Weekly Grain Market Review – Strong Corn and HRW Wheat Basis in Kansas, Average for Sorghum, Weak for Soybeans

Grain Market Summary

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

A. Feedgrain Markets

While awaiting the acreage numbers to be released by USDA NASS in the August 12th Crop Production and WASDE reports, the corn market has now had to deal with yield worries brought on by high temperatures in the last week. With corn pollination approaching in most areas this is a key factor to watch, with cooler temperatures forecast for next week. Corn basis has been relatively strong, while grain sorghum basis has been so-so so far, BUT, would be expected to strengthen if U.S. corn supplies are as short as feared in “new crop” MY 2019/20.

B. Hard Red Winter Wheat Markets

Hard Red Winter wheat harvest is wrapping up in the central and southern plains with some areas having high yields and good/OK test weights. Average protein is estimated to be 11.0% to 11.5% (11.3% average by U.S. Wheat Associates), down from 12.3% estimated for the 2008 crop. Although in the midst of a harvest glut, positive news for U.S. HRW wheat on the demand side revolves around potentially strong wheat feeding to compensate for short feedgrain supplies in “new crop” MY 2019/20, strong forward sales of HRW wheat at this point in time, and uncertain foreign crop prospects among some U.S. wheat export competitors.

C. Soybean Markets

Soybean production and supply prospects have diminished with reductions in planted acres from earlier expectations in year 2019. And U.S. production worries are still a factor in projected 2019 production. Yet, weakness in U.S. soybean exports continue to be a negative factor in the U.S. soybean market, with unresolved U.S.-China trade issues directly hurting U.S. soybean exports (to China) in the World market. Accordingly, Kansas soybean basis levels are as weak as they have been since at least year 2015.

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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, July 19, 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, July 19, 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…

Weekly Grain Market Review – Post 7/11/2019 USDA Reports Price and S-D Situation

Grain Markets after the July 11th USDA Reports

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

July 12, 2019

Feedgrain Markets

The most noteworthy grain market response to the July 11th USDA reports was the recognition that a more accurate forecast U.S. corn planted acreage numbers was “on hold” until the upcoming August 12th USDA NASS Crop Production report.  With the coming re-survey of 2019 U.S. corn planted acreage in early August combined with a more accurate assessment of 2019 prevented plantings for corn, the grain market took at rational, informed approach and implicitly said “we’ll just wait” until the August 12th USDA reports to determine feedgrain market direction for what is likely to be at least the remainder of calendar year 2019.

The manner in which this 2019 crop planting information will be released on August 12, 2019 seems likely to cause substantial grain market volatility at least on the day of the report, and likely in the days following.  It would not be surprising to see increased position taking occur in the U.S. corn options market ahead of that report in an effort by market participants to protect themselves from possible wide price swings that could occur.

Soybean Markets

The results of this report were positive for U.S. soybean market prospects, as lower acreage and production prospects caused a decline in projected ending stocks of 250 million bushels for “new crop” 2019, with projected percent ending stocks-to-use declining by over 5%.  The USDA raised its price projection for “new crop” MY 2019/20 (starting on September 1, 2019) by $0.15 per bushel – which at this point is perhaps as much or more of an indicator of price direction and general level than the “final word” on what U.S. soybean price prospects are for the “new crop” marketing year.

Kansas Hard Red Winter Wheat Markets

Regarding wheat, it seems from a hard red winter wheat perspective that U.S. wheat markets in general and hard red winter wheat prices in particular are “holding up” surprisingly well given that the HRW wheat harvest is still occurring in Kansas.  With wheat production problems for some U.S. export competitors, and “healthy” U.S. wheat export shipments and purchases for later shipments, CME Kansas HRW wheat futures have held up well.  Plus, with prospects for a higher U.S. wheat feeding stemming from constrained corn supplies, wheat prices have found some support.  It will be interesting to see what happens with wheat cash basis and prices in the U.S. central and southern plains states (Kansas, Oklahoma, Texas, Colorado, and Nebraska after the harvest is complete, and more information is known about the sizes of some of these other crops.

So, stay tuned – as it seems there is a every likelihood that grain markets will be volatile from now through August-September 2019.

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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, July 12, 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, July 12, 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 – 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…