2018 Soybean, Corn, & Wheat Outlook KY and TN Grain Conference

Transcription

1 2018 Soybean, Corn, & Wheat Outlook KY and TN Grain Conference S. Aaron Smith, Crop Marketing Specialist, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee Extension

2 Overview Corn, Soybeans, and Wheat Supply Demand Stocks 2018 Price Outlook

3 Supply, Demand, Stocks, and Price Outlook WHEAT

4 Wheat Production continues to exceed production Total Global Production Billion Bushels Total Consumption Billion Bushels Demand is Flat Stocks are record large Projected Ending Stocks Billion Bushels Prices will continue to struggle to get above $5.00.

5 Source:

6 Global Soybean, Corn, and Wheat Consumption per Capita, Corn: : 42% bu/person/year Wheat: : 3% Wheat Corn Soybeans Soybeans: : 64%

7 30.0 Global Wheat Production, Consumption, and Ending Stocks, Billions of Bushels Ending Stocks Production Domestic Consumption

8 Global Days on Hand [Ending Stocks/(Consumption/365)], Days on Hand

9 Wheat Prices July futures range $4.25-$5.00/bu. There is not a lot of attractive pricing strategies for wheat (options?) Quality is going to be key to higher cash prices. Cover crop versus harvest Investment into the crop Finishing/harvesting costs Yield potential

10 Wheat - Net Return Table ($/acre) ($411/acre Cost of Production) Yield (bu/acre) (276) (261) (246) (231) (216) (201) (186) (171) (156) (141) (126) 3.20 (267) (251) (235) (219) (203) (187) (171) (155) (139) (123) (107) 3.40 (258) (241) (224) (207) (190) (173) (156) (139) (122) (105) (88) 3.60 (249) (231) (213) (195) (177) (159) (141) (123) (105) (87) (69) 3.80 (240) (221) (202) (183) (164) (145) (126) (107) (88) (69) (50) 4.00 (231) (211) (191) (171) (151) (131) (111) (91) (71) (51) (31) 4.20 (222) (201) (180) (159) (138) (117) (96) (75) (54) (33) (12) Price 4.40 (213) (191) (169) (147) (125) (103) (81) (59) (37) (15) 7 ($/bu) 4.60 (204) (181) (158) (135) (112) (89) (66) (43) (20) (195) (171) (147) (123) (99) (75) (51) (27) (3) (186) (161) (136) (111) (86) (61) (36) (11) (177) (151) (125) (99) (73) (47) (21) (168) (141) (114) (87) (60) (33) (6) (159) (131) (103) (75) (47) (19) (150) (121) (92) (63) (34) (5) (141) (111) (81) (51) (21) Yield - Ky 77; TN 70

11 Dakotas and Montana Drought

12 Supply, Demand, Stocks, and Price Outlook CORN

13 Corn Supply Global Increased acres Multiple production regions United States 2017 acreage down; record yield 2018 acreage flat/down?

14 Acres Harvested (millions) World Corn Harvested Acres, Million Acres (36 yrs) Million Acres (9 yrs)

15 Source:

16 World Corn Yields by Country (bu/acre) Country 1999 Yield 10 Year Average Yield 2017/18 Yield Difference from 10 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?

17 Yield (bu/acre) U.S. Yield = x R² = 0.95 U.S. Corn Yields, Yields increasing at a rate of 1.7 bu/acre year. Will this level out or accelerate? Record Yield bu/acre US Linear (US)

18 Corn: U.S. Average Yield USDA WASDE Projected August 10, 2017 = bpa September 12, 2017 = bpa Yield revisions added million bushels to U.S. production October 12, 2017 = bpa November 9, 2017 = bpa December 12, 2017 = bpa January 12, 2018 = bpa

19 Corn Demand and Stocks Global Global corn stocks estimated to shrink but still near record large (build up of stocks in the U.S.). Demand increasing - Continued economic growth is important. United States Domestic carryover continues to be problematic. 13% of production goes to exports. Trade / exports are crucial to reducing domestics stocks. NAFTA and Bi-lateral trade agreements are imperative. Competition for exports from South America and other exporting countries.

20 45 Global Corn Production, Consumption, and Ending Stocks, Billions of Bushels Ending Stocks Production Domestic Consumption

21 Global Days on Hand [Ending Stocks/(Consumption/365)], Days on Hand

22 Corn Supply and Demand January Change 16 to 17 Planted and Harvested Acres (million) & Yield Acres Planted Acres Harvested U.S. Yield (bpa) Supply (Million Bushels) Production 15,148 14, Total Supply 16,942 16,947 5 Use & Ending Stocks (Million Bushels) Feed and Residual 5,467 5, Ethanol 5,439 5, Food, Seed & Industrial 1,450 1, Exports 2,293 1, Total Use 14,649 14, U.S. Ending Stocks 2,293 2, Foreign Stocks 6,712 5,655-1,057 Price and Stocks to Use Ratio U.S. Avg. Price ($/bu) $3.36 $2.95-$3.55 -$0.10 U.S. Stocks/Use 15.65% 17.12% 1.47%

23 70 U.S. Corn Days on Hand [Ending Stocks/(Use/365)], Days on Hand

24 Corn Prices Range bound prices Old Crop Look for deferred futures contract opportunities to secure price on stored corn. Look for basis improvements. New Crop Start sales with December 2018 corn futures above $3.90. Fix additional production in 5-10 cent increments. Use options to protect the downside (exit before maturity).

25 Corn - Net Return Table ($/acre) ($608/acre Cost of Production) Yield (bu/acre) (408) (388) (368) (348) (328) (308) (288) (268) (248) (228) (208) 2.25 (383) (361) (338) (316) (293) (271) (248) (226) (203) (181) (158) 2.50 (358) (333) (308) (283) (258) (233) (208) (183) (158) (133) (108) 2.75 (333) (306) (278) (251) (223) (196) (168) (141) (113) (86) (58) 3.00 (308) (278) (248) (218) (188) (158) (128) (98) (68) (38) (8) 3.25 (283) (251) (218) (186) (153) (121) (88) (56) (23) (258) (223) (188) (153) (118) (83) (48) (13) Price 3.75 (233) (196) (158) (121) (83) (46) (8) ($/bu) 4.00 (208) (168) (128) (88) (48) (8) (183) (141) (98) (56) (13) (158) (113) (68) (23) (133) (86) (38) (108) (58) (8) (83) (31) (58) (3) (33) Record corn yields in KY (178) and TN (171)!

26 Price ($/bu) Global Corn Stocks-to-Use to Price Relationship, /18* 1 Projected 0 $ % 15% 20% 25% Stocks-to-Use Ratio Price ($/bu) U.S. Stocks-to-Use to Price Relationship, /18* Projected $ % 5% 10% 15% 20% 25% Stocks-to-Use Ratio

27 September December March July Nearby Corn Futures Prices

28 1.20 Upper-middle Tennessee Monthly Average Corn Basis, Basis ($/bu) January 13 March 13 May 13 July 13 Septmeber 13 November 13 January 14 March 14 May 14 July 14 September 14 November 14 January 15 March 15 May 15 July 15 September 15 November 2015 January 2016 March 2016 May 2016 July 2016 September 2016 November 2016 January 2017 March 2017 May 2017 July 2017 September 2017 November 2017

29 500 December Corn Futures Cents/Bushel Dec 31-Dec 30-Jan 1-Mar 31-Mar 30-Apr 30-May 29-Jun 29-Jul 28-Aug 27-Sep 27-Oct 26-Nov

30 Corn Markets: What I m Watching in Early 2018 Old Crop and New Crop NAFTA Exports sales (MY total = billion bushels higher = good for prices) Planting Intentions (crop insurance price determination period) South American second crop corn plantings Global Economic Growth (Positive, but is it Stable?) U.S. Dollar

31 Supply, Demand, Stocks, and Price Outlook SOYBEANS

32 Soybean Supply Global South American Growth Long Term Growth Prospects in China and India United States 2017 acreage up; 2 nd highest yield 2018 acreage flat?

33 350 World Soybean Harvested Acres, Acres Harvested (millions) Million Acres (31 yrs) +161 Million Acres (23 yrs)

34 Source:

35 World Soybean Yields by Country (bu/acre) Country 1999 Yield 10 Year Average Yield 2017/18 Yield Difference from 10 Year Average Argentina Brazil China United States World U.S. and South American yields are very similar, unlike corn. China has the potential to increase soybean yield and acres (over the long term)

36 60 U.S. Average Soybean Yield, Yield (bu/acre) U.S. Soybean Yield = x R² =

37 Acres (millions) U.S. Planted and Harvested Soybean Acres, Relative prices and lower input costs continue to make soybeans attractive to plant in Harvested Planted

38 Global Soybean Demand and Stocks Global soybean stocks are growing (build up of stocks in the U.S.). Demand increasing - continued economic growth is important. United States Strong domestic crush increases year-over-year. Almost 50/50 domestic use and exports. Trade / exports are crucial to reducing domestics stocks. Bi-lateral trade agreements are imperative. Competition for exports from South America and other exporting countries.

39 14 Global Soybean Production, Consumption, and Ending Stocks, Billions opf Bushels Ending Stocks Production Domestic Consumption

40 120 Global Soybean Days on Hand [Ending Stocks/(Consumption/365)], # of Days Meal Oil Soybean Meal Oil Soybean

41 Soybean Supply and Demand January Change 16 to 17 Planted and Harvested Acres (millions) & Yield Acres Planted Acres Harvested U.S. Yield (bpa) Supply (Million Bushels) Production 3,358 3,927 3,926 4,296 4, Total Supply 3,570 4,052 4,140 4,515 4, Use & Ending Stocks (Million Bushels) Crushing 1,734 1,873 1,886 1,899 1, Exports 1,638 1,842 1,942 2,174 2, Total Use 3,478 3,862 3,944 4,213 4, U.S. Ending Stocks Foreign Stocks 2,211 2,658 2,670 3,244 3, Price and Stocks to Use Ratio U.S. Price ($/bu) $13.00 $10.10 $8.95 $9.47 $8.80-$9.80 -$0.17 U.S. Stocks/Use 2.65% 4.95% 4.99% 7.17% 11.06% 3.90%

42 U.S. Soybean, Soybean Oil, and Soybean Meal Days on Hand [(Ending Stocks/(Use/365)], Meal Oil Soybean Meal Oil Soybean

43 Past Revisions to USDA Ending Stocks (Will they continue.) 2013/ / / / /18 August December July Final/Current

44 Billions of Bushels Soybean Exports as of Week Ending 01/18/2018 (20 Weeks) Year Average 1/ 2013/ / / / /2018 Accumulated Exports to Date Outstanding Sales MY Export Target

45 Soybean Pricing Old Crop Hopefully not much left to price. Basis opportunities are likely muted compared to previous years. New Crop $10.00 on the November start selling production in increments Price 25-60% of production pre-plant (can be more aggressive depending on marketing strategies) Secure a basis / cash price when favorable opportunities are presented.

46 Soybean - Net Return Table ($/acre) $436/acre Cost of Production Yield (bu/acre) (286) (249) (211) (174) (136) (99) (61) (24) (281) (242) (204) (165) (126) (87) (49) (10) (276) (236) (196) (156) (116) (76) (36) (271) (230) (189) (147) (106) (65) (24) (266) (224) (181) (139) (96) (54) (11) (261) (217) (174) (130) (86) (42) (256) (211) (166) (121) (76) (31) Price 9.25 (251) (205) (159) (112) (66) (20) ($/bu) 9.50 (246) (199) (151) (104) (56) (9) (241) (192) (144) (95) (46) (236) (186) (136) (86) (36) (231) (180) (129) (77) (26) (226) (174) (121) (69) (16) (221) (167) (114) (60) (6) (216) (161) (106) (51) (211) (155) (99) (42) Record soybean yields in KY (53) and TN (50)!

47 August November January March July September Nearby Futures Contract

48 0.80 Upper-middle Tennessee Monthly Average Soybean Basis, Basis ($/bu) (0.20) (0.40) (0.60) January 13 March 13 May 13 July 13 September 13 November 13 January 14 March 14 May 14 July 14 September 14 November 14 January 15 March 15 May 15 July 15 September 15 November 2015 January 2016 March 2016 May 2016 July 2016 September 2016 November 2016 January 2017 March 2017 May 2017 July 2017 September 2017 November 2017

49 1200 November Soybean Futures 1100 Cents/Bushel Nov 1-Dec 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov

50 Soybean Markets: What I m Watching in Early Old Crop and New Crop Trade with China 2018 Exports (Sales Pace and Shipments vs. Sales) South American Production (Brazil Up? Argentina Down?) Global Economic Growth (Positive, but is it Stable?) USD/Brazilian Real/Argentinian Peso/Chinese Yuan (Weaker USD = More U.S. Exports)

51 Questions? THANK YOU!