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March 22, 2016
Grain Market Outlook
August 31)
Domestic
Use
Ending
Stocks
Soybean
Production
Soybean
Exports
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historically high World soybean market prices that have occurred since the 2012/13 marketing year. The USDA
has continued to project that strong growth would occur in Chinese soybean imports in “current crop” MY
2015/16 and beyond. If recent strength in Chinese soybean imports and import demand were to falter or even
to “moderate”, it would have a substantial negative impact on U.S. and World soybean market prices.
Kansas Cash Soybean Market Situation
As a result of a record large fall harvest of soybeans in the United States in 2015 spot cash soybean prices
at a selected local location such as Farmers Grain Coop in Hutchinson, Kansas (Hutchinson being a major grain
market hub in the south central part of the state) had fallen to as low as $8.04 per bushel on October 1, 2015,
and ultimately to $7.82 on both November 10 and 13, 2015. Cash soybean prices at this location have traded
in the range of $7.84 (on February 29, 2016) to $8.40 (on December 4, 2015) since then, with a cash spot price
of $8.17 ($0.81 under basis) offered on Friday, March …
December 23, 2015
Grain Market Outlook
… esday, December 23rd were in the range of $7.98 ($1.00
under basis) to $8.23 / bu. ($0.75 under basis November 2016 CME Soybean Futures).
Soybean Market Trend Outlook for 2016‐2017
Given that the USDA projections for “new crop” MY 2014/15 and “next crop” MY 2016/17 indicate that a)
Chinese soybean imports will continue to be strong, and b) South American soybean production harvested in
early‐mid 2016 is again forecast to be record high, there is no indication yet that any change is expected in
these projected trends in production, exports, imports or ending stocks in the broader World soybean market.
The possibility of weather‐related soybean production problems in South America in the first 6 months of
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2016, and in the United States during summer‐fall 2016 months, could impact these trends. However, until
and unless such potential production problems actually do occur, the World soybean market will likely assume
that these “predominant adequate supply trends” will continue into the foreseeable future – with soybean
prices remaining low by recent year’s market standards.
I‐B. CME JANUARY & NOVEMBER 2016 Soybean Futures Trends
“New crop” JANUARY 2016 soybean futures contract prices responded in a neutral manner to the
information in the December 9th USDA reports (Figure 1). On the day of the reports CME JANUARY 2015
futures prices opened at $8.77 /bu, and traded as high as $8.83 ¾ and as low as $8.69 ¾ during the session,
before settling at $8.76 ¾ – unchanged from the previous day. Since then JANUARY 2016 soybean futures
prices have traded within the range from a low of $8.54 on December 17th, to a high of $8.96 ¼ on Monday,
December 21st, before closing at $8.85 ¼ on Tuesday, December 22nd.
Figure 1. JAN and NOV 2016 CME Soybean Futures Price Charts (electronic trade) …
June 22, 2015
Grain Market Outlook
… e 19th were in the range of $8.62 / bu. ($0.78 under basis November 2015 CME Soybean … Futures) to $8.89
($0.51 under basis). “New crop” NOV 2015 soybean futures were trading at $9.40 per bushel at the time of
these new crop forward contract bids were posted on June 19th.
Given that the USDA projections for MY 2014/15 and “new crop” MY 2015/16 indicate that a) Chinese
soybean imports will continue to be strong, and b) South American soybean production harvested in early‐mid
2015 has again been record high, there is no indication yet that any change is expected in these projected
trends in production, exports or imports in the broader World soybean market. The possibility of weather‐
related soybean production problems in the United States during the summer‐fall of 2015 could impact these
trends. However, until and unless such potential production problems actually do occur, the World soybean
market will likely assume that these “predominant adequate supply trends” will continue into the foreseeable
future.
I‐C. Soybean Futures and U.S. Dollar Index Trends
“Current crop” JULY 2015 soybean futures contract prices responded in a negative manner to the
information in the June 10th USDA reports (Figure 1). On the day of the reports CME JULY 2015 futures prices
opened at $9.51 ½ /bu, and traded as high as $9.57 ¾ and as low as $9.44 ½ during the session, before settling
at $9.49 ½ – down $0.02 for the day. Since then JULY 2015 soybean futures prices have traded within the
range from a low of $9.30 ½ on June 15th, a high of $9.67 on June 18th, before closing at $9.71 ½ on Friday,
June 19th.
Figure 1. JULY 2015 and NOV 2015 CME Soybean Futures Price Charts (electronic trade) …
March 2, 2017
Grain Market Outlook
Page | 3
I. U.S. Corn Market Situation and Outlook
February 9th USDA Crop Production & WASDE Reports
On February 9th the USDA World Agricultural Outlook Board (WAOB) released its February 2017 World
Agricultural Supply and Demand Estimates (WASDE) report – containing U.S. and World corn supply‐demand
and price projections for the 2014/15, 2015/16, and “current crop” 2016/17 marketing years (MY) for corn.
The “current” MY 2016/17 for U.S. corn began on September 1, 2016 and will last through August 31, 2017.
Since then, the USDA also released updated estimates of U.S. corn supply‐demand and prices for “next
crop” MY 2017/18 at the 2017 Agricultural Outlook Forum in Arlington, Virginia on February 23‐24, 2017
(https://www.usda.gov/oce/forum/). The “next crop” 2016/17 marketing year for U.S. corn will begin on September 1,
2017 and will last through August 31, 2018. Following its normal procedures, the next supply‐demand and
price forecasts for “next crop” 2017/18 from the USDA will be released in the May 10, 2017 USDA WASDE
report.
CME MAY 2017 & DECEMBER 2017 Corn Futures Trends
MAY 2017 CME Corn Futures
Following a low of $3.32 1/2 on August 31, 2016, MAY 2017 Chicago Mercantile Exchange (CME) corn
futures prices trended up to a high of $3.75 ¾ on October 20, 2016 (Figure 1). Following that high, MAY 2017
corn futures prices declined to a low of $3.49 ¼ on December 1, 2016, before moving to an eventual high of
$3.87 ¼ on February 16, 2017. Since then, MARCH 2017 corn futures first trended lower to $3.67 ¼ on
February 27th, and then to a high of $3.86 ¼ on February 28th before closing at $3.82 on March 1, 2017
DECEMBER 2017 CME Corn Futures
In a similar trading pattern to MARCH 2017 Corn futures, following a low of $3.58 1/2 on August 31, 2016,
DECEMBER 2017 Chicago Mercantile Exchange (CME) corn futures prices trended up to a high of $3.95 ½ on
October 20, 2016 (Figure 1). Following that high, DECEMBER 2017 corn futures prices declined to lows of
$3.74 ¼ on November 15th and $3.74 ½ on December 1, 2016, before moving to an eventual high of $4.03 ¾ on
February 16, 2017. Since then, DECEMBER 2017 corn futures first trended lower to $3.88 on February 27th,
and then to a high of $4.04 on February 28th before closing at $4.01 ¼ on March 1, 2017.
CME Corn Futures 2017 Contract Spreads
The total futures carrying charge or “term spread” between MARCH 2017 and JULY 2017 corn futures on
Wednesday, March 1st was $0.16 ¾ per bushel (i.e., $3.89 ¼ for JULY 2017 Corn less $3.75 ¾ for MARCH 2017
Corn), or $0.0419 per bushel per month. This compares to commercial grain storage charges in Kansas grain
elevators in the range of $0.04 to $0.05 per bushel per month – before accounting for interest or additional
handling costs or other discounts. The MARCH 2017 Corn futures contract was entering the early stages of its
contract delivery period at that time, with grain elevators “rolling” to the MAY 2017 Corn futures contract for
local basis determination purposes. The spread from the MAY 2017 to JULY 2017 Corn futures contracts was
$0.07 ¼ ($3.89 ¼ ‐ $3.82) or $0.03625 per month.
Page | 4
Figure 1. MAY 2017 & DECEMBER 2017 CME Daily Corn Futures Price Charts (as of March 1, 2017)
ne …
May 2, 2017
Grain Market Outlook
ercantile Exchange (CME) corn
futures prices trended up to a high of $3.75 ¾ on October 20, 2016 (Figure 1). Following that high, MAY 2017
corn futures prices declined to a low of $3.49 ¼ on December 1, 2016, before moving to an eventual high of
$3.87 ¼ on February 16, 2017. Since then, MARCH 2017 corn futures first trended lower to $3.67 ¼ on
February 27th, and then to a high of $3.86 ¼ on February 28th before closing at $3.82 on March 1, 2017
DECEMBER 2017 CME Corn Futures
In a similar trading pattern to MARCH 2017 Corn futures, following a low of $3.58 1/2 on August 31, 2016,
DECEMBER 2017 Chicago Mercantile Exchange (CME) corn futures prices trended up to a high of $3.95 ½ on
October 20, 2016 (Figure 1). Following that high, DECEMBER 2017 corn futures prices declined to lows of
$3.74 ¼ on November 15th and $3.74 ½ on December 1, 2016, before moving to an eventual high of $4.03 ¾ on
February 16, 2017. Since then, DECEMBER 2017 corn futures first trended lower to $3.88 on February 27th,
and then to a high of $4.04 on February 28th before closing at $4.01 ¼ on March 1, 2017.
CME Corn Futures 2017 Contract Spreads
The total futures carrying charge or “term spread” between MARCH 2017 and JULY 2017 corn futures on
Wednesday, March 1st was $0.16 ¾ per bushel (i.e., $3.89 ¼ for JULY 2017 Corn less $3.75 ¾ for MARCH 2017
Corn), or $0.0419 per bushel per month. This compares to commercial grain storage charges in Kansas grain
elevators in the range of $0.04 to $0.05 per bushel per month – before accounting for interest or additional
handling costs or other discounts. The MARCH 2017 Corn futures contract was entering the early stages of its
Page | 4
contract delivery period at that time, with grain elevators “rolling” to the MAY 2017 Corn futures contract for
local basis determination purposes. The spread from the MAY 2017 to JULY 2017 Corn futures contracts was
$0.07 ¼ ($3.89 ¼ ‐ $3.82) or $0.03625 per month.
Figure 1. MAY 2017 & DECEMBER 2017 CME Daily Corn Futures Price Charts (as of May 2, 2017)
ne …
March 30, 2018
Grain Market Outlook
… … CME Soybean Futures Contract Spreads: MAY 2018 – AUGUST 2018
The total futures carrying charge or “term spread” between MAY 2018 and AUGUST 2018 soybean futures
on Thursday, March 29, 2018 was $0.13 ¼ per bushel (i.e., $10.58 for AUGUST 2018 Soybeans less $10.44 ¾
for MAY 2018 Soybean futures), or $0.0442 per bushel per month over a 3‐month period. This compares to
commercial grain storage charges in Kansas grain elevators in the range of $0.04 to $0.05 per bushel per
month – before accounting for interest, additional handling costs, or other discounts.
I‐c. Kansas Soybean Seasonal Average Cash Price Trends
Season Average Price Trends for the 1999/2000 through 2016/17 Marketing Years
The monthly seasonal average price index for Kansas soybeans since MY 1999/00 indicates definite
seasonal price trends (Figure 2). Kansas soybean prices have typically been weakest during the harvest month
of October, with an average seasonal price index of 92.0% of the unweighted average Kansas soybean price for
the September 1st through August 31st marketing year period. Kansas cash soybean prices have on average
trended higher from harvest lows beginning in November all the way through to July of the following summer
CME MARCH 2018 Soybean Futures
March 28, 2017 – March 29, 2018
CME NOV 2018 Soybean Futures
March 28, 2017 – March 29, 2018
Page | 6
(up to 108.0% of season average price) before beginning in August to decline toward seasonal lows in the
upcoming fall harvest (late September‐October).
The most variability around these monthly indices has occurred as harvest approached and occurred at the
beginning of the marketing year (September), during late spring in March‐April, and during the key U.S.
soybean crop development month of August – just prior to new crop marketing year starting on September 1st.
Projected “Old Crop” MY 2017/18 Price Trends
These long‐term average price trends for Kansas are compared to projections of “new crop” MY 2017/18
U.S. soybean average prices (Figure 2). These projections are based on U.S. cash soybean prices for September
2017 through January 2018 from USDA NASS, CME soybean futures prices for the MARCH 2018 contract
through the month of February 2017, for the MAY 2018 soybean futures contract for the month of March
through March 26, 2018, and cash basis levels from September 1, 2017 through January 2018.
This updated version of Kansas State University projections for the complete “old crop” MY 2017/18
projects U.S. soybean season average prices to average $9.46 /bu. This is up $0.16 per bushel from the March
8th USDA WASDE midpoint projection of $9.30, but well within the lower limit of the USDA forecast range of
$9.00‐$9.60 /bu. The seasonal price patterns presented in Figure 2 are calculated as a percent of the adjusted
KSU futures‐based price model season average price projection for “old crop” MY 2017/18 of $9.46 per bushel.
These findings indicated that it is likely JULY 2018, AUGUST 2018, and SEPTEMBER 2018 CME soybean
futures prices are displaying limited concern about any possible 2018 U.S. soybean production problems. As
usual for the early spring months, the soybean futures contract price levels in late‐March 2018 are likely to
increase significantly during the following Spring‐early Summer period IF significant U.S. soybean production
problems ultimately DO emerge at that time.
Figure 2. Kansas Soybean Seasonal Price Index (MY 1999/00 – MY 2016/17) plus “Old Crop” MY
2017/18 Estimates as of March 29, 2018 (KSU www.AgManager.info & USDA https://www.quickstats.nass.usda.gov/)
96%
92 …
June 28, 2018
KFMA Newsletters
Bryan Manny – South Central KFMA Ag Economist
The annual KFMA ProfitLink Analysis reveals improvement in accrual net farm income in 2017 on a statewide average.
The average statewide accrual net farm income in 2017 was $62,944 compared to $46,717 for 2016. The range of net
income around the state was from the low in the North Central association at $28,950 to the high in the Southeast
association at $102,671. One of the major factors for the $102,671 would be the amount of soybeans produced in the
southeast association along with a strong soybean price in 2017.
As in 2016 and 2015, the 2017 average net farm income of $62,944 did not cover the average family living expenses and
income taxes of $84,436. Thus, the last three years of family living expenses and income taxes had to be supplemented
by non‐farm income.
There is much net income variability within the KFMA farms. The high net income farms (25%) showed a positive accrual
net farm income of $256,302 versus the low net farm income (25%) having an accrual net loss of $76,110.
The total expense ratio of the average statewide KFMA farm was .8925. In other words, it required $89.25 of expenses
to create $100.00 in value of farm production. The remaining $10.75, the net farm income, is needed to cover principal
payments on debt, family living expenses and income taxes.
As in recent years, cash flow and profitability are important. Positive cash flow is needed to maintain financial stability as
in any other business or industry. There are short‐run and long‐run financial measures that are analyzed for future
survival. In the short‐run, one measure is the current ratio. This is the ratio of current assets divided by current liabilities.
Since 2013, the ratio has decreased from 3.19 to 2.10. Thus, liquidity has decreased and this trend will continue until
accrual net farm income increases to cover annual debt obligations, family living expenses and income taxes. Closely
related to the current ratio is the financial measure of working capital. Working capital is the difference between current
assets and current liabilities. Needless to point out, net working capital has decreased in the last three years. If a farm
cannot meet its current obligations with current assets, it will be forced to liquidate its noncurrent assets, or income
producing assets, to pay off its current obligations. Another option is to refinance some of the operating loan(s) into an
existing, or new, term loan, to reduce the current payment obligations. In 2016 and 2017, this was a solution for some
farm managers as the equity on farms remained strong and interest rates were still historically low. However, spreading
out payment obligations will only solve the working capital problems if cash flow can increases in the future.
http://www.agmanager.info/kfma/ June 2018 E‐newsletter 4
The financial outcome in 2017 was affected not only by low commodity prices on a statewide basis, but also by low
yields on a regional scale. Drought conditions were an issue in the last half of 2017 and continuing into 2018. For the
average KFMA farm in 2017, the government program payments received were $27,689, which was 44% of the net farm
income of $62,944. Thus, without the government program payments, the net farm income would have been $35,255.
The impact of government payments varied among the regions of the state, from 17% of net income in the southeast
area to 124% in south central Kansas, where government payments were $37,964 and net farm income was $30,517.
Overall, the average KFMA farm has retained a strong net worth in in spite of the lower cash flow. How many more years
in the future can the equity remain strong with the lower profitability? Perhaps 2018 will answer this question. …
February 28, 2025
Grain Market Outlook
Bill yield down about 100 basis points. The average of
December …
October 1, 2010
Farm Machinery Papers
producers paying taxes on a cash basis, but
the deduction must … options can
be compared on the basis of a single value. The basic … period and on an
annual basis. Although the purchase and …