KSU Corn Market Outlook in Late-May 2018: A Less Overwhelming Supply-Demand Situation in the Corn Market

An analysis of U.S. and World Corn supply-demand factors and “New Crop” 2018/19 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 May 10, 2018.

A full version of this article will 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 the article with supporting Tables and Charts for “Corn Market Outlook in Late-May 2018″

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Overview of the Corn Market Situation in Late-May 2018

Since early February 2018 the outlook for U.S. corn market prices through Summer-Fall of this year has improved significantly.  Increasingly optimistic forecasts for U.S. corn prices in the “new crop” 2018/19 marketing year are based on a combination of 1) expected reductions in 2018 U.S. corn planted acres and production, 2) forecasts of continued strength in U.S. corn usage, and 3) prospects for tighter supplies in terms of reduced ending stocks and percent ending stocks-to-use.  Improved U.S. corn export prospects are expected as a result of 2018 corn production problems for export competitors Argentina and Brazil.  Strong U.S. ethanol demand is also expected to continue due to growing U.S. gasoline demand in a robust economy.

Even with the strength of U.S. corn prices over the past four (4) months, the path of U.S. corn prices through Fall 2018 will be largely driven by the development of and prospects for the 2018 U.S. corn crop.   Kansas State University projections are that if prospects for 2018 U.S. corn production decline markedly below the 14.040 billion bushel (bb) forecast by the USDA – down to say 13.50-13.75 bb or less, then U.S. corn ending stocks would likely fall to 1.450-1.575 bb or less (compared to the USDA’s forecast of 1.682 bb).  If this occurs, then U.S. corn ending stocks-to-use in “new crop” MY 2018/19 would likely decline to 10% or less – compared to the current USDA forecast of 11.53% ending stocks-to-use. 

If these circumstances were to occur, then in Fall 2018 DEC 2018 corn futures would likely move higher to the range of $4.50-$5.00 /bu. or more.  Projected U.S. average cash prices for “new crop” MY 2018/19 would also likely rise – up to the range of $4.00-$4.50 /bu (midpoint = $4.25).  This compares to the current USDA forecast of $3.30-$4.30 (midpoint = $3.80 /bu) on 11.53% stocks/use for “new crop” MY 2018/19 – beginning September 1, 2018.

CME Corn Futures & Kansas Cash Corn Prices & Basis Bids

Since the release of the USDA’s May 10th World Agricultural Supply and Demand (WASDE) report, “old crop JULY 2018 CME corn futures prices have traded in a range of $3.94 ¼ to $4.09 per bushel before closing at $4.08 ½ /bu on May 23rd (Figure 1).   Over the same time period “new crop DECEMBER 2018 CME corn futures prices have traded in a range of $4.12 ¼ to $4.26 ¾ /bu before closing at $4.26 ½ on May 23rd.   Prices for both of these contracts are up $0.45 ¾ /bu or 12.8% from their lows on January 12th following the January 2018 USDA Annual Crop Production Summary, WASDE, and Grain Stocks reports, and the USDA Prospective Plantings and Grain Stocks reports on March 29th.        

In Western Kansas on Wednesday, May 23rd cash corn bids at major grain elevators ranged from $3.54 ($0.55 under JULY 2018 futures) to $3.98 ($0.11 under), and ranged from $3.68 ½ ($0.40 under) to $3.913 ½ ($0.17 under) in Central Kansas.  These prices are much higher than when bids statewide had fallen to $2.66-$2.96 on December 23, 2016, and 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 $3.98 ½ – $4.03 ½ on May 23rd, up substantially from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on May 23rd ranged from $3.91 ¾ ($0.13 under JULY) to $4.39 ¾ ($0.35 over JULY) – continuing to indicate strength in ethanol demand for corn in Kansas and nationwide.

USDA U.S. Corn Supply-Demand Projections for “Old Crop” MY 2017/18

In the May 10th USDA WASDE report the USDA projected “old crop” MY 2017/18 corn Total Supplies to be unchanged from earlier WASDE reports at 16.947 bb (Table 1 and Figure 6).  Total Use was projected to be the highest on record at 14.765 bb – up from the past record of 14.649 bb a year earlier (Table 1, Figures 7 & 9).  

Continued strength in U.S. gasoline demand resulting from a healthy U.S. economy has supported U.S. ethanol demand – and spurred corn use in ethanol production (Figure 8a).  In spite of a build-up in U.S. ethanol stocks and a moderation in ethanol prices, production has remained at or near record high levels (Figure 8b).  Exports of U.S. ethanol increased sharply in March 2018 to 14.3% of U.S. ethanol production – up from that previous high of 13.2% in December 2011 (Figure 8c).  Most U.S. ethanol exports in 2017 went to Brazil and Canada, and this trend continues in 2018.  

Exports of U.S. corn have increased in volume since early 2018 as the damage to corn crops in export competitors Argentina and Brazil has emerged (Figure 10).  Through May 17th – the 37th week of “old crop” MY 2017/18 – 1.404 bb of U.S. corn had been shipped.  This amounts to 63.1% of the USDA’s projection of 2.225 bb in U.S. exports with 71.2% of the marketing year complete (i.e., 37/52 weeks).  However, total shipments and forward sales of U.S. corn in “old crop” MY 2017/18 through May 17th amounted to 2.105 bb, or 94.6% of the USDA’s projection with 71.2% of MY 2017/18 complete – indicating a positive outlook for “old crop” U.S. corn exports for the remainder of the marketing year through August 31st.

Non-ethanol Food, Seed, and Industrial (FSI) usage has continued to grow to a record high 1.465 bb in “old crop” MY 2017/18.  Feed and Residual use of U.S. corn in “old crop” MY 2017/18 increased to a 10 year high of 5.500 bb – following strong feed demand from year-over-year increases from year 2017 to 2018 in U.S. total red meat and poultry production (Figures 7 & 9).  Production and use of Distillers Dried Grains and Solubles (DDGS) have been robust, with DDGS use for livestock feed and exports remaining strong (Figure 9).

As a result of these supply and use projections for “old crop” MY 2017/18, ending stocks are projected to be 2.182 bb with percent ending stocks-to-use of 14.78% – down from 2.293 bb (15.65% S/U) in MY 2016/17 (Table 1, Figures 11-12).  United States’ corn prices for “old crop” MY 2017/18 are projected in the range of $3.25-$3.55 (midpoint = $3.40 /bu).   

USDA Supply-Demand Projections for “New Crop” MY 2018/19

The USDA provided a forecast of U.S. corn supply, demand, and prices for “new crop” MY 2018/19 In the May 10th USDA WASDE report.  Based on 2018 U.S. corn production projections 88.026 million acres (ma) planted, 80.690 ma harvested, and 2018 U.S. corn average yields of 174.0 bu/ac., the USDA forecast 2018 U.S. corn production to be 14.040 bb – down from 14.604 bb in 2017 (2nd highest on record), and the record high of 15.148 bb in 2018 (Tables 1a-b, Figures 4-5). 

Total Supplies of U.S. corn in “new crop” MY 2018/19 are forecast to be 16.272 bb based on 2.182 bb in beginning stocks, 14.040 bb in production, and 50 mb in imports.  This is down from record highs of 16.942-16.947 bb in U.S. corn Total Supplies the last two marketing years (Tables 1a-b, Figure 6). 

Corn-based ethanol production in the U.S. in “new crop” MY 2018/19 is forecast to be a new record high of 5.625 bb – to be driven by expected ongoing growth in U.S. gasoline demand (Table 1a-b, Figures 7-9).  This would be up 50 mb in U.S. corn use for ethanol than in “old crop” MY 2017/18.   

Exports of U.S. corn in “new crop” MY 2018/19 are forecast to decline 125 mb to 2.100 bb – likely on a return to normal corn production on the part of export competitors Argentina and Brazil in 2019 (Figures 7-9).  As of May 17th, a total of 98.6 mb of U.S. corn sales have been made for delivery in “new crop” MY 2018/19 – beginning on September 1, 2018 – equal to 4.7% of the USDA projection of 2.100 bb for the marketing year.

Non-ethanol Food, Seed, and Industrial (FSI) usage is forecast to be up 35 mb to a record high 1.490 bb in “new crop” MY 2018/19.  Feed and Residual use of U.S. corn in “new crop” MY 2018/19 is forecast to be 5.375 bb – down from the 10 year high of 5.500 bb in “old crop” MY 2017/19 – following the impact of higher corn prices on livestock feed usage (Figures 7 and 9).  The USDA made a partially offsetting increase in its projections of increased wheat feeding (up 50 mb) to offset this reduction.  Increased availability of Distillers Dried Grains and Solubles (DDGS) from increased ethanol production will also help offset this forecast direct reduction in corn use for livestock feeding (Figure 9).

Total Use is projected to be the 3rd highest on record at 14.590 bb – down from the record highs of 14.649-14.765 bb the last two years (Table 1 and Figures 7 & 9). 

As a result of these supply and use projections for “new crop” MY 2018/19, ending stocks are projected to be 1.682 bb with percent ending stocks-to-use of 11.53% – down from 2.182 bb (14.78% S/U) in “old crop” MY 2017/18 (Tables 1a-b and Figures 11-12).  United States’ corn prices for “new crop” MY 2018/19 are projected in the range of $3.30-$4.30 (midpoint = $3.80 /bu) – up $0.40 /bu from the midpoint projection of $3.40 /bu in “old crop” MY 2017/18.   This scenario is given a 45% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2018/19

Three alternative KSU-Scenarios to the USDA’s forecast for U.S. corn supply-demand and prices are presented in what follows for “new crop” MY 2018/19 (Table 1b).  These projections show how varying 2018 U.S. corn production and use scenarios could affect U.S. corn supply-demand and price outcomes in “new crop” MY 2018/19.  Probability-weights are added to reflect judgements about how likely each scenario is to occur in “new crop” MY 2018/19, i.e., during the September 1, 2018 through August 31, 2019 time period.

A – KSU “Higher 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (25% probability): Assumptions are as follows: 88.026 ma planted, 80.690 ma harvested, 176.6 bu/ac record yield (equal to 2017 record high), 14.277 bb production, 16.509 bb total supplies, 14.645 bb total use, 1.845 bb ending stocks, 12.73% S/U, & $3.60 /bu U.S. corn average price; 

B – KSU “Lower 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions are as follows: 88.026 ma planted, 80.846 ma harvested, 164.4 bu/ac yield (equal to 2009 yield), 13.291 bb production, 15.523 bb total supplies, 14.204 bb total use, 1.319 bb ending stocks, 9.23% S/U, & $4.50 /bu U.S. corn average price.

C – KSU “Higher 2018 U.S. Corn Exports” Scenario for “new crop” MY 2018/19: (15% probability): Assumptions are as follows: 88.026 ma planted, 80.846 ma harvested, 174.0 bu/ac yield (equal to USDA forecast yield), 14.040 bb production, 16.272 bb total supplies, 2.400 bb exports (up 300 mb from USDA), 14.590 bb total use, 1.208 bb ending stocks, 8.44% S/U, & $5.25 /bu U.S. corn average price.

World Corn Supply-Demand – With & Without China

World corn production of 1,056.1 million metric tons (mmt) is projected for “new crop” MY 2018/19, up 1.9% from 1,036.7 mmt in “old crop” MY 2017/18, but down 2.1% from the record high of 1,078.3 mmt in MY 2016/17 (Figures 13-14a, Table 2).  The “new crop” 2018/19 marketing year begins September 1, 2018 and continues through August 31, 2019.  Production in Argentina of 41.0 mmt in 2019 would be a “rebound” from the short crop of 33.0 mmt projected in 2018.  Similarly, production in Brazil of 96.0 mmt in 2019 would also be a “rebound” from the short crop of 87.0 mmt projected in 2018.  The 2018 corn harvests for Argentina and Brazil occur in the later half of “old crop” MY 2017/18, i.e., February through August 2018.

World corn total supplies of 1,250.9 mmt in “new crop” MY 2018/19 are forecast to be down moderately from 1,264.2 mmt in “old crop” MY 2017/18, but up from the record high of 1,288.3 mmt in MY 2016/17. 

World corn exports of a 158.0 mmt are projected for “new crop” MY 2018/19, up 4.6% from 151.1 mmt in “old crop” MY 2017/18, but down 1% from the record high of 159.7 mmt in MY 2016/17 (Table 3).

Projected World corn ending stocks of 159.2 mmt (14.6% S/U) in “new crop” MY 2018/19 are down 18.3% from 194.85 mmt (18.2% S/U) in “old crop” MY 2017/18, 30.1% from the record high 227.5 mmt (21.4% S/U) in MY 2016/17, and 210.0 mmt (21.2% S/U) in MY 2015/16  (Figure 13-14a, Tables 8-9).  Projected Foreign (Non-U.S.) corn ending stocks of 116.4 mmt (13.2% S/U) in “new crop” MY 2018/19, is down 16.5% from 139.4 mmt (16.5% S/U) in “old crop” MY 2017/18, and is down from 169.3 mmt (20.0% S/U) in MY 2016/17.  

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 14b-c, Tables 7-9).  “World-Less-China” corn ending stocks are projected to be 98.65 mmt (11.7% S/U) in “new crop” MY 2018/19, down from 115.3 mmt (13.9% S/U) in “old crop” MY 2017/18, and down from 126.8 mmt (15.3% S/U) in MY 2016/17.  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be approximately 20% lower (i.e., 11.7% S/U for the “World-Less-China” versus 14.6% S/U for the “World” overall in “new crop” MY 2018/19). 

At the same time, these figures also show that Chinese ending stocks of corn as proportion of the World total are declining – down from 51.5% in MY 2015/16, to 44.3% in MY 2016/17, to 40.8% in “old crop” MY 2017/18, and now projected to be 38.0% in “new crop” MY 2018/19 (Tables 2-9).  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 eventually increase Chinese import demand for U.S. feedgrains if and when China has a severe short crop situation that they are not able to anticipate ahead of time.

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KSU Corn Market Outlook in March 2018: Weighing U.S. Corn Market Prospects through Fall 2018

An analysis of U.S. & World Corn supply-demand factors and price prospects through the “new crop” 2018/19 marketing year from Kansas State University is provided in the following article summary.  This information follows the USDA World Agricultural Supply and Demand Estimates (WASDE) reports on March 8, 2017 and the Grains & Oilseeds Market Outlook given at the USDA Outlook Forum on February 23, 2018 in Arlington, Virginia.

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 March 2018″

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Summary

1. Overview

Since the USDA’s March 8th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, MAY 2018 CME corn futures prices have traded mostly sideways in a mixed manner.  Longer term – MAY 2018 Corn futures have been trending sharply higher – from a low of $3.53 ¾ on January 12, 2018 to a close of $3.86 ¾ on March 15th.      

Since both the January 12th USDA Annual Crop Summary and WASDE reports, dry conditions in Argentina and southern Brazil, and concerns about dry conditions in the U.S. western Corn Belt have supported corn market prices.  Although the World corn market is still in a “large supply – low price” situation, prospects for lower 2018 South American corn supplies and export competition for the U.S. have provided support for corn market prices, and provided selling opportunities for both “old crop” 2017 and “new crop” 2018 U.S. corn production. 

Even with these concerns about 2018 South American corn supply prospects, it continues to be true that any significant corn futures or cash market price rallies through Spring-early Summer 2018 are likely to be limited by ending stocks of U.S. corn in the 2.000-2.250 billion bushel (bb) range. This is coupled with ending stocks-to-use of 14.0%-15.0% for the “old crop” 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 (i.e., the possibility of 2018 U.S. corn production less than 13.500 bb??) and tighter ending stocks (less than 1.500 bb??) in “new crop” MY 2018/19.  And that risk again is likely to further provide both “old crop” 2017 and “new crop” 2018 pricing opportunities in Spring-Summer 2018.

One positive long-term factor in the U.S. corn market is the considerable “tightening up” that is forecast for foreign (non-U.S.) corn supply-demand balances in the “old crop” 2017/18 marketing year.   If this occurs, it would lead to larger U.S. corn export shipments in spring-early summer 2018 than are currently happening, and support even higher U.S. corn prices in Spring-Summer 2018 than are represented by MAY 2018 through DEC 2018 Corn futures contracts.

2. Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Wednesday, March 15th cash corn bids at major grain elevators ranged from $3.32 ($0.55 under MAY 2018 futures) to $3.74 ($0.13 under), and ranged from $3.43 ¾ ($0.43 under) to $3.61 ¾  ($0.25 under) in Central Kansas.  These prices still are still much higher than a year ago 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 $3.65 ¾ – $3.70 ¾ on March 15th, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on March 15th ranged from $3.73 ¾ ($0.15 under MAY) to $4.13 ¾ ($0.25 over MAY) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.

3. Major Corn Market Considerations for Winter-Spring 2018

First, although the corn market is likely to be responsive to any early season 2018 U.S. corn production threats, the anticipation of large beginning stocks of 2.000-2.100 bb for “new crop” MY 2018/19 will likely “mitigate” of “soften” the immediate price response of the market – more-so than if beginning stocks were down to 1.250-1.500 bb.  If no significant production risk emerges in summer 2018, then these large “old crop” MY 2017/18 carryover ending stocks will limit 2018 corn crop forward pricing prospects.

Second, 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, the USDA has so far projecting at least “moderate” continued strength in U.S. corn exports of 1.900 bb for “new crop” MY 2017/18 – with this number likely increasing IF South American corn production prospects continue to suffer.  United States’ corn export shipments had been “slow” to date in the current marketing year, but have increased markedly in recent weeks.  The USDA maintains its optimism for “new crop” MY 2018/19 U.S. corn exports because of a) low U.S. corn prices to date, b) expectations of significantly tighter foreign stocks and percent (%) stocks-to-use for corn, and c) the eventual “using up” of competing South American corn exports in spring 2018.   

Current forecasts are for 2018 Brazilian corn production to be 94.5 million metric tons (mmt) in this marketing year – versus 98.5 mmt last year – with harvests lasting from February through May.  However, forecasts are for 2018 Argentina corn production to be 36.0 mmt in this marketing year – versus 41.0 mmt a year ago – with harvests lasting from March through May.  The Argentina production figure is at risk to falling further.  To the degree that 2018 corn production in Argentina and southern Brazil is limited by crop weather issues, there will likely be subsequent support U.S. corn export prospects.

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 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.

4. USDA Supply-Demand & Price Forecasts

In the March 8th WASDE report, the USDA left unchanged its projections of a) 2017 U.S. corn production of 14.604 bb – down from the record high of 15.148 bb in 2016, and b) “old crop” MY 2017/18 total supplies of 16.947 bb – up marginally from a year earlier.  Total use is forecast at 14.820 bb – raised 225 mb from the February WASDE on prospects for a) higher ethanol use of 5.575 bb (raised 50 mb), and b) higher exports of 2.225 bb (raised 175 mb).  Ending stocks are projected to be a 2.127 bb (14.35% Stocks/Use) – down 225 mb from February, and down from 2.293 bb (15.65% S/U) in MY 2016/17.  United States’ corn prices are projected to average $3.35 /bu (range of $3.15-$3.55).  This is down $0.01 /bu from $3.36 /bu from MY 2016/17.

At the Agricultural Outlook Forum in Arlington, Virginia on February 23, 2018, the USDA forecast that a) 2018 U.S. corn production would be 14.390 bb – based on 90.0 million acres (ma) planted, 82.7 ma harvested, and a yield of 174.0 bu.  Total use is forecast at 14.520 bb – with projections of ethanol use at 5.650 bb (a record high), non-ethanol food seed and industrial use at 1.495 bb (also a record high), exports of 1.900 bb (down 325 mb from the current marketing year), and feed and residual use of 5.475 mb (down 75 mb from this year).  After a KSU-adjustment for lower beginning stocks based on the March 8th WASDE report, ending stocks are projected to be a 2.047 bb (14.10% Stocks/Use) – with both being down moderately from “old crop” MY 2017/18 levels.  United States’ corn prices are projected to average a KSU-adjusted $3.45 /bu (up $0.05-$0.10 from this year).  It is probable that the export projection for “new crop” MY 2018/19 may be raised in coming months due to South American production problems – causing these ending stocks and % stocks-to-use estimates to tighten further. This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

5. Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2018/19

Two alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2018/19.  These projections are to show how varying 2018 U.S. corn production outcomes could affect U.S. corn supply-demand and price outcomes in “new crop” MY 2018/19. 

A – KSU “Higher 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (25% probability): Assumptions are as follows: 90.000 ma planted, 82.700 ma harvested, 176.6 bu/ac record yield (equal to 2017 record high), 14.605 bb production, 16.782 bb total supplies, 14.600 bb total use, 2.182 bb ending stocks, 14.95% S/U, & $3.30 /bu U.S. corn average price; 

B – KSU “Lower 2018 U.S. Corn Production” Scenario for “new crop” MY 2018/19: (25% probability): Assumptions are as follows: 90.000 ma planted, 82.700 ma harvested, 164.4 bu/ac yield (equal to 2009 yield), 13.596 bb production, 15.773 bb total supplies, 14.315 bb total use, 1.458 bb ending stocks, 10.19% S/U, & $4.20 /bu U.S. corn average price;

6. World Corn Supply-Demand – With & Without China

World corn production of 1,041.7 million metric tons (mmt) is projected for “old crop” MY 2017/18, down 3.1% from the record of 1,075.2 mmt in MY 2016/17, but still up 7.0% from 973.45 mmt in MY 2015/16.  World corn total supplies of 1,273.6 mmt in “old crop” MY 2017/18 are forecast to be down moderately from the record high 1,290.2 mmt in MY 2016/17, but up from 1,183.2 mmt in MY 2015/16. 

World corn exports of a 155.9 mmt are projected for “old crop” MY 2017/18, down 2.4% from the record high of 159.8 mmt in MY 2016/17, and up 30.2% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 199.2 mmt (18.5% S/U) in “old crop” MY 2017/18 are down from the record high 231.9 mmt (21.9% S/U) in MY 2016/17, and from 215.0 mmt (22.2% S/U) in MY 2015/16.  Projected Foreign (Non-U.S.) corn ending stocks of 145.1 mmt (17.0% S/U) in “old crop” MY 2017/18 are down from 173.6 mmt (21.9% S/U) in MY 2016/17, and from 170.9 mmt (23.1% 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 119.6 mmt (14.35% S/U) in “old crop” MY 2017/18, down from 131.1 mmt (15.9% S/U) in MY 2016/17, but up from 104.2 mmt (13.9% 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 22% lower (i.e., 14.35% S/U for the “World-Less-China” versus 18.5% S/U for the “World” overall in “old 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 51.5% in MY 2015/16, to 43.4% in MY 2016/17, and down to 39.9% in “old 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 eventual increase Chinese import demand for U.S. corn and grain sorghum.

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KSU U.S. Sorghum and World Coarse Grain Market Outlook in Late-December 2017

An analysis of U.S. and World Grain Sorghum & World Coarse Grain Market Outlook following the USDA’s December 12th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available on the KSU AgManager website  (http://www.agmanager.info/).

This article also examines the USDA’s Long Term Agricultural Projections in regards to U.S. grain sorghum market outlook in “next crop” MY 2018/19.  The USDA’s Long Term Agricultural Projections can be found at the following web address:

https://www.usda.gov/oce/commodity/projections/

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 to be available shortly at the following web address:

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

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Summary

A. Grain Sorghum Market Overview

In the December 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, the USDA forecast that the 2017 U.S. grain sorghum crop would be 356 million bushel (mb).  This projection of 2017 U.S. Grain Sorghum production combined with a large 2017 U.S. Corn crop of 14.578 billion bushels (bb) have caused U.S. feedgrain markets to focus on “large feedgrain production and supply” scenarios – and have brought continued pressure to both U.S. grain sorghum and corn market prices.  Just as with U.S. corn, wheat, and soybeans, current cash bids for grain sorghum are below full economic cost of production in most instances.  However, higher than anticipated 2017 grain sorghum yields at many Kansas locations may help lower cost of production per bushel and help to mitigate low grain sorghum prices to some degree. 

Strong exports of U.S. grain sorghum during November-mid December 2017 have had a tangible, positive impact on grain sorghum prices in Central and parts of Western Kansas.  China and Japan have been the main  export buyers from the U.S., while purchases from Mexico have declined to date in the “new crop” 2017/18 marketing year.  In response, the USDA raised its’ U.S. Grain Sorghum export projections sharply – up 50 million bushels (mb) to 260 mb for this marketing year ending August 31, 2018.  And in a textbook example of economic “crowding out” – this strong foreign export demand for U.S. grain sorghum has raised domestic prices and is causing a projected shifting of usage away from U.S. domestic livestock feeding and ethanol production in “new crop” MY 2017/18.

The USDA also released Long Term Agricultural Projections on November 28th that anticipate both an increase in U.S. grain sorghum average prices to $3.30 per bushel (equal to the U.S. corn price forecast), and a 1 million acre (+17%) increase in grain sorghum planted acreage in the “next crop” 2018/19 marketing year.  

B. Kansas Cash Grain Sorghum Prices

On December 26th cash grain sorghum price bids at major grain elevators in Western Kansas were in the range of $3.08 – $3.31 /bu – with basis levels $0.45 to $0.22 /bu under CME MARCH 2018 corn futures.  The high bid of $3.31 /bu was in Colby, where the corn price that same day was $3.00 /bu ($0.53 under MARCH).  

Central Kansas cash grain sorghum price bids ranged from $3.17 ½ to $3.48 /bu with basis $0.35 to $0.05 / bu under.  The high bid of $3.48 /bu was in Salina, where the highest corn price was $3.09 ¾ /bu ($0.43 under MARCH).

In East Central Kansas at Topeka, the highest reported grain sorghum price bid was $3.87 ½ /bu (basis = $0.35 over MARCH 2018 corn) – compared to the highest corn bid of $3.09 ¾ /bu ($0.43 under MARCH). 

Kansas ethanol plant price bids for grain sorghum on Dec. 26th ranged from $3.42 to $3.57 /bu, with basis $0.10 under to $0.05 over.  Ethanol plant corn bids were $3.32-$3.79 /bu, with basis $0.20 under to $0.27 over.

C. Market Factors for U.S. Grain Sorghum & Other Feedgrains in 2018

1) Whether the recent strength in U.S. Grain Sorghum exports to China and Japan continues through Spring-Summer 2018 will be THE key factor in grain sorghum price prospects for at least the first half of the year.  IF the recent pace of U.S. grain sorghum exports were to continue at the levels of November-early December 2017 through August 2018, then total U.S. grain sorghum exports would end up being over 300 million bushels in “new crop” MY 2017/18 by KSU estimates. 

2) Usage of U.S. grain sorghum for ethanol production and livestock feeding is likely to be “crowded out” by strong sorghum exports in “new crop” MY 2017/18 – should they continue at their current pace through Spring-Summer 2018.   However, there are ample to abundant supplies of low priced U.S. corn available for these domestic U.S. feedgrain usage industries to use without interruption.  This is occurring when continued strong domestic U.S. fuel ethanol use and livestock feeding of the 2017 crop U.S. feedgrains are anticipated for the remainder of the “new crop” 2017/18 marketing year.

3) Given the pace of U.S. grain sorghum exports, it is likely that there will be reduced grain sorghum storage  beyond the Winter months – as attractive pricing opportunities perform their “demand pull” effect upon farmer’s marketing actions.

4) Higher U.S. grain sorghum prices relative to competitive feedgrains will likely “draw” increased 2018 U.S. grain sorghum planted acreage – as projected by the USDA in its Long Term Agricultural Projections.  The question may be “Just how many more acres of grain sorghum will U.S. farmers plant in 2018?”   It is possible that higher acreage and good growing conditions could bring about an increase in 2018 U.S. Grain Sorghum production to 450-500+ million bushels – much larger than the USDA’s 2018 forecast of 384 mb. 

D. USDA Forecast for “Next Crop” MY 2018/19 & “New Crop” MY 2017/18

In its November 28th Long Term Agricultural Projections, the USDA projected 2018 U.S. Grain Sorghum plantings of 6.700 million acres (ma), up 17% or ≈ 1 ma from 5.709 ma in 2017.  Harvested acres U.S. grain sorghum in 2018 are projected to be 5.700 ma, up from 5.049 ma in 2017.   Average yields in 2018 in the U.S. are forecast at 67.3 bu/ac, down from 70.4 bu/ac in 2017.  As a result, 2018 U.S. Grain Sorghum production is forecast to be 384 mb – up from 356 mb in 2017, but down from 480 mb in year 2016 and 597 mb in 2017.  

Forecast “next crop” MY 2018/19 U.S. Grain Sorghum total supplies are 405 mb (vs 391 this marketing year, and 519-620 mb the 2 years before).   United States’ Grain Sorghum exports are projected to be 230 mb in “next crop” 2018/19 – down from 260 mb in “new crop” MY 2017/18, and less than 241 mb in MY 2016/17.  Total use of U.S. Grain Sorghum in “next crop” MY 2018/19 of 370 mb is unchanged from “new crop” MY 2017/18 – but down from 485-583 mb the two previous years. 

Ending stocks of U.S. Grain Sorghum in “next crop” MY 2018/19 are projected to be 35 mb (9.46% Stocks/Use) – up from 21 mb (5.68% Stocks/Use) in “new crop” MY 2017/18.  

The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to be $3.30 /bu – up from $3.10 /bu in “new crop” MY 2017/18. 

This scenario for “new crop” MY 2017/18 is given an 80% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

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

Two (2) alternative KSU projections for “new crop” MY 2017/18 U.S. Grain Sorghum Total Use include the following forecasts:

1) “Higher Exports” scenario (10% probability) for “new crop” MY 2017/18: 2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 290 mb, total use of 359 mb, ending stocks of 13 mbb, 3.62% ending stocks-to-use, and $3.40 /bu U.S. average price.

2) “Lower Exports” scenario (10% probability) for “new crop” MY 2017/18:  2017 Planted / harvested acres of 5.519/4.812 ma, 2017 production of 339 mb, total supplies of 339 mb, exports of 230 mb, total use of 350 mb, ending stocks of 23 mbb, 6.57% ending stocks-to-use, and $3.00 /bu U.S. average price.

F. World Coarse Grain Supply-Demand

The USDA projected that “new crop” 2017/18 marketing year World Coarse Grain total supplies of 1,586.3 mmt will be down 2.0% from 1,618.7 mmt in “old crop” MY 2016/17, but still up 5.2% over 1,507.35 mmt in MY 2015/16.   Projected World Coarse Grain total use of 1,354.1 mmt in “new crop” MY 2017/18 is down marginally from “old crop” MY 2016/17, but up 7.9% over 1,254.9 mmt in MY 2015/16.   “Coarse Grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.

World Coarse Grain ending stocks are forecast to decline, with the USDA projecting ending stocks of 232.2 mmt in “new crop” MY 2017/18, down 11.5% from 262.4 mmt in “old crop” MY 2016/17, and down 8.0% from 252.4 mmt in MY 2015/16.  Although World Coarse Grain ending stocks are projected to be the eighth highest on record in “new crop” MY 2017/18 at 232.2 mmt, World Coarse Grain percent ending stocks-to-use in “new crop” MY 2017/18 are forecast to actually decline to 17.15% – to the lowest level since 17.12% in MY 2013/14.  This is indicative that strong World usage for coarse grains at low prices is expected to continue.  

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KSU Corn Market Outlook in December 2017: Prospects for “New Crop” MY 2017/18 and “Next Crop” MY 2018/19

An analysis of U.S. and World Corn supply-demand & price prospects for the “New Crop” 2017/18 and “Next Crop” 2018/19 Marketing Years are provided in the following article summary.  This information follows the USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on December 12, 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 December 2017″

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Summary

A. Corn Market Overview

Since the USDA’s December 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, MARCH 2018 CME corn futures prices have traded higher and lower in a mixed manner.  Longer term – MARCH 2018 Corn futures have been trending lower – closing at $3.49 ¼ on December 20th.   In its’ December 12th USDA Crop Production report, the USDA maintained its projection from November of 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 trade expectations during the summer of 2017.

Since both the November 9th and December 12th 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 (now expired) to trade in the range of $3.35 ¼ – $3.47 per bushel during the November 10th through December 14th late- 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 2.350-2.500 billion bushels (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 (i.e., the possibility of 2018 U.S. corn production 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” that is forecast for foreign (non-U.S.) corn supply-demand balances in the “new crop” 2017/18 marketing year.   If this occurs, it would lead to larger U.S. corn export shipments in early 2018 than are currently happening, and support higher U.S. corn prices in Spring-Summer 2018 than are represented by 2018 Corn futures contracts.

B. Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Wednesday, December 20th cash corn bids at major grain elevators ranged from $2.96 ($0.53 under MARCH futures) to $3.37 ($0.12 under), and ranged from $3.01 ½ ($0.48 under) to $3.24 ¼ ($0.25 under) in Central Kansas.  Even though Kansas corn prices have remained low in recent weeks, these prices still are still mostly higher than a year ago 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 $3.24 ¼ – $3.31 ¼ on December 20th, nearly equal to the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on December 20th ranged from $3.27 ½ ($0.20 under MARCH) to $3.74 ½ ($0.27 over MARCH) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.

C. Major Corn Market Considerations for Winter-Spring 2018

First, the corn market is likely to be only moderately responsive to any early season 2018 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 no significant production risk emerges in summer 2018, then these large “old crop” MY 2017/18 carryover supplies will continue to limit 2018 corn crop forward pricing prospects.

Second, 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, the USDA is projecting at least “moderate” continued strength in U.S. corn exports of 1.925 bb for “new crop” MY 2017/18.  United States’ corn export shipments have been “slow” to date in the current marketing year.  However, the USDA maintains its optimism for “new crop” MY 2017/18 U.S. corn exports because of a) low U.S. corn prices,  b) expectations of significantly tighter foreign stocks and percent (%) stocks-to-use for corn, and c) the eventual “using up” of competing South American corn exports in early 2018.

Early forecasts are for 2018 Brazilian corn production to be 95 million metric tons (mmt) in this marketing year with harvests lasting from February through May.  Early forecasts are for 2018 Argentina corn production to be 42 mmt in this marketing year with harvests lasting from March through May.  However, dry conditions may limit 2018 corn production in Argentina and southern Brazil – and subsequently support U.S. corn exports.

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 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.

D. USDA Supply-Demand & Price Forecast for “New Crop” MY 2017/18

In the December 12th Crop Production reports, the USDA left unchanged 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 also USDA left unchanged 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 14.485 bb – raised 50 mb from November on higher ethanol use, but still down 162 mb from last year’s record high.  Ending stocks are projected to be a 2.437 bb (16.8% 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 $2.85-$3.55).  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.

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

Two alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2017/18.  These projections are to show how varying corn export outcomes could affect the USDA’s projection in the December 9, 2017 WASDE report. 

#1 – KSU “Higher Exports” MY 2017/18 Scenario: “2.250 bb Exports” Scenario (10% probability) assumes: 90.348 ma planted, 82.890 ma harvested, 175.4 bu/ac trend yield, 14.539 bb production, 16.884 bb total supplies, 2.250 bb exports, 14.785 bb total use, 2.099 bb ending stocks, 14.20% S/U, & $3.55 /bu U.S. corn average price; 

#2 – KSU “Lower Exports” MY 2017/18 Scenario: “1.800 bb Exports” Scenario (10% probability) assumes: 90.348 ma planted, 82.890 ma harvested, 175.4 bu/ac trend yield, 14.539 bb production, 16.884 bb total supplies, 1.800 bb exports, 14.360 bb total use, 2.524 bb ending stocks, 17.58% S/U, & $3.20 /bu U.S. corn average price;

F. USDA Supply-Demand & Price Forecast for “Next Crop” MY 2018/19

In the November 28th Long Term Baseline projections, the USDA forecast for “next crop” MY 2018/19 that  2018 U.S. corn planted and harvested acres would equal 91.0 million acres (ma) and 83.7 ma, respectively, both up from 90.429 ma planted and 83.119 ma harvested in 2017.  Corn yields in 2018 are forecast at 173.5 bu/ac, down from the record high of 175.4 bu/ac in 2017.  U.S. corn production is 2018 is projected to be 14.520 bb – down from 14.578 bb now projected for 2017.  

The USDA forecast “new crop” MY 2017/18 total supplies to 17.007 bb – adjusted for changes in the December WASDE report in MY 2017/18 ending stocks.  Total use is forecast at 14.450 bb – down 35 mb from this current marketing year.  Ending stocks are projected to be a 2.557 bb (17.7% S/U) – up from 2.437 bb (16.8% S/U) in “new crop” MY 2017/18.  United States’ corn prices are projected to average $3.30 /bu – up from $3.20 /bu in “new crop” MY 2017/18.

G. World Corn Supply-Demand – With & Without China

World corn production of 1,044.8 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 2.9% from the record of 1,074.8 mmt in “old crop” MY 2016/17, but still up 7.3% from 973.5 mmt in MY 2015/16.  World corn total supplies of 1,272.1 mmt are down marginally from the record high 1,290.5 mmt in “old crop” MY 2016/17, but up from 1,183.2 mmt in MY 2015/16. 

World corn exports of a 151.6 mmt are projected for “new crop” MY 2017/18, down 7.6% from the record high of 164.1 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 204.1 mmt (19.1% S/U) in “new crop” MY 2017/18 are down from the record high 227.3 mmt (21.4% S/U) in “old crop” MY 2016/17, and from 214.9 mmt (22.2% S/U) in MY 2015/16.  Projected Foreign (Non-U.S.) corn ending stocks of 142.2 mmt (16.5% S/U) in “new crop” MY 2017/18 are down from 169.0 mmt (19.8% S/U) in “old crop” MY 2016/17, and from 170.8 mmt (23.1% 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 124.5 mmt (15.0% S/U) in “new crop” MY 2017/18, down from 126.6 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 104.1 mmt (13.9% 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., 15.0% 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 51.5% in MY 2015/16, to 44.3% in “old crop” MY 2016/17, and down to 39.0% 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 increase Chinese import demand for both U.S. corn and grain sorghum.

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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.

 

KSU Corn Market Outlook in Mid-September: Assessing 2017 Corn Supply-Demand and Price Scenario Outcomes

This article provides an analysis of U.S. and World Corn supply-demand factors and price prospects for the “New Crop” 2017/18 marketing year following the USDA’s September 12, 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 Mid-September 2017″ with the full article and accompanying analysis are 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-mid-september-2017

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Summary

Overview

Since the USDA’s September 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures prices have declined- although not by as much as may have been expected or feared following the “bearish” report results for corn supply-demand and price prospects.  CME DEC 2017 corn futures opened at $3.57 on Tuesday, September 12th – the day of the report – then traded as low as $3.45 ½ that day before closing at $0.06 lower at $3.51 ½.  Since that day, DEC 2017 corn trended first marginally higher, but since have trended essentially sideways to close at $3.51 ½ on September 18th.  

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.   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 through the end of the month.  Once into September corn futures trended sideways within a trading range through the September 12th USDA reports.  Trade expectations coming into the September 12th report again were for the USDA to lower is 2017 U.S. corn yield and production numbers down closer to long term trend line levels in the 167-168 bu/acre range, with production closer to 14.000 billion bushels (bb).

However, in the September 12th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 169.9 bu/ac, actually up from average pre-report trade estimates of 167.8 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.184 bb. 

Since the September 12th reports, varying trade perspectives on 2017 U.S. corn production prospects have continued, but market expectations in line with the USDA projection of a “large supply – low price” scenario have predominated, leaving DEC 2017 corn futures to trade near $3.50 per bushel.  This difference between the USDA August and September 2017 yield projection and private trade expectations heightens the market’s focus on coming October and November 2017, and January 2018 USDA Crop Production reports.

During 2017 any significant corn futures or cash market price rallies in Spring 2017 have continued to be limited by expectations that ending stocks of U.S. corn will stay above 2.0 bb in “new crop” MY 2017/18, coupled with ending stocks-to-use of 15.0%-16.0%.   Drought conditions in the northern plains states of North Dakota, South Dakota, and Montana as well as parts of Iowa and Illinois may ultimately have a negative impact on 2017 U.S. corn production, as may carryover impacts from delayed plantings in Indiana earlier in Spring 2017.  Periods of high temperatures that may have affected corn pollination in Corn Belt states in the first half of July.  But the final impact of these factors likely will not be known until the 2017 harvest actually occurs.

Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Monday, September 18th cash corn bids at major grain elevators ranged from $3.15 ($0.37 under DEC futures) to $3.42 ($0.10 under DEC futures), and ranged from $2.91 ½ ($0.60 under DEC) to $3.26 ½ ($0.25 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 $3.11 ½ on September 18th, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on September 18th ranged from $3.19 ¾ ($0.35 under DEC) to $3.69 ¾ ($0.15 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.

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 risk.  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 2.335 bb rather than down to 1.000 bb. 

Second, it is anticipated that low prices for U.S. corn will continue to help maintain strong usage for domestic U.S. ethanol and wet milling production, as well as livestock feeding through at least spring 2018. 

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 will be lower due to low prices and poor profitability in 2017 – which may have a positive effect on U.S. corn exports and price prospects later in 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 and the countries involved and their role in global corn export trade.

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

With the USDA’s continuing projection of 2017 U.S. corn plantings at 90.886 million acres or ‘ma’ (down 3.118 ma from 2016), harvested acres of 83.496 ma (down 3.252 ma), and projected yields of 169.9 bu/ac (vs the record high of 174.6 in 2016), 2017 U.S. corn production is forecast to be 14.184 bb – down from the record high of 15.148 bb in 2016.  

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.585 bb – down 355 mb from last year’s record high.  Total use is forecast at 14.250 bb – down 340 mb from last year’s record high.  Ending stocks are projected to be 2.235 bb (16.38% S/U) – down from 2.350 bb (16.11% 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 $0.15 /bu from the midpoint estimate of $3.35 /bu from “old crop” MY 2016/17. This scenario is given a 60% 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 September 12, 2017 WASDE report for “new crop” MY 2017/18. 

A – KSU “New Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.930 bb” Scenario (35% probability) assumes: 90.753 ma planted, 83.261 ma harvested, 167.3 bu/ac trend yield, 13.930 bb production, 16.330 bb total supplies, 14.215 bb total use, 2.115 bb ending stocks, 14.88% S/U, & $3.45 /bu U.S. corn average price; 

B – KSU “New Crop” MY 2017/18 Scenario #2) “164.0 bu/ac – 13.655 bb” Scenario (5% probability) assumes: 90.753 ma planted, 83.261 ma harvested, 164.0 bu/ac yield, 13.655 bb production, 16.055 bb total supplies, 14.095 bb total use, 1.960 bb ending stocks, 13.91% S/U, & $3.60 /bu U.S. corn average price;

C – KSU “New Crop” MY 2017/18 “Wildcard” Scenario #3) “167.3 bu/ac – 13.930 bb” Scenario (???% prob.) assumes: 90.753 ma planted, 83.261 ma harvested, 167.3 bu/ac trend yield, 13.930 bb production, 16.330 bb total supplies, 13.935 bb total use, 2.395 bb ending stocks, 17.19% S/U, & $3.00 /bu U.S. corn average price;

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 2.350 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 1,032.6 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 3.6% from the record high of 1,071.2 mmt in “old crop” MY 2016/17, but still up 6.5% from 969.6 mmt in MY 2015/16.  Near record World corn total supplies of 1,259.6 mmt are projected for “new crop” MY 2017/18, down marginally from the record high of 1,285.1 mmt in “old crop” MY 2016/17, but up from 1,179.2 mmt in MY 2015/16. 

World corn exports of a 150.6 mmt are projected for “new crop” MY 2017/18, down 8.9% from the record high of 165.3 mmt in “old crop” MY 2016/17, and up 25.8% from 119.7 mmt in MY 2015/16.  Projected World corn ending stocks of 202.5 mmt (19.2% 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 213.9 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 121.2 mmt (14.8% S/U) in “new crop” MY 2017/18, down from 125.7 mmt (15.2% S/U) in “old crop” MY 2016/17, but up from 103.1 mmt (13.4% S/U).  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be down approximately 23% (i.e., 14.8% S/U for the “World Less China” versus 19.2% 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 40.1% 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.

KSU Corn Market Outlook in Early-September: Remaining Possible 2017 Corn Crop and S/D-Price Scenario Outcomes

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “New Crop” 2017/18 marketing year following the USDA’s August 10, 2017 USDA Crop Production and https://www.usda.gov/oce/commodity/wasde/latest.pdf reports as well the crop growing conditions that have occurred since those reports were released.

Following is a summary of the article on “Corn Market Outlook in Early-September 2017″ with the full article and accompanying analysis to be available early next week (Monday-Tuesday, September 4-5, 2017) 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

  1. Overview

Since the USDA’s August 10th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, DEC 2017 CME corn futures have fallen sharply.  CME DEC 2017 corn futures opened at $3.85 ½ on August 12th – the day of the report – then traded as low as $3.70 ¼ that day before closing at $0.15 ¼ lower at $3.71.  Since then DEC 2017 corn trended down to a contract low of $3.44 ¼ on August 31st, before closing at $3.55 ¼ on Friday, September 1st.

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.

However, in the August 10th USDA Crop Production report, the USDA projected 2017 U.S. corn yields to average 169.5 bu/ac, up from a number of pre-report trade estimates of 165-168 bu/acre.  As a result, the USDA projected 2017 U.S. corn production to be 14.153 billion bushels (bb) – markedly higher than the range of 13.6 to 13.8 bb that the grain markets were anticipating.

Since the August 10th reports, varying U.S. corn production prospects have continued, but market expectations of a “large supply – low price” scenario have predominated, leading to price declines.  This difference between the USDA August 2017 yield projection and trade expectations heightens the market’s focus on coming September, October and November 2017 USDA Crop Production reports.

During 2017 any significant corn futures or cash market price rallies in Spring 2017 have been limited by expectations that ending stocks of U.S. corn will stay above 2.0 bb in “new crop” MY 2017/18, coupled with ending stocks-to-use above 15.0%-16.0%.   Drought conditions in the northern plains states of North Dakota, South Dakota, and Montana as well as parts of Iowa and Illinois may ultimately have a negative impact on 2017 U.S. corn production, as may carryover impacts from delayed plantings in Indiana earlier in Spring 2017, and periods of high temperatures that may have affected corn pollination in Corn Belt states in the first half of July.

  1. Kansas Cash Corn Prices & Basis Bids

In Western Kansas on Friday, September 1st cash corn bids at major grain elevators ranged from $3.05 ($0.35 under SEPT futures) to $3.40 ($0.15 under DEC futures), and ranged from $2.92 ¼ ($0.63 under DEC) to $3.25 ¼ ($0.30 under DEC) in Central Kansas.  Even though Kansas corn prices have declined in recent weeks, these prices still are sharply higher than in October-December 2016 when corn price 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.

However, cash corn price bids in East Central and Northeast Kansas at major terminal locations were in the range of $3.05 ¼ – $3.15 ¼ on September 1st, actually down from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on September 1st ranged from $3.22 ¾ ($0.35 under DEC) to $3.72 ¾ ($0.15 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 is a positive that Kansas cash corn prices have avoided falling down to USDA loan rate levels.

  1. 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 production risk.  The corn market has been less anxious about the adequacy of corn supplies in the face of 2017 U.S. corn production risk since beginning stocks for “new crop” MY 2017/18 have been up to 2.370 bb rather than down to 1.000 bb.

Second, it is anticipated 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 fall-winter 2017.

Third, at least moderate continued strength is expected in U.S. corn exports due to low U.S. corn prices and 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 will be lower due to low prices and poor profitability in 2017 – which may have a positive effect on U.S. corn exports and price prospects.

Fourth, a possibility exists of broader 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 and the countries involved and their role in global corn export trade.

  1. USDA Supply-Demand & Price Forecast for “New Crop” MY 2017/18

With the USDA’s projection of 2017 U.S. corn plantings at 90.886 million acres or ‘ma’ (down 3.118 ma from 2016), harvested acres of 83.496 ma (down 3.252 ma), and projected yields of 169.5 bu/ac (vs the record high of 174.6 in 2016), 2017 U.S. corn production is forecast to be 14.153 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “new crop” MY 2017/18 total supplies to be 16.573 bb – down 367 mb from last year’s record high.  Total use is forecast at 14.300 bb – down 270 mb from last year’s record high.  Ending stocks are projected to be 2.273 bb (15.90% S/U) – down from 2.370 bb (16.27% S/U) in “old crop” MY 2016/17.  United States’ corn prices are projected to average $3.30 /bu (range of $2.90-$3.70).  This is down $0.05 /bu from the midpoint estimate of $3.35 /bu from “old crop” MY 2016/17. This scenario is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.

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

Four 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 August 10, 2017 WASDE report for “new crop” MY 2017/18.

A – KSU “New crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.815 bb” Scenario (35% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 167.3 bu/ac trend yield, 13.815 bb production, 16.235 bb total supplies, 14.245 bb total use, 1.990 bb ending stocks, 13.97% S/U, & $3.60 /bu U.S. corn average price for “new crop” MY 2017/18;

B – KSU “New crop” MY 2017/18 Scenario #2) “164.0 bu/ac – 13.543 bb” Scenario (10% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 164.0 bu/ac yield, 13.543 bb production, 15.963 bb total supplies, 14.120 bb total use, 1.843 bb ending stocks, 13.05% S/U, & $3.75 /bu U.S. corn average price for “new crop” MY 2017/18;

C – KSU “New crop” MY 2017/18 Scenario #3) “160.0 bu/ac – 13.212 bb” Scenario (4% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 160.0 bu/ac yield, 13.212 bb production, 15.632 bb total supplies, 13.920 bb total use, 1.712 bb ending stocks, 12.30% S/U, & $3.85 /bu U.S. corn average price for “new crop” MY 2017/18;

D – KSU “New crop” MY 2017/18 “Wildcard” Scenario #4) “167.3 bu/ac – 13.815 bb” Scenario (1% probability) assumes: 89.886 ma planted, 82.577 ma harvested, 167.3 bu/ac trend yield, 13.815 bb production, 16.235 bb total supplies, 14.085 bb total use, 2.150 bb ending stocks, 15.26% S/U, & $3.45 /bu U.S. corn average price for “new crop” MY 2017/18;

Note: even with significant reductions in 2017 U.S. corn production as represented in the KSU Scenarios A, B, C and D above, the presence of large beginning stocks of 2.370 bb in “new crop” MY 2017/18 limit the “tightness” of corn supply-demand balances, and hinders any upward price responses.

  1. World Corn Supply-Demand – With & Without China

World corn production of 1,033.5 million metric tons (mmt) is projected for “new crop” MY 2017/18, down 1.7% from the record high of 1,070.5 mmt in “old crop” MY 2016/17, but still up 7.1% from 969.5 mmt in MY 2015/16.  Near record World corn total supplies of 1,262.1 mmt are projected for “new crop” MY 2017/18, down marginally from the record high of 1,284.0 mmt in “old crop” MY 2016/17, but up from 1,178.7 mmt in MY 2015/16.

World corn exports of a 152.0 mmt are projected for “new crop” MY 2017/18, down 6.4% from the record high of 162.4 mmt in “old crop” MY 2016/17, and up 27.1% from 119.6 mmt in MY 2015/16.  Projected World corn ending stocks of 200.9 mmt (18.9% S/U) in “new crop” MY 2017/18 are down from the record high 228.6 mmt (21.7% S/U) in “old crop” MY 2016/17, and from 213.5 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 119.6 mmt (14.5% S/U) in “new crop” MY 2017/18, down from 127.3 mmt (15.5% S/U) in “old crop” MY 2016/17, but up from 102.7 mmt (13.7% S/U).  These figures show that World stocks-to-use of corn less China’s direct influence are projected to be down approximately 23% (i.e., 14.5% S/U for the “World Less China” versus 18.9% S/U for the “World” overall in “new crop” MY 2017/18).

These figures also show that Chinese ending stocks of corn as proportion of the World overall is declining – down from 51.9% in MY 2015/16 to 44.3% in “old crop” MY 2016/17, and down to 40.5% in “new crop” MY 2017/18.  The deliberate actions taken by the Chinese government in recent years to reduce feedgrain stockpiles is impacting the relative amount of corn stocks they hold in the World corn market.