KSU Weekly Grain Market Review: Grain Market “Law of One Price” Will be At Play in U.S.-China Trade Dispute

Weekly Grain Market Review (KSU Ag Econ) for July 6, 2018

Question of the Hour in World Grain Markets:

How Will the “Law of One Price” Work Out for Grain Markets in the U.S.-China Trade Dispute?

By definition, “The law of one price is the economic theory that the price of a given security, commodity or asset has the same price when exchange rates are taken into consideration. The law of one price is another way of stating the concept of purchasing power parity. The law of one price exists due to arbitrage opportunities.” (Source: Investopedia, https://www.investopedia.com/terms/l/law-one-price.aspFeedback)

In regards to grain markets, here is more explanation:  “In case the two markets both produce and can trade a commodity in either direction the law of one price states that the price difference should be smaller or equal to transport and transaction costs.”

There are a number of studies in the grain markets within the last 10-20 years that appear to indicate that the Law of One price DOES hold in the grain markets in the long run, but that there may be short term (from several weeks to a month or so) during which prices may be “out of line” or “not aligned economically” in a manner that would otherwise be dictated by differences in transportation costs, exchange rates, or I would add, time, storage, or possibly even quality.

So, how do these definitions of the Law of One Price relate to the current situation in U.S., Chinese and World grain markets?  It seems that with 1) flexibility in the directional flow of grain, 2) the inflexible needs of domestic users of grain in terms of timing of usage and location of processing plants and/or livestock feeders, 3) the risks associated with point #2 and varying risk averse attitudes and approaches of domestic U.S. and foreign users, 4) the short term inflexibility of supplies coupled to the long term seasonal ability to adjust production plans, and other factors, that in the short term, grain markets may tend to be reactive, if not possibly over reactive to such an issue as tariffs on grain imports placed on U.S. soybeans, grain sorghum and other commodities by China.

However, past the initial reactions of the markets – to a degree rationally driven by short term needs of grain users, but to another degree perhaps driven by fear of the unknown in a risk averse environment, if not a herd mentality – there will be volatility in the grain markets.  In other words, it could be a challenge to figure out to what degree grain price volatility in the midst of a major trade dispute such as this between China and the U.S. should rationally affect grain prices.

There is a fair amount of confidence that grain markets will eventually readjust to changes in the directional flow of grain in international trade, and that livestock that has to be fed and processing plants that have to run will eventually receive their supplies.  But the period of adjustment could “try the mettle” and “test the courage, patience, and managerial ability” of both producers and users of grain, both in the U.S. and in China.

Finally, the reverberations from this event will likely persist and force themselves upon the grain markets over the next 1-2 years at least, as high soybean prices for export in South America may pull more Brazilian and Argentine acres into production for export to China, competing for corn acres in those countries, and affecting the decisions of U.S. corn producers in 2019.  And these speculations on future cropping patterns in response to the current U.S. – China trade dispute are only beginning.

Likely this trade dispute will eventually be settled – possibly by fall 2018 as China will need U.S. soybean supplies after South American supplies have run short.  If the trade dispute is settled by the U.S. 2018 soybean harvest, then the U.S. will likely ship soybeans to China directly.  If it is NOT settled by that time, then China will still need soybeans, but some form of trans shipments or substitution of inventories on an in and out basis via other countries may occur.  These and other questions will likely “roil up” the grain markets for months to come.

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Grain market summary notes, charts and comments supporting the Weekly Grain Market Review presented in the KSU Agriculture Today radio program to be played on Friday, July 6, 2018 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, July 6, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the July 6th recording will be available afterwards at the KSU Agriculture Today website.

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

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Weekly Grain Market Review (KSU AgEcon): Kansas Cash Corn and Wheat Basis Retains Strength Signalling Underlying Demand

Although Corn and HRW futures have declined sharply in the last few weeks, basis levels for corn and wheat at various Kansas locations have retained their strength – signaling underlying demand.

On the days ahead of the June 29, 2018 USDA Grain Stocks and Acreage reports U.S. grain markets have been “weak“.  CME JULY 2018 corn futures closed at $3.45 on Thursday, June 28th – trading in a range of $3.38 3/4 to $3.59 3/4 since June 18th.  CME JULY 2018 Hard Red Winter Wheat futures closed at $4.53 1/4 on Thursday, June 28th – at the very bottom of the trading range of $4.53 1/4 to $5.00 1/2 since June 19th.  Similarly, CME JULY 2018 soybean futures closed at $8.61 1/4 on Thursday, June 28th – trading in a range of $8.77 to $9.05 1/2 since June 18th.

Although the futures markets have been declining, cash basis levels for corn and HRW wheat in Kansas have displayed a large amount of variability across the state.  Corn basis levels in several Southwest Kansas locations are $0.03 to $0.10 under SEPT 2018 Corn futures – a positive event considering the weakness in futures prices.  Corn basis levels in Northwest Kansas are still $0.36-$0.40 under JULY 2018.  Overall, western Kansas cash prices range widely in June 28th, from highs near $3.49-$3.51 per bushel in Southwest Kansas to lows in the $3.05-$3.09 range in Northwest Kansas.

Central Kansas corn prices ranged from $3.10 to $3.28 per bushel, with basis levels being $0.17 to $0.35 under JULY 2018 Corn.  Conversely, Eastern Kansas corn basis was relatively strong, with cash prices of $3.45-$3.50 at major terminals in Topeka and Atchison, with basis being even with or $0.05 over JULY 2018 Corn futures.

Ethanol plant cash bids for corn in Kansas early in the day on June 28th were $3.52 1/2 to $3.82 1/2 on June 28th, with basis ranging from even with to $0.30 over JULY 2018 Corn futures.

Summary Thoughts on Kansas Corn Basis: The upshot of all this for corn, is that in locations near demand centers in Kansas (i.e., cattle feeding in southwest Kansas, processors in northeast Kansas, and ethanol plants throughout the state), cash corn basis levels are holding up well in spite of the recent declines in CME corn futures prices.  This is a positive market indicator of underlying demand for corn in this western Corn Belt state.

Wheat basis bids in Kansas have been strong – moving to the positive side ABOVE JULY 2018 and/or SEPT 2018 CME Kansas HRW wheat futures contract price in most central Kansas terminal locations, and strengthening from recent levels in western KansasCentral Kansas cash wheat bids ranged from $4.59 to $4.78 1/4 on June 28th, with basis ranging from $0.01 over to $0.25 over CME JULY 2018 Kansas HRW Wheat futures.   Eastern Kansas terminal bids in Topeka and Atchison were in the range of $4.43 1/4 to $4.53 1/4, with basis of $0.10 per bushel under to even with JULY 2018 futures.  Western Kansas wheat cash bids were in the range of $4.23 to $4.48 per bushel on June 28th, with basis of $0.30 to $0.25 per bushel under SEPT 2018 Kansas HRW Wheat futures.  These basis levels in western Kansas are stronger than had existed coming through the winter months of late 2017-early 2018.

Summary Thoughts on Kansas Wheat Basis: It seems that the cause of strength in Kansas wheat basis numbers depends on both prospects for a smaller 2018 Kansas and U.S. hard red winter wheat crop, and market demand for higher protein levels.

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Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program that played on Friday, June 29, 2018 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, June 29, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the June 29th  recording will be available at the KSU Agriculture Today website.

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

 

KSU Weekly Grain Market Review: Strong HRW Wheat Basis, Country-Level Grain Exports, and Corn Belt Dry Areas Persist (via NASA-Grace)

Grain market summary notes, charts and comments supporting the Weekly Grain Market Review presented in the KSU Agriculture Today radio program to be played on Friday, June 22, 2018 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_06-22-18.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, June 2, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the June 22nd recording will be available at the KSU Agriculture Today website.

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

KSU Weekly Grain Market Analysis: Falling Grain Markets on U.S.-China Trade Issues and U.S. Crop Prospects

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, June 15, 2018 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_06-15-18.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, June 15, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the June 15th recording will be available at the KSU Agriculture Today website.

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

KSU Weekly Grain Market Analysis: Possible Soybean Market Scenarios for “New Crop” MY 2018/19

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, June 1 will be available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_06-01-18.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, June 1, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the June 1st recording will be available at the KSU Agriculture Today website.

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

KSU Soybean Market Outlook in Late-May 2018 – A Convergence of Volatility-Factors Upon the Soybean Markets

An analysis of U.S. and World soybean supply-demand factors and 2018 price prospects following the USDA’s May 10th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website (http://www.agmanager.info/)

Following an article on “Soybean Market Outlook in Late-May 2018” – with the full article and accompanying analysis to be available on the KSU AgManager website at the following web address:

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

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1. Overview of the Soybean Market Situation in Late-May 2018

Since February 1, 2018 the outlook for U.S. soybean market prices through Summer-Fall of this year has been extremely uncertain.  Prospects for soybean production and trade competition from South America has had both positive and negative impacts on U.S. soybean export market and price prospects. However, the largest source of uncertainty has stemmed from trade disputes between the U.S. and China – which has at different times both diminished and improved U.S. soybean export market prospects.   With soybean planting progressing in the U.S., during July-August 2018 the attention of the soybean market will likely turn toward the development of the 2018 U.S. soybean crop and associated supply and demand prospects.

What can be described as “neutral-to-cautiously optimistic” forecasts for U.S. soybean prices in the “new crop” 2018/19 marketing year that now predominate in the soybean market are based on a combination of market factors.  These include: 1) as yet un-dealt with 2018 U.S. soybean production risk in Summer 2018; 2) expectations of continued strength in U.S. soybean domestic crush and exports in coming months; and 3) the possibility of tighter U.S. soybean supplies in terms of reduced ending stocks and percent ending stocks-to-use if a short crop develops in the U.S. this summer.  Improved U.S. soybean export prospects are expected resulting from 2018 soybean production problems for export competitor Argentina on the one hand, and hopes for a resolution to the China-U.S. trade dispute on the other. 

Even with the relative strength of U.S. soybean prices over the past four (4) months, the path of U.S. soybean prices through Fall 2018 will be largely driven by the development of and prospects for the 2018 U.S. soybean crop.   Kansas State University projections are that if prospects for 2018 U.S. corn production decline markedly below the 4.280 billion bushel (bb) forecast by the USDA – down to say 3.800-4.000 bb or less, then U.S. soybean ending stocks for “new crop” MY 2018/19 would likely fall to 250-300 mb or less (compared to the USDA’s forecast of 415 mb).  If this occurs, then U.S. soybean ending stocks-to-use in “new crop” MY 2018/19 would likely decline to 7.0%-8.0% or less – compared to the current USDA forecast of 9.39% ending stocks-to-use. 

Consequently, if a short crop were to occur in the U.S. in summer 2018, then in Fall 2018 NOV 2018 soybean futures would likely move higher to the range of $11.50-$12.00 /bu. or more.  Projected U.S. average cash prices for “new crop” MY 2018/19 would also likely rise – up to the range of $11.00-$11.50 /bu (midpoint = $11.25).  This compares to the current USDA forecast of $8.75-$11.25 (midpoint = $10.00 /bu) on 9.39% stocks/use for “new crop” MY 2018/19 – beginning September 1, 2018.

2. CME Soybean Futures & Kansas Cash Corn Prices & Basis Bids

Soybean futures have reflected the “disconcerting uncertainty” that these market factors have had on market sentiments.  Chicago Mercantile Exchange (CME) JULY 2018 Soybean futures can be described as “volatile” during the February 1st – March 30th period.  After closing at $10.06 per bushel on February 1st, JULY 2018 Soybean futures moved to a high of $10.90 ¼ on March 2nd; to a low of $9.94 ½ on April 4th; to a high of $10.78 on April 13th; to a low of $9.92 ½ on May 17th; to a high of $10.50 ¾ on May 24th; and finally down to a close of $10.18 ½ on Thursday, May 31st

Since the release of the USDA’s May 10th World Agricultural Supply and Demand (WASDE) report, “old crop JULY 2018 CME Soybean futures prices have traded in a range of $9.98 ½ to $10.35 ¾ per bushel before closing at $10.18 ½ /bu on May 31st (Figure 1).   Over the same time period “new crop NOVEMBER 2018 CME Soybean futures prices have traded in a range of $10.02 to $10.42 ½ /bu before closing at $10.34 ¼ on May 31st.   Prices for the JULY 2018 and NOV 2018 futures contracts are up $0.53 ¼ (up 5.5%) and $0.66 ¾ /bu (up 6.9%) from their lows on January 12th following the January 2018 USDA Annual Crop Production Summary, WASDE, and Grain Stocks reports.         

In Western Kansas on Wednesday, May 30th cash soybean bids at major grain elevators ranged from $8.88 ($1.35 under JULY 2018 futures) to $9.23 ($1.00 under), and ranged from $9.29 ($0.94 under) to $9.43 ($0.80 under) in Central Kansas.  These prices are at least moderately higher than when bids in western and central Kansas had fallen to $8.21-$9.05 ½ ($1.40 to $0.55 /bu under MAR 2018 Soybean futures) on January 12, and greatly above marketing loan rates for soybeans across the state, with loan rates near $5.00 in Central Kansas and $4.80 per bushel in Western Kansas

Cash soybean price bids in East Central and Northeast Kansas at major terminal elevator locations were $9.88 – $9.93 ($0.35 to $0.30 under JULY) on May 30th, up substantially from the range of $9.00 ½ – $9.05 ½ per bushel ($0.60-$0.55 under MAR 2018) on 1/12/2018.  Cash soybean bids at Kansas soybean processing plants in Emporia and Wichita on May 30th ranged from $9.86 ($0.37 under JULY) to $9.93 ($0.30 under).

3. South American Export Competition in “Old Crop” MY 2017/18

Soybean market signals from South American export competitors Argentina, Brazil and Paraguay have been “mixed” so far in year 2018 (Figure 14).  Serious drought has caused Argentina soybean production to decline by 32.5% from a USDA estimate of 57.8 million metric tons (mmt) in 2017 down to 39.0 mmt in 2018, and cut projected Argentine soybean exports by 40.3% to 4.2 mmt in the “old crop” 2017/18 marketing year (MY) ending August 31st (Tables 2 & 3).   Argentina soybean meal exports are projected to be 7.4% lower (29.0 mmt) in MY 2017/18, down from 31.3 mmt in MY 2016/17.

However, Brazilian soybean production is projected to be higher – offsetting Argentina’s declines to a degree.  Brazil is projected by the USDA to produce a record high 117.0 mmt of soybeans in year 2018, up 2.5% from the previous record of 114.5 mmt in year 2017.  Brazilian soybean exports are forecast to be 73.3 mmt in MY 2017/18 (ending August 31st), up 16.1% from 63.1 mmt in MY 2016/17 (Tables 2 & 3).  Brazil soybean meal exports are projected to be 13.3% higher (15.6 mmt) in MY 2017/18, up from 13.8 mmt in MY 2016/17.  

Paraguay soybean production is projected to be down marginally – providing a neutral influence to the market.  Paraguay is projected by the USDA to produce 10.2 mmt of soybeans in year 2018, up marginally from 10.0 mmt in year 2017.  Paraguay soybean exports are forecast to be 6.25 mmt in MY 2017/18 (ending August 31st), up 2.0% from 6.13 mmt in MY 2016/17 (Tables 2 & 3). 

These three South American countries are the main competition in global soybean export markets for the United StatesArgentina, Brazil and Paraguay are forecast to comprise 55.4% (83.75 mmt) of forecast World soybean exports (151.3 mmt) in the “old crop” 2017/18 marketing year (MY). The U.S. is projected to make up 37.2% (56.2 mmt) of World soybean exports for MY 2017/18, with other countries making up the remaining 7.4% (11.3 mmt) (Table 3). 

The trade dispute between the U.S. and China has “pushed” Chinese soybean export purchases toward Brazil and away from the U.S. at least temporarily until the matter is either settled OR exportable South American supplies are no longer available in fall 2018.  There has been both negative and positive news coming from these negotiations to date, with final agreements or lack there of still to come.

4. U.S. Soybean Supply-Demand Projections for “Old Crop” MY 2017/18

In the May 10th USDA WASDE report the USDA projected “old crop” MY 2017/18 soybean Total Supplies to be unchanged from earlier WASDE reports at 4.718 billion bushels (bb) (Table 1 and Figure 6). 

Continued strength in U.S. soybean crush resulting from demand for soybean meal for domestic and foreign livestock feeding has supported domestic U.S. soybean demand (Table 1, Figures 7 & 9ab).  Projected exports of U.S. soybean meal of 12.700 million short tons (mst) in “old crop” MY 2017/18 ending on September 30th are up from 11.601 mst last year – trailing only 13.107 mst in MY 2014/15.  Strong U.S. soybean meal exports in “old crop” MY 2017/18 are a direct result of shortfalls in Argentina soybean production and soybean meal exports due to drought conditions in early 2018.    

The USDA’s World Agricultural Supply and Demand Estimates (WASDE) report monthly projections of U.S. soybeans exports for “old crop” MY 2017/18 have declined by nearly 100 mb since January 2018 – down to a projection of 2.065 bb (Table 1, Figures 7 & 9ab).  This forecast of 2.065 bb for the current marketing year ending on August 31st is still the 2nd highest on record, but down from the record high of 2.174 bb a year earlier.  This moderate reduction in U.S. soybean export prospects in recent months is due to a combination of larger Brazilian soybean production, and trade tensions between the U.S. and China pushing business to Brazil. 

Through May 17th – the 37th week of “old crop” MY 2017/18 – 1.670 bb of U.S. soybeans had been shipped from U.S. ports for exports (Figure 8).  This amounts to 80.9% of the USDA’s projection of 2.065 bb in U.S. exports with 71.2% of the marketing year complete (i.e., 37/52 weeks).  However, total shipments and forward sales of U.S. soybeans in “old crop” MY 2017/18 through May 17th amounted to 2.028 bb, or 98.2% of the USDA’s projection with 71.2% of MY 2017/18 complete – indicating a positive outlook for “old crop” U.S. soybean exports for the remainder of the marketing year through August 31st.

Seed usage of U.S. soybeans is projected to be 103 million bushels (mb) in “old crop” MY 2017/18, with Residual use forecast at 32 mb – both down marginally from MY 2016/17.  Total Use was projected to be a record high of 4.188 bb in “old crop” MY 2017/18 – down moderately from the past record of 4.213 bb in MY 2016/17 (Table 1, Figures 7 & 9ab).

As a result of these supply and use projections for “old crop” MY 2017/18, ending stocks are projected to be the 2nd highest on record at 530 mb with percent ending stocks-to-use of 12.66% – both up from 415 mb (7.17% S/U) in MY 2016/17 (Table 1, Figures 9ab & 10-11).  The record high U.S. soybean ending stocks amount occurred in MY 2006/07, with 574 mb ending stocks and 18.62% ending stocks-to-use. 

United States’ soybean prices for “old crop” MY 2017/18 are projected to average $9.35 /bu – down from $9.47 in MY 2016/17, and comparable to $8.95 /bu in MY 2015/16 (Table 1, Figures 10-11).  

5. U.S. Soybean Supply-Demand Projections for “New Crop” MY 2018/19

The USDA provided a forecast of U.S. soybean supply, demand, and prices for “new crop” MY 2018/19 In the May 10th USDA WASDE report.  Based on 2018 U.S. soybean production projections 88.982 million acres (ma) planted, 88.247 ma harvested, and 2018 U.S. soybean average yields of 48.5 bu/ac., the USDA forecast 2018 U.S. soybean production to be 4.280 bb.  This 2018 forecast of 4.280 bb would be down from the record high of 4.392 bb in 2017, and the 2nd highest amount of 4.296 bb in 2016 (Tables 1a-b, Figures 4-5-6). 

Total Supplies of U.S. soybeans in “new crop” MY 2018/19 are forecast to be a record high 4.835 bb based on 530 mb in beginning stocks, 4.280 bb in production, and 25 mb in imports.  This amount is up from the previous record highs of 4.718 bb and 4.515 bb in U.S. soybean Total Supplies in “old crop” MY 2017/18 and MY 2016/17, respectively (Tables 1a-b, Figure 6). 

Soybean crush in “new crop” MY 2018/19 is forecast to be a new record high of 1.995 bb – to be driven by expected ongoing domestic usage for livestock feed as well as moderately lower soybean meal exports (Table 1a-b, Figures 7 & 9ab).  This would be up 5 mb in U.S. soybean crush from “old crop” MY 2017/18.  

Exports of U.S. soybeans in “new crop” MY 2018/19 are forecast to increase 225 mb to 2.290 bb – likely on short supplies on the part of export competitor Argentina in early 2019 (Figures 7-9).  As of May 17th, a total of 204.2 mb of U.S. soybean sales have been made for delivery in “new crop” MY 2018/19 – beginning on September 1, 2018 – equal to 8.9% of the USDA projection of 2.290 bb for the marketing year.

Seed usage of U.S. soybeans is projected to be 103 million bushels (mb) in “new crop” MY 2018/19, with Residual use forecast at 30 mb – both essentially unchanged from “old crop” MY 2017/18 (Table 1a-b, Figures 9ab). 

Total Use is projected to be a record high of 4.420 bb – up from the previous record highs of 4.188-4.213 bb the last two years (Table 1a-b, Figure 9b). 

As a result of these supply and use projections for “new crop” MY 2018/19, ending stocks are projected to be 415 mb with percent ending stocks-to-use of 9.39% – both down from 530 mb (12.66% S/U) in “old crop” MY 2017/18 (Tables 1a-b, Figures 9ab & 10-11).  United States’ soybean prices for “new crop” MY 2018/19 are projected in the range of $8.75-$11.25 (midpoint = $10.00 /bu) – up $0.65 /bu from the midpoint projection of $9.35 /bu in “old crop” MY 2017/18.   This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

6. Alternative KSU Soybean Forecast Scenarios for “New Crop” MY 2018/19

Three alternative KSU-Scenarios to the USDA’s forecast for U.S. soybean supply-demand and prices are presented for “new crop” MY 2018/19 (Table 1b, Figure 10).  These projections show how varying 2018 U.S. soybean production and use scenarios could affect U.S. soybean supply-demand and price outcomes in “new crop” MY 2018/19.  Probability-weights are added to reflect judgements about how likely each scenario is to occur in “new crop” MY 2018/19, i.e., during the September 1, 2018 through August 31, 2019 time period.

A – KSU “Lower 2018 U.S. Soybean Exports” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions: 88.982 ma planted, 88.053 ma harvested, 48.5 bu/ac yield, 4.271 bb production, 4.826 bb total supplies, 1.995 bb domestic crush, 2.065 bb exports (equal to MY 2017/18 and less than USDA’s forecast), 4.197 bb total use, 629 mb ending stocks, 14.99% S/U, & $8.50 /bu U.S. soybean average price; 

B – KSU “Large 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions: 88.982 ma planted, 88.053 ma harvested, 52.0 bu/ac yield (equal to record high in year 2016), 4.579 bb production, 5.134 bb total supplies, 2.000 bb domestic crush, 2.300 bb exports, 4.435 bb total use, 699 mb ending stocks, 15.76% S/U, & $8.25 /bu U.S. soybean average price; 

C – KSU “Small 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19: (20% probability): Assumptions are: 88.982 ma planted, 88.053 ma harvested, 42.0 bu/ac yield (near recent lows of 40-44 bu /ac in years 2011-2013), 3.698 bb production, 4.253 bb total supplies, 1.950 bb domestic crush, 2.000 bb exports, 4.085 bb total use, 168 mb ending stocks, 4.11% S/U, & $12.50 /bu U.S. soybean average price;

7. World Soybean Supply-Demand Prospects

World soybean production of a record high 354.5 million metric tons (mmt) is projected for “new crop” MY 2018/19, up 5.3% from 336.7 mmt in “old crop” MY 2017/18, and up 1.2% from the current record high of 350.3 mmt in MY 2016/17 (Figure 13, Table 2).  The “new crop” 2018/19 marketing year begins September 1, 2018 and continues through August 31, 2019.   World soybean total supplies of 446.7 mmt in “new crop” MY 2018/19 are forecast to be up 3.1% from 433.1 mmt in “old crop” MY 2017/18, and up 4.2% from 428.7 mmt in MY 2016/17. 

World soybean exports of a 161.8 mmt are projected for “new crop” MY 2018/19, up 7.0% from 151.3 mmt in “old crop” MY 2017/18, and up 9.7% from 147.5 mmt in MY 2016/17 (Table 3).  China would be the key World soybean importer in the coming marketing year, and show little sign of abating yet in their annual soybean import increases (Table 4, Figure 15).

Projected World soybean ending stocks of 86.7 mmt (24.2% S/U) in “new crop” MY 2018/19 are down 5.9% from 92.2 mmt (26.9% S/U) in “old crop” MY 2017/18, 11.1% from the record high 96.4 mmt (29.3% S/U) in MY 2016/17, and 78.4 mmt (25.0% S/U) in MY 2015/16 (Figures 13 & 16, Tables 8-9).  

Projected Foreign (Non-U.S.) soybean ending stocks of 75.4 mmt (18.9% S/U) in “new crop” MY 2018/19, is down 3.0% from 77.7 mmt (20.5% S/U) in “old crop” MY 2017/18, and is down from 88.2 mmt (24.4% S/U) in MY 2016/17 (Tables 8-9).  

KSU Weekly Grain Market Analysis: Focusing on Ethanol and Bioenergy Costs-Returns

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, May 18, 2018 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_05-18-18.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, May 18 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the May 18th  recording will be available at the KSU Agriculture Today website.

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