Feed Grain Outlook January 6, 2017 Volume 26, Number 01

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1 Today s Newsletter Market Situation Grain Use 1 Outside Markets 4 Marketing Strategies Seasonality Feed Grain Marketing Plan 8 Upcoming Reports/Events 9 Market Situation Grain Use. Reports related to grain use released recently generally show firm demand for feed grain. Ethanol production for the week of December 30 th was an all-time record high of million gallons per day. The average so far this corn marketing year suggests grain for fuel use 100 million bushels above the estimate in the December WASDE. 2016/17 U.S. Ethanol Production 2016/17 daily average = mil gal per day Implies use of 5,518 mil bu of corn (2.8 gal/bu) December USDA estimate = 5,300 mil bu corn for fuel, 120 mil bu sorghum fsi. Total = 5,420 mil bu Million gallons per day December % of last year 112% of average /17 marketing year to 2015/16: 103% 2016/17 marketing year to 5-yr avg: 111% year average 2015/ /17 Energy Information Administration, Weekly Petroleum Status Report, January 5, 2017 Ethanol conversion rate, Agricultural Marketing Resource Center, Iowa State University The December Cattle on Feed Report showed on-feed numbers down from December 2015, million head compared to million (-1%). For the corn marketing year, on cattle on feed inventories are -0.3% from last year and -2.7% from average. The big increase in livestock numbers came in the Quarterly Hogs and Pigs report. The U.S. All Hogs and Pigs inventory was 71.5 million head, 3.7% above last year and up 6.6% from the average. While the December 1 number is not a record (that was million head in 1943), 2016 did set record highs for hog and pig inventories in March, June, and September. 1

2 Broiler chick placements continue to run above year ago and average levels, +2.2% and +4.2%. 000 head 12,000 Cattle on Feed 1,000+ capacity feedlots December 1, % of last year 96% of average MY to date Year ago: -0.3% Average: -2.7% 11,500 11,000 10,500 10,000 9,500 9,000 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5-yr avg 2015/ /17 Source: USDA/NASS, December 23, 2016 U.S. All Hogs and Pigs Inventory 2016/17 MY Total to Date Year ago: +3.4% Average: +6.1% 000 head 74,000 73,000 72,000 71,000 70,000 69,000 68,000 67,000 66,000 65,000 64,000 December 1, % compared to last year +6.6% compared to average 71,286 71,500 1-Sep 1-Dec 1-Mar 1-Jun 5-yr avg 15/16 16/17 Source: Quarterly Hogs and Pigs, USDA/NASS, December 23,

3 Thousand 175, /17 Broiler Chicks Placed 19 states, weekly December 31, % of last year 103% of average 2016/17 MY Total to Date Year ago: +2.2% Average: +4.2% 170, , , , ,000 Source: USDA/NASS, January 4, year average 2015/ /17 Corn export sales in the 2016/17 marketing year are currently at 63% of USDA s marketing year target of billion bushels. Normally by the end of December, 55% of the yearly sales are on the books, 63% by the end of January. Mil bu 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, U.S. Corn Export Sales Commitments, 2016/17 MY Projected MY Total Cumulative Net Sales Weekly Net Sales Pace to reach target: 24.1 Export Sales Commitments for the week 12/29/2016: 17 million bushels Total Export Sales Commitments this marketing year: 1,407 million bushels 63% of the 2016/17 MY Export Sales Target of 2,225 million bushels (December WASDE) Normal pace of sales end of December: 55% USDA, Foreign Agricultural Service: 3

4 Grain sorghum exports were basically flat to end the calendar year. Current sales commitments stand at 119 million bushels of the 250 million projected for the year (48%). Week to week, China continues to be the dominant export destination for U.S. sorghum. U.S. Grain Sorghum Export Sales Commitments, 2016/17 MY Mil bu 300 Projected MY Total Cumulative Net Sales Weekly Net Sales Pace to reach target: 3.8 Export Sales Commitments for the week 12/29/2016: -8,000 bushels Total Export Sales Commitments this marketing year: 119 million bushels 48% of the 2016/17 MY Export Sales Target of 250 million bushels (December WASDE) Normal pace of export sales by the end of December: 57% USDA, Foreign Agricultural Service: Outside Markets. The minutes of the Federal Open Market Committee of the Federal Reserve from December were released on Wednesday. Minutes of the meetings of the FMOC are usually released 3 weeks after any policy decisions are made. In December, the committee raised the target range for the federal funds rate to ½ to ¾ percent on an improving labor market and the expectation that inflation would reach the 2% objective over the medium term. As to future rate hikes, the committee noted they would come in response to evolving economic conditions but, almost all also indicated that the upside risks to their forecasts for economic growth had increased as a result of prospects for more expansionary fiscal policies in coming years. But even if more rate increases are seen in 2017: The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. ( 4

5 The December jobs report released this morning showed an increase of 156,000 jobs in December and the unemployment rate up slightly to 4.7%. The broader measure of unemployment which includes people working part time but seeking full time positions, U6, is down to 9.2%, the lowest since April

6 In November, U.S. inflation as measured by the Consumer Price Index was up 1.7% compared to a year ago. Lower meat and grain prices are contributing to a decline in the food inflation index, down 0.4%. The USDA Economic Research Service notes in its Food Price Outlook, that supermarket prices are expected to decline in 2016 (annual deflation) for the first time since 1967 ( U.S. Inflation: All Items and Food % change from same period a year earlier Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 All Items Food Source: U.S. Bureau of Labor Statistics, December 15, 2016 Prices as of 9:00 am CST: I QTR Jan 6-Jan net change % change S&P 500 Index % CRB Commodity Index % MAR 17 Crude Oil % MAR 17 Copper % MAR 17 Dollar Index (1.24) -1.20% MAR 17 Corn % JUL 17 Corn % DEC 17 Corn % 6

7 Marketing Strategies Seasonality. Though every crop year is different, the seasonal index for the December corn futures contract indicates that favorable pricing opportunities are more likely in the first half of the crop year December Corn Futures and Seasonal Index Patterns Price CZ17 30-yr avg 10-yr avg Index

8 2017 Feed Grain Marketing Plan. I have done no pre-harvest pricing of the 2017 crop. I look for growing conditions in South America and early estimates of next year s acreage to shape the early season price prospects for next year s crop. Conditions in Brazil at this time are generally favorable putting downward pressure on prices but the soybean to corn price ratio suggests a significant shift in acres in the U.S. next year. The 20-day average of the November soybean to December corn price ratio for 2017 is 2.6. That is a level that favors soybean returns over corn returns in many mid-west crop budgets. Last year the price ratio of the RMA base prices was 2.29; the ratio during the survey period for the Planting Intentions report was Nov Soybean: Dec Corn Price Ratio Plant Soybeans RMA Price Discovery March Planting Intentions Survey Plant Corn SB:C ratio 20 day MA December Corn Futures and 2017 Marketing Plan /bu % 20% 20% 20% 20% South American crop conditions Battle for Acres Planting Intentions Planting Intentions Grain Stocks Early season crop conditions/ progress Weather outlook Acreage Report/ Grain Stocks Weather Tassel and August Crop Report Cash sales at harvest 9/16/2016 9/28/ /10/ /20/ /1/ /11/ /23/ /6/ /16/ /29/2016 1/9/2017 1/17/2017 1/25/2017 2/2/2017 2/10/2017 2/18/2017 2/26/2017 3/6/2017 3/14/2017 3/22/2017 3/30/2017 4/7/2017 4/15/2017 4/23/2017 5/1/2017 5/9/2017 5/17/2017 5/25/2017 6/2/2017 6/10/2017 6/18/2017 6/26/2017 7/4/2017 7/12/2017 7/20/2017 7/28/2017 8/5/2017 8/13/2017 8/21/2017 8/29/2017 9/6/2017 9/14/2017 9/22/2017 9/30/ /8/ /16/ /24/ /1/ /9/ /17/ /25/ /3/ /11/2017 8

9 Upcoming Reports/Events. January 8-14 January 10 January 12 January January 27 September October 2-3 October October The Executive Program for Agricultural Producers, information available at tepap.tamu.edu Short-term Energy Outlook Crop Production WASDE Grain Stocks Winter Wheat and Canola Seedings Feed Grain Marketing Plan Workshop, Amarillo Cattle on Feed Master Marketer, Uvalde-San Antonio area Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas Tel. (979) Fax. (979) The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas A&M AgriLife Extension Service. The author and Texas A&M AgriLife Extension Service assume no liability for the use of this newsletter. The Texas A&M AgriLife Extension Service provides equal access in its programs, activities, education and employment, without regard to race, color, sex, religion, national origin, disability, age, genetic information, veteran status, sexual orientation or gender identity. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating 9