Feed Grain Outlook. May 26, 2017 Volume 26, Number 29. Today s Newsletter Market Situation Crop Progress 1

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1 Today s Newsletter Market Situation Crop Progress 1 Grain Use 1 Outside Markets 5 Marketing Strategies Seasonality Feed Grain Marketing Plan 7 Upcoming Reports/Events 9 Market Situation Crop Progress. The pace of corn planting in the U.S. reached 84% this week as reported in the Crop Progress for week #20. That number is just ahead of the long-term average for this week of 81%. Of the major producing state that are behind normal, Kansas is -16% (70% planted compared to a five-year average of 86%), Pennsylvania -10% (59% planted versus 69% normal), and Wisconsin -7% (65% planted versus 72% normal). U.S. Corn Planting Progress % Planted, % USDA Crop Progress, May 22, 2017 Week High Low Average 2017 Next week s Crop Progress, released on Tuesday due to the Memorial Day Holiday, will include the first corn crop condition ratings of the season. Grain Use. Ethanol production continues to run about 5% above last year and 12% above the five-year average. Production for the week of May 19 was million gallons per day; the average this corn marketing year is If the current production average extends to the end of the marketing year, about billion bushels of grain will be used for fuel production. Combined 1

2 corn for fuel and sorghum food, seed, and industrial for the 2016/17 marketing year is billion bushels, suggesting we may yet see some increase in the fuel category in supply and demand updates. 2016/17 U.S. Ethanol Production 2016/17 daily average = mil gal per day Implies use of 5,575 mil bu of grain (2.8 gal/bu) May USDA estimate = 5,450 mil bu corn for fuel, 115 mil bu sorghum fsi. Total = 5,565 mil bu Million gallons per day May % of last year 109% of average /17 marketing year to 2015/16: 105% 2016/17 marketing year to 5-yr avg: 112% year average 2015/ /17 Energy Information Administration, Weekly Petroleum Status Report, May 24, 2017 Ethanol conversion rate, Agricultural Marketing Resource Center, Iowa State University Broiler chicks placed for the week of May 20 were 2% above average and 3% above year ago levels. That rate of increase has been steady for most of this marketing year. The Cattle on Feed report will be released this afternoon at 2 pm central time. The average prereport estimate for total on feed May 1 is up 0.8% compared to a year ago on a 6.5% increase in placements and marketings up 1.8%. Another strong week of corn exports sales reported for May 18 th, 18 million bushels, twice the pace needed to achieve the target set by USDA for this marketing year of billion bushels. Sorghum export sales were off this week and exports sales for the year are at 75% of the target. Normally by the end of May, sales commitments are at 89% of the total. 2

3 Thousand 180, /17 Broiler Chicks Placed 19 states, weekly May 20, % of last year 103% of average 2016/17 MY Total to Date Year ago: 102% Average: 104% 175, , , , , ,000 5-year average 2015/ /17 Source: USDA/NASS, Broiler Hatchery, May 24, head 12,000 11,500 11,000 10,500 10,000 9,500 Cattle on Feed 1,000+ capacity feedlots April 1, % of last year 99% of average MY to date Year ago: +0.0% Average: -2.3% May 1, 2017 est. 101% of last year 101% of average 9,000 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5-yr avg 2015/ /17 Source: USDA/NASS, April 21,

4 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 Weekly Net Sales Cumulative Net Sales Projected MY Total Top Importers, Current MY, mil bu. Mexico % Japan % Korea % Colombia 156 7% Taiwan 113 5% Peru 109 5% Saudi Arabia 74 4% Pace to reach target: 9.2 Export Sales Commitments for the week 5/18/2017: 18 million bushels Total Export Sales Commitments this marketing year: 2,097 million bushels 94% of the 2016/17 MY Export Sales Target of 2,225 million bushels (May WASDE) Normal pace of sales end of May: 91% USDA, Foreign Agricultural Service: May 25, 2017 U.S. Grain Sorghum Export Sales Commitments, 2016/17 MY Mil bu 300 Projected MY Total Cumulative Net Sales Top Importers, Current MY, mil bu China % Mexico 13 8% Japan 8 4% 50 0 Weekly Net Sales Pace to reach target: 4.0 Export Sales Commitments for the week 5/18/2017: -127,000 bushels Total Export Sales Commitments this marketing year: 170 million bushels 75% of the 2016/17 MY Export Sales Target of 225 million bushels (May WASDE) Normal pace of export sales by the end of May: 89% USDA, Foreign Agricultural Service: May 25,

5 Outside Markets. Political turmoil in Brazil is spilling over into the U.S. soybean market. Calls for the resignation or impeachment of President Michel Temer, who was appointed following the impeachment last year of President Dilma Rousseff, have increased with accusations of bribery and obstruction of justice. The Brazilian economy is struggling to recover from what is described as its worst ever recession and rising unemployment. The market reflection of the political turmoil can be seen in the drop in the stock market and the value of the Brazilian currency, the real or BRL. The Sao Paulo Stock Exchange Index (IBOV), fell 10% last week and the BRL went from about 0.32 BRL per US dollar to 0.29, a decline of 9%. The price farmers in Brazil receive for soybeans is based on the price in Chicago converted to BRL. With the sharp drop in the value of the BRL, soybean prices in Brazil surged higher. Given the large soybean crop just harvested in Brazil, this price move was thought to encourage farmer selling of soybeans there, which put pressure on the price of soybeans in Chicago. Commenting on the price decline associated with the political situation in Brazil, Todd Hubbs with the University of Illinois notes how this is an indication of the fragility of the current soybean market (Hubbs, T. "Weekly Outlook: Summer Pricing for Corn and Soybeans." farmdoc daily (7):94, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 22, 2017). With fewer acres compared to year ago, feed grains may have more price resiliency than soybeans, where acres are on the increase. But this is still a good reminder of the price risk we face given factors beyond supply and demand. 5

6 Soybean Prices, USD and BRL per bushel USD 9.80 BRL /1/2017 5/2/2017 5/3/2017 5/4/2017 5/5/2017 5/6/2017 5/7/2017 5/8/2017 5/9/2017 5/10/2017 5/11/2017 5/12/2017 5/13/2017 5/14/2017 5/15/2017 5/16/2017 5/17/2017 5/18/2017 5/19/2017 5/20/2017 5/21/2017 5/22/2017 5/23/2017 5/24/2017 5/25/2017 5/26/2017 5/27/2017 5/28/2017 5/29/2017 5/30/2017 5/31/ S USD S BRL Prices as of 10:00 am CDT: II QTR Apr 26-May net change % change S&P 500 Index % CRB Commodity Index (3.24) -1.75% JUL 17 Crude Oil (2.05) -4.01% JUL 17 Copper (0.05) -1.85% JUN 17 Dollar Index (3.10) -3.08% JUL 17 Corn (0.0325) -0.87% SEP 17 Corn (0.0300) -0.78% DEC 17 Corn (0.0200) -0.51% 6

7 2-month chart: 3/27-5/26/17 Marketing Strategies Seasonality. The seasonal pattern for December corn from early March to early June is a sideways pattern. The 2017 contract is following suit. Normally, the highest price of the year is in June with below average prices from July to harvest. My marketing plan calls for having 40 to 60% of the 2017 crop priced by then Feed Grain Marketing Plan. I am ready to price the next 20% of the 2017 crop. I will use basic technical tools to time this sale when they provide the signal that prices are turning lower. With favorable production prospects, the current level of futures prices offers me the opportunity to lock in a price that covers total costs (BE=386). 7

8 Price December Corn Futures and Seasonal Index Patterns Index /3 2/3 3/3 4/3 5/3 6/3 7/3 8/3 9/3 10/3 11/3 12/3 CZ17 30-yr avg 10-yr avg 90 December Corn Futures and 2017 Marketing Plan /bu % 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 9/27/ /6/ /17/ /26/ /4/ /15/ /25/ /6/ /15/ /27/2016 1/6/2017 1/18/2017 1/27/2017 2/7/2017 2/16/2017 2/28/2017 3/9/2017 3/20/2017 3/29/2017 4/7/2017 4/19/2017 4/28/2017 5/9/2017 5/18/2017 5/30/2017 6/6/2017 6/13/2017 6/20/2017 6/27/2017 7/4/2017 7/11/2017 7/18/2017 7/25/2017 8/1/2017 8/8/2017 8/15/2017 8/22/2017 8/29/2017 9/5/2017 9/12/2017 9/19/2017 9/26/ /3/ /10/ /17/ /24/ /31/ /7/ /14/ /21/ /28/ /5/ /12/2017 8

9 Upcoming Reports/Events. May 26 June 9 June 23 June 29 June 30 Cattle on Feed WASDE and Crop Production Cattle on Feed Hogs and Pigs Acreage Grain Stocks September Master Marketer, Castroville, Texas, registration begins July 1 October 2-3 October October Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas Tel. (979) Fax. (979) JMWelch@tamu.edu 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