KSU Corn Market Outlook in Early March 2017: Looking Ahead to “Next Crop” MY 2017/18

An analysis of U.S. and World Corn supply-demand factors and “Next Crop” 2017/18 Marketing Year supply-demand and price prospects is provided in the following article summary.  This information follows the USDA’s February 23-24, 2017 Agricultural Outlook Forum, as well as USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports on February 9, 2017.  A full version of this article is available on the KSU AgManager website:  http://www.agmanager.info

Following is a summary of the article on “Corn Market Outlook in Early March 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address:

KSU Grain Market Outlook Newsletter

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Summary

Overview

Since the USDA’s February 9th World Agricultural Supply and Demand Estimates (WASDE) report, MAY 2017 CME corn futures have been volatile – moving both higher and lower within the range of $3.67 ¼ to $3.87 ¼.  The February 23-24, 2017 USDA 2017 Agricultural Outlook Forum forecast of lower 2017 U.S. corn production of 14.065 billion bushels (bb) and a moderate reduction in “next crop” 2017/18 marketing year ending stocks of 2.215 bb have provided moderate support for the U.S. corn market.

Cash corn prices in at major grain elevators in central and western Kansas ranged from $3.04 to $3.28 on Tuesday, March 1st.  This represents a marked increase since October-December 2016 when prices had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn prices in east central and northeast Kansas – near river terminal locations – were $3.55 on March 1st, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive sign that corn usage has provided support for prices.  Kansas cash corn prices on have increased since late December, having avoided falling down to USDA loan rate – price support levels through the recent fall and winter months.

Other Market Factors in 2017

Other factors that could affect the U.S. corn market in 2017 include the following.

First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early spring 2017.

Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.

Third, at least moderate continued strength in U.S. corn exports – driven partly by the availability of exportable corn supplies from South America through spring 2017.

And fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017.  World geo-political events could provide an unanticipated “shock” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate.

USDA Supply-Demand Forecast for “Next Crop” MY 2017/18.  

With early USDA projections of 2017 U.S. corn plantings of 90.000 million acres or ‘ma’ (down 4.004 ma), harvested acres of 82.400 ma (down 4.348 ma), projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), 2017 U.S. corn production is forecast to be 14.065 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “next crop” MY 2017/18 total supplies of 16.435 bb – down 505 mb from last year’s record high).  Total use is forecast at 14.220 bb – down 400 mb from last year’s record high.  Ending stocks are projected to be 2.215 bb (15.58% S/U) – down from 2.320 bb (15.87% S/U) in “current” MY 2016/17.  United States’ corn prices are projected by the USDA to average $3.50 /bu – up from a midpoint estimate of $3.40 /bu from a year ago – but within the range of $3.20-$3.60 /bu for “current” MY 2016/17. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Forecasts for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18.  Each forecast scenario presents the likelihood of alternative, lower U.S. corn yields and production than projected by the USDA in the February 23-24, 2017 Agricultural Outlook Forum for “next crop” MY 2017/18. 

KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.786 bb” Scenario (25% probability) assumes: 90.000 ma planted, 82.400 ma harvested, 167.3 bu/ac trend yield, 13.786 bb production, 16.156 bb total supplies, 14.185 bb total use, 1.971 bb ending stocks, 13.89% S/U, & $3.65 /bu U.S. corn average price for “next crop” MY 2017/18; 

KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.596 bb” Scenario (15% probability) assumes: 90.000 ma planted, 82.400 ma harvested, 165.0 bu/ac yield, 13.596 bb production, 15.966 bb total supplies, 14.080 bb total use, 1.886 bb ending stocks, 13.39% S/U, & $3.70 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.360 bb” Scenario (5% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 150.0 bu/ac yield, 12.3605 bb production, 14.680 bb total supplies, 13.460 bb total use, 1.220 bb ending stocks, 8.92% S/U, & $4.55 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand:

Record high World corn production of 1,040.2 million metric tons (mmt) is projected for “current” MY 2016/17, up 8.3% from 960.7 mmt in MY 2015/16, and up 2.4% from 1,015.6 mmt in MY 2014/15.  Record high World corn total supplies of 1,250.6 mmt are projected for “current” MY 2016/17, up from 1,170.5 mmt in MY 2015/16, and from 1,190.3 mmt in MY 2014/15. 

World corn exports of 149.0 mmt are projected for “current” MY 2016/17, up 23.0% from 121.1 mmt in MY 2015/16, and up 4.8% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 217.6 mmt (21.1% S/U) in “new crop” MY 2016/17 are up from 210.4 mmt (21.9% S/U) in MY 2015/16, and from 209.8 mmt (21.4% S/U) in MY 2014/15.  

Although World corn ending stocks are projected to be a record high in “current” MY 2016/17 at 217.6 mmt, World corn percent ending stocks-to-use are forecast to actually decline marginally to 21.1%.  Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine).   Ongoing, strong demand could cause sharply increased corn market volatility in the summer of 2017 IF any threats to the 2017 U.S. crop emerge.

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Grain Market Update (3rd of 5 parts) – Graphics of U.S. Grain Sorghum Market Outlook

In the following charts is the third of five blog posts illustrating parts of the “Grain Market Outlook for 2017” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien.  The complete presentation will be available on the www.AgManager.info website provided by the Department of Agricultural Economics at Kansas State University .

This third of five (5) related blog posts provides information on Grain Sorghum Market Situation and Outlook.

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KSU Grain Sorghum and World Coarse Grain Market Outlook in December 2016 – USDA Projections for “Next Crop” MY 2017/18

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

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

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Summary

Overview

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.

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KSU Wheat Market Outlook in December 2016: USDA and KSU Price Forecasts for “Next Crop” MY 2017/18

An analysis of U.S. and World wheat supply-demand factors and 2017 price prospects following the USDA’s December 9th World Agricultural Supply Demand Estimates (WASDE) report, and the market actions that have followed those reports will be available on the KSU AgManager website in the next few days (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/grain-marketing/grain-market-outlook-newsletter

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Summary

Wheat Market Prices

Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat futures market prices have traded higher – with CME MARCH 2017 Kansas HRW Wheat futures gaining $0.08 ¾ /bu to close at $4.13 ½ on 12/9/2016 – the day of the report – and trading as high as $4.20 ¾ per bushel through Wednesday, December 28th before closing down to $4.09 ½ that same day.

World Wheat Supply-Demand

For the “current crop” 2016/17 marketing year (MY), the USDA projected: 1) World wheat total supplies of 991.9 million metric tons (mmt) and total use of 739.8 mmt – both at record high levels, 2) that World wheat exports are continuing to trend higher to 176.8 mmt in the “current” marketing year – up from 172.5 mmt last year, and up from 164.4 mmt two years ago, 3) World wheat ending stocks at a record high 252.1 mmt up from 240.65 mmt last year, and 217.2 mmt two years ago, and 4) World wheat percent ending stocks-to-use (S/U) of 34.1% – up from 33.8% last year, and from 30.8% two years ago – up to the highest level since MY 2005/06.

For a perspective on how historically large World total wheat stocks and World wheat percent stocks-to-use now are, in MY 2007/08 the 34-year low in World wheat ending stocks of 128.1 mmt and at least a 57-year low in percent ending stocks-to-use of 20.75% stocks/use both occurred – the last major World wheat “short crop” marketing year.  The situation in MY 2007/08 compares to projections of 252.1 mmt ending stocks and 34.1% ending stocks-to-use projected for “current” MY 2016/17.  The “large crop-over supply” situation that now exists in World and U.S. wheat markets continues to have a strong prevailing negative influence on U.S. and World wheat prices.

Factors that Could Change the “Large Crop – Over-Supply” Wheat Market Situation

However, the broader large crop-over supply-low price” situation in the World wheat market may be “hiding” at least a couple of other important market issues.  First, while the quantity of wheat available in the World is plentiful, the available supply of high protein milling wheat is less so.  This factor may eventually help exports of both U.S. Hard Red Spring (HRS) wheat (higher protein – good quality) and U.S. Hard Red Winter (HRW) wheat (moderate protein – good quality) relative to World wheat export competitors.  As evidence of this, exports of U.S. HRW wheat have been occurring at the pace needed to meet USDA projections – helped by both low purchase prices and acceptable protein and quality.  This raises the outside possibility of improved U.S. HRW prices in coming months.  Second, while the supply of wheat in World markets overall has grown, the supply of wheat in the “World Less China” is projected to have actually “contracted” or “diminished” in “current crop” MY 2016/17 compared to a year ago – down to the tightest supply-balances situation since MY 2013/14.  If this “China factor” eventually leads to noticeably tighter available global supplies of exportable wheat to occur in coming months, it could have a positive impact U.S. wheat market prices in Spring 2017.

Even so, given the broader World wheat market’s current focus – it is likely that significant World wheat production problems and/or trade disruptions would need to occur in year 2017 in order to have wheat prices recover significantly by spring-summer 2017.  Ongoing strength in the U.S. dollar exchange rate is a serious negative factor that is limiting the competitive affordability of U.S. wheat exports.  These factors have resulted in higher U.S. wheat ending stocks and % ending stocks-to-use, and have caused U.S. and Kansas wheat cash prices to fall sharply – down to and below the marketing loan rate in most of Kansas in fall / early winter 2016.

USDA U.S. Wheat Supply/Demand Forecast for “Next Crop” MY 2017/18

On December 1, 2016 the USDA released their preliminary Long Term Agricultural Projections to 2026, in which they projected 2017 U.S. wheat plantings of 48.500 million acres (ma) – down from 50.154 ma in 2015.  The USDA also forecast 2016 harvested acres of 41.100 ma which would be down from 43.890 ma a year ago.  Trendline 2017 wheat yields for 2017 are projected at 47.1 bu/a, down from the 2016 record of 52.6 bu/ac, while 2017 U.S. wheat production is forecast to be 1.936 billion bushels (bb), down from 2.310 bb in 2015.  Projected “next crop” MY 2017/18 total supplies are 3.199 bb (down from 3.410 bb in “current” MY 2016/17), with total use of 2.206 bb (down from 2.267 bb in “current” MY 2016/17).

Given these numbers, the USDA projected “next crop” MY 2017/18 ending stocks of 933 million bushels (mb) (vs 1.143 bb a year ago), with percent ending stocks-to-use of 45.0% S/U (vs 50.4% last year and 50.0% the previous year).  United States wheat average prices are projected to average $4.00 /bu – up from $3.70 in “current” MY 2016/17, but down from $4.89 /bu in MY 2015/16 and $5.99 /bu in MY 2014/15.   It is assumed by Kansas State University that these USDA projections for “next crop” MY 2016/17 have a 50% probability of occurring.

Three Alternative KSU U.S. Wheat S/D Forecast for “Next Crop” MY 2017/18

As an alternative to the USDA’s projection, three potential KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “next crop” MY 2017/18.  These scenarios assume lower 2017 U.S. planted (47.624 ma) and harvested (38.385 ma) wheat acres than the USDA – due to larger than normal amounts of “graze out” and “crop switching” in 2017.

KSU Scenario 1) “Lower Acres, Trend Yield” Scenario (30% probability) assumes for “next crop” MY 2017/18: 47.624 ma planted, 38.385 ma harvested, 47.0 bu/ac trend yield, 1.804 bb production, 3.067 bb total supplies, 960 mb exports, 200 mb feed & residual use, 2.191 bb total use, 876 mb ending stocks, 39.98% S/U, & $4.00-$4.50 /bu U.S. wheat average price;

KSU Scenario 2) “Lower Acres, Trend Yield, +20% Exports” Scenario (10% probability) assumes for “next crop” MY 2017/18: 47.624 ma planted, 38.385 ma harvested, 47.0 bu/ac trend yield, 1.804 bb production, 3.067 bb total supplies, 1.152 bb exports***, 200 mb feed & residual use, 2.383 bb total use, 684 mb ending stocks, 24.10% S/U, & $5.25-$5.75 /bu U.S. wheat average price;

KSU Scenario 3) “Lower Acres, Short Crop Yield” Scenario (10% probability) assumes for “next crop” MY 2017/18: 47.624 ma planted, 38.385 ma harvested, 43.6 bu/ac low yield***, 1.674 bb production, 2.937 bb total supplies, 925 mb exports, 200 mb feed & residual use, 2.156 bb total use, 781 mb ending stocks, 36.22% S/U, & $4.40-$4.90 /bu U.S. wheat average price.

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KSU Corn Market Outlook in December 2016: USDA and KSU Price Forecasts for “Next Crop” MY 2017/18

An analysis of U.S. and World corn supply-demand factors and 2017/18 price prospects following the USDA’s December 1st Preliminary forecasts for “Next Crop” 2017/18 (https://www.usda.gov/oce/commodity/projections/) and the December 9, 2016 USDA  World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website:  http://www.agmanager.info/default.asp

Following is a summary of the article on “Corn Market Outlook in December 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/grain-marketing/grain-market-outlook-newsletter

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Summary

Corn Futures & Kansas Cash Corn Market Situation

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 $3.45 ¾ on Friday, December 23rd.  The USDA’s forecast of a record large 2016 U.S. corn crop 15.226 billion bushels (bb) and large 2016/17 marketing year ending stocks of 2.403 bb have continued to be the primary limiting focus of U.S. corn market prices.

Cash corn prices in at major grain elevators in central and western Kansas have declined below $3.00 per bushel down to the range of $2.66 to $2.96 per as of December 23rd, but have not fallen down to marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn prices in east central and northeast Kansas – near river terminal locations – were in the range of $3.26-$3.28 per bushel on 12/23/2016.  Although the “large supply and tight storage availability” situation predominates in local Kansas grain markets, it is a positive sign that corn usage has provided enough market support that Kansas cash corn prices have not fallen down to USDA loan rate – price support levels.

Other Market Factors to Consider

Other market factors to consider that could affect the U.S. corn market in 2017 include: 1) the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after 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. corn for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. corn exports – driven partly by a poor harvest and lack of exportable supplies in Brazil in 2016 as well as other World corn 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. corn exports.  Also, World geo-political events could provide an unanticipated “shock” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate.

USDA Supply-Demand Forecast for “Current” MY 2016/17

With USDA projections of 2016 U.S. corn plantings of 94.490 ma, harvested acres of 86.836 ma, record high projected yields of 175.1 bu/ac (vs 168.4 bu/ac in 2015 and the previous record high of 171.0 bu/ac in 2014), 2016 U.S. corn production is forecast to be a record high 15.226 bb – up from 13.601 bb in 2015, the previous record of 14.216 bb in 2014, and 13.829 bb in 2013.

With forecast “current” MY 2016/17 total supplies of 17.031 bb (record high), total use of 14.610 bb (record high), and projected ending stocks of 2.403 bb (16.45% S/U) – up from 1.738 bb (12.72% S/U) in MY 2015/16 and the highest since 4.259 bb (54.90% S/U) in MY 2004/05 – U.S. corn prices are projected by the USDA to be in the range of $3.05-$3.65 (midpoint = $3.35 /bu) – being down from $3.61 /bu for MY 2015/16.  (continued)

USDA Supply-Demand Forecast for “Next Crop” MY 2017/18

With early USDA projections of 2017 U.S. corn plantings of 90.000 ma (down 4.490 ma), harvested acres of 82.300 ma (down 4.536 ma), projected yields of 170.8 bu/ac (vs the record high of 175.3 in 2016), 2017 U.S. corn production is forecast to be 14.060 bb – down from the record high of 15.226 bb in 2016.

With forecast “next crop” MY 2017/18 total supplies of 16.513 bb (down 500 mb from last year’s record high), total use of 14.215 bb (down 395 mb from last year’s record high), and projected ending stocks of 2.298 bb (16.17% S/U) – down from 2.403 bb (16.45% S/U) in “current” MY 2016/17 – U.S. corn prices are projected by the USDA to average $3.30 /bu. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Forecasts for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18.  Each forecast scenario presents the likelihood of lower U.S. corn yields and production than projected by the USDA in the December 1st USDA early supply-demand estimate for “next crop” MY 2017/18.

KSU “Next Crop” MY 2017/18 Scenario #1) “167.4 bu/ac – 13.777 bb” Scenario (25% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 167.4 bu/ac trend yield, 13.777 bb production, 16.230 bb total supplies, 14.215 bb total use, 2.015 bb ending stocks, 14.18% S/U, & $3.55 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario 2) “165.0 bu/ac – 13.580 bb” Scenario (15% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 165.0 bu/ac yield, 13.580 bb production, 16.033 bb total supplies, 14.215 bb total use, 1.818 bb ending stocks, 12.79% S/U, & $3.70 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.345 bb” Scenario (5% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 150.0 bu/ac yield, 12.345 bb production, 14.798 bb total supplies, 13.460 bb total use, 1.338 bb ending stocks, 9.94% S/U, & $4.30 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand

Record high World corn production of 1,039.7 million metric tons (mmt) is projected for “current” MY 2016/17, up 8.2% from 961.1 mmt in MY 2015/16, and up 2.5% from 1,014.0 mmt in MY 2014/15.  Record high World corn total supplies of 1,248.7 mmt are projected for “new crop” MY 2016/17, up from 1,169.3 mmt in MY 2015/16, and from 1,188.8 mmt in MY 2014/15.

World corn exports of 147.7 mmt are projected for “new crop” MY 2016/17, up 21.8% from 121.2 mmt in MY 2015/16, and up 3.9% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 222.25 mmt (21.7% S/U) in “new crop” MY 2016/17 are up from 208.95 mmt (21.8% S/U) in MY 2015/16, and from 208.3 mmt (21.2% S/U) in MY 2014/15.

Although World corn ending stocks are projected to be a record high in “new crop” MY 2016/17 at 222.25 mmt, World corn percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 21.7% – indicative that strong World demand for corn at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.

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KSU Weekly Grain Market Analysis: End of 2016 Supply-Demand and Prices for U.S. Corn, Sorghum, Wheat and Soybeans

Grain market summary notes, charts and comments ahead of the KSU Agriculture Today Grain Outlook to be played on Friday, December 23rd will be available on the Kansas State University www.AgManager.info website at the following web address:

http://www.agmanager.info/news/weekly-grain-market-outook-dan-obrien

The recorded radio program will be aired at 10:03 a.m. central time, Friday, January 8th on the K-State Radio Network (here) – web player available.  Later on the program can also be listened to via a link from the following website in the “Radio Interviews” section: http://www.agmanager.info/news/default.asp

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

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Corn Market Analysis for the 2017 Kansas Corn Schools in Wichita (Jan. 9th), Oakley (Jan. 11th) and Olathe (Jan. 13th)

Following is a summary of corn market analysis and outlook information from Kansas State University to be presented at a series of Kansas Corn Schools in January 2017.  Locations are Wichita (South Central KS) on Monday, January 9th, Oakley (Northwest KS) on Wednesday, January 11th, and Olathe (East Central KS) on Friday, January 13th.  More information on how to register for these meetings please visist the following web location:

http://kscorn.com/2016/11/cornschool/

Corn Market Risk Management in 2017

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

A. U.S. and World Corn Supply-Demand & Price Situation.

After producing the four largest U.S. corn crops on record over the 2013-2016 period following the drought of 2012, U.S. corn ending stocks of 2.403 billion bushels in the “new crop” 2016/17 marketing year have risen to a 29-year high, while percent ending stocks-to-use of 16.56 percent have risen to an 11-year high. In this “large supply – low price,” “buyer’s market,” the USDA has projected U.S. average corn prices in market year 2016/17 in the $3.05 to $3.65 range — down for four consecutive years from a record high of $6.89 per bushel in drought-stricken market year 2012/13 to the lowest level since $3.04 per bushel in market year 2006/07. Foreign coarse grain supplies and ending stocks also have reached record high levels in marketing year 2016/17 — up to 1,118 million metric tons — further exacerbating the “large crop – low price” scenario that currently exists in the U.S. and world corn market.

B. 2017 Corn Market Expectations and Contingencies.

Lower U.S. corn prices are likely to prevail through the winter months until at least mid-spring to early summer 2017 unless unexpected and substantial crop production problems occur in other major coarse grain production regions of the world, such as Argentina, Brazil, China, or the Ukraine. It is also possible that the anticipated change in world weather patterns to a La Nina condition could have a negative impact on 2016 South American (particularly in Argentina and southern Brazil) and U.S. corn production in the western Corn Belt. However, tangible evidence of such a crop production impacts will not be available until February-April 2017 in Argentina and Brazil, and later in the summer months in the United States. Also, financial market volatility, trends in the value of the U.S. dollar relative to other world currencies, and other economic factors may affect the U.S. corn market and other agricultural and energy commodity prices in coming months. However, absent any of these surprises to the U.S. and Kansas corn market, in-state corn prices will likely follow the average normal seasonal price pattern of the last 15 years, with harvest lows followed by seasonal increases through spring-early summer 2017, with weather-based market volatility likely to influence U.S. corn prices through the mid-to-later summer months.

C. Kansas Irrigated & Non-Irrigated Corn Cost of Production

Kansas cash corn prices of $2.87 to $3.36 per bushel in mid-December 2016 at major grain markets throughout the state are substantially below Kansas State University estimates of average cost of production from Kansas Farm Management Association enterprise records for the 2009-2015 period. Kansas State University estimates of statewide average irrigated corn cost of production were $4.00 per bushel in 2015, and $4.47 per bushel on average over the 2010-2014 period. For non-irrigated corn, Kansas State University estimates of statewide average cost of production were $4.36 per bushel in 2015 (with much larger than normal yields) and $5.70 per bushel on average over the 2010-2014 period.

D. What signals about 2017 are the CME corn futures markets providing?

As of December 16, 2016, the structure of futures contract prices over the remainder of the 2016/17 marketing year (i.e., through August 31, 2017) provides little or no incentive for commercial storage of grain and is near neutral at best for on-farm storage. On December 16, 2016 CME MARCH 2016 corn futures closed trade at $3.56 ½ per bushel, followed by MAY 2017 CME corn at $3.63 ¼, JULY 2017 CME corn at $3.70 ¾, and SEPTEMBER 2017 CME corn at 3.77 ½ per bushel.  Per month futures carrying charges for MARCH-MAY were $0.03375 per bushel, $0.0375 per bushel per month for MAY-JULY, and $0.03375 per bushel for JULY-SEPTEMBER.

If commercial storage costs before interest are commonly $0.04 per bushel per month, then mid- December 2016 CME corn futures carrying charges offer no incentive for storing grain — other than the possibility that local cash basis levels may narrow or strengthen enough to make storage possible. If on-farm storage cost is approximately $0.02-$0.02 ½ per bushel, then on-farm storage (before cost of interest) appears to be a “break-even” to slightly profitable marketing strategy absent any rally in corn futures or narrowing of basis in spring-early summer 2017.

E. Signals from New Crop 2017 DEC Corn & NOW Soybean futures

Concerning new crop 2016 acreage prospects for corn and other major competitive crops, on December 18, 2016 CME NOV 2017 soybean futures closed at $10.16 ¼ and CME DEC 2017 corn futures at $3.86 with a ratio of 2.63.   Over time this ratio of soybean to corn prices would be considered to be “favoring soybeans” (i.e., being markedly larger than the customary 2.2 to 2.3 break-even level) —favoring soybeans over corn from an expected profitability standpoint. That said, it is likely that prospects for the South American soybean crop during March-April 2017 will affect both old crop and new crop soybean and corn futures prices in the United States at that time, and could lead to significant changes in relative 2017 prices and expected profits between U.S. corn and soybeans, and ultimately affect U.S. farmers’ 2017 planted acreage decisions.

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