Weekly Grain Market Review (KSU) – Examining USDA Reports as they on Corn-Soybean Crop Maturity Prospects, and World Wheat Supply-Demand

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending September 13, 2019 at the following web address:

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

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Weekly Grain Market Commentary

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

September 13, 2019

Grain markets responded positively to the events of Thursday, September 12th, including the outcome of the USDA Crop Production and World Agricultural Supply-Demand Estimates (WASDE) reports, and positive news about ongoing U.S.-China Trade negotiations.

A. Soybean Market Factors

The USDA projected that ending stocks of U.S. soybeans would tighten further in the “New Crop” 2019/20 marketing year (which began on September 1, 2020).  Ending stocks were projected to decline from 1.005 billion bushels (bb) (25.16% ending stocks-to-use) in “old crop” MY 2018/19 to 640 million bushels (mb) (15.93% ending stocks-to-use) in “new crop” MY 2019/20 – to end on August 31, 2020.  The USDA raised its projection of the U.S. average farm price by $0.10 up to $8.50 per bushel in “new crop” MY 2019/20.  In combination of new purchases of U.S. soybeans by China, exclusion of U.S. soybeans from planned tariffs, and the resumption of U.S.-China trade talks were all supportive of soybean market prices. 

Within the USDA Crop Production report were indications of the lateness of U.S. soybean crop development – showing a 2-3 week delay in soybean crop development and maturity.  The USDA highlighted a tool from NASA that helps to quantify or describe the degree of U.S. crop maturity – called the MODIS NDVI 8-day index for the U.S..  The acronym “NDVI” stands for “normalized difference vegetation index”.  This tool shows how the development of the 2019 U.S. soybean crop compares to the 2001-2015 period, and will be helpful in coming weeks to asses U.S. soybean crop maturity going into fall harvest. 

Information about the NASA MODIS NDVI product is available at the following web address:

https://modis.gsfc.nasa.gov/data/dataprod/mod13.php

In response to these and other soybean market factors, there was an increase of $0.29 to $8.95 1/2 per bushel occurred in NOV 2019 Soybean futures on September 12th.

B. Corn & Grain Sorghum Market Factors

DEC 2019 Corn futures also increased by $0.07 1/4 to $3.67 1/4 per bushel on September 12th – responding to a modest decline in projected 2020 U.S. Corn production by 102 mb down to 13.799 bb.   There are continuing concerns about final U.S. corn planted and particularly harvested acres as well as corn maturity risks in delayed planting areas. 

Corn market prices were also supported by the USDA’s forecast that World Corn ending stocks-to-use will continue a four year decline, from 33.1% in MY 2016/17, down to 31.2% in MY 2017/18, to 29.1% in “old crop” 2018/19, and down further to 27.2% in “new crop” MY 2019/20.   United States’ Grain Sorghum ending stocks-to-use are projected to tighten from 15.94% in “old crop” MY 2018/19 down to 12.78% in “new crop” MY 2019/20. 

The USDA made no changes its projection of the U.S. average farm price of Corn at $3.60 per bushel , and Grain Sorghum at $3.30 per bushel in “new crop” MY 2019/20.

Just as for soybeans, within the USDA Crop Production report were indications also of the lateness of U.S. corn crop development – again showing a 2-3 week delay in corn crop development and maturity.  The MODIS NDVI (normalized difference vegetation index) 8-day index for the U.S. shows how the development of the 2019 U.S. corn crop compares to the 2001-2015 period.  Just as for soybeans, this tool for corn development will be helpful in coming weeks to asses U.S. corn crop maturity going into fall harvest.  Information about the NASA MODIS NDVI product is available at the following web address: https://modis.gsfc.nasa.gov/data/dataprod/mod13.php

C. Wheat Market Factors

DEC 2019 Hard Red Winter (HRW) Wheat futures also increased modestly by $0.05 to $4.03 1/2 per bushel on September 12th.  There were no changes in the USDA’s forecast of “new crop” MY 2019/20 U.S. supply-demand factors.  However, the USDA lowered its projection of the U.S. average farm price of wheat by $0.20 to $4.80 per bushel.   The “new crop” 2019/20 wheat marketing year began on June 1, 2019, and will conclude on May 31, 2019.

Wheat market prices were also supported by the USDA’s forecast that World Wheat ending stocks-to-use will continue to increase. From a low of 26.1% in MY 2012/13, World wheat ending stocks-to-use trended higher to 28.6% in MY 2013/14, 31.8% in MY 2014/15, 34.3% in MY 2015/16, 35.7% in MY 2016/17, and a high of 38.0% in MY 2017/18.  While World Wheat ending stocks have actually declined over the last few years when adjusted for Chinese stocks, still the overall focus of the World wheat market is seemingly on these aggregate figures.

Weather-related roduction problems for wheat are occurring some important producing regions of the World, such as eastern Australia, northern Europe, parts of the Former Soviet Union (western Russia and northern and western Ukraine), Argentina, and Canada have not “come together” at this time in an aggregate, World scale manner to bring declines to Wheat supply-demand balances.

D. Looking to Coming USDA Production Numbers

Overall, grain markets appear to still be waiting for some verification of 2019 U.S. feedgrain and oilseed crop prospects. While the September 12th USDA Crop Production and WASDE reports provided some information about crop prospects, the October 10th, November 8th, and January 2020 USDA reports with harvest information “in hand” will likely “tell the tale” of actual 2019 fall harvested crop size. So, again, stay tuned!

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Access to the KSU Agriculture Today Radio Program was aired on Friday, September 13th at 10:00 a.m. CDT and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

On this program KSU Extension Agricultural Economist Daniel O’Brien and KSU Agricultural Communications and Education Specialist Eric Atkinson provide their analysis of current grain markets and their outlook for the remainder of year 2019. In particular, they discuss how how grain basis levels for corn, grain sorghum, hard red winter wheat, and soybeans in Kansas are reacting to recent lows in grain futures prices.

Following are selected figures for this market summary report, with tables and graphics.

 

Weekly Grain Market Review (KSU) – Examining USDA Reports as they on Corn-Soybean Crop Maturity Prospects, and World Wheat Supply-Demand

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending September 13, 2019 at the following web address:

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

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Weekly Grain Market Commentary

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

September 13, 2019

Grain markets responded positively to the events of Thursday, September 12th, including the outcome of the USDA Crop Production and World Agricultural Supply-Demand Estimates (WASDE) reports, and positive news about ongoing U.S.-China Trade negotiations.

A. Soybean Market Factors

The USDA projected that ending stocks of U.S. soybeans would tighten further in the “New Crop” 2019/20 marketing year (which began on September 1, 2020).  Ending stocks were projected to decline from 1.005 billion bushels (bb) (25.16% ending stocks-to-use) in “old crop” MY 2018/19 to 640 million bushels (mb) (15.93% ending stocks-to-use) in “new crop” MY 2019/20 – to end on August 31, 2020.  The USDA raised its projection of the U.S. average farm price by $0.10 up to $8.50 per bushel in “new crop” MY 2019/20.  In combination of new purchases of U.S. soybeans by China, exclusion of U.S. soybeans from planned tariffs, and the resumption of U.S.-China trade talks were all supportive of soybean market prices. 

Within the USDA Crop Production report were indications of the lateness of U.S. soybean crop development – showing a 2-3 week delay in soybean crop development and maturity.  The USDA highlighted a tool from NASA that helps to quantify or describe the degree of U.S. crop maturity – called the MODIS NDVI 8-day index for the U.S..  The acronym “NDVI” stands for “normalized difference vegetation index”.  This tool shows how the development of the 2019 U.S. soybean crop compares to the 2001-2015 period, and will be helpful in coming weeks to asses U.S. soybean crop maturity going into fall harvest. 

Information about the NASA MODIS NDVI product is available at the following web address:

https://modis.gsfc.nasa.gov/data/dataprod/mod13.php

In response to these and other soybean market factors, there was an increase of $0.29 to $8.95 1/2 per bushel occurred in NOV 2019 Soybean futures on September 12th.

B. Corn & Grain Sorghum Market Factors

DEC 2019 Corn futures also increased by $0.07 1/4 to $3.67 1/4 per bushel on September 12th – responding to a modest decline in projected 2020 U.S. Corn production by 102 mb down to 13.799 bb.   There are continuing concerns about final U.S. corn planted and particularly harvested acres as well as corn maturity risks in delayed planting areas. 

Corn market prices were also supported by the USDA’s forecast that World Corn ending stocks-to-use will continue a four year decline, from 33.1% in MY 2016/17, down to 31.2% in MY 2017/18, to 29.1% in “old crop” 2018/19, and down further to 27.2% in “new crop” MY 2019/20.   United States’ Grain Sorghum ending stocks-to-use are projected to tighten from 15.94% in “old crop” MY 2018/19 down to 12.78% in “new crop” MY 2019/20. 

The USDA made no changes its projection of the U.S. average farm price of Corn at $3.60 per bushel , and Grain Sorghum at $3.30 per bushel in “new crop” MY 2019/20.

Just as for soybeans, within the USDA Crop Production report were indications also of the lateness of U.S. corn crop development – again showing a 2-3 week delay in corn crop development and maturity.  The MODIS NDVI (normalized difference vegetation index) 8-day index for the U.S. shows how the development of the 2019 U.S. corn crop compares to the 2001-2015 period.  Just as for soybeans, this tool for corn development will be helpful in coming weeks to asses U.S. corn crop maturity going into fall harvest.  Information about the NASA MODIS NDVI product is available at the following web address: https://modis.gsfc.nasa.gov/data/dataprod/mod13.php

C. Wheat Market Factors

DEC 2019 Hard Red Winter (HRW) Wheat futures also increased modestly by $0.05 to $4.03 1/2 per bushel on September 12th.  There were no changes in the USDA’s forecast of “new crop” MY 2019/20 U.S. supply-demand factors.  However, the USDA lowered its projection of the U.S. average farm price of wheat by $0.20 to $4.80 per bushel.   The “new crop” 2019/20 wheat marketing year began on June 1, 2019, and will conclude on May 31, 2019.

Wheat market prices were also supported by the USDA’s forecast that World Wheat ending stocks-to-use will continue to increase. From a low of 26.1% in MY 2012/13, World wheat ending stocks-to-use trended higher to 28.6% in MY 2013/14, 31.8% in MY 2014/15, 34.3% in MY 2015/16, 35.7% in MY 2016/17, and a high of 38.0% in MY 2017/18.  While World Wheat ending stocks have actually declined over the last few years when adjusted for Chinese stocks, still the overall focus of the World wheat market is seemingly on these aggregate figures.

Weather-related roduction problems for wheat are occurring some important producing regions of the World, such as eastern Australia, northern Europe, parts of the Former Soviet Union (western Russia and northern and western Ukraine), Argentina, and Canada have not “come together” at this time in an aggregate, World scale manner to bring declines to Wheat supply-demand balances.

D. Looking to Coming USDA Production Numbers

Overall, grain markets appear to still be waiting for some verification of 2019 U.S. feedgrain and oilseed crop prospects. While the September 12th USDA Crop Production and WASDE reports provided some information about crop prospects, the October 10th, November 8th, and January 2020 USDA reports with harvest information “in hand” will likely “tell the tale” of actual 2019 fall harvested crop size. So, again, stay tuned!

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Access to the KSU Agriculture Today Radio Program was aired on Friday, September 13th at 10:00 a.m. CDT and can be found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

On this program KSU Extension Agricultural Economist Daniel O’Brien and KSU Agricultural Communications and Education Specialist Eric Atkinson provide their analysis of current grain markets and their outlook for the remainder of year 2019. In particular, they discuss how how grain basis levels for corn, grain sorghum, hard red winter wheat, and soybeans in Kansas are reacting to recent lows in grain futures prices.

Following are selected figures for this market summary report, with tables and graphics.

 

Weekly Grain Market Review – “Standing By” in Late- August with Harvest “Truth” Coming in October-November

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending August 30, 2019 at the following web address:

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

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Access to the KSU Agriculture Today Radio Program to be aired on Friday, August 30th at 10:00 a.m. CDT is found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

On this program KSU Extension Agricultural Economist Daniel O’Brien and KSU Agricultural Communications and Education Specialist Eric Atkinson provide their analysis of current grain markets and their outlook for the remainder of year 2019. In particular, they discuss how best to interpret the August 12, 2012 USDA Crop Production report and the August 27th USDA-FSA Crop Acreage followup Report from the USDA Office of the Chief Economist.

Following are selected figures for this market summary report, with tables and graphics.

 

Weekly Grain Market Review – “In Process” of Arriving at “Actionable” U.S. Crop Production Numbers in Summer-Fall 2019

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending August 16, 2019 at the following web address:

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

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There are plausible explanations as to what the USDA’s National Agricultural Statistics Service (NASS) August 12th Crop Production numbers for corn and soybean planted and harvested acres represent, as well as that factors that influenced USDA Farm Service Agency (FSA) signup for prevented planting of corn versus soybeans and other crops. The FSA projection of planted acres also is rational, as is the difference between what the FSA indicated for planted acres as of August 1st, and what NASS indicated. Even the seemingly high projection of 2019 U.S. corn yields by USDA NASS is understandable given the process used by USDA in August to arrive at that estimate.

The key issue to remember is that in this “outside the norm” year, surveys and procedures that work relatively well to predict crop planted and harvested acres, as well as yields, are struggling to represent the objective best estimate of where final numbers for U.S. crop production will come out. We literally are not likely to have a resolution to this uncertainty in U.S. corn and soybean production prospects until we get into fall harvest in October. And even then questions about crop size are more than likely to linger through the November 2019 and the January 2020 USDA Crop Production and Grain Stocks reports. The December 1 USDA NASS Grain Stocks report to be released in January may very well “truth test” the USDA’s U.S. fall crop production forecasts this year – and cause a back calculation / recalculation of 2019 U.S corn production at that time.

In the meantime, we should probably expect a large amount of wet, slow drying corn to be harvested in fall 2019 (or later!) – given the lateness of planting in significant acreages of the U.S. Corn Belt. And we seem destined to continue to be involved in a back and forth production and marketing environment with Argentina and Brazil in Corn and Soybean production and exports, and increasing with Ukraine as well regarding Corn production and exports.

U.S. Wheat exports have been stronger of late due to production and export supply problems in Russia, Australia, and elsewhere. And there still is potential for larger than normal wheat feeding to occur in the U.S. – although the western Corn Belt areas where Hard Red Winter wheat supplies are located may have decent feedgrain production prospects by in large with recent rainfall received.

We are going to discuss these issues in depth at the upcoming 2019 Risk and Profit Profit Conference in Manhattan, Kansas on August 22-23, 2019. Please come as we address the key issues being faced by farmers in Kansas and beyond for fall 2019 through year 2020.

http://www.agmanager.info/s…/default/files/Brochure-2019.pdf
http://agmanager.info/sites/default/files/Schedule-2019.pdf
http://www.agmanager.info/events/risk-and-profit-conference

 

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Access to the KSU Agriculture Today Radio Program to be aired on Friday, August 16th at 10:00 a.m. CDT is found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

On this program KSU Extension Agricultural Economist Daniel O’Brien and KSU Agricultural Communications and Education Specialist Eric Atkinson provide their analysis of current grain markets and their outlook for the remainder of year 2019. In particular, they discuss how best to interpret the August 12, 2012 USDA Crop Production report results.

Following are selected figures for this market summary report, with tables and graphics.

 

Weekly Grain Market Review – Perspective on the Grain Markets ahead of the August 12th USDA Reports

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending August 9, 2019 at the following web address:

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

Access to the KSU Agriculture Today Radio Program to be aired on Friday, August 9th at 10:30 a.m. CDT is found at the following web address:

https://www.ksre.k-state.edu/news/radio/live/ksrn.html

On this program KSU Extension Agricultural Economist Daniel O’Brien and KSU Agricultural Communications and Education Specialist Eric Atkinson provide their analysis of current grain markets and their outlook for the remainder of year 2019.

Following are selected figures for this market summary report, with tables and graphics.

 

U.S. Ethanol and Biodiesel Markets and Profits – Net Losses for Ethanol & Biodiesel Plants in July 2019

A. Ethanol Price and Profitability Trends

By Iowa State University model estimates, ethanol plants in Iowa and other Midwest states were operating at losses of ($0.22 /gallon) losses in July, with estimated losses of ($0.25 /gallon) in June 2019.

During the July 1-26, 2019 period, corn input purchase prices for Iowa ethanol plants averaged $4.29 /bu – compared to $4.17 in June, and $3.63 1/2 /bu in May.  Selling prices of distillers dried grains (DDGS) (10% moisture) averaged $134.18 /ton during July 1-26, up from $130.53 /ton in June, and up from 118.63 /ton in May. The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.47 /gallon during July 1-26, up marginally from $1.46 /gallon in June, and from $1.25 /gallon in May.

Overall, during the July 1-26, 2019 time frame, the estimated cost of production of a representative ethanol plant in Iowa has averaged $1.72 per gallon – comparable to $1.69 in June, $1.53 per gallon in May, and $1.43 in April.  This has lead to an estimated average negative net return of minus $0.25 per gallon produced so far in July 2019, with is comparable to losses of $0.22 /gallon in June and losses of $0.27 /gallon in May 2019.

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B. Ethanol Production & Stocks Trends

Since the beginning of the “old crop” 2018/19 marketing year (MY) for U.S. corn on September 1, 2018, U.S. ethanol production has averaged 1.036 million barrels per week over 46 weeks. At this average pace, U.S. ethanol production would reach 15.878 billion barrels in “current” MY 2018/19.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), at total of 5.611 billion bushels of feedgrains would be used for ethanol production in the current marketing year.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on June 11, 2018 have a more conservative, cautious perspective.  In the July WASDE report the USDA projected that in current MY 2018/19 a total of 5.500 billion bushels (bb) of U.S. corn would be used for ethanol production, and that 100 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production.

United States’ ethanol stocks had declined moderately during April-June from historically high levels in March 2019 – which had been burdening the ethanol market and having a negative impact on U.S. ethanol prices.  Now again in July U.S. ethanol stocks have increased – leading to larger corn supply-demand balances, and together with higher priced corn inputs are pressuring the profitability of U.S. ethanol plants.

C. Biodiesel Price & Profitability Trends

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although the losses are comparatively small relative to ethanol producing facilities during the July 1-26, 2019 period.

By Kansas State University estimates, during the July 1-26, 2019 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $28.03 per cwt – up from an average price $27.64 /cwt in June 2019.   This occurred while Biodiesel selling prices averaged $2.81 /gallon during 7/1-30/2019, being up from $2.72 /cwt in May.

Also during the July 1-30 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.85 per gallon – up from $2.75 per gallon June, and from $2.70 /gallon in May.  As a result, net returns of this representative soy biodiesel plant is Iowa during July were estimated a loss of $0.04 per gallon produced.  This is comparable to a projected monthly average loss of $0.03 per gallon in June, and profits of $0.09 /gallon during the May 2019 period. 

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Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, July 30, 2019 and will be located at the KSU AgManager.info website – at the following web address:

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

 

Following are the graphics of this presentation.

Weekly Grain Market Review With Corn, HRW Wheat, and Soybean Markets and Examination of Futures CFTC Position Data

This Weekly Grain Market Review from the Kansas State University Agricultural Economics Department (Daniel O’Brien – Author) is available on the www.AgManager.info website for the market week ending July 26, 2019 at the following web address:

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

Following is the text of the article, with selected figures included at the end.

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Grain Market Review KSU Ag Economics

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

Friday-Saturday, July 26-27, 2019

1) Feedgrain Market Overview

The U.S. feedgrain market is waiting for direction on substantive U.S. corn and grain sorghum planted acreage numbers to be released in the August 12th USDA reports.  These planted acreage numbers will be based on redone early August planted acreage surveys of farmers, satellite image maps, and U.S. farmer’s signup information for prevented plantings in USDA Farm Service Agency (FSA) offices.

While planted acreage and related estimates of harvested acreage of corn and grain sorghum will be perhaps the major focus on these USDA August reports, there are varying reports and opinions regarding yield prospects for the 2019 corn crop.  While the corn market is likely to deal with much the the uncertainty about corn and grain sorghum planted acres in the August Crop Production report, it will have to wait for more accurate assessments of 2019 U.S. corn yields and therefore, final U.S. corn production until the September and especially the October-November Crop Production reports.

Because of the large proportion of late plantings in the eastern and northern U.S. Corn Belt regions, there is more risk than usual of early yield limiting frost damage to feedgrains this coming fall.  This question is not likely to be resolved by the feedgrain markets until at least the September and most likely the October USDA Crop Production reports.   In the meantime, higher U.S. corn prices in summer 2019 are causing rationing of use in ethanol production and U.S. exports, and are likely affecting livestock feed usage of feedgrains as well.

2) Wheat Market Overview

With the 2019 U.S. Hard Red Winter (HRW) Wheat harvest all but completed in the central and southern plains regions, the U.S. wheat market’s attention turns domestically to a) 2019 Hard Red Spring (HRS) Wheat crop prospects in the northern plains states, b) U.S. Soft Red Winter (SRW) Wheat prospects in the eastern Corn Belt states, and c) White Wheat (WW) crop estimates in the Pacific Northwest and Mountain West States.  Reports from recent crop tours are for moderate-to-good yields of HRS Wheat in the Northern Plains states of North Dakota, etc..  With large yields, fairly good test weights but average-to-below average protein in HRW Wheat in many western Kansas locations, it will be important to find out the protein quality of the coming 2019 HRS Wheat crop for blending and milling purposes.

Concerns have also emerged about foreign wheat production prospects among major export competitors in parts of Europe, Russia, and Australia.  As a result, weekly U.S. wheat exports have been “positive” to sometimes “bullish” – especially for U.S. HRW Wheat.  Also, increased feed usage of U.S. wheat is likely to occur as a result of short 2019 U.S. feedgrain production – having some impact on U.S. wheat supply-demand balances (i.e., down 200+ million bushels) and prices.

3) Soybean Market Overview

The USDA reduced is projection of U.S. soybean planted and harvested acres in the July WASDE report, which resulted in tighter projected ending stocks-to-use for “new crop” MY 2019/20 of 19.3% – down sharply from 26.6% a year earlier but still large historically.  The USDA forecast of U.S. season average soybean prices for “new crop” MY 2019/20 was raised by $0.15 per bushel up to $8.40, while still being down from $8.50 per bushel in “old crop” MY 2018/19 ending on August 31, 2019.

A record large 2019 soybean crop in Brazil and near record high crop in Argentina are limiting U.S. soybean export and price prospects.  Also, the continued U.S.-China trade conflict has severely limited U.S. sales to that country, and diminished U.S. sales overall.

The growing season problems that have plagued U.S. corn production prospects this year have also affected soybeans but to a lesser degree – i.e., delayed or less than ideal planting conditions, hot-dry conditions recently, etc..  To the degree that volatile feedgrain markets occur from mid-August on into fall, soybean markets may be affected as well.  However, at this point in time U.S. grain markets seems to be less concerned about 2019 soybean crop production difficulties than for feedgrains.

4) Long Term Grain Futures Market Price Expectations in Years 2020-2022

  • Corn Futures Price Prospects through Harvest 2022

On Friday, July 26th SEPTEMBER 2019 Corn futures closed at $4.14 1/2 compared to $4.24 1/2 for DEC 2019 Corn. These near term prices compare to longer term prices of $4.16 for DEC 2020 Corn, and $4.20 – $4.20 1/4 for DEC 2021 & DEC 2022 Corn futuresAs of today, looking two-to-four years ahead, when the corn market has little information to go on other than current “old crop” and early “new crop’ supply-demand and prices, corn market futures price expectations for harvest in years 2020, 2021 and 2022 are in the $4.16-$4.20 1/2 per bushel range.  These price levels are down marginally (i.e., $0.04 per bushel) from harvest 2019 corn futures as expressed by DEC 2019 Corn futures at $4.24 1/2 /bu.  

With DEC Corn futures from 2019 through year 2020 are largely “unchanged to marginally declining” through time, to a small degree these current and longer term DEC Corn futures prices reflect a small amount of expected “mean reversion” in corn markets.  In other words, there seems to be the expectation among traders that higher corn prices NOW in year 2019 will provide an impetus for higher production and lower prices future years.  Still though, until the uncertainty about U.S. feedgrain production and prices for “new crop” MY 2019/20 is resolved in the coming fall months, the question of the level of DEC 2019 corn futures and market expectations for succeeding years will remain unresolved.

  • HRW Wheat Futures Price Prospects through Harvest 2022

On Friday, July 26th SEPTEMBER 2019 HRW Wheat futures closed at $4.32 compared to $4.50 1/4 for DEC 2019 HRW Wheat. These nearer term prices compare to longer term prices of $4.84 for “next harvest” JULY 2020 HRW Wheat, and $5.28 1/2 – $5.37 1/4 for JULY 2021 & JULY 2022 HRW Wheat futures.  So, as of today, looking two-to-four years ahead, when the HRW Wheat market just like the Corn futures market has little to go on other than current “new crop” supply-demand and prices, HRW Wheat futures market price expectations for harvest in years 2020, 2021 and 2022 are in the range of $0.52-$1.05 1/4 per bushel higher than lead SEPT 2019 futures.

Compared to deferred “new crop” DEC Corn futures, on the surface these deferred “new crop” JULY HRW Wheat futures prices APPEAR to indicate market expectations of much higher prices over the next 2 to 4 years. HOWEVER, it is more likely that the accumulation of carrying charges from current to deferred futures 2 to 4 years into the future INSTEAD represent market expectations of the impact of the Variable Storage Rate (VSR) mechanism upon grain futures contract prices into the future relative to the level of current lead HRW Wheat futures contracts.

In other words, it appears at this time that the price determination focus of the HRW wheat futures complex is set upon the lead SEPTEMBER 2019 HRW Wheat futures contract, with anticipated carrying charges between deferred contracts affecting relative price levels in an accumulative manner off into future months – and in this case – years.  This phenomena in HRW Wheat futures DOES present forward pricing opportunities for seller hedgers in future time periods should they choose to bear the risk and uncertainty of such deferred pricing strategies.

  • Soybean Futures Price Prospects through Harvest 2022

On Friday, July 26th AUGUST 2019 Soybean futures closed at $8.83 1/4 compared to $9.01 for “new crop” NOVEMBER 2019 Soybean futures. These nearer term prices compare to longer term prices of $9.48 3/4 for “future harvest” NOV 2020 Soybeans, $9.49 3/4 for NOV 2021, & $9.36 for NOV 2022 Soybean futures.  So again, as of today, looking two-to-four years ahead, when the soybean market just like the Corn and HRW Wheat futures markets has little to go on other than current “new crop” supply-demand and prices, Soybean futures market price expectations for harvest in years 2020, 2021 and 2022 are in the range of $0.52-$0.66 1/2 per bushel higher than lead AUGUST 2019 futures.

Compared to deferred “new crop” NOV Soybean futures prices of $9.01 per bushel, these deferred “new crop” NOV Soybean futures prices indicate market expectations of much tighter supply-demand conditions and higher soybean prices over the next 2 to 4 years. For soybeans originated in the United States, they may also reflect a long term expectation that U.S.-China trade conflicts will be resolved – with larger U.S. soybean exports and higher prices as a result.

5) Corn Futures Managed Money (Spec) & Commercial Trader Positions in (CFTC Data)

The “more bullish” position of the corn futures market in recent weeks is shown in the evolution of futures trade positions during June-July.  As reported by Commodity Futures Trading Commission (CFTC) trader position dataManaged Money (Spec) traders position data indicate that there existed a “short” or “sell” position that has declined to 587 million bushels (mb) for the week ending July 23, 2019, based on 117,300 contracts @ 5,000 bu/contract .  This is moderately more bearish than the previous week (485 mb short for week ending July 16th), but decidedly less bearish than record large short position that occurred for the week ending April 23, 2019 at 2.650 bb.

There were also “long” or “buy” positions of 1.304 mb from 260,840 contacts for Managed Money (Specs) for the week ending 7/23/2019.  When combined, there was a “net LONG” managed money position of 718 mb in Corn futures for the week ending July 23, 2019 – the most recent available public record of trading data.  This is a dramatic change from the record “net SHORT” managed money position occurred recently for the week ending April 23, 2019 with 1.721 bb in Corn futures.

Also of note, as of the week ending July 23rd, Commercial Traders in Corn futures had a near record large short or “sell” position in Corn futures of 977,132 contracts (4.886 bb), combined with a long or “buy” position of 460,046 contracts (2.300 bb).  This is a near record large short or “sell” position for Corn futures since mid-year 2006, with 517,086 contracts (2.585 bb) for the week ending July 23, 2019.   The record highs since early 2006 for commercial short positions (5.040 bb), and for net short commercial positions (2.691 bb) was recorded for the week ending July 16, 2019 – the previous week.  It appears that commercial sellers of corn (such as farmers and grain elevators) are taking advantage of the current high prices in Corn futures to hedge against the possibility of falling prices later in 2019.

6) HRW Wheat Futures Managed Money (Spec) & Commercial Trader Positions in (CFTC Data)

The “relatively more positive” although still “bearish” net position of the HRW Wheat futures market is shown in futures trade positions during June-July 2019.  As reported by Commodity Futures Trading Commission (CFTC) trader position data, for the week ending July 23, 2019 Managed Money (Spec) traders held an aggregate “short” or “sell” position that has declined to 345 million bushels (mb), based on 68,930 contracts @ 5,000 bu/contract.  This is down from a record bearish short position since at least June 2006 on the week ending April 30, 2019 at 117,242 contracts (586 mb).

There were also “long” or “buy” positions of 240 mb from 48,086 contacts for Managed Money (Specs) for the week ending 7/23/2019.  When combined, there was a “net short” managed money position of 104 mb in HRW Wheat futures for the week ending July 23, 2019 – the most recent available public record of trading data. This is a more positive position in the HRW Wheat futures market than the record “net short” managed money position that occurred for the week ending May 7, 2019 with 299 m in HRW Wheat futures “net short”.

Also of note, as of the week ending July 23rd, Commercial Traders in HRW Wheat futures had an aggregate short or “sell” position of 98,148 contracts (491 mb), combined with a long or “buy” position of 71,615 contracts (358 mb).  The record large short or “sell” position for HRW Wheat futures since mid-year 2006 of 172,992 contracts (865 mb) occurred on the week ending July 11, 2017.   The record large NET short amount of commercial positions (652 mb) was recorded for the week ending July 18, 2017 – again during the later part of harvest 2 years ago.  It appears the current HRW Wheat futures market supply-demand and price situation in “new crop” MY 2019/20 is an improvement from two years ago in MY 2017/18, with only “moderate” harvest time “bearishness” occurring compared to selected years in the past.

7) Soybean Futures Managed Money (Spec) & Commercial Trader Positions in (CFTC Data)

Just as for HRW Wheat futures, Soybean futures have have trended toward a “relatively more positive” although still “bearish” net position of futures trader during June-July 2019.  As reported by Commodity Futures Trading Commission (CFTC) trader position data, for the week ending July 23, 2019 Managed Money (Spec) traders held an aggregate “short” or “sell” position of 566 million bushels (mb), based on 113,203 contracts @ 5,000 bu/contract.  This is down from a record bearish short position since at least June 2006 on the week ending May 14, 2019 at 230,728 contracts (1.154 bb).

There were also “long” or “buy” positions of 353 mb from 70,824 contacts for Managed Money (Specs) for the week ending 7/23/2019.  When combined, there was a “net short” managed money position of 213 mb in Soybean futures for the week ending July 23, 2019. A “net short” managed money position in the range of 184-229 mb has occurred since the week ending June 25, a more positive market position than the range of 641-856 mb “short” that occurred during the April 23rd through May 28th period.  Planting and other crop production problems have provided support for soybean futures while limiting the “bearish” positions of Managed Money (Specs) traders.

Also of note, as of the week ending July 23rd, Commercial Traders in Soybean futures had an aggregate short or “sell” position of 481,452 contracts (1.407 bb), combined with a long or “buy” position of 213,662 contracts (1.068 bb).  The record high for NET short commercial hedge positions (1.739 bb) was recorded for the week ending July 2, 2012 – during the drought year of 2012.  It seems that commercial grain hedgers are somewhat “mixed” in their actions regarding the soybean market – with neither extremely large long or short positions dominating their soybean hedging portfolio.