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December 28, 2017
Grain Market Outlook
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I. U.S. Grain Sorghum Market Situation and Outlook
I‐a. December 12th USDA Crop Production & WASDE Reports
On December 12th the USDA World Agricultural Outlook Board (WAOB) released its December 2017
World Agricultural Supply and Demand Estimates (WASDE) report – containing U.S. and World grain sorghum
supply‐demand and price projections for the 2015/16, “old crop” 2016/17, and “new crop” 2017/18 marketing
years (MY). The “new crop” MY 2017/18 for U.S. corn began on September 1, 2017 and will last through
August 31, 2018. Monthly USDA WASDE estimates of U.S. crop and livestock supply‐demand and prices can
be found at the following web address: https://www.usda.gov/oce/commodity/wasde/
On the same day the USDA National Agricultural Statistics Service (NASS) released its December 2017
Crop Production report. This report can be found at the following web address:
http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd‐12‐12‐2017.pdf
The next survey‐based report of U.S. corn production results for 2017 will be released in the USDA Annual
Crop Production Summary and Crop Production reports on January 12, 2018. The same U.S. on‐farm grain
sorghum plots which were sampled for the August, September, October, and November USDA NASS Crop
Production reports will revisited for the January 2018 report – with final 2017 post‐harvest production results
reported.
On November 28, 2017 the USDA released its Long Term Agricultural Projections through year 2027.
United States’ grain sorghum supply‐demand and price projections were included, along with corn, wheat,
soybeans, cotton and other major crops. These Long Term Agricultural Projections can be found at the
following website: https://www.usda.gov/oce/commodity/projections/
I‐b. Kansas Grain Sorghum Seasonal Average Price Trends
During the eighteen (18) year period from the 1999/2000 through 2016/17 marketing years the typical
season price pattern for grain sorghum in Kansas exhibited pronounced pre‐harvest through harvest lows
during September‐October (Figure 2). Then prices have trended higher from November through April,
becoming level at seasonal highs during the April through June period. Kansas grain sorghum prices then
tended to decline from June into July, and then to decline further into August. The widest variability around
these average seasonal price trends occurred during the June through September period.
So far during the “new crop” 2017/18 marketing year which began on September 1, 2017, U.S. grain
sorghum prices declined from September‐October into November, but have recovered from November lows
into December 2017 in a stronger manner than normal (Figure 2). Contra‐seasonal strength in U.S. grain
sorghum prices in December 2017 is attributed to strong demand for U.S. grain sorghum exports – primary
from China and Japan.
These long‐term average price trends for Kansas are compared to projections of “new crop” MY 2017/18
U.S. grain sorghum average prices. These projections are based on U.S. cash grain sorghum and corn prices for
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September and October 2017 from USDA NASS, CME corn futures prices on December 26, 2017, and 2016/17
marketing years monthly average U.S. corn basis levels.
This updated version of Kansas State University projections for the complete “new crop” MY 2017/18
projects U.S. grain sorghum season average prices to average $3.25 per bushel. This is up $0.15 per bushel
from the December 12th USDA WASDE midpoint projection of $3.10, but within the upper end of the USDA
forecast range of $2.75‐$3.45 per bushel (Figure 2). These findings indicated that it is likely SEPT 2018 and DEC
2018 CME corn futures prices are higher than they would be if grain markets were more confident at this time
of “average‐to‐large” 2018 U.S. corn and grain sorghum crops. These corn futures contract prices are likely to
decline in Spring‐early Summer 2018 IF significant combined U.S. corn and grain sorghum production problems
ultimately do NOT emerge in the growing season next year.
Figure 2. Kansas Grain Sorghum Seasonal Price Index (MY 1999/00 – MY 2016/17) plus “New Crop”
MY 2017/18 Estimates as of December 26, 2017 (Sources: KSU www.AgManager.info & USDA ERS http://www.ers.usda.gov/data‐
products/season‐average‐price‐forecasts.aspx)
II. U.S. Grain Sorghum Acreage, Yield, Production & Total Supplies
Table 1 shows the USDA U.S. grain sorghum supply‐demand balance sheet for the MY 2008/09 through
“new crop” MY 2017/18 period. Table 1a focuses on “new crop” MY 2017/18 with the December 12th USDA
projection plus alternative possible market scenarios from Kansas State University. An adjusted version of the
USDA’s Long Term Agricultural Projection for U.S. grain sorghum supply‐demand and prices with forecasts for
“next crop” MY 2018/19 is also included in Table 1a. Grain sorghum planted and harvested planted acreage in
the U.S. for the 2006 – projected 2018 period are shown in Figure 2, with U.S. grain sorghum yields for 2006
through projected 2018 shown in Figure 3. United States’ grain sorghum production and total supplies for the
2005/06 through projected “next crop” 2018/19 marketing years are shown in Figure 4.
95 …
March 30, 2018
Grain Market Outlook
gularly occurring in South America and the United States. Strong demand for
soybean imports from China, Japan, and other Asian countries have supported World soybean prices.
Longer term, from MY 2007/08 to “old crop” MY 2017/18, this strong upward trend in World soybean
production (up 5.6% annually) has “out‐paced” increases in World soybean use (up 5.0% per year). As long as
growth in World soybean production continues to outpace World soybean usage, then World soybean stocks
will remain at high levels with prices continuing at their current “moderate” levels – being affected positively
be ongoing strength in demand, but held “in check” by more than adequate world supplies.
The potential for soybean market disruptions from trade policy‐related confrontations between the U.S. and
China has emerged as an issue in early 2018. These economic – geopolitical tensions so far have not resulted
in official direct tariffs or import limitations by China on U.S. soybeans. However, it is reported that Chinese
buyers of soybeans have responded by aggressively pursuing Brazilian soybean imports, and to a degree have
at least moderated their purchases of U.S. soybeans in recent months. So, although no official action has been
taken by China against U.S. soybean imports, such tensions have to a degree already affected U.S. soybean
trade by “pressuring” Chinese buyers to redirect their buying focus toward Brazil, Argentina, Paraguay, and
wherever else globally they can secure soybean and oilseed products.
B. Soybean Market Response to the March 8th & 29th USDA Reports
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on March 8th
soybean futures prices had moved primarily lower. From the March 8th close of $10.64, CME MAY 2018
Soybean futures prices have traded from a high of $10.63 on 3/9/2018 down to a low of $10.09 ¼ on March
23rd, before closing at $10.18 on Wednesday, March 28th – the day prior to the USDA Quarterly Stocks &
Prospective Plantings reports on March 29th. Then on the day of the March 29th USDA reports, CME MAY
2018 Soybean futures responded positively, trading from a low of $10.12 ½ to a high of $10.50 ¾ before
closing at $10.44 ¾ – up $0.26 ¾ per bushel for the day.
Kansas cash soybean prices at terminals in central and eastern Kansas ranged from $9.42 ¾ to $9.89 ¾ /bu on
March 29th – with basis ranging from $1.02 under to $0.60 under MAY 2018 Soybean futures. That same day
in western Kansas, major grain elevator bids ranged from $9.10 to $9.45 per bushel – with basis ranging from
$1.35 under to $1.00 under.
C. World Soybean Supply‐Demand Findings in the March 8th WASDE USDA Report
On March 8th for the “old crop” 2017/18 marketing year (MY) to end on August 31, 2018, the USDA projected
the following.
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First, that World soybean total supplies would be 437.5 million metric tons (mmt) (down 3.0%) with total use
of 34.8 mmt (up 4.2%) for “old crop” MY 2017/18. With supplies moving lower and demand increasing, there
has been a moderate “tightening” of projected World ending stocks of soybeans.
Second, that World soybean exports will continue trending higher – up to a record high to 150.6 mmt in the
“old crop” 2017/18 marketing year. This amount of World soybean exports of 150.6 mmt in “old crop” MY
2017/18 would be up from previous records of 147.5 mmt last year, and 132.6 mmt two years ago. World
soybean exports have been growing annually at a 9.1% rate since the 2007/08 marketing year.
Third, that World soybean ending stocks would be a 94.4 mmt in “old crop” MY 2017/18 ‐ down from the
record high of 96.65 mmt in MY 2016/17, but still up from 78.3 mmt in MY 2015/16. Overall, World soybean
ending stocks have grown at an 8.0% rate annually since the 2007/08 marketing year.
Fourth, that World soybean percent ending stocks‐to‐use (% S/U) would be 27.5% ‐ the 2nd highest on record
but down from the record high of 29.3% last year, while being up from 24.9% and 25.7% the two years prior.
D. USDA U.S. Soybean Supply/Demand for “Old Crop” MY 2017/18 & “New Crop” MY 2018/19
The USDA released their soybean production, supply‐demand and price projections for the U.S. for “old crop”
MY 2017/18 in the March 8th WASDE report, for “new crop” MY 2018/19 in its February 23rd USDA Ag Outlook
Forum projections, for 2018 planted acres in the March 29th Prospective Plantings report, and for November‐
February 2018 usage of U.S. soybeans and March 29th Grain Stocks report.
U.S. soybean plantings are forecast to be 88.982 million acres (ma) in 2018, down from 90.142 ma in 2017, and
83.433 ma in 2016. Harvested acres are forecast by Kansas State University to be 88.222 ma in 2018 (99.15%
harvested‐to‐planted – latest 5 year average), down 1.45% from 89.522 ma in year 2017, but up 6.7% from
82.696 ma in 2016.
The 2018 U.S. average soybean yield is forecast at 48.5 bu/ac, down from a KSU‐adjusted estimate of 49.79
bu/ac in 2017, and from the 2016 record of 52.0 bu/acre. This KSU adjustment to the most recent official
USDA estimate on March 8th was made following the March 29th grain stocks report. The USDA estimate of
March 1, 2018 U.S. soybean stocks came in approximately 65 mb larger than trade estimates. Given that
estimates of U.S. soybean domestic crush, exports, and seed use for the November‐February 2018 quarter are
known with some accuracy, it seems that the unexplained increase in U.S. soybean stocks on March 1st may be
due to the USDA underestimating the size of the 2017 U.S. soybean crop. As a result, if 2017 soybean planted
and harvested acreage are left unchanged, and 65 mb is added to the size of the 2017 U.S. soybean crop, then
this KSU‐adjusted estimate of 2017 U.S. soybean yields is raised to 49.79 bu/ac – up from the latest USDA’s
official 2017 U.S. soybean yield estimate of 49.1 bu/ac.
Soybean production in the U.S. in 2018 is forecast to be 4.279 billion bushels (bb), down from the KSU‐
adjusted record high of 4.457 bb in 2017 (vs the latest USDA estimate of 4.392 bb – see discussion above), but
up from 4.296 bb in 2016. After these adjustments, projected “new crop” MY 2018/19 U.S. soybean total
supplies are forecast at 4.924 bb, up from a KSU‐adjusted 4.783 bb in “old crop” MY 2017/18, and from 4.515
bb in MY 2016/17. Record high U.S. soybean total use of 4.415 bb is forecast for “new crop” MY 2018/19, up
from 4.163 bb in “old crop” MY 2017/18, and from 4.213 bb in MY 2016/17.
With previously mentioned changes in 2017 U.S. soybean production resulting from the outcome of the March
29th Grain Stocks report, the KSU‐adjusted USDA projection for “new crop” MY 2018/19 U.S. soybean ending
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stocks equals 509 million bushels (mb) (11.52% stocks/use), down from a KSU‐adjusted estimate of 620 mb in
“new crop” MY 2017/18 (14.89% stocks/use), but up from 302 mb in MY 2016/17 (7.17% stocks/use).
United States’ soybean prices are projected to average $9.40 /bu in “new crop” MY 2018/19, up from $9.30
/bu in “old crop” MY 2017/18, but down from $9.47 in MY 2016/17, and comparable to $8.95 /bu in MY
2015/16, and $10.10 /bu in MY 2014/15. It is estimated by Kansas State University that these KSU‐adjusted
USDA projections for “new crop” MY 2018/19 have a 55% probability of occurring.
D. Two Alternative KSU U.S. Soybean S/D Forecasts for “New Crop” MY 2018/19
To represent possible alternative outcomes from the KSU‐adjusted USDA February 23rd projection for “new
crop” MY 2018/19, two potential KSU‐Scenarios for U.S. soybean supply‐demand and prices are presented.
KSU Scenario 1) “HIGHER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (25%
probability): 88.982 ma planted, 99.15% harvested‐to‐planted, 88.222 ma harvested, 52.0 bu/ac average
yield, 4.588 bb production, 5.233 bb total supplies, 2.350 bb exports, 2.000 bb domestic crush, 135 mb seed &
residual use, 4.485 bb total use, 748 mb ending stocks, 16.68% Stocks/Use, & $8.50 /bu U.S. soybean average
price.
KSU Scenario 1) “LOWER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (20%
probability): 88.982 ma planted, 99.15% harvested‐to‐planted, 88.222 ma harvested, 42.0 bu/ac average
yield, 3.705 bb production, 4.350 bb total supplies, 2.000 bb exports, 1.960 bb domestic crush, 135 mb seed &
residual use, 4.095 bb total use, 255 mb ending stocks, 6.23% Stocks/Use, & $11.00 /bu U.S. soybean average
price.
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December 26, 2018
Grain Market Outlook
Kazakhstan wheat exports are forecast to be 8.50 mmt in “current” MY 2018/19, down from 9.00 mmt
in “old crop” MY 2017/18, but up from 7.40 mmt in MY 2016/17.
World total usage of wheat is projected to be a record high of 745.25 mmt in “current” MY 2018/19 – up
marginally from 744.16 mmt in “old crop” MY 2017/18, and from 739.86 mmt in MY 2016/17 (Figure 13).
World wheat ending stocks are projected to be 268.10 mmt in “current” MY 2018/19 – the 2nd highest in
history following the record high of 279.94 mmt in “old crop” MY 2017/18, and 261.04 mmt in MY 2016/17
(Figure 13). Since MY 2007/08, World wheat ending stocks have been growing an average of 12.7 mmt per
marketing year (by 9.9% annually) from the 10‐year low of 179.02 mmt in MY 2012/13 – out‐pacing the annual
growth in total use of 11.9 mmt per year (+1.9% annually) (Figures 14a‐b).
The distorting effect perpetually large Chinese wheat ending stocks on World wheat ending stocks figures
of will be examined in the following section.
World wheat percent ending stocks‐to‐use (% S/U) are forecast to be 35.97% in “current” MY 2018/19 ‐
the 2nd highest on record (Figures 14a‐b). The record high is 37.62% in “old crop” MY 2017/18, up from
35.28% on MY 2016/17 (3rd highest on record). World wheat % stocks‐to‐use have consistently increased each
year from the recent low of 26.02% in MY 2012/13 to the present – increasing to 28.5% in MY 2013/14; 31.7%
in MY 2014/15; 34.2% in MY 2015/16, 35.3% in MY 2016/17; and to the record high of 37.6% S/U in “old crop”
MY 2017/18; before a projected moderate decline to 36.0% in “current” MY 2018/19.
C. “World‐Less‐China” Wheat Supply‐Demand – “11‐Year LOW Ending Stocks”
The broader “large crop‐over supply‐low price” situation in the World wheat market continues to
“obscure” or “mask” the effect of large but somewhat isolated Chinese wheat stocks on actually available
World wheat supplies and stocks.
From a “World‐Less‐China” perspective, forecast ending stocks‐to‐use of 20.01% for “current” MY 2018/19
would be the lowest level in 11 years – since 17.54% S/U in MY 2007/08 (Figures 15a‐b). “World‐Less‐China”
wheat ending stocks‐to‐use are forecast to be down sharply from 23.86% in “old crop” MY 2017/18, and from
the range of 22.05% to 27.48% during the MY 2008/09 – MY 2017/18 period.
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This “World‐Less‐China” perspective compares to the aggregated “World” perspective, in which forecast
World wheat ending stocks‐to‐use of 35.97% for “current” MY 2018/19 would be the 2nd highest level in 12
years – down only from the high of 37.62% S/U in “old crop” MY 2017/18 (Figures 14a‐b).
IF in coming months this “China supply isolation factor” eventually leads to noticeably tighter available
global supplies of purchasable wheat for buyers to gain possession of to meet their domestic needs, it could
yet have a significant positive impact on U.S. and World wheat market prices during the January‐May period of
“current” MY 2018/19. However, unless there is such a noticeable “tightening” in accessible, available wheat
supplies for buyers in the broader, with a predominant move AWAY FROM a large aggregate global supplies
perspective over TO tight available “World‐Less‐China” supplies situation, the market’s attention on this factor
may not positively affect the pro‐active purchasing of World wheat market participants. The information in
the following section may be an impetus for that change.
D. Wheat Futures & Kansas Cash Markets Since the December 11th
CME Kansas HRW Wheat Futures
Since the USDA’s December 11th Crop Production and World Agricultural Supply and Demand Estimates
(WASDE) report, CME MARCH 2019 Kansas Hard Red Winter (HRW) Wheat futures have traded first higher,
and then lower. On the day of the reports, MAR 2019 Kansas HRW wheat futures opened at $5.10 ¼ /bu, and
traded in the range of $5.01 ½ to $5.14 ½ before closing $0.05 ½ lower to $5.02 ½ . Since then, MAR 2019
HRW wheat futures first trended higher, trading as high as $5.24 ½ on December 14th, but then trended down
to a low of $4.97 ½ on December 24th , before closing at $5.02 ½ /bu on that same day (Figure 1).
Kansas Cash Wheat Prices & Basis
On December 21st – the 8th trading day after the USDA reports – Kansas cash wheat price terminal quotes
for ordinary U.S. no. 1 HRW in central Kansas ranged from $4.68 ¾ to $4.87 ¾ per bushel – with basis ranging
from $0.34 under to $0.15 under MARCH 2019 KS HRW Wheat futures. Cash wheat prices in eastern Kansas
grain terminals ranged from $4.52 ¾ to $4.87 ¾ /bu with basis ranging from $0.50 under to $0.15 under MAR
2019 futures. These prices are still up 27%‐32% from the range of $3.42 ¼ to $3.83 ¼ /bu in late December
2017 in eastern and central Kansas – with basis at that time being from $0.80 under to $0.39 under nearby
MARCH 2018 futures.
In western Kansas on December 21st bids for ordinary U.S. no. 1 HRW wheat at selected grain elevators
ranged from $4.48 to $4.61 /bu, with basis being $0.55 under to $0.42 under MAR 2019 futures. Recent wheat
cash price bids in western Kansas are up 27% to 29% from $3.47 to $3.64 /bu in late December 2017 in this
same area – when local basis varied from $0.85 under to $0.58 under MARCH 2018 futures.
A Hard White Wheat (HWW) grain terminal bid was available in Wichita, Kansas on 12/21/2018 for $4.82
¾ /bu, with a basis of $0.20 /bu under MAR 2019 Kansas HRW wheat futures.
E. U.S. Wheat Supply/Demand – …
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