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November 27, 2018
Grain Market Outlook
Lingering 2018 U.S. Fall Harvest Delays: As of November 25, 2018 the U.S. corn harvest was estimated
to be 94% complete in the 18 major states – compared to the recent 5 year average of 95% completed.
Moderate end of season harvest delays still lingered in states such as Kansas (94% harvested vs 99% 5‐
yr avg.); Nebraska (94% harvested vs 97% average); North Dakota (80% harvested vs 93% avg.); Ohio
(86% harvested vs 93% avg.); Pennsylvania (82% harvested vs 89% avg.); and South Dakota (90%
harvested vs 97% avg.); To complicate matters in these areas, precipitation in the form of snow had
fallen in parts of Nebraska, Kansas, Iowa, Illinois, and North and South Dakota over the November 19‐
26 period – further slowing harvest in these areas.
The accumulated result of these slow harvest and recent precipitation events will be to delay the final
part of the 2018 U.S. corn harvest to some degree – providing at least moderate uncertainty about final
2018 U.S. corn production and some support for corn prices through the conclusion of the U.S. Fall harvest.
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October 16, 2018
Grain Market Outlook
Positive Corn Market Factors
However, a number of factors are providing positive support for U.S. corn supply‐demand and price
prospects – including strong exports, developing harvest delays from wet fall weather, ongoing strong ethanol
usage, and uncertain South American corn production prospects in in 2019.
Strong U.S. Corn Exports: In recent weeks, U.S. corn export shipments have been strong – above the pace
needed to meet the USDA’s October 11th updated forecast of 2.475 bb in exports for “new crop” MY
2018/19. For the weeks ending September 27th and October 4th, the U.S. had corn export shipments of
55.4 and 53.2 million bushels (mb), respectively. These were above the pace of 47.8 mb needed to meet
the USDA forecast of 2.475 bb – which had already been raised by 75 mb in the October 11th USDA WASDE
report. Accumulated exports of 228.6 mb as of October 4th were 9.2% of the 2.475 bb USDA projection for
“new crop” MY 2018/19. Total shipments and forward sales as of 10/4/2018 were 775.5 mb – equaling
31.3% of the USDA’s 2.475 bb projection with 7.7% (4 or 52 weeks) of “new crop” MY 2018/19 completed
(Table 1 & Figures 10‐11).
As a result, strong positive signals exist for U.S. corn exports to remain strong in coming months –
providing support for U.S. corn prices.
Developing 2018 U.S. Fall Harvest Delays: As of October 7, 2018 the U.S. corn harvest was estimated to be
34% complete in the 18 major states – compared to the recent 5 year average of 26% completed.
However, since October 8th the National Oceanic and Atmospheric Administration (NOAA) reports that
rainfall as much as 200% to 400% or more above normal has been received in parts of the U.S. Corn Belt
from Texas north, through Oklahoma, Kansas, Nebraska, parts of Iowa, South Dakota, North Dakota,
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Minnesota and Wisconsin. In addition, the eastern states of Georgia, North and South Carolina, and
elsewhere have been affected. Precipitation from Kansas to the north fell in the form of snow.
The result of these accumulated precipitation events will be to delay the 2018 U.S. corn harvest to some
degree – providing at least moderate support for corn prices through the remainder of the U.S. Fall harvest.
Ongoing Strong Ethanol Use: According to Environmental Information Administration (EIA) data, for the
period of September 1st through October 5th, 2018, U.S. ethanol production has averaged 1.032 million
barrels per day (range of 1.02 to 1.051 mb/d). Assuming 42 gallons of ethanol per barrel, and 2.8 gallons
of ethanol per bushel of either corn or grain sorghum used in the production process, this rate of U.S.
ethanol production would result in 5.592 bb of U.S. feedgrain use for ethanol. Assuming approximately
75‐100 mb of U.S. grain sorghum to be used for ethanol production in “new crop” MY 2018/19, at the
current pace of usage there would be 5.000‐5.250 bb of U.S. corn used for ethanol production over the
same period. This amount of ethanol use would be down 450‐650 mb from the USDA’s projection of
record high 5.650 bb use for ethanol (Table 1, Figures 9abc‐10).
However, the Environmental Protection Agency’s (EPA’s) recent action to approve the use of E15 on a season‐
round basis in U.S. motor fuels may lead to increased feedgrain use for ethanol during the remainder of
“new crop” MY 2018/19 through August 31, 2019.
Taken together, these results indicated continued strong use of U.S. feedgrains in general and U.S. corn
in particular in domestic ethanol production.
Uncertain Prospects for South American Corn Production in 2019: As a result of what can be formally termed
to be a “trade war” between China and the United States, China’s soybean export purchases have shifted
completely away from the U.S. to Argentina, Brazil and other non‐U.S. World soybean producing countries.
The export price difference between locations in Brazil and the U.S. are estimated to be more than $2.00
per bushel when converted to U.S. dollars. Given this price differential favoring South American soybeans,
it makes sense that South American farmers will have an incentive to increase their soybean acreage and
production in 2019 (Figures 14 & 15abc).
Early planting progress for soybeans in Brazil is ahead of historical pace, with indications that soybean acreage
will be increased – likely drawing acres away from first crop Brazilian corn (which typically accounts for 1/3
of the Brazil corn crop). The second Brazilian corn crop – much of which typically enters World export
markets – will be planted on harvested soybean acres in early 2019.
Consequently, IF there is a sizable acreage shift toward soybean acres in South America in 2019, and if
those acres come from corn, THEN lower World corn production will help support prices in late Winter –
Spring 2019.
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September 17, 2018
Grain Marketing Presentations
for 2018 - 2019
2018 KSU Risk &Profit Conference
Manhattan, Kansas
DANIEL … KCOmaha Branch
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1) 2018 U.S … HRW wheat $’s in 2018?
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May 7, 2019
Grain Market Outlook
A Deferred Future “Carrying Charge” View of KS HRW Winter Wheat Futures
On May 6th carrying charges between the JULY 2019 to SEPTEMBER 2019 Kansas HRW Wheat futures
contracts (i.e., the JUL‐SEP 2019 Spread) were $0.11 per bushel, or $0.0550 per bushel per month. This
compares to spreads of $0.22 /bu or $0.0733 /bu/mo. for SEP‐DEC 2019, and $0.2250 /bu or $0.0750 /bu/mo.
for DEC 2019‐MAR 2020 Kansas HRW Wheat futures contracts.
These “full carry” deferred futures full contract storage cost contract spreads are influenced by large
supplies on hand – which leads to higher Variable Storage Rates (VSR) among Kansas HRW Wheat futures
contracts. These large carries are encouraging storage of “new crop” 2019 Kansas HRW wheat on the one
hand, and provide the basis for a potential return to storage hedges by producers and grain elevators for the
2019 HRW wheat crop on the other.
Extending this analysis further to later deferred contracts, whereas on May 6th harvest JULY 2019 Kansas
HRW Wheat futures closed at $4.03 /bu, the JULY 2020 contract closed at $4.84 ¾ /bu for JULY 2020 – up
20.2% and $0.0681 /bu/month from JULY 2019. Extending even further into the next year, on May 6th JULY
2021 KS HRW Wheat closed at $5.42 ½ /bu, up 11.9% and $0.0479 /bu/month from JULY 2020
From an economic viewpoint, these deferred years’ JULY Kansas HRW Wheat futures prices in years 2020
& 2021 could reflect market expectations that HRW wheat futures prices will eventually be higher than
current bids for JULY 2019 futures – which is consistent with economic theory. However, it also seems that
the carrying charges now reflected across the range of available deferred KS HRW Wheat futures contracts
appear to be being extended out to the distant “new crop” JULY 2020 and JULY 2021 contracts.
Restated, it appears these uninterrupted positive carrying charges are being inflexibly and mechanically
applied to deferred KS HRW Wheat futures contracts as far as 24 months into the future – regardless of what
expected fundamental supply‐demand conditions may be in the wheat market that far out. If this is so, then
these deferred futures prices may present: a) opportunities for long‐term market arbitrage positions to
traders, or b) hedging opportunities for U.S. wheat producers IF they are able to financially manage the risk of
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July 18, 2012
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