When the USDA released its November 10th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, grain sorghum cash bids at first moved sharply lower, but have since moved sideways to marginally higher.
With expectations of a 594 million bushel (mb) U.S. grain sorghum crop, and a sizable 2015 U.S. corn harvest, and with large foreign coarse grain crops forecast in the “new crop” 2015/16 marketing year, U.S. sorghum cash prices are unlikely to rise to $4.25-$5.00+ by spring 2016 absent unexpected strength in market demand. If low grain sorghum cash prices persist through spring 2016, then sorghum enterprise net returns will be limited, making it likely that South American and U.S. farmers will reduce 2016 feedgrain acreage and production prospects as a result.
It is possible that a variety of market factors could still impact feedgrain market price direction and volatility in the later part of “new crop” 2015/16 marketing year. For now though low feedgrain prices have helped feedgrain-using industries to be profitable due to lower input costs and improved profitability. Over time both lower production in response to low profits and increased demand encouraged by low input prices are likely to cause a change in the prevailing “large crop – low price” market scenario in U.S./World coarse grain markets.
USDA U.S. Grain Sorghum Market Forecast
In the 11/10/2015 WASDE report, the USDA raised its forecasts of 2015 U.S. grain sorghum production and ending stocks – leading to a moderate decrease in projected U.S sorghum prices for “new crop” MY 2015/16. Projected 2015 U.S. sorghum production of 594 mb is up 20 mb from October, up 27% from 433 mb in 2014, and the largest U.S. sorghum crop since 1999. Forecast MY 2015/16 total sorghum usage of 555 mb (up 5 mb) includes food, seed and industrial use of 100 mb – up 85 mb from both October and from a year ago, anticipating a major increase in use of low cost corn for ethanol production.
Exports were forecast at 325 mb – down 105 mb from the October projection, and indicative of a moderation in Chinese import demand for sorghum. Feed and residual use was forecast to be 130 mb – up 25 mb from October and up 50 mb vs year ago – with low prices helping usage. Ending stocks are forecast at 58 mb (10.45% S/U) in “new crop” MY 2015/16 – up 16 mb from last month, and up from 18 mb (4.1% S/U) in “old crop” MY 2014/15. “New crop” MY 2015/16 U.S. average cash prices are forecast in the range of $3.30-$3.90 /bu ($3.60 /bu midpoint) – down from the October WASDE forecast of $3.65-$4.35 /bu ($4.00 midpoint), versus $4.03 /bu in “old crop” MY 2014/15, $4.28 in MY 2013/14, and the record high $6.33 in MY 2012/13.
Kansas State University (KSU) U.S. Sorghum Market Forecasts
KSU forecasts of supply-demand and price scenarios for “new crop” MY 2015/16 are as follows:
a) “Higher Exports” Scenario (60% prob.): All crop assumptions equal to the USDA’s, but with higher sorghum exports of 375 mb and other adjustments, 6.64% stock/use, and $3.90 /bu U.S. MYA prices;
b) “Lower Exports” Scenario (40% prob.): All crop-size assumptions equal to the USDA’s, but with smaller sorghum exports of 275 mb and other adjustments, 21.4% stock/use, and $3.25 /bu U.S. prices.
World Coarse Grain Supply-Demand
World coarse grain supplies of 1,512.7 million metric tons (mmt) are projected for “new crop” MY 2015/16, up from 1,507.9 mmt in “old crop” MY 2014/15, and from 1,444.8 mmt in MY 2013/14.
Projected World ending stocks of 247.2 mmt (19.5% S/U) in “new crop” MY 2015/16 are up from 243.1 mmt (19.2% S/U) in “old crop” MY 2014/15, and from 210.9 mmt (17.1% S/U) in MY 2013/14.
Downward adjustments by the USDA in the November WASDE report to Chinese coarse grain feed use for the last three marketing years had a marked impact on World coarse grain supply-demand balances relative to a month earlier.