Key Supply-Demand Factors “Driving” Grain Markets (KSU Extension Ag Economics)

The following presentation on “Key Supply-Demand Factors ‘Driving” Grain Markets” was given on Tuesday, March 14, 2017 to the AgEcon 605 class on “Price Analysis and Forecasting” as a guest lecture.  The class is regularly taught by Dr. Richard Llewelyn of the Kansas State University Department of Agricultural Economics.

This presentation focuses on the key factors that have been “driving” or influencing grain markets over the last 15-25 years.   The full presentation will be available on the KSU Agricultural Economics website at the following web location:

http://www.agmanager.info/sites/default/files/pdf/OBrien_GrainMarketDrivers_03-15-17.pdf

 

 

 

Grain Market Update (5th of 5 parts) – Graphics of U.S. Soybean Market Outlook

In the following charts is the fifth 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 fifth of five (5) related blog posts provides information on Soybean Market Situation and Outlook.

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Soybean Market Analysis – Graphics Focusing on Russell, Kansas (via KSU)

Following are a set of graphics showing key trends and relationships in U.S. and World Soybean markets.  These selected U.S. and World supply-demand relationships are among those most likely to impact U.S. agricultural imports and therefore U.S. grain prices.

These slides are part of a larger “Grain Market Outlook for 2017” presentation which is located on the KSU AgManager website (www.AgManager.info) in the “Grain Marketing” section (http://www.agmanager.info/grain-marketing).

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KSU “Quick Analysis” Calculations of USDA November 9th Reports – Focusing on U.S. Corn and Soybean Yields and Production, and World Crop Supply-Demand Balances

A KSU “quick analysis” worksheet of the key grain marketing-related information found in the November 9, 2016 USDA Crop Production (here) and World Agricultural Supply and Demand Estimates (WASDE) report (here) can be found on the Kansas State University AgManager.info website (http://www.agmanager.info/).

The specific web address for this downloadable MS Excel Spreadsheet is found here:  http://www.agmanager.info/grain-marketing

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The spreadsheet contains a comparison of USDA November 2016 forecasts with a) pre-report trade estimates, b) last month’s October 2016 WASDE projections, and c) projections for previous marketing years.  Key information is contained on the following:

A. U.S. crop production forecasts for 2016 corn, soybean and grain sorghum.

B. U.S. ending stocks projections for the “new crop” 2016/17 marketing year for major crops.

C. World ending stocks projections for the “new crop” 2016/17 marketing year for major crops

The worksheet also contains a more extensive analysis of the September WASDE report results in regards to World wheat, coarse grain, corn and soybean supply-demand results, focusing on country-by-country (or region-by-region in many cases) projections of production, imports, exports, domestic feed use, and ending stocks.

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A Kansas Grain Elevator (Source: https://www.britannica.com/topic/grain-elevator/images-videos)

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“Soybean Market Outlook for 2017” Presentation at KSU Ag Lender’s Conferences, October 4-5, 2016

As part of the Kansas State University Agricultural Lenders Conferences to be held on Tuesday, October 4th in Garden City, Kansas and on Wednesday, October 5th in Manhattan, Kansas, a “Grain Market Outlook in 2017” presentation will be given by Daniel O’Brien, KSU Extension Agricultural Economist.

Following are the full set of slide for the first part of that presentation pertaining to Soybean Market Outlook for 2017.

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KSU Soybean Market Outlook in September 2016 – Positive U.S. Crush and Exports Offer Hope to Soybean Market

An analysis of U.S. and World soybean supply-demand factors and 2016-2017 price prospects following the USDA’s September 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports either is available on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary of the article on Soybean Market Outlook – with the full article and accompanying analysis available on the KSU AgManager website at the following web address;

http://www.agmanager.info/soybean-market-outlook-september-2016

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Summary

Market Overview

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on September 12th, soybean futures prices have moved both higher and lower within approximately a $0.50 range.  From the September 12th close of $9.64 ¼, 2016 when CME NOV 2016 soybean futures prices have traded from a low of $9.40 ½ on 9/14 to a high of $9.94 on 9/20, before closing at $9.49 ¼ on 9/27/2016.

Since 2014, World soybean market prices have been limited by a developing “large crop – low price” supply-demand regime, caused by consecutive record World soybean production years for 2014 and 2015, with large but not record crop in South America and a record high in the United States.  Lower than expected 2016 production in Brazil has led to record high U.S. soybean export trade prospects in “new crop” MY 2016 (starting 9/1/2016).

World Production, Ending Stocks & % Stocks-to-Use

Longer term, from MY 2008/09 to projected “new crop” MY 2016/17, the USDA forecasts a strong upward trend in World soybean production (up 7.0% annually) which will have “out-paced” the increase in World soybean use (up 6.0% per year) if it holds true.  However, the shortfall in South American’s soybean production in “old crop” MY 2015/16 has at least temporarily interrupted these trends, and has caused projected World soybean ending stocks and percent ending stocks-to-use to fall since MY 2014/15.

As this trend toward larger supplies has “abated” in “old crop” MY 2015/16 and for projected “new crop” MY 2016/17, U.S. and World soybean prices have received at least moderate support.  Since World soybean ending stocks of 62.0 mmt (22.4% S/U) in MY 2013/14, stocks grew sharply in MY 2014/15 to 78.5 mmt (26.1% S/U), but have since declined to an estimate of 72.9 mmt (23.0% S/U) in “old crop” MY 2015/16, and are forecast to decline further marginally to 72.2 mmt (22.0% S/U) in “new crop” MY 2016/17.

Key Focus in 2017 on Weather in South America and the U.S.

A key World soybean market issue will be to find out if 2017 weather or disease problems in South America end up driving southern hemisphere soybean production low enough to alter the existing “large supply – buyer’s market” situation that has existed in U.S. and World soybean markets in recent years.

Markets will also be focusing on the degree to which the record large 2016 U.S. soybean crop will “rectify” this short run trend toward lower World soybean ending stocks and lead to a re-establishment of the “large supply – low price” situation in fall 2016 that had existed during the 2014-2015 time period.

USDA U.S. Soybean Supply-Demand Forecast of “Old Crop” MY 2015/16

The USDA raised its forecast of U.S. soybean exports and sharply tightened ending stocks to use in “old crop” MY 2015/16.  With a projection of U.S. total supplies at 4.145 bb and domestic crush at 1.900 bb, the USDA forecast U.S. exports to be 1.940 bb – up 60 mb from August. With this change, total use increased 60 mb to 3.949 bb, with ending stocks declining to 195 mb (down 60 mb.

Ending stocks-to-use are projected at 4.94% – down from 6.56% in August, and 9.225% in July, and essentially equal to 4.95% in MY 2014/15, but still above the record low of 2.65% in MY 2013/14.  The USDA forecast “old crop” MY 2015/16 U.S. soybean average prices to be $8.95 /bu – down from $10.10 in MY 2014/15, $13.00 in MY 2013/14, and the record high of $14.40 in MY 2012/13.

USDA Forecast for “New Crop” MY 2016/17 (65% LikelihoodKSU)

The USDA left unchanged its projection of 2016 U.S. soybean plantings of a record high 83.688 million acres (ma) – up from 82.650 ma in 2015.  Forecast 2016 harvested acres of a record 83.037 ma is also up from 81.814 ma in 2015.  With record high projected yields of 50.6 bu/ac (up 1.7 bu from August), 2016 U.S. soybean production is projected to be a record high 4.201 bb – up from 3.929 bb in 2015 and 3.927 bb in 2014.   With forecast “new crop” MY 2016/17 domestic crush at a record 1.950 bb (up 10 mb) and exports at a record 1.985 bb (up 35 mb), projected total use equals 4.061 bb (a new record high ahead of 3.949 bb in “old crop” MY 2015/16 and 3.862 bb in MY 2014/15).

Given these results,  ending stocks are forecast to be 365 mb (8.99% S/U), while U.S. soybean prices are estimated by the USDA to be in the range of $8.30-$9.80 (midpoint = $9.05 /bu) – up from the $8.95 /bu in “old” MY 2015/16.  This USDA projection is thought to have a 65% probability of occurring according to Kansas State University Extension.

Alternative KSU Forecast for “New Crop” MY 2016/17 (35% LikelihoodKSU)

An alternative KSU-Scenario for U.S. soybean supply-demand and prices is presented for “new crop” MY 2016/17.  In this market perspective U.S. soybean domestic crush is projected to be 2.000 bb – up 50 mb from the USDA’s projection.  Also, U.S. soybean exports are forecast to be 2.035 bb – also up 50 mb from USDA estimates.  Taken together, U.S. soybean total use is forecast to be 4.161 bb – up 100 mb from USDA.

Ending stocks are forecast to be 265 mb – down 100 mb vs USDA #s, with % ending stocks-to-use estimated to be 6.37% – down from 8.99% S/U according to USDA projections.  Under this scenario, “new crop” MY 2016/17 U.S. soybean average prices would likely average $9.70 /bu – compared to the USDA’s midpoint projection of $9.05 per bushel.  This scenario is thought to have a 35% likelihood of occurring – compared to a 65% probability of occurrence for the USDA supply-demand and price projection for U.S. soybeans in “new crop” MY 2016/17.

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KSU “Quick Analysis” Calculations of USDA September 12th Reports – Large fall crops coming with low harvest prices likely

A KSU “quick analysis” worksheet of the key grain marketing-related information found in the September 12th USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports can be found on the Kansas State University AgManager.info website (http://www.agmanager.info/).

The specific web address for this downloadable MS Excel Spreadsheet is found here:

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

The spreadsheet contains a comparison of USDA September 12, 2016 U.S. and Foreign grain supply-demand and market price forecasts for the “new crop” 2016/17 marketing year for corn, wheat, soybeans and grain sorghum, with comparisons to a) pre-report trade estimates, and b) last month’s (August 2016) USDA grain production, supply-demand, and price projections.  Key information is contained on the following:

A. United States’, Brazil, Argentina and Total World crop production forecasts for 2016 corn, grain sorghum, wheat and soybeans.

B. Updated U.S. & World ending stocks projections for the “old crop” 2015/16 marketing years for major crops (corn, sorghum, wheat, and soybeans).

C. Updated U.S. & World ending stocks projections for the “new crop” 2016/17 marketing year for major crops & crop categories (corn, coarse grains, wheat, and soybeans).

The worksheet also contains a more extensive foreign country-by-country analysis of the September 12, 2016 WASDE report results in regards to World wheat, coarse grain, corn and soybean supply-demand, focusing on country-by-country (or region-by-region in many cases) projections of production, imports, exports, domestic feed use, total domestic use, ending stocks, and percent ending stocks-to-use.

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A. Kansas Sorghum being harvested in November 2015 (Source: http://kansasagnetwork.com/2015/kansas-fall-harvest-and-wheat-planting-nearing-the-finish-line/)

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Scenes from Kansas Corn harvest in 2014 (source: http://kansasagnetwork.com/2014/kansas-farm-bureau-insight-successful-farming/)

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Kansas soybean harvest in late September 2015 (Source: http://kansasagnetwork.com/2015/soybean-harvest-underway-in-kansas/)