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.

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KSU Corn Market Outlook in Early-September: Remaining Possible 2017 Corn Crop and S/D-Price Scenario Outcomes

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “New Crop” 2017/18 marketing year following the USDA’s August 10, 2017 USDA Crop Production and https://www.usda.gov/oce/commodity/wasde/latest.pdf reports as well the crop growing conditions that have occurred since those reports were released.

Following is a summary of the article on “Corn Market Outlook in Early-September 2017″ with the full article and accompanying analysis to be available early next week (Monday-Tuesday, September 4-5, 2017) on the KSU AgManager website (www.AgManager.info) at the following web address:

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

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Summary

  1. Overview

Since the USDA’s August 10th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures have fallen sharply.  CME DEC 2017 corn futures opened at $3.85 ½ on August 12th – the day of the report – then traded as low as $3.70 ¼ that day before closing at $0.15 ¼ lower at $3.71.  Since then DEC 2017 corn trended down to a contract low of $3.44 ¼ on August 31st, before closing at $3.55 ¼ on Friday, September 1st.

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.

However, in the August 10th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 169.5 bu/ac, up from a number of pre-report trade estimates of 165-168 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.153 billion bushels (bb) – markedly higher than the range of 13.6 to 13.8 bb that the grain markets were anticipating.

Since the August 10th reports, varying U.S. corn production prospects have continued, but market expectations of a “large supply – low price” scenario have predominated, leading to price declines.  This difference between the USDA August 2017 yield projection and trade expectations heightens the market’s focus on coming September, October and November 2017 USDA Crop Production reports.

During 2017 any significant corn futures or cash market price rallies in Spring 2017 have been 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 above 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, and periods of high temperatures that may have affected corn pollination in Corn Belt states in the first half of July.

  1. Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Friday, September 1st cash corn bids at major grain elevators ranged from $3.05 ($0.35 under SEPT futures) to $3.40 ($0.15 under DEC futures), and ranged from $2.92 ¼ ($0.63 under DEC) to $3.25 ¼ ($0.30 under DEC) in Central Kansas.  Even though Kansas corn prices have declined in recent weeks, these prices still are sharply higher than in October-December 2016 when corn price 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.

However, cash corn price bids in East Central and Northeast Kansas at major terminal locations were in the range of $3.05 ¼ – $3.15 ¼ on September 1st, 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 1st ranged from $3.22 ¾ ($0.35 under DEC) to $3.72 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 is a positive that Kansas cash corn prices have avoided falling down to USDA loan rate levels.

  1. 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 production risk.  The corn market has been less anxious about the adequacy of corn supplies in the face of 2017 U.S. corn production risk since beginning stocks for “new crop” MY 2017/18 have been up to 2.370 bb rather than down to 1.000 bb.

Second, it is anticipated 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 fall-winter 2017.

Third, at least moderate continued strength is expected in U.S. corn exports due to low U.S. corn prices and 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.

Fourth, a possibility exists of broader 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.

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

With the USDA’s 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 169.5 bu/ac (vs the record high of 174.6 in 2016), 2017 U.S. corn production is forecast to be 14.153 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.573 bb – down 367 mb from last year’s record high.  Total use is forecast at 14.300 bb – down 270 mb from last year’s record high.  Ending stocks are projected to be 2.273 bb (15.90% S/U) – down from 2.370 bb (16.27% S/U) in “old crop” MY 2016/17.  United States’ corn prices are projected to average $3.30 /bu (range of $2.90-$3.70).  This is down $0.05 /bu from the midpoint estimate of $3.35 /bu from “old crop” MY 2016/17. This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

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

Four 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 August 10, 2017 WASDE report for “new crop” MY 2017/18.

A – KSU “New crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.815 bb” Scenario (35% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 167.3 bu/ac trend yield, 13.815 bb production, 16.235 bb total supplies, 14.245 bb total use, 1.990 bb ending stocks, 13.97% S/U, & $3.60 /bu U.S. corn average price for “new crop” MY 2017/18;

B – KSU “New crop” MY 2017/18 Scenario #2) “164.0 bu/ac – 13.543 bb” Scenario (10% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 164.0 bu/ac yield, 13.543 bb production, 15.963 bb total supplies, 14.120 bb total use, 1.843 bb ending stocks, 13.05% S/U, & $3.75 /bu U.S. corn average price for “new crop” MY 2017/18;

C – KSU “New crop” MY 2017/18 Scenario #3) “160.0 bu/ac – 13.212 bb” Scenario (4% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 160.0 bu/ac yield, 13.212 bb production, 15.632 bb total supplies, 13.920 bb total use, 1.712 bb ending stocks, 12.30% S/U, & $3.85 /bu U.S. corn average price for “new crop” MY 2017/18;

D – KSU “New crop” MY 2017/18 “Wildcard” Scenario #4) “167.3 bu/ac – 13.815 bb” Scenario (1% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 167.3 bu/ac trend yield, 13.815 bb production, 16.235 bb total supplies, 14.085 bb total use, 2.150 bb ending stocks, 15.26% S/U, & $3.45 /bu U.S. corn average price for “new crop” MY 2017/18;

Note: even with significant reductions in 2017 U.S. corn production as represented in the KSU Scenarios A, B, C and D above, the presence of large beginning stocks of 2.370 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances, and hinders any upward price responses.

  1. World Corn Supply-Demand – With & Without China

World corn production of 1,033.5 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 1.7% from the record high of 1,070.5 mmt in “old crop” MY 2016/17, but still up 7.1% from 969.5 mmt in MY 2015/16.  Near record World corn total supplies of 1,262.1 mmt are projected for “new crop” MY 2017/18, down marginally from the record high of 1,284.0 mmt in “old crop” MY 2016/17, but up from 1,178.7 mmt in MY 2015/16.

World corn exports of a 152.0 mmt are projected for “new crop” MY 2017/18, down 6.4% from the record high of 162.4 mmt in “old crop” MY 2016/17, and up 27.1% from 119.6 mmt in MY 2015/16.  Projected World corn ending stocks of 200.9 mmt (18.9% S/U) in “new crop” MY 2017/18 are down from the record high 228.6 mmt (21.7% S/U) in “old crop” MY 2016/17, and from 213.5 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 119.6 mmt (14.5% S/U) in “new crop” MY 2017/18, down from 127.3 mmt (15.5% S/U) in “old crop” MY 2016/17, but up from 102.7 mmt (13.7% 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., 14.5% S/U for the “World Less China” versus 18.9% S/U for the “World” overall in “new crop” MY 2017/18).

These figures also show that Chinese ending stocks of corn as proportion of the World overall is declining – down from 51.9% in MY 2015/16 to 44.3% in “old crop” MY 2016/17, and down to 40.5% in “new crop” MY 2017/18.  The deliberate actions taken by the Chinese government in recent years to reduce feedgrain stockpiles is impacting the relative amount of corn stocks they hold in the World corn market.

U.S. Ethanol and Biodiesel Market-Profitability Graphics (with Kansas-Illinois Ethanol Plant Locations)

Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, August 22nd and will be located at the KSU AgManager.info website – at the following web address:

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

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.

 

 

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.

 

 

KSU Corn Market Outlook in Mid July 2017: “Next Crop” MY 2017/18 Probability Scenarios

An analysis of U.S. and World Corn supply-demand factors and “Next Crop” 2017/18 Marketing Year supply-demand and price prospects is provided in the following article summary.  This information follows the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on July 12, 2017.

A full version of this article is available on the KSU AgManager website http://www.agmanager.info/ at the following web address:

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

Following is a summary of the article on “Corn Market Outlook in Mid July 2017″

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Summary

Overview

Since the USDA’s July 12th World Agricultural Supply and Demand Estimates (WASDE) report, SEPT 2017 CME corn futures have fallen sharply.  CME SEPT 2017 corn futures opened at $4.00 on July 12th – the day of the report – then traded as low as $3.68 ½ on July 13th before closing at $3.76 ¼ on July 14th.  To date SEPT 2017 has remained above the recent contract low of $3.64 ½ on June 23, 2017, and the longer term contract lows of $3.48 ¼ on August 30-31, 2016.

Thus far in year 2017 U.S. corn prices have found moderate support due to spring corn planting and summer corn production uncertainties, and strong U.S. corn use in terms of ethanol production, wet corn milling, exports and – to a moderate degree – livestock feeding.   Although the USDA forecast in the June 30th Acreage report of 90.886 million acres (ma) of U.S. corn plantings in 2017 was above trade expectations, this projection is still down from 94.004 ma planted in 2016.  The USDA used a crop modeling approach to forecast 2017 U.S. corn yields to be 170.7 bu/acre in the July WASDE report.

However, in the upcoming survey-based August 10th Crop Production report, it is possible that various production problems resulting from dry conditions in the U.S. northern plains and late plantings elsewhere in the U.S. Corn Belt may result in U.S. corn yield projections closer to long term trend estimates of 165-168 bu/acre.  If this occurs, then 2017 U.S. corn production estimates could be in the range of 13.6 to 13.8 billion bushels (bb) in the August 10th USDA reports instead of the USDA projection of 14.255 bb in the July WASDE.

So far, any significant corn futures or cash market price rallies in Spring 2017 have been limited by expectations that ending stocks of U.S. corn will stay above 2.0 bb in “next crop” MY 2017/18, coupled with ending stocks-to-use above 15.0%-16.0% in both “current” MY 2016/17 and “next crop” MY 2017/18.   Drought conditions in the northern plains states of North Dakota, South Dakota, and Montana as well as parts of Nebraska and Iowa may have a negative impact on 2017 U.S. corn production.  Also, corn production in 2017 may be negatively affected by carryover impacts from delayed plantings in the central Corn Belt earlier in Spring 2017, and periods of high temperatures that may have affected corn pollination in the first half of July.

Kansas Cash Corn Prices & Basis Bids

Cash corn bids at major grain elevators ranged from $3.36 ($0.40 under SEPT futures) to $3.76 ($0.00 under or par with futures) in Western Kansas and $3.21 ¼ ($0.55 under) to $3.41 ¼ ($0.35 under) in Central Kansas on Friday, July 14th.  This represents a marked increase since October-December 2016 when corn price bids statewide 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 price bids in east central and northeast Kansas – near river terminal locations – were near $3.44 – $3.46 on July 14th, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on July 17th ranged from $3.52 ¼ ($0.24 under) to $4.18 ¼ ($0.42 over) – 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 is a positive market signal that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.

Major Corn Market Considerations

First, large beginning stocks of U.S. corn coming into “next crop” MY 2017/18 have been a “mitigating” or “limiting” factor affecting the response of the corn market to 2017 production risk.  The corn market is less anxious about having adequate corn supplies in the face of 2017 U.S. corn production risk when beginning stocks are 2.370 bb rather than 1.000 bb. 

Second, it is anticipated that moderately low prices of 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 summer-fall 2017. 

Third, at least moderate continued strength is expected in U.S. corn exports due to moderately low U.S. corn prices. Exports of U.S. corn are expected to continue at a “decent” pace” even though South American corn production will continue to be a competitive factor in World trade through at least the end of 2017.  

Fourth, the possibility exists of broader 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 have the potential to provide “shocks” to U.S. and World energy and grain markets.  However, the impact on the direction of U.S. and World corn markets of such disruptive events are difficult to anticipate – depending on which countries may be involved and their role in global corn export trade. 

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

The USDA has projected 2017 U.S. corn plantings to be 90.886 million acres or ‘ma’ (down 3.118 ma from 2016).   Harvested acres in 2017 are forecast at 83.496 ma (down 3.252 ma), with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016). This leads to a USDA 2017 U.S. corn production forecast of 14.255 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “next crop” MY 2017/18 total supplies to be 16.675 bb – down 265 mb from last year’s record high.  Total use is forecast at 14.350 bb – down 220 mb from last year’s record high.  Ending stocks are projected to be 2.325 bb (16.20% S/U) – down from 2.370 bb (16.27% S/U) in “current” MY 2016/17.  United States’ corn prices are projected to average $3.30 /bu (range of $2.90-$3.70).  This is down $0.05 /bu from the midpoint estimate of $3.30 /bu from “current” MY 2016/17. This scenario is given a 45% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

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

Four 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 July 12, 2017 WASDE report for “next crop” MY 2017/18. 

A – KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.815 bb” Scenario (25% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 167.3 bu/ac trend yield, 13.815 bb production, 16.235 bb total supplies, 14.245 bb total use, 1.990 bb ending stocks, 13.97% S/U, & $3.55 /bu U.S. corn average price for “next crop” MY 2017/18; 

B – KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.652 bb” Scenario (20% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 165.0 bu/ac yield, 13.625 bb production, 16.045 bb total supplies, 14.120 bb total use, 1.925 bb ending stocks, 16.63% S/U, & $3.60 /bu U.S. corn average price for “next crop” MY 2017/18;

C – KSU “Next Crop” MY 2017/18 Scenario #3) “160.0 bu/ac – 13.212 bb” Scenario (5% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 160.0 bu/ac yield, 13.212 bb production, 15.632 bb total supplies, 13.920 bb total use, 1.712 bb ending stocks, 12.30% S/U, & $3.80 /bu U.S. corn average price for “next crop” MY 2017/18;

D – KSU “Next Crop” MY 2017/18 Scenario #4) “150.0 bu/ac – 12.387 bb” Scenario (5% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 150.0 bu/ac yield, 12.387 bb production, 14.807 bb total supplies, 13.400 bb total use, 1.407 bb ending stocks, 10.50% S/U, & $4.20 /bu U.S. corn average price for “next crop” MY 2017/18;

Note: even with significant reductions in 2017 U.S. corn production as represented in KSU Scenarios C and D above, the presence of large beginning stocks of 2.370 bb in “next crop” MY 2017/18 limit the “tightness” of corn supplies, and lowers price prospects.

World Corn Supply-Demand – With & Without China

World corn production of 1,036.9 million metric tons (mmt) is projected for “next crop” MY 2017/18, down 3.0% from the record high of 1,068.8 mmt in “current” MY 2016/17, but still up 7.0% from 968.8 mmt in MY 2015/16.  Near record World corn total supplies of 1,264.4 mmt are projected for “next crop” MY 2017/18, down marginally from the record high of 1,281.6 mmt in “current” MY 2016/17, but up from 1,178.4 mmt in MY 2015/16. 

World corn exports of a near record 152.5 mmt are projected for “next crop” MY 2017/18, down 4.6% from the record high of 159.7 mmt in MY 2015/16, and up 27.5% from 119.6 mmt in MY 2015/16.  Projected World corn ending stocks of 200.8 mmt (18.9% S/U) in “next crop” MY 2017/18 are down from the record high 227.5 mmt (21.6% S/U) in “current” MY 2016/17, and from 212.8 mmt (22.0% 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 119.5 mmt (14.5% S/U and 40.5% of World corn stocks) in “next crop” MY 2017/18, down from 126.2 mmt (15.4% S/U and 44.5% of World stocks) in “current” MY 2016/17, but up from 102.0 mmt (13.6% S/U and 52.1% of World Stocks).  These figures show that World stocks of corn less China’s direct influence are projected to be down approximately 23% (i.e., 14.5% S/U for the “World Less China” versus 18.9% S/U for the “World” overall in “next crop” MY 2017/18).  

These figures also show that Chinese ending stocks of corn as proportion of the World overall is declining – down from 52.1% in MY 2015/16 to 44.5% in “current” MY 2016/17, and down to 40.5% in “next crop” MY 2017/18.  The deliberate actions taken by the Chinese government in recent years to reduce feedgrain stockpiles is impacting the relative amount of corn stocks they hold in the World corn market.

U.S. Ethanol and Biodiesel Market-Profitability Graphics through 6/27/2017 (via KSU AgManager)

Following are some graphics on price and profitability trends in the U.S. ethanol and biodiesel industries, which will soon be available on the KSU AgManager website: http://www.agmanager.info/    The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, June 27, 2017 and will be located at the KSU AgManager.info website.

“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: