KSU U.S. Sorghum and World Coarse Grain Market Outlook in Late-July 2018

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s July 12th 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

July 31, 2018

A. Perspectives on the U.S. Grain Sorghum Market

The Impact of Chinese Tariffs: During year 2018 market prospects for U.S. grain sorghum have been dramatically affected by the imposition of Chinese import tariffs as part of trade tensions between the U.S. and Chinese governments.  Since the Chinese tariffs went into effect, shipments of grain sorghum have almost literally stopped.  Although prices of U.S. grain sorghum have been relatively “low priced” and seemingly a “good buy” in World export markets, the relative abundance of U.S. corn supplies at moderately low prices have apparently “crowded out” U.S. grain sorghum exports over the last 11-12 weeks, i.e., since late April – early May.  This situation of low U.S. grain sorghum exports is unlikely to be sustained indefinitely, but has certainly been the case since Spring 2018.

Opportunities for Other Domestic Uses: Converse to the situation with U.S. grain sorghum exports, the availability of grain sorghum in domestic U.S. markets at low prices relative to corn have improved prospects for usage in the U.S. domestic ethanol industry and perhaps also the U.S. livestock feeding sector.  USDA projections for the “new crop” 2018/19 marketing year that will begin September 1, 2018 reflect this expectation for ethanol production, with sharp increases in industrial (i.e., ethanol) usage projected at that same time that grain sorghum exports are forecast to decline significantly. 

Alternative Future Sorghum Market “Paths”: Going forward, it seems that market prospects for U.S. grain sorghum in “new crop” MY 2018/19 can proceed in either of two directions.   The first possibility is that if the U.S.-China trade dispute is settled by say Fall 2018, that Chinese import purchases of U.S. grain sorghum will resume at or near pre-trade dispute levels.  IF that occurs, then it is likely again that U.S. sorghum exports will become the primary driver of grain sorghum usage, domestic prices, and market prospects going forward into the future.  In that event, U.S. grain sorghum would likely continue to find a sales niche in the Chinese government’s feed inventory management program, i.e., filling needs for lower priced feedgrains that Chinese buyers are unable to fill with artificially higher priced domestic supplies which are tied up in their corn stock management programs. 

The second possibility is a market path into the future focused more on a competitive “hammer & tongues” or “slug it out” strategy aiming toward a balance of feed, bionenergy, AND export usage.  This 2nd possibility assumes that there will STILL be significant demand for U.S. grain sorghum in World export markets, BUT not in the same manner or to the same degree as when China is exclusively focused on U.S. sorghum import purchases.  In this 2ND scenario, U.S. grain sorghum will compete with other feedgrains from the U.S. and abroad on a price, quality, and productivity basis for usage in bioenergy and livestock feeding industries.  

What is a “Prudent Direction” for U.S. Grain Sorghum to Take Going Forward?  Of these two possible paths for U.S. grain sorghum to pursue in the future, it may be prudent to prepare and proceed aiming for maximum competitiveness as a feedgrain alternative in domestic and foreign markets.  THEN if the large export demand opportunities present themselves again for U.S. grain sorghum export sales to China or elsewhere, then to of course take advantage of them.  Strategically speaking, there may be merit in following a balanced strategy of being prepared for a long term competitive usage environment with other feedgrains on the one hand, while being positioned to take advantage of periods on high export demand and prices may occur.

 

B. Kansas Cash Grain Sorghum Market Prices on July 30, 2018

Kansas grain sorghum basis levels at major terminal elevators have remained wide since the imposition of tariffs by China on U.S. grain sorghum imports in late winter 2017, and have been $0.25-$0.60 /bu lower than corn prices.  However, cash grain bids at Kansas ethanol plants at some locations have been equal to that of corn – indicating ready acceptance or sorghum as a competitive bioenergy source.

On July 30th cash grain sorghum price bids at major grain elevators in Western Kansas ranged from $3.07 to $3.27 /bu – with basis levels $0.60 to $0.40 /bu under CME SEPTEMBER 2018 corn futures.  The high bid of $3.27 /bu was in Sublette, Kansas in the livestock feeding demand center in Southwest Kansas.  The corn price that same day in Sublette was $3.67 /bu (even with SEP 2018).   

Central Kansas cash grain sorghum price bids on July 30th ranged from $3.07 to $3.22 /bu with basis $0.75 to $0.45 / bu under.  The high bid of $3.22 /bu was available in Salina, Wellington, and Arkansas City in Central and South Central Kansas.   The range of corn bids in these same three locations on July 30th was $3.42 ¼ to $3.47 ¼ /bu (from $-0.25 to $-0.20 under SEP 2018).

In East Central Kansas at Topeka, the reported grain sorghum cash bid was $3.07 /bu (basis = $0.75 under DEC 2018 corn).  On July 30th in Atchison and Topeka in east central and northeast Kansas, corn bids were $3.74 1/4  /bu ($0.07 /bu over SEP 2018 corn).   Note that in late-January 2018 at the height of Chinese export demand for U.S. grain sorghum, the Topeka, Kansas grain sorghum public bid was the highest in the state, with basis bids of $0.55-$0.60 /bu over MARCH 2018 corn futures. 

Kansas ethanol plant cash bids for grain sorghum on July 30th ranged from $3.37 to $3.92 /bu, with local grain basis being $0.25 under to $0.30 over SEPT 2018 corn futures.  Ethanol plant corn bids in Kansas the same day were $3.74 to $3.92, with basis bids of $0.12 /bu over to $0.30 over JULY 2018 corn futures.  So, the top grain sorghum bids at Kansas ethanol plants on July 30th were equal to those for corn at the same locations.

 

C. U.S. Grain Sorghum Supply-Demand for “New Crop” MY 2018/19

Trade disagreements between the U.S. and China have severely damaged U.S. grain sorghum exports in recent months (see Figure 7).  However, total use in “old crop” MY 2017/18 ending August 31st and “new crop” MY 2018/19 starting September 1, 2018 were NOT forecast to change appreciably by the USDA in the July 12th World Agricultural Supply and Demand Estimates (WASDE) report.  Rather, the USDA projects that the leading factor in U.S. grain sorghum use will change from exports to other domestic uses such as ethanol production.  With no shortage of U.S. corn supplies in “new crop” MY 2018/19 anticipated at this time, projected use of U.S. grain sorghum for livestock feeding remains stable.

In the July 12th WASDE report, the USDA projected 2018 U.S. Grain Sorghum plantings of 6,040,000 acres, up 7.4% or 404,000 acres from 5.626 million acres (ma) in 2017, but down 9.7% from 6.690 ma in year 2016 (Tables 1a-b, Figure 2)Harvested acres of U.S. Grain Sorghum in 2018 are projected to be 5,098,000 acres, up from 5.045 ma in 2017, but still down 14.1% from 6.163 ma in year 2016.   U.S. yields in 2018 are forecast at 67.3 bu/ac, down from 72.1 bu/ac in 2017, and 77.9 bu/ac in 2016 (Tables 1a-b, Figure 3)

The USDA forecast that the 2018 U.S. Grain Sorghum production would be 356 million bushels (mb) – the smallest U.S. crop in 6 years (Tables 1a-b, Figure 4).   This amount is down from 364 mb in 2017, 480 mb in 2016, and the 21-year high of 597 mb in 2015.  Total supplies of U.S. Grain Sorghum (i.e., beginning stocks + production + imports) are forecast to be 390 mb in “new crop” MY 2018/19, down from 399 mb in “old crop” MY 2017/18, 519 mb in MY 2016/17, and the 20-year high of 620 mb in MY 2015/16. 

Exports of U.S. Grain Sorghum are projected to be 175 mb in “new crop” 2018/19 – lowered 40 mb from the June WASDE report forecast (Tables 1a-b, Figures 5, 6, & 7).  Total U.S. grain sorghum exports of 175 mb in “new crop” MY 2018/19 would be down from the USDA’s forecast of 230 mb in “old crop” MY 2017/18, 238 mb in MY 2016/17, 342 mb in MY 2015/16 (2nd highest on record) and the record high of 352 mb in MY 2014/16.  Livestock feed & residual use is projected to be 80 mb in “new crop” 2018/19 – down from 85 mb in “old crop” MY 2017/18, and less than 133 mb in MY 2016/17 (Table 1a-b, Figures 5 & 6)

Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new crop” 2018/19 – up sharply from a 4-year low of 50 mb in “old crop” MY 2017/18, but less than 115 mb in MY 2016/17 and the record high of 137 mb in MY 2015/16.  The 32-year low of 15 mb in FSI use came during the record high export year of MY 2014/15.  Total use of U.S. Grain Sorghum in “new crop” MY 2018/19 of 355 mb is forecast to be down from 365 mb in “old crop” MY 2017/18, from 485 in MY 2016/17, and from the 19-year high of 583 mb in MY 2015/16 (Tables 1a-b, Figures 5 & 6)

Ending stocks of U.S. Grain Sorghum in “new crop” MY 2018/19 are projected to be 35 mb (9.9% Stocks/Use or ‘S/U’) – up marginally from 34 mb (9.3% S/U) in “old crop” MY 2017/18, and from 33 mb (6.8% S/U) in MY 2016/17 (Tables 1a-b, Figures 5, 6 & 8)

The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to range from $3.10-$4.10 (midpoint = $3.60), with the midpoint being up from $3.15-$3.25 (midpoint = $3.20) in “old crop” MY 2017/18, and from $2.79 /bu in MY 2016/17 (Tables 1a-b, Figures 8 & 9)This USDA scenario for “new crop” MY 2017/18 is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

 

D. Alternative KSU Supply-Demand & Price Forecasts for “New Crop” MY 2018/19

The possibility exists of at least three (3) alternative supply-demand and price outcomes for U.S. Grain Sorghum markets in “new crop” MY 2018/19.  It is assumed that there is a 50% probability of the USDA forecast scenario in the July 12th WASDE report to ultimately occur.  Alternative possible outcomes identified by Kansas State University include the following (Table 1a):

#1) Higher 2018 Production & Use for Ethanol” for “New Crop” MY 2018/19 (20% probability):

2018 Planted / harvested acres of 6.040/5.292 ma;  75.0 bu/ac yield (up vs 67.3 bu/acUSDA);  2018 production of 397 mb (up vs 356 mbUSDA)total supplies of 431 mb (up vs 390 mb mbUSDA);  exports of 175 mb, food-industrial-seed (FSI) use of 135 mb (up vs 100 mbUSDA);  feed & residual use of 80 mb;  total use of 390 mb (up vs 355 mbUSDA);  ending stocks of 41 mb (down vs 35 mbUSDA);  10.51% ending stocks-to-use (up vs 9.94% S/UUSDA);  and $3.50 /bu U.S. average price (down vs $3.60 /buUSDA).

#2) Higher Feed & Ethanol Use plus Lower Exports” for “New Crop” MY 2018/19 (15% probability):

2018 Planted / harvested acres of 6.040/5.292 ma;  67.3 bu/ac yield;  2018 production of 356 mb;  total supplies of 390 mb;  exports of 150 mb (down vs 175 mbUSDA), food-industrial-seed (FSI) use of 115 mb (up vs 100 mbUSDA);  feed & residual use of 95 mb (up vs 80 mbUSDA)total use of 360 mb (up vs 355 mbUSDA);  ending stocks of 30 mb (down vs 35 mbUSDA);  8.33% ending stocks-to-use (down vs 9.94% S/UUSDA);  and $3.80 /bu U.S. average price (up vs $3.60 /buUSDA).

#3) “MUCH Higher Exports – Recovery to Pre-tariff Levels” for “New Crop” MY 2018/19 (15% probability):

2018 Planted / harvested acres of 6.040/5.292 ma;  67.3 bu/ac yield;  2018 production of 356 mb;  total supplies of 390 mb;  exports of 230 mb (up vs 175 mbUSDA), food-industrial-seed (FSI) use of 60 mb (down vs 100 mbUSDA);  feed & residual use of 80 mb;  total use of 370 mb (up vs 355 mbUSDA);  ending stocks of 20 mb (down vs 35 mbUSDA);  5.41% ending stocks-to-use (down vs 9.94% S/UUSDA);  and $4.25 /bu U.S. average price (up vs $3.60 /buUSDA).

 

E. World Coarse Grain Supply-Demand – All Countries

WORLD Coarse Grain Percent (%) Grain Ending Stocks-to-Use is tightening to the most constrained level in six (6) years – since MY 2013/14.  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” 2018/19 marketing year (MY) are projected to be 1,557.9 million metric tons (mmt) – the 3rd highest on record behind 1,577.2 mmt in “old crop” MY 2017/18 and the record high of 1,617.95 mmt in MY 2016/17.  World “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains (Figure 10).

Forecast WORLD Coarse Grains Total Use in “new crop” MY 2018/19 of 1,378.1 mmt is the highest on record.  The “new crop” MY 2018/19 forecast of 1,378.1 mmt in total use of WORLD Coarse Grains is up vs previous record high of 1,356.2 mmt in “old crop” MY 2017/18, and vs 1,355.9 mmt (3rd highest on record) in MY 2016/17.  The estimated levels of WORLD Coarse Grain total use for MY 2016/17 – MY 2018/19 have “stepped up” or “expanded” from the range of 1,236.3 – 1,276.5 mmt during MY 2013/14 through MY 2015/16 (Figure 10).

Ending Stocks of WORLD Coarse Grains in “new crop” MY 2018/19 are projected to be 6-year low of 179.8 mmt – down 1.8 mmt from the June WASDE report.  This would be down 18.7% vs 221.0 mmt in “old crop” MY 2017/18, and down from 262.0 mmt in MY 2016/17, 248.1 mmt in MY 2015/16, and 244.0 mmt in MY 2014/15 (Figure 10).  

Percent (%) Ending Stocks-to-Use of WORLD Coarse Grains in “new crop” MY 2018/19 are projected to be a historic 44-year record low (the lowest since at least MY 1975/76) of 13.05% Stocks/Use (S/U).  This would be down vs 16.3% S/U in “old crop” MY 2017/18; from 19.3% S/U in MY 2016/17; 19.7% S/U in MY 2015/16; and 19.1% S/U in MY 2014/15 (Figure 11).  For the sake of comparison and context, WORLD Coarse Grain percent (%) S/U has declined as low as 14.6% in MY 2012/13; 13.9% in MY 2011/12; 15.2% in MY 2007/08; 13.7% in MY 2006/07, and 14.6% in MY 1975/76.   A six (6) year low in WORLD Coarse Grains ending stocks combined with continued growth in WORLD Coarse Grain Usage as resulted in a forecast of historically tight percent (%) ending stocks-to-use in “new crop” MY 2018/19.  “Tight” supply-demand marketing years for WORLD Coars Grains have generally been high priced time periods for U.S. feedgrains such as grain sorghum and corn.

 

F. World Coarse Grain Supply-Demand – The “WORLD-Less-China” Perspective

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

Ending Stocks of “WORLD-Less-China” Coarse Grains in “new crop” MY 2018/19 are projected to be 6-year low at 120.2 mmt – down 14.5% vs 140.6 mmt in “old crop” MY 2017/18.  This projection for “new crop” MY 2018/19 is also down from 160.0 mmt in MY 2016/17, 136.0 mmt in MY 2015/16, and 142.1 mmt in MY 2014/15 (Figure 12).   The record low of 62.6 mmt occurred in MY 1995/96, followed by 64.4 mmt in MY 1975/76, 77.5 mmt in MY 1982/83, and 83.9 mmt in 1996/97 – all years of relative price strength for U.S. Feed Grains.

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains in “new crop” MY 2018/19 are also projected to be a 6-year low of 10.9% S/U.  This would be down vs 12.9% S/U in “old crop” MY 2017/18; and down from 14.5% S/U in MY 2016/17; 13.3% S/U in MY 2015/16; and 13.6% S/U in MY 2014/15 (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; 8.7% in MY 1995/96; 13.5% in 1993/94; and 14.6% in MY 1975/76.  These marketing years were generally high priced time periods for U.S. feedgrains such as grain sorghum and corn.

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through Late-July 2018

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 Friday, July 27th 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.

 

 

KSU Soybean Market Outlook in Late-July 2018 – Weighing Impacts of U.S. Crop Prospects vs Trade Tensions

An analysis of U.S. and World soybean supply-demand factors and 2018 price prospects following the USDA’s July 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 “New Crop” 2018/19 Marketing Year to begin on September 1, 2018.

Following is a summary of the article on Soybean Market Outlook in Late-July 2018 – 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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Soybean Market Outlook in Late-July 2018

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

July 26, 2018

A. What is “Known” & “Unknown” About the Soybean Market in Late-July 2018

The outlook for soybean markets in fall 2018 is now dominated by two major knownand unknown” factors.  What is known is that prospects for a large 2018 U.S. soybean crop have continued through most of July, with the critical U.S. soybean crop development month of August approaching.  What is “unknown” is the duration of the trade dispute between the U.S. and China, and the price impact of Chinese tariffs on U.S. soybean imports from now through fall 2018 (if the trade dispute is not solved by then).

What is “Known” – Strong 2018 U.S. Soybean Production Prospects: Market expectations for the 2018 U.S. soybean crop are “positive” as of the date of this article in late July 2018.  The USDA reports that 2018 U.S. soybean crop development is ahead of schedule, with 78% blooming on July 22nd in the 18 major states compared to the 2013-2017 average of 63% as of July 22nd.  Also, 44% of soybeans are blooming in the 18 major states compared to the 2013-2017 average of 23%.   The 2018 U.S. soybean crop is rated to be 70% Good-Excellent with 22% Fair, and only 8% Poor-Very Poor in the 18 major states.  This compares to 57% Good-Excellent, 29% Fair, and 14% Poor-Very Poor at the same time in 2017 in these same states.

In the July WASDE report, the USDA projected that the 2018 U.S. soybean crop would be a near record 4.310 billion bushels (bb), down 82 million bushels (mb) from the record high of 4.392 billion bushels (bb) in year 2017, but up from 4.296 bb in year 2016.  The August 10th USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will provide the first in-the-field samples and farmer survey results for the 2018 U.S. soybean crop.  There are of course opportunities for surprises to occur in the August 10th reports, which represent the USDA’s estimate of 2018 U.S. soybean crop production prospects near August 1st.

What is “Unknown” – The Strength of U.S. Soybean Exports Through Fall 2018: The imposition by the Chinese government of a 25% tariff on U.S. soybean imports into their country has had a decidedly negative impact on U.S. soybean prices over the past few weeks.  However, in terms of actual shipments of U.S. soybeans at the current time, U.S. soybean exports are still running “on pace” to meet USDA projections for the “old crop” 2017/18 marketing year ending August 31st.  

The USDA Foreign Agricultural Service (FAS) reports that for the week ending July 19th the U.S. shipped 30.3 mb of soybeans for export, down marginally from the pace of 31.2 mb per week to meet the USDA’s forecast of 2.085 bb in U.S. soybean exports for the “old crop” 2017/18 marketing year ending August 31st (Figure 8).   Total shipments of 1.898 bb through July 19th were 91.0% of the USDA projection of 2.085 bb in “old crop” MY 2017/18, with 88.5% of the marketing year complete (i.e., 46/52 weeks). 

In terms of forward purchases, the USDA reports that an additional 240 mb of wheat have been “bought ahead” for export as of July 19th.  Adding the shipments-to-date of 1.898 bb and forward purchases of 0.240 bb together, total shipments and purchases amount to 2.138 bb, up 2.5% and 53 mb higher than the USDA’s projection of 2.085 bb for “old crop” MY 2017/18. 

As of July 19th a total of 361.2 mb of U.S. soybeans had also been purchased for shipment in the “new crop” 2018/19 marketing year, beginning on September 1, 2018.   This amount of pre-sales equals 17.7% of the USDA’s projection of 2.040 bb in U.S. soybean exports in “new crop” MY 2018/19.  However, it should be noted that the USDA lowered its projection of “new crop” MY 2018/19 U.S. soybean exports by 250 mb down to the 2.040 bb projection in the July 12, 2018 WASDE report in response to U.S.-Chinese trade actions.   

Taken together, prospects for U.S. soybean exports in “new crop” MY 2018/19 have been reduced at this point-in-time – down 10.9% from the June to the July WASDE report by the USDA’s estimates.  However, the current pace of U.S. soybean exports in “old crop” MY 2017/18 have not declined appreciably since the announcement of the Chinese soybean import tariff.  

While U.S. soybean exports in “old crop” MY 2017/18 to China are down 266 mb (down 20.8%) from a year ago through July 19th, U.S. exports to all other countries in “old crop” MY 2017/18 are up 176.4 mb or 24.8% over a year earlier.   Among the countries that have tangibly increased U.S. soybean imports from a year ago are some in the European Union (i.e., Germany, the Netherlands, and Portugal), Turkey, Taiwan, Indonesia, Iran, Israel, Pakistan, Thailand, Vietnam, Egypt, Tunisia, Columbia, Mexico, Cuba, Peru, and Venezuela.

B) Other Factors to Consider in Soybean Market Outlook

Prior to the escalation of the U.S.-China trade dispute, U.S. soybean market prospects where described as “neutral-to-cautiously optimistic” for the “new crop” 2018/19 marketing year.  Now with the uncertainty and potential negative impacts of 25% soybean import tariffs by China against U.S. soybeans, the “narrative consensus opinion” of the market has turned pessimistic price-wise, which has been reflected in “new crop” NOVEMBER 2018 Soybean futures.  NOV 2018 Soybean futures declined from a high of $10.43 ¾ on May 30th down to a low of $8.46 per bushel on July 17th (Figure 1).  Since then, NOV 2018 Soybean futures have increased moderately to a close of $8.76 on Thursday, July 26th

There are still other unsettled questions about key U.S. soybean supply-demand factors that need to be answered between now and fall harvest 2018.  These include: 1) remaining 2018 U.S. soybean production risk in Summer 2018; 2) expectations of continued strength in U.S. soybean domestic crush and to some degree exports in coming months; and 3) the possibility of tighter U.S. soybean supplies in terms of reduced ending stocks and percent ending stocks-to-use if a short crop develops in the U.S. this summer.   

Looking forward, it is possible that Brazilian soybean producers may respond to the current high prices they are receiving from Chinese purchases of their 2018 crop by sharply increasing their acreage and production prospects for 2019.  High soybean prices in Brazil have been brought on by the directed focus of China upon purchasing South American soybeans at the exclusion of the U.S. during the current trade dispute.  It is possible if not likely that farmers in Brazil and Argentina will sharply increase 2019 soybean planted acres, which with decent yields would result in an even larger 2019 soybean crop than would otherwise be expected – and more pressure on World soybean market prices.  

Planting of the South American soybean crop begins in late fall 2018 here in the United States.  This means that U.S. corn and soybean producers will have some amount of information on 2019 South American crop and market prospects when they make crop planting decisions in late winter – early spring 2019 here in the United States.   All else being equal, anticipated 2019 South American acreage trends may lead U.S. farmers to lower their 2019 U.S. soybean plantings and to raise their 2019 U.S. corn plantings.

C) Kansas Cash Soybean Prices & Basis Bids

Cash soybean price bids on Wednesday, July 25th in Central at major terminal elevator locations were in the range of $7.70 ¾ to $8.01 ¾ per bushel ($0.90 to $0.59 under AUGUST 2018).  At Topeka and Atchison in Northeast Kansas, cash prices ranged from $8.20 ¾ to $8.25 ¾ per bushel ($0.40 to $0.35 under AUGUST 2018).   These Central and Northeast Kansas prices on July 25th are down substantially from $9.88 – $9.93 ($0.35 to $0.30 under JULY) on May 30th.  Cash soybean bids at Kansas soybean processing plants in Emporia and Wichita on July 25th ranged from $8.40 ¾ to $8.45 ¾ per bushel ($0.15 to $0.20 under AUGUST 2018) – down substantially from May 30th when prices ranged from $9.86 ($0.37 under JULY) to $9.93 ($0.30 under). 

In Western Kansas cash soybean bids at major grain elevators on July 25th ranged from $7.36 to $7.76 per bushels ($1.30 to $$0.90 under AUGUST 2018), down substantially again from $8.88 ($1.35 under JULY 2018 futures) to $9.23 ($1.00 under) on May 30th.

D) South American Export Competition in “Old Crop” MY 2017/18

Soybean market signals from South American export competitors Argentina, Brazil and Paraguay have improved in recent months as a result of the U.S.-China trade dispute (Figure 14).  Serious drought had caused Argentina soybean production to decline by 32.7% from a USDA estimate of 55.0 million metric tons (mmt) in 2017 down to 37.0 mmt in 2018, and cut projected Argentine soybean exports by 55.9% to 3.1 mmt in the “old crop” 2017/18 marketing year (MY) ending August 31st (Tables 2 & 3).   Argentina soybean meal exports are projected to be 11.7% lower (27.65 mmt) in MY 2017/18, down from 31.3 mmt in MY 2016/17.

However, Brazilian soybean production is projected to be higher – offsetting Argentina’s declines to a degree.  Brazil is projected by the USDA to produce a record high 119.5 mmt of soybeans in year 2018, up 4.3% from the previous record of 114.5 mmt in year 2017.  Brazilian soybean exports are forecast to be 74.65 mmt in MY 2017/18 (ending August 31st), up 18.2% from 63.1 mmt in MY 2016/17 (Tables 2 & 3).  Brazil soybean meal exports are projected to be 14.1% higher (15.7 mmt) in MY 2017/18, up from 13.8 mmt in MY 2016/17.  

Paraguay soybean production is projected to be down marginally – providing a neutral influence to the market.  Paraguay is projected by the USDA to produce 10.0 mmt of soybeans in year 2018 – down marginally from 10.2 mmt in year 2017.  Paraguay soybean exports are forecast to be 6.25 mmt in MY 2017/18 (ending August 31st), up 2.0% from 6.13 mmt in MY 2016/17 (Tables 2 & 3). 

These three South American countries are the main competition in global soybean export markets for the United StatesArgentina, Brazil and Paraguay are forecast to comprise 55.2% (84.0 mmt) of forecast World soybean exports (152.2 mmt) in the “old crop” 2017/18 marketing year (MY). The U.S. is projected to make up 37.3% (56.7 mmt) of World soybean exports for MY 2017/18, with other countries making up the remaining 7.55% (11.5 mmt) (Table 3). 

The trade dispute between the U.S. and China has “pushed” Chinese soybean export purchases toward Brazil and away from the U.S. at least temporarily until the matter is either settled OR exportable South American supplies are eventually no longer available in fall 2018.  There has been both negative and positive news coming from these negotiations to date, with final agreements or lack there-of still to come.

E) U.S. Soybean Supply-Demand Projections for “Old Crop” MY 2017/18

In the July 12th USDA WASDE report the USDA projected “old crop” MY 2017/18 soybean Total Supplies to be up marginally from earlier WASDE reports at 4.715 billion bushels (bb) (Table 1 and Figure 6). 

Continued strength in U.S. soybean crush resulting from demand for soybean meal for domestic and foreign livestock feeding has supported domestic U.S. soybean demand (Table 1, Figures 7 & 9ab).  Projected U.S. soybean crush of 2.030 bb in “old crop” MY 2017/18 is a record high – up 15 mb from June and up 129 mb from MY 2016/17.  Strong crush of U.S. soybeans is related directly to strong demand for U.S. soybean meal. 

Projected exports of U.S. soybean meal of a record high 13.500 million short tons (mst) in “old crop” MY 2017/18 ending on September 30th are up from 11.580 mst last year – up from the previous record of 13.107 mmt in MY 2014/15.  Strong U.S. soybean meal exports in “old crop” MY 2017/18 are a direct result of shortfalls in Argentina soybean production and soybean meal exports due to drought conditions in early 2018, and possibly from the U.S.-China trade dispute and the 25% Chinese tariffs on U.S. soybean imports.    

The USDA’s World Agricultural Supply and Demand Estimates (WASDE) report monthly projections of U.S. soybeans exports for “old crop” MY 2017/18 have declined by nearly 80 mb since January 2018 – down to a projection of 2.085 bb (while up 20 mb from June) (Table 1, Figures 7 & 9ab).  This forecast of 2.085 bb for the current marketing year ending on August 31st is still the 2nd highest on record, but down from the record high of 2.174 bb in U.S. soybean exports a year earlier.   

Seed usage of U.S. soybeans is projected to be 104 mb in “old crop” MY 2017/18, with Residual use at 32 mb – both down marginally from MY 2016/17. 

Total Use of U.S. soybeans was projected to be a record high of 4.251 bb in “old crop” MY 2017/18 – up from the past record of 4.214 bb in MY 2016/17 (Table 1, Figures 7 & 9ab).

As a result of these supply and use projections for “old crop” MY 2017/18, ending stocks are projected to be the 2nd highest on record at 465 mb (down 40 mb from June) with percent ending stocks-to-use of 10.94% – both measures being up from 302 mb (7.17% S/U) in MY 2016/17 (Table 1, Figures 9ab & 10-11).  The record high occurred in MY 2006/07, with 574 mb ending stocks and 18.62% ending stocks-to-use. 

United States’ soybean prices for “old crop” MY 2017/18 are projected to average $9.35 /bu – down from $9.47 in MY 2016/17, and comparable to $8.95 /bu in MY 2015/16 (Table 1, Figures 10-11).  

F) U.S. Soybean Supply-Demand Projections for “New Crop” MY 2018/19

The USDA provided a forecast of U.S. soybean supply, demand, and prices for “new crop” MY 2018/19 In the July 12th USDA WASDE report.  Based on 2018 U.S. soybean production projections 88.557 million acres (ma) planted, 88.862 ma harvested, and 2018 U.S. soybean average yields of 48.5 bu/ac., the USDA forecast 2018 U.S. soybean production to be 4.310 bb.  This 2018 forecast of 4.310 bb would be down from the record high of 4.392 bb in 2017, and the 2nd highest amount of 4.296 bb in 2016 (Tables 1a-b, Figures 4-5-6). 

Total Supplies of U.S. soybeans in “new crop” MY 2018/19 are forecast to be a record high 4.800 bb, based on 465 mb in beginning stocks, 4.310 bb in production, and 25 mb in imports.  This amount is up from the previous record highs of 4.715 bb and 4.515 bb in U.S. soybean Total Supplies in “old crop” MY 2017/18 and MY 2016/17, respectively (Tables 1a-b, Figure 6). 

Soybean crush in “new crop” MY 2018/19 is forecast to be a new record high of 2.045 bb (up 45 mb from June) – to be driven by expected ongoing domestic usage for livestock feed and sharply higher U.S. soybean meal exports (Table 1a-b, Figures 7 & 9ab).  This would be up 15 mb in U.S. soybean crush from the previous record of 2.030 bb in “old crop” MY 2017/18.  

Exports of U.S. soybeans in “new crop” MY 2018/19 are forecast to decline 45 mb to 2.040 bb – down 250 mb from the June WASDE as a result of the expected impact of U.S.-China trade tensions (Figures 7-9).  A total of 361.2 mb of U.S. soybeans have been purchased for shipment in the “new crop” 2018/19 marketing year, beginning on September 1, 2018.   This amount of pre-sales equals 17.7% of the USDA’s projection of 2.040 bb in U.S. soybean exports in “new crop” MY 2018/19. 

Seed usage of U.S. soybeans is projected to be 103 million bushels (mb) in “new crop” MY 2018/19, with Residual use forecast at 32 mb – both essentially equal to “old crop” MY 2017/18 (Table 1a-b, Figures 9ab). 

Total Use is projected to be a near-record high of 4.220 bb – down 205 mb from June, and down from the previous record high of 4.251 bb last year (Table 1a-b, Figure 9b). 

As a result of these supply and use projections for “new crop” MY 2018/19, ending stocks are projected to be 580 mb (up 195 mb from June) with percent ending stocks-to-use of 13.74% – both up from 465 mb (10.94% S/U) in “old crop” MY 2017/18 (Tables 1a-b, Figures 9ab & 10-11).  United States’ soybean prices for “new crop” MY 2018/19 are projected in the range of $8.00-$10.50 (midpoint = $9.25 /bu) – all being down $0.75 /bu from the June WASDE report, and comparable to the midpoint projection of $9.35 /bu in “old crop” MY 2017/18.   This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

G) Alternative KSU Soybean Forecast Scenarios for “New Crop” MY 2018/19

Three alternative KSU-Scenarios to the USDA’s forecast for U.S. soybean supply-demand and prices are presented for “new crop” MY 2018/19 (Table 1b, Figure 10).  These projections show how varying 2018 U.S. soybean production and use scenarios could affect U.S. soybean supply-demand and price outcomes in “new crop” MY 2018/19.  Probability-weights are added to reflect judgements about how likely each scenario is to occur in “new crop” MY 2018/19, i.e., during the September 1, 2018 through August 31, 2019 time period.

#1 – KSU “Lower 2018 U.S. Soybean Exports” Scenario for “new crop” MY 2018/19: (20% probability): Assumptions: 88.557 ma planted, 88.862 ma harvested, 48.5 bu/ac yield, 4.310 bb production, 4.800 bb total supplies, 2.045 bb domestic crush, 1.890 bb exports (down 150 mb from USDA’s forecast), 4.070 bb total use, 730 mb ending stocks, 17.94% S/U, & $7.75 /bu U.S. soybean average price; 

#2 – KSU “Large 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions: 88.557 ma planted, 88.862 ma harvested, 51.0 bu/ac yield (near the record high in year 2016 of 52.0 bu/ac), 4.532 bb production, 5.022 bb total supplies, 2.045 bb domestic crush, 2.150 bb exports (up 110 mb from USDA), 4.330 bb total use, 692 mb ending stocks, 15.98% S/U, & $8.25 /bu U.S. soybean average price; 

#3 – KSU “Small 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions are: 88.557 ma planted, 88.862 ma harvested, 46.0 bu/ac yield (closer to recent lows of 40-44 bu /ac in years 2011-2013), 4.088 bb production, 4.578 bb total supplies, 1.950 bb domestic crush, 2.000 bb exports, 4.110 bb total use, 468 mb ending stocks, 11.38% S/U, & $9.50 /bu U.S. soybean price;

H) World Soybean Supply-Demand Prospects

World soybean production of a record high 359.5 million metric tons (mmt) is projected for “new crop” MY 2018/19, up 6.8% from 336.7 mmt in “old crop” MY 2017/18, and up 3.3% from the current record high of 348.1 mmt in MY 2016/17 (Figure 13, Table 2).  The “new crop” 2018/19 marketing year begins September 1, 2018 and continues through August 31, 2019.   World soybean total supplies of 455.5 mmt in “new crop” MY 2018/19 are forecast to be up 5.1% from 433.4 mmt in “old crop” MY 2017/18, and up 6.3% from 428.6 mmt in MY 2016/17. 

World soybean exports of a 157.3 mmt are projected for “new crop” MY 2018/19, up 3.0% from 152.2 mmt in “old crop” MY 2017/18, and up 6.8% from 147.35 mmt in MY 2016/17 (Table 3).  China would be the key World soybean importer in the coming marketing year, and shows little sign of abating yet in their annual soybean usage or import increases (Table 4, Figure 15).

Projected World soybean ending stocks of a record high 98.3 mmt (27.7% S/U) in “new crop” MY 2018/19 are up 2.3% from 96.0 mmt (28.3% S/U) in “old crop” MY 2017/18, up from the previous record high 96.7 mmt (29.7% S/U) in MY 2016/17, and 78.0 mmt (25.8% S/U) in MY 2015/16 (Figures 13 & 16, Tables 8-9).  

Projected Foreign (Non-U.S.) soybean ending stocks of 82.5 mmt (22.5% S/U) in “new crop” MY 2018/19, are down 1.1% from 83.4 mmt (22.2% S/U) in “old crop” MY 2017/18, and is down from 88.5 mmt (24.5% S/U) in MY 2016/17 (Tables 8-9).  

 

KSU Corn Market Outlook in July 2018: The July WASDE Impact on 2018-2019 Corn Price Prospects

An analysis of Corn Market Situation & Outlook in July 2018 for the remainder of the “old crop”  2017/18 and “new crop” 2018/19 marketing years is provided in the following article from Kansas State University .  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) report on July 12, 2018.

A full version of this article is or will shortly be 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 Situation & Outlook in July 2018″

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Corn Market Situation & Outlook in July 2018

In response to the July 12, 2018 USDA WASDE Report

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

July 13, 2018

Intro

The July 12, 2018 USDA reports contained positive news for corn market prospects on balance.  Corn markets generally responded in a moderately positive-to-neutral manner to the July 2018 USDA World Agricultural Supply and Demand Estimates (WASDE) report – with important changes occurring and trends emerging in both domestic U.S. and foreign corn grain supply-demand and price prospects.

Projections of: 1) changes in corn usage in the U.S. corn “old crop” 2017/18 marketing year (MY); 2) higher 2018 production and total use estimates for U.S. “new crop” MY 2018/19; and 3) a sharp tightening of foreign corn supply-demand balances forecast for “new crop” MY 2018/19, were each key elements found in the July 12th WASDE report.

1) Higher Usage of U.S. Corn in “Old Crop” MY 2017/18 (ending August 31st)

The USDA increased its projection of U.S. corn usage and tightened its forecast of ending stocks in the “old crop” MY 2017/18 supply-demand balance sheet for U.S. corn.  Total “old crop” use of U.S. corn was projected to be up 70 million bushels (mb) from a month earlier to a record high 14.910 billion bushels (bb).  This was due to a combination of a 100 mb increase in projected exports (2.400 bb), a 25 mb increase in corn ethanol use (5.600 bb), a 20 mb drop in non-ethanol food, seed and industrial use (1.460 bb), and a 50 mb drop in forecast feed & residual use (5.450 bb). 

Projected exports were raised in response to the level of forward purchases of U.S. corn exports – being affected by a reduction in the 2018 Brazilian corn crop and exportable supplies.  Forecast U.S. corn ethanol use was increased to match the pace of U.S. ethanol production that has been occurring.  Conversely, U.S. corn feed usage was lowered following the rate of corn use reported in the June 29th USDA Grain Stocks report.  Ending stocks of 2.027 bb were down 25 mb from a month earlier, with a drop in percent ending stocks-to-use from 14.2% in the June WASDE to 13.6% in July, and mid-range price estimates being unchanged at $3.40 per bushel.

2) Higher Production & Usage with Tighter Stocks of U.S. Corn in “New Crop” MY 2018/19

The USDA raised its projection of 2018 U.S. corn production by 190 mb to 14.230 bb due to the increase in 2018 U.S. corn planted acreage (89.128 million acres or ‘ma’) and harvested acres (81.770 ma) reported in the June 29th USDA Acreage report.  Projected total supplies in “new crop” MY 2018/19 were raised by 115 mb to 16.307 bb due to a combination of reduced beginning stocks and higher production.

Total use of U.S. corn in “new crop” MY 2018/19 is projected to be up 140 mb than a month earlier, up to 14.755 bb – 2nd highest on record.  This was due to a combination of a 140 mb increase in projected exports (2.225 bb), a 50 mb decrease in corn ethanol use (5.625 bb – still a record high), a 10 mb drop from a month earlier in non-ethanol food, seed and industrial use (1.480 bb), and a 75 mb increase in forecast feed and residual use (5.425 bb).  Forecast ending stocks of 1.552 bb were down 25 mb from a month earlier, with a drop in percent ending stocks-to-use from 10.8% in the June WASDE to 10.5% in July, and midrange price estimates being down $0.10 from a month earlier at $3.80 per bushel.

3) South American Corn Trends Affecting World Stocks & U.S. Export Prospects

For “old crop” MY 2017/18 the USDA lowered its projections for Brazil of both production (down 1.5 million metric tons or ‘mmt’ to 83.5 mmt) and exports (down 3 mmt to 26.0 mmt) from a month earlier.  Forecast Argentina corn exports for “old crop” MY 2017/18 were also lowered from a month earlier, down 1 mmt to 24.0 mmt.  These reductions in South American exports were partially offset by a 2.54 mmt (100 mb) increase in forecast U.S. corn exports for “old crop” MY 2017/18. 

Sizable increases in World corn production are forecast from 1,033.74 mmt in “old crop” MY 2017/18 to 1,054.30 mmt in “new crop” MY 2018/19 (up 2.0%) – beginning on September 1, 2018.  These year-to-year production increases are more than matched by expected increases in total use, from 1,069.67 mmt in “old crop” MY 2017/18 to 1,094.08 mmt in “new crop” MY 2018/19 (up 2.3%).   As a result, ending stocks and % stocks-to-use of World corn are forecast to decline significantly, from 191.73 mmt in (17.9% Stks/Use) “old crop” MY 2017/18 to 151.96 mmt in (13.9% Stks/Use) in “new crop” MY 2018/19 (down 22.5%).   

Implications of the July 12, 2018 WASDE Report for U.S. Corn Market Outlook

The July 12th WASDE report spoke more to the demand and usage potential for U.S. corn in 2018-2019 than to supply prospects.  The first USDA survey-based information on the size of the 2018 U.S. corn crop will be provided in the August 10th USDA Crop Production report provided by the USDA National Agricultural Statistical Service (NASS).  These NASS results will be used in the August World Agricultural Supply and Demand Estimates (WASDE) report that same day for the purpose of estimating corn market supply-demand and prices going forward into “new crop” MY 2018/19 (to begin on September 1st).

The possibility still exists of 2018 U.S. corn production ending up being markedly lower than the 14.230 bb forecast in the July WASDE report.  Dry conditions in various areas – particularly Missouri and eastern Kansas, along with excessive moisture in the northern Iowa – southern Minnesota – eastern South Dakota area could cause lower yields, as could such issues as warmer than normal night time temperatures, etc. throughout the U.S. Corn Belt.  So, it is too soon to indicate without reasonable caution that 2018 U.S. corn crop prospects are reliably proceeding toward a 14.0-14.2 bb or more U.S. corn crop.  However, it IS likely at this time that the 2018 U.S. corn crop will not be “short”, and that total supplies of 16.25 to 16.75 bb will occur in “new crop” MY 2018/19 – being the 2nd highest on record after 16.937 bb which is now projected in “old crop” MY 2017/18. 

Key Issue – U.S. Corn Use Supported by Large Supplies & Low Corn Input Prices

A key issue driving in the U.S. corn market is the ongoing positive impact of low corn prices on U.S. corn usage.  Low prices due to abundant supplies nationally have provided support for U.S. corn domestic ethanol and wet corn milling use, and feed usage, as well as U.S. corn exports.  It is of no small significance that U.S. corn ending stocks are projected to drop from 2.027 bb (13.59% Stks/Use) in “old crop” MY 2017/18 down to 1.552 bb (10.52% Stks/Use) in “new crop” MY 2018/19. 

Following these changes in ending stocks, U.S. corn prices are projected to rise from a range midpoint estimate of $3.40 in the “old crop” period up to the range of $3.30-$4.30 /bu (midpoint = $3.80 /bu) in “new crop” MY 2018/19.  There is support for the idea that after harvest occurs there may be enough domestic and foreign demand for U.S. corn that the U.S. corn price could end up being closer to the higher end of the USDA forecast range (i.e., closer to $4.30 /bu) by summer 2019.   

Whether that occurs or not may depend on the development of production prospects for the 2019 South American corn crop during the January-June 2019 period.   It is widely thought that high soybean prices in South America that are occurring now in response to the U.S. – China trade dispute may cause larger than normal planted areas of soybeans to be planted in Argentina and Brazil in 2019 – essentially “crowding out” or “limiting” corn production in these same areas.  IF that occurs, then lower 2019 South American corn exportable supplies will provide support for U.S. corn exports in spring 2019.   And if any weather or production threats were to impact prospects for 2019 South American corn production, well, it would provide strong support for U.S. corn exports and prices in the first half of year 2019.

Final Thoughts re: U.S. Corn Market Outlook

It seems prudent to plan to manage both “old crop” and “new crop” corn marketings in years 2018-2019 with the idea that there will be adequate U.S. corn supplies and no major short crop event occurring.  This leads to adoption of the attitude that a somewhat “normal” seasonal price pattern for corn is likely for the remainder of “old crop” MY 2017/18 and especially for “new crop” MY 2018/19.  This would result is some price volatility being likely for the remainder of July-August 2018, but then as harvest approaches the probability of a seasonal harvest price low in September-November 2018. 

However, this year, from November 2018 through January 2019, the “narrative consensus” of the corn market will likely have a greater focus on corn planting progress and early season development in Argentina and Brazil – particularly in tandem with a focus on similar reports about the acreage and progress of their soybean crops.  It is possible if not likely that news about the pace of usage of U.S. domestic corn and other feedgrains will have the attention of the U.S. corn markets.  The impact of this news will be exacerbated IF U.S. corn exports are spurred on to higher levels 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 prospects.  The corn market will 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 “new crop” MY 2018/19, U.S. producers will be making marketing decisions under conditions of “uncertainty” as profitable seasonal pricing opportunities present themselves.  For those with a “risk averse” perspective on corn price risk management, there will 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.  This “early action” approach contrasts to those of producers who are less worried (i.e., “averse”) about being in what is essentially a “speculative storage” position in the corn market – holding unpriced corn in storage longer while waiting for the possibility of a better price.    

The key point is that the likelihood exists of there being greater than normal price strength in U.S. corn markets through the winter and spring 2019 months – given the likelihood of more South American crop area being planted into soybeans to the exclusion of corn and the strong domestic demand base for the crop.

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U.S. Ethanol and Biodiesel Trends in Prices and Profitability

Ethanol Market & Price Trends in June 2018

By Kansas State University estimates, although distillers grains selling prices have declined sharply in Iowa since the beginning June, ethanol plants in the state are estimated to still be making a small profit due to the combination of somewhat “steady” ethanol market prices and a severe downturn in cash corn input costs.  For the June 1-22 period, our KSU estimates are for representative ethanol plants in Iowa to have covered their costs by approximately $0.05 per gallon produced.  As corn prices have kept declining in June, the profitability of ethanol plants has remained slightly positive – with the decline in the cost of corn inputs to date during the month having a bigger impact than the combination of “steady” ethanol prices and “weak” distillers’s grain selling prices.

Biodiesel Market & Price Trends in June 2018

Reductions in the estimated cost of producing biodiesel have “raced to the bottom” faster than the selling price of Biodiesel.  With this continuing input / output price relationship, the estimated profitability of soy biodiesel production in Iowa locations has continued to be positive for the 6th consecutive month.  KSU estimates are for biodiesel production in Iowa to net positive returns of $0.25 per gallon on average during the June 1-22 period.

 

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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) as supporting reference information for a program to that will be aired on Tuesday, June 27th.  This presentation 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.

 

Corn Market Prospects in Late-June 2018: Lower Prices – But Still Weighing “Likely vs Possible” S-D Outcomes

An analysis of U.S. & World Corn supply-demand factors and price prospects through the “new crop” 2018/19 marketing year from Kansas State University is provided in the following article summary.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) reports on June 12, 2018 with adjustments for alternative outcomes as identified by Kansas State University Extension Agricultural Economist Daniel O’Brien.

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

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

Following is a summary of the article on “Corn Market Outlook in Late-June 2018″

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Corn Market Outlook in Late-June 2018

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

June 23, 2018

1. CME Corn Futures & Kansas Cash Corn Prices & Basis Bids

Since the release of the USDA’s June 12th World Agricultural Supply and Demand (WASDE) report, “old crop JULY 2018 CME corn futures prices have traded sharply lower.  On June 12th, the day of the report, JULY 2018 corn actually closed higher – up $0.10 ¼ to $3.77 ½ per bushel.  However, since then JULY 2018 corn futures have traded as low as $3.38 ¾ on June 19th before closing at $3.57 ¼ /bu on June 22nd (Figure 1).   “New crop DECEMBER 2018 CME corn futures prices also closed higher on June 12th – up $0.10 to $3.98 ¼ per bushel.  Then – just as for the JULY 2018 contract, DEC 2018 corn futures declined as low as $3.75 ½ on June 19th before closing at $3.78 /bu on June 22nd.   

The key point is that on May 24th prices for both of these contracts had traded approximately $0.50 /bu higher than their lows on January 12th of $3.62 /bu for JULY 2018 and $3.79 ¾ for DEC 2018 corn futures following the January 2018 USDA Annual Crop Production Summary, WASDE, and Grain Stocks reports.  But since then prices for both of these futures contracts have since fallen below those January 12th levels, effectively negating any “old crop” and “new crop” corn futures price gains that had occurred.        

In Western Kansas on Friday, June 22nd cash corn bids at major grain elevators ranged from $3.17 ($0.40 per bushel under JULY 2018 futures) to $3.52 ($0.05 under), and ranged from $3.22 ¼ ($0.35 under) to $3.40 ¼ ($0.17 under) in Central Kansas.  These prices are still higher than when corn bids statewide had fallen to $2.66-$2.96 /bu on December 23, 2016, and above marketing loan rates 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 $3.52 – $3.57 /bu on June 22nd, with basis bids being $0.05 under to even with JULY 2018 corn futures.  These cash corn prices are still up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on June 22nd ranged from $3.52 /bu ($0.05 under JULY) to $3.87 ($0.30 over JULY) – continuing to indicate strength in ethanol demand for corn in Kansas and nationwide.

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2. Overview of U.S. Corn Supply-Demand Prospects in Late-June 2018

The outlook and prospects for U.S. corn market prices through Summer-Fall 2018 of this year has declined from the end of May through June 22nd.   The outlook for U.S. corn prices is a “mixed bag” of factors that will likely have a combination of negative, positive, and as yet unknown impacts on corn prices in the “new crop” 2018/19 marketing year beginning on September 1, 2018.  The corn market is weighing the following factors in assessing current and future supply-demand and price prospects (Table 1).

First, U.S. corn planted acres are projected to be 88.026 million acres (ma) in 2018, down 2.141 ma from year 2017, and down 5.978 ma from year 2016 – with similar reductions in harvest acres (Table 1, Figure 4).  This reduction in acres continues to be a positive factor in support of corn price prospects for “new crop” MY 2018/19.  Lower U.S. corn acreage in 2018 has decreased the potential for total 2018 corn production, and provided support for “new crop” 2018/19 marketing year (MY) U.S. corn price prospects.   

Second, working contrary to the decrease in 2018 U.S. corn acres, strong U.S. corn planting progress in May and as of yet limited threats to 2018 U.S. corn yields in the U.S. have decreased risk and moderately increased 2018 U.S. corn production prospects from just a month ago in the view of the corn market – although the USDA has not changed its 2018 production forecast over that time period (Table 1, Figures 5-6).  In its June 12th WASDE report, the USDA projected 2018 U.S. corn yields to be 174.0 bu/ac, and 2018 U.S. corn production to be 14.040 billion bushels (bb) – both unchanged from a month earlier. 

Still, near record 2018 corn yields of 176.0 bu/ac would raise 2018 U.S. corn production to 14.229 bb – still down from both 14.604 bb in 2017 and the record high of 15.148 bb in 2016.  With beginning stocks of 2.102 bb and imports of 50 million bushels (mb), total supplies of U.S. corn in “new crop” MY 2018/19 are forecast to be 16.192 bb, down from record highs of 16.942 bb both of the previous two marketing years, but still the 3rd highest on record (Table 1, Figure 6)

Third, recent historic strength in U.S. total corn usage is expected to continue without interruption into “new crop” MY 2018/19.  Projections are for U.S. corn total use to be 14.615 bb in “new crop” MY 2018/19, down from the record high of 14.840 bb in “old crop” MY 2017/18, and from 14.649 bb in MY 2016/17 (Table 1, Figure 7 & 9)

By category, U.S. ethanol production and corn-ethanol usage continues to grow with support from a strong U.S. economy, associated gasoline demand, and the ongoing ethanol fuel usage requirements of the U.S. Renewable Fuels Standard (Table 1, Figures 8a-b-c).  United States’ corn usage for ethanol production is projected at arecord high 5.675 bb in “new crop” MY 2018/19, up from 5.575 bb a year ago, and 5.432 bb two years ago.  Non-ethanol Food, Seed and Industrial usage is projected to be record high 1.490 bb – up from 1.465 bb and 1.451 bb the previous two (2) marketing years (Table 1, Figure 7).  

Exports of U.S. corn are projected to be 2.100 bb in “new crop” MY 2018/19 – down from the 11-year high (Table 1, Figures 7 & 10) of 2.300 bb in “old crop” MY 2017/18, and 2.293 bb in MY 2016/17 .  During the eight (8) previous years, U.S. corn exports averaged 1.702 bb – ranging from 730 mb to 1.979 bb.  This “new plateau” in the exports for My 2016/17 through projected “new crop” MY 2018/19 illustrates the recent strength of U.S. corn exports and their contribution to U.S. corn usage.  Improved U.S. corn export prospects are expected partly as a result of 2018 corn production problems for export competitors Argentina and Brazil. 

United States’ corn feed and residual use is projected to be 5.350 bb in “new crop” MY 2018/19 as a result of anticipated high levels of overall U.S. livestock production in the remainder of 2018 and 2019, as well as expectations on only moderate strength in U.S. corn prices (Table 1, Figures 7 & 9).  This feed use amount of 5.350 bb in “new crop” MY 2018/19 would be down from the 11-year high of 5.500 bb in “old crop” MY 2017/18, and down from 5.472 bb in MY 2016/17, but up from an average of 4.902 bb the previous 8 marketing years.

Fourth, expectations are that U.S. corn ending stocks in “new crop” MY 2018/19 will decline considerably from a year earlier – down to 1.577 bb, and that percent (%) ending stocks-to-use will drop to 10.79% as a result of moderately tighter total U.S. corn supplies and continued strong total U.S. corn use (Table 1, Figures 11-12).  These figures compare to 2.102 bb ending stocks and 14.16% stocks/use in “old crop” MY 2017/18, and to 2.293 bb ending stocks and 15.65% stocks/use in MY 2016/17. 

Fifth, from late June through Fall 2018 the path of U.S. corn prices will be largely driven by the prospects for the 2018 U.S. corn crop – particularly as crop size information becomes available in the August, September and November USDA National Agricultural Statistics Service (NASS) reports on U.S. Crop Production.   The USDA projects that in “new crop” MY 2018/19 U.S. corn prices will range from $3.40-$4.40 per bushel – with a midpoint forecast of $3.90 per bushel (/bu) (Table 1a).  If U.S. corn prices were to average $3.90 in “new crop” MY 2018/19, it would be the highest price in five (5) years since $4.46 /bu in MY 2013/14 – the year of recovery following the catastrophic U.S. Corn Belt drought of MY 2012/13 when U.S. corn prices averaged a record high $6.89 /bu.  Expected higher U.S. corn prices in “new crop” MY 2018/19 is evidence of the impact of lower 2018 U.S. corn acreage and prospects for strong usage. 

The U.S. corn supply-demand and price scenario presented by the USDA in the June 12, 2018 World Agricultural Supply and Demand Estimates (WASDE) report is given a 50% likelihood of occurring by KSU Extension Agricultural Economist Kansas State University (Table 1a).

Sixth, when considering alternative outcome scenarios from the USDA’s June 12th forecast, IF for whatever reason during July-August 2018 there were a 200-500+ mb reduction in 2018 U.S. corn production prospects down to 13.500-13.900 bb, THEN projected U.S. corn ending stocks in “new crop” MY 2018/10 would likely decline to 1.250-1.400 bb with some price rationing of usage (Table 1a).   In this situation, percent (%) ending stocks-to-use likely fall below 10% stocks/use, with U.S. corn prices moving above $4.00 toward $4.35-$4.50 per bushel.  This point is further discussed in Section 3 that follows, where alternative scenarios and outcomes for U.S. corn supply-demand and prices are presented for “new crop” MY 2018/19.

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3. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2018/19

Three alternative KSU-Scenarios to the USDA’s forecast for U.S. corn supply-demand and prices are presented in what follows for “new crop” MY 2018/19 (Table 1a).  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 in “new crop” MY 2018/19.  Probability-weights are added to reflect judgements about how likely each scenario is to occur in “new crop” MY 2018/19, i.e., during the September 1, 2018 through August 31, 2019 time period.

A – KSU “Higher 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (25% probability): Assumptions are as follows: 88.026 ma planted, 80.846 ma harvested, 176.0 bu/ac record yield (near the 2017 record high), 14.229 bb production, 16.381 bb total supplies, 14.666 bb total use, 1.715 bb ending stocks, 11.69% S/U, & $3.75 /bu U.S. corn average price; 

B – KSU “Lower 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions are as follows: 88.026 ma planted, 80.846 ma harvested, 165.0 bu/ac yield (near the 2009 low yield), 13.340 bb production, 15.492 bb total supplies, 14.205 bb total use, 1.287 bb ending stocks, 9.06% S/U, & $4.35 /bu U.S. corn average price.

C – KSU “Higher 2018 U.S. Corn Exports” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions are as follows: 88.026 ma planted, 80.846 ma harvested, 174.0 bu/ac yield (equal to USDA forecast yield), 14.040 bb production, 16.192 bb total supplies, 2.250 bb exports (up 250 mb from USDA), 14.865 bb total use, 1.327 bb ending stocks, 8.93% S/U, & $4.65 /bu U.S. corn average price.

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4. World Corn Supply-Demand – Both With & Without China

World Production:  World corn production of 1,052.4 million metric tons (mmt) is projected for “new crop” MY 2018/19, up 1.7% from 1,034.8 mmt in “old crop” MY 2017/18, but down 2.4% from the record high of 1,078.4 mmt in MY 2016/17 (Figures 13-14a, Table 2).  The “new crop” 2018/19 marketing year begins September 1, 2018 and continues through August 31, 2019.  Production in Argentina of 41.0 mmt in 2019 would be a “rebound” from the short crop of 33.0 mmt projected in 2018, and equal again to 41.0 mmt produced in 2017.  Similarly, production in Brazil of 96.0 mmt in 2019 would also be a “rebound” from the short crop of 85.0 mmt projected in 2018, but down from 98.5 mmt in 2017.  The 2018 corn harvests for Argentina and Brazil occur in the later half of “old crop” MY 2017/18, i.e., February through August 2018.

World Total Supplies: World corn total supplies of 1,245.1 mmt in “new crop” MY 2018/19 are forecast to be down moderately from 1,262.7 mmt in “old crop” MY 2017/18, but up from the record high of 1,288.4 mmt in MY 2016/17. 

World Exports: World corn exports of a 158.0 mmt are projected for “new crop” MY 2018/19, up 4.6% from 151.1 mmt in “old crop” MY 2017/18, but down 1% from the record high of 159.7 mmt in MY 2016/17 (Table 3).

World Ending Stocks (% Stocks/Use): Projected World corn ending stocks of 154.7 mmt (14.2% S/U) in “new crop” MY 2018/19 are down 19.7% from 192.7 mmt (18.0% S/U) in “old crop” MY 2017/18, down 32.1% from the record high 227.9 mmt (21.5% S/U) in MY 2016/17, and 210.0 mmt (21.2% S/U) in MY 2015/16 (Figure 13-14a, Tables 8-9).  Projected Foreign (Non-U.S.) corn ending stocks of 114.6 mmt (13.1% S/U) in “new crop” MY 2018/19, is down 16.5% from 139.3 mmt (16.5% S/U) in “old crop” MY 2017/18, and is down from 17.7% from 169.3 mmt (20.0% S/U) in MY 2016/17.  

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 14b-c, Tables 7-9).  “World-Less-China” corn ending stocks are projected to be 94.19 mmt (11.2% S/U) in “new crop” MY 2018/19, down from 113.1 mmt (13.6% S/U) in “old crop” MY 2017/18, and down from 127.2 mmt (15.4% 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 21% lower (i.e., 11.2% S/U for the “World-Less-China” versus 14.2% S/U for the “World” overall in “new crop” MY 2018/19). 

World versus China Ending Stocks: At the same time, these figures also show that Chinese ending stocks of corn as proportion of the World total are declining – down from 52.8% in MY 2015/16, to 44.2% in MY 2016/17, to 41.3% in “old crop” MY 2017/18, and now are projected to be 39.1% in “new crop” MY 2018/19 (Tables 2-9).  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 eventually increase Chinese import demand for U.S. feedgrains if and when China has a severe short crop situation and limited stockpiles available to meet domestic demand.

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KSU U.S. Sorghum and World Coarse Grain Market Outlook in Early-June 2018

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s May 10th USDA World Agricultural Supply Demand Estimates (WASDE) reports is 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 6, 2018

 

1. The “Boom, Bust & Recovery” of the U.S. Grain Sorghum Market

Since September 2017 Kansas grain sorghum prices have been on a “boom – bust – recovery” process.  During this period U.S. grain sorghum markets have responded to changes foreign sorghum export demand, and to increases in domestic use made more affordable by lower grain sorghum prices.   

The “BOOM”: From August 30, 2017 through February 1, 2018 there was an export-driven “boom” in U.S. grain sorghum prices – primarily in response to aggressive Chinese purchases.  Cash grain sorghum bids at one of the major grain terminal elevators in Salina, Kansas increased from $2.86 to $3.87 per bushel during this period, while corn futures increased $0.32 ¼ per bushel from $3.29 ½ on 8/30/2017 (SEPTEMBER 2017 Corn) to $3.61 ¾ (MARCH 2018 Corn).  Strong U.S. exports of grain sorghum caused selected terminal elevator basis bids at Salina, Kansas to strengthen from $0.43 ½ /bu under on 8/30/2017 to $0.25 ¼ /bu over on 2/1/2018. 

The “BUST”: Beginning in January 2018, trade tensions rapidly developed between China and the U.S., eventually leading to actions by the Chinese to limit U.S. grain sorghum imports.  This caused an immediate “bust” in U.S. sorghum cash prices resulting from a collapse in local sorghum basis levels.   Leading terminal elevator cash bids in Salina, Kansas dropped sharply from $3.87 /bu ($0.25 ¼ over) on February 1st down to $3.04 /bu ($0.54 ¾ under) on February 5th.  However, following this “bust” in grain sorghum prices, users of feedgrains found profitable opportunities for using grain sorghum in livestock feeding, bioenergy production, and in a few cases sorghum export purchase opportunities by countries other than China.  Then in late May 2018 China announced that it was dropping its export actions against U.S. grain sorghum. 

The “RECOVERY”: From those early February 2018 market lows, grain sorghum cash bids at key Salina, KS terminal locations began to trend back higher – with both increasing futures AND narrowing basis bids occurring.  Specifically, from the low of $3.04 /bu ($0.54 ¾ under) on 2/5/2018, sorghum prices at one key Salina terminal location trended upward to a high of $3.59 /bu ($0.49 ½ under) on 5/23/2018.  From there, cash bids have declined moderately – down to a close of $3.39 /bu ($0.45 under) on 6/5/2018. 

Note that grain sorghum basis bids at this Salina, KS location have improved moderately since the price collapse on 2/5/2018, narrowing from $0.54 ¾ /bu under to $0.45 /bu under on 6/5/2018.   This is a sign of generally improving grain sorghum demand across a variety of uses.

 

2. Kansas Cash Grain Sorghum Market Prices on June 5, 2018

On June 5th cash grain sorghum price bids at major grain elevators in Western Kansas ranged from $3.24 to $3.44 /bu – with basis levels $0.60 to $0.40 /bu under CME JULY 2018 corn futures.  The high bid of $3.44 /bu was in Syracuse in southwest Kansas, where the corn price that same day was $3.69 /bu ($0.15 under JULY).   Central Kansas cash grain sorghum price bids on June 5th ranged from $3.24 to $3.39 /bu with basis $0.60 to $0.45 / bu under.  The high bid of $3.39 /bu was in Salina, where the highest corn price that day was $3.48 ¾ /bu ($0.35 under JULY).

In East Central Kansas at Topeka, the highest reported grain sorghum cash price /bu bid was $3.29 /bu (basis = $0.55 under JULY 2018 corn) – compared to the highest corn bid of $3.76 ¾ /bu ($0.07 under JULY).  Note that  in late-January 2018 at the height of Chinese export demand for U.S. grain sorghum, the Topeka, Kansas grain sorghum public bid was the highest in the state, with basis bids of $0.55-$0.60 /bu over MARCH 2018 corn futures.  As indicated above, on June 5th Topeka basis bids for grain sorghum were $0.55 /bu under.

Kansas ethanol plant cash bids for grain sorghum on June 5th ranged from $3.55 ¾ to $3.95 ¾ /bu, with local grain basis being $0.25 under to $0.15 over JULY 2018 corn futures.  Ethanol plant corn bids in Kansas the same day were $3.75 ¾ to $4.10 ¾, with basis bids of $0.05 /bu under to $0.30 over JULY 2018 corn futures.

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

Possible 2018 Feedgrain Crop Problems: From the perspective of Kansas grain sorghum producers, there is the possibility of “hoped-for” strength in U.S. grain sorghum prices through the end of “old crop” MY 2017/18 on August 31st.   Whether grain sorghum prices surge higher or not in coming months largely depends on summer 2018 growing conditions for U.S. feedgrains (corn and  grain sorghum mainly, along with barley and oats).   Any serious weather threats to 2018 U.S. feedgrain supplies would support both “old crop” MY 2017/18 and “new crop” MY 2018/19 feedgrain prices in coming months (Table 1a).

U.S. Grain Sorghum Exports in “Old Crop” MY 2017/18: Export shipments of U.S. grain sorghum have averaged 5.0 mb per week since the beginning of the “old crop” 2017/18 marketing year on September 1, 2017 – totaling 190.1 mb through May 24, 2018 – the 38th week of the marketing year.  To reach the USDA’s projection of 245 mb in shipments for “old crop” MY 2017/18 by the end of the marketing year on August 31, 2018, U.S. grain sorghum export shipments have to average at least 3.9 mb per week for the remaining 14 weeks of the period (Table 1a-b, Figures 5, 6 & 7)

  1. Weekly Pace of Recent U.S. Sorghum Exports: For the last 5 weeks ending April 26 through May 24th, the USDA Foreign Agricultural Service (FAS) reported that export shipments have averaged 3.4 mb/week (Figure 7). In addition, as of May 24th, there were only 10.4 mb of advance sales of U.S. grain sorghum for export through August 31st – which does not bode well for U.S. exports to reach the 245 mb target for “old crop” MY 2017/18.  However, recent Chinese actions to remove barriers to purchasing sorghum from the U.S. provides hope that the goal of 245 mb in U.S. grain sorghum exports may be achieved in the current marketing year.
  2. A hypothetical question: “What IF the trade dispute between China and the U.S. had NOT occurred?” In hindsight, IF the earlier pre-trade conflict pace of U.S. grain sorghum exports were to have continued at the levels of November 2017 – January 2018 through the end of August 2018, then total U.S. grain sorghum exports could have ended up being over 300 million bushels in “old crop” MY 2017/18. This assumes that the U.S. would not have just “run out” of exportable grain sorghum supplies before that occurred.

U.S. Sorghum Ethanol & Livestock Feed Use: At the height of U.S. grain sorghum export demand from September 2017 through January 2018, usage and the securing of exportable supplies of U.S. grain sorghum was “crowding out” other sorghum use in ethanol production and livestock feeding in “old crop” MY 2017/18. Prices being paid for grain sorghum to go into export channels were too high for bioenergy and livestock uses to competitively bid for them.  This has been particularly true with abundant supplies of U.S. corn available as a substitute at lower cost (Table 1a-b, Fig. 5 & 6)

  1. However, when S. grain sorghum export trade was disrupted in early February 2018, the rapid and significant decline in sorghum cash prices made sorghum an attractive competitor with U.S. corn as an input for these other domestic user industries. As a result, the USDA raised its projection of U.S. grain sorghum use in domestic livestock feeding from the February (65 mb) to the March (80 mb) WASDE report – and has maintained that projection through the May WASDE.
  2. The USDA has projected that 45 mb of U.S. sorghum would be used in Food, Seed & Industrial (FSI) use in “old crop” MY 2017/18, with most of this amount likely going to ethanol production.

2018 Planted Acres of U.S. Grain Sorghum: The sharply wider U.S. grain sorghum basis levels and lower cash prices during the February – April 2018 period may affect U.S. crop producer’s price and profitability expectations for 2018 grain sorghum acres. As a result, it may also ultimately have a negative effect on U.S. farmers decisions regarding 2018 U.S. grain sorghum planted acres.   The USDA projected that 5.932 million acres (ma) of grain sorghum would be planted in the U.S. in 2018, up from 5.626 ma in 2017, but down from 6.690 ma in 2016 and the 15-year high of 8.459 ma in 2015 (Table 1a-b, Figure 2).

  1. However, an offsetting factor may have been the extreme dry conditions that have existed from southwest Kansas south in to Oklahoma and Texas. This may cause more acres to be planted to grain sorghum as a means of managing drought conditions in spring 2018.

 

4. USDA Forecasts for “New Crop” MY 2018/19 & “Old Crop” MY 2017/18

In the May 10th World Agricultural Supply and Demand Estimates (WASDE) report, the USDA projected 2018 U.S. Grain Sorghum plantings of 5.932 million acres (ma), up 5.4% or 306 ma from 5.626 ma in 2017, but down from 6.690 ma in year 2016.  Harvested acres of U.S. grain sorghum in 2018 are projected to be 5.098 ma, up from 5.045 ma in 2017, but still down significantly from 6.163 ma in year 2016.   U.S. yields in 2018 are forecast at 67.3 bu/ac, down from 72.1 bu/ac in 2017, and 77.9 bu/ac in 2016 (Tables 1a-b, Figures 2 & 3)

As a result, the USDA forecast that the 2018 U.S. grain sorghum production would be 343 million bushel (mb) – the smallest U.S. crop in 6 years (Table 1a-b, Figure 4).   Production of 343 mb in 2018 would be down from 364 mb in 2017, 480 mb in 2016, and the 21-year high of 597 mb in 2015.  Total U.S. feedgrain production (corn, grain sorghum, barley and oats) in the “new crop” 2018/19 marketing year (MY) is projected to be 430.8 million metric tons (mmt) – the 3rd highest on record behind 449.2 mmt in “old crop” MY 2017/18 and the record high of 453.6 mmt in MY 2016/17. 

U.S. Grain Sorghum exports are projected to be 165 mb in “new crop” 2018/19 – down from 245 mb in “old crop” MY 2017/18, and also less than 241 mb in MY 2016/17.  Livestock feed & residual use is projected to be 80 mb in “new crop” 2018/19 – unchanged from 80 mb in “old crop” MY 2017/18, but less than 130 mb in MY 2016/17.  Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new crop” 2018/19 – up sharply from a 4-year low of 45 mb in “old crop” MY 2017/18, but less than 115 mb in MY 2016/17 and the record high of 137 mb in MY 2015/16.  Total use of U.S. Grain Sorghum in “new crop” MY 2018/19 of 345 mb is down from 370 mb in “old crop” MY 2017/18, and from 485-583 mb in MY 2016/17 and MY 2015/16 (Tables 1a-b, Figures 5, 6, & 7).

Ending stocks of U.S. Grain Sorghum in “new crop” MY 2018/19 are projected to be 27 mb (7.83% Stocks/Use) – down from 29 mb (7.84% Stocks/Use) in “old crop” MY 2017/18, and from 33 mb (6.80% Stocks/Use) in MY 2016/17.  The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to range from $3.10-$4.10 (midpoint = $3.60), up from $3.10-$3.30 (midpoint = $3.20) in “old crop” MY 2017/18, and from $2.79 /bu in MY 2016/17 (Tables 1a-b, Figures 5 through 9) This scenario for “new crop” MY 2017/18 is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

 

5. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2018/19

Three (e) alternative KSU projection scenarios for “new crop” MY 2018/19 U.S. Grain Sorghum supply-demand and prices include the following forecasts (Table 1b):

1) “Higher 2018 Production & Other Uses” for “New Crop” MY 2018/19 (20% probability):

2018 Planted / harvested acres of 5.932/5.098 ma, 2018 production of 387 mb, total supplies of 416 mb, exports of 180 mb, food- industrial-seed (FSI) use of 115 mb, feed & residual use of 80 mb, total use of 375 mb, ending stocks of 41 mbb, 11.00% ending stocks-to-use, and $3.25 /bu U.S. average price.

2) “Higher Exports” for “new crop” MY 2018/19 (15% probability):

2018 Planted / harvested acres of 5.932/5.098 ma, 2018 production of 343 mb, total supplies of 372 mb, exports of 245 mb, food-seed-industrial (FSI) use of 45 mb, feed & residual use of 67 mb, total use of 357 mb, ending stocks of 15 mb, 4.20% ending stocks-to-use, and $4.00 /bu U.S. average price.

3) “Lower Exports” (15% probability) for “new crop” MY 2018/19:

2018 Planted / harvested acres of 5.932/5.098 ma, 2018 production of 343 mb, total supplies of 372 mb, exports of 140 mb, food-seed-industrial (FSI) use of 115 mb, feed & residual use of 77 mb, total use of 331 mb, ending stocks of 41 mb, 12.39% ending stocks-to-use, and $3.10 /bu U.S. avg. price.

 

6. World Coarse Grain Supply-Demand

The USDA projected that “new crop” 2018/19 marketing year World Coarse Grain total supplies of 1,563.8 mmt will be down 3.2% from 1,577.8 mmt in “old crop” MY 2017/18, and down 3.3% over 1,616.9 mmt in MY 2016/17.   Projected World Coarse Grain total use of 1,378.3 mmt in “new crop” MY 2018/19 is up 1.7% from both 1,355.1 mmt “old crop” MY 2017/18, and 1,355.8 mmt in MY 2016/17.   World “Coarse Grains” include World grain sorghum, corn, barley, oats, rye, millet, and mixed grains (Figure 10, Table 7).

World Coarse Grain ending stocks are forecast to decline, with the USDA projecting ending stocks of 185.45 mmt in “new crop” MY 2018/19, down 16.7% from 222.7 mmt in “old crop” MY 2017/18, and down 29.0% from 261.1 mmt in MY 2016/17 (Figure 10, Table 8).  

World Coarse Grain percent ending stocks-to-use in “new crop” MY 2018/19 are forecast to actually decline to a record low of 13.5% S/U, from 16.4% in “old crop” MY 2017/18, and from 19.3% in MY 2016/17, being the lowest since 13.9% in MY 2011/12 (Figure 10, 11 & 12, Table 9).  This indicates that strong World use of coarse grains are expected to continue, and that more strength in U.S. and World coarse grain prices may occur than the market now anticipates.