USDA Sept. 29th Small Grains 2017 Summary and Grain Stocks Reports “By the Numbers”

The September 29, 2017 USDA Small Grains Summary and Grain Stocks reports provided the following results:

A. U.S. Corn Results

  • U.S. Corn stocks on September 1, 2017 were projected to be 2.295 billion bushels – down from pre-report expectations of 2.353 bb.  Compared to recent years: U.S. corn stocks on September 1st (2.295 bb) were 32%-33% larger than on the same dates in 2015 & 2016, up 86% from 2014, and up 180% from 2013.
  • U.S. Corn Use in June-August 2017 of 2.930 billion bu. was up from implicit pre-report expectations of approximately 2.876 bb.   Compared to recent years: June-August 2017 U.S. corn use was down marginally from the same period in 2016 (2.970 bb – down 1%), but up 6%-16% from 2014-2015, up 35%-48% from 2012-2013, and up 12%-15% from 2010-2011.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are at least marginally positive for U.S. corn supply-demand prospects, indicating that usage of U.S. corn for feed and possibly fuel ethanol were larger than the trade had expected.  Still, these are historically large levels of U.S. corn stocks for September 1st.  The existing “large supply – low price” scenario for U.S. corn heading into the 2017 harvest was not appreciably changed by these results.

B. U.S. Soybean Results

  • U.S. Soybean stocks on September 1, 2017 were projected to be 301 million bushels – down from pre-report expectations of 338 mb.   Compared to recent years: U.S. soybean stocks on September 1st (301 mb) were 53%-58% larger than on the same dates in 2015 & 2016, up 227% from 2014, and up 113% from 2013.
  • U.S. Soybean Use in June-August 2017 of 665 million bu. was up from implicit pre-report expectations of approximately 628 mb.  Compared to recent years: June-August 2017 U.S. soybean use was down marginally from the same period in 2016 (681 mb – down 2%), but up 49%-94% from 2014-2015, up 109% from 2013, and up 32%-63% from 2010-2012.
  • Summary Thoughts: Similar to U.S. corn, relative to pre-report trade expectations, these results are at least marginally positive for U.S. soybean supply-demand prospects, indicating that usage of U.S. soybeans for domestic crush and residual uses were larger than the trade had expected.  Still, these are also historically large levels of U.S. soybean stocks for September 1st.  The existing “large supply – low price” scenario for U.S. soybeans heading into the 2017 harvest was not appreciably changed by these results either.

C. U.S. Wheat Results

  • U.S. Wheat stocks on September 1, 2017 were projected to be 2.253 billion bushels – up from pre-report expectations of 2.205 bb.   Compared to recent years: U.S. wheat stocks on September 1st (2.253 bb) were down 11% from 2016, but were 7%-19% larger than on the same dates in 2013, 2014, & 2015.
  • U.S. Wheat Use in June-August 2017 of 668 million bu. was down 10%-11% from 2014-2016, down 26%-34% from 2012-2013, and down 7%-8% from 2010-2011.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are negative for for U.S. wheat supply-demand prospects, indicating at a minimum that usage of U.S. wheat for domestic feed and residual uses were less than the trade had expected.  Also, these are also historically large levels of U.S. wheat stocks for September 1st.  The existing “large supply – low price” scenario for U.S. wheat heading into Fall-Winter 2017-2018 was supported by these results.

D. U.S. Grain Sorghum Results

  • U.S. Grain Sorghum stocks on September 1, 2017 were projected to be 34 million bushels – up from pre-report expectations of 28 mb.   Compared to recent years: U.S. grain sorghum stocks on September 1st (34 mb) were down 8% from 2016, were 89% larger than on the same date in 2015, and were 100%-107% of September 1st stocks in 2013-2014.
  • U.S. Grain Sorghum Use in June-August 2017 of 51 million bu. was down 6% from 2016, up 219% from 2015, down 12% from 2014, but up 42%-76% from 2012-2013.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are negative for for U.S. grain sorghum supply-demand prospects, indicating at a minimum that usage of U.S. grain sorghum for domestic feed and residual uses were less than the trade had expected.  The existing “large supply – low price” scenario for U.S. grain sorghum and other feedgrains as a whole heading into Fall-Winter 2017-2018 was supported by these results.

E. U.S. Wheat Annual Small Grains Summary Results

  • U.S. All Wheat Production is projected to be 1.741 billion bushels – up  from pre-report expectations of 1.718 bb.   Compared to recent years: U.S. All Wheat Production is down 25% from 2016, and 14%-18% from 2013-2015.
  • U.S. Winter Wheat Production is projected to be 1.269 billion bushels – down from pre-report expectations of 1.287 bb.   Compared to recent years: U.S. Winter Wheat Production is down 24% from 2016, and 8%-18% from 2013-2015.
  • U.S. Hard Red Winter (HRW) Wheat Production is projected to be 750 million bushels – down from pre-report expectations of 758 mb.   Compared to recent years: U.S. HRW Wheat Production is down 31% from 2016, and down 10% to up 1% from 2013-2015.
  • U.S. Soft Red Winter (SRW) Wheat Production is projected to be 292 million bushels – down from pre-report expectations of 306 mb.   Compared to recent years: U.S. SRW Wheat Production is down 15% from 2016, and 19%-49% from 2013-2015.
  • U.S. White Winter Wheat Production is projected to be 230 million bushels – up from pre-report expectations of 230 mb.   Compared to recent years: U.S. White Winter Wheat Production is down 6% from 2016, and up 24%-25% from 2014-2015.
  • U.S. Other Spring Wheat Production is projected to be 416 million bushels – up from pre-report expectations of 402 mb.   Compared to recent years: U.S. Other Spring Wheat Production is down 22% from 2016, and 22%-31% from 2013-2015.
  • U.S. Durum Wheat Production is projected to be 55 million bushels – up from pre-report expectations of 51 mb.   Compared to recent years: U.S. Durum Wheat Production is down 47% from 2016, and down 35% from 2015.

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KSU Weekly Grain Market Analysis: Focus on Grain Sorghum and USDA Stocks/Small Grains Reports

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, September 29, 2017 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_09-29-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, September 29, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the August 4th 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 U.S. Sorghum and World Coarse Grain Market Outlook in Late-September 2017

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s September 12th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is 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 to be available shortly at the following web address:

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

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Summary

Overview

Since the September 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, the USDA forecast that the 2017 U.S. grain sorghum crop would be 371 million bushel (mb).  This projection for U.S. grain sorghum combined with a large 2017 U.S. corn crop of 14.184 billion bushels (bb) have caused markets to focus on “large feedgrain production and supply” scenarios, bringing continued to pressure both U.S. grain sorghum and corn market prices.  Just as with corn, wheat, and soybeans, current cash bids for grain sorghum are below cost of production in most instances – although to a degree anticipated high yields in 2017 at many locations may help lower cost of production per bushel and help to mitigate low grain sorghum prices to some degree.

Since September 12th, corn futures prices have trended essentially sideways.  On Tuesday, September 12th – the day of the report – CME DEC 2017 corn futures opened at $3.57, but then traded as low as $3.45 ½ before closing at $0.06 lower at $3.51 ½.  Since that day, DEC 2017 corn at first trended higher, but since has moved generally sideways to close at $3.54 on September 27th.

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Cash Grain Sorghum Market Prices in Kansas

On Wednesday, September 27th cash grain sorghum price bids at major grain elevators in Western Kansas were in the range of $2.84 – $2.96 /bu – with basis levels $0.70 to $0.50 per bushel under CME DEC 2017 Corn futures.  As low as these prices were, they were still markedly higher than county FSA marketing loan rates of $1.76-$1.90 per bushel.  Similarly, Central Kansas cash grain sorghum price bids were in the range of $2.89 – $3.14 /bu with basis levels $0.65 to $0.40 per bushel under DEC 2017 Corn, but still above local FSA loan rates of $1.85-$1.93 /bu..  At Topeka in East Central Kansas, a bid was reported of $3.14 /bu (basis = $0.40 under).

Kansas ethanol plant price bids for grain sorghum ranged from $3.14 ¼ to $3.37 ¼ , with basis at $0.35 to $0.15 under DEC 2017 Corn futures. This higher ethanol bid relative to other Kansas cash grain sorghum price bids is indicative of both strength in ethanol industry profitability AND that grain sorghum is a competitive feedstock for ethanol production at Western Corn Belt plant locations.

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Market Factors for U.S. Grain Sorghum / Feedgrains in 2017-2018

1) The pace and timing of U.S. farmer marketing of the 2017 grain sorghum and corn crops – much of which may end up being placed in storage after the 2017 fall harvest and likely will be held for sale through the winter into at least early spring 2018

2) Anticipation of continued strong domestic U.S. fuel ethanol use and livestock feeding of the 2017 crop U.S. feedgrains through the “new crop” 2017/18 marketing year.

3) At least moderate strength in U.S. grain sorghum exports – with the possibility that prospects for a smaller 2018 South American feedgrain harvest that may help U.S. exports of grain sorghum and other feedgrains.

4) The possibility in late 2017-2018 of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets.  The impact on the direction of U.S. and World grain sorghum and corn markets from these potential disruptions is difficult to anticipate or predict.

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USDA Supply-Demand Forecast for “New Crop” MY 2017/18

The USDA has projected of 2017 U.S. sorghum plantings of 5.987 ma, harvested acres of 5.311 ma, and yields of 69.8 bu/ac (vs 77.9 bu/ac in 2016 and 76.0 bu/ac in 2015), resulting in a 2017 U.S. grain sorghum production of forecast to be 371 mb.  This size of a 2017 U.S. grain sorghum crop is the lowest in five years, being down from 480 mb in 2016, 597 mb in 2015, 433 mb in 2014, and 392 mb in 2013.

With forecast “new crop” MY 2017/18 total supplies of 399 mb, total use of 370 mb, and projected ending stocks of 29 mb (7.94% S/U), U.S. grain sorghum prices are projected by the USDA to be in the range of $2.50-$3.30 (midpoint = $2.90 /bu).   Ending stocks of 29 mb (7.94% S/U) in “new crop” MY 2017/18 compared to 37 mb (6.35% S/U) in “old crop” MY 2016/17, and 18 mb (4.10% S/U) in MY 2015/16.  This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

U.S. grain sorghum prices of $2.90 /bu in “new crop” MY 2017/18 are only a “small relief” from the multiple-year downward price trend from the record high of $6.33 /bu in the drought year of MY 2012/13.  Since that record high, U.S. average grain sorghum prices have declined to $4.28 in MY 2013/14, $4.03 in MY 2014/15, $3.31 /bu in MY 2015/16, $2.85 /bu in “old crop” MY 2016/17, and to now to the forecast range of $2.50-$3.30 (midpoint – $2.90 /bu) in “new crop” MY 2017/18.

Note: This is a “large U.S. feedgrain crop” – “no major U.S. or Foreign crop problem” scenario.  Emerging production threats and the actual outcome of 2018 U.S. grain sorghum and corn production will play a large part in driving the U.S. grain sorghum market in the later months of “new crop” MY 2017/18.

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Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. grain sorghum supply-demand and prices are presented for “new crop” MY 2017/18.  Each scenario presents the likelihood of lower U.S. grain sorghum acreage, varying yields and alternative production outcomes than projected for “new crop” MY 2017/18 by the USDA in the September 12th WASDE report.

A – KSU “New Crop” MY 2017/18 Scenario #1) “Lower Acres – 69.8 bu/ac.” Scenario (15% probability) assumes: 5.468 ma planted, 4.850 ma harvested, 69.8 bu/ac trend yield, 339 mb production, 368 mb total supplies, 351 mb total use, 17 mb ending stocks, 4.95% S/U, & $3.05 /bu U.S. grain sorghum average price;

B – KSU “New Crop” MY 2017/18 Scenario #2) “Lower Acres – 75.0 bu/ac.” Scenario (25% probability) assumes: 5.468 ma planted, 4.850 ma harvested, 75.0 bu/ac trend yield, 364 mb production, 393 mb total supplies, 370 mb total use, 23 mb ending stocks, 6.22% S/U, & $3.00 /bu U.S. grain sorghum average price;

C – KSU “New Crop” MY 2017/18 Scenario #3) “Lower Acres – 75.0 bu/ac. – Higher Use” Scenario (10% probability) assumes: 5.468 ma planted, 4.850 ma harvested, 75.0 bu/ac trend yield, 364 mb production, 393 mb total supplies, 381 mb total use, 12 mb ending stocks, 3.15% S/U, & $3.15 /bu U.S. grain sorghum average price.

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World Coarse Grain Supply-Demand

The USDA projected that “new crop” 2017/18 marketing year World coarse grain total supplies of 1,578.1 mmt will be down 2.3% from 1,615.9 mmt in “old crop” MY 2016/17, but still up 4.7% over 1,507.2 mmt in MY 2014/15.   Projected World coarse grain total use of 1,347.8 mmt in “new crop” MY 2017/18 is down 0.5% from “old crop” MY 2016/17, but up 7.3% over MY 2016/17.   “Coarse grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.

World coarse grain ending stocks are forecast to continue to decline, with the USDA projecting ending stocks of 230.3 mmt in “new crop” MY 2017/18, down 2.0% from “old crop” MY 2016/17, and down 8.4% from MY 2015/16.  Although World coarse grain ending stocks are projected to be the fourth highest on record in “new crop” MY 2017/18 at 230.2 mmt, World coarse grain percent ending stocks-to-use in “new crop” MY 2017/18 are forecast to actually decline to 17.1% – to the lowest level in four (4) years.  This is indicative that strong World demand for coarse grains at low prices is expected to continue.

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U.S. Ethanol and Biodiesel Market-Profitability Graphics through 9/26/2017

Following are some graphics on price and profitability trends in the U.S. ethanol and biodiesel industries, which is available on the KSU AgManager website at the following webaddress:

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

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” was made in support of a bioenergy market update presented on WILL (Illinois Public Radio) on Tuesday, September 26, 2017.

KSU Weekly Grain Market Analysis: Weighing Alternative U.S. Corn and Soybean Market Scenarios

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program that was played on Friday, September 22, 2017 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_09-22-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, September 22, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the September 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 Soybean Market Outlook in Mid-September 2017 – Likelihood of Lower Production and Higher Price Outcomes

An analysis of U.S. and World soybean supply-demand factors and 2016-2017 price prospects following the USDA’s September 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports either is available on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary of the article on Soybean Market Outlook – with the full article and accompanying analysis 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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Summary

Recent Soybean Futures Price Trends

Since the USDA’s September 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, soybean futures have increased.  CME NOV 2017 soybean futures opened at $9.60 ¾ on Tuesday, September 12th – the day of the report – then traded as low as $9.37 ½ that same day before closing $0.09 ½ lower that day at $9.50 ½.  Since then, NOV 2017 soybeans have trended “irregularly” higher to close at $9.70 ¾ on Thursday, September 21st.  

World Soybean Market Perspectives

Since 2014, World soybean market prices have been limited by a developing “large crop – low price” supply-demand regime, caused by consecutive record or near record World soybean production years for 2014 through projections for 2017.

Longer term, from MY 2008/09 to projected “new crop” MY 2017/18, a strong upward trend in World soybean production (up 7.1% annually) has “out-paced” annual increases in World soybean use (up 6.1% per year).  “Old crop” MY 2016/17 World production is estimated to have been a record high of 351.4 mmt, followed by a projection of near record World production of 348.4 mmt in “new crop” MY 2017/18.  In what is exceedingly good news for the World soybean market, total use has also increased along with production, to 329.8 mmt in “old crop” MY 2016/17, and to a projected record high of 344.3 mmt in “new crop” MY 2017/18.

The degree of “abundance” or “large quantities” in World soybean ending stocks have been a key issue leading to current “moderate-to-low” soybean prices in World markets relative to recent years.   Since World soybean ending stocks of 61.5 mmt (22.3% ending stocks-to-use or ‘S/U’) in MY 2013/14, soybean stocks grew sharply to 77.5 mmt (25.6% S/U) in MY 2014/15 and 77.7 mmt (24.7% S/U).  Then in “old crop” MY 2016/17 World ending stocks are estimated to have increased to a record level of 96.0 mmt (29.1% S/U), followed by a further increase to 97.5 mmt (28.3% S/U) in “new crop” MY 2017/18. 

A key World soybean market strategy will be to wait to figure out whether dry conditions or some other crop production malady will occur in late 2017 or early 2018 in South America that could limit 2018 soybean production in the southern hemisphere.  Although World soybean demand growth has been as strong as can be expected, it seems that a “supply shock” or “crop shortfall” in 2018 or following years would be the most likely factor to drive World soybean production and supply-demand balances low enough to alter the existing “large supply – buyer’s market” situation.  With prospects now pointing toward a near record 2017 U.S. soybean crop, World markets will turn their attention toward 2018 South American production prospects as the next major source of soybean market risk – providing the possibility of a change in paradigm and higher soybean prices in the next 12-18 months.

USDA Corn Supply-Demand & Price Forecast for “New Crop” MY 2017/18

The USDA made no adjustments in its projection of 2017 U.S. soybean plantings of a record high 89.513 million acres (ma) – up from 83.433 ma in 2016.  Forecast 2016 harvested acres of a record 88.731 ma is also up from 82.736 ma in 2016.  With near record high projected yields of 49.9 bu/ac (up 0.5 bu from August), 2017 U.S. soybean production is projected to be a record high 4.431 bb – up from 4.307 bb in 2016 (2nd highest) and from 3.926 bb in 2014.   With forecast “new crop” MY 2017/18 domestic crush at a record 1.940 bb and exports forecast to be a record 2.250 bb (up 25 mb), projected U.S. total soybean use is a record 4.326 bb – up from 4.183 bb in “old crop” MY 2016/17 and from 3.944 bb in the previous marketing year. 

Given these results, “new crop” MY 2017/18 U.S. soybean ending stocks are forecast to be an 11 year high of 475 mb (10.98% S/U), while U.S. soybean prices are forecast to be in the range of $8.35-$10.05 (midpoint = $9.20 /bu).  This U.S. soybean price forecast is down from $9.50 in “old crop” MY 2016/17, but up from $8.95 the year before.  This USDA projection scenario is thought to have a 60% probability of occurring in the judgment of Kansas State University Extension.

Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. soybean supply-demand and prices to the USDA projection are presented for “new crop” MY 2017/18.  Each forecast scenario presents the likelihood that exists of higher U.S. soybean acreage, lower yields and lower production, and higher prices than projected by the USDA in the September 12, 2017 WASDE report. 

A – KSU “New Crop” MY 2017/18 “Lower Yield” Scenario #1) “48.0 bu/ac – 4.278 bb” Scenario (30% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 48.0 bu/ac yield, 4.278 bb production, 4.648 bb total supplies, 4.226 bb total use, 422 mb ending stocks, 9.99% S/U, & $9.70 /bu U.S. average soybean price; 

B – KSU “New Crop” MY 2017/18 “Very Low Yield” Scenario #2) “45.85 bu/ac – 4.085 bb” Scenario (5% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 45.85 bu/ac yield, 4.085 bb production, 4.455 bb total supplies, 4.106 bb total use, 349 mb ending stocks, 8.50% S/U, & $10.20 /bu U.S. average soybean price; 

C – KSU “New Crop” MY 2017/18 “Wildcard World Event” Scenario #3) “48.0 bu/ac – 4.278 bb” Scenario (5% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 48.0 bu/ac yield, 4.278 bb production, 4.648 bb total supplies, 3.861 bb total use, 787 mb ending stocks, 20.38% S/U, & $7.00 /bu U.S. average soybean price; 

Note: The presence of large beginning stocks of 345 mb in “new crop” MY 2017/18 limit the “tightness” of supply-demand balances along with prospects for a record large 2017 U.S. soybean crop of 4.431 bb (USDA). Prospects for such large supplies of soybeans hinders any upward price responses in the KSU Scenarios A, B and C above.

KSU Corn Market Outlook in Mid-September: Assessing 2017 Corn Supply-Demand and Price Scenario Outcomes

This article provides an analysis of U.S. and World Corn supply-demand factors and price prospects for the “New Crop” 2017/18 marketing year following the USDA’s September 12, 2017 USDA Crop Production and https://www.usda.gov/oce/commodity/wasde/latest.pdf reports.

Following is a summary of the article on “Corn Market Outlook in Mid-September 2017″ with the full article and accompanying analysis are available  on the KSU AgManager website (www.AgManager.info) at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/corn-market-outlook-mid-september-2017

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Summary

Overview

Since the USDA’s September 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have declined- although not by as much as may have been expected or feared following the “bearish” report results for corn supply-demand and price prospects.  CME DEC 2017 corn futures opened at $3.57 on Tuesday, September 12th – the day of the report – then traded as low as $3.45 ½ that day before closing at $0.06 lower at $3.51 ½.  Since that day, DEC 2017 corn trended first marginally higher, but since have trended essentially sideways to close at $3.51 ½ on September 18th.  

Looking back, until the August 10th USDA reports U.S. corn prices had found support due to 1) spring corn planting difficulties, 2) summer corn production problems in select parts of the U.S. Corn Belt, and 3) strong U.S. corn use for ethanol production, wet corn milling, exports and – to a moderate degree – livestock feeding.   Then when the USDA’s August 10th projection of 2017 U.S. corn production came in approximately 300 million bushels (mb) higher than average pre-report trade estimates, corn futures prices declined through the end of the month.  Once into September corn futures trended sideways within a trading range through the September 12th USDA reports.  Trade expectations coming into the September 12th report again were for the USDA to lower is 2017 U.S. corn yield and production numbers down closer to long term trend line levels in the 167-168 bu/acre range, with production closer to 14.000 billion bushels (bb).

However, in the September 12th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 169.9 bu/ac, actually up from average pre-report trade estimates of 167.8 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.184 bb. 

Since the September 12th reports, varying trade perspectives on 2017 U.S. corn production prospects have continued, but market expectations in line with the USDA projection of a “large supply – low price” scenario have predominated, leaving DEC 2017 corn futures to trade near $3.50 per bushel.  This difference between the USDA August and September 2017 yield projection and private trade expectations heightens the market’s focus on coming October and November 2017, and January 2018 USDA Crop Production reports.

During 2017 any significant corn futures or cash market price rallies in Spring 2017 have continued to be limited by expectations that ending stocks of U.S. corn will stay above 2.0 bb in “new crop” MY 2017/18, coupled with ending stocks-to-use of 15.0%-16.0%.   Drought conditions in the northern plains states of North Dakota, South Dakota, and Montana as well as parts of Iowa and Illinois may ultimately have a negative impact on 2017 U.S. corn production, as may carryover impacts from delayed plantings in Indiana earlier in Spring 2017.  Periods of high temperatures that may have affected corn pollination in Corn Belt states in the first half of July.  But the final impact of these factors likely will not be known until the 2017 harvest actually occurs.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Monday, September 18th cash corn bids at major grain elevators ranged from $3.15 ($0.37 under DEC futures) to $3.42 ($0.10 under DEC futures), and ranged from $2.91 ½ ($0.60 under DEC) to $3.26 ½ ($0.25 under DEC) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are sharply higher than in Oct-Dec 2016 when bids statewide had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd.  These prices were still above marketing loan rates for corn across the state, with corn loans near $2.05 in Central Kansas and $2.19 per bushel in Western Kansas

Cash corn price bids in East Central and Northeast Kansas at major terminal locations were $3.11 ½ on September 18th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on September 18th ranged from $3.19 ¾ ($0.35 under DEC) to $3.69 ¾ ($0.15 over DEC) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.  While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it continues to be positive that Kansas cash corn prices have avoided falling down to USDA loan rate levels.

Major Corn Market Considerations for Fall 2017 through Spring 2018

First, large beginning stocks of U.S. corn coming into “new crop” MY 2017/18 have been a “mitigating” factor limiting the response of the corn market to 2017 summer-early fall production risk.  The corn market has been less responsive to any 2017 U.S. corn production threats since beginning stocks for “new crop” MY 2017/18 have been projected to be near 2.335 bb rather than down to 1.000 bb. 

Second, it is anticipated that low prices for U.S. corn will continue to help maintain strong usage for domestic U.S. ethanol and wet milling production, as well as livestock feeding through at least spring 2018. 

Third, at least moderate continued strength is expected in U.S. corn exports due to low U.S. corn prices and also to a moderate weakening of the U.S. dollar against other World currencies.  Exports of U.S. corn are expected to continue at a “decent” pace of 1.850 bb for “new crop” MY 2017/18 even though South American corn production will continue to be a competitive factor in World trade through at least the end of 2017.  Also, preliminary forecasts for 2018 are that Brazilian corn acreage will be lower due to low prices and poor profitability in 2017 – which may have a positive effect on U.S. corn exports and price prospects later in 2018.

Fourth, a continuing threat exists of U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017-2018.  World geo-political events could provide “shocks” to U.S. and World energy and grain markets which could in turn impact grain prices in either direction depending on the circumstances and the countries involved and their role in global corn export trade.

USDA Supply-Demand & Price Forecast for “New Crop” MY 2017/18

With the USDA’s continuing projection of 2017 U.S. corn plantings at 90.886 million acres or ‘ma’ (down 3.118 ma from 2016), harvested acres of 83.496 ma (down 3.252 ma), and projected yields of 169.9 bu/ac (vs the record high of 174.6 in 2016), 2017 U.S. corn production is forecast to be 14.184 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.585 bb – down 355 mb from last year’s record high.  Total use is forecast at 14.250 bb – down 340 mb from last year’s record high.  Ending stocks are projected to be 2.235 bb (16.38% S/U) – down from 2.350 bb (16.11% S/U) in “old crop” MY 2016/17.  United States’ corn prices are projected to average $3.20 /bu (range of $2.80-$3.60).  This is down $0.15 /bu from the midpoint estimate of $3.35 /bu from “old crop” MY 2016/17. This scenario is given a 60% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2017/18.  Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields and production than projected by the USDA in the September 12, 2017 WASDE report for “new crop” MY 2017/18. 

A – KSU “New Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.930 bb” Scenario (35% probability) assumes: 90.753 ma planted, 83.261 ma harvested, 167.3 bu/ac trend yield, 13.930 bb production, 16.330 bb total supplies, 14.215 bb total use, 2.115 bb ending stocks, 14.88% S/U, & $3.45 /bu U.S. corn average price; 

B – KSU “New Crop” MY 2017/18 Scenario #2) “164.0 bu/ac – 13.655 bb” Scenario (5% probability) assumes: 90.753 ma planted, 83.261 ma harvested, 164.0 bu/ac yield, 13.655 bb production, 16.055 bb total supplies, 14.095 bb total use, 1.960 bb ending stocks, 13.91% S/U, & $3.60 /bu U.S. corn average price;

C – KSU “New Crop” MY 2017/18 “Wildcard” Scenario #3) “167.3 bu/ac – 13.930 bb” Scenario (???% prob.) assumes: 90.753 ma planted, 83.261 ma harvested, 167.3 bu/ac trend yield, 13.930 bb production, 16.330 bb total supplies, 13.935 bb total use, 2.395 bb ending stocks, 17.19% S/U, & $3.00 /bu U.S. corn average price;

Note: even with moderate reductions in 2017 U.S. corn production as represented in the KSU Scenarios A, B and C above, the presence of large beginning stocks of 2.350 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances, and hinders any upward price responses.

World Corn Supply-Demand – With & Without China

World corn production of 1,032.6 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.6% from the record high of 1,071.2 mmt in “old crop” MY 2016/17, but still up 6.5% from 969.6 mmt in MY 2015/16.  Near record World corn total supplies of 1,259.6 mmt are projected for “new crop” MY 2017/18, down marginally from the record high of 1,285.1 mmt in “old crop” MY 2016/17, but up from 1,179.2 mmt in MY 2015/16. 

World corn exports of a 150.6 mmt are projected for “new crop” MY 2017/18, down 8.9% from the record high of 165.3 mmt in “old crop” MY 2016/17, and up 25.8% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 202.5 mmt (19.2% S/U) in “new crop” MY 2017/18 are down from the record high 227.0 mmt (21.4% S/U) in “old crop” MY 2016/17, and from 213.9 mmt (22.2% S/U) in MY 2015/16.  

An alternative view of the World corn supply-demand is presented if Chinese corn usage and ending stocks are isolated from the World market.  “World-Less-China” corn ending stocks are projected to be 121.2 mmt (14.8% S/U) in “new crop” MY 2017/18, down from 125.7 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 103.1 mmt (13.4% S/U).  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be down approximately 23% (i.e., 14.8% S/U for the “World Less China” versus 19.2% S/U for the “World” overall in “new crop” MY 2017/18).  

At the same time, these figures also show that Chinese ending stocks of corn as proportion of the World total are declining – down from 51.8% in MY 2015/16, to 44.6% in “old crop” MY 2016/17, and down to 40.1% in “new crop” MY 2017/18.  The deliberate actions in recent years – taken by the Chinese government to reduce feedgrain stockpiles – is impacting the relative amount of World total corn stocks they hold.