KSU Weekly Grain Market Analysis: Watching Crop Weather Trends in January & Seeds of a Wheat Market Turnaround

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, January 5, 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_01-05-17.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, January 5, 2018 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…

Advertisements

KSU Soybean Market Outlook in Late-December 2017 – Healthy Demand Upholding World Soybean Markets

An analysis of U.S. and World soybean supply-demand factors and 2018 price prospects following the USDA’s December 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website (http://www.agmanager.info/)

This article also analyzes information from the USDA’s Long Term Agricultural Projections for U.S. soybeans, particularly for the “Next Crop” 2018/19 Marketing Year to begin on September 1, 2018.  The USDA’s long term outlook is found at the following web address:

https://www.usda.gov/oce/commodity/projections/

Following is a summary of the article on Soybean Market Outlook in Late-December 2017 – 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

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

KSU Wheat Market Outlook in Late-December 2017 – U.S., World, and “World-Less-China” Market Scenarios for 2018

This report provides an analysis of U.S. and World wheat supply-demand factors and 2018 marketing year price prospects following the USDA’s December 12, 2017 Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.  It also incorporates U.S. wheat market supply-demand and price projections for the “next crop” 2018/19 marketing year from the USDA’s Long Term Agricultural Projections released on November 28, 2017. This article will be available in full on the KSU AgManager website in coming days (http://www.agmanager.info/).

Following is a summary – with the full analysis-article for Wheat Market Outlook in Late-December 2018 to be found at this web location:

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

*****

Summary

A. Wheat Market Response to the December 12th USDA Reports

Since the USDA’s December 12th World Agricultural Supply and Demand Estimates (WASDE) report, CME MARCH 2018 Kansas HRW Wheat futures have traded higher.  MARCH 2018 Kansas HRW wheat futures opened at $4.13 on 12/12/2017 – the day of the report – but closed lower to $4.11 ¼ that day.  Since then, MARCH 2018 HRW wheat futures have trended higher to a close of $4.22 ¾ on Friday, December 22nd.   

That same day Kansas cash wheat price terminal quotes in central and eastern Kansas ranged from $3.42 ¼ to $3.83 ¼ per bushel – with basis ranging from $0.80 under to $0.39 under MARCH 2018 futures.  In western Kansas, representative wheat elevator bids ranged from $3.47 to $3.64 per bushel – with basis ranging from $0.85 under to $0.58 under MARCH 2018 futures.  Although cash prices are markedly above marketing loan rates, basis levels are still “wide and weak” compared to historic Kansas wheat basis patterns.

B. Key World Wheat Supply-Demand Findings in the December 12th USDA WASDE Report

For the “new crop” 2017/18 marketing year (MY) beginning on June 1, 2017, the USDA projected the following.

First, that World wheat total supplies would be 1,010.5 million metric tons (mmt) with total use of 742.1 mmt – both being record high levels for “new crop” MY 2017/18. 

Second, that World wheat exports will also trend marginally lower to 182.15 mmt in the “new crop” 2017/18 marketing year – down from a record high of 183.2 mmt last year, but still up from 172.8 mmt two years ago. 

Third, that World wheat ending stocks would be a record high 268.4 mmt in “new crop” MY 2017/18 – up from the previous record of 255.3 mmt in MY 2016/17, and from 241.4 mmt in MY 2015/16. 

Fourth, that World wheat percent ending stocks-to-use (S/U) would be 36.24% – up from 34.5% last year, and from 33.9% two years ago – rising to the highest level since 36.25% in MY 1998/99.

C. Perspectives on Current World Wheat Stock Levels

For a perspective on how historically large World total wheat stocks and World wheat percent stocks-to-use now are, consider that in MY 2007/08 the 34-year low in World wheat ending stocks of 128.2 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% stocks/use both occurred.  The 2007/08 marketing year was the last significant World wheat “short crop” marketing year to have occurred. 

The “tight supply-demand” situation in MY 2007/08 compares to the most recent USDA projections of 268.4 mmt ending stocks and 36.2% ending stocks-to-use projected for “new crop” MY 2017/18.  The present “large crop-over supply” situation in World and U.S. wheat markets continues to have a prevalent limiting influence on U.S. and World wheat prices – even with recent drought-fueled moves higher in the market. 

D. “World Less China” Wheat Market Situation

The broader “large crop-over supply-low price” situation in the World wheat market may be “obscuring” at some important underlying market issues.  

While the aggregate supply of wheat in World markets has grown, the supply of wheat from a “World Less China” perspective is projected to have actually “contracted” or “diminished” further in “new crop” MY 2017/18.   “World-Less-China” wheat percent (%) stocks-to-use have declined to the tightest level since at least MY 2012/13 when U.S. wheat cash prices averaged a record high $7.77 /bu.  If this “China supply isolation factor” eventually leads to noticeably tighter available global supplies of openly exportable wheat in the next 12 months, it could have a significant positive impact on U.S. and World wheat market prices.

However, unless there is this change in the broader, overriding focus of the World wheat market away from aggregate global supplies to available “World-Less-China supplies – it is likely that significant World wheat production problems and/or trade disruptions would need to occur in year 2018 in order to have wheat prices recover significantly in 2018.   Such disruptions elsewhere would likely cause the market to then focus on the limited availability of food quality wheat outside of China in the World market.   Also, ongoing strength in the U.S. dollar exchange rate continues to be a negative factor limiting the competitive affordability of U.S. wheat exports in World markets.    

E. U.S. Wheat Supply/Demand for “New Crop” MY 2017/18 & “Next Crop” MY 2018/19  

The USDA released their wheat production, supply-demand and price projections for the U.S. for “new crop” MY 2017/18 in the December 12th WASDE report, and for “next crop” MY 2018/19 in its November 28th Long Term Agricultural Projections.   

U.S. wheat plantings are forecast to be 45.000 million acres (ma) in 2018, down from 46.012 ma in 2017, and 50.119 ma in 2016, to the lowest level since the early 1900s.  Harvested acres are forecast at 38.3 ma in 2018 (85.11% harvested-to-planted), up from 37.586 ma (81.69% harvested-to-planted) in 2017, but down from 43.850 ma in 2016.  

The 2018 U.S. average wheat yield is estimated at 47.4 bu/ac, up from 46.3 bu/ac in 2017, but down from the 2016 record of 52.7 bu/acre. 

Wheat production in the U.S. in 2018 is forecast to be 1.815 billion bushels (bb), up from 1.741 bb in 2017, but down from 2.309 bb in 2016.  After adjustments by Kansas State University from the December 12th WASDE report, projected “next crop” MY 2018/19 total supplies are forecast at 2.910 bb, down from 3.071 bb in “new crop” MY 2017/18, and down from 3.402 bb in MY 2016/17.  U.S. Wheat total use of 2.072 bb is forecast for “next crop” MY 2018/19, down from 2.111 bb in “new crop” MY 2017/18, and from 2.222 bb in MY 2016/17. 

With previously mentioned KSU adjustments from the December 12th WASDE report, the USDA projected “next crop” MY 2018/19 ending stocks to be 838 million bushels (mb) (40.44% stocks/use), down from 960 mb in “new crop” MY 2017/18 (45.48% stocks/use), and 976 mb in MY 2016/17 (50.03% stocks/use).   

United States’ wheat prices are projected to average $4.60 /bu in “next crop” MY 2018/19, unchanged from “new crop” MY 2017/18, but up from $3.89 in MY 2016/17, and comparable to $4.89 /bu in MY 2015/16, and $5.99 /bu in MY 2014/15.   It is estimated by Kansas State University that these USDA projections for “new crop” MY 2017/18 have a 75% probability of occurring.

F. Two Alternative KSU U.S. Wheat S/D Forecast for “New Crop” MY 2017/18 

To represent possible alternative outcomes from the USDA’s December 12th projection, two potential KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “new crop” MY 2017/18.    

KSU Scenario 1) “Lower Export” Scenario (15% probability) assumes for “new crop” MY 2017/18 that the following outcome occurs.  This scenario assumes that there will be 46.012 ma planted, 81.69% harvested-to-planted, 37.586 ma harvested, 46.3 bu/ac average yield, 1.741 bb production, 3.071 bb total supplies, 775 mb exports, 120 mb feed & residual use, 1.911 bb total use, 1.160 bb ending stocks, 60.70% Stocks/Use, & $4.10 /bu U.S. wheat average price.

KSU Scenario 2) “Higher U.S. Wheat Exports” Scenario (10% probability) assumes for “new crop” MY 2017/18 that the following outcome happens.  This scenario assumes that there will be 46.012 ma planted, 81.69% harvested-to-planted, 37.586 ma harvested, 46.3 bu/ac average yield, 1.741 bb production, 3.071 bb total supplies, 1.150 bb exports, 120 mb feed & residual use, 2.286 bb total use, 785 mb ending stocks, 34.34% Stocks/Use, & $5.10 /bu U.S. wheat average price.

*****

 

KSU Ag Econ “Soybean and Cotton Market Outlook for 2018” Presentation

Following is a presentation on “Soybean & Cotton Market Outlook for 2018”.  This information was given as part of a larger “Grain Market Outlook for 2018” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien at a Farming for the Future meeting in Pratt, Kansas on December 14, 2017.

Additional Farming for the Future conferences in Kansas are planned for December 19th in Salina, January 10th in Scott City, and January 11th in Emporia.  Registration information can be found at the following web address:

http://www.agmanager.info/events/farming-future

****

The full “Grain Market Outlook for 2018” presentation is available online at the KSU AgManager website at the following web address:

http://www.agmanager.info/sites/default/files/pdf/AGEC520_GrainOutlook_10-19-17.pdf

Information on Wheat, Soybean & Cotton supply-demand and market outlook will be provided in succeeding posts.

Following is information on “Soybean and Cotton Market Outlook for 2018”:

 

KSU Corn Market Outlook in Late-October 2017: From the 2017 Corn Harvest Forward in the Markets

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for the “new crop” 2017/17 marketing year following the USDA’s October 12, 2017 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.

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

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

 

******

Summary

Overview

Since the USDA’s October 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have traded essentially sideways.  DEC 2017 corn opened at $3.46 per bushel on Thursday, October 12th – then traded as low as $3.42 ½ that day before closing at $0.03 higher at $3.49.  Since that day, DEC 2017 corn has traded in a range of $3.43 to $3.53, before closing at $3.50 ½ on October 25th.

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.  DEC 2017 corn reached as high as $4.17 ¼ on July 11th.  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 from high of $3.89 on August 10th to a low of $3.44 ¼ on August 31st. After a high of $3.62 on September 6th, DEC 2017 corn futures have trended sideways-to-lower throughout the remainder of September and the majority of October.

Then, in the October 12th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 171.8 bu/ac, actually up from average pre-report trade estimates of 170.1 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.280 billion bushels (bb) – up from pre-report trade expectations of 14.204 bb.

Since the October 12th USDA reports, market expectations have formed a consensus in line with the USDA projection of a “large supply – low price” scenario, leaving DEC 2017 corn futures to trade near $3.50 per bushel during the 2017 harvest period.  The USDA will provide updated 2017 U.S. corn production numbers in its upcoming November 9, 2017, and early January 2018 USDA Crop Production reports.

Any significant corn futures or cash market price rallies through winter 2017-2018 on into early Spring 2018 are likely to continue to be limited by expectations of ending stocks of U.S. corn staying above 2.0 bb, coupled with ending stocks-to-use of 15.0%-16.0% for MY 2017/18.   However, in Spring-early Summer 2018 the U.S. corn market is likely again to have to weigh the annual risk of weather-limited 2018 U.S. corn production prospects (less than 13.500 bb??) and tighter ending stocks (less than 1.250 bb??) in “next crop” MY 2018/19.  And that risk again is likely to provide both old crop and new crop pricing opportunities in Spring-Summer 2018.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Wednesday, October 25th cash corn bids at major grain elevators ranged from $2.96 ($0.55 under DEC futures) to $3.46 ($0.05 under DEC futures), and ranged from $3.01 ($0.50 under DEC) to $3.19 ($0.32 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 $3.09 ¾ on October 25th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on October 25th ranged from $3.22 ¾ ($0.30 under DEC) to $3.72 ¾ ($0.20 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 – especially in the midst of the 2017 Kansas corn harvest.

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 risks that occurred.  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 2.340 bb rather than down to 1.000 bb.  If this “large stocks situation” persists through summer 2018, this mitigating and limiting affect will likely hamper future 2018 corn crop forward pricing prospects as well.

Second, the grain market continues to anticipate that low prices for U.S. corn will help maintain strong usage for domestic U.S. ethanol and wet milling production, as well as livestock feeding through at least spring 2018 if not into the summer months. 

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 and production will be lower due to low prices and poor profitability in 2017.  Combined with emerging weather concerns in Brazil – these factors “could” have a positive impact on U.S. corn exports and price prospects in spring-summer 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, the countries involved, and their role in global corn export trade. 

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

In the October 12th Crop Production report, the USDA adjusted its projection of a) 2017 U.S. corn plantings at 90.429 million acres or ‘ma’ (down 3.575 ma from 2016), b) harvested acres of 83.119 ma (down 3.629 ma), c) projected yields of 171.8 bu/ac (vs the record high of 174.6 in 2016), and d) 2017 U.S. corn production of 14.280 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.625 bb – down 317 mb from last year’s record high.  Total use is forecast at 14.285 bb – down 362 mb from last year’s record high.  Ending stocks are projected to be 2.240 bb (16.38% S/U) – down from 2.295 bb (15.67% 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 $0.16 /bu from the midpoint estimate of $3.36 /bu from “old crop” MY 2016/17. This scenario is given a 75% 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 October 12, 2017 WASDE report for “new crop” MY 2017/18. 

  • A – KSU “New Crop” MY 2017/18 Scenario #1) “169.5 bu/ac – 14.059 bb” Scenario (20% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 169.5 bu/ac trend yield, 14.059 bb production, 16.404 bb total supplies, 14.241 bb total use, 2.164 bb ending stocks, 15.19% S/U, & $3.35 /bu U.S. corn average price; 
  • B – KSU “New Crop” MY 2017/18 Scenario #2) “167.3 bu/ac – 13.876 bb” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 167.3 bu/ac yield, 13.876 bb production, 16.221 bb total supplies, 14.196 bb total use, 2.026 bb ending stocks, 14.27% S/U, & $3.45 /bu U.S. corn average price;
  • C – KSU “New Crop” MY 2017/18 “Wildcard” Scenario #3) “169.5 bu/ac – 14.059 bb” Scenario (???% prob.) assumes: 90.404 ma planted, 82.941 ma harvested, 169.5 bu/ac trend yield, 14.059 bb production, 16.404 bb total supplies, 13.926 bb total use, 2.479 bb ending stocks, 17.80% S/U, & ≈ $3.10 /bu U.S. corn average;

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 2.295 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 1,038.8 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.4% from the record of 1,075.3 mmt in “old crop” MY 2016/17, but still up 6.8% from 972.4 mmt in MY 2015/16.  World corn total supplies of 1,265.8 mmt are projected for “new crop” MY 2017/18, down from the record high of 1,289.3 mmt in “old crop” MY 2016/17, but up from 1,181.8 mmt in MY 2015/16. 

World corn exports of a 150.7 mmt are projected for “new crop” MY 2017/18, down 8.0% from the record high of 163.8 mmt in “old crop” MY 2016/17, and up 25.9% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 201.0 mmt (18.9% 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 214.0 mmt (22.1% 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 121.8 mmt (14.8% S/U) in “new crop” MY 2017/18, down from 125.7 mmt (15.1% S/U) in “old crop” MY 2016/17, but up from 103.2 mmt (13.8% S/U).  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be down approximately 22% (i.e., 14.8% S/U for the “World Less China” versus 18.9% 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 39.4% 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.

*******

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

******

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.

“Deep Numbers” Analysis of the September 12, 2017 USDA Crop Production and WASDE Reports

A “deep numbers” analysis of the results of the September 12, 2017 USDA Crop Production and WASDE (World Agricultural Supply and Demand Estimates) reports are provided by Kansas State University.  This numbers analysis is available at the KSU AgManager.info website at the following web address:

http://www.agmanager.info/wasde-deep-numbers-analysis-spreadsheet

The September 2017 USDA Crop Production report considered and reported the conditions of major U.S. crops in early September, giving projections of final acreage, yields, and production of U.S. corn, grain sorghum, soybeans, and other crops.

The September 2017 USDA WASDE report considered projected supply-demand and price projections for U.S. crops, and supply-demand prospects for global and country-by-country analysis for the period covering the New Crop” 2017/18 Marketing Years, Old Crop” MY 2016/17, and MY 2015/16 supply-demand and price prospects.

This “deep numbers” analysis considers how the September 12th USDA Crop Production and WASDE report results compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows: