Feed Grain Outlook January 27, 2017 Volume 26, Number 05

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1 Today s Newsletter Market Situation Grain Use 1 Outside Markets 4 Marketing Strategies Seasonality Feed Grain Marketing Plan 5 Upcoming Reports/Events 7 Market Situation Grain Use. Reports related to grain use this week continue to show firm demand for feed grain. Ethanol production for the week of January 20 th of million gallons per day dipped slightly below the record high the week before but is the widest spread above last year and average in the current corn marketing year. Grain consumed for ethanol at the current rate is about 100 million bushels above the estimate in the January WASDE. 2016/17 U.S. Ethanol Production 2016/17 daily average = mil gal per day Implies use of 5,552 mil bu of corn (2.8 gal/bu) January USDA estimate = 5,325 mil bu corn for fuel, 125 mil bu sorghum fsi. Total = 5,450 mil bu Million gallons per day January % of last year 116% of average /17 marketing year to 2015/16: 104% 2016/17 marketing year to 5-yr avg: 112% year average 2015/ /17 Energy Information Administration, Weekly Petroleum Status Report, Ethanol conversion rate, Agricultural Marketing Resource Center, Iowa State University The January Cattle on Feed Report showed on-feed numbers about on par with a year ago, million head compared to million on January 1, For the corn marketing year, on cattle on feed inventories are -0.2% from last year and -2.8% from average. Broiler chick placements continue to run above year ago and average levels, for the week of January 21, +3% and +5%. 1

2 000 head 12,000 11,500 11,000 10,500 10,000 9,500 Cattle on Feed 1,000+ capacity feedlots January 1, % of last year 97% of average MY to date Year ago: -0.2% Average: -2.8% 9,000 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5-yr avg 2015/ /17 Source: USDA/NASS, Thousand 175, /17 Broiler Chicks Placed 19 states, weekly January 21, % of last year 105% of average 2016/17 MY Total to Date Year ago: +2.1% Average: +4.1% 170, , , , ,000 Source: USDA/NASS, 5-year average 2015/ /17 2

3 Corn export sales in the 2016/17 marketing year are currently at 69% of USDA s marketing year target of billion bushels. Normally by the end of January, 63% of the yearly sales are on the books. 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: 22.2 Export Sales Commitments for the week 1/192/2017: 54 million bushels Total Export Sales Commitments this marketing year: 1,538 million bushels 69% of the 2016/17 MY Export Sales Target of 2,225 million bushels (January WASDE) Normal pace of sales end of January: 63% USDA, Foreign Agricultural Service: January 26, 2017 Grain sorghum exports were basically flat to end the calendar year. Current sales commitments stand at 125 million bushels of the 250 million projected for the year (50%). To date this marketing year, of the known destinations, China continues to be the dominant importer of U.S. sorghum (75%) followed by Mexico (4%) and Japan (3%). 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: 4.0 Export Sales Commitments for the week 1/19/2017: 3 million bushels Total Export Sales Commitments this marketing year: 125 million bushels 50% of the 2016/17 MY Export Sales Target of 250 million bushels (January WASDE) Normal pace of export sales by the end of January: 65% USDA, Foreign Agricultural Service: January 26,

4 Rising trade concerns with Mexico could have an impact on the U.S. grain market. In the current marketing year, Mexico is the number one importer of U.S. corn (27% of total sales), number two in soybeans (5%), and number one in wheat (10%) (USDA, Grain Transportation Report, January 26, 2017). Outside Markets. The Bureau of Economic Analysis released updated GDP estimates of the U.S. economy this morning. The preliminary estimate for the fourth quarter of 2016 is +1.9%, up from $16,727 billion in the third quarter to $16,805. Giving a boost to GDP was personal consumption spending up $71 billion, business inventories and investment up $72 billion, and government spending up $9 billion. A negative influence on GDP was a decrease in net exports (increased imports) of $77 billion, the lowest level of net exports since the first quarter of The Bureau also revised the estimate of 3rd Quarter GDP growth from 3.1% to 3.5%. GDP, % change annual basis 6% 4% 2% 0% -2% -4% -6% -8% Prices as of 11:30 am 2006 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 Source: U.S. Bureau of Economic Analysis, updated 3-Jan 27-Jan net change % change I QTR 2017 S&P 500 Index % CRB Commodity Index % MAR 17 Crude Oil (0.42) -0.79% MAR 17 Copper % MAR 17 Dollar Index (2.59) -2.51% MAR 17 Corn % JUL 17 Corn % DEC 17 Corn % -10% 4

5 December 28, 2016 through 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. The pattern so far this year is consistent with the average seasonal index Feed Grain Marketing Plan. I made the decision to price the first 20% of the 2017 feed grain crop on Thursday at 390¾. December corn futures had broken above a topside level of resistance then fell back below. This price level is above my projected cost of production so I decided to go ahead and lock that in on a portion of production. I hope that this is the worst sale I make all year. 5

6 Price December Corn Futures and Seasonal Index Patterns Index CZ17 30-yr avg 10-yr avg 90 Conditions in Brazil at this time are generally favorable but this may be offset by expectations of a major shift in corn acres this year. As we approach the window of RMA base price discovery, 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 6

7 /bu December Corn Futures and 2017 Marketing Plan 20% 20% 20% 20% 20% South American crop conditions Battle for Acres Planting Intentions Sold 20% at 390¾ 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 1/11/2017 1/24/2017 2/3/2017 2/11/2017 2/19/2017 2/27/2017 3/7/2017 3/15/2017 3/23/2017 3/31/2017 4/8/2017 4/16/2017 4/24/2017 5/2/2017 5/10/2017 5/18/2017 5/26/2017 6/3/2017 6/11/2017 6/19/2017 6/27/2017 7/5/2017 7/13/2017 7/21/2017 7/29/2017 8/6/2017 8/14/2017 8/22/2017 8/30/2017 9/7/2017 9/15/2017 9/23/ /1/ /9/ /17/ /25/ /2/ /10/ /18/ /26/ /4/ /12/2017 Upcoming Reports/Events. February 1 February 9 February 24 March 31 September October 2-3 October October Grain Crushings Crop Production WASDE Cattle on Feed Grain Stocks Prospective Plantings Master Marketer, Uvalde-San Antonio area 7

8 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 8