Wheat Outlook at the 2019 KSU Risk and Profit Conf. – Some promising demand for exports and feed use with strong basis, but falling HRW Wheat futures (4th of 4)

The following slides are part of the presentation on “Grain Market Outlook for Years 2019-2020” given at the 2019 Risk and Profit Conference in sponsored by the Kansas State University Department of Agricultural Economics in Manhattan, Kansas.  The whole presentation are available on the KSU www.AgManager.info website at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2019-risk-and-profit-conference-0

This forth of 4 sets of slides covers the Wheat market (slides 85-118).  This follows an Introductory section (slides #1-23), Feedgrain Outlook (slides 23-58), and Soybean Outlook (slikdes 59-84) covered in earlier posts.

Soybean Outlook at the 2019 KSU Risk and Profit Conf. – Projecting 50%-50% Probability of a 48.5 bu/ac (USDA) vs 46.5 bu/ac (KSU), 3.68 (USDA) vs 3.53 billion bu. 2019 U.S. Prodn, with $8.40 (USDA) vs $9.00 /bu Prices (3rd of 4)

The following slides are part of the presentation on “Grain Market Outlook for Years 2019-2020” given at the 2019 Risk and Profit Conference in sponsored by the Kansas State University Department of Agricultural Economics in Manhattan, Kansas.  The whole presentation are available on the KSU www.AgManager.info website at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2019-risk-and-profit-conference-0

This third of 4 posts or sets of slides covers the Soybean market (slides 59-84).  This follows an Introductory section (slides #1-23) and Feedgrain Outlook (slides 23-58) covered in an earlier post, with info for Wheat markets to be presented in a following post.

Corn and Sorghum Outlook at the 2019 KSU Risk and Profit Conf. – Projecting 70% Probability of a 12.5-12.9 billion bu. 2019 U.S. Corn Crop, with => $4.00 /bu Corn (2nd of 4)

The following slides are part of the presentation on “Grain Market Outlook for Years 2019-2020” given at the 2019 Risk and Profit Conference in sponsored by the Kansas State University Department of Agricultural Economics in Manhattan, Kansas.  The whole presentation are available on the KSU www.AgManager.info website at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2019-risk-and-profit-conference-0

This second of 4 posts or sets of slides covers the Feedgrain market (Corn & Grain Sorghum – slides 24-58).  This follows an Introductory section (slides #1-23) covered in an earlier post, with info for Soybeans and Wheat markets to be presented in following posts.

Grain Outlook at the 2019 KSU Risk & Profit Conference – Prevailing Issues in U.S. Grain Markets, Including 2019 Acreage Issues (1st of 4)

The following slides are part of the presentation on “Grain Market Outlook for Years 2019-2020” given at the 2019 Risk and Profit Conference in sponsored by the Kansas State University Department of Agricultural Economics in Manhattan, Kansas.  The whole presentation are available on the KSU www.AgManager.info website at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2019-risk-and-profit-conference-0

This first of 3 posts or sets of slides cover the Introductory section (slides #1-21).   Feedgrain market (Corn and Grain Sorghum) information, and info for Soybeans and Wheat markets will be presented in following posts.

KSU Corn Market Outlook on June 22, 2019: “A ‘Short’ U.S. Corn Crop Market Scenario in “New Crop” MY 2019/20”

An analysis of Corn Market Outlook on June 24, 2019 for “new crop” 2019/20 marketing year is provided in the following article from Kansas State University Department of Agricultural Economics.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) and other USDA reports through mid-day on Monday, June 24, 2019, with info from the USDA NASS Crop Progress reports on June 17, 2019.  Note that the USDA Acreage Report to be released on Friday, June 28th will provide more solid numbers on U.S. corn planted acreage in 2019 – from which more accurate supply-demand and price projections can then be made.

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 “U.S. Corn Market Outlook on June 24, 2019”

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U.S. Corn Market Outlook on June 24, 2019

‘Development of an Historic U.S. Corn Short Crop Year in “New Crop” MY 2019/20’

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

June 24, 2019

Summary

Excessive and prolonged rainfall and moist field conditions have reduced U.S. corn planted acres, reduced yield prospects on late-planted corn, and diminished overall U.S. corn production prospects in year 2019.   Following is the USDA forecast of U.S. corn supply-demand balances and prices for the “new crop” 2019/20 marketing year.

A. USDA Forecast – 13.680 billion bu. (bb) Crop, $3.80 /bu (20% probability KSU)

On June 11th the USDA projected that U.S. corn production would be 13.680 billion bushels (bb) in year 2019, with ending stocks of 1.675 bb, percent (%) stocks-to-use of 11.75%, and projected U.S. average cash corn prices of $3.80 per bushel for the “new crop” 2019/20 marketing year beginning September 1, 2019 (Tables 1a-b)This USDA forecast is given a 20% probability of occurring by KSU Extension Ag Economist D. O’Brien. 

B. KSU Scenario #1 – 12.417 bb Crop, $4.15 /bu (30% probability KSU)

An alternative KSU Scenario #1 to consider for “new crop” MY 2019/20 involves less planted acres, lower production, tighter stocks, and higher prices then the USDA’s forecast (Table 1b).  This scenario involves 85.0 million acres (ma) of corn planted, 88.0% harvested-to-plant acres, an average yield of 166 bu. per acre, and 2019 U.S. corn production of 12.417 bb (versus 13.680 bb by USDA).  This scenario results in lower ending stocks of 1.350 bb, lower percent (%) stocks-to-use of 10.14%, and higher projected U.S. average cash corn prices of $4.15 /bu.. (Estimated 30% probability KSU)  

C. KSU Scenario #2 – 11.669 bb Crop, $5.00 /bu (25% probability KSU)

For alternative KSU Scenario #2 for “new crop” MY 2019/20, there are still less planted acres (same as Scenario #1), but even lower production due to still lower yields of 156 bu/ac., with the result of still tighter stocks, and even higher prices (Table 1b).  This scenario involves 85.0 million acres (ma) of corn planted, 88.0% harvested-to-plant acres, an average yield of 156 bu. per acre, and 2019 U.S. corn production of 11.669 bb.  This scenario results in still lower ending stocks of 1.110 bb, lower percent (%) stocks-to-use of 8.67%, and even higher projected U.S. average cash corn prices of $5.00 /bu.. (Estimated 25% probability KSU)  

D. KSU Scenario #3 – 11.686 bb Crop, $5.05 /bu (15% probability KSU)

For alternative KSU Scenario #3 for “new crop” MY 2019/20, there are even less planted acres (down from Scenarios #1 & #2), lower production due to low yields of 166 bu/ac., with the result of tight stocks, and higher prices (Table 1b).  This scenario involves 80.0 million acres (ma) of corn planted, 88.0% harvested-to-plant acres, an average yield of 166 bu. per acre, and 2019 U.S. corn production of 11.686 bb.  This scenario again results in lower ending stocks of 1.107 bb, low percent (%) stocks-to-use of 8.63%, and higher projected U.S. average cash corn prices of $5.05 /bu.. (Estimated 15% probability KSU

E. KSU Scenario #4 – 10.982 bb Crop, $5.70 /bu (10% probability KSU)

For alternative KSU Scenario #4 for “new crop” MY 2019/20, there are even less planted acres (down from Scenarios #1 & #2), lower production due to sharply lower yields of 156 bu/ac., with the result of tight stocks, and even higher prices (Table 1b).  This scenario involves 80.0 million acres (ma) of corn planted, 88.0% harvested-to-plant acres, an average yield of 156 bu. per acre, and 2019 U.S. corn production of 10.982 bb.  This scenario again results in still lower ending stocks of 1.000 bb, low percent (%) stocks-to-use of 8.18%, and higher projected U.S. average cash corn prices of $5.70 /bu.. (Estimated 10% probability KSU)  

 

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The U.S. Corn Market Situation on June 24, 2019

The serious and prolonged excess moisture problems during the 2019 spring planting season for U.S. corn have led to a sharp reduction in 2019 U.S. corn production prospects.  In some areas of the U.S. Corn Belt the historic extremely moist field condition situation that began during April-May has persisted through June 2019 – beyond crop insurance full coverage deadlines and the physiological limits of a normal annual planting / growing season. 

The strong likelihood of a major U.S. corn production shortfall in year 2019 has brought about the strong likelihood of a classic “short crop” scenario occurring for U.S. corn in the “new crop” 2019/20 marketing year. The last major “short crop” marketing year for U.S. corn occurred seven (7) years ago in year 2012 due to extreme summer heat and accompanying crop stress – rather than the over-abundance of rainfall with accompanying flooding and soggy fields that has occurred in Spring 2019.

In so many words, calendar year 2019 has already become a unique, “analog” year in terms of how spring moisture has delayed or prevented U.S. corn plantings.   What remains to be seen are that actual, physical “numbers” for planted and harvested U.S. corn acres, the rate of crop development and eventual degree of physiological maturity in the fall of 2019, and the final size and quality of the 2019 U.S. corn crop going into “new crop” MY 2019/20. 

These U.S. corn supply concerns have driven corn futures sharply higher in recent weeks as the corn market anticipates how sharply reduced 2019 U.S. corn production would lead to much tighter U. S. corn supply-demand balances and the need for price rationing of usage in “new crop” MY 2019/20 (beginning on September 1, 2019).  

For example, “old crop” JULY 2019 Corn futures prices have increased from a low of $3.43  per bushel on May 13th to a high of $4.38 on May 29th, and then up to a high of $4.64 ¼ on June 17th, before closing lower at $4.47 on June 24th.  Similarly, “new crop” DEC 2019 Corn futures prices have increased from a low $3.63 ¾ per bushel on May 13th to a high of $4.54 on May 29th, and then likewise up to a high of $4.73 on June 17th, before closing lower at $4.57 ¼ on June 24th . (Figures 1 & 2a-b).   With this rally in corn futures, managed money (specs) traders who had been holding record short or bearish positions during April through mid-May, through mid-June have bought back much (but not all) of their bearish short futures positions and instead build up the long or buy side of their speculative trade portfolios (Figures 3a-b-c-d).

The U.S. government is also planning to provide a second round of Market Facilitation Payments (MFPs) to U.S. crop producers, with the stipulation that crops have to be actually planted in year 2019 to collect these MFP funds.  That actual crop acres had to be planted for farmers to receive this second round of MFP payments has been the policy position of the USDA Farm Service Agency (FSA) through the time of the writing of this article.  However, a U.S. congressional disaster aid program – a separate effort to support U.S. farmers affected by flooding and prevented planting in year 2019 – may provide additional support for those who have not been able to plant crops at all. 

As these planting delays U.S. corn have continued into mid-late June, the more likely it is that U.S. farmer who CAN get into fields to plant will switch to other shorter season cropping options such as soybeans and grain sorghum – or just take prevented planting crop insurance payments in crop year 2019.   The allowance by the USDA of planting “cover crops” such as annual forages on these same acres has also factored into these discussions among USDA policy makers, congress, the crop insurance industry, and farm groups together with the farmers they represent.

It is a vast oversimplification to say that the direction of the U.S. corn market for the remainder of “old crop” MY 2018/19 (ending August 31st) and the beginning stages of “new crop” MY 2019/20 (starting September 1st) will depend on how these 2019 production issues work themselves out.  Fundamental questions about a) the final actual amount of U.S. corn acres that WERE planted (and WHEN they were planted), b) the percent harvested acres in water logged areas, and c) the final amount of physiologically mature crop yields as the growing season advances from now into fall 2019.   During that period U.S. farmers will likely be “under duress” as they make difficult late season marketing and financial management decisions under conditions of production uncertainty on their individual farms. 

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Status of Delayed U.S. Corn Production Prospects Through June 22nd

The U.S. Corn Belt states that have been hardest hit by wet weather, flooding and planting delays for corn and other crops in 2019 have been Illinois, Indiana, Michigan, Ohio, South Dakota and Wisconsin.  Significant wet soil conditions and planting delays have also occurred in Iowa, Kansas, Minnesota, Missouri, Nebraska, and Pennsylvania.   This can be seen in the percent of corn emerged through June 16th as reported by the USDA National Agricultural Statistical Service (NASS) (Table 2).  Percent of corn emerged may be a more accurate assessment of 2019 U.S. corn acreage and production prospects at this time than percent planted – given questions about how prevented plantings may be included in the former measure of planting progress. 

The USDA reported that 92% of the 2019 corn crop in the 18 major states had been planted and that 92% had emerged as of June 16th in its latest USDA NASS Weekly Crop Progress report (Table 2).  In these top 18 states this amounts to 70,674,400 acres emerged out of 85,350,000 acres forecast in the March 28th USDA NASS Prospective Plantings report.  Note that the upcoming USDA Acreage report to be released on Friday, June 28th will provide an estimate of 2019 U.S. corn plantings on a state and national basis, and will take the place of the March 28th USDA Prospective Plantings report in these types of calculations. 

Extended to the entire U.S., 82% emerged on 6/16/2019 would equal 76,251,860 acres planted out of the USDA Prospective Plantings forecast for the U.S. of 92,792,000 acres of corn in year 2019.  Note that the USDA World Outlook Board had already lowered that forecast in its June 11th USDA World Agricultural Supply and Demand Estimates (WASDE) report.  Average U.S. corn emergence in the 18 major states on June 16th over the 5-year 2014-2018 period was 99%, with 6/16/2019 corn emergence being 17% and 6,620,900 acres behind in the 18 states, and an estimated 6,699,140  acres behind in the U.S. in total.

*****

A “Dynamic Base” Effect Is Occurring in 2019 USDA NASS Crop Progress Reports

Recent comments by USDA NASS administrators have indicated that these weekly USDA percent planting or emergence estimates are subject to a sort of “dynamic base” effect which may impact how they are to be interpreted.  By a “dynamic base” effect this author is referring to the approach apparently taken by farmers in reporting the progress of their field work and the development of the crop – which in turn is effected by how USDA asks its weekly crop progress report survey questions. 

Seemingly, farmers and anyone else who fills out these weekly surveys of crop progress take the approach of “rebasing” their expectations of crop progress relative to the status of the crop and their evolving planting intentions or crop development realities at the beginning of the weekly reporting period.  Their assessments of crop progress are based on their updated expectations instead of either their original intentions of planted acres OR regular historical rates of crop development.  

This tendency has been more of a critical issue in year 2019 because of the excessive cropland moisture situation that has occurred in the U.S. Corn Belt, and the delays in corn plantings it has caused. This is particularly relevant due to the likelihood of a much higher than normal amount of prevented planting acreage in 2019. 

Consequently, when farmers indicate they may be 100% completed in their plantings this year, it is likely to refer to their completion of all that they actually CAN plant – excluding those saturated and/or flooded acres that cannot be planted at least to corn in 2019 and that they have given up on for corn acreage this year.  Since farmers expectations regarding what their planted acres can reasonably BE planted in a saturated year such as 2019, then their BASE expectations are “dynamic”. 

After all this wrangling over definitions, in so many words, the 92% planted acreage estimate reported for June 16th by the USDA NASS Crop Progress report is likely overstated because U.S. farmers are implicitly accounting for either prevented plantings or switching to other crops as they fill out the reports of weekly corn planting completion for USDA. 

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2019 U.S. Corn Production Based on the June 16th U.S. Planted Acres Estimate

With only 82% or an estimated 76,251,860 acres of U.S. corn emerged to date, production prospects for the 2019 U.S. corn crop based on what is actually emerged so far are still down considerably.  In the USDA June 11, 2019 World Agricultural Supply and Demand Estimates (WASDE) report, forecast 2019 corn production in the U.S. to be 13.680 billion bushels (Tables 1a-b, Figure 7). 

 Based on the June 16th estimate of 82% of U.S. corn emerged – with 76,251,860 acres planted of the 92.792 ma originally intended.  Of these 76.25 ma now planted, it is estimated that 70,778,954 acres would be harvested (equaling latest 3-year average harvested-to-planted in the top 18 corn producing states).  With a 2019 U.S. average corn yield of 175 bu/ac, estimated corn production would equal 12.4 billion bushels (bb) (Table 2).  Alternatively, with a 2019 U.S. average corn yield of 167 bu/ac, estimated corn production would equal 11.25 bb.  Both of these projection are down substantially from the USDA’s June 11th WASDE projection of 13.680 bb.

This KSU calculation of 2019 U.S. corn production can be justly criticized for several reasons. 

First, it is likely based on too high of an estimate of percent (%) harvested-to-planted acres due to flooding and excessive moisture – having been set equal to the most recent 2016-2018 3-year average.  In the “new crop” MY 2019/20 U.S. corn supply-demand and price projections by Kansas State University that follow in Table 1b, it is assumed that final 2019 U.S. corn planted acreage is either 85.000 ma or 80.000 ma – down from the USDA June 11th WASDE estimate of 89.800 ma. 

As indicated earlier, the upcoming USDA Acreage report to be released on Friday, June 28th will provide an estimate of 2019 U.S. corn plantings on a state and national basis, and will take the place of the March 28th USDA Prospective Plantings report or the June 11th WASDE report in these types of calculations.

Second, it can also be criticized for having 2019 U.S. corn average yields set too high at 175 bu/acre for the initial scenario.  With delayed plantings and excessively wet soils it may be more prudent to consider an 8 bu/acre lower U.S. corn yield market of 167 bu/acre.  Note that there is a credible possibility of 2019 U.S. corn yields even lower than this – with scenarios of 166 bushels and 156 bushels per acre considered in KSU Alternative Projections in Table 1b.

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Prospects for Final 2019 U.S. Corn Planted & Harvested Acres

It is assumed in the following projections by Kansas State University Extension Agricultural Economist Daniel O’Brien that because of increasing new crop fall 2019 pricing opportunities and the requirement that crop acres be planted to receive a 2nd round of MFP payments, there will substantial amounts of additional U.S. corn acreage planted in early and mid-June 2019.  Most of these acres of U.S. corn will have been planted after U.S. crop insurance final planting dates (Table 1b).  In this analysis it is assumed that these additional plantings will still leave final U.S. corn planted acreage down to either 85,000,000 acres or 80,000,000 acres. 

Both of these estimates are down from the June 11th USDA WASDE estimate of 89,400,000 acres, and will be directly comparable to the updated USDA projection in the upcoming June 28th USDA Acreage report. Also due to the prevalent wet soils and flooded fields in many areas, the national percent harvested-to-planted is forecast at 88.0% – down from the estimate of 91.87% in the USDA June 11th WASDE report. 

  • 2019 U.S. Corn Planted Acres Scenarios #1 & #2: “85,000,000 acres” (55% probability)

For comparison, the USDA forecast of 89,400,000 acres of corn planted in 2019 is estimated to have a 20% probability of occurring according to KSU Ag Economist D. O’Brien estimates.  The combined estimated probability of there being closer to 85,000,000 acres of corn planed in KSU scenarios #1 and #2 is 55%.  Harvested acreage in this scenario is estimated to be 74,800,000 acres (i.e., 85.0 ma x 88.0% harvested-to-planted acres).

  • 2019 U.S. Corn Planted Acres Scenarios #3 & #4: “80,000,000 acres” (25% prob.)

With the USDA forecast of 89,400,000 acres of corn planted in 2019 estimated to have a 20% probability of occurring, and the KSU estimate of 85,000,000 acres thought to have a combined 55% probability in scenarios #1 & #2, the combined estimated probability of there being closer to 80,000,000 acres in KSU scenarios #3 and #4 is 25%.  Harvested acreage in this scenario is estimated to be 70,400,000 acres (i.e., 80.0 ma x 88.0% harvested-to-planted acres).

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World Corn Supply-Demand – Both W. & Without China

  • World Production

World corn production of 1,099.19 million metric tons (mmt) is projected for “new crop” MY 2019/20, down from 1,120.47 mmt in “old crop” MY 2018/19, up from 1,077.98 mmt in MY 2017/18, ut down from the record high of 1,125.21 mmt in MY 2016/17 (Figure 14).  The “new crop” 2019/20 marketing year will begin September 1, 2019 and continue through August 31, 2020. 

Forecast corn production in Argentina of 50.00 mmt in year 2020 would be “up marginally” from 49 mmt in 2019, up from the short crop of 32.00 mmt in 2018, and above 41.00 mmt produced in 2017.  Similarly, production in Brazil of 101.00 mmt forecast in year 2020 would be “unchanged” from year 2019, unchanged from the short crop of 82.00 mmt in year 2018, and up from 98.50 mmt in 2017.  A large portion of the corn harvests for Argentina and Brazil occur in the later half of September 1st – August 31st marketing years, i.e., February through August.  For “new crop” MY 2019/20, the Argentina and Brazil corn harvests will be during February-August in calendar year 2020.

  • World Total Supplies

World corn total supplies of 1,424.57 mmt are forecast for “new crop” MY 2019/20, down from the record high 1,459.72 mmt in “old crop” MY 2018/19, down from 1,429.44 mmt in MY 2017/18, and up from the previous record high of 1,436.93 mmt in MY 2016/17.   The estimates of World corn total supplies were adjusted approximately 14% higher in the November 8, 2018 WASDE report to address changes in Chinese domestic corn supply-demand balance sheets – with these adjustments carrying through to all following reports.

  • World Corn Exports

World corn exports are forecast to be 169.84 mmt, down from the record high 172.78 mmt for “old crop” MY 2018/19, up from 148.82 mmt in MY 2017/18, and up from 160.47 mmt in MY 2016/17 (Figure 14).

  • World Corn Ending Stocks & Percent (%) Stocks-to-Use

Projected World corn ending stocks of 290.52 mmt (25.62% S/U) in “new crop” MY 2019/20 are down from 325.38 mmt in “old crop” MY 2018/19, and down from 339.25 mmt (31.12% S/U) in MY 2017/18.  They are also down from the record high 351.46 mmt (33.14% S/U) in MY 2016/17, and down from 311.17 mmt (31.14% S/U) in MY 2015/16 (Figures 14 & 15a).    Projected Foreign (Non-U.S.) corn ending stocks of 247.96 mmt (26.32% S/U) in “new crop” MY 2019/20, are down from 269.61 mmt (28.64% S/U) in “old crop” MY 2018/19, and are down from 284.88 mmt (33.01% S/U) in MY 2017/18. 

Changes in Chinese corn ending stocks increased World corn ending stocks estimates by 93.0% in the November 2018 USDA WASDE report, and increased World ending stocks-to-use estimates from 14.39% in October 2018 up to 27.16% and 27.30% in the November 8th and December 11th WASDE reports, respectively, and to 27.40% in the February 8, 2019 WASDE.

  • “World-Less-China” Corn Ending Stocks & Percent (%) Stocks-to-Use

An alternative view of the World corn supply-demand is presented IF Chinese corn usage and ending stocks are isolated from the World market (Figures 15b-c).  “World-Less-China” corn ending stocks are projected to be 98.91 mmt (11.54% S/U) in “new crop” MY 2019/20, down from 115.54 mmt (13.45% S/U) in “old crop” MY 2018/19, and down from 116.73 mmt (14.46% S/U) in MY 2017/18.  These figures show that World % stocks-to-use of corn less China’s direct influence are projected to be 55.0% lower or “tighter” (i.e., 11.54% S/U for the “World-Less-China” versus 25.62% S/U for the “World” overall in “new crop” MY 2019/20). 

  • China’s Proportion of World Corn Ending Stocks

After the changes in World corn supply-demand reported in the November 8th WASDE report, which were carried forward into the December 11th and February 8, 2019 reports, the USDA showed that estimates of Chinese ending stocks of corn as proportion of the World total have increased significantly from the October 2018 WASDE report.   The percent of World corn stocks held by China has grown at an increasing but slowing rate since MY 2007/08 through “old crop” MY 2018/19.  In recent years, this proportion grew from 55.91% in MY 2012/13, up to 57.65% in MY 2013/14, 61.9% in MY 2014/15, 68.0% in MY 2015/16, 63.45% in MY 2016/17, 65.6% in MY 2017/18, and 64.5% in “old crop” 2018/19, and are now projected to be 66.0% in “new crop” MY 2019/20. 

While China’s percent of World corn stocks is estimated to have increased with these new USDA figures, “World-Less-China” percent (%) corn ending stocks-to-use are forecast to be 11.54% in “new crop” MY 2019/20, the lowest percentage in 7 years (Figures 15a-b)“World-Less-China” corn stocks-to-use was 9.46%-9.92% during the years of MY 2011/12 – MY 2012/13, but increased to the range of 12.25% to 13.85% during the MY 2013/14 through MY 2015/16 period.  Then after a high of 15.94% in MY 2016/17, “World-Less-China” corn ending stocks-to-use declined to 14.11% in MY 2017/18, and 13.45% in “old crop” MY 2018/19, and is projected to decline further to 11.54% in “new crop” MY 2019/20.   This decline supports the idea that corn stocks outside of China are “tightening up” considerably – and that the overall World corn market has an increasing possibility of seeing sharply higher prices in the near future if these trends continue.

 

 

KSU U.S. Sorghum Acres-Yield Scenarios and World Coarse Grain Markets in Mid-June 2019

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s June 11th USDA World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website  (http://www.agmanager.info/).

Following is a summary of the article on “U.S. Grain Sorghum and World Coarse Grain Market Outlook” with the full article and accompanying analysis on the KSU AgManager website available at the following web address:

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

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U.S. Grain Sorghum & World Coarse Grain Market Outlook

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

June 14, 2019

 

A. The Current U.S. Grain Sorghum Market Situation

Prospects for U.S. grain sorghum market prices have been greatly effected by U.S. corn planting problems and prospective production concerned that developed in May and early-June, 2019.  As evidence of this change, the USDA raised the projected price of U.S. grain sorghum in the “new crop” 2019/20 marketing year by $0.50 to $3.50 per bushel in the June 11th WASDE report.  It is notable that this projected price increase occurred with no changes to the U.S. grain sorghum supply-demand balance sheet for the “new crop” 2019/20 marketing year.  This indicates that major market cross-over impacts on U.S. grain sorghum supply-demand and price prospects are expected to happen as a result of dramatically declining 2019 U.S. corn production prospects. 

Planting delays and prevented planting choices, as well as figuring out the procedures and qualifiers for future Market Facilitation Payments (MFPs) have been some of the challenges in the U.S. feedgrain market in recent weeks.   Delayed plantings of U.S. corn until early-mid June have been severe and prevalent enough that crop insurance coverage has been sharply reduced for these late corn acres.  Also, the understanding from USDA public statements to date that crop acres must be planted to qualify for further USDA Market Facilitation Payments (MFP) have also factored into farmers crop production decisions.  These factors taken together seem likely to motivated U.S. farmers to plant more U.S. grain sorghum acres this year.

From a mid-June 2019 perspective, grain sorghum seems to have physiological production advantages over late-planted corn – including a shorter growing season and a later final planting date to qualify for full crop insurance coverage.  Individual ethanol plants and livestock feeders may be motivated to encourage grain sorghum production in their local areas in year 2019.  Increased year 2019 grain sorghum production in these areas could at least temporarily help compensate for significant anticipated shortfalls in their local 2019 corn supplies – to keep their ethanol plants and livestock feeding operations running with less disruption form limited supplies and/or extremely high feedgrain prices. 

 As a result of these factors, it seems likely that the USDA’s initial projection of 5.135 million acres planted in the U.S. in year 2019 will be raised in coming months.  This would lead to increased estimates of 2019 U.S. grain sorghum production, and increased usage of sorghum for bioenergy and livestock feed uses to compensate for short corn supplies.  The impact on U.S. grain sorghum exports is less certain, at least until U.S.-China trade conflicts find a resolution.   

*****

B. U.S. Grain Sorghum Supply-Demand for “New Crop” MY 2019/20

In the June 11th WASDE report, the USDA left unchanged its projection of 2019 U.S. Grain Sorghum plantings of 5,134,000 acres, down from 5.690 million acres (ma) in 2018, 5.629 ma in 2017, and 6.690 ma in year 2016 (Table 2, Figure 2a-b).  The pace of planting U.S. grain sorghum acres is moderately behind the average of the last five years (2014-2018), with 47% planted on June 9th relative to the 5-year average of 63% planted by that date (Table 1).  However, it is generally considered that there is adequate time before USDA Final Planting dates in late June – such as June 25th in Kansas for grain sorghum to be planted in time without declines in expected yields in year 2019.    

Harvested acres of U.S. grain sorghum in 2019 are projected to be 4,600,000 acres, down from 5.061 ma in 2018, 5.045 ma in 2017, and 6.163 ma in year 2016.   To date, U.S. grain sorghum plantings are moderately behind pace, the final planting date in Kansas for full crop insurance coverage is June 25th

U.S. yields in 2019 are forecast at 67.4 bu/ac, down from 72.1 bu/ac in 2018, 71.7 bu/ac in 2017, and the record high of 77.9 bu/ac in 2016 (Table 2, Figure 3a-b).  The USDA’s 2019 forecast would be the smallest U.S. grain sorghum yield since 59.6 bu/ac in year 2013, and 49.6 bu/ac in the drought ravaged year of 2012.

The USDA forecast that the 2019 U.S. Grain Sorghum production would be 310 million bushels (mb) – the smallest U.S. crop since 248 mb in drought year 2012, and 213 mb in year 2011 when percent harvested acres were well below average at 72.4% (Table 2, Figures 4a-b).   This amount is down from 365 mb in year 2018, 362 mb in 2017, 480 mb in 2016, and the 21-year high of 597 mb in 2015. 

KSU Commentary: There is a strong possibility that in future USDA reports U.S. grain sorghum planted and harvested acreage estimates for year 2019 will increase from this initial estimate of 5.134 ma.  The USDA 2019 yield forecast also appears conservative.  Taken together, these alternative scenarios point toward expectations of higher 2019 U.S. grain sorghum production than the USDA has projected.  These possible alternative scenarios will be discussed in below, and are presented in Table 3.

Total supplies of U.S. Grain Sorghum (i.e., beginning stocks + production + imports) are forecast to be 370 mb in “new crop” MY 2019/20, down from 400 mb in “old crop” MY 2018/19, 397 mb in MY 2017/18, 519 mb in MY 2016/17, and the 20-year high of 620 mb in MY 2015/16. 

KSU Commentary: With the possibility of higher 2019 U.S. grain sorghum production in the coming July, August, September, and November USDA WASDE and Crop Production reports, total supplies of U.S. sorghum are expected to increase (see Table 3).

Exports of U.S. grain sorghum are projected to be 100 mb in “new crop” 2019/20 (Tables 2-3, Figures 4a-b, 5a-b, & 6a-b).  Projected U.S. grain sorghum exports of 100 mb in “new crop” MY 2019/20 would be up from the USDA’s forecast of 85 mb in “old crop” MY 2018/19, but down from 205 mb in MY 2017/18, 342 mb in MY 2015/16 (2nd highest on record) and the record high of 352 mb in MY 2014/16. 

Trade disagreements between the United States and China have severely damaged U.S. grain sorghum exports since late-summer / fall of year 2018 (see Figures 7a-b).  At its current weekly pace through June 6, 2019, U.S. grain sorghum exports would end up at approximately 60 mb in the “old crop” MY 2018/19 – down 25 mb from the USDA projection of 85 mb.  A weekly pace of shipments of 3.1 mb would be needed over the last 13 weeks of “old crop” MY 2018/19 to reach the 85 mb forecast by the USDA in U.S. grain sorghum exports.  For the weeks ending May 30th and June 6th, there have been 2.36 mb and 1.96 mb actually shipped, respectively. 

KSU Commentary: It is likely that the USDA will need to reduce its forecast of “old crop” MY 2018/19 U.S. grain sorghum exports unless the export pace increases sharply – adding to projected ending stocks.   However, the set of broader U.S. grain market issues having to do with anticipated reductions in U.S. feedgrain supplies and rationing of feedgrain usage throughout the end of “old crop” MY 2018/19 on August 31, 2019 and on into “new crop” MY 2019/20 will be the  dominating factors in the U.S. grain sorghum market.

Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new crop” 2019/20.  This amount of projected FSI use in “new crop” MY 2019/20 is equal to 100 mb in “new crop” MY 2018/19, but up sharply from a 5-year low of 60 mb in MY 2017/18, and less than 115 mb in MY 2016/17 and the record high of 137 mb in MY 2015/16.  The 33-year low of 15 mb in FSI use came during the record high export year of MY 2014/15. 

KSU Commentary: With anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from ethanol plants in western Corn Belt areas for U.S. grain sorghum use. To the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic ethanol production.

Livestock feed & residual use is projected to be 125 mb in “new crop” 2019/20 – down from 155 mb in “old crop” MY 2018/19, up from 97 mb in MY 2017/18, and less than 133 mb in MY 2016/17 (Table 2, Figures 5a-b & 6a-b).

KSU Commentary: Just as for ethanol use of grain sorghum, with anticipated short supplies of U.S. feedgrains in “new crop” MY 2019/20, it is likely that there will be strong “demand pull” from livestock feeders in western Corn Belt areas for U.S. grain sorghum use.   And, also to the degree that U.S. grain sorghum production increases from current projected levels, all that much more U.S. grain sorghum may be used in domestic livestock feeding.

Total use of U.S. Grain Sorghum in “new crop” MY 2019/20 of 325 mb is forecast to be down from 340 mb in “old crop” MY 2018/19, from 362 mb in MY 2017/18, 485 in MY 2016/17, and from the 20-year high of 583 mb in MY 2015/16 (Table 2, Figures 5a-b & 6a-b).  Overall, the USDA projects that there will be a) no change in ethanol / FSI use, b) increased exports, and c) lower feed and residual use in “new crop” MY 2019/20 than in “old crop” MY 2018/19.  

Ending stocks of U.S. Grain Sorghum in “new crop” MY 2019/20 are projected to be 45 mb (13.85% Stocks/Use or ‘S/U’) – down from 60 mb (17.65% S/U) in “old crop” MY 2018/19, but up from 35 mb (9.67% S/U) in MY 2017/18 (Table 2, Figures 5a-b, 6a-b & 8a-b)

KSU Commentary: This projection in total use and ending stocks of U.S. grain sorghum in “new crop” MY 2019/20 is “subject to change” based on the final size of the 2019 U.S. sorghum crop, and the spillover effects on to domestic demand of sorghum are due to sharp reductions in 2019 U.S. feedgrain supplies. 

The season average price for U.S. Grain Sorghum in “new crop” MY 2019/20 is projected to be $3.50 – raised $0.50 /bu by the USDA in the June 11th WASDE from May 10th WASDE projections  (Table 2, Figures 8a-b & 9a-b)This USDA scenario for “new crop” MY 2017/18 is given a 20% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

KSU Commentary: The USDA raised the price of U.S. grain sorghum by $0.50 per bushel for “new crop” MY 2019/20 in the June 11th WASDE report while making no changes in the associated U.S. grain sorghum supply-demand balance sheet.  This is an indication that broader U.S. and World feedgrain market factors and coming adjustments are likely to impact U.S. grain sorghum prices to a significant degree.  It is likely that volatile feedgrain and grain sorghum prices will occur in what remains of “old crop” MY 2018/19 through August 31st, and on into “new crop” MY 2019/20.

*****

C. Alternative S-D & Price Forecasts for “New Crop” MY 2019/20

Given the reductions that have occurred in year 2019 U.S. corn planted and harvested acres through May-June – with associated reductions in 2019 U.S. corn production prospects, strong positive “demand-pull” market forces have been and are occurring in U.S. grain sorghum markets.  For the “new crop” 2019/20 marketing year beginning on September 1, 2019, these feedgrain market forces may lead to significant increases in U.S. grain sorghum planted acreage and production.  With reductions occurring in U.S. corn supplies in “new crop” MY 2019/20, high feedgrain prices are likely to force any additional U.S. grain sorghum supplies that are produced to be quickly used. 

The following alternative supply-demand scenarios for U.S. grain sorghum in “new crop” MY 2019 illustrate how a progression of higher U.S. grain sorghum acreage and production may work out in terms of supply-demand balances and prices. 

The first scenario represents the USDA projection for “new crop” MY 2019/20 from the May 10, 2019 WASDE report.  Alternative scenarios for 2019 U.S. grain sorghum acreage, yields, production, usage and prices are presented in Table 3. 

***

  1. USDA June 2019 WASDE Forecast for “New Crop” MY 2019/20 – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               67.4 bu/ac

Beginning Stocks                                                   60 million bushels (mb)

2019 U.S. Sorghum Production                         310 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                370 mb

Food, Alcohol & Industrial Use                             99 mb

Seed Use                                                                   0.63 mb

Exports                                                                  100 mb

Feed & Residual Use                                            125 mb

Total U.S. Sorghum Use                                      325 mb

Ending Stocks                                                          45 mb

% Ending Stocks-to-Use                                      13.81%

U.S. Sorghum Season Avg. Farm Price                $3.50 /bu

Note: With the feedgrain planting problems that have occurred in the U.S. in April-May-June 2019, the June 11th WASDE market scenario for “new crop” MY 2019/20 has a low likelihood of occurring (20%KSU Est.).  See Table 3.

***

Alt. Scenario #1MY 2019/20-KSU: Same Planted Ac., 73 bu/ac Yield, 336 mb Crop – 20% Probability:

Planted Acres                                                       5.135 million acres (ma)

Harvested Acres                                                   4.600 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year Average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         336 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 396 mb

Food, Alcohol & Industrial Use                           129 mb

Seed Use                                                                   0.63 mb

Exports                                                                    70 mb

Feed & Residual Use                                            150 mb

Total U.S. Sorghum Use                                      350 mb

Ending Stocks                                                          46 mb

% Ending Stocks-to-Use                                      13.14%

U.S. Sorghum Season Avg. Farm Price                $3.60 /bu

Note: This scenario is based on no changes in U.S. grain sorghum acres, but a more representative 5 year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.   This alternative KSU scenario for “new crop” MY 2019/20 also has a limited likelihood of occurring (20%KSU Est.).  See Table 3.

***

Alt. Scenario #2MY 2019/20-KSU: +250K Planted Ac., 73 bu/ac Yield, 352 mb Crop – 30% Probability:

Planted Acres                                                       5.385 million acres (ma)

Harvested Acres                                                   4.825 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         352 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 412 mb

Food, Alcohol & Industrial Use                           134 mb

Seed Use                                                                   0.63 mb

Exports                                                                    75 mb

Feed & Residual Use                                            165 mb

Total U.S. Sorghum Use                                      375 mb

Ending Stocks                                                          37 mb

% Ending Stocks-to-Use                                       9.87%

U.S. Sorghum Season Avg. Farm Price                $4.00 /bu (i.e., the lower end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 250,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (w/o a U.S.-China trade agreement), and increased ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This KSU scenario for “new crop” MY 2019/20 is estimated to have a 30% likelihood of occurring (30%KSU Est.).  See Table 3.

***

Alt. Scenario #3MY 2019/20-KSU: +500K Planted Ac., 73 bu/ac Yield, 369 mb Crop – 20% Probability:

Planted Acres                                                       5.635 million acres (ma)

Harvested Acres                                                   5.049 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         369 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 429 mb

Food, Alcohol & Industrial Use                           139 mb

Seed Use                                                                   0.63 mb

Exports                                                                    80 mb

Feed & Residual Use                                            185 mb

Total U.S. Sorghum Use                                      405 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.93%

U.S. Sorghum Season Avg. Farm Price                $4.75 /bu (i.e., the mid-point of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 500,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 20% likelihood of occurring (20%KSU Est.).  See Table 3.

***

Alt. Scenario #4MY 2019/20-KSU: +1 million Planted Ac., 73 bu/ac Yield, 401 mb Crop – 10% Probability:

Planted Acres                                                       6.135 million acres (ma)

Harvested Acres                                                   5.497 ma

% Harvested-to-Planted                                      89.6%

U.S. Average Sorghum Yield                               73.0 bu/ac  (= 5-year average U.S. grain sorghum yield)

Beginning Stocks                                                    60 million bushels (mb)

2019 U.S. Sorghum Production                         401 mb

Imports                                                                      0 mb

Total U.S. Sorghum Supply                                 461 mb

Food, Alcohol & Industrial Use                           151 mb

Seed Use                                                                   0.63 mb

Exports                                                                    90 mb

Feed & Residual Use                                            195 mb

Total U.S. Sorghum Use                                      437 mb

Ending Stocks                                                          24 mb

% Ending Stocks-to-Use                                       5.49%

U.S. Sorghum Season Avg. Farm Price                $5.50 /bu (i.e., the top end of a $4.00 to $5.50 /bu range)

Note: This scenario is based on an additional 1,000,000 U.S. grain sorghum acres, a 5-year average U.S. grain sorghum yield (73.0 bu/ac), less limited U.S grain sorghum exports (without a U.S.-China trade agreement), and further increases in ethanol and feed usage to cover for short domestic supplies of U.S. corn.  This alternative KSU scenario for “new crop” MY 2019/20 is estimated to have a 10% likelihood of occurring (10%KSU Est.).  See Table 3.

KSU Commentary: In this 4th alternative KSU scenario, a 1 million acre increase in U.S. grain sorghum plantings will indicate just that much greater of a reduction in 2019 U.S. corn plantings and likely production in key areas of the U.S. Corn Belt.  The shortfall in U.S. corn acres and production potential is likely to support the high price for U.S. grain sorghum of $5.50 / bushel in “new crop” MY 2019/20.

*****

D. World Coarse Grain Supply-Demand – All Countries

WORLD Coarse Grain Percent (%) Grain Ending Stocks-to-Use is tightening to the most constrained level in five (5) years – since MY 2014/15.  This tightening of available World Coarse Grain supplies relative to use signals that stronger World use of coarse grains is expected to continue, and that more strength in U.S. and World coarse grain prices may occur in the coming year than the World Coarse Grain market now anticipates.

Total Supplies of WORLD Coarse Grains in the “new crop” 2019/20 marketing year (MY) are projected to be 1,741.14 million metric tons (mmt) – down from 1,763.53 mmt in “old crop” MY 2018/19, from 1,745.77 mmt in MY 2017/18, and the record high of 1,769.06 in MY 2016/17.  World “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains (Figure 10).

Forecast Total Use of WORLD Coarse Grains in “new crop” MY 2019/20 of 1,421.40 mmt is the highest on record.  This forecast compares to the previous record high of 1,411.87 mmt in “old crop” MY 2018/19, to 1,376.92 mmt in MY 2017/18, and to 1,382.36 mmt in MY 2016/17 (Figure 10).

Ending Stocks of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be 5-year low of 319.74 mmt – down 10.0% from 351.66 mmt in “old crop” MY 2018/19, down 15.4% from 368.85 mmt in MY 2017/18, and down 20.9% from 386.53 mmt in MY 2016/17 (Figure 10).  

Percent (%) Ending Stocks-to-Use of WORLD Coarse Grains in “new crop” MY 2019/20 are projected to be a 6-year low (the lowest since MY 2013/14) of 22.5% Stocks/Use (S/U).  This would be down vs 24.9% S/U in “old crop” MY 2018/19; and down from the range of 24.7% – 28.0% S/U over the MY 2014/15 – MY 2017/18 period (Figure 11)

KSU Commentary: IF there were to be a further reduction of 1 billion bushels (39.36 mmt) in U.S. feedgrain production in year 2019, then all else being equal, World coarse grain ending stocks would decline to near 280 mmt, with World coarse grain stocks-to-use falling to a 7-year low of 19.7% S/U. And this would be before any price-rationing of World coarse grain usage occurs. 

For comparison, in the record short crop year of MY 2012/13 World coarse grain supply-demand balances had fallen to 15.4% S/U, and had declined to 13.4% S/U for the two marketing years previous to that. 

The key point is that IF such a decline occurs in the U.S. in 2019 U.S. corn production – down from the current USDA projection of 13.68 billion bushels (bb) to 12.68 bb – THEN it is noteworthy to remember that historic minimums as occurred in the MY 2010/11 through MY 2012/13 period STILL would not likely have been matched.   High prices will have occurred, but the supply-demand conditions that led to record high U.S. grain sorghum prices of $6.33 per bushel will still not have been matched.

 

E. World Coarse Grain S-D – The “WORLD-Less-China” Perspective

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains have also tightened appreciably, but less so than for the aggregate WORLD coarse grain market as a whole.

Ending Stocks of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are projected to be 6-year low at 127.31 mmt – down 9.9% vs 141.25 mmt in “old crop” MY 2018/19.  This projection for “new crop” MY 2019/20 is also down from 145.47 mmt in MY 2017/18, and from 162.19 mmt in MY 2016/17 (Figure 12).   The record low of 62.60 mmt occurred in MY 1995/96, followed by 64.40 mmt in MY 1975/76, 77.51 mmt in MY 1983/84, and 83.91 mmt in 1996/97 – all years of relative price strength for U.S. feed grains in general and U.S. grain sorghum in particular.

Percent (%) Ending Stocks-to-Use of “WORLD-Less-China” Coarse Grains in “new crop” MY 2019/20 are also projected to be a 7-year low of 11.3% S/U.  This would be down vs 12.6% S/U in “old crop” MY 2018/19; and down from the range of 12.5% – 14.7% for the MY 2013/14 through MY 2017/18 time period (Figure 12)

Historically, “WORLD-Less-China” Coarse Grain percent (%) S/U has declined as low as 10.2% in MY 2012/13; 10.4% in MY 2011/12; 11.55% in MY 2010/11; 11.8% in MY 2006/07; 11.2% in MY 1996/97; and 8.7% in MY 1995/96.  These marketing years were generally high priced time-periods for U.S. feedgrains such as grain sorghum and corn.

 

 

FAO Projection for 2019 U.S. Corn Crop at 12.99 billion bu (330 mmt) + World Wheat S-D

Here is an article from the Foreign Agricultural Service regard their projections for the size of the 2019 U.S. corn crop.  They project a crop of 330 mmt or 12.99 billion bushels.

http://www.fao.org/worldfoodsituation/csdb/en/?utm_source=Ag+Insider+Subscribers&utm_campaign=a412282389-EMAIL_CAMPAIGN_2019_06_06_08_45_COPY_01&utm_medium=email&utm_term=0_b0e8c666dd-a412282389-120343085

Diminishing maize production prospects in the United States dampen the global cereal production outlook this year

Release date: 06/06/2019

FAO’s latest forecast for world cereal production in 2019 points to an increase of 1.2 percent from 2018, to 2 685 million tonnes.

However, the year-on-year expansion is now much less significant than earlier predicted, as global maize production is now seen to fall in 2019, largely because of sharp downward revisions since the previous report concerning maize production prospects in the United States.

Due to prolonged excessive wet conditions resulting in major delays in crop plantings, this year’s maize production in the United States is now pegged at 330 million tonnes, down 45 million tonnes from FAO’s first production forecast published in May and almost 10 percent (36 million tonnes) short of last year’s level.

The recent USDA crop progress report pointed to a sharply reduced planted area of only 58 percent of planting intentions as of 26 May, well below the 5-year average level of 90 percent and the slowest pace ever recorded.  (Note: this has been updated to 67% planted as of June 2, 2019 – down from the recent 5 year average of 96%.  Daniel O’Brien, Extension Agricultural Economist, Kansas State University)

Most of the expected rebound in global cereal production in 2019 is attributed to expected expansions in wheat and barley production, with year-on-year increases of 5.3 percent and 5.8 percent, respectively. Total rice production is likely to remain close to last year’s record level as expectations of area-driven expansions in Asia could offset foreseen contractions in most other regions, triggered by inclement weather and prospects of reduced profit margins.

World cereal utilization in 2019/20 is forecast to reach 2 707 million tonnes, down 15.5 million tonnes, or 0.6 percent, from the May forecast but still 1 percent (26 million tonnes) higher than in 2018/19. Most of this month’s downward adjustment again concerns the United States, where, because of deteriorating production prospects, total domestic utilization of maize is seen to fall below the 2018/19 level. Following the revision for the United States, world utilization of coarse grains in 2019/20 is now anticipated to reach 1 434 million tonnes, down 0.9 percent from the previous forecast but 0.7 percent higher than in 2018/19. Global wheat utilization is expected to grow by 1.2 percent, reaching 755 million tonnes, while that of rice is predicted to reach 518 million tonnes, 1.4 percent higher than in 2018/19.

Based on the latest production and utilization forecasts, world cereal stocks could decline by as much as 26 million tonnes, or 3 percent, in the new season to a four-year low of 830 million tonnes. This figure is around 18 million tonnes, or 2 percent, below the FAO’s May forecast. The sharp month-on-month downward revision is mostly associated with maize, whereas the forecasts for wheat and rice inventories have been raised slightly since the previous report. The projected fall in cereal stocks would result in a drop in the global cereal stock-to-use ratio to just below 30 percent, which still points to a relatively comfortable supply level.

Globally, coarse grain inventories are seen heading towards a second consecutive annual decline in 2019/20, falling by 9 percent to just over 369 million tonnes, the lowest level since 2014/15. By contrast, total wheat stocks could expand by 4.6 percent year-on-year and approach a near-record level of 281 million tonnes. The increase of 1 percent in wheat stocks since May reflects upward adjustments made for the EU and the United States, outweighing downward revisions in Australia and the Russian Federation.  World rice stocks at the close of 2019/20 are still envisaged to fall slightly (0.9 percent) from their record opening levels, to 179 million tonnes, despite some upward revisions to forecasts for the United States and Viet Nam.

World trade in cereals in 2019/20 is forecast at around 414 million tonnes, up 1.2 million tonnes, or 0.3 percent, from the previous forecast and nearly 6 million tonnes, or 1.4 percent, higher than the estimated total shipments of cereals in 2018/19. Most of the predicted expansion in world cereal trade is associated with greater wheat and rice trade, while trade in coarse grains, most notably maize, is expected to fall below the 2018/19 level, mainly on expectations of reduced imports by the EU and a sharp reduction in exports by the United States. By contrast, wheat trade is predicted to rebound by 3.3 percent from the 2018/19 reduced level, driven by stronger import demand by several countries, especially in Africa and Asia, and supported by the expectation of large export availabilities in the Black Sea region and the EU. World rice trade, on the other hand, is likely to contract by 3.5 percent in 2019 before a possible rebound in 2020 on expectation of greater purchases by several countries in Africa.