daniel o’brien extension agricultural economist · depends on continued growth in import demand...

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