KSU Soybean Market Outlook in Late-December 2017 – Healthy Demand Upholding World Soybean Markets

An analysis of U.S. and World soybean supply-demand factors and 2018 price prospects following the USDA’s December 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website (http://www.agmanager.info/)

This article also analyzes information from the USDA’s Long Term Agricultural Projections for U.S. soybeans, particularly for the “Next Crop” 2018/19 Marketing Year to begin on September 1, 2018.  The USDA’s long term outlook is found at the following web address:

https://www.usda.gov/oce/commodity/projections/

Following is a summary of the article on Soybean Market Outlook in Late-December 2017 – with the full article and accompanying analysis to be available on the KSU AgManager website at the following web address:

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

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KSU U.S. Sorghum and World Coarse Grain Market Outlook in Late-December 2017

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s December 12th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available on the KSU AgManager website  (http://www.agmanager.info/).

This article also examines the USDA’s Long Term Agricultural Projections in regards to U.S. grain sorghum market outlook in “next crop” MY 2018/19.  The USDA’s Long Term Agricultural Projections can be found at the following web address:

https://www.usda.gov/oce/commodity/projections/

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 to be available shortly at the following web address:

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

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Summary

A. Grain Sorghum Market Overview

In the December 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, the USDA forecast that the 2017 U.S. grain sorghum crop would be 356 million bushel (mb).  This projection of 2017 U.S. Grain Sorghum production combined with a large 2017 U.S. Corn crop of 14.578 billion bushels (bb) have caused U.S. feedgrain markets to focus on “large feedgrain production and supply” scenarios – and have brought continued pressure to both U.S. grain sorghum and corn market prices.  Just as with U.S. corn, wheat, and soybeans, current cash bids for grain sorghum are below full economic cost of production in most instances.  However, higher than anticipated 2017 grain sorghum yields at many Kansas locations may help lower cost of production per bushel and help to mitigate low grain sorghum prices to some degree. 

Strong exports of U.S. grain sorghum during November-mid December 2017 have had a tangible, positive impact on grain sorghum prices in Central and parts of Western Kansas.  China and Japan have been the main  export buyers from the U.S., while purchases from Mexico have declined to date in the “new crop” 2017/18 marketing year.  In response, the USDA raised its’ U.S. Grain Sorghum export projections sharply – up 50 million bushels (mb) to 260 mb for this marketing year ending August 31, 2018.  And in a textbook example of economic “crowding out” – this strong foreign export demand for U.S. grain sorghum has raised domestic prices and is causing a projected shifting of usage away from U.S. domestic livestock feeding and ethanol production in “new crop” MY 2017/18.

The USDA also released Long Term Agricultural Projections on November 28th that anticipate both an increase in U.S. grain sorghum average prices to $3.30 per bushel (equal to the U.S. corn price forecast), and a 1 million acre (+17%) increase in grain sorghum planted acreage in the “next crop” 2018/19 marketing year.  

B. Kansas Cash Grain Sorghum Prices

On December 26th cash grain sorghum price bids at major grain elevators in Western Kansas were in the range of $3.08 – $3.31 /bu – with basis levels $0.45 to $0.22 /bu under CME MARCH 2018 corn futures.  The high bid of $3.31 /bu was in Colby, where the corn price that same day was $3.00 /bu ($0.53 under MARCH).  

Central Kansas cash grain sorghum price bids ranged from $3.17 ½ to $3.48 /bu with basis $0.35 to $0.05 / bu under.  The high bid of $3.48 /bu was in Salina, where the highest corn price was $3.09 ¾ /bu ($0.43 under MARCH).

In East Central Kansas at Topeka, the highest reported grain sorghum price bid was $3.87 ½ /bu (basis = $0.35 over MARCH 2018 corn) – compared to the highest corn bid of $3.09 ¾ /bu ($0.43 under MARCH). 

Kansas ethanol plant price bids for grain sorghum on Dec. 26th ranged from $3.42 to $3.57 /bu, with basis $0.10 under to $0.05 over.  Ethanol plant corn bids were $3.32-$3.79 /bu, with basis $0.20 under to $0.27 over.

C. Market Factors for U.S. Grain Sorghum & Other Feedgrains in 2018

1) Whether the recent strength in U.S. Grain Sorghum exports to China and Japan continues through Spring-Summer 2018 will be THE key factor in grain sorghum price prospects for at least the first half of the year.  IF the recent pace of U.S. grain sorghum exports were to continue at the levels of November-early December 2017 through August 2018, then total U.S. grain sorghum exports would end up being over 300 million bushels in “new crop” MY 2017/18 by KSU estimates. 

2) Usage of U.S. grain sorghum for ethanol production and livestock feeding is likely to be “crowded out” by strong sorghum exports in “new crop” MY 2017/18 – should they continue at their current pace through Spring-Summer 2018.   However, there are ample to abundant supplies of low priced U.S. corn available for these domestic U.S. feedgrain usage industries to use without interruption.  This is occurring when continued strong domestic U.S. fuel ethanol use and livestock feeding of the 2017 crop U.S. feedgrains are anticipated for the remainder of the “new crop” 2017/18 marketing year.

3) Given the pace of U.S. grain sorghum exports, it is likely that there will be reduced grain sorghum storage  beyond the Winter months – as attractive pricing opportunities perform their “demand pull” effect upon farmer’s marketing actions.

4) Higher U.S. grain sorghum prices relative to competitive feedgrains will likely “draw” increased 2018 U.S. grain sorghum planted acreage – as projected by the USDA in its Long Term Agricultural Projections.  The question may be “Just how many more acres of grain sorghum will U.S. farmers plant in 2018?”   It is possible that higher acreage and good growing conditions could bring about an increase in 2018 U.S. Grain Sorghum production to 450-500+ million bushels – much larger than the USDA’s 2018 forecast of 384 mb. 

D. USDA Forecast for “Next Crop” MY 2018/19 & “New Crop” MY 2017/18

In its November 28th Long Term Agricultural Projections, the USDA projected 2018 U.S. Grain Sorghum plantings of 6.700 million acres (ma), up 17% or ≈ 1 ma from 5.709 ma in 2017.  Harvested acres U.S. grain sorghum in 2018 are projected to be 5.700 ma, up from 5.049 ma in 2017.   Average yields in 2018 in the U.S. are forecast at 67.3 bu/ac, down from 70.4 bu/ac in 2017.  As a result, 2018 U.S. Grain Sorghum production is forecast to be 384 mb – up from 356 mb in 2017, but down from 480 mb in year 2016 and 597 mb in 2017.  

Forecast “next crop” MY 2018/19 U.S. Grain Sorghum total supplies are 405 mb (vs 391 this marketing year, and 519-620 mb the 2 years before).   United States’ Grain Sorghum exports are projected to be 230 mb in “next crop” 2018/19 – down from 260 mb in “new crop” MY 2017/18, and less than 241 mb in MY 2016/17.  Total use of U.S. Grain Sorghum in “next crop” MY 2018/19 of 370 mb is unchanged from “new crop” MY 2017/18 – but down from 485-583 mb the two previous years. 

Ending stocks of U.S. Grain Sorghum in “next crop” MY 2018/19 are projected to be 35 mb (9.46% Stocks/Use) – up from 21 mb (5.68% Stocks/Use) in “new crop” MY 2017/18.  

The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to be $3.30 /bu – up from $3.10 /bu in “new crop” MY 2017/18. 

This scenario for “new crop” MY 2017/18 is given an 80% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

E. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Two (2) alternative KSU projections for “new crop” MY 2017/18 U.S. Grain Sorghum Total Use include the following forecasts:

1) “Higher Exports” scenario (10% probability) for “new crop” MY 2017/18: 2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 290 mb, total use of 359 mb, ending stocks of 13 mbb, 3.62% ending stocks-to-use, and $3.40 /bu U.S. average price.

2) “Lower Exports” scenario (10% probability) for “new crop” MY 2017/18:  2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 230 mb, total use of 350 mb, ending stocks of 23 mbb, 6.57% ending stocks-to-use, and $3.00 /bu U.S. average price.

F. World Coarse Grain Supply-Demand

The USDA projected that “new crop” 2017/18 marketing year World Coarse Grain total supplies of 1,586.3 mmt will be down 2.0% from 1,618.7 mmt in “old crop” MY 2016/17, but still up 5.2% over 1,507.35 mmt in MY 2015/16.   Projected World Coarse Grain total use of 1,354.1 mmt in “new crop” MY 2017/18 is down marginally from “old crop” MY 2016/17, but up 7.9% over 1,254.9 mmt in MY 2015/16.   “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.

World Coarse Grain ending stocks are forecast to decline, with the USDA projecting ending stocks of 232.2 mmt in “new crop” MY 2017/18, down 11.5% from 262.4 mmt in “old crop” MY 2016/17, and down 8.0% from 252.4 mmt in MY 2015/16.  Although World Coarse Grain ending stocks are projected to be the eighth highest on record in “new crop” MY 2017/18 at 232.2 mmt, World Coarse Grain percent ending stocks-to-use in “new crop” MY 2017/18 are forecast to actually decline to 17.15% – to the lowest level since 17.12% in MY 2013/14.  This is indicative that strong World usage for coarse grains at low prices is expected to continue.  

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KSU Corn Market Outlook in December 2017: Prospects for “New Crop” MY 2017/18 and “Next Crop” MY 2018/19

An analysis of U.S. and World Corn supply-demand & price prospects for the “New Crop” 2017/18 and “Next Crop” 2018/19 Marketing Years are provided in the following article summary.  This information follows the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on December 12, 2017.

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 December 2017″

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Summary

A. Corn Market Overview

Since the USDA’s December 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, MARCH 2018 CME corn futures prices have traded higher and lower in a mixed manner.  Longer term – MARCH 2018 Corn futures have been trending lower – closing at $3.49 ¼ on December 20th.   In its’ December 12th USDA Crop Production report, the USDA maintained its projection from November of 2017 U.S. corn yields to average a record high 175.4 bu/ac, with 2017 U.S. corn production at 14.578 billion bushels (bb) – both up substantially from trade expectations during the summer of 2017.

Since both the November 9th and December 12th USDA reports, market expectations have reinforced a consensus consistent with the USDA projection of a “large supply – low price” scenario, leaving DEC 2017 corn futures (now expired) to trade in the range of $3.35 ¼ – $3.47 per bushel during the November 10th through December 14th late- harvest period.  The USDA will provide updated 2017 U.S. corn production numbers in its upcoming January 12, 2018 USDA Crop Production report.

It continues to be true that any significant corn futures or cash market price rallies through winter 2017-2018 on into early Spring 2018 are likely to be limited by ending stocks of U.S. corn in the 2.350-2.500 billion bushels (bb) range, coupled with ending stocks-to-use of 16.0%-17.5% for the 2017/18 marketing year.   However, in Spring-early Summer 2018 the U.S. corn market is likely again to have to weigh the annual risk of weather-limiting 2018 U.S. corn production prospects (i.e., the possibility of 2018 U.S. corn production less than 13.500 bb??) and tighter ending stocks (less than 1.500 bb??) in “next crop” MY 2018/19.  And that risk again is likely to provide both old crop and new crop pricing opportunities in Spring-Summer 2018.

One positive long-term factor in the U.S. corn market is the considerable “tightening up” that is forecast for foreign (non-U.S.) corn supply-demand balances in the “new crop” 2017/18 marketing year.   If this occurs, it would lead to larger U.S. corn export shipments in early 2018 than are currently happening, and support higher U.S. corn prices in Spring-Summer 2018 than are represented by 2018 Corn futures contracts.

B. Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Wednesday, December 20th cash corn bids at major grain elevators ranged from $2.96 ($0.53 under MARCH futures) to $3.37 ($0.12 under), and ranged from $3.01 ½ ($0.48 under) to $3.24 ¼ ($0.25 under) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are still mostly higher than a year ago when bids statewide had fallen to $2.66-$2.96 on December 23, 2016.  These prices were still above marketing loan rates for corn across the state, with corn loans near $2.05 in Central Kansas and $2.19 per bushel in Western Kansas

Cash corn price bids in East Central and Northeast Kansas at major terminal locations were $3.24 ¼ – $3.31 ¼ on December 20th, nearly equal to the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on December 20th ranged from $3.27 ½ ($0.20 under MARCH) to $3.74 ½ ($0.27 over MARCH) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.

C. Major Corn Market Considerations for Winter-Spring 2018

First, the corn market is likely to be only moderately responsive to any early season 2018 U.S. corn production threats since beginning stocks for “new crop” MY 2017/18 have been projected to be near 2.295 bb rather than down to 1.250-1.500 bb.  If no significant production risk emerges in summer 2018, then these large “old crop” MY 2017/18 carryover supplies will continue to limit 2018 corn crop forward pricing prospects.

Second, low prices for U.S. corn will help maintain strong usage for domestic U.S. ethanol and wet milling production, as well as livestock feeding through at least spring 2018 if not into the summer months. 

Third, the USDA is projecting at least “moderate” continued strength in U.S. corn exports of 1.925 bb for “new crop” MY 2017/18.  United States’ corn export shipments have been “slow” to date in the current marketing year.  However, the USDA maintains its optimism for “new crop” MY 2017/18 U.S. corn exports because of a) low U.S. corn prices,  b) expectations of significantly tighter foreign stocks and percent (%) stocks-to-use for corn, and c) the eventual “using up” of competing South American corn exports in early 2018.

Early forecasts are for 2018 Brazilian corn production to be 95 million metric tons (mmt) in this marketing year with harvests lasting from February through May.  Early forecasts are for 2018 Argentina corn production to be 42 mmt in this marketing year with harvests lasting from March through May.  However, dry conditions may limit 2018 corn production in Argentina and southern Brazil – and subsequently support U.S. corn exports.

Fourth, a continuing threat exists of U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2018.  World geo-political events could provide “shocks” to U.S. and World energy and grain markets which could in turn impact grain prices in either direction depending on the circumstances, the countries involved, and their role in global corn export trade.

D. USDA Supply-Demand & Price Forecast for “New Crop” MY 2017/18

In the December 12th Crop Production reports, the USDA left unchanged its projections of a) projected yields up to a record high of 175.4 bu/ac (vs the previous record of 174.6 in 2016), and b) 2017 U.S. corn production up to 14.578 bb – down from the record high of 15.148 bb in 2016.  The also USDA left unchanged its forecast “new crop” MY 2017/18 total supplies to 16.922 bb – down marginally (20 mb) from last year’s record high.  Total use is forecast at 14.485 bb – raised 50 mb from November on higher ethanol use, but still down 162 mb from last year’s record high.  Ending stocks are projected to be a 2.437 bb (16.8% S/U) – up from 2.295 bb (15.7% S/U) in “old crop” MY 2016/17.  United States’ corn prices are projected to average $3.20 /bu (range of $2.85-$3.55).  This is down $0.16 /bu from $3.36 /bu from “old crop” MY 2016/17. This scenario is given an 80% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

E. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Two alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2017/18.  These projections are to show how varying corn export outcomes could affect the USDA’s projection in the December 9, 2017 WASDE report. 

#1 – KSU “Higher Exports” MY 2017/18 Scenario: “2.250 bb Exports” Scenario (10% probability) assumes: 90.348 ma planted, 82.890 ma harvested, 175.4 bu/ac trend yield, 14.539 bb production, 16.884 bb total supplies, 2.250 bb exports, 14.785 bb total use, 2.099 bb ending stocks, 14.20% S/U, & $3.55 /bu U.S. corn average price; 

#2 – KSU “Lower Exports” MY 2017/18 Scenario: “1.800 bb Exports” Scenario (10% probability) assumes: 90.348 ma planted, 82.890 ma harvested, 175.4 bu/ac trend yield, 14.539 bb production, 16.884 bb total supplies, 1.800 bb exports, 14.360 bb total use, 2.524 bb ending stocks, 17.58% S/U, & $3.20 /bu U.S. corn average price;

F. USDA Supply-Demand & Price Forecast for “Next Crop” MY 2018/19

In the November 28th Long Term Baseline projections, the USDA forecast for “next crop” MY 2018/19 that  2018 U.S. corn planted and harvested acres would equal 91.0 million acres (ma) and 83.7 ma, respectively, both up from 90.429 ma planted and 83.119 ma harvested in 2017.  Corn yields in 2018 are forecast at 173.5 bu/ac, down from the record high of 175.4 bu/ac in 2017.  U.S. corn production is 2018 is projected to be 14.520 bb – down from 14.578 bb now projected for 2017.  

The USDA forecast “new crop” MY 2017/18 total supplies to 17.007 bb – adjusted for changes in the December WASDE report in MY 2017/18 ending stocks.  Total use is forecast at 14.450 bb – down 35 mb from this current marketing year.  Ending stocks are projected to be a 2.557 bb (17.7% S/U) – up from 2.437 bb (16.8% S/U) in “new crop” MY 2017/18.  United States’ corn prices are projected to average $3.30 /bu – up from $3.20 /bu in “new crop” MY 2017/18.

G. World Corn Supply-Demand – With & Without China

World corn production of 1,044.8 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 2.9% from the record of 1,074.8 mmt in “old crop” MY 2016/17, but still up 7.3% from 973.5 mmt in MY 2015/16.  World corn total supplies of 1,272.1 mmt are down marginally from the record high 1,290.5 mmt in “old crop” MY 2016/17, but up from 1,183.2 mmt in MY 2015/16. 

World corn exports of a 151.6 mmt are projected for “new crop” MY 2017/18, down 7.6% from the record high of 164.1 mmt in “old crop” MY 2016/17, and up 26.7% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 204.1 mmt (19.1% S/U) in “new crop” MY 2017/18 are down from the record high 227.3 mmt (21.4% S/U) in “old crop” MY 2016/17, and from 214.9 mmt (22.2% S/U) in MY 2015/16.  Projected Foreign (Non-U.S.) corn ending stocks of 142.2 mmt (16.5% S/U) in “new crop” MY 2017/18 are down from 169.0 mmt (19.8% S/U) in “old crop” MY 2016/17, and from 170.8 mmt (23.1% S/U) in MY 2015/16.  

An alternative view of the World corn supply-demand is presented if Chinese corn usage and ending stocks are isolated from the World market.  “World-Less-China” corn ending stocks are projected to be 124.5 mmt (15.0% S/U) in “new crop” MY 2017/18, down from 126.6 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 104.1 mmt (13.9% S/U) in MY 2015/16.  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be approximately 21% lower (i.e., 15.0% S/U for the “World-Less-China” versus 19.1% S/U for the “World” overall in “new crop” MY 2017/18).  

At the same time, these figures also show that Chinese ending stocks of corn as proportion of the World total are declining – down from 51.5% in MY 2015/16, to 44.3% in “old crop” MY 2016/17, and down to 39.0% in “new crop” MY 2017/18.  The deliberate actions in recent years – taken by the Chinese government to reduce feedgrain stockpiles – is impacting the relative amount of World total corn stocks they hold.  These actions may increase Chinese import demand for both U.S. corn and grain sorghum.

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KSU Ag Econ “Soybean and Cotton Market Outlook for 2018” Presentation

Following is a presentation on “Soybean & Cotton Market Outlook for 2018”.  This information was given as part of a larger “Grain Market Outlook for 2018” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien at a Farming for the Future meeting in Pratt, Kansas on December 14, 2017.

Additional Farming for the Future conferences in Kansas are planned for December 19th in Salina, January 10th in Scott City, and January 11th in Emporia.  Registration information can be found at the following web address:

http://www.agmanager.info/events/farming-future

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The full “Grain Market Outlook for 2018” presentation is available online at the KSU AgManager website at the following web address:

http://www.agmanager.info/sites/default/files/pdf/AGEC520_GrainOutlook_10-19-17.pdf

Information on Wheat, Soybean & Cotton supply-demand and market outlook will be provided in succeeding posts.

Following is information on “Soybean and Cotton Market Outlook for 2018”:

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through Late-November 2017

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, November 28th 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

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.

 

KSU Corn Market Outlook in Mid-November 2017: “What is and what is likely to come” in the U.S. Corn Market

An analysis of U.S. and World Corn supply-demand factors and “Next Crop” 2017/18 Marketing Year supply-demand and price prospects is provided in the following article summary.  This information follows the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on November 9, 2017.

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-November 2017″

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Summary

Overview

Since the USDA’s November 9th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have traded first lower, and then higher to partially recover their initial decline.  During the summer months of 2017 DEC 2017 corn futures reached as high as $4.17 ¼ per bushel on July 11th, but then declined to a low of $3.44 ¼ on August 31st. After a high of $3.62 on September 6th, DEC 2017 corn futures have trended sideways-to-lower throughout the remainder of September, October to a low on November 16th of $3.36 ¼, before closing at $3.45 on November 21st.  

In its’ November 9th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average a record high 175.4 bu/ac, with 2017 U.S. corn production at 14.578 billion bushels (bb) – both up substantially from pre-report trade expectations.   Since the November 9th USDA reports, market expectations have reinforced a consensus consistent with the USDA projection of a “large supply – low price” scenario, leaving DEC 2017 corn futures to trade in the range of $3.35-$3.55 per bushel during the 2017 harvest period.  The USDA will provide updated 2017 U.S. corn production numbers in its upcoming January 12, 2018 USDA Crop Production report.

It continues to be true that any significant corn futures or cash market price rallies through winter 2017-2018 on into early Spring 2018 are likely to be limited by ending stocks of U.S. corn in the 2.250-2.500 bb range, coupled with ending stocks-to-use of 16.0%-17.5% for the 2017/18 marketing year.   However, in Spring-early Summer 2018 the U.S. corn market is likely again to have to weigh the annual risk of weather-limiting 2018 U.S. corn production prospects (less than 13.500 bb??) and tighter ending stocks (less than 1.500 bb??) in “next crop” MY 2018/19.  And that risk again is likely to provide both old crop and new crop pricing opportunities in Spring-Summer 2018.

One positive long-term factor in the U.S. corn market is the considerable “tightening up” forecast with foreign (non-U.S.) corn supply-demand balances in the “new crop” 2017/18 marketing year.   If this forecast by the USDA comes to fruition, could eventually lead to larger U.S. corn exports than currently forecast, and help support somewhat higher U.S. corn prices in Spring-Summer 2018 than is currently expected by the market.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Monday, November 20th cash corn bids at major grain elevators ranged from $2.98 ($0.47 under DEC futures) to $3.40 ($0.05 under DEC), and ranged from $2.98 ($0.47 under DEC) to $3.20 ($0.25 under DEC) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are higher than in Fall of a year abo when bids statewide had fallen to $2.66-$2.96 on December 23, 2016.  These prices were still above marketing loan rates for corn across the state, with corn loans near $2.05 in Central Kansas and $2.19 per bushel in Western Kansas

Cash corn price bids in East Central and Northeast Kansas at major terminal locations were $3.18-$3.22 on November 20th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on November 20th ranged from $3.23 ($0.20 under DEC) to $3.63 ($0.20 over DEC) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.  While the “large supply and tight storage availability” situation continues in local Kansas grain markets, it is a positive sign that Kansas cash corn prices have avoided falling down to USDA loan rate levels – especially throughout the 2017 Kansas corn harvest.

Major Corn Market Considerations for Fall 2017 through Spring 2018

First, large beginning stocks of U.S. corn coming into “new crop” MY 2017/18 have been a “mitigating” factor limiting the response of the corn market to 2017 summer-early fall production risks that occurred.  The corn market has been less responsive to any 2017 U.S. corn production threats since beginning stocks for “new crop” MY 2017/18 have been projected to be near 2.295 bb rather than down to 1.250-1.500 bb.  If this “large stocks situation” persists into summer 2018, this mitigating and limiting affect will likely hamper future 2018 corn crop forward pricing prospects as well.

Second, the grain market continues to anticipate that low prices for U.S. corn will help maintain strong usage for domestic U.S. ethanol and wet milling production, as well as livestock feeding through at least spring 2018 if not into the summer months. 

Third, at least “moderate” continued strength is expected in U.S. corn exports due to low U.S. corn prices and also to a moderately weaker U.S. dollar against other World currencies compared to a year ago.  Exports of U.S. corn are expected to continue at a “decent” pace of 1.925 bb for “new crop” MY 2017/18 even though South American corn production will continue to be a competitive factor in World trade through at least the end of 2017.  Also, preliminary forecasts for 2018 are that Brazilian corn acreage and production will be lower due to low prices and poor profitability in 2017, as well as a delayed 2nd crop of corn in parts of the country.  Combined with the potential for crop-weather concerns in Brazil in coming months – these factors “could” have a positive impact on U.S. corn exports and price prospects in spring-summer 2018.

Fourth, a continuing threat exists of U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017-2018.  World geo-political events could provide “shocks” to U.S. and World energy and grain markets which could in turn impact grain prices in either direction depending on the circumstances, the countries involved, and their role in global corn export trade.

USDA Supply-Demand & Price Forecast for “New Crop” MY 2017/18

In the November 12th Crop Production report, the USDA raised its projections of a) projected yields up to a record high of 175.4 bu/ac (vs the previous record of 174.6 in 2016), and b) 2017 U.S. corn production up to 14.578 bb – down from the record high of 15.148 bb in 2016.  

The USDA raised its forecast “new crop” MY 2017/18 total supplies to 16.922 bb – down marginally (20 mb) from last year’s record high.  Total use is forecast at 14.435 bb – down 212 mb from last year’s record high.  Ending stocks are projected to be a 2.487 bb (17.2% S/U) – up from 2.295 bb (15.7% S/U) in “old crop” MY 2016/17.  United States’ corn prices are projected to average $3.20 /bu (range of $2.80-$3.60).  This is down $0.16 /bu from $3.36 /bu from “old crop” MY 2016/17. This scenario is given an 80% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2017/18.  These forecast scenarios vary from the USDA’s projection in the November 9, 2017 WASDE report for “new crop” MY 2017/18. 

A – KSU “Higher Exports” MY 2017/18 Scenario) “2.250 bb Exports” Scenario (10% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 175.4 bu/ac trend yield, 14.548 bb production, 16.893 bb total supplies, 2.250 bb exports, 14.735 bb total use, 2.158 bb ending stocks, 14.65% S/U, & $3.50 /bu U.S. corn average price; 

B – KSU “Lower Exports” MY 2017/18 Scenario) “1.800 bb Exports” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 175.4 bu/ac trend yield, 14.548 bb production, 16.893 bb total supplies, 1.800 bb exports, 14.310 bb total use, 2.583 bb ending stocks, 18.05% S/U, & $3.15 /bu U.S. corn average price; 

C – KSU “Lower Yield” MY 2017/18 Scenario) “172.5 bu/ac – 14.307 bb crop” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 172.5 bu/ac trend yield, 14.307 bb production, 16.652 bb total supplies, 14.435 bb total use, 2.217 bb ending stocks, 15.36% S/U, & $3.40 /bu U.S. corn average;

Note: The presence of large beginning stocks of 2.295 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances in scenarios “A” and “C”, and hinder potential upward price responses.

World Corn Supply-Demand – With & Without China

World corn production of 1,043.9 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.9% from the record of 1,074.8 mmt in “old crop” MY 2016/17, but still up 7.3% from 972.9 mmt in MY 2015/16.  World corn total supplies of 1,270.5 mmt are down 1.45% from the record high 1,289.2 mmt in “old crop” MY 2016/17, and still up 7.4% from 1,182.4 mmt in MY 2015/16. 

World corn exports of a 151.6 mmt are projected for “new crop” MY 2017/18, down 7.3% from the record high of 163.6 mmt in “old crop” MY 2016/17, and up 26.7% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 203.9 mmt (19.1% S/U) in “new crop” MY 2017/18 are down from the record high 226.6 mmt (21.3% S/U) in “old crop” MY 2016/17, and from 214.4 mmt (22.2% S/U) in MY 2015/16.

An alternative view of the World corn supply-demand is presented if Chinese corn usage and ending stocks are isolated from the World market.  “World-Less-China” corn ending stocks are projected to be 125.2 mmt (15.1% S/U) in “new crop” MY 2017/18, down from 125.9 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 103.7 mmt (13.8% S/U) in MY 2015/16.  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be approximately 21% lower (i.e., 15.1% S/U for the “World-Less-China” versus 19.1% S/U for the “World” overall in “new crop” MY 2017/18).  

At the same time, these figures also show that Chinese ending stocks of corn as proportion of the World total are declining – down from 51.7% in MY 2015/16, to 44.5% in “old crop” MY 2016/17, and down to 38.6% in “new crop” MY 2017/18.  The deliberate actions in recent years – taken by the Chinese government to reduce feedgrain stockpiles – is impacting the relative amount of World total corn stocks they hold.  These actions may also eventually increase Chinese import demand for both U.S. corn and grain sorghum.

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics (with KS-IL Plant Info)

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” was made for WILL (Illinois Public Radio) on Tuesday, November 7, 2017, and will be located at the KSU AgManager.info website – at the following web address:

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

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes updated maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.