KSU Weekly Grain Market Analysis: “Grinding” Thru February in the U.S. on the way to Spring Planting

Grain market summary notes, charts and comments ahead of the KSU Agriculture Today Grain Outlook to played on Friday, February 17, 2017 are available on the Kansas State University www.AgManager.info website at the following web address:

https://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_02-17-17.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, February 17 on the K-State Radio Network (here) – with the program available to listen to online.  After the program airs, a recording can also be listened to from the KSU AgManager.info website via a link  in the “Radio Interviews” section: http://www.agmanager.info/news/default.asp

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Grain Market Update (2nd of 5 parts) – Graphics of U.S. Corn Market Outlook

In the following charts is the second of five (5) blog posts illustrating parts of the “Grain Market Outlook for 2017” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien.  The complete presentation will be available on the www.AgManager.info website provided by the Department of Agricultural Economics at Kansas State University .

This second of five (5) related blog posts provides information on Corn Market Situation and Outlook.

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KSU Weekly Grain Market Analysis: Lower U.S. Winter Wheat Acres and Tighter U.S. Corn-Soybean Supply-Demand

Grain market summary notes, charts and comments supporting the KSU Agriculture Today Grain Outlook to be played on Friday, January 13th is available on the Kansas State University www.AgManager.info website at the following KSU web address:

https://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_01-13-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, January 13th on the K-State Radio Network (KSU Agriculture Today Radio) – web player available.

Later today the program can also be listened to via a link from the following website in the “Radio Interviews” section: http://www.agmanager.info/news#ksrn-radio-interviews

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 Weekly Grain Market Analysis: Steady-Higher in Kansas feedgrain and wheat markets in early 2017

 

Grain market summary notes, charts and comments ahead of the KSU Agriculture Today Grain Outlook to be played on Friday, January 5, 2017 is available on the Kansas State University www.AgManager.info website at the following KSU web address:

https://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_1-06-17.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, January 6, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available.

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 Corn Market Outlook in December 2016: USDA and KSU Price Forecasts for “Next Crop” MY 2017/18

An analysis of U.S. and World corn supply-demand factors and 2017/18 price prospects following the USDA’s December 1st Preliminary forecasts for “Next Crop” 2017/18 (https://www.usda.gov/oce/commodity/projections/) and the December 9, 2016 USDA  World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website:  http://www.agmanager.info/default.asp

Following is a summary of the article on “Corn Market Outlook in December 2016″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address:

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

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Summary

Corn Futures & Kansas Cash Corn Market Situation

Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, MARCH 2016 CME corn futures have trended lower.  On the day of the report, MARCH 2016 corn futures closed at $3.59 ½ per bushel, and then moved to a high of $3.63 on December 15th, before declining to a close of $3.45 ¾ on Friday, December 23rd.  The USDA’s forecast of a record large 2016 U.S. corn crop 15.226 billion bushels (bb) and large 2016/17 marketing year ending stocks of 2.403 bb have continued to be the primary limiting focus of U.S. corn market prices.

Cash corn prices in at major grain elevators in central and western Kansas have declined below $3.00 per bushel down to the range of $2.66 to $2.96 per as of December 23rd, but have not fallen down to 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 in the range of $3.26-$3.28 per bushel on 12/23/2016.  Although the “large supply and tight storage availability” situation predominates in local Kansas grain markets, it is a positive sign that corn usage has provided enough market support that Kansas cash corn prices have not fallen down to USDA loan rate – price support levels.

Other Market Factors to Consider

Other market factors to consider that could affect the U.S. corn market in 2017 include: 1) 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 will be held for sale through the winter into at least early spring 2017, 2) anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. corn exports – driven partly by a poor harvest and lack of exportable supplies in Brazil in 2016 as well as other World corn market factors, and 4) the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets in 2017.

For example, U.S. financial policy announcements by the U.S. Federal Reserve in 2017 could lead to increases in U.S. interest rates and the value of the U.S. dollar relative to other World currencies, which could in turn have a negative impact on U.S. corn exports.  Also, World geo-political events could provide an unanticipated “shock” 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.

USDA Supply-Demand Forecast for “Current” MY 2016/17

With USDA projections of 2016 U.S. corn plantings of 94.490 ma, harvested acres of 86.836 ma, record high projected yields of 175.1 bu/ac (vs 168.4 bu/ac in 2015 and the previous record high of 171.0 bu/ac in 2014), 2016 U.S. corn production is forecast to be a record high 15.226 bb – up from 13.601 bb in 2015, the previous record of 14.216 bb in 2014, and 13.829 bb in 2013.

With forecast “current” MY 2016/17 total supplies of 17.031 bb (record high), total use of 14.610 bb (record high), and projected ending stocks of 2.403 bb (16.45% S/U) – up from 1.738 bb (12.72% S/U) in MY 2015/16 and the highest since 4.259 bb (54.90% S/U) in MY 2004/05 – U.S. corn prices are projected by the USDA to be in the range of $3.05-$3.65 (midpoint = $3.35 /bu) – being down from $3.61 /bu for MY 2015/16.  (continued)

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

With early USDA projections of 2017 U.S. corn plantings of 90.000 ma (down 4.490 ma), harvested acres of 82.300 ma (down 4.536 ma), projected yields of 170.8 bu/ac (vs the record high of 175.3 in 2016), 2017 U.S. corn production is forecast to be 14.060 bb – down from the record high of 15.226 bb in 2016.

With forecast “next crop” MY 2017/18 total supplies of 16.513 bb (down 500 mb from last year’s record high), total use of 14.215 bb (down 395 mb from last year’s record high), and projected ending stocks of 2.298 bb (16.17% S/U) – down from 2.403 bb (16.45% S/U) in “current” MY 2016/17 – U.S. corn prices are projected by the USDA to average $3.30 /bu. 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 yields and production than projected by the USDA in the December 1st USDA early supply-demand estimate for “next crop” MY 2017/18.

KSU “Next Crop” MY 2017/18 Scenario #1) “167.4 bu/ac – 13.777 bb” Scenario (25% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 167.4 bu/ac trend yield, 13.777 bb production, 16.230 bb total supplies, 14.215 bb total use, 2.015 bb ending stocks, 14.18% S/U, & $3.55 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario 2) “165.0 bu/ac – 13.580 bb” Scenario (15% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 165.0 bu/ac yield, 13.580 bb production, 16.033 bb total supplies, 14.215 bb total use, 1.818 bb ending stocks, 12.79% S/U, & $3.70 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.345 bb” Scenario (5% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 150.0 bu/ac yield, 12.345 bb production, 14.798 bb total supplies, 13.460 bb total use, 1.338 bb ending stocks, 9.94% S/U, & $4.30 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand

Record high World corn production of 1,039.7 million metric tons (mmt) is projected for “current” MY 2016/17, up 8.2% from 961.1 mmt in MY 2015/16, and up 2.5% from 1,014.0 mmt in MY 2014/15.  Record high World corn total supplies of 1,248.7 mmt are projected for “new crop” MY 2016/17, up from 1,169.3 mmt in MY 2015/16, and from 1,188.8 mmt in MY 2014/15.

World corn exports of 147.7 mmt are projected for “new crop” MY 2016/17, up 21.8% from 121.2 mmt in MY 2015/16, and up 3.9% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 222.25 mmt (21.7% S/U) in “new crop” MY 2016/17 are up from 208.95 mmt (21.8% S/U) in MY 2015/16, and from 208.3 mmt (21.2% S/U) in MY 2014/15.

Although World corn ending stocks are projected to be a record high in “new crop” MY 2016/17 at 222.25 mmt, World corn percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 21.7% – indicative that strong World demand for corn at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.

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KSU Weekly Grain Market Analysis: End of 2016 Supply-Demand and Prices for U.S. Corn, Sorghum, Wheat and Soybeans

Grain market summary notes, charts and comments ahead of the KSU Agriculture Today Grain Outlook to be played on Friday, December 23rd will be available on the Kansas State University www.AgManager.info website at the following web address:

http://www.agmanager.info/news/weekly-grain-market-outook-dan-obrien

The recorded radio program will be aired at 10:03 a.m. central time, Friday, January 8th on the K-State Radio Network (here) – web player available.  Later on the program can also be listened to via a link from the following website in the “Radio Interviews” section: http://www.agmanager.info/news/default.asp

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

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Corn Market Analysis for the 2017 Kansas Corn Schools in Wichita (Jan. 9th), Oakley (Jan. 11th) and Olathe (Jan. 13th)

Following is a summary of corn market analysis and outlook information from Kansas State University to be presented at a series of Kansas Corn Schools in January 2017.  Locations are Wichita (South Central KS) on Monday, January 9th, Oakley (Northwest KS) on Wednesday, January 11th, and Olathe (East Central KS) on Friday, January 13th.  More information on how to register for these meetings please visist the following web location:

http://kscorn.com/2016/11/cornschool/

Corn Market Risk Management in 2017

Daniel O’Brien, Extension Agricultural Economist – Kansas State University

A. U.S. and World Corn Supply-Demand & Price Situation.

After producing the four largest U.S. corn crops on record over the 2013-2016 period following the drought of 2012, U.S. corn ending stocks of 2.403 billion bushels in the “new crop” 2016/17 marketing year have risen to a 29-year high, while percent ending stocks-to-use of 16.56 percent have risen to an 11-year high. In this “large supply – low price,” “buyer’s market,” the USDA has projected U.S. average corn prices in market year 2016/17 in the $3.05 to $3.65 range — down for four consecutive years from a record high of $6.89 per bushel in drought-stricken market year 2012/13 to the lowest level since $3.04 per bushel in market year 2006/07. Foreign coarse grain supplies and ending stocks also have reached record high levels in marketing year 2016/17 — up to 1,118 million metric tons — further exacerbating the “large crop – low price” scenario that currently exists in the U.S. and world corn market.

B. 2017 Corn Market Expectations and Contingencies.

Lower U.S. corn prices are likely to prevail through the winter months until at least mid-spring to early summer 2017 unless unexpected and substantial crop production problems occur in other major coarse grain production regions of the world, such as Argentina, Brazil, China, or the Ukraine. It is also possible that the anticipated change in world weather patterns to a La Nina condition could have a negative impact on 2016 South American (particularly in Argentina and southern Brazil) and U.S. corn production in the western Corn Belt. However, tangible evidence of such a crop production impacts will not be available until February-April 2017 in Argentina and Brazil, and later in the summer months in the United States. Also, financial market volatility, trends in the value of the U.S. dollar relative to other world currencies, and other economic factors may affect the U.S. corn market and other agricultural and energy commodity prices in coming months. However, absent any of these surprises to the U.S. and Kansas corn market, in-state corn prices will likely follow the average normal seasonal price pattern of the last 15 years, with harvest lows followed by seasonal increases through spring-early summer 2017, with weather-based market volatility likely to influence U.S. corn prices through the mid-to-later summer months.

C. Kansas Irrigated & Non-Irrigated Corn Cost of Production

Kansas cash corn prices of $2.87 to $3.36 per bushel in mid-December 2016 at major grain markets throughout the state are substantially below Kansas State University estimates of average cost of production from Kansas Farm Management Association enterprise records for the 2009-2015 period. Kansas State University estimates of statewide average irrigated corn cost of production were $4.00 per bushel in 2015, and $4.47 per bushel on average over the 2010-2014 period. For non-irrigated corn, Kansas State University estimates of statewide average cost of production were $4.36 per bushel in 2015 (with much larger than normal yields) and $5.70 per bushel on average over the 2010-2014 period.

D. What signals about 2017 are the CME corn futures markets providing?

As of December 16, 2016, the structure of futures contract prices over the remainder of the 2016/17 marketing year (i.e., through August 31, 2017) provides little or no incentive for commercial storage of grain and is near neutral at best for on-farm storage. On December 16, 2016 CME MARCH 2016 corn futures closed trade at $3.56 ½ per bushel, followed by MAY 2017 CME corn at $3.63 ¼, JULY 2017 CME corn at $3.70 ¾, and SEPTEMBER 2017 CME corn at 3.77 ½ per bushel.  Per month futures carrying charges for MARCH-MAY were $0.03375 per bushel, $0.0375 per bushel per month for MAY-JULY, and $0.03375 per bushel for JULY-SEPTEMBER.

If commercial storage costs before interest are commonly $0.04 per bushel per month, then mid- December 2016 CME corn futures carrying charges offer no incentive for storing grain — other than the possibility that local cash basis levels may narrow or strengthen enough to make storage possible. If on-farm storage cost is approximately $0.02-$0.02 ½ per bushel, then on-farm storage (before cost of interest) appears to be a “break-even” to slightly profitable marketing strategy absent any rally in corn futures or narrowing of basis in spring-early summer 2017.

E. Signals from New Crop 2017 DEC Corn & NOW Soybean futures

Concerning new crop 2016 acreage prospects for corn and other major competitive crops, on December 18, 2016 CME NOV 2017 soybean futures closed at $10.16 ¼ and CME DEC 2017 corn futures at $3.86 with a ratio of 2.63.   Over time this ratio of soybean to corn prices would be considered to be “favoring soybeans” (i.e., being markedly larger than the customary 2.2 to 2.3 break-even level) —favoring soybeans over corn from an expected profitability standpoint. That said, it is likely that prospects for the South American soybean crop during March-April 2017 will affect both old crop and new crop soybean and corn futures prices in the United States at that time, and could lead to significant changes in relative 2017 prices and expected profits between U.S. corn and soybeans, and ultimately affect U.S. farmers’ 2017 planted acreage decisions.

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