KSU Corn Market Outlook in Late-October 2017: From the 2017 Corn Harvest Forward in the Markets

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for the “new crop” 2017/17 marketing year following the USDA’s October 12, 2017 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.

Following is a summary of the article on “Corn Market Outlook in Late-October 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website (www.AgManager.info) at the following web address:

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

 

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Summary

Overview

Since the USDA’s October 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have traded essentially sideways.  DEC 2017 corn opened at $3.46 per bushel on Thursday, October 12th – then traded as low as $3.42 ½ that day before closing at $0.03 higher at $3.49.  Since that day, DEC 2017 corn has traded in a range of $3.43 to $3.53, before closing at $3.50 ½ on October 25th.

Looking back, until the August 10th USDA reports U.S. corn prices had found support due to 1) spring corn planting difficulties, 2) summer corn production problems in select parts of the U.S. Corn Belt, and 3) strong U.S. corn use for ethanol production, wet corn milling, exports and – to a moderate degree – livestock feeding.  DEC 2017 corn reached as high as $4.17 ¼ on July 11th.  Then when the USDA’s August 10th projection of 2017 U.S. corn production came in approximately 300 million bushels (mb) higher than average pre-report trade estimates, corn futures prices declined from high of $3.89 on August 10th 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 and the majority of October.

Then, in the October 12th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 171.8 bu/ac, actually up from average pre-report trade estimates of 170.1 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.280 billion bushels (bb) – up from pre-report trade expectations of 14.204 bb.

Since the October 12th USDA reports, market expectations have formed a consensus in line with the USDA projection of a “large supply – low price” scenario, leaving DEC 2017 corn futures to trade near $3.50 per bushel during the 2017 harvest period.  The USDA will provide updated 2017 U.S. corn production numbers in its upcoming November 9, 2017, and early January 2018 USDA Crop Production reports.

Any significant corn futures or cash market price rallies through winter 2017-2018 on into early Spring 2018 are likely to continue to be limited by expectations of ending stocks of U.S. corn staying above 2.0 bb, coupled with ending stocks-to-use of 15.0%-16.0% for MY 2017/18.   However, in Spring-early Summer 2018 the U.S. corn market is likely again to have to weigh the annual risk of weather-limited 2018 U.S. corn production prospects (less than 13.500 bb??) and tighter ending stocks (less than 1.250 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.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Wednesday, October 25th cash corn bids at major grain elevators ranged from $2.96 ($0.55 under DEC futures) to $3.46 ($0.05 under DEC futures), and ranged from $3.01 ($0.50 under DEC) to $3.19 ($0.32 under DEC) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are sharply higher than in Oct-Dec 2016 when bids statewide had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd.  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 $3.09 ¾ on October 25th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on October 25th ranged from $3.22 ¾ ($0.30 under DEC) to $3.72 ¾ ($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 still predominates in local Kansas grain markets, it continues to be positive that Kansas cash corn prices have avoided falling down to USDA loan rate levels – especially in the midst of 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 2.340 bb rather than down to 1.000 bb.  If this “large stocks situation” persists through 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 moderate weakening of the U.S. dollar against other World currencies.  Exports of U.S. corn are expected to continue at a “decent” pace of 1.850 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.  Combined with emerging weather concerns in Brazil – 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 October 12th Crop Production report, the USDA adjusted its projection of a) 2017 U.S. corn plantings at 90.429 million acres or ‘ma’ (down 3.575 ma from 2016), b) harvested acres of 83.119 ma (down 3.629 ma), c) projected yields of 171.8 bu/ac (vs the record high of 174.6 in 2016), and d) 2017 U.S. corn production of 14.280 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.625 bb – down 317 mb from last year’s record high.  Total use is forecast at 14.285 bb – down 362 mb from last year’s record high.  Ending stocks are projected to be 2.240 bb (16.38% S/U) – down from 2.295 bb (15.67% 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 the midpoint estimate of $3.36 /bu from “old crop” MY 2016/17. This scenario is given a 75% 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.  Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields, and production than projected by the USDA in the October 12, 2017 WASDE report for “new crop” MY 2017/18. 

  • A – KSU “New Crop” MY 2017/18 Scenario #1) “169.5 bu/ac – 14.059 bb” Scenario (20% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 169.5 bu/ac trend yield, 14.059 bb production, 16.404 bb total supplies, 14.241 bb total use, 2.164 bb ending stocks, 15.19% S/U, & $3.35 /bu U.S. corn average price; 
  • B – KSU “New Crop” MY 2017/18 Scenario #2) “167.3 bu/ac – 13.876 bb” Scenario (5% probability) assumes: 90.404 ma planted, 82.941 ma harvested, 167.3 bu/ac yield, 13.876 bb production, 16.221 bb total supplies, 14.196 bb total use, 2.026 bb ending stocks, 14.27% S/U, & $3.45 /bu U.S. corn average price;
  • C – KSU “New Crop” MY 2017/18 “Wildcard” Scenario #3) “169.5 bu/ac – 14.059 bb” Scenario (???% prob.) assumes: 90.404 ma planted, 82.941 ma harvested, 169.5 bu/ac trend yield, 14.059 bb production, 16.404 bb total supplies, 13.926 bb total use, 2.479 bb ending stocks, 17.80% S/U, & ≈ $3.10 /bu U.S. corn average;

Note: even with moderate reductions in 2017 U.S. corn production as represented in the KSU Scenarios A, B and C above, the presence of large beginning stocks of 2.295 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances, and hinders any upward price responses.

World Corn Supply-Demand – With & Without China

World corn production of 1,038.8 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.4% from the record of 1,075.3 mmt in “old crop” MY 2016/17, but still up 6.8% from 972.4 mmt in MY 2015/16.  World corn total supplies of 1,265.8 mmt are projected for “new crop” MY 2017/18, down from the record high of 1,289.3 mmt in “old crop” MY 2016/17, but up from 1,181.8 mmt in MY 2015/16. 

World corn exports of a 150.7 mmt are projected for “new crop” MY 2017/18, down 8.0% from the record high of 163.8 mmt in “old crop” MY 2016/17, and up 25.9% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 201.0 mmt (18.9% S/U) in “new crop” MY 2017/18 are down from the record high 227.0 mmt (21.4% S/U) in “old crop” MY 2016/17, and from 214.0 mmt (22.1% 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 121.8 mmt (14.8% S/U) in “new crop” MY 2017/18, down from 125.7 mmt (15.1% S/U) in “old crop” MY 2016/17, but up from 103.2 mmt (13.8% S/U).  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be down approximately 22% (i.e., 14.8% S/U for the “World Less China” versus 18.9% 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 51.8% in MY 2015/16, to 44.6% in “old crop” MY 2016/17, and down to 39.4% 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.

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KSU Weekly Grain Market Analysis: Prepping for June 30th USDA Acreage and Stocks Reports

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program aired on on Friday, June 30, 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_06-30-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, June 30, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the June 30th recording is 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…

“Deep Numbers” Analysis of the June 9, 2017 USDA WASDE and Crop Production Reports (KSU Ag Economics))

A “deep numbers” analysis of the results of the June 9, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The USDA June WASDE and Crop Production reports considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available on the KSU AgManager.info website at the following web address:

http://www.agmanager.info/wasde-deep-numbers-analysis-spreadsheet

This “deep numbers” analysis considers how the June 9th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

KSU Corn Market Outlook in Mid-May 2017: Considering Acreage, Yield and Production Scenarios

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for the “next crop” 2016/17 marketing year following the USDA’s May 10, 2017 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.

Following is a summary of the article on “Corn Market Outlook in Mid-May 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website (www.AgManager.info) at the following web address:

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

 

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Summary

Overview

Since the USDA’s May 10th World Agricultural Supply and Demand Estimates (WASDE) report, JULY 2017 CME corn futures have been moderately volatile – moving both higher and lower within the range of $3.65 ¼ to $3.74.  “Current” MY 2016/17 U.S. corn prices have found some support due to 2017 production uncertainties (i.e., wet soils impacting corn planting & establishment in some regions and varying weather forecasts for summer 2017) and strong U.S. corn use in ethanol production, wet corn milling, exports and to a moderate degree in livestock feeding.

In addition, in the March 31st Prospective Plantings report the USDA forecast fewer U.S. corn planted acres in 2017.  If in 2017 there is a return to trend line U.S. corn yields near 167-168 bu/acre, then 170 bu/acre in 2017, then 2017 U.S. corn production could be in the range of 13.500 to 13.750 billion bushels (bb) instead of the USDA projection of 14.065 bb or the record high of 15.148 bb in 2016.

Forecasts by the USDA and other market analysts that ending stocks of U.S. corn will stay above 2 bb in “next crop” MY 2017/18, coupled with ending stocks-to-use above 14.5%-15.0% in both “current” MY 2016/17 and “next crop” MY 2017/18 has limited any significant corn futures or cash market price rallies to date in Spring 2017.   IF excessive moisture conditions that have developed in the U.S. Corn Belt in late April – mid-May were to continue until late-May and significantly delay planting progress – THEN increased concerns about 2017 U.S. corn production prospects could lead to higher U.S. corn prices in late-Spring – Summer 2017.

Kansas Cash Corn Bids & Basis as of May 17, 2017

Cash corn bids at major grain elevators ranged from $3.07 ($0.65 under JULY futures) to $3.62 ($0.10 under) in Western Kansas and $2.98 ($0.73 under) to $3.31 ½ ($0.40 under) in Central Kansas on Wednesday, May 17th.  This represents a marked increase since October-December 2016 when corn price bids statewide had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn price bids in east central and northeast Kansas – near river terminal locations – were near $3.48 ½ – $3.51 ½ on May 17th, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on May 17th ranged from $3.47 ¾ ($0.20 under) to $4.02 ¾ ($0.35 over) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.

While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive market signal that corn usage has not declined, and that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.

Other Factors that Could Affect the Corn Market in 2017

  • First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early-spring and some into summer 2017.
  • Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.
  • Third, at least moderate continued strength in U.S. corn exports – at least until what is forecast to be a sizable 2nd crop of corn from South America becomes available on global markets during Summer 2017.
  • And fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017.  World geo-political events have the potential to provide “shocks” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate depending on which countries may be involved and their role in global corn export trade.

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

Early USDA projections are for 2017 U.S. corn plantings of 89.996 million acres or ‘ma’ (down 4.0 ma).   Harvested acres of approximately 82.4 ma (down 4.35 ma) are forecast, with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), leading to a 2017 U.S. corn production is forecast of 14.065 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “next crop” MY 2017/18 total supplies to be 16.410 bb – down 530 mb from last year’s record high.  Total use is forecast at 14.300 bb – down 345 mb from last year’s record high.  Ending stocks are projected to be 2.110 bb (14.76% S/U) – down from 2.295 bb (15.67% S/U) in “current” MY 2016/17.  United States’ corn prices are projected to average $3.40 /bu (range of $3.00-$3.80).  This equals the midpoint estimate of $3.40 /bu from “current” MY 2016/17. This scenario is given a 45% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Supply-Demand & Price Forecast for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18.  Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields and production than projected by the USDA in the May 10, 2017 WASDE report for “next crop” MY 2017/18.

  • KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.556 bb” Scenario (25% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 167.3 bu/ac trend yield, 13.556 bb production, 15.901 bb total supplies, 14.255 bb total use, 1.646 bb ending stocks, 11.55% S/U, & $3.95 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.370 bb” Scenario (15% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 165.0 bu/ac yield, 13.370 bb production, 15.715 bb total supplies, 14.155 bb total use, 1.560 bb ending stocks, 11.02% S/U, & $4.10 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.155 bb” Scenario (5% probability) assumes: 88.500 ma planted, 80.535 ma harvested, 150.0 bu/ac yield, 12.080 bb production, 14.375 bb total supplies, 13.460 bb total use, 915 million bushels (mb) ending stocks, 6.80% S/U, & $6.00 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand Trends

World corn production of 1,033.7 million metric tons (mmt) is projected for “next crop” MY 2017/18, down 3.0% from the record high of 1,065.1 mmt in “current” MY 2016/17, but still up 6.8% from 968.1 mmt in MY 2015/16.  Near record World corn total supplies of 1,257.6 mmt are projected for “next crop” MY 2017/18, down marginally from the record high of 1,278.1 mmt in “current” MY 2016/17, but up from 1,177.5 mmt in MY 2015/16.

World corn exports of a near record 151.9 mmt are projected for “next crop” MY 2017/18, down 4.2% from the record high of 158.6 mmt in MY 2015/16, and up 26.6% from 119.95 mmt in MY 2015/16.  Projected World corn ending stocks of 195.3 mmt (18.4% S/U) in “next crop” MY 2017/18 are down from the record high 223.9 mmt (21.3% S/U) in “current” MY 2016/17, and from 212.4 mmt (22.0% S/U) in MY 2015/16.

Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine).   An ongoing, strong demand base for corn could help cause sharply increased corn market volatility in the summer of 2017 IF any serious threats emerge to the 2017 U.S. corn crop.

“Deep Numbers” Analysis of the May 10, 2017 USDA WASDE Report (D. O’Brien KSU)

A “deep numbers” analysis of the results of the May 10, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The May WASDE report considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available at the following web address:

http://www.agmanager.info/wasde-quick-analysis-spreadsheet

This “deep numbers” analysis considers how the May 10th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

KSU Corn Market Outlook in Early-May: Alternative Crop Production and Price Scenarios for MY 2017/18

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “new crop” 2016/17 marketing year following the USDA’s April 11, 2017 USDA Crop Production and https://www.usda.gov/oce/commodity/wasde/latest.pdf reports.

Following is a summary of the article on “Corn Market Outlook in Early-May 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website (www.AgManager.info) at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/corn-market-outlook-early-may-2017

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Summary

Overview & Summary

Since the USDA’s April 11th World Agricultural Supply and Demand Estimates (WASDE) report, MAY 2017 CME corn futures have been moderately volatile – moving both higher and lower within the range of $3.54 ¼ to $3.73.  “Current” MY 2016/17 U.S. corn prices have found some support at levels above local marketing loan rates because of the positive impact that low prices have had on the use of U.S. corn in ethanol production, wet corn milling, exports and to a moderate degree in livestock feeding.   In addition, the February 23-24 USDA 2017 Agricultural Outlook Forum together with the March 31st Prospective Plantings report have forecast fewer U.S. corn planted acres in 2017, and with a return to trend line U.S. corn yields, lower 2017 U.S. corn production of 14.065 billion bushels (bb) versus the record highs of 15.148 bb in 2016.

However, projections of ending stocks of U.S. corn staying above 2 billion bushels (bb) coupled with ending stocks-to-use above 15% in both “current” MY 2016/17 and “next crop” MY 2017/18 has limited any significant corn futures or cash market price rallies to date in Spring 2017.   IF excessive moisture conditions that have developed in the U.S. Corn Belt in late April – very early May were to continue until mid-May and significantly delay planting progress – THEN increased concerns about 2017 U.S. corn production prospects could lead to higher U.S. corn prices in late-Spring – Summer 2017.

Cash corn prices at major grain elevators in central and western Kansas ranged from $3.04 to $3.31 on Monday, May 1st.  This represents a marked increase since October-December 2016 when prices had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn prices in east central and northeast Kansas – near river terminal locations – were near $3.55 on May 1st, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn prices at Kansas ethanol plants on May 1st ranged from $3.38 to $3.73 – indicating continuing strength in ethanol demand in Kansas and nationwide.  While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive market signal that corn usage has not declined, and that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.

Other Factors Potentially Affecting the U.S. Corn Market

Other factors that could affect the U.S. corn market in 2017 include the following:

  • First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early spring 2017.
  • Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.
  • Third, at least moderate continued strength in U.S. corn exports – at least until what is forecast to be a sizable 2nd crop of corn from South America becomes available on global markets during Summer 2017.
  • Fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017.  World geo-political events have the potential to provide “shocks” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate depending on which countries may be involved and their role in global corn export trade.

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

With early USDA projections of 2017 U.S. corn plantings of 89.996 million acres or ‘ma’ (down 4.0 ma).   Harvested acres of approximately 82.4 ma (down 4.35 ma) are forecast, with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), leading to a 2017 U.S. corn production is forecast to be 14.065 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “next crop” MY 2017/18 total supplies to be 16.435 bb – down 505 mb from last year’s record high.  Total use is forecast at 14.220 bb – down 400 mb from last year’s record high.  Ending stocks are projected to be 2.215 bb (15.58% S/U) – down from 2.320 bb (15.87% S/U) in “current” MY 2016/17.  United States’ corn prices are projected by the USDA to average $3.50 /bu – up from a midpoint estimate of $3.40 /bu from “current” MY 2016/17 – but within the range of $3.25-$3.55 /bu for this marketing year. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Forecasts for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18.  Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields and production than projected by the USDA in the February 23-24, 2017 Agricultural Outlook Forum for “next crop” MY 2017/18.

  • KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.556 bb” Scenario (25% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 167.3 bu/ac trend yield, 13.556 bb production, 15.926 bb total supplies, 14.185 bb total use, 1.741 bb ending stocks, 12.27% S/U, & $3.85 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.370 bb” Scenario (15% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 165.0 bu/ac yield, 13.370 bb production, 15.740 bb total supplies, 14.080 bb total use, 1.660 bb ending stocks, 11.21% S/U, & $4.05 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.155 bb” Scenario (5% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 150.0 bu/ac yield, 12.155 bb production, 14.525 bb total supplies, 13.460 bb total use, 1.065 bb ending stocks, 7.91% S/U, & $4.75 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand

Record high World corn production of 1,053.8 million metric tons (mmt) is projected for “current” MY 2016/17, up 9.4% from 963.3 mmt in MY 2015/16, and up 3.7% from 1,016.0 mmt in MY 2014/15.  Record high World corn total supplies of 1,265.6 mmt are projected for “current” MY 2016/17, up from 1,173.1 mmt in MY 2015/16, and from 1,190.8 mmt in MY 2014/15.

World corn exports of 154.4 mmt are projected for “current” MY 2016/17, up 28.7% from 120.0 mmt in MY 2015/16, and up 8.6% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 223.0 mmt (21.4% S/U) in “new crop” MY 2016/17 are up from 211.8 mmt (22.0% S/U) in MY 2015/16, and from 209.8 mmt (21.4% S/U) in MY 2014/15.

  • Although World corn ending stocks are projected to be a record high in “current” MY 2016/17 at 223.0 mmt, World corn percent ending stocks-to-use are forecast to actually decline marginally to 21.4%.  Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine).   An ongoing, strong demand base for corn could help cause sharply increased corn market volatility in the summer of 2017 IF any serious threats emerge to the 2017 U.S. corn crop.

KSU Weekly Grain Market Analysis: Pre-Report Trade Estimates for March 31st Prospective Plantings and Quarterly Stocks

Grain market summary notes, charts and comments ahead of the KSU Agriculture Today Grain Outlook to played on Friday, March 31, 2016 are available on the Kansas State University www.AgManager.info website at the following web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_03-31-17.pdf

The recorded radio program will be aired at 10:03 a.m. central time, Friday, March 31st on the K-State Radio Network (here) – with the program available to listen to online.  After the program airs, a recording can also be listened to from the KSU AgManager.info website via a link  in the “Radio Interviews” section: http://www.agmanager.info/news