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May 19, 2017
Grain Market Outlook
The recent upward trend in the relative value of the U.S. dollar began in earnest after the dollar index was
valued at 77.5510 in August 2014. This upward trend continued throughout the remainder of 2014 and 2015
to early 2016 – with the index climbing to a high of 95.4259 in December 2016 (up 23.05% from August 2014).
Since then the index has declined moderately, falling to a low of 93.9727 in February 2017, before trending
sideways‐to‐higher to an average of 94.4902 in March and 94.0015 in April 2017. To date for the May 1 – 12,
2017 period the U.S. dollar index has averaged 93.9927.
In addition, since 1980 the global price of corn has a monthly average of $3.49 per bushel (in U.S. dollars)
with a median value of $2.93 – which like the historic U.S. dollar index above indicates positive skewness (i.e.,
a few extremely high values pulling up the average) (Figure 3). The historic low in global corn prices since 1980
on a monthly basis was $1.66 per bushel – occurring in October 1986 during the U.S. farm crisis years. A
historic high of $8.46 per bushel occurred in July 2012 – in the midst of the extensive 2012 drought in the
United States. Over the January 1980 through March 2017 period the global price of corn has sloped upward
marginally at a rate of +$0.0063 per bushel per month.
Since 1980 there has been a negative correlation of ‐0.524 between the U.S. Trade Weighted dollar index
and the global price of corn. This indicates that the global price of corn – typically denominated in U.S. dollars
– tends to have a negative or inverse relationship over‐time with the value of the U.S. dollar.
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The upward trend in the value of the U.S. trade weighted dollar index since mid‐2014 has been a negative
factor in export markets for U.S. corn and other U.S. grains (especially for wheat). A higher U.S. dollar
exchange rate relative to other major World currencies generally makes it more expensive for foreign buyers
of U.S. grains to exchange their country’s currencies for U.S. dollars – which they would then in turn use to
purchase U.S. grain exports (i.e., which are denominated or “priced” in U.S. dollars in U.S. grain markets).
Although this is not the only factor negatively impacting U.S. grain exports, it is a very important one –
working against U.S. corn and especially wheat being affordable, competitive alternative export alternatives in
the World grain trade.
Figure 3. Monthly U.S. Trade Weighted Dollar Index (Major Currencies) vs Global Corn Prices (in
USD$s), January 1973 to Mid‐May 2017 (Source: St. Louis Federal Reserve Bank, FRED) …
September 21, 2017
Grain Market Outlook
Since the November 2011 low of 69.0639, the recent upward trend in the relative value of the U.S. dollar
began in earnest following the dollar index value of 77.5510 in August 2014. This upward trend continued
through January 2016 with the index climbing to a high of 95.4259 ‐ up 23% from August 2014. Since then the
index has moved sideways to lower – falling to a low of 88.1905 in August 2016 – and moving even lower
during the first half of September 2017, down to a daily average of 86.086.
In addition, since January 1980 the global price of soybeans has a monthly average of $7.67 per bushel (in
U.S. dollars) with a median value of $6.56 per bushel – which like the historic U.S. dollar index above indicates
positive skewness (i.e., a few extremely high values pulling up the average) (Figure 3). The historic low in the
global soybean prices since 1980 on a monthly basis was $4.31 per bushel – occurring in July 1999, while the
historic high of $16.95 per bushel occurred in August 2012. Over the January 1980 through mid‐September
2017 period the global soybean price has sloped upward at a rate of +$0.013 per bushel per month.
Since 1980 there has been a negative correlation of ‐0.578 between the U.S. Trade Weighted dollar index
and the global price of soybeans. This indicates that the global price of soybeans – typically denominated in
U.S. dollars – has a negative or inverse relationship over‐time with the value of the U.S. dollar.
The sideways‐to‐lower trend in U.S. dollar value in recent months has been a positive factor for U.S.
soybean exports. A higher U.S. dollar exchange rate relative to other major currencies generally makes it more
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November 21, 2017
Grain Market Outlook
m 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.
2. 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
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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.
3. 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.
4. 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.
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5. 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.
5. 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.
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