An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s December 12th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available on the KSU AgManager website (http://www.agmanager.info/).
This article also examines the USDA’s Long Term Agricultural Projections in regards to U.S. grain sorghum market outlook in “next crop” MY 2018/19. The USDA’s Long Term Agricultural Projections can be found at the following web address:
Following is a summary of the article on “U.S. Grain Sorghum and World Coarse Grain Market Outlook” with the full article and accompanying analysis on the KSU AgManager website to be available shortly at the following web address:
A. Grain Sorghum Market Overview
In the December 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, the USDA forecast that the 2017 U.S. grain sorghum crop would be 356 million bushel (mb). This projection of 2017 U.S. Grain Sorghum production combined with a large 2017 U.S. Corn crop of 14.578 billion bushels (bb) have caused U.S. feedgrain markets to focus on “large feedgrain production and supply” scenarios – and have brought continued pressure to both U.S. grain sorghum and corn market prices. Just as with U.S. corn, wheat, and soybeans, current cash bids for grain sorghum are below full economic cost of production in most instances. However, higher than anticipated 2017 grain sorghum yields at many Kansas locations may help lower cost of production per bushel and help to mitigate low grain sorghum prices to some degree.
Strong exports of U.S. grain sorghum during November-mid December 2017 have had a tangible, positive impact on grain sorghum prices in Central and parts of Western Kansas. China and Japan have been the main export buyers from the U.S., while purchases from Mexico have declined to date in the “new crop” 2017/18 marketing year. In response, the USDA raised its’ U.S. Grain Sorghum export projections sharply – up 50 million bushels (mb) to 260 mb for this marketing year ending August 31, 2018. And in a textbook example of economic “crowding out” – this strong foreign export demand for U.S. grain sorghum has raised domestic prices and is causing a projected shifting of usage away from U.S. domestic livestock feeding and ethanol production in “new crop” MY 2017/18.
The USDA also released Long Term Agricultural Projections on November 28th that anticipate both an increase in U.S. grain sorghum average prices to $3.30 per bushel (equal to the U.S. corn price forecast), and a 1 million acre (+17%) increase in grain sorghum planted acreage in the “next crop” 2018/19 marketing year.
B. Kansas Cash Grain Sorghum Prices
On December 26th cash grain sorghum price bids at major grain elevators in Western Kansas were in the range of $3.08 – $3.31 /bu – with basis levels $0.45 to $0.22 /bu under CME MARCH 2018 corn futures. The high bid of $3.31 /bu was in Colby, where the corn price that same day was $3.00 /bu ($0.53 under MARCH).
Central Kansas cash grain sorghum price bids ranged from $3.17 ½ to $3.48 /bu with basis $0.35 to $0.05 / bu under. The high bid of $3.48 /bu was in Salina, where the highest corn price was $3.09 ¾ /bu ($0.43 under MARCH).
In East Central Kansas at Topeka, the highest reported grain sorghum price bid was $3.87 ½ /bu (basis = $0.35 over MARCH 2018 corn) – compared to the highest corn bid of $3.09 ¾ /bu ($0.43 under MARCH).
Kansas ethanol plant price bids for grain sorghum on Dec. 26th ranged from $3.42 to $3.57 /bu, with basis $0.10 under to $0.05 over. Ethanol plant corn bids were $3.32-$3.79 /bu, with basis $0.20 under to $0.27 over.
C. Market Factors for U.S. Grain Sorghum & Other Feedgrains in 2018
1) Whether the recent strength in U.S. Grain Sorghum exports to China and Japan continues through Spring-Summer 2018 will be THE key factor in grain sorghum price prospects for at least the first half of the year. IF the recent pace of U.S. grain sorghum exports were to continue at the levels of November-early December 2017 through August 2018, then total U.S. grain sorghum exports would end up being over 300 million bushels in “new crop” MY 2017/18 by KSU estimates.
2) Usage of U.S. grain sorghum for ethanol production and livestock feeding is likely to be “crowded out” by strong sorghum exports in “new crop” MY 2017/18 – should they continue at their current pace through Spring-Summer 2018. However, there are ample to abundant supplies of low priced U.S. corn available for these domestic U.S. feedgrain usage industries to use without interruption. This is occurring when continued strong domestic U.S. fuel ethanol use and livestock feeding of the 2017 crop U.S. feedgrains are anticipated for the remainder of the “new crop” 2017/18 marketing year.
3) Given the pace of U.S. grain sorghum exports, it is likely that there will be reduced grain sorghum storage beyond the Winter months – as attractive pricing opportunities perform their “demand pull” effect upon farmer’s marketing actions.
4) Higher U.S. grain sorghum prices relative to competitive feedgrains will likely “draw” increased 2018 U.S. grain sorghum planted acreage – as projected by the USDA in its Long Term Agricultural Projections. The question may be “Just how many more acres of grain sorghum will U.S. farmers plant in 2018?” It is possible that higher acreage and good growing conditions could bring about an increase in 2018 U.S. Grain Sorghum production to 450-500+ million bushels – much larger than the USDA’s 2018 forecast of 384 mb.
D. USDA Forecast for “Next Crop” MY 2018/19 & “New Crop” MY 2017/18
In its November 28th Long Term Agricultural Projections, the USDA projected 2018 U.S. Grain Sorghum plantings of 6.700 million acres (ma), up 17% or ≈ 1 ma from 5.709 ma in 2017. Harvested acres U.S. grain sorghum in 2018 are projected to be 5.700 ma, up from 5.049 ma in 2017. Average yields in 2018 in the U.S. are forecast at 67.3 bu/ac, down from 70.4 bu/ac in 2017. As a result, 2018 U.S. Grain Sorghum production is forecast to be 384 mb – up from 356 mb in 2017, but down from 480 mb in year 2016 and 597 mb in 2017.
Forecast “next crop” MY 2018/19 U.S. Grain Sorghum total supplies are 405 mb (vs 391 this marketing year, and 519-620 mb the 2 years before). United States’ Grain Sorghum exports are projected to be 230 mb in “next crop” 2018/19 – down from 260 mb in “new crop” MY 2017/18, and less than 241 mb in MY 2016/17. Total use of U.S. Grain Sorghum in “next crop” MY 2018/19 of 370 mb is unchanged from “new crop” MY 2017/18 – but down from 485-583 mb the two previous years.
Ending stocks of U.S. Grain Sorghum in “next crop” MY 2018/19 are projected to be 35 mb (9.46% Stocks/Use) – up from 21 mb (5.68% Stocks/Use) in “new crop” MY 2017/18.
The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to be $3.30 /bu – up from $3.10 /bu in “new crop” MY 2017/18.
This scenario for “new crop” MY 2017/18 is given an 80% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.
E. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18
Two (2) alternative KSU projections for “new crop” MY 2017/18 U.S. Grain Sorghum Total Use include the following forecasts:
1) “Higher Exports” scenario (10% probability) for “new crop” MY 2017/18: 2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 290 mb, total use of 359 mb, ending stocks of 13 mbb, 3.62% ending stocks-to-use, and $3.40 /bu U.S. average price.
2) “Lower Exports” scenario (10% probability) for “new crop” MY 2017/18: 2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 230 mb, total use of 350 mb, ending stocks of 23 mbb, 6.57% ending stocks-to-use, and $3.00 /bu U.S. average price.
F. World Coarse Grain Supply-Demand
The USDA projected that “new crop” 2017/18 marketing year World Coarse Grain total supplies of 1,586.3 mmt will be down 2.0% from 1,618.7 mmt in “old crop” MY 2016/17, but still up 5.2% over 1,507.35 mmt in MY 2015/16. Projected World Coarse Grain total use of 1,354.1 mmt in “new crop” MY 2017/18 is down marginally from “old crop” MY 2016/17, but up 7.9% over 1,254.9 mmt in MY 2015/16. “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.
World Coarse Grain ending stocks are forecast to decline, with the USDA projecting ending stocks of 232.2 mmt in “new crop” MY 2017/18, down 11.5% from 262.4 mmt in “old crop” MY 2016/17, and down 8.0% from 252.4 mmt in MY 2015/16. Although World Coarse Grain ending stocks are projected to be the eighth highest on record in “new crop” MY 2017/18 at 232.2 mmt, World Coarse Grain percent ending stocks-to-use in “new crop” MY 2017/18 are forecast to actually decline to 17.15% – to the lowest level since 17.12% in MY 2013/14. This is indicative that strong World usage for coarse grains at low prices is expected to continue.