Grain Market Outlook for 2020 2019 Ag Lenders Conferences Garden City & Manhattan, Kansas October 9-10, 2019 DANIEL O’BRIEN EXTENSION AGRICULTURAL ECONOMIST Unpredictable Grain Markets in 2019-20 The “Ups & Downs” of U.S. Trade Tensions • U.S.-Japan Trade Agreement (+) o Likely positive impact on U.S. wheat exports vs TPP Countries • U.S. vs China (?) o Soybeans & Sorghum (Working towards final resolution) • USMCA Trade Agreement U.S.-Mexico-Canada To be ratified (+) o Mexico grain purchases from the U.S. o Canada grain export competition vs U.S. (Wheat, Oilseeds)
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Grain Market Outlook for 20202019 Ag Lenders Conferences
Garden City & Manhattan, Kansas
October 9-10, 2019
DANIEL O’BRIEN
EXTENSION AGRICULTURAL ECONOMIST
Unpredictable Grain Markets in 2019-20
The “Ups & Downs” of U.S. Trade Tensions
• U.S.-Japan Trade Agreement (+)o Likely positive impact on U.S. wheat exports vs TPP Countries
• U.S. vs China (?)o Soybeans & Sorghum (Working towards final resolution)
• USMCA Trade Agreement U.S.-Mexico-Canada To be ratified (+)
o Mexico grain purchases from the U.S.
o Canada grain export competition vs U.S. (Wheat, Oilseeds)
Grain Market Events to Come ….
1) 2019 U.S. Corn & Soybean harvest (Oct-Nov 2019)
o Corn2019 < 13.8 bln bu? End Stocks < 2.000 bb?
o Soybeans2018 < 3.6 bln bu? End Stocks < 600 mb?
2) U.S. HRW Wheat Seedings (Oct 2019)
o Dry soils & Fall Harvest conflicts may HRW seedings in 2019
o Struggling profitability for 2013-2018 HRW Wheat
More Grain Market Events to Anticipate….
3) Production of “New Crop” MY 2019/20 Export Competitors
• Soybeans So-Am 2020 Up 2-3% vs MY 2018/19 ‘China demand’
• Corn So-Am + Ukraine 2020 UP 35% per year since MY 2015/16
• Argentina politics / export taxes & Brazil & Ukraine domestic issues
4) 2019 U.S. Spring Wheat Crop Harvest Damage
• Wet conditions stopped harvest & damaged last 20-30%
• USDA to re-survey & for the November Crop Production report
More Grain Market Events to Anticipate….
5) 2020 U.S. Plantings of Fall Harvested Crop (April-May 2020)
• 1st determine U.S. crops in fall 2019 (Have short crops or not?)
• Soybeans U.S 2020 Uncertain ≈ U.S.-China Trade Status
• Corn U.S. 2020 Up ≈ U.S. Ethanol & Feed Demand
6) 2020 U.S. HRW Crop Development (April-June 2020)
Q? What will the protein &/or quality condition of the 2019 crop be?
Q? What “cross over” HRS vs HRW wheat market impacts will occur?
Corn & Sorghum Markets
Commercial Hedge Positions in CME CornCFTC Commitment of Traders to 10/1/2019
Managed Money (Spec) Positions in CME CornCFTC Commitment of Traders to 10/1/2019
U.S. Corn & Sorghum Stocks…..
• Corn: “Moderate” Stocks & % S/U
o End Stocks 2019/20 1.808 bln bu (vs 2.114 bb last year)
o % Stocks/Use 2019/20 12.8% S/U (vs 15.0% S/U last year)
• Grain Sorghum: “Low” Price$’s (Still hurt by trade issues)
o End Stocks 2019/20 54 mln bu ( Exports & Ethanol Use)
o % Stocks/Use 2019/20 15.0% S/U ( vs 18.6% S/U last year)
CME Corn FuturesWeekly Chart: September 2014 – October 4, 2019
DEC 2018$3.84 ¾ 10/4/2019
$3.18 (10/1/2014) $3.01 (8/31/2016)
$3.35 (12/12/2017)
$3.85
$3.30 (7/13/2018)
$3.40 (9/9/2019)
Corn Cash & Futures $’sGarden City, KS Local Elevators – October 4, 2019
$3.85 $3.97 $4.03 $4.06 $4.01 $4.04
$3.60$3.84 $3.80 $3.85
$2.43 $2.43 $2.43
$0
$1
$2
$3
$4
$5
$6
$7
Pric
e $
/bu
Futures Low $ High $ Mktg Loan-Finney Co.
$0.0408 /mo$0.0275 /mo $0.0163 /mo $0.0125 /mo
Corn Cash & Futures $’sSalina, KS Local Elevators – October 4, 2019
$3.85 $3.97 $4.03 $4.06 $4.01 $4.04
$3.30
$3.70 $3.74
$2.29 $2.29 $2.29
$0
$1
$2
$3
$4
$5
$6
$7
Pric
e $
/bu
Futures Low $ High $ Mktg Loan-Saline Co.
$0.0408 /mo$0.0275 /mo $0.0163 /mo $0.0125 /mo
U.S. Corn Acreage
Final 2019 ?U.S. Corn Harvested Acres
U.S. Corn YieldsUSDA 2018 USDA Forecast = 168.2 bu/ac
U.S. Corn Production & Supplies
U.S. Corn Use – By Category
Livestock Feed
Ethanol
DDGS Feed
DDGS Exports
End Stocks
U.S. Corn Ending Stocks & % Stx/Use
1,967
8211,232
1,731 1,7372,293 2,140 2,114
1,783
17.0
7.49.2
12.6 12.7
15.714.5 15.0
12.6
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
5
10
15
20
Mill
ion
Bush
els
% E
nd
Sto
cks-
to-U
se
Marketing Year
U.S. Corn % Stocks/Use vs Price$
World Corn Supply, Use & Stocks
U.S. Corn $USD-adj vs WorldLess China %Stx/Use MY 2007/08 through “New Crop” MY 2019/20
Sorghum Cash & Futures $’sGarden City, KS Local Elevators – October 4, 2019
$3.85 $3.97 $4.03 $4.06 $4.01 $4.04
$3.10
$3.35 $3.25
$2.17 $2.17 $2.17
$0
$1
$2
$3
$4
$5
$6
$7
Pric
e $
/bu
Futures Low $ High $ Mktg Loan-Finney Co.
$0.0408 /mo$0.0275 /mo $0.0163 /mo $0.0125 /mo
Sorghum Cash & Futures $’sSalina, KS Local Elevators – October 4, 2019
$3.85 $3.97 $4.03 $4.06 $4.01 $4.04
$2.99
$3.09
$3.29 $3.34
$2.17 $2.17
$0
$1
$2
$3
$4
$5
$6
$7
Pric
e $
/bu
Futures Low $ High $ Mktg Loan-Finney Co.
$0.0408 /mo$0.0275 /mo $0.0163 /mo $0.0125 /mo
U.S. Corn % Stocks/Use vs Price$
U.S. Sorghum % Stocks/Use vs Price$
Wheat Markets
Commercial Hedge Positions in HRW WheatCFTC Commitment of Traders to 10/1/2019
Managed Money (Spec) Positions in HRW WheatCFTC Commitment of Traders to 10/1/2019
U.S. Wheat Stocks…..
• All U.S. Wheat: “Large & Moderating” Stocks
o End Stocks 2019/20 1.080 bln bu (1.004 bb last year)
o % Stocks/Use 2019/20 53.0% S/U (46.2% Stx/Use last year)
• U.S. HRW Wheat: “Still Large” Carryover (also declining)
o End Stocks 2019/20 462 mln bu (506 mb last year)
o % Stocks/Use 2019/20 52.0% S/U (68.2% Stx/Use last year)
World Wheat Market Prospects:Large Supplies Less of a “Buyer’s Market”
• Record Supplies - & - Record Usage in MY 2019/20
o 2.1% in Production vs 1.5% in Usage 13.1% in End Stocks
• Forecast in 2019 crops in all nations except Kazakhstan
• More “competitive buying pressure” in World Trade
o “Tighter” supplies from a “World-Less-China” perspective
o Some evidence “healthy” U.S. HRW wheat exports in MY 2019/20
World Wheat Supply, Use & Stocks
CME Kansas Hard Red Winter WheatWeekly Chart: March 2015 – October 4, 2019
DEC 2019$4.04 10/4/2019
$4.04
$3.82 (12/7/2016) $3.98 (12/12/2017)
$3.81 (9/3/2019)
Wheat Cash & HRW Wheat FuturesGarden City, KS Local Elevators - October 4, 2019
$4.04 $4.19 $4.28 $4.38 $4.49
$3.44
$3.64
$2.80 $2.80 $2.80
$0
$2
$4
$6
Pric
e $
/bu
Futures Low $ High $ Marketing Loan - Finney County
$0.0483 /mo$0.0488 /mo
VSR Effect?
$0.0475 /mo $0.0563 /mo
Wheat Cash & HRW Wheat FuturesSalina, KS Local Elevators - October 4, 2019
$4.04 $4.19 $4.28 $4.38 $4.49
$3.50
$3.89
$3.03 $3.03 $3.03
$0
$2
$4
$6
Pric
e $
/bu
Futures Low $ High $ Marketing Loan - Saline County
$0.0483 /mo$0.0488 /mo
VSR Effect?
$0.0475 /mo $0.0563 /mo
U.S. Wheat Seeded Acreage
U.S. Wheat Planted & Harvested Acres
U.S. Wheat Production & Supplies
?
U.S. All Wheat Exports – Weekly thru September 26, 2019
U.S. HRW Wheat Exports – Weekly thru Sept. 26, 2019
U.S. Wheat Use – By Category
DDGS Feed
Food Use
Exports
End Stocks
U.S. Wheat Ending Stocks & % Stx/Use
456306
976
590
9761,181 1,099 1,080 1,004
22
13
49
24
5053 55
53
46
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0
10
20
30
40
50
60M
illio
n Bu
she
ls
% E
nd
Sto
cks-
to-U
se
Marketing Year
U.S. Wheat Ending Stocks/Use & Prices
World Wheat Ending Stocks & % Stx/Use
128
204180 198
223245 262
282 277 28621
31
2629
3234 36
40 39 40
0
100
200
300
400
500
600
0
10
20
30
40
Mill
ion
Me
tric
To
ns
% E
nd
ing
Sto
cks-
to-U
se
Marketing Year
U.S. Wheat Price ($) vs World % Stx/UseMY 2007/08 – “New Crop” MY 2019/20
World Wheat % S/U
@ 39%-40% last 3 years
U.S. Wheat $ vs Non-China % Stx/UseMY 1973/74 – “New Crop” MY 2017/18
BUT“World-Less-China”
% Stocks/Use
are the TIGHTEST
since 2013/14
Soybean & Cotton Markets
Commercial Hedge Positions in SoybeansCFTC Commitment of Traders to 10/1/2019
Managed Money (Spec) Positions in SoybeansCFTC Commitment of Traders to 10/1/2019
U.S. Soybean Market Prospects in 2018-19
A. U.S.-China Trade Dispute • HAS affected U.S. Soybean export shipments, forward
purchases & prices, with recent positive negotiation news
B. U.S. Exports forecast down 17%+ vs 2-3 years ago highs
• Foreign buyer “switching” between U.S. & South America
C. Market Focus in Fall-Winter 2018-19
• So. America crops – response to China demand in 2019
U.S. Soybean & Cotton Stocks…..
• Soybean: “Large” Stocks & % S/U
o End Stocks 2019/20 548 mln bu (Down vs 913 mb last year)
o % Stocks/Use 2019/20 13.6% S/U (Down vs 23.0% last year)
• Cotton: Large % Stocks/Use & Lower $’s in MY 2019/20
o Production 2019/20 21.9 mln bales (18.4 & 20.9 mb last 2 years)
o End Stocks 2019/20 7.2 mln bales (4.85 & 4.2 mb last 2 years)
o % Stocks/Use 2019/20 36.9% S/U (27.3% & 21.5% last 2 years)
CME Soybean Futures Weekly Chart: September 2014 through October 4, 2019
$8.66(9/11/2015)
$8.12 (9/18/2018)
NOV 2019$9.16 ¼ 10/4/2019
$9.16
$8.50
$8.15
Soybean Cash & Futures Price$’sGarden City, KS Local Elevators - October 4, 2019
$9.16 $9.30 $9.41 $9.50 $9.58 $9.62 $9.60
$7.71
$7.91 $7.91
$6.03 $6.03 $6.03
$0
$4
$8
$12
$16
Pric
e $
/bu
Futures Low $ High $ Marketing Loan - Finney Co.
$0.07 /mo $0.0525 /mo $0.0463 /mo $0.0413 /mo
Soybean Cash & Futures Price $’sSalina, KS Local Elevators - October 4, 2019
$9.16 $9.30 $9.41 $9.50 $9.58 $9.62 $9.60
$7.76
$8.36
$6.20 $6.20 $6.20
$0
$4
$8
$12
$16
Pric
e $
/bu
Futures Low $ High $ Marketing Loan - Saline Co.
$0.07 /mo $0.0525 /mo $0.0463 /mo $0.0413 /mo
U.S. Soybean Acreage
For 2019 ???Question re: Final
Harvested Acres
U.S. Soybean YieldsUSDA 2019 = 47.9 bu/ac
Final 2019???Impact of Wet Harvest???
45 bu/ac is still possible?
U.S. Soybean Production & Supplies
U.S. Soybean Exports – Weekly thru September 26, 2019
U.S. Soybean Use & End Stocks
U.S. Soybean % Stocks/Use vs Price$
World Soybean Supply, Use & Stocks
So. America Soybean Supply-Demand MY 2007/08 through “New Crop” MY 2019/20