An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2017 price prospects following the USDA’s December 9th 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
Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, MARCH 2016 CME corn futures have trended lower. On the day of the report, MARCH 2016 corn futures closed at $3.59 ½ per bushel, and then moved to a high of $3.63 on December 15th, before declining to a close of $3.49 ¾ on Thursday, December 29th. The USDA’s forecast of a 462 million bushel (mb) 2016 U.S. grain sorghum crop along with record large 2016 U.S. corn crop of 15.226 billion bushels (bb), along with large 2016/17 marketing year U.S. feedgrain ending stocks of 64.8 million metric tons (mmt) – up 35%-38% from the previous two marketing years – and have continued to pressure both U.S. grain sorghum and corn market prices.
Cash grain sorghum prices in Kansas
Cash bids for grain sorghum in Kansas on December 29th were near $2.50 per bushel in many locations, with ethanol plants and some export oriented locations at $2.85-$3.05 /bu..
At major grain elevators in western Kansas, cash grain sorghum prices were in the range of $2.40 – $2.55 /bu on Thursday, December 29th with basis levels $0.95 to $1.10 under CME MARCH 2017 Corn futures. As low as these prices were, they were still markedly higher than county FSA marketing loan rates of $1.76-$1.90 per bushel. Similarly, central Kansas cash grain sorghum prices were in the range of $2.48 – $2.84 /bu with basis levels $1.02 to $0.65 under MARCH 2017 Corn, but still above local FSA loan rates of $1.85-$1.93 /bu.. At Topeka in east central Kansas, a higher bid was reported of $3.05 /bu (basis = $0.45 under). Kansas ethanol plant bids for grain sorghum ranged from $2.84 ¾ to $2.89 ¾, with basis at $$0.60-$0.65 under MARCH 2017 Corn futures. Just as with corn, wheat, and soybeans, current cash bids for grain sorghum are below cost of production in most instances – although to a degree high yields in 2016 has helped to mitigating this factor.
Although the existing “large supply and tight storage availability” situation predominates in local Kansas grain sorghum and corn markets in late December 2016, it is a positive sign that usage of these crops has provided enough market support so that Kansas cash prices have not fallen down to USDA loan rate – price support levels during the 2016 harvest and immediate post-harvest period.
Other Feedgrain Market Considerations
Other market factors to consider that could affect the U.S. feedgrain markets in 2017 include: 1) the pace and timing of U.S. farmer marketing of the 2016 grain sorghum and corn crops – much of which had been placed in storage after the 2016 fall harvest and likely will be held for sale through the winter into at least early spring 2017, 2) anticipation of continued strong use of 2016 crop U.S. feedgrains for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. grain sorghum exports – driven partly by a poor Brazilian feedgrain harvest and lack of exportable supplies in earlier in 2016, as well as other World coarse grain market factors, and 4) the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets in 2017.
For example, U.S. financial policy announcements by the U.S. Federal Reserve in 2017 could lead to increases in U.S. interest rates and the value of the U.S. dollar relative to other World currencies, which could in turn have a negative impact on U.S. grain sorghum exports. Also, World geo-political events could provide unanticipated “shocks” to U.S. and World energy and grain markets. The impact on the direction of U.S. and World grain sorghum and corn markets from these potential disruptions is difficult to anticipate or predict.
USDA Supply-Demand Forecast for “Current” MY 2016/17
The USDA has projected of 2016 U.S. sorghum plantings of 6.761 ma, harvested acres of 6.045 ma, record high yields of 76.5 bu/ac (vs 76.0 bu/ac in 2015 and 67.6 bu/ac in 2014), resulting in a 2016 U.S. grain sorghum production is forecast to be 462 mb – down from 597 mb in 2015, but above 433 mb in 2014, and 392 mb in 2013.
With forecast “current” MY 2016/17 total supplies of 500 mb, total use of 465 mb, and projected ending stocks of 35 mb (7.48% S/U), U.S. grain sorghum prices are projected by the USDA to be in the range of $2.80-$3.30 (midpoint = $3.05 /bu). Ending stocks of 35 mb (7.48% S/U) in “current” MY 2016/17 compare to 37 mb (6.28% S/U) in MY 2015/16, and 18 mb (4.10% S/U) in MY 2004/05. United States grain sorghum prices of $3.05 /bu in “current” MY 2016/17 continue the downward trend from $3.31 /bu in MY 2015/16, $4.03 in MY 2014/15, $4.28 in MY 2013/14, and the record high of $6.33 /bu in the drought year of MY 2012/13.
USDA Supply-Demand Forecast for “Next Crop” MY 2017/18
With early USDA projections of 2017 U.S. sorghum plantings of 6.300 ma (down 461,000 acres), harvested acres of 5.400 ma (down 645,000 acres), projected yields of 67.1 bu/ac (vs the record high of 76.5 bu in 2016), 2017 U.S. grain sorghum production is forecast to be 362 mb – down from 462 mb in 2016, and 597 mb in 2015.
With forecast “next crop” MY 2017/18 total supplies of 397 mb (down from 500 mb last year and 620 mb the year before), total use of 365 mb (down from 465 mb last year and 583 the year before), and projected ending stocks of 32 mb (8.76% S/U) – down from 35 mb (7.48% S/U) in “current” MY 2016/17 – U.S. sorghum prices are projected by the USDA to average $3.10 /bu.
Note: This is a “large U.S. feedgrain crop” – “no major U.S. or Foreign crop problem” scenario. Emerging production threats and the actual outcome of 2017 U.S. grain sorghum and corn production will drive the U.S. grain sorghum market in “next crop” MY 2017/18.
World Coarse Grain Supply-Demand
Record high World coarse grain production of 1,329.35 million metric tons (mmt) is projected for “current” MY 2016/17, up 6.4% from 1,249.65 mmt in MY 2015/16, and up 1.8% from 1,306.1 mmt in MY 2014/15. Record high World coarse grain total supplies of 1,574.15 mmt are projected for “new crop” MY 2016/17, up from 1,495.0 mmt in MY 2015/16, and from 1,517.2 mmt in MY 2014/15. “Coarse grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.
World coarse grain exports of 185.2 mmt are projected for “new crop” MY 2016/17, up 12.4% from 164.8 mmt in MY 2015/16, and down 0.5% from 186.1 mmt in MY 2014/15. Projected record high World coarse grain ending stocks of 254.9 mmt (19.3% S/U) in “new crop” MY 2016/17 are up from 244.8 mmt (19.6% S/U) in MY 2015/16, but down from 245.4 mmt (19.3% S/U) in MY 2014/15.
Although World coarse grain ending stocks are projected to be a record high in “new crop” MY 2016/17 at 254.9 mmt, World coarse grain percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 19.3% – indicative that strong World demand for coarse grains at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.