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July 31, 2018
Grain Market Outlook
he
U.S.‐China trade dispute is settled by say Fall 2018, that Chinese import purchases of U.S. grain sorghum will
resume at or near pre‐trade dispute levels. IF that occurs, then it is likely again that U.S. sorghum exports will
become the primary driver of grain sorghum usage, domestic prices, and market prospects going forward into
the future. In that event, U.S. grain sorghum would likely continue to find a sales niche in the Chinese
government’s feed inventory management program, i.e., filling needs for lower priced feedgrains that Chinese
buyers are unable to fill with artificially higher priced domestic supplies which are tied up in their corn stock
management programs.
The second possibility is a market path into the future focused more on a competitive “hammer &
tongues” or “slug it out” strategy aiming toward a balance of feed, bionenergy, AND export usage. This 2nd
possibility assumes that there will STILL be significant demand for U.S. grain sorghum in World export markets,
BUT not in the same manner or to the same degree as when China is exclusively focused on U.S. sorghum
import purchases. In this 2ND scenario, U.S. grain sorghum will compete with other feedgrains from the U.S.
and abroad on a price, quality, and productivity basis for usage in bioenergy and livestock feeding industries.
What is a “Prudent Direction” for U.S. Grain Sorghum to Take Going Forward? Of these two possible
paths for U.S. grain sorghum to pursue in the future, it may be prudent to prepare and proceed aiming for
maximum competitiveness as a feedgrain alternative in domestic and foreign markets. THEN if the large
export demand opportunities present themselves again for U.S. grain sorghum export sales to China or
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elsewhere, then to of course take advantage of them. Strategically speaking, there may be merit in following a
balanced strategy of being prepared for a long term competitive usage environment with other feedgrains on
the one hand, while being positioned to take advantage of periods on high export demand and prices may
occur.
B. Kansas Cash Grain Sorghum Market Prices on July 30, 2018
Kansas grain sorghum basis levels at major terminal elevators have remained wide since the imposition of
tariffs by China on U.S. grain sorghum imports in late winter 2017, and have been $0.25‐$0.60 /bu lower than
corn prices. However, cash grain bids at Kansas ethanol plants at some locations have been equal to that of
corn – indicating ready acceptance or sorghum as a competitive bioenergy source.
On July 30th cash grain sorghum price bids at major grain elevators in Western Kansas ranged from $3.07
to $3.27 /bu – with basis levels $0.60 to $0.40 /bu under CME SEPTEMBER 2018 corn futures. The high bid of
$3.27 /bu was in Sublette, Kansas in the livestock feeding demand center in Southwest Kansas. The corn price
that same day in Sublette was $3.67 /bu (even with SEP 2018).
Central Kansas cash grain sorghum price bids on July 30th ranged from $3.07 to $3.22 /bu with basis $0.75
to $0.45 / bu under. The high bid of $3.22 /bu was available in Salina, Wellington, and Arkansas City in Central
and South Central Kansas. The range of corn bids in these same three locations on July 30th was $3.42 ¼ to
$3.47 ¼ /bu (from $‐0.25 to $‐0.20 under SEP 2018).
In East Central Kansas at Topeka, the reported grain sorghum cash bid was $3.07 /bu (basis = $0.75 under
DEC 2018 corn). On July 30th in Atchison and Topeka in east central and northeast Kansas, corn bids were
$3.74 1/4 /bu ($0.07 /bu over SEP 2018 corn). Note that in late‐January 2018 at the height of Chinese export
demand for U.S. grain sorghum, the Topeka, Kansas grain sorghum public bid was the highest in the state, with
basis bids of $0.55‐$0.60 /bu over MARCH 2018 corn futures.
Kansas ethanol plant cash bids for grain sorghum on July 30th ranged from $3.37 to $3.92 /bu, with local
grain basis being $0.25 under to $0.30 over SEPT 2018 corn futures. Ethanol plant corn bids in Kansas the
same day were $3.74 to $3.92, with basis bids of $0.12 /bu over to $0.30 over JULY 2018 corn futures. So, the
top grain sorghum bids at Kansas ethanol plants on July 30th were equal to those for corn at the same
locations.
C. U.S. Grain Sorghum Supply‐Demand for “New Crop” MY 2018/19
Trade disagreements between the U.S. and China have severely damaged U.S. grain sorghum exports in
recent months (see Figure 7). However, total use in “old crop” MY 2017/18 ending August 31st and “new
crop” MY 2018/19 starting September 1, 2018 were NOT forecast to change appreciably by the USDA in the
July 12th World Agricultural Supply and Demand Estimates (WASDE) report. Rather, the USDA projects that
the leading factor in U.S. grain sorghum use will change from exports to other domestic uses such as ethanol
production. With no shortage of U.S. corn supplies in “new crop” MY 2018/19 anticipated at this time,
projected use of U.S. grain sorghum for livestock feeding remains stable.
In the July 12th WASDE report, the USDA projected 2018 U.S. Grain Sorghum plantings of 6,040,000 acres,
up 7.4% or 404,000 acres from 5.626 million acres (ma) in 2017, but down 9.7% from 6.690 ma in year 2016
Page | 3
(Tables 1a‐b, Figure 2). Harvested acres of U.S. Grain Sorghum in 2018 are projected to be 5,098,000 acres, up
from 5.045 ma in 2017, but still down 14.1% from 6.163 ma in year 2016. U.S. yields in 2018 are forecast at
67.3 bu/ac, down from 72.1 bu/ac in 2017, and 77.9 bu/ac in 2016 (Tables 1a‐b, Figure 3).
The USDA forecast that the 2018 U.S. Grain Sorghum production would be 356 million bushels (mb) – the
smallest U.S. crop in 6 years (Tables 1a‐b, Figure 4). This amount is down from 364 mb in 2017, 480 mb in
2016, and the 21‐year high of 597 mb in 2015. Total supplies of U.S. Grain Sorghum (i.e., beginning stocks +
production + imports) are forecast to be 390 mb in “new crop” MY 2018/19, down from 399 mb in “old crop”
MY 2017/18, 519 mb in MY 2016/17, and the 20‐year high of 620 mb in MY 2015/16.
Exports of U.S. Grain Sorghum are projected to be 175 mb in “new crop” 2018/19 – lowered 40 mb from
the June WASDE report forecast (Tables 1a‐b, Figures 5, 6, & 7). Total U.S. grain sorghum exports of 175 mb in
“new crop” MY 2018/19 would be down from the USDA’s forecast of 230 mb in “old crop” MY 2017/18, 238
mb in MY 2016/17, 342 mb in MY 2015/16 (2nd highest on record) and the record high of 352 mb in MY
2014/16. Livestock feed & residual use is projected to be 80 mb in “new crop” 2018/19 – down from 85 mb in
“old crop” MY 2017/18, and less than 133 mb in MY 2016/17 (Table 1a‐b, Figures 5 & 6).
Food, Seed & Industrial (FSI) use (including for bioenergy production) is projected to be 100 mb in “new
crop” 2018/19 – up sharply from a 4‐year low of 50 mb in “old crop” MY 2017/18, but less than 115 mb in MY
2016/17 and the record high of 137 mb in MY 2015/16. The 32‐year low of 15 mb in FSI use came during the
record high export year of MY 2014/15. Total use of U.S. Grain Sorghum in “new crop” MY 2018/19 of 355 mb
is forecast to be down from 365 mb in “old crop” MY 2017/18, from 485 in MY 2016/17, and from the 19‐year
high of 583 mb in MY 2015/16 (Tables 1a‐b, Figures 5 & 6).
Ending stocks of U.S. Grain Sorghum in “new crop” MY 2018/19 are projected to be 35 mb (9.9%
Stocks/Use or ‘S/U’) – up marginally from 34 mb (9.3% S/U) in “old crop” MY 2017/18, and from 33 mb (6.8%
S/U) in MY 2016/17 (Tables 1a‐b, Figures 5, 6 & 8).
The season average price for U.S. Grain Sorghum in “next crop” MY 2018/19 is projected to range from
$3.10‐$4.10 (midpoint = $3.60), with the midpoint being up from $3.15‐$3.25 (midpoint = $3.20) in “old crop”
MY 2017/18, and from $2.79 /bu in MY 2016/17 (Tables 1a‐b, Figures 8 & 9). This USDA scenario for “new
crop” MY 2017/18 is given a 50% likelihood of occurring by KSU Extension Agricultural Economist D. O’Brien.
D. Alternative KSU Supply‐Demand & Price Forecasts for “New Crop” MY 2018/19
The possibility exists of at least three (3) alternative supply‐demand and price outcomes for U.S. Grain
Sorghum markets in “new crop” MY 2018/19. It is assumed that there is a 50% probability of the USDA
forecast scenario in the July 12th WASDE report to ultimately occur. Alternative possible outcomes identified
by Kansas State University include the following (Table 1a):
#1) “Higher 2018 Production & Use for Ethanol” for “New Crop” MY 2018/19 (20% probability):
2018 Planted / harvested acres of 6.040/5.292 ma; 75.0 bu/ac yield (up vs 67.3 bu/acUSDA); 2018 production
of 397 mb (up vs 356 mbUSDA); total supplies of 431 mb (up vs 390 mb mbUSDA); exports of 175 mb, food‐
industrial‐seed (FSI) use of 135 mb (up vs 100 mbUSDA); feed & residual use of 80 mb; total use of 390 mb
Page | 4
(up vs 355 mbUSDA); ending stocks of 41 mb (down vs 35 mbUSDA); 10.51% ending stocks‐to‐use (up vs 9.94%
S/UUSDA); and $3.50 /bu U.S. average price (down vs $3.60 /buUSDA).
#2) “Higher Feed & Ethanol Use plus Lower Exports” for “New Crop” MY 2018/19 (15% probability):
2018 Planted / harvested acres of 6.040/5.292 ma; 67.3 bu/ac yield; 2018 production of 356 mb; total
supplies of 390 mb; exports of 150 mb (down vs 175 mbUSDA), food‐industrial‐seed (FSI) use of 115 mb (up
vs 100 mbUSDA); feed & residual use of 95 mb (up vs 80 mbUSDA); total use of 360 mb (up vs 355 mbUSDA);
ending stocks of 30 mb (down vs 35 mbUSDA); 8.33% ending stocks‐to‐use (down vs 9.94% S/UUSDA); and
$3.80 /bu U.S. average price (up vs $3.60 /buUSDA).
#3) “MUCH Higher Exports – Recovery to Pre‐tariff Levels” for “New Crop” MY 2018/19 (15% prob.):
2018 Planted / harvested acres of 6.040/5.292 ma; 67.3 bu/ac yield; 2018 production of 356 mb; total
supplies of 390 mb; exports of 230 mb (up vs 175 mbUSDA), food‐industrial‐seed (FSI) use of 60 mb (down
vs 100 mbUSDA); feed & residual use of 80 mb; total use of 370 mb (up vs 355 mbUSDA); ending stocks of 20
mb (down vs 35 mbUSDA); 5.41% ending stocks‐to‐use (down vs 9.94% S/UUSDA); and $4.25 /bu U.S. average
price (up vs $3.60 /buUSDA).
E. World Coarse Grain Supply‐Demand – All Countries
WORLD Coarse Grain Percent (%) Grain Ending Stocks‐to‐Use is tightening to the most constrained level in
six (6) years – since MY 2013/14. This tightening of available World Coarse Grain supplies relative to use
signals that stronger World use of coarse grains is expected to continue, and that more strength in U.S. and
World coarse grain prices may occur in the coming year than the World Coarse Grain market now anticipates.
Total Supplies of WORLD Coarse Grains in the “new crop” 2018/19 marketing year (MY) are projected to
be 1,557.9 million metric tons (mmt) – the 3rd highest on record behind 1,577.2 mmt in “old crop” MY 2017/18
and the record high of 1,617.95 mmt in MY 2016/17. World “Coarse Grains” include grain sorghum, corn,
barley, oats, rye, millet, and mixed grains (Figure 10).
Forecast WORLD Coarse Grains Total Use in “new crop” MY 2018/19 of 1,378.1 mmt is the highest on
record. The “new crop” MY 2018/19 forecast of 1,378.1 mmt in total use of WORLD Coarse Grains is up vs
previous record high of 1,356.2 mmt in “old crop” MY 2017/18, and vs 1,355.9 mmt (3rd highest on record) in
MY 2016/17. The estimated levels of WORLD Coarse Grain total use for MY 2016/17 – MY 2018/19 have
“stepped up” or “expanded” from the range of 1,236.3 – 1,276.5 mmt during MY 2013/14 through MY
2015/16 (Figure 10).
Ending Stocks of WORLD Coarse Grains in “new crop” MY 2018/19 are projected to be 6‐year low of 179.8
mmt – down 1.8 mmt from the June WASDE report. This would be down 18.7% vs 221.0 mmt in “old crop” MY
2017/18, and down from 262.0 mmt in MY 2016/17, 248.1 mmt in MY 2015/16, and 244.0 mmt in MY 2014/15
(Figure 10).
Page | 5
Percent (%) Ending Stocks‐to‐Use of WORLD Coarse Grains in “new crop” MY 2018/19 are projected to be
a historic 44‐year record low (the lowest since at least MY 1975/76) of 13.05% Stocks/Use (S/U). This would be
down vs 16.3% S/U in “old crop” MY 2017/18; from 19.3% S/U in MY 2016/17; 19.7% S/U in MY 2015/16; and
19.1% S/U in MY 2014/15 (Figure 11). For the sake of comparison and context, WORLD Coarse Grain percent
(%) S/U has declined as low as 14.6% in MY 2012/13; 13.9% in MY 2011/12; 15.2% in MY 2007/08; 13.7% in MY
2006/07, and 14.6% in MY 1975/76. A six (6) year low in WORLD Coarse Grains ending stocks combined with
continued growth in WORLD Coarse Grain Usage as resulted in a forecast of historically tight percent (%)
ending stocks‐to‐use in “new crop” MY 2018/19. “Tight” supply‐demand marketing years for WORLD Coars
Grains have generally been high priced time periods for U.S. feedgrains such as grain sorghum and corn.
F. World Coarse Grain Supply‐Demand – The “WORLD‐Less‐China” Perspective
Percent (%) Ending Stocks‐to‐Use of “WORLD‐Less‐China” Coarse Grains have also tightened considerably,
but less so than for the WORLD as a whole.
Ending Stocks of “WORLD‐Less‐China” Coarse Grains in “new crop” MY 2018/19 are projected to be 6‐
year low at 120.2 mmt – down 14.5% vs 140.6 mmt in “old crop” MY 2017/18. This projection for “new crop”
MY 2018/19 is also down from 160.0 mmt in MY 2016/17, 136.0 mmt in MY 2015/16, and 142.1 mmt in MY
2014/15 (Figure 12). The record low of 62.6 mmt occurred in MY 1995/96, followed by 64.4 mmt in MY
1975/76, 77.5 mmt in MY 1982/83, and 83.9 mmt in 1996/97 – all years of relative price strength for U.S. Feed
Grains.
Percent (%) Ending Stocks‐to‐Use of “WORLD‐Less‐China” Coarse Grains in “new crop” MY 2018/19 are
also projected to be a 6‐year low of 10.9% S/U. This would be down vs 12.9% S/U in “old crop” MY 2017/18;
and down from 14.5% S/U in MY 2016/17; 13.3% S/U in MY 2015/16; and 13.6% S/U in MY 2014/15 (Figure
12). Historically, “WORLD‐Less‐China” Coarse Grain percent (%) S/U has declined as low as 10.2% in MY
2012/13; 10.4% in MY 2011/12; 11.55% in MY 2010/11; 11.8% in MY 2006/07; 11.2% in MY 1996/97; 8.7% in
MY 1995/96; 13.5% in 1993/94; and 14.6% in MY 1975/76. These marketing years were generally high priced
time periods for U.S. feedgrains such as grain sorghum and corn.
…
September 1, 2005
LRP Insurance
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Westland/Hallmark; Chino, CA Event:
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