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…

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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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“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:

 

 

Corn and Grain Sorghum Market Outlook for 2017-2018 @ the 2017 KSU Risk and Profit Conference, August 18, 2017

The following information on the “Corn and Grain Sorghum Market Outlook for 2017-2018” was presented at the 2017 K-State Risk and Profit Conference in Manhattan, Kansas on Friday, August 18, 2017.

The full version of this presentation – with additional information not presented to the conference because of time constraints – is available online at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2017-risk-and-profit-conference

Following is the full “Corn and Grain Sorghum Market Outlook for 2017-2018” available at the 2017 K-State Risk and Profit Conference on Friday, August 18, 2017.

 

 

“Deep Numbers” Analysis of the June 9, 2017 USDA WASDE and Crop Production Reports (KSU Ag Economics))

A “deep numbers” analysis of the results of the June 9, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The USDA June WASDE and Crop Production reports considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available on the KSU AgManager.info website at the following web address:

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

This “deep numbers” analysis considers how the June 9th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers 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:

 

“Deep Numbers” Analysis of the May 10, 2017 USDA WASDE Report (D. O’Brien KSU)

A “deep numbers” analysis of the results of the May 10, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The May WASDE report considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available at the following web address:

http://www.agmanager.info/wasde-quick-analysis-spreadsheet

This “deep numbers” analysis considers how the May 10th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers 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:

 

KSU Corn Market Outlook in Early-May: Alternative Crop Production and Price Scenarios for MY 2017/18

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “new crop” 2016/17 marketing year following the USDA’s April 11, 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 Early-May 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/corn-market-outlook-early-may-2017

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Summary

Overview & Summary

Since the USDA’s April 11th World Agricultural Supply and Demand Estimates (WASDE) report, MAY 2017 CME corn futures have been moderately volatile – moving both higher and lower within the range of $3.54 ¼ to $3.73.  “Current” MY 2016/17 U.S. corn prices have found some support at levels above local marketing loan rates because of the positive impact that low prices have had on the use of U.S. corn in ethanol production, wet corn milling, exports and to a moderate degree in livestock feeding.   In addition, the February 23-24 USDA 2017 Agricultural Outlook Forum together with the March 31st Prospective Plantings report have forecast fewer U.S. corn planted acres in 2017, and with a return to trend line U.S. corn yields, lower 2017 U.S. corn production of 14.065 billion bushels (bb) versus the record highs of 15.148 bb in 2016.

However, projections of ending stocks of U.S. corn staying above 2 billion bushels (bb) coupled with ending stocks-to-use above 15% in both “current” MY 2016/17 and “next crop” MY 2017/18 has limited any significant corn futures or cash market price rallies to date in Spring 2017.   IF excessive moisture conditions that have developed in the U.S. Corn Belt in late April – very early May were to continue until mid-May and significantly delay planting progress – THEN increased concerns about 2017 U.S. corn production prospects could lead to higher U.S. corn prices in late-Spring – Summer 2017.

Cash corn prices at major grain elevators in central and western Kansas ranged from $3.04 to $3.31 on Monday, May 1st.  This represents a marked increase since October-December 2016 when prices had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn prices in east central and northeast Kansas – near river terminal locations – were near $3.55 on May 1st, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn prices at Kansas ethanol plants on May 1st ranged from $3.38 to $3.73 – indicating continuing strength in ethanol demand in Kansas and nationwide.  While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive market signal that corn usage has not declined, and that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.

Other Factors Potentially Affecting the U.S. Corn Market

Other factors that could affect the U.S. corn market in 2017 include the following:

  • First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early spring 2017.
  • Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.
  • Third, at least moderate continued strength in U.S. corn exports – at least until what is forecast to be a sizable 2nd crop of corn from South America becomes available on global markets during Summer 2017.
  • Fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017.  World geo-political events have the potential to provide “shocks” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate depending on which countries may be involved and their role in global corn export trade.

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

With early USDA projections of 2017 U.S. corn plantings of 89.996 million acres or ‘ma’ (down 4.0 ma).   Harvested acres of approximately 82.4 ma (down 4.35 ma) are forecast, with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), leading to a 2017 U.S. corn production is forecast to be 14.065 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “next crop” MY 2017/18 total supplies to be 16.435 bb – down 505 mb from last year’s record high.  Total use is forecast at 14.220 bb – down 400 mb from last year’s record high.  Ending stocks are projected to be 2.215 bb (15.58% S/U) – down from 2.320 bb (15.87% S/U) in “current” MY 2016/17.  United States’ corn prices are projected by the USDA to average $3.50 /bu – up from a midpoint estimate of $3.40 /bu from “current” MY 2016/17 – but within the range of $3.25-$3.55 /bu for this marketing year. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Forecasts for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next 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 February 23-24, 2017 Agricultural Outlook Forum for “next crop” MY 2017/18.

  • KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.556 bb” Scenario (25% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 167.3 bu/ac trend yield, 13.556 bb production, 15.926 bb total supplies, 14.185 bb total use, 1.741 bb ending stocks, 12.27% S/U, & $3.85 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.370 bb” Scenario (15% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 165.0 bu/ac yield, 13.370 bb production, 15.740 bb total supplies, 14.080 bb total use, 1.660 bb ending stocks, 11.21% S/U, & $4.05 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.155 bb” Scenario (5% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 150.0 bu/ac yield, 12.155 bb production, 14.525 bb total supplies, 13.460 bb total use, 1.065 bb ending stocks, 7.91% S/U, & $4.75 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand

Record high World corn production of 1,053.8 million metric tons (mmt) is projected for “current” MY 2016/17, up 9.4% from 963.3 mmt in MY 2015/16, and up 3.7% from 1,016.0 mmt in MY 2014/15.  Record high World corn total supplies of 1,265.6 mmt are projected for “current” MY 2016/17, up from 1,173.1 mmt in MY 2015/16, and from 1,190.8 mmt in MY 2014/15.

World corn exports of 154.4 mmt are projected for “current” MY 2016/17, up 28.7% from 120.0 mmt in MY 2015/16, and up 8.6% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 223.0 mmt (21.4% S/U) in “new crop” MY 2016/17 are up from 211.8 mmt (22.0% S/U) in MY 2015/16, and from 209.8 mmt (21.4% S/U) in MY 2014/15.

  • Although World corn ending stocks are projected to be a record high in “current” MY 2016/17 at 223.0 mmt, World corn percent ending stocks-to-use are forecast to actually decline marginally to 21.4%.  Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine).   An ongoing, strong demand base for corn could help cause sharply increased corn market volatility in the summer of 2017 IF any serious threats emerge to the 2017 U.S. corn crop.