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…

KSU Weekly Grain Market Update (5/3/2019) – 2019 Corn Planting Problems, Kansas Wheat Tour Results, and Positive Feedgrain Export Trends

Corn Market Decision Time re: Planting Prospects

and

Examining 2019 Kansas Wheat Tour Results

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

May 3, 2019

Point #1) Delayed U.S. Corn Plantings in May 2019

The situation with 2019 U.S. corn plantings as of May 3, 2019 is the following.  First, as of April 28th the USDA reports that corn plantings are delayed in several key corn producing states in the U.S. Corn Belt – most notably in Illinois (9% vs 43% 5-yr avg), Minnesota (2% vs 24% 5-yr avg), Indiana (2% vs 17% 5-yr avg), and Ohio (2% vs 13% 5-yr avg).  Plantings in Iowa, Kansas, Missouri, Nebraska, North Carolina, North Dakota, and Tennessee are also trailing the most recent 5 year average pace, but not a seriously as in IL, MN, IN, and OH.  With credible weather service forecasts for significant rainfall over many of these central and eastern U.S. Corn Belt states over the next week, prospects for timely plantings of 2019 U.S. corn acres are declining in a quantifiable manner.

Corn futures markets have not responded to this decline in 2019 U.S. corn planting and associated production prospects.  Within the next 1-2 weeks it seems these issues of 2019 U.S. corn planting prospects, how plantings could affect 2019 U.S. corn production, supply-demand balances, and expected corn prices for what remains of the “current crop” 2018/19 marketing year (MY) through August 31, 2019, and for “new crop” MY 2019/20 will all likely have to be dealt with by the corn futures and cash markets.

If the 2019 U.S. corn crop is planted in a timely manner, then it will have fully adequate soil moisture to begin development with – and which could provide for growth from May through June and into July.

However, if instead of the 92.792 million acres (ma) projected for year 2019 by the USDA in the Prospective Plantings report on March 29th, actual 2019 U.S. corn plantings are reduced by 5% down to 88.152 ma, or by 10% down to 83.513 ma, it would likely have significant, tangible, negative impacts on 2019 U.S. corn production.

At its current projection of 92.792 ma planted, 84.723 ma harvested (91.30% harvested to planted acres), and 176.4 bu/ac yields, the USDA is implicitly forecasting U.S. corn production in year 2019 would be 14.945 billion bushels

However, IF 2019 U.S. corn plantings decline 5% to 88.152 ma, then with 91.30% harvested-to-planted acres, there would be 80.486 ma harvested.  And with the same 176.4 bu/ac yield, U.S. corn production would be 14.198 bbdown 747 mb from the initial USDA implicit forecast of 14.945 bb.

In addition, IF U.S. corn plantings are down 10% from the USDA projection to 83.513 ma, then using the same harvested-to-planted acres factor of 91.30% to figure 2019 U.S. corn harvested acres at 76.247 ma, and using 176.4 bu/ac again, then 2019 U.S. corn production would fall to 13.450 bb down 1.495 bb from the USDA’s initial levels of 14.945 bb 2019 U.S. corn production.

Therefore, either a 5% or especially a 10% reduction in U.S. 2019 Corn planted acres would have significant negative impacts on U.S. corn production in 2019, leading to much tighter U.S. corn ending stocks, and higher cash prices as usage would be rationed on smaller supplies.

Point #2) Examining the Results of the 2019 Kansas Wheat Tour

This week’s 2019 Kansas Wheat Tour projected the 2019 Kansas wheat yield to be 47.2 bu/ac, with an implicit harvested acreage estimate of 6.494 million acres (92.8% harvested-to-planted acres off of 7.000 ma planted), and 2019 Kansas wheat production of 306,500,000 bushels (i.e., 306.5 million bushels or mb).   According to KSU Extension Agronomist Romulo Lulato ( lollato@ksu.edu), the Kansas wheat crop is 3 to 4 weeks behind normal in maturity, with the next month being crucial to crop development and possible disease threats.

Since year 2014, the annual Kansas Wheat Tour has UNDER-forecast Kansas wheat production by 10.4% (in 2015), 18.2% (in 2016), 15..6% (in 2017), and 12.3% (in 2018).  The reason for this under estimate of Kansas production in recent years has been a combination of underestimated yields, and especially low projections of harvested acreage.   During the years 2011-2018 period the Kansas Wheat Tour underestimated final Kansas wheat harvested acres each year, ranging from 4% too low in 2016 to 13.7% in 2011.  For instance, in 2018 Kansas harvested acres of wheat were implicitly forecast to be 6.576 ma, but ended up being 7.300 ma as estimated by USDA.  Following the same trend, it is possible the implicit harvested acreage of 6.494 ma for wheat in Kansas for 2019 could end up being too low.

Finally, total Hard Red Winter (HRW) wheat production in the central and southern plains states of Nebraska, Colorado, Kansas, Oklahoma and Texas is forecast to be 638 million bushels (mb) in 2019, up from 523 mb for these states in 2018, but comparable to 635 mb in 2017, 870 mb in 2016, and 655 mb in 2015.  The 2019 forecast for Texas came from KSU Calculations, while those for Kansas, Nebraska, Colorado, and Oklahoma came from the 2019 Kansas Wheat Tour.

An additional factor to watch as the 2019 Kansas wheat crop develops will be the levels of protein and/or other quality factors.  It is likely that significant amounts of the high protein / good quality 2018 Kansas wheat crop likely still in storage in Kansas grain elevators.  As a result, IF the 2019 Kansas wheat crop were of lower protein / quality, THEN it is likely that carryover supplies from the higher protein/higher quality 2018 crop would be blended with the 2019 crop to enhance marketability.

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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 3, 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 3, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 26th 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…

KSU Weekly Grain Market Analysis Through 4/26/2019 – Watching Weather for Corn Planting plus Positive Sorghum and HRW Wheat Exports Weeks

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, April 26, 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 was aired at 10:03 a.m. central time, Friday, April 26, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 26th 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…

KSU Weekly Grain Market Analysis Through 3/17/2019 – Floods, Wet Fields and Prospects for Delayed Field Work / Corn Planting

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, March 15, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

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

The recorded radio program was aired at 10:03 a.m. central time, Friday, March 15, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the March 15th 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…

KSU Weekly Grain Market Analysis: A “March 1st” Pre-Crop Risk Snapshot of U.S. Grain Markets

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, March 1, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

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

The recorded radio program will be aired at 10:03 a.m. central time, Friday, March 1, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the March 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…

“Beginning of 2019” Wheat Market Outlook Presentation – Kansas State University

The following slides are part of an “Early 2019 U.S. Wheat Market Outlook” presentation to be given by Daniel O’Brien, Extension Agricultural Economist – Kansas State University.  This full presentation will be place on the www.AgManager.info website in early 2019 at the following web address:

http://www.agmanager.info/grain-marketing/presentations

 

KSU Weekly Grain Market Analysis: U.S. and World Corn S-D and the Impact of China Corn Stocks Changes in the 11/8/2018 USDA Reports

Corn Market Impact from the 11/8/2018 WASDE Report

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

November 9, 2018

The USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports general provided neutral-to-positive information for the U.S. and World Corn Market.

 

A. United States Domestic Corn Supply-Demand & Prices

With projected 2019 U.S. corn yields dropping 1.8 bu/ac from a month earlier to 178.9 bu/ac, the USDA’s 2019 U.S. corn production forecast of 14.626 billion bushels (bb) was down 95 million bushels (mb) from average pre-report trade expectations, down 152 mb from the October 11th USDA forecast, and comparable to U.S. corn production of 14.604 bb in year 2017 and the record high of 15.148 bb in year 2016.  As a result, total supplies of U.S. corn are forecast to be 16.816 bb in “new crop” MY 2018/19, down from 16.934 bb in “old crop” MY 2017/18, and from 16.942 bb in MY 2016/17.

The USDA reduced forecast feed and residual use by 50 mb to 5.500 bb for “new crop” MY 2018/19 – still the highest amount in the last three marketing years (i.e., up from 5.470 bb in MY 2016/17 and 5.298 bb in “old crop” MY 2007/18).  The USDA also reduced its forecast of U.S. corn exports by 25 mb to 2.450 bb for “new crop” MY 2018/19 – which still would be the highest amount in the last three marketing years (i.e., up from 2.294 bb in MY 2016/17 and 2.438 bb in “old crop” MY 2007/18).  

Following lower forecast feed and export use, the USDA reduced forecast total U.S. corn use by 75 mb to 15.080 bb for “new crop” MY 2018/19 – also still the highest amount in the last three marketing years (i.e., up from 14.649 bb in MY 2016/17 and 14.793 bb in “old crop” MY 2007/18). 

Taking decreased U.S. corn supplies and U.S. total corn use together, the USDA ended up reducing its forecast of U.S. corn ending stocks for “new crop” MY 2018/19 by 77 mb to 1.736 bb – which would be the lowest amount in the most recent three marketing years (i.e., down from 2.293 bb in MY 2016/17 and 2.438 bb in “old crop” MY 2007/18).

U.S. corn percent ending stocks-to-use (S/U) is forecast to be 11.51% in “new crop” MY 2018/19, down from 11.96% in the October USDA report, 14.47% S/U in “old crop” MY 2017/18, and from 15.56% S/U in MY 2016/17. 

As a result of this “tightening” of U.S. corn percent ending stocks-to-use, the USDA raised its forecast price range for U.S. corn season average prices to $3.20-$4.00 (midpoint = $3.60 /bu up $0.10 /bu from October).  Although viewed as “low” and below full cost of production for most Kansas corn producers, a U.S. average corn price of $3.60 /bu in “new crop” MY 2018/19 is the highest in the last three years – compared to $3.36 /bu in both “old crop” MY 2017/18 and  MY 2016/17.

 

B. “World” & “World-Less-China” Corn Ending Stocks & % Stocks/Use

Following changes announced by the Chinese government in early November in the amounts of their domestic ending stocks of corn since 2007, the USDA “followed suit” and made similar changes in its November 8th WASDE report.

Following China’s lead, the USDA increased Chinese corn ending stocks in “new crop” MY 2018/19 by 145-150 million metric tons (mmt).  As a result, the USDA’s projection of World corn ending stocks increased by the amount of the increase in Chinese corn stocks, i.e., from 159.35 mmt in the October 11th WASDE to 307.51 mmt in the November 8th WASDE report.  As a result, World corn percent ending stocks-to-use jumped sharply from 15.7% in the October 11, 2018 USDA WASDE report, up to 27.2% in the November 11th report.

However, by examining World corn stocks and percent stocks-to-use with China excluded, i.e., from a “World-Less-China” perspective, the USDA WASDE estimates show that in “new crop” MY 2018/19 “World-Less-China” grain stocks of 100.02 mmt are projected to be the “tightest” level in 3 years – being down from 118.37 mmt in “old crop” MY 2017/18 and from 127.45 mmt in MY 2016/17. 

In addition, percent (%) ending stocks-to-use of corn for the “World-Less-China” are projected to be 11.7% in “new crop” MY 2018/19, down from 14.4% in “old crop” MY 2017/18 and from 15.4% in MY 2016/17.  

 

C. Summary Thoughts on Chinese-World Corn Stocks Increases

The increase in World corn ending stocks and percent ending stocks-to-use that occurred in the November 8th USDA WASDE report are likely to have minimal affect on the U.S. and World corn markets.  China is a strong domestic user of corn, and has an established pattern of using all supplies it produces domestically internally without entering into World corn trade to either buy or sell except perhaps during periods of sharply reduced Chinese domestic corn supplies.  Also, the intention of the Chinese government to increase domestic corn ethanol production in the near future will play a large role in increased usage of their domestic corn supplies and stocks. 

See Table D in the accompanying “Grain Market Update” notes for the November 9th KSU Agriculture Today radio program for details over the MY 2014/15 through “new crop” MY 2018/19 period.

 

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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, November 9, 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, November 9, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the November 9th 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…