KSU Grain Sorghum Market Outlook in early May 2016 – Planting and Production Prospects to Come Soon

An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2016-2017 price prospects following the USDA’s April 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).

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

https://www.agmanager.info/marketing/outlook/newletters/archives/GRAIN-OUTLOOK_05-03-16_Sorghum.pdf

and

http://www.agmanager.info/marketing/outlook/newletters/Sorghum.asp

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Summary

Recent Grain Sorghum Price Trends in Central Kansas

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on April 12th, grain sorghum cash bids at export terminals and country elevators near Hutchinson, Kansas have been “volatile”.  After first trending $0.20-$0.22 per bu. higher through April 20th, cash prices then dropped $0.32-$0.34 lower in two days on April 22nd.   However, sorghum prices then trended higher again – up $0.19-$0.20 by April 29th – before trending lower through Tuesday a.m., May 3rd, with area cash bids ranging from $3.07 to $3.27 /bu – depending on the individual elevator.  At the same time a cash bid of $3.41 per bu. for grain sorghum was offered by an ethanol plant in the central Kansas area.  New crop forward contract bids for October-November 2016 delivery were in the range of $3.17-$3.45 /bu depending on location.

Market Overview

Overall, grain sorghum market prospects for spring-summer 2016 and for the “next crop” 2016/17 marketing year depend largely on the planting and growing conditions for the U.S. 2016 feedgrain crops along with the ongoing strength of U.S. grain sorghum usage.  To date in its preseason projections the USDA has assumed that there will be no serious crop production problems in the summer of 2016, and has projected larger ending stocks-to-use and a continuation of low prices for U.S. grain sorghum in “next crop” MY 2016/17.  However, prospects for U.S. feedgrain prices have improved since early April – with CME MAY 2016 corn futures contracts rising from a low of $3.47 ¼ on April 1st, to highs of $4.02 on April 21st and $3.92 on April 29th, to a close of $3.90 ¼ on May 2nd.  “New Crop” CME DEC 2016 corn futures also rose from a low of $3.64 on April 1 up to a high of $4.09 on April 21st before settling after some volatile market swings at $3.96 ½ on May 2nd.

Production & Market Uncertainties: Feedgrain production concerns in parts of South America, concerns about wet soil conditions and delayed plantings in parts of the U.S. western Corn Belt, and an increase in U.S. feedgrain exports have recently provided support for U.S. grain sorghum and corn prices.   That said, there are several key crop production and market factors that will impact U.S. feedgrain market price direction and volatility during the remainder of year 2016.  First, increasing prospects for a transition from the recently prevalent El Nino weather system to a La Nina weather pattern with an increased likelihood of hot, dry crop production conditions in the U.S. Corn Belt in the summer of 2016 could bring about swift, dramatic change in U.S. grain market supply-demand and price prospects, and improve prospects for grain sorghum prices and profitability (in areas of the U.S. not impacted by drought!).  Second, total use of U.S. grain sorghum has been relatively high in “current crop” MY 2015/16 as low sorghum prices have helped domestic U.S. feedgrain-using industries to lower their input costs and to improve their profitability (if not limit their financial losses).

Over time the combination of both a) lower production in response to low profits and/or crop production problems, and b) increased grain sorghum use supported by low grain prices for livestock feed, exports and grain processing use, are likely to work together to bring about a change in the current prevailing “large crop – low price” market scenario in U.S./World coarse grain markets.

Given current market information, it seems fair to judge that absent any change in this projected “large supply / low price” scenario, U.S. grain sorghum cash prices are unlikely to rise very far from current levels (which are in the $3.00-$3.40 per bushel in much of Kansas).  Major concerns about U.S. and/or foreign feedgrain crop production prospects will be required for U.S. grain sorghum prices to move up to $4.00-$4.50+ during late spring-summer 2016.

USDA Estimate for “Current Crop” MY 2015/16

The USDA made several changes in its projected U.S. grain sorghum supply-demand balance sheet for “current crop” MY 2015/16.  While 2015 U.S. sorghum production of 597 mb, total supplies of 620 mb, and total use of 555 mb are unchanged, adjustments were made in several usage categories.  Food, alcohol and industrial use is projected at 124 mb – up 25 mb from March, and offsetting decreases in exports (315 mb – down 10 mb), and feed and residual use (115 mb – down 15 mb).  Ending stocks are forecast at 65 mb (11.71% S/U) – up from 18 mb (4.0% S/U) in “old crop” MY 2014/15, and 34 mb (9.1% S/U) in MY 2013/14.  The forecast of U.S. grain sorghum average cash prices is lowered to the range of $3.10-$3.30 /bu. ($3.20 midpoint – down $0.10) in “current crop” MY 2015/16, versus $4.03 in “old crop” MY 2014/15, $4.28 in MY 2013/14, and $6.33 (record high) in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

On December 14, 2015 the USDA released preliminary estimates of its USDA Agricultural Outlook Forum projections on February 25-26, 2016.  The March 31st Prospective Plantings report provided an updated forecast of 2016 U.S. sorghum planted acreage. These KSU-adjusted USDA forecasts for “next crop” MY 2016/17 account for updated grain sorghum planted acreage estimates and associated production and stocks adjustments.

The USDA projected 2016 U.S. grain sorghum plantings of 7.216 million acres (ma) – down 1.243 ma or 14.7% from 2015.  Forecast 2016 harvested acres of 6.046 ma would be down 1.805 ma or 23.0% vs 2015.  With projected yields of 65.1 bu/ac, 2016 U.S. grain sorghum production is forecast to be 394 mb – down sharply from 597 mb in 2015, but comparable to 433 mb in 2013, and 392 mb in 2012.   With forecast “next crop” MY 2016/17 total use of 415 mb (down from 555 mb in “current crop” MY 2015/16), and projected ending stocks of 44 mb (10.6% S/U), U.S. sorghum prices are projected by the USDA to be $3.40 /bu – down $0.05 from the USDA corn price projection of $3.45 /bu for “next crop” MY 2016/17, but up from the $3.20 /bu midpoint estimate for U.S. grain sorghum “current” MY 2015/16.  By KSU estimates, this scenario has a 50% likelihood of occurring in “next crop” MY 2016/17.

KSU Forecast for “Next Crop” MY 2016/17

Two alternative KSU-Scenarios for U.S. grain sorghum supply-demand and prices are presented for “next crop” MY 2016/17, with both assuming a 216,000 acre downward adjustment in 2016 U.S. grain sorghum planted area from the USDA’s March 31st Prospective Plantings report:

A) “Normal Crop” KSU-Scenario A (Lower Acres & Trend Yield) (40% probability) assumes for “next crop” MY 2016/17: 7.000 ma planted, 5.865 ma harvested, 67.3 bu/ac yield, 395 mb production, 460 mb total supplies, 385 mb total use, 75 mb ending stocks, 19.5% S/U, & $3.15 /bu U.S. grain sorghum average price;  and

B) “Short Crop” KSU-Scenario B (Lower Acres & Low Yield) (10% probability) assumes for “next crop” MY 2016/17: 7.000 ma planted, 5.865 ma harvested, 55.0 bu/ac yield, 323 mb production, 388 mb total supplies, 341 mb total use, 47 mb ending stocks, 13.8% S/U, & $4.70 /bu U.S. grain sorghum average price.

Potential KSU 2016 U.S. Sorghum and Corn “Short Crop” Scenario – 12.600 Billion Bu U.S. Corn Crop

If significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in approximately a 12.607 bb corn (150.0 bu/ac yield on 84.044 ma harvested), then all else being equal, ending stocks of U.S. corn for “next crop” MY 2016/17 could decline to 1.137 bb (8.5% S/U), with U.S. corn prices likely to increase to $4.50-$5.50 per bushel.  Grain sorghum prices in the U.S. would likely in the $4.25 to $5.25 per bushel range for “next crop” MY 2016/17.  At this time by KSU estimates there is a 10% likelihood of this occurring – similar to “short crop” KSU Scenario B above.

World Coarse Grains Supply-Demand

World total supplies of 1,505.0 million metric tons (mmt) are projected for “current” MY 2015/16, down marginally from 1,514.8 mmt in “old crop” MY 2014/15, but up from 1,443.9 mmt in MY 2013/14.  Projected World coarse grain ending stocks of 245.1 mmt (19.5% S/U) in “current crop” MY 2015/16 are up marginally from 243.7 mmt (19.2% S/U) in “old crop” MY 2014/15, and from 211.4 mmt (17.1% S/U) in MY 2013/14.

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Grain sorghum field with an ethanol plant near Oakley-Campus, Kansas (Source of image: http://ksgrainsorghum.org/ethanol/)

https://i2.wp.com/bloximages.chicago2.vip.townnews.com/kansasagland.com/content/tncms/assets/v3/editorial/2/5a/25a9919b-4aa9-5fff-a56f-9d37b1ffec34/5484da0264301.image.jpg

Harvesting Grain Sorghum in Western Kansas in 2014 (Gove County) (Source of image: http://www.kansasagland.com/news/stateagnews/)

Wheat Market Outlook in April 2016 (via KSU AgManager.info)

An analysis of U.S. and World wheat supply-demand factors and 2016-2017 price prospects following the USDA’s April 12th World Agricultural Supply Demand Estimates (WASDE) report and the market actions that have followed are available on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary – with the full analysis-article for Wheat to be found at this web location:  http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp

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Summary

Overview & World Wheat Market Analysis

Since the USDA’s April 12th World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat market prices have been volatile because of worries about U.S. and foreign crops and a weakening of the U.S. dollar – first trending higher through April 21st, and then dropped sharply through April 25th before trending higher again through April 29th.

For the “new crop” 2015/16 marketing year the USDA projected:

1) World wheat total supplies of 947.9 mmt and total use of 708.7 mmt – both at record high levels,

2) that at least marginally weaker trade continues in World wheat exports with 163.1 mmt in the current marketing year – down from 164.1 mmt last year, and from 165.9 mmt two years ago,

3) World wheat ending stocks at a record high 239.3 mmt compared to 214.8 mmt last year, and 193.9 mmt two years ago, and

4), World wheat percent ending stocks-to-use of 33.8% – up from 30.5% last year and from 27.8% two years ago – up to their highest level in 14 years (since MY 2001/02).  For perspective, the 34-year low in World wheat ending stocks of 128.7 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% S/U both occurred in MY 2007/08, the last major World wheat “short crop” marketing year.

The World wheat market continues to monitor a) potential wheat production problems in major world wheat production areas such northwestern Africa, the Middle East, south Asia/India, China, South America, and Australia, and the central and southern plains of the United States (possible wheat disease problems from seasonal rains), b) ongoing geopolitical conflicts and tensions in the Middle East and the Black Sea region that could impact commodity markets, and c) spillover impacts into grain markets and other commodities from volatile World economies, and financial and currency markets.  Even so, the “large crop-over supply” situation that exists in World and U.S. wheat markets continues to have a strong prevailing negative influence on World wheat prices.

It is likely that significant World wheat production problems and/or trade disruptions would need to occur in coming weeks and months in order to have wheat prices recover significantly before summer-2016.  Ongoing strength in the U.S. dollar exchange rate – although it has been weakening recently – alos is a serious negative factor that is limiting U.S. wheat exports, raising U.S. wheat ending stocks and % ending stocks-to-use, and causing sharply lower U.S. wheat prices.

USDA U.S. Wheat Forecast for “Current Crop” MY 2015/16

The USDA made minor changes in its supply-demand and price projections for U.S. wheat in the “current crop” 2015/16 marketing year – with 2.052 billion bushels (bb) production, 2.924 bb total supplies, 775 million bushels (mb) of exports, 140 mb wheat feed use (down 10 mb), 1.948 bb of total use (down 10 mb), 976 mb ending stocks (up 10 mb), and 50.09% ending-stocks-to-use (up from 49.34% in March to the highest level since 48.6% in MY 2009/10).  A price range of $4.90-$5.00 /bu was forecast by the USDA with a midpoint of $4.95 /bu – the lowest U.S. wheat marketing year average price since $4.87 /bu in MY 2009/10.

USDA U.S. Wheat Forecast for “Next Crop” MY 2016/17

Based on March 31st USDA Prospective Plantings Report forecasts and information from the USDA Agricultural Outlook Forum in Arlington, VA on February 25-26, 2016, a KSU-adjusted USDA forecast of U.S. wheat supply-demand is available for “next crop” 2016/17 marketing year beginning June 1, 2016.   The USDA projected 2016 U.S. wheat plantings of 49.559 million acres (ma) – down 5.085 ma from 2015.  Forecast 2016 harvested acres of 42.174 ma would be down 4.920 ma vs 2015.  Based on projected 2016 U.S. wheat yields of 45.9 bu/ac (up from 43.6 bu/ac in 2015), 2016 U.S. wheat production is projected to be 1.935 bb (vs 2.052 bb in 2015), with “next crop” MY 2016/17 total supplies of 3.036 bb (up from 2.924 bb in “current crop” MY 2015/16).  With projected “next crop” MY 2016/17 ending stocks of 943 mb and percent ending stocks-to-use of 45.05% S/U, U.S. wheat average prices are projected to be $4.20 /bu – down from $4.95 /bu in “current crop” MY 2015/16.   It is assumed by KSU that these adjusted USDA projections for “next crop” MY 2016/17 is assumed to have a 40% probability of occurring.

KSU Forecast for “Next Crop” MY 2016/17

Three alternative KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “next crop” MY 2016/17, with each assuming the same 2016 planted acreage as USDA, but 437,000 less acres harvested than the adjusted USDA estimates based on historical percent harvested-to-planted acres relationships.

A) KSU-Scenario A (Trend Yield) (30% probability) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.021 bb total supplies, 850 mb exports, 2.043 bb total use, 978 mb ending stocks, 47.87% S/U, & $4.05 /bu U.S. wheat average price;

B) KSU-Scenario B (Foreign Crop Problems – Higher U.S. Exports) (15% prob.) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.021 bb total supplies, 1.050 bb exports, 2.243 bb total use, 778 mb ending stocks, 34.7% S/U, & $5.10 /bu U.S. wheat average price;  and

C) KSU-Scenario C (Widespread U.S. Crop Problems) (15% prob.) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 40.0 bu/ac yield, 1.669 bb production, 2.770 bb total supplies, 850 mb exports, 2.043 bb total use, 727 mb ending stocks, 35.6% S/U, & $5.00 /bu U.S. wheat average price.

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KSU Soybean Market Outlook: Examining Market Prospects for “Next Crop” MY 2016/17

An analysis of U.S. and World soybean supply-demand factors and late 2015-2016 price prospects is provided following the USDA’s April 12th World Agricultural Supply Demand Estimates (WASDE) reports, the March 31st USDA NASS Prospective Plantings report, the March 31st USDA quarterly Grain Stocks Report, and the February 25-26 USDA Agricultural Outlook Forum .   The full KSU Soybean Market Outlook in April 2016 will be available on March 26, 2016 on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary – with the full analysis-article for soybean to be found at this web location:  http://www.agmanager.info/marketing/outlook/newletters/Soybean.asp

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Summary

Overview

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on April 12th, soybean futures prices have moved sharply higher.  To date in the “current” 2015/16 marketing year, soybean market prices in the U.S. and World have been limited by the current “large crop – low price” scenario, caused by consecutive record 2014, 2015 and projected 2016 South American and U.S. soybean crops.  However, recent significant crop production problems have occurred in key South American production areas such as Argentina and parts of Brazil.  The current market oversupply situation is illustrated by 28% growth over a two year period in World soybean stocks, from 61.8 mmt (22.4% stocks/use) in the MY 2013/14 up to 79.0 mmt (25.0% stocks/use) in the “current crop” MY 2015/16.  To make export sales of U.S. soybeans even more challenging, the high value of the U.S. dollar relative to declining or low currency exchange rates of foreign soybean export competitors in South America has had some negative impact on U.S. exports and prices. However, with limited numbers of major exporting countries available to buy from in the World market, the negative impact has been more limited than it has been for U.S. wheat trade.

In April excessive rainfall has caused problems with the Argentina 2016 soybean crop, adding to ongoing dry conditions in some key Brazilian soybean production areas in recent months. Once the extent of these threats to soybean production in these countries is adequately quantified, then World soybean markets will turn their attention to spring-summer-fall soybean crop prospects in the United States.  The key issue will be to determine whether any weather or disease problems end up driving U.S. soybean production low enough to alter the current “large supply” “buyer’s market” situation that now exists in U.S. and World soybean markets.

Longer term, since MY 2008/09 a strong upward trend in World soybean production (up 7.3% annually) has “out-paced” the increase in World soybean use (up 6.1% per year), leading to record World soybean ending stocks and growth in percent ending stocks-to-use, and consequently to a dramatic reduction in soybean price prospects in the “current” and anticipated “next” crop years.  Absent any major unforeseen crop production problems in the U.S. and South America in year 2016, low prices and poor profitability this coming fall are likely to cause either a scaling back or “leveling” of World soybean production in 2017 and beyond.

USDA U.S. Soybean Forecast of “Current Crop” MY 2015/16

The USDA maintained its forecast 2015 U.S. soybean production of a record 3.929 billion bushels (bb) – up marginally from 3.927 bb in 2014.  For “current crop” 2015/16, USDA projected U.S. total supplies at a record 4.150 bb (vs 4.052 bb in MY 2014/15), crush at 1.870 bb, exports at 1.705 bb (up 15 mb from March, but still down from the record 1.843 bb in “old crop” MY 2014/15), total use at 3.705 bb (up 15 mb but less than the record of 3.862 bb in “old crop” MY 2014/15), and ending stocks at a 9-year high of 445 mb (down 15 mb, but still up from 191 million bushels or ‘mb’ in “old crop” MY 2014/15, and 92 mb in MY 2013/14).   Ending stocks-to-use are projected at 12.01% – up dramatically from 4.95% in “old crop” MY 2014/15, and the record low of 2.65% in MY 2013/14.  The USDA forecast “current crop” MY 2015/16 prices to be in the range $8.50-$9.00 (midpoint = $8.75 /bu) – down from $10.10 in “old crop” MY 2014/15, $13.00 in MY 2013/14, and the record high of $14.40 in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

An adjusted version of the USDA’s “next crop” MY 2016/17 forecast for U.S. soybeans is presented here, building on the information presented by the USDA at its Agricultural Outlook Forum in Arlington, VA on February 25-26, with 2016 U.S. soybean planted acres equal to the March 31st Prospective Planting report forecast.  The USDA projected 2016 U.S. soybean plantings of 82.236 million acres (ma) – down 414,000 acres from 2015.  Forecast 2016 harvested acres of 81.257 ma is developed using longer term KSU harvested-to-planted acreage estimates (98.8%), and would be down 1.592 ma vs 2015.

With projected yields of 46.7 bu/ac, 2016 U.S. soybean production is projected to be 3.795 bb – 3rd highest on record behind 3.927 bb in 2014 and 3.929 bb in 2015.   With forecast “next crop” MY 2016/17 total use of 3.850 bb (2nd highest behind 3.862 bb in “old crop” MY 2014/15), and an adjusted projection of ending stocks of 420 mb (10.91% S/U), U.S. soybean prices were estimated by the USDA to be $8.50 /bu at the 2016 Ag Outlook Forum – down from the USDA’s $8.75 /bu midpoint estimate for “current” MY 2015/16.

KSU Forecasts for “Next Crop” MY 2016/17

Three alternative KSU-Scenarios for U.S. soybean supply-demand and prices are presented for “next crop” MY 2016/17, with each assuming a 1.500 ma upward adjustment in 2016 U.S. soybean planted acres from the USDA’s March 31st Prospective Plantings report.

A) KSU-Scenario A (Higher Acres & Trend Yield) (30% probability) assumes for “next crop” MY 2016/17: 83.736 ma planted, 83.739 ma harvested, 45.85 bu/ac yield, 3.794 bb production, 4.269 bb total supplies, 3.726 bb total use, 546 mb ending stocks, 14.57% S/U, & $8.25 /bu U.S. soybean average price;

B) KSU-Scenario B (Higher Acres & Moderate Crop Stress) (25% prob.) assumes 83.736 ma planted, 82.739 ma harvested, 44.0 bu/ac yield, 3.641 bb production, 4.116 bb total supplies, 3.653 bb total use, 463 mb ending stocks, 12.67% S/U, & $8.60 /bu U.S. soybean price; and

C) KSU-Scenario C (Higher Acres & Extreme Drought) (10% prob.) assumes 83.736 ma planted, 82.739 ma harvested, 39.0 bu/ac yield, 3.227 bb production, 3.702 bb total supplies, 3.426 bb total use, 276 mb ending stocks, 8.1% S/U, & $10.00 /bu U.S. soybean price.

World Soybean Supply-Demand

World total supplies of 397.9 million metric tons (mmt) are projected for “current” MY 2015/16, up 4.3% from 381.3 mmt in “old crop” MY 2014/15, and up 17.8% from 337.9 mmt in MY 2013/14.  Projected World soybean ending stocks of 79.0 mmt (25.0% S/U) in “current” MY 2015/16 are up moderately from 77.7 mmt (25.9% S/U) in “old crop” MY 2014/15, and from 61.8 mmt (22.4% S/U) in MY 2013/14.

World soybean supplies and ending stocks have been growing in recent marketing years, but usage has grown at an equal or greater pace.  These trends have led to the result that percent ending stocks-to-use is lower in “current crop” MY 2015/16 (25.0%) than in “old crop” MY 2014/15 (25.8%) – a positive sign for future trends in World soybean markets.

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Considering Narrow Row Soybeans in the Eastern Corn Belt (Source: http://www.hoosieragtoday.com/narrow-row-soybeans-have-yield-advantage/ )

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Picturesque Western Kansas near Scott Lake State Park (Source: http://www.tourist-destinations.com/2015/01/kansas-usa.html)

KSU Corn Market Outlook in April 2016: USDA and KSU Price Forecasts for “Next Crop” MY 2016/17

An analysis of U.S. and World corn supply-demand factors and 2015/16 price prospects following the USDA’s April 12, 2016 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available on the KSU AgManager website:  http://www.agmanager.info/default.asp

Following is a summary of the article on “Corn Market Outlook in April 2016″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address: http://www.agmanager.info/marketing/outlook/newletters/Corn.asp

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Summary

Overview

Since the USDA’s April 12th World Agricultural Supply and Demand Estimates (WASDE) report, corn futures have traded first sharply higher through early in the day on Thursday, April 21st, but then fell sharply through April 22nd – giving back much of the prices increases since the WASDE report was released.  With a third consecutive large U.S. corn crop in the 13.6 to 14.2 billion bushel (bb) range in 2015 along with sizable foreign coarse grain crops in the “current” 2015/16 marketing year, it will be difficult for corn futures prices to rise to $4.25-$4.50+ by May-June 2016 unless a) unexpected late season corn production problems are shown to have occured South America, b) larger than expected U.S. corn usage occurs in response to low U.S. and World corn prices during the March-May 2016 quarter, and/or c) significant planting and establishment problems occur for the 2016 U.S. corn crop – leading to reduced corn acreage and production prospects.  Low corn prices and limited corn net returns prospects may reduce U.S. 2016 corn acreage and production prospects.

Market factors such as a) economic and financial system disruptions impacting grain, energy, and other commodity markets, b) U.S. farmer resistance to selling at low late-April and May 2016 cash corn prices, and c) concerns about possible “El Nino” or “El Nino-La Nina transition”- related weather patterns in spring-summer 2016 with an eye toward their possible negative impacts on 2016 crop production, could each still impact corn market prices through summer-fall 2016.  Also, low feedgrain prices have resulted in lower input costs for U.S. and Foreign livestock feeding and bioenergy users – leading to strong domestic and foreign feedgrain usage and providing underlying support for U.S. corn exports.  In the “current” 2015/16 marketing year the high value of the U.S. dollar and prospects for a large 2016 South American corn crop have been significant limiting factors for U.S. corn exports – although the U.S. dollar has been trending lower in recent weeks.

USDA Estimate for “Current” MY 2015/16

The USDA made several changes to the U.S. corn supply-demand balance sheet for “current crop” MY 2015/16 – with 2015 U.S. corn production of 13.601 bb, and total supplies of 15.382 bb for MY 2015/16.  Total use is projected to be 13.521 bb (down 24 million bushels or ‘mb’)  Ethanol use was projected to be 5.250 bb (up 25 mb), with non-ethanol Food, Seed, and Industrial (FSI) use of 1.371 bb (up 1 mb), exports of 1.650 bb, and feed and residual use of 5.250 bb (down 25 mb).  Ending stocks are forecast to be up 25 mb to 1.862 bb (13.77% S/U) in “current” MY 2015/16 – up from 1.731 bb (12.6% S/U) in “old crop” MY 2014/15, and 1.232 bb (9.2% S/U) in MY 2013/14.  U.S. corn average cash prices are forecast to be in the range of $3.40-$3.70 /bu. ($3.55 midpoint) versus $3.70 in “old crop” MY 2014/15, $4.46 in MY 2013/14, and $6.89 (record high) in MY 2012/13.

Adjusted USDA Forecast for “Next Crop” MY 2016/17

An adjusted version of the USDA’s “next crop” MY 2016/17 forecast for U.S. corn is presented here, building on the information presented by the USDA at its Agricultural Outlook Forum in Arlington, VA on February 25-26, with 2015 U.S. corn planted acres matching the higher March 31st Prospective Planting report planted acreage forecast.   Projected 2016 U.S. corn plantings equal 93.601 ma – up 5.602 ma from 2015.  Forecast 2016 harvested acres of 85.413 ma would be up 4.664 ma vs 2015.  With projected yields of 168.0 bu/ac, 2016 U.S. corn production is projected to be a record 14.349 billion bushels (bb) – up from 13.829 bb in 2013, 14.216 bb in 2014, and 13.601 bb in 2015.   With forecast MY 2016/17 total use of 13.725 bb (2nd highest behind 13.748 bb in “old crop” MY 2014/15), and projected ending stocks of 2.486 bb (18.11% S/U) – up from 1.862 bb (13.77% S/U) in “current crop” MY 2015/16, U.S. corn prices are projected by the USDA to be $3.45 /bu – down from the $3.55 /bu midpoint estimate for “current” MY 2015/16 and subject to lowering in future USDA WASDE reports. This scenario is given a 35% likelihood of occurring by KSU.

KSU Forecast for “Next Crop” MY 2016/17

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2016/17, with each assuming a 1.5 ma downward adjustment in 2016 U.S. corn planted acres from the USDA’s March 31st Prospective Plantings report.

A) KSU-Scenario A (Lower Acres & Trend Yield) (30% probability) assumes for “next crop” MY 2016/17: 92.101 ma planted, 84.404 ma harvested, 164.5 bu/ac yield, 13.825 bb production, 15.727 bb total supplies, 13.640 bb total use, 2.087 bb ending stocks, 15.30% S/U, & $3.20 /bu U.S. corn average price;

B) KSU-Scenario B (Lower Acres & Moderate Drought) (25% prob.) assumes 92.101 ma planted, 84.404 ma harvested, 158.0 bu/ac yield, 13.279 bb production, 15.186 bb total supplies, 13.575 bb total use, 1.611 bb ending stocks, 11.87% S/U, & $3.70 /bu U.S. corn price;  and

C) KSU-Scenario C (Lower Acres & Extreme Drought) (10% prob.) assumes 92.101 ma planted, 84.404 ma harvested, 150.0 bu/ac yield, 12.607 bb production, 14.519 bb total supplies, 13.382 bb total use, 1.137 bb ending stocks, 8.5% S/U, & $4.75 /bu U.S. corn price.

World Corn Supply-Demand

World total supplies of 1,179.7 million metric tons (mmt) are projected for “current” MY 2015/16, down from 1,187.9 mmt in “old crop” MY 2014/15, but up from 1,123.9 mmt in MY 2013/14.  Projected World corn ending stocks of 208.9 mmt (21.5% S/U) in “current” MY 2015/16 are up from 207.6 mmt (21.2% S/U) in “old crop” MY 2014/15, and from 175.0 mmt (18.4% S/U) in MY 2013/14.

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March 1st Grain Stocks and Dec-Feb Usage Tables-Charts following the 3/31/2016 USDA Grain Stocks Report

Following are KSU Summary Tables and Charts following the USDA National Agricultural Statistical Service (NASS) Quarterly Stocks report.  The full USDA report is available the following web address: https://www.ksre.k-state.edu/news/radio-network/ag-today.html

These charts and tables are available on the KSU AgManager Website in a couple of alternative forms.

First, these particular tables and charts are available on as part of the KSU Weekly Grain Market Update for April 9th at the following web address:

http://www.agmanager.info/news/Articles/KSRN_GrainOutlook_04-08-16.pdf

Second, a broader, comprehensive set of World and U.S. corn, wheat and soybean market supply-demand and price information is available on AgManager.info in the “Spreadsheets with USDA WASDE (World Agricultural Supply and Demand Estimates” part of the “Crops: Supply and Demand (WASDE)” section at the following web address:

http://www.agmanager.info/marketing/outlook/WASDE/default.asp

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Modern Grain Storage Facilities in Western Kansas.  Source of image: http://reifwelding.com/grain-bins/3652540

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Grain Storage View “from the Highway” in the Texas / Oklahoma / Kansas area in Fall 2014.  Source of image: https://retiredroadtrippers.wordpress.com/2014/10/18/texas-oklahoma-kansas/

(Updated) KSU Grain Sorghum Market Outlook in March 2016 – Adjusted Outlook Due to Chinese Corn Stockpile Policy Changes

Following is an updated analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2016-2017 price prospects. This article reflects the adjustment in U.S. grain sorghum prospects for “next crop” MY 2016/17 prices, profitability, and likely 2016 planted acreage and production following the March 29th announcement regarding changes in their corn stockpiling policy to be instituted in October 2016.  Details can be found at the following Reuters news article dated 3/29/2016.

http://www.reuters.com/article/us-china-corn-stockpiles-idUSKCN0WV06Z

The full updated article examining the USDA’s March 9th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports along with updated KSU projections (adjusted for this Chinese policy change) is available  on the KSU AgManager website:

http://www.agmanager.info/marketing/outlook/newletters/Sorghum.asp

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Summary

Updated on March 29, 2016 from previous day’s article

Chinese Government Announcement Re: Corn Stockpile Management Policy (Updated on 3/29/2016)

Within the last few days the Chinese government announced that “…it plans to scrap its corn stockpiling scheme and allow markets to set prices for grain.” Reuters article, March 29, 2016.  Quoted from the article – “And as domestic prices start to shift in line with international markets, Chinese demand for imports of corn and corn substitutes such as sorghum, feed-grade barley, and distillers’ grains is expected to tank, hitting major suppliers such as the United States and Australia.”  The Chinese government has indicated that these changes will be instituted in the “next crop” 2016/17 marketing year for Chinese feedgrains beginning in October 2016.  The anticipated negative impact on U.S. grain sorghum exports and on U.S. ag producers’ expectation of grain sorghum profitability and likely on planted acres are represented below in an updated KSU grain sorghum market outlook projection for “next crop” MY 2016/17.

KSU Forecast for “Next Crop” MY 2016/17 (Updated on 3/29/2016)

Based on the recent Chinese government announcement regarding changes it will make in its corn stockpile management policy and anticipated responses by U.S. farmers, KSU supply-demand and price projections for “next crop” MY 2016/17 have been adjusted.  Projected planted acres of grain sorghum in the U.S. has been lowered in anticipation that U.S. crop producers will lower their expectations of U.S. grain sorghum prices and profitability due to the change in Chinese grain sorghum import prospects.

KSU projections of 2016 planted acres equal 6.800 mb – down 500,000 acres from 7.300 ma projected by the USDA.  KSU projections for 2016 harvested acres are 5.746 ma (based on historic average harvested-to-planted acres relationships), with long term trend yields for 2016 of 67.3 bu/ac, and 2016 U.S. grain sorghum production of 3870 mb (down 23 mb from the USDA).  Total use of 385 mb includes 109 mb food, alcohol, and industrial use (up 10 mb from USDA), seed use of 1 mb (same as USDA), exports of 130 mb (down 70 mb vs USDA), and livestock feed and residual use of 145 mb (up 30 mb vs USDA).  Following these KSU supply and use projections, ending stocks are projected to be 670 mb (17.4% S/U), with U.S. sorghum prices projected by KSU to be $3.30 /bu – down $0.10 /bu from the USDA’s early projection of $3.40 /bu for “next crop” MY 2016/17.

When the USDA released its March 9th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, grain sorghum cash bids at export terminal and country elevators near Hutchinson, Kansas first trended higher for the week following the reports.  Then cash sorghum prices moved either sideways or lower based on location through Monday, March 28th .  The USDA has preliminarily projected lower U.S. grain sorghum production in 2016 at 410 million bushel (mb) – down sharply from 2015 U.S. sorghum production of 597 mb.  Grain sorghum market prospects for spring-summer 2016 and for the “next crop” 2016/17 marketing year depend largely on the planting and growing conditions for the U.S. 2016 feedgrain crops along with the ongoing strength of U.S. grain sorghum usage.

Negative Price Outlook Predominates

The USDA in its preseason forecasts has assumed that there will be no serious crop production problems in the summer of 2016, and has projected larger ending stocks-to-use and a continuation of low prices for U.S. grain sorghum in “next crop” MY 2016/17.   Absent any change in this projected “large supply / low price” scenario, U.S. grain sorghum cash prices are unlikely to rise from current levels (which are at or below $3.00 per bushel in Kansas) up to $4.00-$4.50+ by late spring and mid-summer 2016.   Also, if low “old crop” MY 2015/16 grain sorghum prices and enterprise profits persist through April-May 2016, then it is very possible that U.S. farmers’ 2016 grain sorghum planted acreage and 2016 production prospects may be negatively affected.

Production & Market Uncertainties

There are a variety of crop production and market factors could impact U.S. feedgrain market price direction and volatility during year 2016.  First, increasing prospects for a transition from the El Nino weather system that has prevailed in recent years / months to a La Nina weather pattern with an increased likelihood of hot, dry crop production conditions in the U.S. Corn Belt in the summer of 2016 could bring about swift, dramatic change in U.S. grain market supply-demand and price prospects, and improve prospects for grain sorghum profitability (in areas of the U.S. not impacted by drought!).  Second, total use of U.S. grain sorghum has been relatively high in “current crop” MY 2015/16 as low sorghum prices have helped feedgrain-using industries to lower their input costs and helped them to improve their profitability if not limit their financial losses.

Over time the combination of both a) lower production in response to low profits and/or crop production problems, and b) increased grain sorghum use supported by low grain prices for livestock feed, exports and grain processing use, are likely work together to bring about a change in the prevailing “large crop – low price” market scenario in U.S./World coarse grain markets.

USDA Estimate for “Current Crop” MY 2015/16

The USDA made no changes in its estimate of the U.S. grain sorghum supply-demand balance sheet for “current crop” MY 2015/16 – with 2015 U.S. sorghum production of 597 mb, and total supplies of 620 mb.  Total use is projected to be 555 mb – including food, alcohol and industrial use of 99 mb, seed use of 1 mb, exports of 325 mb, and feed and residual use of 130 mb.  Ending stocks are forecast at 65 mb (11.71% S/U) in “current crop” MY 2015/16 – up from 18 mb (4.0% S/U) in “old crop” MY 2014/15, and 34 mb (9.1% S/U) in MY 2013/14.  U.S. grain sorghum average cash prices are forecast to be in the range of $3.15-$3.45 /bu. ($3.30 midpoint) in “current crop” MY 2015/16 versus $4.03 in “old crop” MY 2014/15, $4.28 in MY 2013/14, and $6.33 (record high) in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

On December 14, 2015 the USDA released preliminary estimates of its USDA Agricultural Outlook Forum projections on February 25-26, 2016.  In its December 14th forecasts the USDA forecast U.S. grain sorghum supply-demand and prices for the “next crop” 2016/17 marketing year beginning September 1, 2016, but provided no further specifics in the February 25-26 meeting.

The USDA projected 2016 U.S. grain sorghum plantings of 7.300 million acres (ma) – down 1.159 ma or 13.7% from 2015.  Forecast 2016 harvested acres of 6.300 ma would be down 1.551 ma vs 2015.  With projected yields of 65.1 bu/ac, 2016 U.S. grain sorghum production is forecast to be 410 mb – down sharply from 597 mb in 2015, and comparable to 433 mb in 2013, and 392 mb in 2012.   With forecast “next crop” MY 2016/17 total use of 415 mb (down from 555 mb in “current crop” MY 2015/16), and projected ending stocks of 60 mb (14.46% S/U), U.S. sorghum prices are projected by the USDA to be $3.40 /bu – down $0.05 from the USDA corn price projection of $3.45 /bu for “next crop” MY 2016/17, but up from $3.30 /bu midpoint estimate for U.S. grain sorghum “current” MY 2015/16.

Potential KSU 2016 U.S. Sorghum and Corn “Short Crop” Scenario – 13.000 Billion Bu U.S. Corn Crop

If moderately significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in a 13.000 bb corn (157.95 bu/ac yield on 82.300 ma harvested), then all else being equal, ending stocks of U.S. corn for “next crop” MY 2016/17 could decline to 1.172 bb (8.5% S/U), with U.S. corn prices likely to increase to $4.50-$5.50 per bushel.  Grain sorghum prices in the U.S. would likely in the $4.25 to $5.25 per bushel range for “next crop” MY 2016/17.

World Coarse Grains Supply-Demand

World total supplies of 1,504.7 million metric tons (mmt) are projected for “current” MY 2015/16, down marginally from 1,509.65 mmt in “old crop” MY 2014/15, but up from 1,444.5 mmt in MY 2013/14.  Projected World coarse grain ending stocks of 243.1 mmt (19.3% S/U) in “current crop” MY 2015/16 are up marginally from 241.15 mmt (19.0% S/U) in “old crop” MY 2014/15, and from 211.2 mmt (17.1% S/U) in MY 2013/14.

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KSU Grain Sorghum Market Outlook in March 2016 – Questions of 2016 U.S. Sorghum Acreage and Production Lay Ahead

An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2015-2016 price prospects following the USDA’s March 9th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).

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

http://www.agmanager.info/marketing/outlook/newletters/archives/GRAIN-OUTLOOK_03-29-16_Sorghum.pdf

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Summary

Overview

When the USDA released its March 9th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, grain sorghum cash bids at export terminal and country elevators near Hutchinson, Kansas first trended higher for the week following the reports.  Then cash sorghum prices moved either sideways or lower based on location through Monday, March 28th .  The USDA has preliminarily projected lower U.S. grain sorghum production in 2016 at 410 million bushel (mb) – down sharply from 2015 U.S. sorghum production of 597 mb.  Grain sorghum market prospects for spring-summer 2016 and for the “next crop” 2016/17 marketing year depend largely on the planting and growing conditions for the U.S. 2016 feedgrain crops along with the ongoing strength of U.S. grain sorghum usage.

Negative Price Outlook: The USDA in its preseason forecasts has assumed that there will be no serious crop production problems in the summer of 2016, and has projected larger ending stocks-to-use and a continuation of low prices for U.S. grain sorghum in “next crop” MY 2016/17.   Absent any change in this projected “large supply / low price” scenario, U.S. grain sorghum cash prices are unlikely to rise from current levels (which are at or below $3.00 per bushel in Kansas) up to $4.00-$4.50+ by late spring and mid-summer 2016.   Also, if low “old crop” MY 2015/16 grain sorghum prices and enterprise profits persist through April-May 2016, then it is very possible that U.S. farmers’ 2016 grain sorghum planted acreage and 2016 production prospects may be negatively affected.

Production & Market Uncertainties: There are a variety of crop production and market factors could impact U.S. feedgrain market price direction and volatility during year 2016.  First, increasing prospects for a transition from the El Nino weather system that has prevailed in recent years / months to a La Nina weather pattern with an increased likelihood of hot, dry crop production conditions in the U.S. Corn Belt in the summer of 2016 could bring about swift, dramatic change in U.S. grain market supply-demand and price prospects, and improve prospects for grain sorghum profitability (in areas of the U.S. not impacted by drought!).  Second, total use of U.S. grain sorghum has been relatively high in “current crop” MY 2015/16 as low sorghum prices have helped feedgrain-using industries to lower their input costs and helped them to improve their profitability if not limit their financial losses.

Over time the combination of both a) lower production in response to low profits and/or crop production problems, and b) increased grain sorghum use supported by low grain prices for livestock feed, exports and grain processing use, are likely work together to bring about a change in the prevailing “large crop – low price” market scenario in U.S./World coarse grain markets.

USDA Estimate for “Current Crop” MY 2015/16

The USDA made no changes in its estimate of the U.S. grain sorghum supply-demand balance sheet for “current crop” MY 2015/16 – with 2015 U.S. sorghum production of 597 mb, and total supplies of 620 mb.  Total use is projected to be 555 mb – including food, alcohol and industrial use of 99 mb, seed use of 1 mb, exports of 325 mb, and feed and residual use of 130 mb.  Ending stocks are forecast at 65 mb (11.71% S/U) in “current crop” MY 2015/16 – up from 18 mb (4.0% S/U) in “old crop” MY 2014/15, and 34 mb (9.1% S/U) in MY 2013/14.  U.S. grain sorghum average cash prices are forecast to be in the range of $3.15-$3.45 /bu. ($3.30 midpoint) in “current crop” MY 2015/16 versus $4.03 in “old crop” MY 2014/15, $4.28 in MY 2013/14, and $6.33 (record high) in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

On December 14, 2015 the USDA released preliminary estimates of its USDA Agricultural Outlook Forum projections on February 25-26, 2016.  In its December 14th forecasts the USDA forecast U.S. grain sorghum supply-demand and prices for the “next crop” 2016/17 marketing year beginning September 1, 2016, but provided no further specifics in the February 25-26 meeting.

The USDA projected 2016 U.S. grain sorghum plantings of 7.300 million acres (ma) – down 1.159 ma or 13.7% from 2015.  Forecast 2016 harvested acres of 6.300 ma would be down 1.551 ma vs 2015.  With projected yields of 65.1 bu/ac, 2016 U.S. grain sorghum production is forecast to be 410 mb – down sharply from 597 mb in 2015, and comparable to 433 mb in 2013, and 392 mb in 2012.   With forecast “next crop” MY 2016/17 total use of 415 mb (down from 555 mb in “current crop” MY 2015/16), and projected ending stocks of 60 mb (14.46% S/U), U.S. sorghum prices are projected by the USDA to be $3.40 /bu – down $0.05 from the USDA corn price projection of $3.45 /bu for “next crop” MY 2016/17, but up from $3.30 /bu midpoint estimate for U.S. grain sorghum “current” MY 2015/16.

KSU Forecast for “Next Crop” MY 2016/17

Using recent USDA 2016 planted acres projections of 7.300 ma (see above), KSU projections for 2016 harvested acres are 6.169 ma (based on historic average harvested-to-planted acres relationships), with long term trend yields for 2016 of 67.3 bu/ac, and 2016 U.S. grain sorghum production of 415 mb (up 5 mb from the USDA).  Total use of 415 mb includes 99 mb food, alcohol, and industrial use, non-seed use of 1 mb (both the same as USDA), exports of 220 mb (up 20 mb vs USDA), and livestock feed and residual use of 110 mb (down 5 mb vs USDA).  Following these KSU supply and use projections, ending stocks are projected to be 50 mb (11.6% S/U), with U.S. sorghum prices projected by KSU to be $3.70 /bu – up $0.30 /bu from the USDA’s early projection of $3.40 /bu for “next crop” MY 2016/17.

Potential KSU 2016 U.S. Sorghum and Corn “Short Crop” Scenario – 13.000 Billion Bu U.S. Corn Crop

If moderately significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in a 13.000 bb corn (157.95 bu/ac yield on 82.300 ma harvested), then all else being equal, ending stocks of U.S. corn for “next crop” MY 2016/17 could decline to 1.172 bb (8.5% S/U), with U.S. corn prices likely to increase to $4.50-$5.50 per bushel.  Grain sorghum prices in the U.S. would likely in the $4.25 to $5.25 per bushel range for “next crop” MY 2016/17.

World Coarse Grains Supply-Demand

World total supplies of 1,504.7 million metric tons (mmt) are projected for “current” MY 2015/16, down marginally from 1,509.65 mmt in “old crop” MY 2014/15, but up from 1,444.5 mmt in MY 2013/14.  Projected World coarse grain ending stocks of 243.1 mmt (19.3% S/U) in “current crop” MY 2015/16 are up marginally from 241.15 mmt (19.0% S/U) in “old crop” MY 2014/15, and from 211.2 mmt (17.1% S/U) in MY 2013/14.

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