KSU Soybean Market Outlook in Late-March 2018 – New Soybean S-D and Price Expectations for “New Crop” MY 2018/19

An analysis of U.S. and World soybean supply-demand factors and 2018-2019 price prospects following the USDA’s March 8th World Agricultural Supply Demand Estimates (WASDE) report, and the March 29th USDA Prospective Plantings and Grain Stocks reports will be 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 to be available on April 2, 2018 on the KSU AgManager website at the following web address:

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

************************.

Summary

A. Some Perspective on the World Soybean Market

Since 2014, World soybean market prices have been declining in response to the “large crop – low price” supply-demand regime that has been caused by consecutive record World soybean production years for 2014 through 2017, with large crops regularly occurring in South America and the United States.  Strong demand for soybean imports from China, Japan, and other Asian countries have supported World soybean prices.

Longer term, from MY 2007/08 to “old crop” MY 2017/18, this strong upward trend in World soybean production (up 5.6% annually) has “out-paced” increases in World soybean use (up 5.0% per year).  As long as growth in World soybean production continues to outpace World soybean usage, then World soybean stocks will remain at high levels with prices continuing at their current “moderate” levels – being affected positively be ongoing strength in demand, but held “in check” by more than adequate world supplies.  

B. China-U.S. Trade Tensions

The potential for soybean market disruptions from trade policy-related confrontations between the U.S. and China has emerged as an issue in early 2018.  These economic – geopolitical tensions so far have not resulted in official direct tariffs or import limitations by China on U.S. soybeans.  However, it is reported that Chinese buyers of soybeans have responded by aggressively pursuing Brazilian soybean imports, and to a degree have at least moderated their purchases of U.S. soybeans in recent months.  So, although no official action has been taken by China against U.S. soybean imports, such tensions have to a degree already affected U.S. soybean trade by “pressuring” Chinese buyers to redirect their buying focus toward Brazil, Argentina, Paraguay, and wherever else globally they can secure soybean and oilseed products.

C. Soybean Market Response to the March 8th & 29th USDA Reports

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on March 8th soybean futures prices had moved primarily lower.  From the March 8th close of $10.64, CME MAY 2018 Soybean futures prices have traded from a high of $10.63 on 3/9/2018 down to a low of $10.09 ¼ on March 23rd, before closing at $10.18 on Wednesday, March 28th – the day prior to the USDA Quarterly Stocks & Prospective Plantings reports on March 29th.  Then on the day of the March 29th USDA reports, CME MAY 2018 Soybean futures responded positively, trading from a low of $10.12 ½ to a high of $10.50 ¾ before closing at $10.44 ¾ – up $0.26 ¾ per bushel for the day.

Kansas cash soybean prices at terminals in central and eastern Kansas ranged from $9.42 ¾ to $9.89 ¾ /bu on March 29th – with basis ranging from $1.02 under to $0.60 under MAY 2018 Soybean futures.  That same day in western Kansas, major grain elevator bids ranged from $9.10 to $9.45 per bushel – with basis ranging from $1.35 under to $1.00 under. 

D. World Soybean Supply-Demand Findings in the March 8th WASDE USDA Report

On March 8th for the “old crop” 2017/18 marketing year (MY) to end on August 31, 2018, the USDA projected the following.

First, that World soybean total supplies would be 437.5 million metric tons (mmt) (down 3.0%) with total use of 34.8 mmt (up 4.2%) for “old crop” MY 2017/18. With supplies moving lower and demand increasing, there has been a moderate “tightening” of projected World ending stocks of soybeans. 

Second, that World soybean exports will continue trending higher – up to a record high to 150.6 mmt in the “old crop” 2017/18 marketing year.  This amount of World soybean exports of 150.6 mmt in “old crop” MY 2017/18 would be up from previous records of 147.5 mmt last year, and 132.6 mmt two years ago.   World soybean exports have been growing annually at a 9.1% rate since the 2007/08 marketing year.

Third, that World soybean ending stocks would be a 94.4 mmt in “old crop” MY 2017/18 – down from the record high of 96.65 mmt in MY 2016/17, but still up from 78.3 mmt in MY 2015/16.  Overall, World soybean ending stocks have grown at an 8.0% rate annually since the 2007/08 marketing year.

Fourth, that World soybean percent ending stocks-to-use (% S/U) would be 27.5% – the 2nd highest on record but down from the record high of 29.3% last year, while being up from 24.9% and 25.7% the two years prior.

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

The USDA released their soybean production, supply-demand and price projections for the U.S. for “old crop” MY 2017/18 in the March 8th WASDE report, for “new crop” MY 2018/19 in its February 23rd USDA Ag Outlook Forum projections, for 2018 planted acres in the March 29th Prospective Plantings report, and for November-February 2018 usage of U.S. soybeans and March 29th Grain Stocks report.   

U.S. soybean plantings are forecast to be 88.982 million acres (ma) in 2018, down from 90.142 ma in 2017, and 83.433 ma in 2016.  Harvested acres are forecast by Kansas State University to be 88.222 ma in 2018 (99.15% harvested-to-planted – latest 5 year average), down 1.45% from 89.522 ma in year 2017, but up 6.7% from 82.696 ma in 2016. 

The 2018 U.S. average soybean yield is forecast at 48.5 bu/ac, down from a KSU-adjusted estimate of 49.79 bu/ac in 2017, and from the 2016 record of 52.0 bu/acre.  This KSU adjustment to the most recent official USDA estimate on March 8th was made following the March 29th grain stocks report.  The USDA estimate of March 1, 2018 U.S. soybean stocks came in approximately 65 mb larger than trade estimates. Given that estimates of U.S. soybean domestic crush, exports, and seed use for the November-February 2018 quarter are known with some accuracy, it seems that the unexplained increase in U.S. soybean stocks on March 1st may be due to the USDA underestimating the size of the 2017 U.S. soybean crop. 

As a result, if 2017 soybean planted and harvested acreage are left unchanged, and 65 mb is added to the size of the 2017 U.S. soybean crop, then this KSU-adjusted estimate of 2017 U.S. soybean yields is raised to 49.79 bu/ac – up from the latest USDA’s official 2017 U.S. soybean yield  estimate of 49.1 bu/ac.

Soybean production in the U.S. in 2018 is forecast to be 4.279 billion bushels (bb), down from the KSU-adjusted record high of 4.457 bb in 2017 (vs the latest USDA estimate of 4.392 bb – see discussion above), but up from 4.296 bb in 2016.  After these adjustments, projected “new crop” MY 2018/19 U.S. soybean total supplies are forecast at 4.924 bb, up from a KSU-adjusted 4.783 bb in “old crop” MY 2017/18, and from 4.515 bb in MY 2016/17.  Record high U.S. soybean total use of 4.415 bb is forecast for “new crop” MY 2018/19, up from 4.163 bb in “old crop” MY 2017/18, and from 4.213 bb in MY 2016/17. 

With previously mentioned changes in 2017 U.S. soybean production resulting from the outcome of the March 29th Grain Stocks report, the KSU-adjusted USDA projection for “new crop” MY 2018/19 U.S. soybean ending stocks equals 509 million bushels (mb) (11.52% stocks/use), down from a KSU-adjusted estimate of 620 mb in “new crop” MY 2017/18 (14.89% stocks/use), but up from 302 mb in MY 2016/17 (7.17% stocks/use).  

United States’ soybean prices are projected to average $9.40 /bu in “new crop” MY 2018/19, up from $9.30 /bu in “old crop” MY 2017/18, but down from $9.47 in MY 2016/17, and comparable to $8.95 /bu in MY 2015/16, and $10.10 /bu in MY 2014/15.   It is estimated by Kansas State University that these KSU-adjusted USDA projections for “new crop” MY 2018/19 have a 55% probability of occurring.

F. Two Alternative KSU U.S. Soybean S/D Forecasts for “New Crop” MY 2018/19

To represent possible alternative outcomes from the KSU-adjusted USDA February 23rd projection for “new crop” MY 2018/19, two potential KSU-Scenarios for U.S. soybean supply-demand and prices are presented.   

KSU Scenario 1) “HIGHER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (25% probability): 

88.982 ma planted, 99.15% harvested-to-planted, 88.222 ma harvested, 52.0 bu/ac average yield, 4.588 bb production, 5.233 bb total supplies, 2.350 bb exports, 2.000 bb domestic crush, 135 mb seed & residual use, 4.485 bb total use, 748 mb ending stocks, 16.68% Stocks/Use, & $8.50 /bu U.S. soybean average price.

KSU Scenario 1) “LOWER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (20% probability): 

88.982 ma planted, 99.15% harvested-to-planted, 88.222 ma harvested, 42.0 bu/ac average yield, 3.705 bb production, 4.350 bb total supplies, 2.000 bb exports, 1.960 bb domestic crush, 135 mb seed & residual use, 4.095 bb total use, 255 mb ending stocks, 6.23% Stocks/Use, & $11.00 /bu U.S. soybean average price.  

*****

Advertisements

KSU Weekly Grain Market Analysis: A “360 View” of Grain Markets on USDA Grain Stocks and Prospective Plantings Day

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, March 30, 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_03-30-18.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, March 30, 2018 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the March 30th recording is 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…

2018 Soybean Market Situation & Outlook – Salina, KS on January 23, 2018

Following are the slides from a presentation on “Soybean Market Outlook in 2018” presented to 150 people at a “Kansas Soybean School” in Salina, Kansas held on January 23, 2018.   The workshop was sponsored by the Kansas Soybean Commission (http://kansassoybeans.org/) and K-State Research and Extension.

Following are the slides and key points presented by Extension Agricultural Economist Daniel O’Brien of the Department of Agricultural Economics at Kansas State University titled “Soybean Market Outlook in 2018“.  This presentation is available on the KSU AgManager.info website (http://www.agmanager.info/) at the following web address:

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

 

 

Corn and Grain Sorghum Market Situation & Outlook – Amarillo, Texas on January 24, 2018

Following are the slides from a presentation on “Feedgrain Market Outlook in 2018” presented by teleconference to a “Feedgrain Marketing Plan Workshop” in Amarillo, Texas held on January 23-24, 2018.   The workshop was sponsored by Texas Agri-Life Extension.

Following are the slides and key points presented by Extension Agricultural Economist Daniel O’Brien of the Department of Agricultural Economics at Kansas State University titled on “Feedgrain Market Outlook in 2018”.  This presentation will also be available on the KSU AgManager.info website (http://www.agmanager.info/) at the following web address:

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

 

 

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…

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.

*****