KSU Corn Market Outlook in Early March 2017: Looking Ahead to “Next Crop” MY 2017/18

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’s February 23-24, 2017 Agricultural Outlook Forum, as well as USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports on February 9, 2017.  A full version of this article is available on the KSU AgManager website:  http://www.agmanager.info

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

KSU Grain Market Outlook Newsletter

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Summary

Overview

Since the USDA’s February 9th World Agricultural Supply and Demand Estimates (WASDE) report, MAY 2017 CME corn futures have been volatile – moving both higher and lower within the range of $3.67 ¼ to $3.87 ¼.  The February 23-24, 2017 USDA 2017 Agricultural Outlook Forum forecast of lower 2017 U.S. corn production of 14.065 billion bushels (bb) and a moderate reduction in “next crop” 2017/18 marketing year ending stocks of 2.215 bb have provided moderate support for the U.S. corn market.

Cash corn prices in at major grain elevators in central and western Kansas ranged from $3.04 to $3.28 on Tuesday, March 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 $3.55 on March 1st, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive sign that corn usage has provided support for prices.  Kansas cash corn prices on have increased since late December, having avoided falling down to USDA loan rate – price support levels through the recent fall and winter months.

Other Market Factors in 2017

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 – driven partly by the availability of exportable corn supplies from South America through spring 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 could provide an unanticipated “shock” 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.

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

With early USDA projections of 2017 U.S. corn plantings of 90.000 million acres or ‘ma’ (down 4.004 ma), harvested acres of 82.400 ma (down 4.348 ma), projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), 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 of 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 a year ago – but within the range of $3.20-$3.60 /bu for “current” MY 2016/17. 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 alternative, lower U.S. corn 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 – 13.786 bb” Scenario (25% probability) assumes: 90.000 ma planted, 82.400 ma harvested, 167.3 bu/ac trend yield, 13.786 bb production, 16.156 bb total supplies, 14.185 bb total use, 1.971 bb ending stocks, 13.89% S/U, & $3.65 /bu U.S. corn average price for “next crop” MY 2017/18; 

KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.596 bb” Scenario (15% probability) assumes: 90.000 ma planted, 82.400 ma harvested, 165.0 bu/ac yield, 13.596 bb production, 15.966 bb total supplies, 14.080 bb total use, 1.886 bb ending stocks, 13.39% S/U, & $3.70 /bu U.S. corn average price for “next crop” MY 2017/18;

KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.360 bb” Scenario (5% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 150.0 bu/ac yield, 12.3605 bb production, 14.680 bb total supplies, 13.460 bb total use, 1.220 bb ending stocks, 8.92% S/U, & $4.55 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand:

Record high World corn production of 1,040.2 million metric tons (mmt) is projected for “current” MY 2016/17, up 8.3% from 960.7 mmt in MY 2015/16, and up 2.4% from 1,015.6 mmt in MY 2014/15.  Record high World corn total supplies of 1,250.6 mmt are projected for “current” MY 2016/17, up from 1,170.5 mmt in MY 2015/16, and from 1,190.3 mmt in MY 2014/15. 

World corn exports of 149.0 mmt are projected for “current” MY 2016/17, up 23.0% from 121.1 mmt in MY 2015/16, and up 4.8% from 142.2 mmt in MY 2014/15.  Projected record high World corn ending stocks of 217.6 mmt (21.1% S/U) in “new crop” MY 2016/17 are up from 210.4 mmt (21.9% 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 217.6 mmt, World corn percent ending stocks-to-use are forecast to actually decline marginally to 21.1%.  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).   Ongoing, strong demand could cause sharply increased corn market volatility in the summer of 2017 IF any threats to the 2017 U.S. crop emerge.

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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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Grain Market Update (3rd of 5 parts) – Graphics of U.S. Grain Sorghum Market Outlook

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

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Grain Market Update (2nd of 5 parts) – Graphics of U.S. Corn Market Outlook

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

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KSU Weekly Grain Market Analysis: Lower U.S. Winter Wheat Acres and Tighter U.S. Corn-Soybean Supply-Demand

Grain market summary notes, charts and comments supporting the KSU Agriculture Today Grain Outlook to be played on Friday, January 13th is available on the Kansas State University www.AgManager.info website at the following KSU web address:

https://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_01-13-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, January 13th on the K-State Radio Network (KSU Agriculture Today Radio) – web player available.

Later today the program can also be listened to via a link from the following website in the “Radio Interviews” section: http://www.agmanager.info/news#ksrn-radio-interviews

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

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KSU Grain Sorghum and World Coarse Grain Market Outlook in December 2016 – USDA Projections for “Next Crop” MY 2017/18

An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2017 price prospects following the USDA’s December 9th World Agricultural Supply Demand Estimates (WASDE) reports will be available shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary of the article on U.S. Grain Sorghum & World Coarse Grain Market Outlook – with the full article and accompanying analysis available on the KSU AgManager website 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 December 9th World Agricultural Supply and Demand Estimates (WASDE) report, MARCH 2016 CME corn futures have trended lower.  On the day of the report, MARCH 2016 corn futures closed at $3.59 ½ per bushel, and then moved to a high of $3.63 on December 15th, before declining to a close of $3.49 ¾ on Thursday, December 29th.  The USDA’s forecast of a 462 million bushel (mb) 2016 U.S. grain sorghum crop along with record large 2016 U.S. corn crop of 15.226 billion bushels (bb), along with large 2016/17 marketing year U.S. feedgrain ending stocks of 64.8 million metric tons (mmt) – up 35%-38% from the previous two marketing years – and have continued to pressure both U.S. grain sorghum and corn market prices.

Cash grain sorghum prices in Kansas

Cash bids for grain sorghum in Kansas on December 29th were near $2.50 per bushel in many locations, with ethanol plants and some export oriented locations at $2.85-$3.05 /bu..

At major grain elevators in western Kansas, cash grain sorghum prices were in the range of $2.40 – $2.55 /bu on Thursday, December 29th with basis levels $0.95 to $1.10 under CME MARCH 2017 Corn futures.  As low as these prices were, they were still markedly higher than county FSA marketing loan rates of $1.76-$1.90 per bushel.  Similarly, central Kansas cash grain sorghum prices were in the range of $2.48 – $2.84 /bu with basis levels $1.02 to $0.65 under MARCH 2017 Corn, but still above local FSA loan rates of $1.85-$1.93 /bu..  At Topeka in east central Kansas, a higher bid was reported of $3.05 /bu (basis = $0.45 under).  Kansas ethanol plant bids for grain sorghum ranged from $2.84 ¾ to $2.89 ¾, with basis at $$0.60-$0.65 under MARCH 2017 Corn futures.  Just as with corn, wheat, and soybeans, current cash bids for grain sorghum are below cost of production in most instances – although to a degree high yields in 2016 has helped to mitigating this factor.

Although the existing “large supply and tight storage availability” situation predominates in local Kansas grain sorghum and corn markets in late December 2016, it is a positive sign that usage of these crops has provided enough market support so that Kansas cash prices have not fallen down to USDA loan rate – price support levels during the 2016 harvest and immediate post-harvest period.

Other Feedgrain Market Considerations

Other market factors to consider that could affect the U.S. feedgrain markets in 2017 include: 1) the pace and timing of U.S. farmer marketing of the 2016 grain sorghum and corn crops – much of which had been placed in storage after the 2016 fall harvest and likely will be held for sale through the winter into at least early spring 2017, 2) anticipation of continued strong use of 2016 crop U.S. feedgrains for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. grain sorghum exports – driven partly by a poor Brazilian feedgrain harvest and lack of exportable supplies in earlier in 2016, as well as other World coarse grain market factors, and 4) the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets in 2017.

For example, U.S. financial policy announcements by the U.S. Federal Reserve in 2017 could lead to increases in U.S. interest rates and the value of the U.S. dollar relative to other World currencies, which could in turn have a negative impact on U.S. grain sorghum exports.  Also, World geo-political events could provide  unanticipated “shocks” to U.S. and World energy and grain markets.  The impact on the direction of U.S. and World grain sorghum and corn markets from these potential disruptions is difficult to anticipate or predict.

USDA Supply-Demand Forecast for “Current” MY 2016/17

The USDA has projected of 2016 U.S. sorghum plantings of 6.761 ma, harvested acres of 6.045 ma, record high yields of 76.5 bu/ac (vs 76.0 bu/ac in 2015 and 67.6 bu/ac in 2014), resulting in a 2016 U.S. grain sorghum production is forecast to be 462 mb – down from 597 mb in 2015, but above 433 mb in 2014, and 392 mb in 2013.

With forecast “current” MY 2016/17 total supplies of 500 mb, total use of 465 mb, and projected ending stocks of 35 mb (7.48% S/U), U.S. grain sorghum prices are projected by the USDA to be in the range of $2.80-$3.30 (midpoint = $3.05 /bu).  Ending stocks of 35 mb (7.48% S/U) in “current” MY 2016/17 compare to 37 mb (6.28% S/U) in MY 2015/16, and 18 mb (4.10% S/U) in MY 2004/05.  United States grain sorghum prices of $3.05 /bu in “current” MY 2016/17 continue the downward trend from $3.31 /bu in MY 2015/16, $4.03 in MY 2014/15, $4.28 in MY 2013/14, and the record high of $6.33 /bu in the drought year of MY 2012/13.

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

With early USDA projections of 2017 U.S. sorghum plantings of 6.300 ma (down 461,000 acres), harvested acres of 5.400 ma (down 645,000 acres), projected yields of 67.1 bu/ac (vs the record high of 76.5 bu in 2016), 2017 U.S. grain sorghum production is forecast to be 362 mb – down from 462 mb in 2016, and 597 mb in 2015.

With forecast “next crop” MY 2017/18 total supplies of 397 mb (down from 500 mb last year and 620 mb the year before), total use of 365 mb (down from 465 mb last year and 583 the year before), and projected ending stocks of 32 mb (8.76% S/U) – down from 35 mb (7.48% S/U) in “current” MY 2016/17 – U.S. sorghum prices are projected by the USDA to average $3.10 /bu.

Note: This is a “large U.S. feedgrain crop” – “no major U.S. or Foreign crop problem” scenario.  Emerging production threats and the actual outcome of 2017 U.S. grain sorghum and corn production will drive the U.S. grain sorghum market in “next crop” MY 2017/18.

World Coarse Grain Supply-Demand

Record high World coarse grain production of 1,329.35 million metric tons (mmt) is projected for “current” MY 2016/17, up 6.4% from 1,249.65 mmt in MY 2015/16, and up 1.8% from 1,306.1 mmt in MY 2014/15.  Record high World coarse grain total supplies of 1,574.15 mmt are projected for “new crop” MY 2016/17, up from 1,495.0 mmt in MY 2015/16, and from 1,517.2 mmt in MY 2014/15.  “Coarse grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.

World coarse grain exports of 185.2 mmt are projected for “new crop” MY 2016/17, up 12.4% from 164.8 mmt in MY 2015/16, and down 0.5% from 186.1 mmt in MY 2014/15.  Projected record high World coarse grain ending stocks of 254.9 mmt (19.3% S/U) in “new crop” MY 2016/17 are up from 244.8 mmt (19.6% S/U) in MY 2015/16, but down from 245.4 mmt (19.3% S/U) in MY 2014/15.

Although World coarse grain ending stocks are projected to be a record high in “new crop” MY 2016/17 at 254.9 mmt, World coarse grain percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 19.3% – indicative that strong World demand for coarse grains at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.

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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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