KSU Corn Market Outlook in Mid-November 2017: “What is and what is likely to come” in the U.S. Corn Market

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 November 9, 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-November 2017″

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

Summary

Overview

Since the USDA’s November 9th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have traded first lower, and then higher to partially recover their initial decline.  During the summer months of 2017 DEC 2017 corn futures reached as high as $4.17 ¼ per bushel on July 11th, but then declined 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, October to a low on November 16th of $3.36 ¼, before closing at $3.45 on November 21st.  

In its’ November 9th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average a record high 175.4 bu/ac, with 2017 U.S. corn production at 14.578 billion bushels (bb) – both up substantially from pre-report trade expectations.   Since the November 9th USDA reports, market expectations have reinforced a consensus consistent with the USDA projection of a “large supply – low price” scenario, leaving DEC 2017 corn futures to trade in the range of $3.35-$3.55 per bushel during the 2017 harvest period.  The USDA will provide updated 2017 U.S. corn production numbers in its upcoming January 12, 2018 USDA Crop Production report.

It continues to be true that any significant corn futures or cash market price rallies through winter 2017-2018 on into early Spring 2018 are likely to be limited by ending stocks of U.S. corn in the 2.250-2.500 bb range, coupled with ending stocks-to-use of 16.0%-17.5% for the 2017/18 marketing year.   However, in Spring-early Summer 2018 the U.S. corn market is likely again to have to weigh the annual risk of weather-limiting 2018 U.S. corn production prospects (less than 13.500 bb??) and tighter ending stocks (less than 1.500 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.

One positive long-term factor in the U.S. corn market is the considerable “tightening up” forecast with foreign (non-U.S.) corn supply-demand balances in the “new crop” 2017/18 marketing year.   If this forecast by the USDA comes to fruition, could eventually lead to larger U.S. corn exports than currently forecast, and help support somewhat higher U.S. corn prices in Spring-Summer 2018 than is currently expected by the market.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Monday, November 20th cash corn bids at major grain elevators ranged from $2.98 ($0.47 under DEC futures) to $3.40 ($0.05 under DEC), and ranged from $2.98 ($0.47 under DEC) to $3.20 ($0.25 under DEC) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are higher than in Fall of a year abo when bids statewide had fallen to $2.66-$2.96 on December 23, 2016.  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 $3.18-$3.22 on November 20th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on November 20th ranged from $3.23 ($0.20 under DEC) to $3.63 ($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 continues in local Kansas grain markets, it is a positive sign that Kansas cash corn prices have avoided falling down to USDA loan rate levels – especially throughout 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 2.295 bb rather than down to 1.250-1.500 bb.  If this “large stocks situation” persists into 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 moderately weaker U.S. dollar against other World currencies compared to a year ago.  Exports of U.S. corn are expected to continue at a “decent” pace of 1.925 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, as well as a delayed 2nd crop of corn in parts of the country.  Combined with the potential for crop-weather concerns in Brazil in coming months – 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 November 12th Crop Production report, the USDA raised its projections of a) projected yields up to a record high of 175.4 bu/ac (vs the previous record of 174.6 in 2016), and b) 2017 U.S. corn production up to 14.578 bb – down from the record high of 15.148 bb in 2016.  

The USDA raised its forecast “new crop” MY 2017/18 total supplies to 16.922 bb – down marginally (20 mb) from last year’s record high.  Total use is forecast at 14.435 bb – down 212 mb from last year’s record high.  Ending stocks are projected to be a 2.487 bb (17.2% S/U) – up from 2.295 bb (15.7% 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 $3.36 /bu from “old crop” MY 2016/17. This scenario is given an 80% 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.  These forecast scenarios vary from the USDA’s projection in the November 9, 2017 WASDE report for “new crop” MY 2017/18. 

A – KSU “Higher Exports” MY 2017/18 Scenario) “2.250 bb Exports” Scenario (10% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 175.4 bu/ac trend yield, 14.548 bb production, 16.893 bb total supplies, 2.250 bb exports, 14.735 bb total use, 2.158 bb ending stocks, 14.65% S/U, & $3.50 /bu U.S. corn average price; 

B – KSU “Lower Exports” MY 2017/18 Scenario) “1.800 bb Exports” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 175.4 bu/ac trend yield, 14.548 bb production, 16.893 bb total supplies, 1.800 bb exports, 14.310 bb total use, 2.583 bb ending stocks, 18.05% S/U, & $3.15 /bu U.S. corn average price; 

C – KSU “Lower Yield” MY 2017/18 Scenario) “172.5 bu/ac – 14.307 bb crop” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 172.5 bu/ac trend yield, 14.307 bb production, 16.652 bb total supplies, 14.435 bb total use, 2.217 bb ending stocks, 15.36% S/U, & $3.40 /bu U.S. corn average;

Note: The presence of large beginning stocks of 2.295 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances in scenarios “A” and “C”, and hinder potential upward price responses.

World Corn Supply-Demand – With & Without China

World corn production of 1,043.9 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.9% from the record of 1,074.8 mmt in “old crop” MY 2016/17, but still up 7.3% from 972.9 mmt in MY 2015/16.  World corn total supplies of 1,270.5 mmt are down 1.45% from the record high 1,289.2 mmt in “old crop” MY 2016/17, and still up 7.4% from 1,182.4 mmt in MY 2015/16. 

World corn exports of a 151.6 mmt are projected for “new crop” MY 2017/18, down 7.3% from the record high of 163.6 mmt in “old crop” MY 2016/17, and up 26.7% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 203.9 mmt (19.1% S/U) in “new crop” MY 2017/18 are down from the record high 226.6 mmt (21.3% S/U) in “old crop” MY 2016/17, and from 214.4 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 125.2 mmt (15.1% S/U) in “new crop” MY 2017/18, down from 125.9 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 103.7 mmt (13.8% S/U) in MY 2015/16.  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be approximately 21% lower (i.e., 15.1% S/U for the “World-Less-China” versus 19.1% 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 51.7% in MY 2015/16, to 44.5% in “old crop” MY 2016/17, and down to 38.6% 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.  These actions may also eventually increase Chinese import demand for both U.S. corn and grain sorghum.

 

Advertisements

U.S. Ethanol and Biodiesel Market-Profitability Graphics (with KS-IL Plant Info)

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” was made for WILL (Illinois Public Radio) on Tuesday, November 7, 2017, 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 updated 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.

 

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.

*******

U.S. Ethanol and Biodiesel Market-Profitability Graphics through 9/26/2017

Following are some graphics on price and profitability trends in the U.S. ethanol and biodiesel industries, which is available on the KSU AgManager website at the following webaddress:

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

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” was made in support of a bioenergy market update presented on WILL (Illinois Public Radio) on Tuesday, September 26, 2017.

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.

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

******

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.