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:
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.
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.
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.
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.
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.
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.