2017/18 Corn Outlook

Transcription

1 217/18 Corn Outlook 217 Ag Econ In service Training Dr. S. Aaron Smith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee Overview Domestic (U.S.) Supply and Demand Tennessee Global Supply and Demand Price, Commodity Program Payments, and Crop Insurance 218 Price Outlook 1

2 U.S. Supply Reduced acreage Five years of above trend line yield 2

3 12 U.S. Planted and Harvested Corn Acres, Acres (milions) Planted Harvested 1% U.S. Corn Harvested toplanted Ratio, % 8% Harvested to planted Ratio 7% 6% 5% 4% 3% 2% 1% % Max 92.5% Min 6.9% Average 87.3% StDev 4.5%

4 U.S. Corn Yields, Yield (bu/acre) U.S. Yield = x R² = US Linear (US) Yields increasing at a rate of 1.7 bu/acre year. Will this level out or accelerate? 4

5 U.S. Corn Production, $77 $74 14 Billions of Dollar $32 $55 $49 $47 $65 $62 $53 Increasing production and declining revenue! $49 $ Billions of Bushels Value Bushels 5

6 U.S. Corn Marketing Year (September 1 to August 31) Ending Stocks, Billions of Bushels Tennessee Acres Down Record Yield! Production Flat 6

7 Acres 1,2, 1,, 8, 6, 4, 2, Tennessee Corn Acres Planted and Harvested, % 9% 8% 7% 6% 5% 4% 3% 2% 1% % Harvested to Planted Ratio (%) Planted Harvested H/P Corn Acres Planted In Tennessee, 217 (FSA Certified) 7

8 Tennessee Top 5 Planted Acres of Corn, 217 (FSA Certified) 8

9 Tennessee Corn Yields, TN Yield = x R² =.88 Yield (bu/acre) TN Linear (TN) Tennessee Corn Production, Millions of Dollars $183 $318 $337 $319 $355 $632 $594 $615 $538 $458 $ Millions of Bushels $ BU 9

10 U.S. Demand Stable Will there be a new ethanol? 16. U.S. Corn Use, Billions of Bushels FSI Consumption Feed Dom. Consumption Exports billion bushels of corn projected to be used in ethanol production this marketing year. 1

11 Ethanol Facilities 12 U.S. Weekly Ethanol Production (Thousand Barrels per Day) Thousands of Barrels per Day Jun 4, 21 Oct 4, 21 Feb 4, 211 Jun 4, 211 Oct 4, 211 Feb 4, 212 Jun 4, 212 Oct 4, 212 Feb 4, 213 Jun 4, 213 Oct 4, 213 Feb 4, 214 Jun 4, 214 Oct 4, 214 Feb 4, 215 Jun 4, 215 Oct 4, 215 Feb 4, 216 Jun 4, 216 Oct 4, 216 Feb 4, 217 Jun 4, 217 Oct 4, 217 Average Weekly Production Year-over- Year Growth % % % % % 11

12 Source: Dr. Robert Wisner, biofuels economist balancesheet.pdf 8 US Corn and Byproduct Exports, Million MT Corn DDGS Corn Gluten Feed/Meal 12

13 7 U.S. Corn Days on Hand [Ending Stocks/(Use/365)], Days on Hand Corn Domestic Balance Sheet, USDA WASDE 217/18 Projected September 217/18 Projected October Change From Previous Month Change 216/17 to 217/18 213/14 214/15 215/16 216/17 Est. Planted and Harvested Acres & Yield Planted (Million Acres) Harvested (Million Acres) U.S. Yield (Bu/Acre) Supply (Million Bushels) Beg. Stocks 821 1,232 1,731 1,737 2,35 2, Production 13,829 14,216 13,62 15,148 14,184 14, Imports Total Supply 14,686 15,479 15,41 16,942 16,585 16, Use & Ending Stocks (Million Bushels) Feed and Residual 5,4 5,28 5,114 5,464 5,475 5, Ethanol 5,124 5,2 5,224 5,438 5,475 5, Food, Seed & Industrial 1,369 1,41 1,424 1,452 1,45 1, Exports 1,92 1,867 1,91 2,293 1,85 1, Total Use 13,454 13,748 13,664 14,647 14,25 14, U.S. Ending Stocks 1,232 1,731 1,737 2,295 2,335 2, Foreign Stocks 5,653 6,529 6,687 6,641 5,636 5, ,7 Price and Stocks to Use Ratio U.S. Avg. Price ($/Bu) $4.46 $3.7 $3.61 $3.36 $2.8-$3.6 $2.8-$3.6 $. -$.15 U.S. Stocks/Use 9.16% 12.59% 12.71% 15.67% 16.39% 16.38%.%.71% 13

14 Global Supply & Demand The US is still the dominant producer of corn but a much more diversified production base than soybeans MILLIONS OF ACRES 1,8 1,6 1,4 1,2 1, WORLD ACRES HARVESTED FOR SPECIFIED CROPS, Since 26 the world has added 1.2 million acres Since 26 the world has added 87 million acres of corn or an area roughly equal to the US Wheat Corn Rice, Milled Barley Sorghum Oats 14

15 World Corn Harvested Acres, Acres Harvested (millions) Million Acres (36 yrs) +81 Million Acres (9 yrs) World Corn Yields by Country(bu/acre) Country 1999 Yield 1 Year Average Yield 217/18 Yield Difference from 1 Year Average Argentina Brazil China European Union Ukraine United States World U.S. has a major yield advantage over other corn producers. Will US yields plateau? Will/when world yields catch up? 15

16 Source: Global Agricultural Monitoring Source: Global Agricultural Monitoring 16

17 Billions of Bushels World Corn Production by Country, United States ROW China Brazil European Union Argentina Ukraine US share of world corn production has decreased from 39% in 1999 to 35% in Global Corn Production, Consumption, and Ending Stocks, Billions of Bushels If global stocks due drop by 1 billion bushels this year, there is the potential for price improvements Ending Stocks Production Domestic Consumption 17

18 6 Global Corn Consumption Per Capita, bu/person/year : 2.5 bu/person/year 23: 4. bu/person/year 217: 5.5 bu/person/year Trade, ethanol, and increased demand for proteins from emerging markets Top 5 Corn Importersby Country, 217/18 Marketing Year 11% 54% 7% 11% 7% 1% European Union Mexico Japan Korea, South Egypt ROW 18

19 TOP 5 EXPORTERS OF CORN 217/18 MARKETING YEAR United States Brazil Argentina Ukraine Russia ROW 9% 4% 31% 14% 19% 23% Global Days on Hand [Ending Stocks/(Consumption/365)], Days on Hand

20 World Corn Supply and Use (Million Bushels) 217/18 (October) Country / Region Beginning Stocks Production Imports Domestic Feed Domestic Total Exports Ending Stocks World 8,936 4,895 5,74 25,68 41,92 5,933 7,911 US 2,295 14,28 5 5,5 12,435 1,85 2,34 Foreign 6,641 26,615 5,69 2,18 29,485 4,83 5,571 Argentina 219 1, , Brazil 365 3, ,47 2,421 1, South Africa Egypt EU 279 2, ,25 2, Japan Mexico 22 1, , Southeast Asia 13 1, ,421 1, South Korea Canada China 3,986 8, ,535 9, ,118 Ukraine 61 1, ROW 973 5,85 2,342 4,628 7, Price, Commodity Program Payments, and Crop Insurance Low price environment is likely to continue into 218 2

21 8 U.S. Average Farm Corn Price, $6.89 Price (S/bu) : Average = $.69; Range: $.29 $1.44; Duration: 24 years : Average = $1.27; Range: $1. $2.16; Duration: 3 years : Average = $4.29; Range: $3.4 $6.89; Duration: : Average = $2.36; Range: $1.5 $3.24; Duration: 33 years. $

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23 5 December Corn Futures 45 Cents/Bushel Dec 31 Dec 3 Jan 1 Mar 31 Mar 3 Apr 3 May 29 Jun 29 Jul 28 Aug 27 Sep 27 Oct 26 Nov

24 .5 Tennessee Monthly Average Corn Basis, Price ($/bu).1..1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Northwest Upper Mid Lower Mid Northwest Barge Points Memphis TN (Corn).4 Tennessee Corn Basis Five Region Average, & Basis ($/bu).1. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

25 Commodity Program Payments (Corn) ARC CO Payments 214: 17 Counties; payment rate $ $68.77 per base acre 215: 49 Counties; payment rate $ $84.64 per base acre 216: 92 Counties; payment rate $ $82.87 per base acre Payments will decline in 217 and substantially decline in 218 PLC Payments (Reference Price = $3.7) 214: $ $3.7 MYA 215: $.9/bu $3.61 MYA 216: $.34/bu $3.36 MYA 217: $.5/bu $3.2 MYA ****Payments are delayed one year 216 payments were received beginning Oct 1, 217**** Acres 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Tennessee Base, Planted, and Insured Acres 214: 144,428 acres of corn planted on generic base 215: 125,747 acres of corn planted on generic base Base Acres FSA Planted ('14 '16) NASS Planted ('14 '16) RMA Insured ('14 '16) 25

26 Tennessee Corn Crop Insurance Summary 218 Price Outlook When supply exceeds demand prices.. 26

27 Tennessee Considerations for 218 Old crop (217) National prices will improve late 217 to early 218 as the typical post harvest price trend should emerge. Tennessee basis is likely to remain weak South American weather, macro economic conditions, and trade will dictate any major price changes. New crop (218) Domestic carry over will continue to weigh on prices however a glimmer of hope may occur if global stocks decline as projected by the USDA Planted acreage will be dictated by relative prices (soybeans and cotton), crop insurance prices, and South American crop progress U.S. Corn Stocks to Use to Price Relationship, Price = 4.27ln(Stocks to Use) R² =.7632 Price ($/bu) : 16.4% =$ % 5% 1% 15% 2% 25% Stocks to Use 27

28 8 Global Corn Stocks to Use to Price Relationship, Price ($/bu) y = 4.329ln(x) R² = % 5% 1% 15% 217: 19% 2% 25% Stocks to Use Ratio =$4.4/bu 218 Price Projections Source 218 Price CBOT $3.96 CBO $3.59 FAPRI $3.64 WASDE $2.8 $3.6 28

29 Price ($/bu) Average Monthly Deviation from the Marketing Year Average Corn Price in Tennessee, $.4 $.8 $.26 $.19 $.27 $.48 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC $.9 $.7 $.4 $.36 $.22 $.18 Corn - Net Return Table ($/acre) Assumed Cost of Production $491/acre Yield (bu/acre) (291) (271) (251) (231) (211) (191) (171) (151) (131) (111) (91) 2.25 (266) (244) (221) (199) (176) (154) (131) (19) (86) (64) (41) 2.5 (241) (216) (191) (166) (141) (116) (91) (66) (41) (16) (216) (189) (161) (134) (16) (79) (51) (24) (191) (161) (131) (11) (71) (41) (11) (166) (134) (11) (69) (36) (4) (141) (16) (71) (36) (1) Price 3.75 (116) (79) (41) (4) ($/bu) 4. (91) (51) (11) (66) (24) (41) (16)

30 Soybean/Corn (s/c) Price Ratio Monthly U.S. Price Ratios Corn, Soybeans, and Upland Cotton, Price ratio is one out of three relative ratios to consider (price, yield, & cost) Cotton/Corn and Cotton/Soybean Price Ratio s/c ct/c ct/s Key Issues for 218 Global supply of grains remains record large Trade Competition for exports from South America Huge unknown in trade policy/bilateral/multilateral trade agreements U.S. 218 acres planted? Macro economic conditions and domestic policy Look for continued low prices $3. $4. per bushel with the possibility of improved new crop price prospects Take advantage of marketing opportunities when they are presented 3

31 Resources Crop Economics Webpage Market highlights Crop Budgets UT Crop Blog Quarterly Market Zoom Meeting (next one Nov 8) Thank you Questions? 31