Soybean, Corn, & Wheat Outlook Middle Tennessee Grain Conference S. Aaron Smith, Crop Marketing Specialist, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee Extension aaron.smith@utk.edu https://ag.tennessee.edu/arec/pages/cropeconomics.aspx
Overview Corn, Soybeans, and Wheat Supply Demand Stocks 2018 Price Outlook
Supply, Demand, Stocks, and Price Outlook WHEAT
Wheat Production continues to exceed production Total Global Production 27.815 Billion Bushels Total Consumption 27.253 Billion Bushels Demand is Flat Stocks are record large Projected Ending Stocks 9.891 Billion Bushels Prices will continue to struggle to get above $5.00.
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 bu/person/year 6.0 5.0 4.0 3.0 2.0 Global Soybean, Corn, and Wheat Consumption per Capita, 1960-2017 Corn: 2000-17: 42% Wheat: 2000-17: 3% 1.0 0.0 Soybeans: 2000-17: 64% Wheat Corn Soybeans
Billions of Bushels 30.0 Global Wheat Production, Consumption, and Ending Stocks, 2000-2017 25.0 20.0 15.0 10.0 7.6 7.5 6.2 5.0 5.7 5.6 4.9 4.7 6.2 7.5 7.3 7.3 6.5 7.2 8.0 8.9 9.4 9.9 5.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ending Stocks Production Domestic Consumption
Days on Hand Global Days on Hand [Ending Stocks/(Consumption/365)], 2000-2017 129 126 102 85 94 91 79 76 97 114 111 105 94 103 113 124 127 133 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Supply, Demand, Stocks, and Price Outlook CORN
Corn Supply Global Increased acres Multiple production regions United States 2017 acreage down; record yield 2018 acreage flat?
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Acres Harvested (millions) 500 450 400 350 300 250 200 150 100 50 0 World Corn Harvested Acres, 1960-2017 +78 Million Acres (36 yrs) +81 Million Acres (9 yrs)
Source: https://cropmonitor.org/
World Corn Yields by Country (bu/acre) Country 1999 Yield 10 Year Average Yield 2017/18 Yield Difference from 10 Year Average Argentina 88 116 129 13 Brazil 40 74 86 12 China 79 90 97 7 European Union 102 108 113 5 Ukraine 40 86 89 2 United States 134 156 177 20 World 70 84 90 6 U.S. has a major yield advantage over other corn producers. Will US yields plateau? Will/when world yields catch up?
1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Yield (bu/acre) 200 180 160 140 120 100 80 60 40 20 0 U.S. Yield = 1.7429x + 3.3652 R² = 0.95 U.S. Corn Yields, 1926-2017 Yields increasing at a rate of 1.7 bu/acre year. Will this level out or accelerate? Record Yield 176.6 bu/acre US Linear (US)
Corn: U.S. Average Yield USDA WASDE Projected August 10, 2017 = 169.5 bpa September 12, 2017 = 169.9 bpa Yield revisions added 500-600 million bushels to U.S. production October 12, 2017 = 171.8 bpa November 9, 2017 = 175.4 bpa December 12, 2017 = 175.4 bpa January 12, 2018 = 176.6 bpa
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.
Billions of Bushels 45 Global Corn Production, Consumption, and Ending Stocks, 2006-2017 40 35 30 25 20 15 10 5 0 4.28 5.03 5.64 5.55 6.86 8.25 8.46 9.01 8.13 4.83 5.05 5.23 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ending Stocks Production Domestic Consumption
Days on Hand Global Days on Hand [Ending Stocks/(Consumption/365)], 2006-2017 79 81 79 55 60 67 63 52 54 56 67 71 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Corn Supply and Demand 2016 2017 January Change 16 to 17 Planted and Harvested Acres (million) & Yield Acres Planted 94 90.2-3.8 Acres Harvested 86.7 82.7-4.0 U.S. Yield (bpa) 174.6 176.6 2.0 Supply (Million Bushels) Production 15,148 14,604-544 Total Supply 16,942 16,947 5 Use & Ending Stocks (Million Bushels) Feed and Residual 5,467 5,550 83 Ethanol 5,439 5,525 86 Food, Seed & Industrial 1,450 1,470 20 Exports 2,293 1,925-368 Total Use 14,649 14,470-179 U.S. Ending Stocks 2,293 2,477 184 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%
70 U.S. Corn Days on Hand [Ending Stocks/(Use/365)], 2006-2017 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Days on Hand 42 47 51 48 32 29 27 33 46 46 57 63
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. For example, $3.90 = 10% of production; $4.00 = 20%. Look for basis opportunities.
Price ($/bu) 8 Global Corn Stocks-to-Use to Price Relationship, 2006-2017 7 6 2012 2011 5 4 3 2 1 2010 2006 2013 2007 2009 2008 2017* Projected $3.95 2014 2016 2015 0 10% 12% 14% 16% 18% 20% 22% 24% Stocks-to-Use Ratio
Price ($/bu) 8 7 6 U.S. Stocks-to-Use to Price Relationship, 2000-2016 2012 2011 5 4 3 2 1 2010 2013 2014 2003 2007 2008 2009 2016 2006 2017* Projected 2015 2002 2005 2004 2001 2000 0 0 0.05 0.1 0.15 0.2 0.25
Corn Markets: What I m Watching in Early 2018 Old Crop and New Crop NAFTA Exports sales pace (55% compared to 5-yr Avg of 59% of MY total) Planting Intentions (crop insurance price determination period) South American second crop corn plantings Global Economic Growth (Positive, but is it Stable?) U.S. Dollar
Supply, Demand, Stocks, and Price Outlook SOYBEANS
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?
Acres Harvested (millions) 350 World Soybean Harvested Acres, 1960-2017 300 250 200 +91 Million Acres (31 yrs) 150 100 50 0 +161 Million Acres (23 yrs)
Source: https://cropmonitor.org/
World Soybean Yields by Country (bu/acre) Country 1999 Yield 10 Year Average Yield 2017/18 Yield Difference from 10 Year Average Argentina 37 40 45 4 Brazil 38 44 47 3 China 27 26 27 1 United States 37 44 49 5 World 33 38 41 4 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)
1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Yield (bu/acre) 60 U.S. Average Soybean Yield, 1926-2017 50 40 U.S. Soybean Yield = 0.3641x + 11.149 R² = 0.94 30 20 10 0
1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Acres (millions) 100 90 80 70 60 50 40 30 20 10 0 U.S. Planted and Harvested Soybean Acres, 1926-2017 Relative prices and lower input costs continue to make soybeans attractive to plant. Harvested Planted
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.
Billions opf Bushels 14 Global Soybean Production, Consumption, and Ending Stocks, 2006-2017 12 10 8 6 4 2 2.31 1.94 1.58 2.23 2.59 1.96 2.03 2.26 2.85 2.87 3.55 3.62 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ending Stocks Production Domestic Consumption
# of Days 120 Global Soybean Days on Hand [Ending Stocks/(Consumption/365)], 2006-2017 100 80 60 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Meal 18 18 12 15 19 21 20 21 25 22 20 19 Oil 42 39 36 35 39 37 36 32 32 25 22 20 Soybean 102 84 70 93 102 75 77 81 94 91 107 104 Meal Oil Soybean
Soybean Supply and Demand 2013 2014 2015 2016 2017 January Change 16 to 17 Planted and Harvested Acres (millions) & Yield Acres Planted 76.8 83.3 82.7 83.4 90.1 6.7 Acres Harvested 76.3 82.6 81.7 82.7 89.5 6.8 U.S. Yield (bpa) 44.0 47.5 48 52 49.1-2.9 Supply (Million Bushels) Production 3,358 3,927 3,926 4,296 4,392 96 Total Supply 3,570 4,052 4,140 4,515 4,718 203 Use & Ending Stocks (Million Bushels) Crushing 1,734 1,873 1,886 1,899 1,950 51 Exports 1,638 1,842 1,942 2,174 2,160-14 Total Use 3,478 3,862 3,944 4,213 4,248 35 U.S. Ending Stocks 92 191 197 302 470 168 Foreign Stocks 2,211 2,658 2,670 3,244 3,152-92 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%
80 70 60 50 40 30 20 10 0 U.S. Soybean, Soybean Oil, and Soybean Meal Days on Hand [(Ending Stocks/(Use/365)], 2006-2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Meal 3 3 2 3 3 3 3 2 2 2 3 2 Oil 55 43 57 65 49 47 29 20 32 28 28 24 Soybean 68 24 17 16 24 20 16 10 18 18 26 40 Meal Oil Soybean
Past Revisions to USDA Ending Stocks (Will they continue.) 2013/14 2014/15 2015/16 2016/17 2017/18 August 220 430 470 330 460 December 150 410 465 480 445 July 140 255 350 410 - Final/Current 92 191 197 302 470
Billions of Bushels 2.5 Soybean Exports as of Week Ending 01/18/2018 (20 Weeks) 2.0 1.5 1.76 0.41 0.51 1.64 0.42 1.83 0.35 1.94 0.46 2.17 2.16 0.41 1.0 0.5 1.13 1.03 1.21 1.15 1.37 1.18 0.0 5 Year Average 1/ 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 Accumulated Exports to Date Outstanding Sales MY Export Target
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 Secure a basis / cash price when favorable basis is presented.
Nearby Close
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 1.00 Lower-Middle Tennessee Soybeans Basis, 2013-2017 0.80 0.60 0.40 0.20 0.00 (0.20) (0.40) (0.60)
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)
Questions? THANK YOU!