FAPRI agricultural commodity outlook By William H. Meyers Howard Cowden Professor of Agricultural and Applied Economics FAPRI at MU UN DESA Expert Group Meeting on the World Economy 21 October 2013 New York, NY
World Bank food, energy, metals price indices, 1/00 to 7/13, 2005=100
With such volatility, what are US midwest farmer expectations? Source: Farmer meeting in the midwest August, 2013 $275/tonne
Agenda Some perspective On the near term On the longer term Market outlook as of August 2013 Possible impacts of policy developments
Bushels per acre Drop in US corn yield, bu/ac --three years in a row! 170 160 150 140 130 120 110 100 90 80 U.S. corn yield Trend Source: FAPRI calculations based on NASS data, October 2012
Bushels per acre Dollars per bushel U.S. corn yields and prices U.S. corn yield U.S. corn farm price 170 8 160 7 150 6 140 130 5 4 3 120 2 110 1 100 2009 2010 2011 2012 2013 0 09/10 10/11 11/12 12/13 13/14 Source: USDA WASDE, August 2013
Million metric tons Million metric tons Global grain supply, use and stocks World grain production 2450 2400 2350 2300 2250 2200 2150 2100 2050 10/11 11/12 12/13 13/14 09/10 500 490 480 470 460 450 440 430 420 410 400 390 World grain ending stocks 09/10 10/11 11/12 12/13 13/14 Production Use Ending stocks Source: USDA WASDE, August 2013
Last years BIG decline (USDA WASDE Sept 12, 2013) Production (mil mt) 2011/12 2012/13 change Coarse Grains 1154.0 1128.5-25.5 USA 323.7 286.0-37.7 FSU-12 78.7 69.0-9.7 EU-27 150.0 145.1-4.9 Wheat 697.2 655.3-41.9 FSU-12 115.0 77.2-37.8 EU-27 and Aus. 168.0 155.1-12.9 USA 54.4 61.8 7.4
This years BIGGER increase (USDA WASDE Sept 12, 2013) Production (mil mt) 2012/13 2013/14 e change Coarse Grains 1128.5 1245.5 117.0 USA 286.0 367.8 81.8 FSU-12 69.0 85.2 16.2 EU-27 145.1 156.2 11.1 Wheat 655.3 708.9 53.6 FSU-12 77.2 108.0 30.8 EU-27 and Aus. 155.1 168.4 13.3 USA 61.8 57.5-4.3
Recent corn price movements FAPRI baseline 13/14 $4.64
Things happen, recent soybeans.. FAPRI baseline 13/14 $11.33
China: The setting for the next decade (FAO view) Success in growth, food consumption/security, rural incomes Rising constraints raise issue on how sustainable growth is Land, water, labor are in tight supply Real exchange rates are rising Increasing government support How much will demand grow?? Slowing population growth, but rapid urbanization High income growth continues Consumption base room to grow but nearing saturation? 12
2006 2008 2010 2012 2014 2016 2018 2020 2022 2006 2008 2010 2012 2014 2016 2018 2020 2022 Million metric tons Million metric tons China grain and oilseed imports 20 18 16 14 12 10 8 6 4 2 0 Grain imports 120 100 80 60 40 20 0 Oilseed sector imports Coarse grains Wheat Rice Oilseeds Meals Oils Source: OECD/FAO outlook, June 2013
Kilograms per capita 1990 1994 1998 2002 2006 2010 Source: author calculations from PSD Online data. Trend is simple linear trend fit over 1990-2012. Global crop use per capita 140 120 100 80 60 40 20 0 Maize Wheat Rice Soybeans 2010-12 average Kg/yr Annual growth rate Kg/yr Percent growth rate Maize 123 1.6 1.3% Wheat 96-0.2-0.2% Milled rice 65 0.0 0.0% Soybeans 37 0.8 2.3% Increases in per-capita feed use account for about 39% of the increase in per-capita use since 1990. Ethanol and other uses account for the rest. Increased use of soymeal in livestock rations and soyoil in both food and industrial uses contributed to the growth in per-capita use.
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Kilograms per capita World grain and oilseed production and use per capita 400 390 380 370 360 350 340 330 320 310 Production Use Sources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Kilograms per capita World grain and oilseed production and use per capita minus US ethanol 400 390 380 370 360 350 340 330 320 310 Production Use Minus US ethanol Sources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Kilograms per capita World less China grain and oilseed production and use per capita 410 400 390 380 370 360 350 340 330 320 310 Production Use Minus US ethanol Sources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
Million metric tons U.S. maize ethanol & coproduct use 160 140 120 100 80 60 40 20 0 Increase from 2005/06 to 2010/11: 87 mil. mt Increase from 2010/11 to 2022/23: 14 mil. mt FAPRI-MU Jan. USDA Jul. Sources: FAPRI-MU baseline, January 2013 and USDA WASDE, July 2013.
2013 dollars per capita China real GDP per capita 14,000 12,000 10,000 8,000 Doubled from 2004-2012 (10%/yr.) Doubles again from 2012-2022 (7%/yr.) 6,000 4,000 GDP/cap. Source: IHS Global Insight, Jan. 2013 2,000 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Kg/person/year China: Per capita meat + fish consumption rises to OECD levels 100 90 80 70 60 50 40 30 20 10 0 1995 2000 2005 2010 2015 2020 China meat OECD meat China meat + fish OECD meat + fish Source: Holger Matthey, FAO, based on the OECD/FAO Agricultural Outlook, June 2013 20
Agenda Some perspective On the near term On the longer term Market outlook as of August 2013
Real GDP growth rates Source: IHS Global Insight, July 2013
Oil and Natural Gas prices Source: IHS Global Insight, July 2013
Dollars per bushel U.S. corn prices Farm and futures prices 8 7 6 5 4 3 2 1 0 06/07 08/09 10/11 12/13 14/15 16/17 18/19 FAPRI farm price Dec. futures price Sources: FAPRI- MU baseline, Aug. 2013; CME Dec. contracts, Oct. 17, 2013
Dollars per bushel U.S. soybean prices Farm and futures prices 16 14 12 10 8 6 4 2 FAPRI farm price Nov. futures price Sources: FAPRI-MU baseline, Aug. 2013; CME Nov. contracts, Oct. 17, 2013 0 06/07 08/09 10/11 12/13 14/15 16/17 18/19
Sharp Price Drop Expected After 3 Years of Low Yield 400 350 300 250 200 150 100 50 Feed grains prices, $/mt Corn, #2 yellow, U.S. Gulf Barley, Alberta Sorghum, #2 yellow, U.S. Gulf 0 1990 1995 2000 2005 2010 2015 2020
Farmer expectations and FAPRI s FAPRI Outlook Source: Farmer meeting in the midwest August, 2013 $180/tonne $275/tonne
Improved Supplies After 2012 Ease Wheat Price Wheat price, U.S. Gulf, $/mt 400 Hard Red Winter 350 Soft Red Winter 300 250 200 150 100 50 0 1990 1995 2000 2005 2010 2015 2020
Oilseed Prices Stay Strong But Not at Record Levels 700 Oilseed prices, $/mt 600 500 400 300 200 100 0 Soybeans, #2 yellow, Central Illinois Rapeseed, cif Hamburg 1990 1995 2000 2005 2010 2015 2020
Vegetable oils among the strongest due to demand growth. $/mt
Has come off of 10/11 high and slightly above past levels, $/mt
Doing stochastic simulations Need to select a set of exogenous variables and get joint distributions US crop yields Energy and input prices Demand equation errors Stock equation errors Export equation errors which combine all foreign origin shocks such as supply, demand and exchange rate shocks 500 Random draws from these to generate 500 scenarios (Meyer et al paper in JIATD)
Bushels per acre Dollars per bushel U.S. corn yields and prices Average and 3 of the 500 stochastic outcomes 200 190 180 170 160 150 140 130 120 110 100 U.S. corn yield 2009 2011 2013 2015 2017 Actual/avg. Outcome #26 Outcome #250 Outcome #375 8.00 7.00 6.00 5.00 4.00 3.00 2.00 U.S. corn prices Source: FAPRI-MU stochastic baseline, Jan. 2013 2009 2011 2013 2015 2017 Actual/avg. Outcome #26 Outcome #250 Outcome #375
Some alternative US corn price outcomes Source: Rough calculations based on FAPRI-MU projections August 2013 and January 2013 stochastic baseline
U.S. farm level corn price Source: Rough calculations based on FAPRI-MU projections August 2013 and January 2013 stochastic baseline
Agenda Some perspective On the near term On the longer term Market outlook as of August 2013 Possible impacts of policy developments
Renewable Fuel Standard Energy Independence and Security Act Establishes annual Renewable Fuel Standard Mandates for biodiesel, cellulosic biofuels, all advanced biofuels and a total No specific corn ethanol mandate EPA can waive portions of mandate Have done so for cellulosic, but without changing other mandates For 2014, expected to change other mandates, too Perhaps (for first time) including share that can be met with corn ethanol
Billion gallons Renewable fuel standard, ethanol use and the blend wall 30 25 20 15 10 5 0 2009 2011 2013 2015 2017 Total RFS Gap for corn ethanol 10% of fuel use Source: FAPRI- MU baseline, Aug. 2013., based on provisions of the EISA and projected levels of motor gasoline use
Possible impacts of policies US farm bill changes unlikely to have much market impact but RFS might EU policy changes may reduce production but also small impact Little chance for Doha Round changes Larger impacts from energy prices, weather/climate change, and macro developments
Dollars per barrel An example from alternative views on oil prices 160 140 120 100 80 60 40 20 0 IHS Global Insight* OECD/FAO** June futures, 5/8*** BFAP assumption *U.S. refiner s acquisition price, Jan. 2013 estimate **Brent crude as reported in OECD/FAO outlook publication ***Brent crude futures, June contracts, 5 August 2013.
Recent FAPRI analyses August baseline update: http://www.fapri.missouri.edu/outreach/publications/2013/fapri_mu_report _04_13.pdf Senate and House Ag. Committee farm bill: http://www.fapri.missouri.edu/outreach/publications/2013/fapri_mu_report _06_13.pdf RFS and analysis of RINs: http://www.fapri.missouri.edu/outreach/publications/2013/fapri_mu_report _03_13.pdf Or just visit www.fapri.missouri.edu to see what s new
Thank you!