Grain Market Outlook for 2018

2017 Farming for the Future Workshop

Pratt, Kansas

DANIEL O’BRIEN

EXTENSION AGRICULTURAL ECONOMIST

Topics to be discussed…..

1) Grain Market Analysis & Outlook

• Corn & Grain Sorghum

• Wheat

• Soybeans & Cotton

2) Economic “forces at work” in the grain markets& where they are taking us…

U.S. Dollar Index & Cash Prices

Monthly Chart: January 1973 through December 12, 201788.8

Avg. Index #Early DEC 2017

Corn & Sorghum Markets

U.S. Corn & Sorghum Supply-Use

• Prospects “LARGE” 14.6 billion bu 2017 U.S. Corn Crop

• Large Supplies & Stocks are limiting Feedgrain Price$’s

• Low Price$’s are supporting Corn Use

o Livestock Feed 2017/18 = 5.575 bln bu (10 year high – vs 5.858 bb in 2007/08)

o Ethanol 2017/18 = 5.525 bln bu (Record high – vs 5.439 bb last year)

o Other FSI 2017/18 = 1.460 bln bu (Record high – vs 1.452 bb in 2016/17)

o Exports 2017/18 = 1.925 bln bu (vs 2.293 bb in ‘16/17 & 1.901 in ‘15/16)

U.S. Corn & Grain Sorghum Stocks…..

• Corn: “Large” Stocks & % Stx/Use

o End Stocks 2017/18 2.437 bln bu (2nd highest since 1987/88)

o % Stocks/Use 2017/18 16.8% S/U (Highest since 2005/06)

• Grain Sorghum: “Tighter” Stocks & % Stx/Use than Corn

o End Stocks 2017/18 21 Mln bu (15 - 55 mb since 2008/09)

o % Stocks/Use 2017/18 5.7% S/U (Tightest since 2014/15)

CME Corn FuturesWeekly Chart: October 2008 – November 2017 + 12/13/2017

$2.90 $3.18 ¼ $3.01$3.49

MAR 2018$3.49

12/13/2017

Corn Cash & Futures Prices ($/bu)Pratt, KS Local Elevators – December 13, 2017

$3.37 $3.49 $3.57 $3.66 $3.73 $3.81

$3.24 $3.41

$3.51

$3.29

$3.51

$2.10 $2.10

$0

$1

$2

$3

$4

$5

$6

Pric

e $

/bu

Futures Low $ High $ Mktg Loan-Pratt

$0.0410 /mo

$0.0411 /mo

Kansas Corn Seasonal Cash $ IndexMonthly: Long Term Average & MY 2017/18 Projection

Long Term

2017/18

Grain Sorghum Cash & Corn Futures $’sPratt, KS Local Elevators – December 13, 2017

$3.37 $3.49 $3.57 $3.66 $3.73 $3.81

$3.04

$3.19 $3.19 $3.30

$1.86 $1.86

$0

$1

$2

$3

$4

$5

$6

Pric

e $

/bu

Futures Low $ High $ Mktg Loan-Pratt

$0.0410 /mo

$0.0411 /mo

Crop

BUT still

Large Supply

Domestic Use&

Exports

% Stocks/Use&

Prices

U.S. Corn AcreageFor 2018???

UP ≈ 0.5 to 1 million acres

U.S. Corn YieldsUSDA 2017 USDA Forecast = 175.4 bu/ac

Final 2017???Q? Is >175 bu/ac possible?

U.S. Corn Yields: 2000-2017Accuracy of November 1st USDA Forecasts

(0.8)

0.2 1.7

(1.0)

0.1

(0.5) (2.1) (2.3) (0.5)

1.5

(1.7)

0.1 0.8

(2.3) (2.4) (0.9) (0.7)(20)

0

20

40

60

80

100

120

140

100

110

120

130

140

150

160

170

180

Fore

ca

st E

rro

r (Bu

/ac

)

U.S

. Co

rn Y

ield

–Bu

/Ac

re

Year

Difference (bu/ac) November 1 USDA Forecast Final Yield

U.S. Corn Production & Supplies

Final 2017???U.S. Corn Production of

14.3-14.8 bln bu

U.S. Corn Use – By Category

U.S. Corn Use – By Category

U.S. Corn Exports – Weekly thru November 30, 2017

U.S. Corn Ending Stocks & % Stx/Use

1,967

8211,232

1,731 1,737

2,295 2,437 2,557

17.0

7.4

9.2

12.6 12.7

15.716.8

17.7

0

1,000

2,000

3,000

4,000

5,000

6,000

0

5

10

15

20

Mill

ion

Bush

els

% E

nd

Sto

cks-

to-U

se

Marketing Year

U.S. Corn % Stocks/Use vs Price$

U.S. Corn % Stocks/Use vs Price$

MORE Flexible $ responses

LESS

Fle

xib

le $

resp

ons

es

Corn % Stx/Use has trended

larger for 5 years running –

into “low $ flexible”

Δ Price$ / Δ Supply areas

World Corn (Maize) Production Regions

World Corn Supply, Use & Stocks

World Crop

BUT still

Large Supply

China

EU

Brazil

FSU-12

So. Africa

Mexico

Argentina

Canada

U.S. Corn Price$ vs “World-China” % S/UMY 1973/74 through “New Crop” MY 2017/18

Note impact of China

Grain Stocks policies on

World grain markets!!

“Total” vs “Accessible” World Corn Stocks

U.S. Sorghum Acreage

U.S. Sorghum YieldsUSDA 2018 USDA Forecast = 67.3 bu/ac

U.S. Milo $ vs U.S. Feedgrain % Stocks/UseMY 1973/74 thru “New Crop” MY 2017/18

Strong Sorghum Exports

have increased Prices vs

other feedgrains

Wheat Markets

U.S. Wheat Market Overview• U.S. Wheat Production trending lower (to a 15 year low in 2017)

• Large U.S. & World Stocks continue to limit Wheat Price$’s **

• “Moderate” Exports limiting 2017/18 U.S. Wheat Use

o Exports 2017/18 = 975 mln bu (778 mb – 1.291 bb range since 2008/09)

o Food Use 2017/18 = 950 mln bu (Level Food Use since MY 2012/13)

o Feed Use+ 2017/18 = 120 mln bu (Down from 228-365 mb in 2012 - 2013)

o HRW Exports 2017/18 = 405 mln bu (Down from 455 mb in MY 2016/17)

U.S. Wheat Stocks…..

• All U.S. Wheat: “Large” Stocks

o End Stocks 2017/18 960 mln bu (1.181 bb last year)

o % Stocks/Use 2017/18 45.5% S/U (53.2% S/U last year)

• U.S. HRW Wheat: “Large” Carryovers

o End Stocks 2017/18 470 mln bu (589 mb last year)

o % Stocks/Use 2017/18 53.7% S/U (62.5% S/U last year)

U.S. Wheat Quality & Grade

• U.S. HRW Wheat 2017 11.4% protein, 60.5 lb test, 0.6% dockage

o Versus 5 yr avg: 11.2% protein, 60.3 lb test wt, 0.6% dockage

• U.S. SRW Wheat 2017 9.5% protein, 59.1 lb test, 0.4% dockage

o Versus 5 yr avg: 9.8% protein, 58.4 lb test wt, 0.6% dockage

• U.S. Soft White Wheat2017 9.6% protein, 60.9 lb test, 0.5% dockage

o Versus 5 yr avg: 10.2% protein, 60.6 lb test wt, 0.5% dockage

• U.S. HRS Spring Wheat 2017 14.6% protein, 61.6 lb test, 0.5% dockage

o Versus 14.2% protein, 61.3 lb test wt, 0.9% defects in 2016

World Wheat Market Prospects:Large Supplies A “Buyer’s Market”

• Record Supplies & Large Usage Forecast for 2017/18

o 5 consecutive record high World wheat crops !!!

• Varying 2017/18 Crop Prospects by Country

• Still a “buyer’s market” for World Wheat Trade….but….

o Uncertainty about U.S. & World Crops in 2018?

o BUT a TIGHT “World-Less-China” supply situation has emerged***

CME Kansas Hard Red Winter WheatMonthly Chart: October 2008 – November 2017 + 12/13/2017

$4.33 $4.59

$6.01

$3.67 $4.16

MARCH 2018$4.16 ¼ 12/13/2017

Wheat Cash & HRW Wheat FuturesPratt, KS Local Elevators – December 13, 2017

$3.99 $4.16 $4.29 $4.45 $4.60 $4.82

$3.41 $3.41 $3.70$4.32

$2.94 $2.94

$0$1$2$3$4$5$6$7$8$9

Pric

e $

/bu

Futures High Price$ Mktg Loan-Pratt

$0.0575 /mo $0.0650 /mo $0.08 /mo $0.0713 /mo

Anticipated VSR Affect!!!

$0.0742 /mo

Crop

BUT still

Large Supply

Less Domestic Use&

Exports

Stocks/Use&

Prices

U.S. Wheat Seeded Acreage

2018 U.S. Winter Wheat Acres 4%+- Low Profits

- Disease pressure

- Wet / Delayed Planting @ Fall Seeding

U.S. Wheat Acreage

U.S. Wheat YieldsRecord High

U.S. Wheat Production & Supplies

U.S. Wheat Use by Category

U.S. All Wheat Exports – Weekly thru November 30, 2017

U.S. Hard Red Winter Wheat Exports - Weekly

U.S. Wheat Ending Stocks & % Stx/Use

876

456306

657976

590 752976

1,181960 838

37

22

13

29

49

24

37

5053

4540

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

10

20

30

40

50

60M

illio

n Bu

she

ls

% E

nd

Sto

cks-

to-U

se

Marketing Year

U.S. Wheat Ending Stocks & Prices

U.S. Wheat Price vs U.S. Stocks-to-Use

World Wheat Production Regions

World Wheat Supply, Use & Stocks

U.S. Crops

BUT

Foreign Wheat

Russia, Turkey,

EU, India, China

BUT

Canada

Australia

Kazakhstan

Feed Use

Export Trade

Beg. Stocks

Production

Supplies

Ending Stocks

World Wheat Ending Stocks & % Stx/Use

209 203

136 128

204178 195

218241 255 268

3635

2321

31

26

2831

34 3536

0

100

200

300

400

500

600

700

0

10

20

30

40

Mill

ion

Me

tric

To

ns

% E

nd

ing

Sto

cks-

to-U

se

Marketing Year

U.S. Wheat Price ($) vs World % Stx/UseMY 1973/74 – “New Crop” MY 2017/18

Total World Wheat

% Skocks/Use

are “dismally” large!

U.S. Wheat $ vs Non-China % Stx/UseMY 1973/74 – “New Crop” MY 2017/18

Soybean & Cotton Markets

U.S. Soybean Market Prospects

• Strong Use & Exports - BUT Large Stocks, & Weaker Prices

U.S. soybean exports in 2017/18 to be historically large in spite of

large 2017 South American Production

Depends on continued growth in import demand from China, EU,

Southeast Asia, Mexico, & elsewhere

Questions & concerns have emerged in fall-winter 2017-2018 re:

2018 South American soybean crop risk (i.e., La Nina effects, etc.)

U.S. Soybean Supply-Use• 2017 U.S. Soybean Production & Supplies @ record HIGHS

• Large Soybean Stocks in U.S. & So. America** limit Price$’s

• Low Price$’s support Use in “New Crop” MY 2017/18 ***

o Soy Crush 2017/18 = 1.940 bln bu (Record – vs 1.899 bb 1 year ago)

o Exports 2017/18 = 2.225 bln bu (Record – vs 2.174 bb 1 year ago)

o Total Use 2017/18 = 4.306 bln bu (Record – vs 4.214 bb 1 year ago)

o SBM Use 2017/18 = 46.5 mln tons (vs 44.95 in MY 2016/17 & 45.1 in MY 2015/16)

U.S. Soybean & Cotton Stocks…..

• Soybean: “Large” Stocks & % S/U

o End Stocks 2017/18 445 mln bu (High vs 574 mb in 2006/07)

o % Stocks/Use 2017/18 10.3% S/U (High vs 18.6% in 2006/07)

• Cotton: “Large” 2017 Crop & “Growing” Stocks

o Production 2017/18 21.4 mln bales (17.2 & 12.9 mb last 2 years)

o End Stocks 2017/18 5.8 mln bales (2.75 & 3.8 mb last 2 years)

o % Stocks/Use 2017/18 32.0% S/U** (15.1% & 30.2% last 2 years)

CME Soybean Futures Monthly Chart: October 2008 – November 2017 + 12/13/2017

$7.76 ¼ $8.53 $9.00 ¼

$9.79

JAN 2018$9.79 ¼ 12/13/2017

Soybean Cash & Futures Price$’sPratt, KS Local Elevators - December 13, 2017

$9.79 $9.91 $10.02 $10.11 $10.13 $10.05 $9.98

$8.98 $8.89 $9.08

$4.96 $4.96

$0

$3

$6

$9

$12

$15

$18

Pric

e $

/bu

Futures High Price$ Mktg Loan (Pratt)

$0.0556/mo

$0.0529 /mo

Kansas Soybean Seasonal Cash $ IndexMonthly Prices: Long Term Average + “New Crop” MY 2017/18

MY 2017/18

Record Crop

and

Large Supply

Record Use&

Exports

Stocks/Use&

Prices

U.S. Soybean Acreage

For 2018???U.S. Soybean Planted Acres

UP ≈ 0.5 to 1 million ac.

U.S. Soybean YieldsUSDA 2017 = 49.5 bu/ac; 2018 Forecast = 48.4

U.S. Soybean Yields: 2000-2017Accuracy of November 1st USDA Forecasts

0.1 0.2 0.5 0.1

(0.4)

0.4

(0.1)

0.4 0.4 0.7

(0.4)

0.7 0.7 1.0 0.0

(0.3) (0.4)

(10)

0

10

20

30

40

50

60

20

25

30

35

40

45

50

55

Fore

ca

st E

rro

r (Bu

)

U.S

. So

ybe

an

Yie

ld –

Bu/A

cre

Year

Difference (bu/ac) November 1 USDA Forecast Final Yield

U.S. Soybean Production & Supplies

U.S. Soybean Use & End Stocks

U.S. Soybean Exports - Weekly

U.S. Soybean Ending Stocks & % Stx/Use

138 169 141 92191 197

301445 395

4.5%5.4%

4.5%

2.6%

5.0% 5.0%

7.1%

10.3%

8.9%

0

500

1,000

1,500

2,000

2,500

3,000

0%

4%

8%

12%

Mill

ion

Bu.

% E

nd

Sto

cks-

to-U

se

Marketing Year

U.S. Soybean % Stocks/Use vs Price$

U.S. Soybean $ vs U.S. Stx-to-UseMY 1973/74 through “Next Crop” MY 2017/18

World Soybean Supply, Use & Stocks

World Crop

U.S. Crop

Foreign Crop

Canada

China

Brazil**

Argentina**

Paraguay

India

Beg. Stocks

Production

Total Supply

Crush

Total Use

Trade

End Stocks

U.S. Soybean$ vs World %Stx/Use MY 1973/74 through “New Crop” MY 2017/18

Soybean Importer Purchases

52

126 3

16

97

149

4

26

0

50

100

China EU-28 SE Asia Mexico Rest of World

Mil

lio

n M

etri

c T

on

s

2010/11 2011/12 2012/13 2013/142014/15 2015/16 2016/17 2017/18

+13% /yr

+1.2% /yr+7.9% /yr +3.0% /yr

+9.7% /yr

China 41.2 mmt in 7 years

9.2 mmtin 7 years

Questions?

Daniel O’Brien – Extension Ag Economist

Blog: www.ksugrains.wordpress.com

KSUGrains on Twitter & Facebook

www.AgManager.info