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″

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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.

 

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KSU Weekly Grain Market Analysis: Updated U.S. Corn and Wheat Supply-Demand and Price Scenarios for MY 2017/18

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, August 4, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_11-17-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, November 17, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the August 4th recording will be available at the KSU Agriculture Today website.

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

KSU Weekly Grain Market Analysis: U.S. Corn Supply-Demand, China Ethanol Policy, and Strong Sorghum Prices in Central KS

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, August 4, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_10-27-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, October 27, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the October 27th recording will be available at the KSU Agriculture Today website.

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

KSU Weekly Grain Market Analysis: USDA Grain Supply-Demand #s during Wheat Seeding and Fall Harvest

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, October 13, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_10-13-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, October 13, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the October 13th recording will be available at the KSU Agriculture Today website.

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

KSU Weekly Grain Market Analysis: Heading toward delayed Wheat Seeding and Harvest in Kansas

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, October 6, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_10-06-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, October 6, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the August 4th recording will be available at the KSU Agriculture Today website.

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

USDA Sept. 29th Small Grains 2017 Summary and Grain Stocks Reports “By the Numbers”

The September 29, 2017 USDA Small Grains Summary and Grain Stocks reports provided the following results:

A. U.S. Corn Results

  • U.S. Corn stocks on September 1, 2017 were projected to be 2.295 billion bushels – down from pre-report expectations of 2.353 bb.  Compared to recent years: U.S. corn stocks on September 1st (2.295 bb) were 32%-33% larger than on the same dates in 2015 & 2016, up 86% from 2014, and up 180% from 2013.
  • U.S. Corn Use in June-August 2017 of 2.930 billion bu. was up from implicit pre-report expectations of approximately 2.876 bb.   Compared to recent years: June-August 2017 U.S. corn use was down marginally from the same period in 2016 (2.970 bb – down 1%), but up 6%-16% from 2014-2015, up 35%-48% from 2012-2013, and up 12%-15% from 2010-2011.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are at least marginally positive for U.S. corn supply-demand prospects, indicating that usage of U.S. corn for feed and possibly fuel ethanol were larger than the trade had expected.  Still, these are historically large levels of U.S. corn stocks for September 1st.  The existing “large supply – low price” scenario for U.S. corn heading into the 2017 harvest was not appreciably changed by these results.

B. U.S. Soybean Results

  • U.S. Soybean stocks on September 1, 2017 were projected to be 301 million bushels – down from pre-report expectations of 338 mb.   Compared to recent years: U.S. soybean stocks on September 1st (301 mb) were 53%-58% larger than on the same dates in 2015 & 2016, up 227% from 2014, and up 113% from 2013.
  • U.S. Soybean Use in June-August 2017 of 665 million bu. was up from implicit pre-report expectations of approximately 628 mb.  Compared to recent years: June-August 2017 U.S. soybean use was down marginally from the same period in 2016 (681 mb – down 2%), but up 49%-94% from 2014-2015, up 109% from 2013, and up 32%-63% from 2010-2012.
  • Summary Thoughts: Similar to U.S. corn, relative to pre-report trade expectations, these results are at least marginally positive for U.S. soybean supply-demand prospects, indicating that usage of U.S. soybeans for domestic crush and residual uses were larger than the trade had expected.  Still, these are also historically large levels of U.S. soybean stocks for September 1st.  The existing “large supply – low price” scenario for U.S. soybeans heading into the 2017 harvest was not appreciably changed by these results either.

C. U.S. Wheat Results

  • U.S. Wheat stocks on September 1, 2017 were projected to be 2.253 billion bushels – up from pre-report expectations of 2.205 bb.   Compared to recent years: U.S. wheat stocks on September 1st (2.253 bb) were down 11% from 2016, but were 7%-19% larger than on the same dates in 2013, 2014, & 2015.
  • U.S. Wheat Use in June-August 2017 of 668 million bu. was down 10%-11% from 2014-2016, down 26%-34% from 2012-2013, and down 7%-8% from 2010-2011.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are negative for for U.S. wheat supply-demand prospects, indicating at a minimum that usage of U.S. wheat for domestic feed and residual uses were less than the trade had expected.  Also, these are also historically large levels of U.S. wheat stocks for September 1st.  The existing “large supply – low price” scenario for U.S. wheat heading into Fall-Winter 2017-2018 was supported by these results.

D. U.S. Grain Sorghum Results

  • U.S. Grain Sorghum stocks on September 1, 2017 were projected to be 34 million bushels – up from pre-report expectations of 28 mb.   Compared to recent years: U.S. grain sorghum stocks on September 1st (34 mb) were down 8% from 2016, were 89% larger than on the same date in 2015, and were 100%-107% of September 1st stocks in 2013-2014.
  • U.S. Grain Sorghum Use in June-August 2017 of 51 million bu. was down 6% from 2016, up 219% from 2015, down 12% from 2014, but up 42%-76% from 2012-2013.
  • Summary Thoughts: Relative to pre-report trade expectations, these results are negative for for U.S. grain sorghum supply-demand prospects, indicating at a minimum that usage of U.S. grain sorghum for domestic feed and residual uses were less than the trade had expected.  The existing “large supply – low price” scenario for U.S. grain sorghum and other feedgrains as a whole heading into Fall-Winter 2017-2018 was supported by these results.

E. U.S. Wheat Annual Small Grains Summary Results

  • U.S. All Wheat Production is projected to be 1.741 billion bushels – up  from pre-report expectations of 1.718 bb.   Compared to recent years: U.S. All Wheat Production is down 25% from 2016, and 14%-18% from 2013-2015.
  • U.S. Winter Wheat Production is projected to be 1.269 billion bushels – down from pre-report expectations of 1.287 bb.   Compared to recent years: U.S. Winter Wheat Production is down 24% from 2016, and 8%-18% from 2013-2015.
  • U.S. Hard Red Winter (HRW) Wheat Production is projected to be 750 million bushels – down from pre-report expectations of 758 mb.   Compared to recent years: U.S. HRW Wheat Production is down 31% from 2016, and down 10% to up 1% from 2013-2015.
  • U.S. Soft Red Winter (SRW) Wheat Production is projected to be 292 million bushels – down from pre-report expectations of 306 mb.   Compared to recent years: U.S. SRW Wheat Production is down 15% from 2016, and 19%-49% from 2013-2015.
  • U.S. White Winter Wheat Production is projected to be 230 million bushels – up from pre-report expectations of 230 mb.   Compared to recent years: U.S. White Winter Wheat Production is down 6% from 2016, and up 24%-25% from 2014-2015.
  • U.S. Other Spring Wheat Production is projected to be 416 million bushels – up from pre-report expectations of 402 mb.   Compared to recent years: U.S. Other Spring Wheat Production is down 22% from 2016, and 22%-31% from 2013-2015.
  • U.S. Durum Wheat Production is projected to be 55 million bushels – up from pre-report expectations of 51 mb.   Compared to recent years: U.S. Durum Wheat Production is down 47% from 2016, and down 35% from 2015.

KSU Weekly Grain Market Analysis: Focus on Grain Sorghum and USDA Stocks/Small Grains Reports

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, September 29, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_09-29-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, September 29, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the August 4th recording will be available at the KSU Agriculture Today website.

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