KSU U.S. Sorghum Acres-Yield Scenarios and World Coarse Grain Markets in Mid-June 2019

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s June 11th USDA World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website  (http://www.agmanager.info/).

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

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

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U.S. Grain Sorghum & World Coarse Grain Market Outlook

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

June 14, 2019

 

A. The Current U.S. Grain Sorghum Market Situation

Prospects for U.S. grain sorghum market prices have been greatly effected by U.S. corn planting problems and prospective production concerned that developed in May and early-June, 2019.  As evidence of this change, the USDA raised the projected price of U.S. grain sorghum in the “new crop” 2019/20 marketing year by $0.50 to $3.50 per bushel in the June 11th WASDE report.  It is notable that this projected price increase occurred with no changes to the U.S. grain sorghum supply-demand balance sheet for the “new crop” 2019/20 marketing year.  This indicates that major market cross-over impacts on U.S. grain sorghum supply-demand and price prospects are expected to happen as a result of dramatically declining 2019 U.S. corn production prospects. 

Planting delays and prevented planting choices, as well as figuring out the procedures and qualifiers for future Market Facilitation Payments (MFPs) have been some of the challenges in the U.S. feedgrain market in recent weeks.   Delayed plantings of U.S. corn until early-mid June have been severe and prevalent enough that crop insurance coverage has been sharply reduced for these late corn acres.  Also, the understanding from USDA public statements to date that crop acres must be planted to qualify for further USDA Market Facilitation Payments (MFP) have also factored into farmers crop production decisions.  These factors taken together seem likely to motivated U.S. farmers to plant more U.S. grain sorghum acres this year.

From a mid-June 2019 perspective, grain sorghum seems to have physiological production advantages over late-planted corn – including a shorter growing season and a later final planting date to qualify for full crop insurance coverage.  Individual ethanol plants and livestock feeders may be motivated to encourage grain sorghum production in their local areas in year 2019.  Increased year 2019 grain sorghum production in these areas could at least temporarily help compensate for significant anticipated shortfalls in their local 2019 corn supplies – to keep their ethanol plants and livestock feeding operations running with less disruption form limited supplies and/or extremely high feedgrain prices. 

 As a result of these factors, it seems likely that the USDA’s initial projection of 5.135 million acres planted in the U.S. in year 2019 will be raised in coming months.  This would lead to increased estimates of 2019 U.S. grain sorghum production, and increased usage of sorghum for bioenergy and livestock feed uses to compensate for short corn supplies.  The impact on U.S. grain sorghum exports is less certain, at least until U.S.-China trade conflicts find a resolution.   

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B. U.S. Grain Sorghum Supply-Demand for “New Crop” MY 2019/20

In the June 11th WASDE report, the USDA left unchanged its projection of 2019 U.S. Grain Sorghum plantings of 5,134,000 acres, down from 5.690 million acres (ma) in 2018, 5.629 ma in 2017, and 6.690 ma in year 2016 (Table 2, Figure 2a-b).  The pace of planting U.S. grain sorghum acres is moderately behind the average of the last five years (2014-2018), with 47% planted on June 9th relative to the 5-year average of 63% planted by that date (Table 1).  However, it is generally considered that there is adequate time before USDA Final Planting dates in late June – such as June 25th in Kansas for grain sorghum to be planted in time without declines in expected yields in year 2019.    

Harvested acres of U.S. grain sorghum in 2019 are projected to be 4,600,000 acres, down from 5.061 ma in 2018, 5.045 ma in 2017, and 6.163 ma in year 2016.   To date, U.S. grain sorghum plantings are moderately behind pace, the final planting date in Kansas for full crop insurance coverage is June 25th

U.S. yields in 2019 are forecast at 67.4 bu/ac, down from 72.1 bu/ac in 2018, 71.7 bu/ac in 2017, and the record high of 77.9 bu/ac in 2016 (Table 2, Figure 3a-b).  The USDA’s 2019 forecast would be the smallest U.S. grain sorghum yield since 59.6 bu/ac in year 2013, and 49.6 bu/ac in the drought ravaged year of 2012.

The USDA forecast that the 2019 U.S. Grain Sorghum production would be 310 million bushels (mb) – the smallest U.S. crop since 248 mb in drought year 2012, and 213 mb in year 2011 when percent harvested acres were well below average at 72.4% (Table 2, Figures 4a-b).   This amount is down from 365 mb in year 2018, 362 mb in 2017, 480 mb in 2016, and the 21-year high of 597 mb in 2015. 

KSU Commentary: There is a strong possibility that in future USDA reports U.S. grain sorghum planted and harvested acreage estimates for year 2019 will increase from this initial estimate of 5.134 ma.  The USDA 2019 yield forecast also appears conservative.  Taken together, these alternative scenarios point toward expectations of higher 2019 U.S. grain sorghum production than the USDA has projected.  These possible alternative scenarios will be discussed in below, and are presented in Table 3.

Total supplies of U.S. Grain Sorghum (i.e., beginning stocks + production + imports) are forecast to be 370 mb in “new crop” MY 2019/20, down from 400 mb in “old crop” MY 2018/19, 397 mb in MY 2017/18, 519 mb in MY 2016/17, and the 20-year high of 620 mb in MY 2015/16. 

KSU Commentary: With the possibility of higher 2019 U.S. grain sorghum production in the coming July, August, September, and November USDA WASDE and Crop Production reports, total supplies of U.S. sorghum are expected to increase (see Table 3).

Exports of U.S. grain sorghum are projected to be 100 mb in “new crop” 2019/20 (Tables 2-3, Figures 4a-b, 5a-b, & 6a-b).  Projected U.S. grain sorghum exports of 100 mb in “new crop” MY 2019/20 would be up from the USDA’s forecast of 85 mb in “old crop” MY 2018/19, but down from 205 mb in MY 2017/18, 342 mb in MY 2015/16 (2nd highest on record) and the record high of 352 mb in MY 2014/16. 

Trade disagreements between the United States and China have severely damaged U.S. grain sorghum exports since late-summer / fall of year 2018 (see Figures 7a-b).  At its current weekly pace through June 6, 2019, U.S. grain sorghum exports would end up at approximately 60 mb in the “old crop” MY 2018/19 – down 25 mb from the USDA projection of 85 mb.  A weekly pace of shipments of 3.1 mb would be needed over the last 13 weeks of “old crop” MY 2018/19 to reach the 85 mb forecast by the USDA in U.S. grain sorghum exports.  For the weeks ending May 30th and June 6th, there have been 2.36 mb and 1.96 mb actually shipped, respectively. 

KSU Commentary: It is likely that the USDA will need to reduce its forecast of “old crop” MY 2018/19 U.S. grain sorghum exports unless the export pace increases sharply – adding to projected ending stocks.   However, the set of broader U.S. grain market issues having to do with anticipated reductions in U.S. feedgrain supplies and rationing of feedgrain usage throughout the end of “old crop” MY 2018/19 on August 31, 2019 and on into “new crop” MY 2019/20 will be the  dominating factors in the U.S. grain sorghum market.

Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new crop” 2019/20.  This amount of projected FSI use in “new crop” MY 2019/20 is equal to 100 mb in “new crop” MY 2018/19, but up sharply from a 5-year low of 60 mb in MY 2017/18, and less than 115 mb in MY 2016/17 and the record high of 137 mb in MY 2015/16.  The 33-year low of 15 mb in FSI use came during the record high export year of MY 2014/15. 

KSU Commentary: With anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from ethanol plants in western Corn Belt areas for U.S. grain sorghum use. To the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic ethanol production.

Livestock feed & residual use is projected to be 125 mb in “new crop” 2019/20 – down from 155 mb in “old crop” MY 2018/19, up from 97 mb in MY 2017/18, and less than 133 mb in MY 2016/17 (Table 2, Figures 5a-b & 6a-b).

KSU Commentary: Just as for ethanol use of grain sorghum, with anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from livestock feeders in western Corn Belt areas for U.S. grain sorghum use.   And, also to the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic livestock feeding.

Total use of U.S. Grain Sorghum in “new crop” MY 2019/20 of 325 mb is forecast to be down from 340 mb in “old crop” MY 2018/19, from 362 mb in MY 2017/18, 485 in MY 2016/17, and from the 20-year high of 583 mb in MY 2015/16 (Table 2, Figures 5a-b & 6a-b).  Overall, the USDA projects that there will be a) no change in ethanol / FSI use, b) increased exports, and c) lower feed and residual use in “new crop” MY 2019/20 than in “old crop” MY 2018/19.  

Ending stocks of U.S. Grain Sorghum in “new crop” MY 2019/20 are projected to be 45 mb (13.85% Stocks/Use or ‘S/U’) – down from 60 mb (17.65% S/U) in “old crop” MY 2018/19, but up from 35 mb (9.67% S/U) in MY 2017/18 (Table 2, Figures 5a-b, 6a-b & 8a-b)

KSU Commentary: This projection in total use and ending stocks of U.S. grain sorghum in “new crop” MY 2019/20 is “subject to change” based on the final size of the 2019 U.S. sorghum crop, and the spillover effects on to domestic demand of sorghum are due to sharp reductions in 2019 U.S. feedgrain supplies. 

The season average price for U.S. Grain Sorghum in “new crop” MY 2019/20 is projected to be $3.50 – raised $0.50 /bu by the USDA in the June 11th WASDE from May 10th WASDE projections  (Table 2, Figures 8a-b & 9a-b)This USDA scenario for “new crop” MY 2017/18 is given a 20% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

KSU Commentary: The USDA raised the price of U.S. grain sorghum by $0.50 per bushel for “new crop” MY 2019/20 in the June 11th WASDE report while making no changes in the associated U.S. grain sorghum supply-demand balance sheet.  This is an indication that broader U.S. and World feedgrain market factors and coming adjustments are likely to impact U.S. grain sorghum prices to a significant degree.  It is likely that volatile feedgrain and grain sorghum prices will occur in what remains of “old crop” MY 2018/19 through August 31st, and on into “new crop” MY 2019/20.

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C. Alternative S-D & Price Forecasts for “New Crop” MY 2019/20

Given the reductions that have occurred in year 2019 U.S. corn planted and harvested acres through May-June – with associated reductions in 2019 U.S. corn production prospects, strong positive “demand-pull” market forces have been and are occurring in U.S. grain sorghum markets.  For the “new crop” 2019/20 marketing year beginning on September 1, 2019, these feedgrain market forces may lead to significant increases in U.S. grain sorghum planted acreage and production.  With reductions occurring in U.S. corn supplies in “new crop” MY 2019/20, high feedgrain prices are likely to force any additional U.S. grain sorghum supplies that are produced to be quickly used. 

The following alternative supply-demand scenarios for U.S. grain sorghum in “new crop” MY 2019 illustrate how a progression of higher U.S. grain sorghum acreage and production may work out in terms of supply-demand balances and prices. 

The first scenario represents the USDA projection for “new crop” MY 2019/20 from the May 10, 2019 WASDE report.  Alternative scenarios for 2019 U.S. grain sorghum acreage, yields, production, usage and prices are presented in Table 3. 

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  1. USDA June 2019 WASDE Forecast for “New Crop” MY 2019/20 – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               67.4 bu/ac

Beginning Stocks                                                   60 million bushels (mb)

2019 U.S. Sorghum Production                         310 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                370 mb

Food, Alcohol & Industrial Use                             99 mb

Seed Use                                                                   0.63 mb

Exports                                                                  100 mb

Feed & Residual Use                                            125 mb

Total U.S. Sorghum Use                                      325 mb

Ending Stocks                                                          45 mb

% Ending Stocks-to-Use                                      13.81%

U.S. Sorghum Season Avg. Farm Price                $3.50 /bu

Note: With the feedgrain planting problems that have occurred in the U.S. in April-May-June 2019, the June 11th WASDE market scenario for “new crop” MY 2019/20 has a low likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #1MY 2019/20-KSU: Same Planted Ac., 73 bu/ac Yield, 336 mb Crop – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year Average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         336 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 396 mb

Food, Alcohol & Industrial Use                           129 mb

Seed Use                                                                   0.63 mb

Exports                                                                    70 mb

Feed & Residual Use                                            150 mb

Total U.S. Sorghum Use                                      350 mb

Ending Stocks                                                          46 mb

% Ending Stocks-to-Use                                      13.14%

U.S. Sorghum Season Avg. Farm Price                $3.60 /bu

Note: This scenario is based on no changes in U.S. grain sorghum acres, but a more representative 5 year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.   This alternative KSU scenario for “new crop” MY 2019/20 also has a limited likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #2MY 2019/20-KSU: +250K Planted Ac., 73 bu/ac Yield, 352 mb Crop – 30% Probability:

Planted Acres                                                       5.385 million acres (ma)

Harvested Acres                                                   4.825 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         352 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 412 mb

Food, Alcohol & Industrial Use                           134 mb

Seed Use                                                                   0.63 mb

Exports                                                                    75 mb

Feed & Residual Use                                            165 mb

Total U.S. Sorghum Use                                      375 mb

Ending Stocks                                                          37 mb

% Ending Stocks-to-Use                                       9.87%

U.S. Sorghum Season Avg. Farm Price                $4.00 /bu (i.e., the lower end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 250,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (w/o a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This KSU scenario for “new crop” MY 2019/20 is estimated to have a 30% likelihood of occurring (30%KSU Est.).  See Table 3.

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Alt. Scenario #3MY 2019/20-KSU: +500K Planted Ac., 73 bu/ac Yield, 369 mb Crop – 20% Probability:

Planted Acres                                                       5.635 million acres (ma)

Harvested Acres                                                   5.049 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         369 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 429 mb

Food, Alcohol & Industrial Use                           139 mb

Seed Use                                                                   0.63 mb

Exports                                                                    80 mb

Feed & Residual Use                                            185 mb

Total U.S. Sorghum Use                                      405 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.93%

U.S. Sorghum Season Avg. Farm Price                $4.75 /bu (i.e., the mid-point of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 500,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 20% likelihood of occurring (20%KSU Est.).  See Table 3.

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Alt. Scenario #4MY 2019/20-KSU: +1 million Planted Ac., 73 bu/ac Yield, 401 mb Crop – 10% Probability:

Planted Acres                                                       6.135 million acres (ma)

Harvested Acres                                                   5.497 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         401 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 461 mb

Food, Alcohol & Industrial Use                           151 mb

Seed Use                                                                   0.63 mb

Exports                                                                    90 mb

Feed & Residual Use                                            195 mb

Total U.S. Sorghum Use                                      437 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.49%

U.S. Sorghum Season Avg. Farm Price                $5.50 /bu (i.e., the top end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 1,000,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), less limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 10% likelihood of occurring (10%KSU Est.).  See Table 3.

KSU Commentary: In this 4th alternative KSU scenario, a 1 million acre increase in U.S. grain sorghum plantings will indicate just that much greater of a reduction in 2019 U.S. corn plantings and likely production in key areas of the U.S. Corn Belt.  The shortfall in U.S. corn acres and production potential is likely to support the high price for U.S. grain sorghum of $5.50 / bushel in “new crop” MY 2019/20.

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D. World Coarse Grain Supply-Demand – All Countries

WORLD Coarse Grain Percent (%) Grain Ending Stocks-to-Use is tightening to the most constrained level in five (5) years – since MY 2014/15.  This tightening of available World Coarse Grain supplies relative to use signals that stronger World use of coarse grains is expected to continue, and that more strength in U.S. and World coarse grain prices may occur in the coming year than the World Coarse Grain market now anticipates.

Total Supplies of WORLD Coarse Grains in the “new crop” 2019/20 marketing year (MY) are projected to be 1,741.14 million metric tons (mmt) – down from 1,763.53 mmt in “old crop” MY 2018/19, from 1,745.77 mmt in MY 2017/18, and the record high of 1,769.06 in MY 2016/17.  World “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains (Figure 10).

Forecast Total Use of WORLD Coarse Grains in “new crop” MY 2019/20 of 1,421.40 mmt is the highest on record.  This forecast compares to the previous record high of 1,411.87 mmt in “old crop” MY 2018/19, to 1,376.92 mmt in MY 2017/18, and to 1,382.36 mmt in MY 2016/17 (Figure 10).

Ending Stocks of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be 5-year low of 319.74 mmt – down 10.0% from 351.66 mmt in “old crop” MY 2018/19, down 15.4% from 368.85 mmt in MY 2017/18, and down 20.9% from 386.53 mmt in MY 2016/17 (Figure 10).  

Percent (%) Ending Stocks-to-Use of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be a 6-year low (the lowest since MY 2013/14) of 22.5% Stocks/Use (S/U).  This would be down vs 24.9% S/U in “old crop” MY 2018/19; and down from the range of 24.7% – 28.0% S/U over the MY 2014/15 – MY 2017/18 period (Figure 11)

KSU Commentary: IF there were to be a further reduction of 1 billion bushels (39.36 mmt) in U.S. feedgrain production in year 2019, then all else being equal, World coarse grain ending stocks would decline to near 280 mmt, with World coarse grain stocks-to-use falling to a 7-year low of 19.7% S/U. And this would be before any price-rationing of World coarse grain usage occurs. 

For comparison, in the record short crop year of MY 2012/13 World coarse grain supply-demand balances had fallen to 15.4% S/U, and had declined to 13.4% S/U for the two marketing years previous to that. 

The key point is that IF such a decline occurs in the U.S. in 2019 U.S. corn production – down from the current USDA projection of 13.68 billion bushels (bb) to 12.68 bb – THEN it is noteworthy to remember that historic minimums as occurred in the MY 2010/11 through MY 2012/13 period STILL would not likely have been matched.   High prices will have occurred, but the supply-demand conditions that led to record high U.S. grain sorghum prices of $6.33 per bushel will still not have been matched.

 

E. World Coarse Grain S-D – The “WORLD-Less-China” Perspective

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

Ending Stocks of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are projected to be 6-year low at 127.31 mmt – down 9.9% vs 141.25 mmt in “old crop” MY 2018/19.  This projection for “new crop” MY 2019/20 is also down from 145.47 mmt in MY 2017/18, and from 162.19 mmt in MY 2016/17 (Figure 12).   The record low of 62.60 mmt occurred in MY 1995/96, followed by 64.40 mmt in MY 1975/76, 77.51 mmt in MY 1983/84, and 83.91 mmt in 1996/97 – all years of relative price strength for U.S. feed grains in general and U.S. grain sorghum in particular.

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are also projected to be a 7-year low of 11.3% S/U.  This would be down vs 12.6% S/U in “old crop” MY 2018/19; and down from the range of 12.5% – 14.7% for the MY 2013/14 through MY 2017/18 time period (Figure 12)

Historically, “WORLD-Less-China” Coarse Grain percent (%) S/U has declined as low as 10.2% in MY 2012/13; 10.4% in MY 2011/12; 11.55% in MY 2010/11; 11.8% in MY 2006/07; 11.2% in MY 1996/97; and 8.7% in MY 1995/96.  These marketing years were generally high priced time-periods for U.S. feedgrains such as grain sorghum and corn.

 

 

FAO Projection for 2019 U.S. Corn Crop at 12.99 billion bu (330 mmt) + World Wheat S-D

Here is an article from the Foreign Agricultural Service regard their projections for the size of the 2019 U.S. corn crop.  They project a crop of 330 mmt or 12.99 billion bushels.

http://www.fao.org/worldfoodsituation/csdb/en/?utm_source=Ag+Insider+Subscribers&utm_campaign=a412282389-EMAIL_CAMPAIGN_2019_06_06_08_45_COPY_01&utm_medium=email&utm_term=0_b0e8c666dd-a412282389-120343085

Diminishing maize production prospects in the United States dampen the global cereal production outlook this year

Release date: 06/06/2019

FAO’s latest forecast for world cereal production in 2019 points to an increase of 1.2 percent from 2018, to 2 685 million tonnes.

However, the year-on-year expansion is now much less significant than earlier predicted, as global maize production is now seen to fall in 2019, largely because of sharp downward revisions since the previous report concerning maize production prospects in the United States.

Due to prolonged excessive wet conditions resulting in major delays in crop plantings, this year’s maize production in the United States is now pegged at 330 million tonnes, down 45 million tonnes from FAO’s first production forecast published in May and almost 10 percent (36 million tonnes) short of last year’s level.

The recent USDA crop progress report pointed to a sharply reduced planted area of only 58 percent of planting intentions as of 26 May, well below the 5-year average level of 90 percent and the slowest pace ever recorded.  (Note: this has been updated to 67% planted as of June 2, 2019 – down from the recent 5 year average of 96%.  Daniel O’Brien, Extension Agricultural Economist, Kansas State University)

Most of the expected rebound in global cereal production in 2019 is attributed to expected expansions in wheat and barley production, with year-on-year increases of 5.3 percent and 5.8 percent, respectively. Total rice production is likely to remain close to last year’s record level as expectations of area-driven expansions in Asia could offset foreseen contractions in most other regions, triggered by inclement weather and prospects of reduced profit margins.

World cereal utilization in 2019/20 is forecast to reach 2 707 million tonnes, down 15.5 million tonnes, or 0.6 percent, from the May forecast but still 1 percent (26 million tonnes) higher than in 2018/19. Most of this month’s downward adjustment again concerns the United States, where, because of deteriorating production prospects, total domestic utilization of maize is seen to fall below the 2018/19 level. Following the revision for the United States, world utilization of coarse grains in 2019/20 is now anticipated to reach 1 434 million tonnes, down 0.9 percent from the previous forecast but 0.7 percent higher than in 2018/19. Global wheat utilization is expected to grow by 1.2 percent, reaching 755 million tonnes, while that of rice is predicted to reach 518 million tonnes, 1.4 percent higher than in 2018/19.

Based on the latest production and utilization forecasts, world cereal stocks could decline by as much as 26 million tonnes, or 3 percent, in the new season to a four-year low of 830 million tonnes. This figure is around 18 million tonnes, or 2 percent, below the FAO’s May forecast. The sharp month-on-month downward revision is mostly associated with maize, whereas the forecasts for wheat and rice inventories have been raised slightly since the previous report. The projected fall in cereal stocks would result in a drop in the global cereal stock-to-use ratio to just below 30 percent, which still points to a relatively comfortable supply level.

Globally, coarse grain inventories are seen heading towards a second consecutive annual decline in 2019/20, falling by 9 percent to just over 369 million tonnes, the lowest level since 2014/15. By contrast, total wheat stocks could expand by 4.6 percent year-on-year and approach a near-record level of 281 million tonnes. The increase of 1 percent in wheat stocks since May reflects upward adjustments made for the EU and the United States, outweighing downward revisions in Australia and the Russian Federation.  World rice stocks at the close of 2019/20 are still envisaged to fall slightly (0.9 percent) from their record opening levels, to 179 million tonnes, despite some upward revisions to forecasts for the United States and Viet Nam.

World trade in cereals in 2019/20 is forecast at around 414 million tonnes, up 1.2 million tonnes, or 0.3 percent, from the previous forecast and nearly 6 million tonnes, or 1.4 percent, higher than the estimated total shipments of cereals in 2018/19. Most of the predicted expansion in world cereal trade is associated with greater wheat and rice trade, while trade in coarse grains, most notably maize, is expected to fall below the 2018/19 level, mainly on expectations of reduced imports by the EU and a sharp reduction in exports by the United States. By contrast, wheat trade is predicted to rebound by 3.3 percent from the 2018/19 reduced level, driven by stronger import demand by several countries, especially in Africa and Asia, and supported by the expectation of large export availabilities in the Black Sea region and the EU. World rice trade, on the other hand, is likely to contract by 3.5 percent in 2019 before a possible rebound in 2020 on expectation of greater purchases by several countries in Africa.

KSU Prevented Planting Decision Worksheet (via KSU AgManager.info)

KSU-Prevented Planting on Corn Decision Tool

By Monte Vandeveer, Extension Agricultural Economist – Kansas State University

http://www.agmanager.info/ksu-prevented-planting-corn

This tool was developed to assist producers facing a situation of prevented planting for corn in Kansas due to flooding and soil moisture conditions. Possible options include late planting of corn, planting soybeans or grain sorghum or other crops, taking prevented planting payments, and possible use of cover crops.

Image may contain: text and food

Updated Prevented Planting Decisions & Related Government Payments Info (KSU Ag Economics)

An Update on Prevented Planting Decisions and Related Government Payments

Monte Vandeveer (montev@ksu.edu) – K‐State Department of Ag Economics 

Daniel O’Brien (dobrien@ksu.edu) – K‐State Department of Ag Economics

Address of Article on the KSU AgManager Website:

http://www.agmanager.info/crop-insurance/risk-management-strategies

May 2019

 

     Last week we posted an article on KSU’s AgManager.info website which discussed Prevented Planting rules and options for producers facing wet planting conditions for their insured corn crop. A number of new developments, particularly the May 23rd announcement of additional Market Facilitation Program payments, call for an updated discussion of farmer options.

Prevented Planting Dates and Deadlines

     To review, many Kansas producers who insured their intended 2019 corn acres are nearing or already past the “Final Planting Date” (FPD) deadline, which marks the latest date for which they can plant their corn crop and still obtain the full level of crop insurance coverage. The FPD was May 15 for southeast Kansas, May 25 for central and northeast Kansas, and May 31 for western Kansas. Refer again to the map in last week’s article to see which zone includes your county.

     Once the FPD passes, producers enter what is called the “Late Planting Period” (LPP), during which corn may still be planted, but the level of insurance coverage will decline day by day. In particular, the production guarantee (= APH yield x % guarantee level) will decline 1 percent for each day after the FPD that a particular acre gets planted.

     An example: consider a non‐irrigated corn producer who has an APH yield of 120 bushels per acre and has chosen the 75% coverage level. His/her production guarantee for acres planted up through the FPD is 90 bushels per acre (= 120 bu/a APH x 75% coverage). For acres planted, say, 10 days into the LPP, the production guarantee is reduced by 10 percent (= 90 bu/a x 90% = 81 bu/a).

    Producers who DO plant corn during the LPP must keep a running tally of which acres are planted day by day, since each day’s planted acreage will have a different production guarantee.

     For corn in Kansas, the LPP extends another 20 days after the FPD. This means the final day of the LPP is June 4 for southeast Kansas, June 14 for central and northeast Kansas, and June 20 for western Kansas. If insurable causes of loss continue to delay planting past the LPP, corn may still be planted and insured after the LPP ends. Acres planted at this point would receive a production guarantee of 55 percent of the original APH yield. Our example producer above would thus have a production guarantee of 120 bu/a x 55% = 66 bu/a.

Announcement of Market Facilitation Program payments

     On May 23, 2019, the Trump Administration announced it would provide additional Market Facilitation Program (MFP) payments for agricultural producers affected by lost markets in the ongoing trade disputes with China and other countries. These direct payments to farmers are expected to total $14.5 billion dollars and will be provided for producers of more than 20 covered commodities. Many details have yet to be released, but the May 23 announcement did include some important bits of information.

     Most importantly, affected producers will receive one per‐acre payment based on a single county rate, rather than separate rates by crop as done under the 2018 MFP payments. This single county rate will be based on planting patterns of the affected crops in the county, reflecting the mix of crops seen there. The USDA statement points out that, those per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. Moreover, total payment‐eligible plantings cannot exceed total 2018 plantings.”

     A crucial change in the 2019 approach is the use of a single payment rate for a county, rather than the per‐bushel payments on actual crop production used in 2018. The 2018 program provided $1.65/bu for soybeans, $0.86/bu for grain sorghum, $0.14/bu for wheat, and $0.01/bu for corn, based on bushels actually produced in that crop year. One of USDA’s goals in 2019 clearly was to not favor planting of one crop over another.

     In our article last week, we assumed an MFP payment would be based on the 2018 approach, where soybeans and grain sorghum might receive much larger payments than corn. Those calculations indicated that an MFP soybean payment of about $1.50/bu (slightly less than the 2018 payment rate of $1.65/bu) could be enough to tilt the planting decision toward soybeans. However, the single payment rate approach for 2019 payments should not favor the planting of one crop over another.

     But it must be noted that the MFP payments will still require actual 2019 planting. That is, acres which do not eventually get planted to any crop will not be eligible for the MFP payment. This favors the planting of something (corn, soybeans, grain sorghum, or some other eligible crop) over nothing.

     Planting nothing would allow the insured producer to collect the full corn PP payment from insurance, which should equal 55% of the original production guarantee. For our example farmer with a 120 bu/a APH yield, a 75% coverage level, and this year’s Projected Price of $4.00/bu, the full corn PP payment would come to:    

120 𝑏𝑢/acre    x    $4.00/bu   𝑥 75% 𝑐𝑜𝑣𝑒𝑟𝑎𝑔𝑒   𝑥   55% 𝑃𝑃 𝑟𝑎𝑡𝑒   =    $198 𝑝𝑒𝑟 𝑎𝑐𝑟𝑒

     In our examples from last week’s article, an MFP payment of about $30/acre could tip the decision toward planting a late corn crop over taking the full corn PP payment for Kansas producers.

     Yet another complication is the prospect for disaster aid for agriculture as part of a larger disaster relief package making its way through Congress. On May 23rd, the Senate passed a disaster aid package aimed mainly at victims of Hurricanes Michael and Florence, but also covering a variety of agricultural losses, including a specific provision for “crops prevented from planting in 2019.” See a farmdoc article from the University of Illinois for more details. While press reports indicate President Trump would sign the package into law if it clears Congress, it has been delayed in the House of Representatives (as of May 28).

     Some see these disaster payments as a way to assist producers who will never be able to plant anything in 2019 – that is, for the places where wet conditions persist through the entire planting season. One rationale for these additional payments is that providing MFP payments only on planted acres penalizes those producers who were unable to plant through no fault of their own. The counter‐ argument, however, is that these disaster payments could create another incentive not to plant anything in a year when corn acres could end up desperately short. About $3 billion were appropriated for agricultural losses in the May 23 Senate version of the disaster aid bill, but it is unclear how that amount might be spread over the various affected crops and regions, should the bill finally pass the House.

Effect of late & prevented plantings & effects on markets & prices

     A final factor to consider is the effect of all the late planting concerns on market prices. One would expect both total planted corn acres and actual corn yields to decline in the aggregate, but the extent of these changes is of course still guesswork. A farmdoc article examines the potential effect of fewer acres and lower yields for corn prices. It speculates that as many as 35 million acres of corn may remain unplanted as of the May 28 crop progress report, and traces this effect through the rest of the market “balance sheet” (acres, yields, exports, other usage, final stocks, etc). 

     See a similar analysis from Kansas State University on KSU AgManager.info titled       “U.S. Corn Market Outlook in Late-May 2019 – Tight Supply-Demand & Higher Corn Prices in “New Crop” MY 2019/20″ 

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

     In our Kansas planting decision, the role of rising market prices for corn is to raise the value of those bushels that do get produced. A rising market value of expected actual corn production crops would tend to favor late planting of corn relative to no planting at all.

     Again, producers are encouraged to develop their own calculations, based on their own expected yields, costs, etc. Last week’s article provides examples that could be a useful starting point.

     Producers are also reminded to keep in close contact with their crop insurance agents as they evaluate options, to be sure they remain in compliance with their insurance policies and to discuss the alternatives.

*****

For more information about this publication and others, visit AgManager.info.

K‐State Agricultural Economics | 342 Waters Hall, Manhattan, KS 66506‐4011 | 785.532.1504

www.ageconomics.k‐state.edu

Copyright 2019: AgManager.info and K‐State Department of Agricultural Economics

KSU Corn Market Outlook in Late-May 2019: ‘Tight Supply-Demand & Higher Corn Prices in “New Crop” MY 2019/20’

An analysis of Corn Market Outlook in Late-2019 for “new crop” 2019/20 marketing years is provided in the following article from Kansas State University Department of Agricultural Economics.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) and other USDA reports on May 10, 2019, with info from the USDA NASS Crop Progress reports on May 26, 2019

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

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

Following is a summary of the article on “Corn Market Outlook in Late-May 2019″

**************

U.S. Corn Market Outlook in Late-May 2019

‘Tight Supply-Demand & Higher Corn Prices in “New Crop” MY 2019/20’

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

May 29, 2019

 

1) The U.S. Corn Market Situation in Spring 2019

The serious and prolonged spring planting season problems during April-May 2019 for U.S. corn producers are leading to a sharp reduction in 2019 U.S. corn production prospects.  The likelihood of a U.S. corn production shortfall in year 2019 is bring about a classic “short crop” marketing year for U.S. corn markets in “new crop” MY 2019/20. The last major “short crop” for U.S. corn production occurred seven (7) years ago in year 2012 due to excessive summer heat.    

Concerns about delayed plantings or even the potential inability to plant corn or other crops this year have driven corn futures sharply higher in recent weeks.   “Old crop” JULY 2019 Corn futures prices have increased from a low of $3.43 /bushel on May 13th to a high of $4.38 on May 29th before closing at $4.18 ¾ that same day.  Similarly, “new crop” DEC 2019 Corn futures prices have increased from a low of $3.63 ¾ /bushel on May 13th to a high of $4.54 on May 29th before closing at $4.35 ¾ that same day (Figures 1a-b-c, & 2a-b).   With this rally in corn futures, managed money (specs) who had been holding record short or bearish positions have begun to buy back their short futures positions and instead build up the long or buy side of trade portfolios (Figures 3a-b-c-d).

The U.S. government is also planning to provide a second round of Market Facilitation Payments (MFPs) to U.S. crop producers, with the stipulation that crops have to be actually planted in year 2019 to collect these MFP funds.  The longer into June 2019 these U.S. corn planting delays go, the more difficult it may be for U.S. corn producers to keep with their original plans to plant corn this year, and not switch to other shorter season cropping options such as soybeans and grain sorghum.   

It is an oversimplification to say that the direction of the U.S. corn market for the remainder of “current” MY 2018/19 (ending August 31st) and the start of “new crop” MY 2019/20 (starting September 1st) will depend largely on the amount of U.S. corn acres planted over the coming few weeks through June 2019.  During that period U.S. farmers will likely be “under duress” as they make what may be difficult late season planting decisions.

*****

2) Status of Delayed U.S. Corn Plantings Through May 26th

The U.S. Corn Belt states that have been hardest hit by wet weather, flooding and planting delays so far in 2019 are Illinois, Indiana, Michigan, Ohio, South Dakota and Wisconsin (Tables 2a-b).  Significant wet soil conditions and planting delays have also occurred in Iowa, Kansas, Minnesota, Missouri, Nebraska, and Pennsylvania.   In these are other states many U.S. farmers who have not yet been able to plant all or part of their 2019 corn acreage are considering either late plantings of corn, switching to alternative shorter season crops such as soybeans, or possibly using Prevented Planting options from the USDA Farm Service Agency.

The USDA reported that 58% of the 2019 corn crop in the 18 major states had been planted as of May 26th in its latest USDA NASS Weekly Crop Progress report (Table 2a).  In these top 18 states this amounts to 49,131,600 acres planted out of 85,350,00 acres forecast in the March 28th USDA NASS Prospective Plantings report

Extended to the entire U.S., 58% planted on 5/26/2019 would equal 53,819,360 acres planted out of the USDA Prospective Plantings forecast for the U.S. of 92,792,000 acres of corn in year 2019.   Average corn plantings in the 18 major states on May 26th over the 5-year 2014-2018 period are 90%, with 5/26/2019 corn plantings being 32% and 27,844,900 acres behind in the 18 states and an estimated 29,693,440 acres behind in the U.S. in total.

*****

3) 2019 U.S. Corn Production Based on the May 26thS. Planted Acres Estimate

With only 58% or an estimated 53.8 million acres of U.S. corn planted to date, production prospects for the 2019 U.S. corn crop based on what is actually planted so far are down considerably.  In the USDA May 10, 2019 World Agricultural Supply and Demand Estimates (WASDE) report, forecast 2019 corn production in the U.S. to be 15.030 billion bushels (Tables 1a, 1b, & 2b). 

 This is based on the May 26th estimate of 58% of U.S. corn planted – amounting to 53.8 million acres (ma) planted of the 92.792 ma originally intended.  Of these 53.8 ma now planted, it is estimated that 49.460 ma would be harvested (equaling latest 3-year average harvested-to-planted in the top 18 corn producing states), with a 2019 U.S. average corn yield of 175 bu/ac, and that estimated corn production would equal 8.655 billion bushels (bb) (Table 2b). 

This estimate of 2019 U.S. corn production prospects to date can be criticized for several reasons. 

First, it is likely based on too high of an estimate of % harvested-to-planted acres due to flooding and excessive moisture – having been set equal to the most recent 2016-2018 3-year average. 

Second, it can also be criticized for having 2019 U.S. corn average yields set too high at 175 bu/acre.  With delayed plantings and excessively we soils it may be more prudent to consider an 8 bu/acre lower U.S. corn yield market of 167 bu/acre.  At 167 bu/ac yields, 2019 U.S. corn production on 53.819 ma planted and 49.460 ma harvested would be 8.260 bb – down substantially from the USDA’s May 10th WASDE projection of 15.030 bb. 

Third, these early projections for 2019 of U.S. corn planted acres of 53.819 ma, and of 8.260 bb in 2019 U.S. corn production do not account for the progress that will continue to be made in U.S. corn plantings from May 26th through the month of June.  In the “new crop” MY 2019/20 U.S. corn supply-demand and price projections by Kansas State University that follow in Table 1b, it is assumed that final 2019 U.S. corn planted acreage is either 82.792 ma or 77.792 ma.

*****

4) Prospects for Final 2019 U.S. Corn Planted & Harvested Acres

It is assumed in the following projections by Kansas State University Extension Agricultural Economist Daniel O’Brien that substantial amounts of additional U.S. corn acreage will be planted from now through June 2019 (Table 1b).  In this analysis it is assumed that these additional plantings will leave final U.S. corn planted acreage down 10-15 ma below the USDA’s Prospective Plantings report forecast on 3/29/2019 of 92.792 ma, but still up 24-29 ma from levels represented in the May 26th planting progress estimates.

  • U.S. Corn Planted Acreage Scenarios #1 & #2: “Down 10 ma 2019 U.S. Corn Plantings”:

As shown in Table 1b, IF 82.792 ma of corn is eventually planted in the U.S. in 2019, total corn plantings would be down 10 ma from initial USDA projections of 92.792 ma in the March 29th USDA Prospective Plantings report.  However, they would also represent an additional 28.973 ma yet to be planted in year 2019 from May 26th levels. 

Due to wet soils and flooded fields in many areas, the national percent harvested-to-planted is forecast to be 88.0%, just above the recent low of 87.9% in year 2002. Harvested acreage estimated to be 72.857 ma – down from 84.500 ma in the USDA’s May 10th WASDE report.

  • S. Corn Planted Acreage Scenarios #3 & #4: “Down 15 ma 2019 U.S. Corn Plantings”:

Also shown in Table 1b, IF 77.792 ma of corn is eventually planted in the U.S. in 2019, total corn plantings would be down 15 ma from initial USDA projections of 92.792 ma in the March 29th Prospective Plantings report.  However, they would also represent an additional 23.973 ma yet to be planted in year 2019 from May 26th levels. 

Also due to the prevalent wet soils and flooded fields in many areas, the national percent harvested-to-planted is forecast at 88.0%, with harvested acreage estimated to be 68.457 ma – down from 84.500 ma in the USDA’s May 10th WASDE report.

*****

5) Prospects for U.S. Corn Supply-Demand & Prices in “New Crop” MY 2019/20

Given the KSU 2019 U.S. corn reduced planted and harvested acre projections in Table 1b, projected 2019 U.S. corn production is substantially lower than the USDA’s May 10th WASDE forecast of 15.030 bb.  For the “new crop” 2019/20 marketing year to begin on September 1, 2019, this leads to substantially reduced U.S. corn supplies, significant rationing of U.S. corn usage and tightening of ending stocks and stocks-to-use and much higher U.S. corn prices.  The first scenario represents the USDA projection for “new crop” MY 2019/20 from the May 10, 2019 WASDE report.

Alternative scenarios for 2019 U.S. corn acreage and yields are presented in Figures 5 & 6, with varying 2019 U.S. corn production scenarios in Figure 7.  Alternative U.S. corn ending stocks-to-use scenarios for “new crop” MY 2019/20 are presented in Figures 12-a-b, while the relationship that has existed between U.S. corn percent (%) ending stocks-to-use and U.S. Average Corn prices is shown in Figure 13

Scenario A. USDA May 2019 WASDE Forecast for “New Crop” MY 2019/20 – 0% Probability:

Planted Acres                                     92.792 million acres (ma)

Harvested Acres                                  85.400 ma

% Harvested-to-Planted                      92.0%

U.S. Average Corn Yield                       176 bu/ac

Beginning Stocks                                 2.095 billion bushels (bb)

2019 U.S. Corn Production                15.030 bb

Imports                                                  0.035 bb

Total U.S. Corn Supply                       17.160 bb

Ethanol for Fuel Use                            5.500 bb

Food & Industrial Use                            1.435 bb

Seed Use                                                0.030 bb

Exports                                                    2.275 bb

Feed & Residual Use                               5.450 bb

Total U.S. Corn Use                             14.675 bb

Ending Stocks                                          2.485 bb

% Ending Stocks-to-Use                       16.93%

U.S. Corn Season Avg. Farm Price           $3.30 /bu

Note: With the planting problems that have occurred in the U.S. in April-May 2019, the May 10th WASDE market scenario for “new crop” MY 2019/20 has virtually no likelihood of occurring.

 

Scenario #1MY 2019/20-KSU: Less 10 mln ac Planted, 172 bu/ac Yield, 12.531 bb Crop – 35% Probability:

Planted Acres                                     82.792 million acres (ma)                           (less 10 ma vs USDA)

Harvested Acres                                  72.857 ma                                                       (less 12.5 ma vs USDA)

% Harvested-to-Planted                    88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                    172 bu/ac                                                        (less 4.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              12.531 bb                                                        (less 2.499 bb vs USDA)

Imports                                                   0.035 bb

Total U.S. Corn Supply                     14.661 bb                                                       (less 2.499 bb vs USDA)  

Ethanol for Fuel Use                           5.250 bb                                                        (less    250 mb vs USDA)

Food & Industrial Use                         1.420 bb                                                          (less      15 mb vs USDA)

Seed Use                                                0.032 bb                                                        (up          2 mb vs USDA)

Exports                                                    1.709 bb                                                       (less    566 mb vs USDA)

Feed & Residual Use                            5.000 bb                                                          (less    450 mb vs USDA)

Total U.S. Corn Use                           13.411 bb                                                        (less  1.235 bb vs USDA)

Ending Stocks                                         1.250 bb                                                        (less  1.235 bb vs USDA)

% Ending Stocks-to-Use                         9.32%                                                        (less      7.61% vs USDA)

U.S. Corn Season Avg. Farm Price        $4.35 /bu                                                    (up  $1.05 /bu vs USDA)

Note: In this scenario, significant rationing of grain use occurs, with prices increasing to make that occur.   

******

 

Scenario #2MY 2019/20-KSU: Less 10 mln ac Planted, 167 bu/ac Yield, 12.167 bb Crop – 35% Probability:

Planted Acres                                     82.792 million acres (ma)                           (less 10 ma vs USDA)

Harvested Acres                                   72.857 ma                                                      (less 12.5 ma vs USDA)

% Harvested-to-Planted                       88.0%                                                            (less 4.0% vs USDA)

U.S. Average Corn Yield                    167 bu/ac                                                        (less 9.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              12.167 bb                                                       (less 2.863 bb vs USDA)

Imports                                                 0.035 bb

Total U.S. Corn Supply                    14.297 bb                                                       (less 2.863 bb vs USDA)  

Ethanol for Fuel Use                          5.225 bb                                                        (less    275 mb vs USDA)

Food & Industrial Use                         1.420 bb                                                         (less      15 mb vs USDA)

Seed Use                                             0.032 bb                                                         (up          2 mb vs USDA)

Exports                                                1.570 bb                                                         (less    705 mb vs USDA)

Feed & Residual Use                          4.950 bb                                                         (less    500 mb vs USDA)

Total U.S. Corn Use                        13.197 bb                                                        (less  1.478 bb vs USDA)

Ending Stocks                                         1.100 bb                                                      (less  1.385 bb vs USDA)

% Ending Stocks-to-Use                         8.34%                                                      (less      8.59% vs USDA)

U.S. Corn Season Avg. Farm Price    $5.45 /bu                                                     (up  $2.15 /bu vs USDA)

Note: In this scenario, further significant rationing of grain use occurs, with prices increasing to over $5.00 to make that occur on very limited supplies.  The implicit assumption in these supply-demand scenarios is that U.S. corn markets are likely to be reticent to allow U.S. corn ending stocks to move much below 1.0 bb.    

*****

 

Scenario #3MY 2019/20-KSU: Less 15 mln ac Planted, 172 bu/ac Yield, 11.775 bb Crop – 15% Probability:

Planted Acres                                     77.792 million acres (ma)                           (less 15 ma vs USDA)

Harvested Acres                                   68.457 ma                                                       (less 16.9 ma vs USDA)

% Harvested-to-Planted                       88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                      172 bu/ac                                                        (less 4.0 bu/ac vs USDA)

Beginning Stocks                                 2.095 billion bushels (bb)

2019 U.S. Corn Production             11.775 bb                                                        (less 3.255 bb vs USDA)

Imports                                                0.035 bb

Total U.S. Corn Supply                    13.905 bb                                                        (less 3.255 bb vs USDA)  

Ethanol for Fuel Use                          5.150 bb                                                        (less    350 mb vs USDA)

Food & Industrial Use                          1.400 bb                                                         (less      35 mb vs USDA)

Seed Use                                              0.033 bb                                                         (up          3 mb vs USDA)

Exports                                                 1.472 bb                                                         (less    803 mb vs USDA)

Feed & Residual Use                            4.850 bb                                                         (less    600 mb vs USDA)

Total U.S. Corn Use                          12.905 bb                                                        (less  1.770 bb vs USDA)

Ending Stocks                                       1.000 bb                                                         (less  1.485 bb vs USDA)

% Ending Stocks-to-Use                    7.75%                                                            (less      9.18% vs USDA)

U.S. Corn Season Avg. Farm Price      $5.70 /bu                                                     (up  $2.40 /bu vs USDA)

Note: In this scenario, with only 77.792 ma planted and production of 11.775 bb, ending stocks fall to 1.000 bb and prices increase to $5.70 /bu to ration usage.    

*****

 

Scenario #4MY 2019/20-KSU: Less 15 mln ac Planted, 167 bu/ac Yield, 11.432 bb Crop – 15% Probability:

Planted Acres                                    77.792 million acres (ma)                           (less 15 ma vs USDA)

Harvested Acres                                  68.457 ma                                                       (less 16.9 ma vs USDA)

% Harvested-to-Planted                    88.0%                                                                (less 4.0% vs USDA)

U.S. Average Corn Yield                    167 bu/ac                                                        (less 9.0 bu/ac vs USDA)

Beginning Stocks                                  2.095 billion bushels (bb)

2019 U.S. Corn Production              11.432 bb                                                        (less 3.598 bb vs USDA)

Imports                                                   0.035 bb

Total U.S. Corn Supply                     13.562 bb                                                        (less 3.598 bb vs USDA)  

Ethanol for Fuel Use                           5.100 bb                                                        (less    400 mb vs USDA)

Food & Industrial Use                         1.400 bb                                                         (less      35 mb vs USDA)

Seed Use                                                0.033 bb                                                       (up          3 mb vs USDA)

Exports                                                    1.379 bb                                                         (less    896 mb vs USDA)

Feed & Residual Use                            4.750 bb                                                         (less    700 mb vs USDA)

Total U.S. Corn Use                           12.662 bb                                                        (less  2.013 bb vs USDA)

Ending Stocks                                         0.900 bb                                                        (less  1.585 bb vs USDA)

% Ending Stocks-to-Use                         7.11%                                                          (less      9.18% vs USDA)

U.S. Corn Season Avg. Farm Price    $6.00 /bu                                                      (up  $2.70 /bu vs USDA)

Note: In this scenario, with only 77.792 ma planted and production of 11.432 bb, ending stocks fall below 1.000 bb down to 900 mb, with U.S. corn prices increasing to near $6.00 /bu to further ration usage.    

Prevented Planting Options in 2019 for Kansas Corn Growers-Revised as of 5/23/2019 (To be updated when MFP 2.0 County Payment Rate Details Released)

Prevented Planting Options in 2019 for Kansas Corn Growers-Revised

Monte Vandeveer (montev@ksu.edu)

Kansas State University Department of Agricultural Economics – May 2019

http://agmanager.info/crop-insurance/risk-management-strategies/prevented-planting-options-2019-kansas-corn-growers

 

     Wet conditions the past few weeks have slowed planting progress for Kansas corn producers. The May 20 Crop Progress Report from the National Agricultural Statistics Service indicated that Kansas corn acres planted were only at 61 percent, behind last year’s planting progress of 80 percent, which also matches the five-year average on this date.

     Some crop insurance deadlines are looming for Kansas farmers who have Revenue Protection, RP with the harvest price option, or Yield Protection coverage, and one deadline has already passed for southeast Kansas farmers. This deadline is the “final planting date,” and it marks the final day on which crops can be planted and receive their full insurance coverage.

     Final Planting Dates (FPDs) vary across the state for corn, with three regions represented. Figure 1 shows a map of these regions. Fourteen counties in southeast Kansas had a FPD of May 15th, another 60 counties in central and northeast Kansas have a FPD of May 25th, and 31 counties in western Kansas have a FPD of May 31st.

A second important insurance term here is the “late planting period” (LPP). The LPP allows the farmer to still plant the original crop and receive insurance coverage, but the level of coverage will decline. Specifically, the production guarantee declines 1 percent for each day that planting is delayed after the FPD.

As an example, consider a non-irrigated grower with an APH yield of 120 bushels per acre. With a 75% coverage level, the grower’s production guarantee is 90 bushels per acre. Acres planted on the fifth day into the LPP by this grower would have their production guarantee reduced by 5 percent, or 4.5 bushels per acre.

For corn in Kansas, the LPP extends for 20 days after the FPD ends. Hence, the final day of the LPP is June 4, 2019 for southeast Kansas, June 14, 2019, for central and northeast Kansas, and June 20, 2019 for western Kansas.

Producers who expect they will not be able to complete their corn planting by the Final Planting Date in their county need to alert their crop insurance agent. Farmers in this situation have several options available, but they need to coordinate with their agent as they move forward. Prevented Planted payments are subject to an adjuster and not a guarantee.

Readers looking for more details on Prevented Planting from RMA can consult the following resources:

– RMA’S main web page related to Prevented Planting
– An RMA fact sheet about PP provisions related to flooding
– RMA’s page for Frequently Asked Questions related to flooding and PP
– The RMA Prevented Planting Standards Handbook
– The Common Crop Insurance Policy document; the section on Prevented Planting is Section 17, beginning on numbered page 25

*****

Below, we describe and evaluate some of the options for corn acres not planted by the FPD. We list five here:

1. Acres that were not planted due to an insured cause of loss can be left unplanted and receive a full Prevented Planting payment, equal to 55 percent of the original production guarantee (or 60% if they bought-up on PP coverage)

2. These acres may also be planted to a cover crop during or after the end of the LPP. These acres will also receive the full Prevented Planting payment so long as the cover crop is not hayed or grazed before November 1. The cover crop may not be harvested otherwise at any time (for silage, grain, seed, haylage, etc.).

3. Acres unplanted by the FPD may still be planted to corn. For acres planted during the LPP, the corn crop is still insured but the production guarantee will decline by 1 percent each day, as described above. No Prevented Planting payment is made in this case.

If insurable causes of loss continue to delay planting, corn could still be planted after the end of the LPP. Acres planted at this point would receive a production guarantee of 55 percent of the original APH yield. Prospects of late maturity and other production issues may make this a less attractive option.

4. These acres may be planted to another crop. This could be soybeans or grain sorghum for many Kansas producers. In this case, no Prevented Planting payment is received. Crop insurance is available on this second crop if coverage has already been purchased for this crop on other acres in this unit.

5. The grower may take 35 percent of the corn Prevented Planting payment and plant another crop for harvest, but this second crop must be planted after the corn LPP ends. In this option, the farmer must pay still 35% of the corn premium.

 

Some conditions must be met to satisfy Prevented Planting rules. These include:
Acres must be eligible for PP acres. This means the PP acres must be 20 acres or 20 percent of the insurable crop acreage in the unit, whichever is less.
– The farm must have a history of planting corn and those historical acres will affect the amount of PP acres a producer can claim

Producers should also be aware if they take 35% of the corn payment and then plant a 2nd crop that acres designated as PP will get a yield equal to 60 percent of the approved yield for the first insured crop to calculate the average yield for subsequent crop years. If they take the full PP payment and do not plant a second crop, APH will not be affected.

COMPARING PREVENTED PLANTING OPTIONS

The following section develops some simple examples to compare all these options and consider which might be most advantageous for Kansas producers. As an example, it looks at the following case:

– Producer located in north central Kansas (corn Final Planting Date is May 25th, LPP ends June 14); soybean FPD is June 15

– The producer has a Revenue Protection policy with a guarantee of 75%, APH yield of 120 bu/acre, and a premium cost of $18 per acre

– Corn planting has been delayed; soybeans are considered for a second crop

– Weed control costs are $30/acre if corn acres are left unplanted, $15/acre if a cover crop is used

– Planting costs (seed, fuel, etc.) for a cover crop are $15/acre

– Corn Projected Price for insurance is $4.00; expected cash prices at harvest are $3.43 for corn and $7.27 for soybeans

– Expected corn yield at normal planting times is 120 bu/a; expected corn yield declines to 108 bushels (10%) for acres planted in the LPP

– Expected soybean yield for late May/early June planting is 41 bu/a, expected yield for mid-to-late June planting is 30 bu/acre

*****

     Tables 1 and 2 show the two options possible when the full Prevented Planting payment is collected.

     Table 1 indicates a net return of $150 per acre, based on a PP payment of $198 per acre (= 120 bu/a x $4.00/bu x 75% guarantee x 55% PP payment factor). From this return, the producer would need to subtract weed control costs of $30 per acre and an $18 crop insurance premium for corn.

Table 1: Full Prevented Planting Payment, No Cover Crop

Prevented Planting payment factor                                                      55%
Prevented Planting payment                                                           $198.00
Weed control costs per acre                                                             $30.00
Crop insurance premium per acre                                                    $18.00
Net returns ($ per acre)                                                               $150.00

*****

   Table 2 shows the case of collecting the same PP payment as the first option, but a cover crop is used instead of leaving the land fallow. Weed control cost is set at $15 per acre, and cover crop planting costs are $15 per acre. This example also produces a net return of $150. These weed control and cover crop expenses have been artificially set to produce equivalent outcomes, in order to highlight the importance of these costs. That is, if the producer decides to collect the full PP payment, they must consider their weed control and cover crop costs more closely to see if one offers a clear benefit. Some producers will be interested in the other benefits of cover crops such as potential improvements to soil quality, less erosion, and possible forage value after November 1.

Table 2: Full Prevented Planting Payment, Cover Crop Planted

Prevented Planting payment factor                                                      55%
Prevented Planting payment                                                           $198.00
Weed control costs per acre                                                             $15.00
Planting cost for cover crop                                                              $15.00
Crop insurance premium per acre                                                    $18.00
Net returns ($ per acre)                                                               $150.00

*****

     Table 3 shows expected costs and returns for Option 3, the producer who still plants corn but does so in the Late Planting Period. No Prevented Planting payment is collected, and the producer will also find his/her insurance coverage reduced, according to the number of days past the FPD on which these particular acres get planted. The example assumes a reduced corn yield, an expected local cash price at harvest of $3.43/bu and an expected Harvest Price for insurance of $3.70/bu.

     The acres considered here are planted on May 31, 6 days into the LPP. As a result, the production guarantee is reduced by 6 percent, from the original 75% guarantee of 90 bu/acre to 84.6 bu/acre. As a result, the revenue guarantee is also adjusted, down to $338.40 per acre (calculated as 84.6 bu/acre x $4.00/bu). The producer still owes the original crop insurance premium for corn of $18/acre.

     On the return side, expected cash sales at harvest are $370.44 per acre (= $3.43/bu x 108 bu/acre). No crop insurance indemnity is expected. Despite the lower expected Harvest Price, actual harvest revenue using the expected yield of 108 bu/acre would exceed the adjusted revenue guarantee for insurance.

     On the cost side, expenses are based on the 2019 KSU Farm Management Guides for non-irrigated corn in north central Kansas. In this case, costs of N fertilizer, its application, pre-plant burndown herbicides and related spraying costs are considered “sunk costs”, and are deducted from the totals in the KSU budgets. These expenses come to about $57 per acre, and they are not included because they have already been spent and don’t affect returns to any option going forward. Harvesting costs reflect the expected yield of 108 bu/acre. Total (remaining) costs come to $248/acre, producing an expected net return of about $122 per acre. This is about $28 per acre below the expected return for taking the full PP payment, as seen in Options 1 and 2.

Table 3: Corn planted during LPP

Planting date                                                                                       5/31
Adjusted production guarantee, bu/a                                                 84.6
Expected Harvest Price for insurance                                                $3.70
Adjusted revenue guarantee, $/acre                                             $338.40

Percent reduction in expected yield                                                    10%
Expected yield, (bu per acre)                                                               108
Expected actual revenue for insurance                                          $399.60
Crop insurance payment                                                                   $0.00

Expected cash price, $ per bu                                                            $3.43
Expected crop revenue, $ per acre                                                $370.44
Total revenue, $ per acre                                                           $370.44

Input costs, $ per acre                                                                   $170.61
Machinery & field operations                                                         $28.62
Harvesting costs                                                                             $48.96
Crop insurance premium                                                                $18.00
Total expenses                                                                            $248.18

Expected net returns ($ per acre)                                             $122.26

*****

     Table 4 shows the expected costs and returns of switching to another crop after the Final Planting Date. This option considers the case where soybeans are planted before the expiration of the Late Planting Period, foregoing any share of the corn PP payment. These acres are assumed planted on May 31 and can achieve an expected yield of 41 bushels per acre. The local “new crop” cash quote for soybeans is $7.27/bu. Expenses are based on the KSU Farm Management Guide budget for non-irrigated soybeans in north central Kansas. As before, costs from those budgets are adjusted to reflect what has already been spent for N, fertilizer application, and burndown herbicides.

     The only revenue on these acres are the soybean cash sales proceeds of $298 per acre. Total costs, including a $15/acre crop insurance premium for soybeans, come to about $210/acre, leaving an expected net of about $88 per acre.

 

Table 4: Plant soybeans, skip corn PP payment

Planting date                                                                                              5/31
Expected yield, (bu per acre)                                                                         41
Expected cash price, $ per bu                                                                   $7.27
Expected crop revenue, $ per acre                                                        $298.07
Crop insurance payment                                                                           $0.00
Total revenue, $ per acre                                                                   $298.07

Input costs, $ per acre                                                                             129.06
Machinery & field operations                                                                    29.04
Harvesting costs                                                                                        36.86
Crop insurance premium                                                                           15.07
Total expenses                                                                                    $210.02

Expected net returns ($ per acre)                                                        $88.05

MFP payment needed to match Option 1                                               $61.95
MFP $/bu needed to match Option 1                                                       $1.51

 

Another source of revenue may be possible for the case of soybeans, namely another Market Facilitation Program (MFP) payment from USDA. The 2018 MFP payment for soybeans was $1.65/bu, and while the Administration has indicated there would not be MFP payments for 2019, falling prices from the continuing trade war could still create pressure for such payments.

     The calculations at the bottom of Table 4 show how large an MFP payment would be needed, given actual production of 41 bu/acre, for this option to match the return of $150/acre seen for Options 1 and 2. The MFP would have to total about $62 per acre, or $1.51/bushel.

*****

    Table 5 shows the last option, that of taking 35 percent of the corn PP payment and then waiting until the Late Planting Period ends in order to plant soybeans. The example assumes soybeans planted on the Final Planting Date for soybeans of June 15. This later planting date for soybeans reduces the expected soybean yield down to 30 bu/acre. Production costs are adjusted as before, and harvest costs decline slightly, due to a lower yield.

     Soybean cash sales are about $218/acre, and the 35% PP payment from corn comes to $69.30 per acre, making total revenue about $287 per acre. Total costs are $212 per acre, making for an expected net return of $75 per acre. This is slightly below the expected returns to Option 4, and still about $75 per acre less than those options which take the full PP payment for corn. In considering a possible MFP payment, it would take an MFP payment rate of about $2.50/bushel on the 30-bushel expected yield to produce a return comparable to the full corn PP payment option.

Table 5: Take 35% corn PP payment, plant soybeans late

Planting date                                                                                           6/15
Expected yield, (bu per acre)                                                                      30
Expected cash price, $ per bu                                                                $7.27
Expected crop revenue, $ per acre                                                     $218.10
Crop insurance payment (35% of corn full PP)                                    $69.30
Total revenue, $ per acre                                                                $287.40

Input costs, $ per acre                                                                          129.06
Machinery & field operations                                                                29.04
Harvesting costs                                                                                    32.68
35% of corn insurance premium                                                             6.30
Crop insurance premium, soybeans                                                      15.07
Total expenses                                                                                 $212.14

Expected net returns ($ per acre)                                                    $75.26

MFP payment needed to match Option 1                                           $74.74
MFP $/bu needed to match Option 1                                                   $2.49

 

*****

FURTHER DISCUSSION

     These examples attempt to compare the Prevented Planting options for a non-irrigated corn producer in Kansas. Producers need to consider how their own results may vary, using yields, cash prices, and production costs that more closely match their own situation. But the examples in Tables 1 to 5 do suggest some items to watch closely.

     First, the yield penalty one expects for corn planted after the FPD plays a role. These examples assumed a 10 percent reduction in yield, and the option ended up with an expected net return below the full PP payment. If a producer is only 2 or 3 days late and doesn’t expect a big yield reduction, then planting corn looks more attractive.

     In the absence of any MFP payment for soybeans, then planting corn or taking the full corn PP payment appears more advantageous than either of the options which planted soybeans here. The option of planting soybeans later and collecting 35% of the corn PP payment offered just slightly less return than the timely planted soybeans.

     The prospect of an MFP payment, however, would make soybeans more appealing. An MFP payment of $1.50/bushel would raise returns on soybeans planted in the LPP competitive with taking the full corn PP payment, assuming normal soybean yields could be achieved.

     Having the MFP payment as such a wild card means producers will need to make a judgment quite soon about the likelihood and size of any such payment. If prospects for a large MFP payment fade and the appeal grows for the full corn PP payment, producers will then need to decide whether they want to leave the land fallow or go with a cover crop.

KSU Weekly Grain Market Update – The position of grain markets just prior to the USDA Reports on 5/10/209

Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, May 10, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

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

The recorded radio program will be aired at 10:03 a.m. central time, Friday, May 10, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the May 10th recording is be available at the KSU Agriculture Today website at this time.

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