the close of $3.78 ¼ in MARCH 2019 corn futures on February 13, 2019 (Figure 1).  

4B – Corn Futures Positions of Traders (CFTC Data)

Position of traders data released by the Commodity Futures Trading Commission (CFTC) is available from the CFTC at the following web address:  https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm .   The CFTC position of traders data on January 15th shows a “volatile” but at least temporarily “balanced” picture of corn futures trader sentiments, especially in regards to the offsetting quantities of “long” and “short” futures positions held by Management Money (Speculator or “Spec”) traders.

  • Net Positions of Commercial, Spec, & Index Traders: The net “long” or “buy” position of CME Corn futures speculative or “management money” traders was 78 million bushels (mb) on January 15, 2019 – following net “long” positions of 246 mb being held just one week earlier on January 8th (Figure 3a). The net short position of commercial hedgers on January 15th was 1.416 bb, down moderately from net short positions in the range of 1.497-1.855 bb during the December 4th – January 8th  The net position of index traders declined to 806 mb on January 15th, after having consistently been long during the 12/4/2018-1/8/2019 period, in the 909 mb-91 mb range. 
  • Commercial Hedgers Long & Short Positions: Both the “short / sell” and “long / buy” positions of CME Corn futures commercial hedgers have remained relatively consistent since early July 2018 (Figure 3b). Total commercial hedger “short / sell” positions have ranged from 3.727 bb to 4.024 bb during the 12/4/2018-1/8/2019 period, before declining to 3.638 bb in “short / sell” positions on 1/15/2019.  Typical risk management-related grain futures transactions and positions of commercial grain elevators and/or farmer hedgers would fall into this “short position” category.   Commercial hedger “long / buy” positions have ranged from 2.152 bb to 2.238 bb during the same period, with 2.222 bb in “long / buy” positions on 1/15/2019.  Typical risk management grain futures transactions and positions of commercial grain processors, ethanol plants, and livestock feeders would fall in this “long position” category.  
  • Managed Money (Specs) Long & Short Positions: The aggregate “short / sell” position of CME Corn futures management money (speculative) traders been increasing moderately since early December 2018 (Figure 3c).  Total speculator’s “short / sell” positions have ranged from 0.824 bb to 1.109 bb during the 12/4/2018 to 1/15/2019 period, with the largest amount of 1.109 bb in “short / sell” positions at the end of the period on 1/15/2019.   Speculator’s “long / buy” positions have also declined during this period, ranging from 1.187 bb to 1.446 bb during the same period, with the smallest amount of 1.187 bb in “long / buy” positions on 1/15/2019 at the end of the period.  

4C – Corn Cash Price & Basis Trends in Kansas

In Western Kansas on Wednesday, February 13th cash corn bids at major grain elevators ranged from $3.44 ($0.35 per bushel under MAR 2019 futures) to $3.81 ($0.02 basis over futures), and ranged from $3.35 ¾  ($0.43 under CME MAR 2019 corn) to $3.58 ¾ ($0.20 under) in Central Kansas.  These prices are much higher than when corn bids statewide had fallen to $2.66-$2.96 /bu on December 23, 2016. 

Cash corn price bids in East Central and Northeast Kansas at major terminal locations were $3.798 ¾ /bu on February 13th, with basis bids being $0.00 level with MAR 2019 corn futures.  These eastern Kansas cash corn prices are up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on Wednesday, December 13th ranged from $3.77 ¼ /bu ($0.01 under MAR) to $3.98 ¼ ($0.20 over MAR 2019) – continuing to indicate strength in ethanol demand for corn in Kansas and nationwide. 

 

5) USDA & KSU S-D & Price Forecasts for “Current” MY 2018/19

The USDA’s projection and three alternative KSU-Scenarios to the USDA’s forecast for U.S. corn supply-demand and prices are presented in what follows for “current” MY 2018/19 (Tables 1-1a & Figures 12-12a).  These projections show how varying 2018 U.S. corn production and export / total use scenarios could affect U.S. corn supply-demand and price outcomes yet in “current” MY 2018/19.  Probability-weights are added to reflect judgements about how likely each scenario is to occur in “current” MY 2018/19, i.e., during the September 1, 2018 through August 31, 2019 time period.

Scenario AMY 2018/19USDA WASDE Corn S-D Scenario for “Current” MY 2018/19: (75% prob.): Assumptions: 89.129 ma planted; 81.740 ma harvested; 176.4 bu/ac yield; 14.420 bb production; 16.600 bb total supplies; 5.575 bb ethanol use; 1.465 bb food, seed & industrial use; 2.450 bb exports; 5.375 bb feed & residual use; 14.865 bb total use; 1.735 bb ending stocks; 11.67% Stocks/Use; & $3.60 /bu U.S. corn average price

Scenario BKSU “Lower U.S. Corn Exports” Scenario for “Current” MY 2018/19 (10% prob.): Assumptions are: 89.129 ma planted; 81.740 ma harvested; 176.4 bu/ac yield; 14.420 bb production; 16.600 bb total supplies; 5.575 bb ethanol use; 1.451 bb food, seed & industrial use; 2.350 bb exports (down 100 mb vs USDA’s 2.450 bb); 5.375 bb feed & residual use; 14.765 bb total use (down 100 mb vs USDA’s 15.030 bb); 1.835 bb ending stocks (up 100 mb vs USDA’s 1.735 bb); 12.43% Stocks/Use (up vs USDA’s 11.67% S/U); & $3.40 /bu U.S. corn average price (down vs USDA’s $3.60 per bushel);   

Scenario CKSU “Higher U.S. Corn Exports” Scenario for “Current” MY 2018/19 (10% prob.): Assumptions are: 89.129 ma planted; 81.740 ma harvested; 176.4 bu/ac yield; 14.420 bb production; 16.600 bb total supplies; 5.575 bb ethanol use; 1.465 bb food & industrial use; 2.550 bb exports (up 100 mb vs USDA’s 2.450 bb); 5.375 bb feed & residual use; 14.965 bb total use (up 100 mb vs USDA’s 14.865 bb); 1.635 bb ending stocks (down 100 mb vs USDA’s 1.735 bb); 10.93% Stocks/Use (down vs USDA’s 11.67% S/U); & $3.75 /bu U.S. corn average price (up vs USDA’s $3.60 per bushel).   

Scenario DKSU “Higher Ethanol Use of U.S. Corn” Scenario for “Current” MY 2018/19 (5% prob.): Assumptions are: 89.129 ma planted; 81.740 ma harvested; 176.4 bu/ac yield; 14.420 bb production; 16.600 bb total supplies; 5.675 bb ethanol use (up 100 mb vs USDA’s 5.575 bb); 1.450 bb food & industrial use; 2.450 bb exports; 5.500 bb feed & residual use; 14.965 bb total use (up 100 mb vs USDA’s 5.575 bb); 1.635 bb ending stocks (down 100 mb vs USDA’s 1.735 bb); 10.93% Stocks/Use (down vs USDA’s 11.67% S/U); & $3.75 /bu U.S. corn average price (up vs USDA’s $3.60 per bushel).   

 

6) USDA Preliminary Market Forecast for “Next Crop” MY 2019/20

An adjusted version of USDA’s projection for U.S. corn supply-demand and prices for “next crop” MY 2019/20 (Table 1a).  These projections show the USDA’s projections for U.S. corn in the “next” marketing year, based on the U.S. corn harvest in year 2019, with the marketing year beginning on September 1, 2019 and lasting through August 31, 2020.  Liberty has been taken to make minor adjustments to the USDA’s projections following from the results of the December 11, 2018 USDA WASDE report.

Scenario AUSDA December 11th WASDE Corn S-D Scenario for “Next Crop” MY 2019/19: (75% prob.): Assumptions are: 92.000 ma planted (up 2.860 ma vs MY 2018/19), 84.600 ma harvested (up 2.833 ma vs MY 2018/19), 176.5 bu/ac yield (up 0.1 bu/ac vs MY 2018/19), 14.930 bb production (up 510 mb vs MY 2018/19), 16.715 bb total supplies (up 115 mb vs MY 2018/19), 5.700 bb ethanol use (up 125 mb vs MY 2018/19), 1.459 bb food & industrial use (up 25 mb vs MY 2018/19), 2.425 bb exports (down 25 mb vs MY 2018/19), 5.575 bb feed & residual use (up 200 mb vs MY 2018/19), 15.190 bb total use (up 325 mb vs MY 2018/19), 1.529 bb ending stocks (down 206 mb vs MY 2018/19), 10.07% Stocks/Use (down vs 11.67% S/U in MY 2018/19), & $3.90USDA /bu U.S. corn average price (up $0.30 /bu vs MY 2018/19); 

 

7) World Corn Supply-Demand – Both With & Without China

World Production:  World corn production of 1,099.61 million metric tons (mmt) is projected for “current” MY 2018/19, up 2.2% from 1,075.61 mmt in “old crop” MY 2017/18, but down 2.0% from the record high of 1,122.41 mmt in MY 2016/17 (Figures 14).  The “current” 2018/19 marketing year began September 1, 2018 and continues through August 31, 2019. 

Forecast corn production in Argentina of 46.00 mmt in 2019 would be a “rebound” from the short crop of 32.00 mmt projected in 2018, and above 41.00 mmt produced in 2017.  Similarly, production in Brazil of 94.50 mmt in 2019 would also be a “rebound” from the short crop of 82.00 mmt projected in 2018, but down from 98.50 mmt in 2017.  A large portion of the corn harvests for Argentina and Brazil occur in the later half of September 1st – August 31st marketing years, i.e., February through August.  For “current” MY 2018/19, the Argentina and Brazil corn harvests will be during February-August, 2019.

World Total Supplies:  World corn total supplies of a record high 1,440.42 mmt in “current” MY 2018/19 are forecast to be up 1.0% from 1,425.85 mmt in “old crop” MY 2017/18, and up 0.5% from the previous record high of 1,433.79 mmt in MY 2016/17.   The estimates of World corn total supplies were adjusted approximately 14% higher in the November 8th WASDE report to changes in Chinese domestic corn supply-demand balance sheets – with these adjustments carrying through to the December 11th and February 8, 2019 reports.

World Exports: World corn exports of a record high 167.36 mmt are projected for “current” MY 2018/19, up 14.4% from 146.29 mmt in “old crop” MY 2017/18, and up 4.6% from the previous record high of 160.05 mmt in MY 2016/17 (Figure 14).

World Ending Stocks (% Stocks/Use):  Projected World corn ending stocks of 309.78 mmt (27.40% S/U) in “current” MY 2018/19 are down from 340.81 mmt (31.41% S/U) in “old crop” MY 2017/18, down from the record high 350.24 mmt (32.32% S/U) in MY 2016/17, and 311.38 mmt (31.12% S/U) in MY 2015/16 (Figures 14 & 15a).    Projected Foreign (Non-U.S.) corn ending stocks of 265.70 mmt (28.87% S/U) in “current” MY 2018/19, are down from 286.44 mmt (33.48% S/U) in “old crop” MY 2017/18, and is down from 291.99 mmt (33.50% S/U) in MY 2016/17. 

Just as for total supplies, changes in Chinese corn ending stocks increased World corn ending stocks estimates by 93.0% in the November 2018 USDA WASDE report, and increased World ending stocks-to-use estimates from 14.39% in October 2018 up to 27.16% and 27.30% in the November 8th and December 11th WASDE reports, respectively, and to 27.40% in the February 8, 2019 WASDE.

World-Less-China Ending Stocks (% Stocks/Use): An alternative view of the World corn supply-demand is presented IF Chinese corn usage and ending stocks are isolated from the World market (Figures 15b-c).  “World-Less-China” corn ending stocks are projected to be 101.97 mmt (11.95% S/U) in “current” MY 2018/19, down from 118.24 mmt (14.39% S/U) in “old crop” MY 2017/18, and down from 127.23 mmt (15.82% S/U) in MY 2016/17.  These figures show that World % stocks-to-use of corn less China’s direct influence are projected to be 56.4% lower or “tighter” (i.e., 11.95% S/U for the “World-Less-China” versus 27.40% S/U for the “World” overall in “current” MY 2018/19). 

World versus China Corn Ending Stocks: After the changes in World corn supply-demand reported in the November 8th WASDE report, which were carried forward into the December 11th and February 8, 2019 reports, the USDA showed that estimates of Chinese ending stocks of corn as proportion of the World total have increased significantly from the October 2018 WASDE report.   The updated figures show the percent of World corn stocks held by China to be 61.91% in MY 2014/15, 68.09% in MY 2015/16, 63.67% in MY 2016/17, 65.29% in “old crop” MY 2017/18, and now are projected to be 67.08% in “current” MY 2018/19. 

While China’s percent of World corn stocks is estimated to have increased with these new USDA figures,  “World-Less-China” percent corn ending stocks-to-use are estimated to be 11.95% in “current” MY 2018/19, the lowest percentage in 6 years (Figures 15a-b)“World-Less-China” corn stocks-to-use was 9.5%-9.9% during the years of MY 2011/12 – MY 2012/13, but increased to the range of 12.2% to 13.8% during the MY 2013/14 through MY 2015/16 period.  Then after a high of 15.82% in MY 2016/17, “World-Less-China” corn ending stocks-to-use declined to 14.39% in “old crop” MY 2017/18, and to a projected level of 11.95% in “current” MY 2018/19.   This decline supports the idea that corn stocks outside of China are “tightening up” – and that the overall World corn market has an increasing possibility of seeing higher prices in the future if these trends continue.

 

7) Final Thoughts re: Corn Market Focus in “Current” MY 2018/19

From mid-February 2019 through May 2019, the “narrative focus” of the corn market will likely be on corn the later part of the planting season in southern areas and early season development in Argentina and Brazil.   It is possible if not likely that news about the pace of usage of U.S. domestic corn and other feedgrains and the possibility of excessive moisture delaying U.S. corn planting progress will also have the attention of the U.S. corn markets during February-May 2019. 

The impact of this news will be exacerbated IF U.S. corn exports are spurred higher by worries about potentially lower South American corn supplies for export in spring 2019.  Then from late winter into spring 2019, U.S. corn markets will be simultaneously paying attention to the pace of U.S. corn domestic and export usage and to 2019 U.S. corn planting progress.  The corn market would likely then be driven by 2019 U.S. corn production prospects from what remains of Spring through Summer and early fall 2019. 

During this anticipated “normal seasonal” price pattern for corn in “current” MY 2018/19, U.S. producers will be making marketing decisions under conditions of “uncertainty” as what may be profitable seasonal pricing opportunities present themselves.  For those with a “risk averse” perspective on corn price risk management, there will likely be a tendency to price corn “earlier” and in “greater quantities” to avoid the possibility of being forced to sell at lower prices later on at harvest during fall 2019.  This early action” approach contrasts to those corn producers who are less worried (i.e., “less risk averse”) about being in what is essentially a “speculative post-harvest storage” position in the corn market – i.e., holding unpriced corn in storage longer while waiting for the possibility of a better price that may come later.   

The key point to consider is that the likelihood exists of there being greater price strength in U.S. corn markets through the Winter and Spring 2019 months than many may now be taking into account.  Any such optimism in the U.S. corn market depends on the likelihood of 1) crop production problems for South American corn in 2019, b) the strong domestic demand base that seems to exist for the U.S. corn crop in “current” MY 2018/19, and c) the growing possibility of delayed planting for U.S. corn – particularly in the central, northern, and eastern parts of the U.S. Corn Belt.

“Beginning of 2019” Corn Market Outlook Presentation – Kansas State University

The following slides present an “Early 2019 U.S. Corn Market Outlook” presentation to be given by Daniel O’Brien, Extension Agricultural Economist – Kansas State University.  This full presentation will be place on the www.AgManager.info website in early 2019 at the following web address:

http://www.agmanager.info/grain-marketing/presentations