Simply Put, Just too Much!
Ag Market Driers for 2014? World Food inflation to rise 3.7% in 2014 (s. 2.9% in 2013) drien primarily by gains in liestock/dairy prices. Total 2014 world meat production down.8%. Beef prices to gain 7.4%, pork 8.5%, poultry 5.7% and milk prices 7.9%. 2014 world food CPI to gain een with lower grain prices. 2014 the year of the cow! North America will be energy self sufficient by 2020. Fracking will occur around the world by 2020. How is fracking the impacting the US ag markets today? World Farmland prices hae peaked and could correct 5-35% depending on how fast interest rates rise and China s future import demand of soy/grain. Bio Fuel Boom is mature rising caloric intake now has to kick in for bull markets. In the past 2 years, world trend yields hae risen faster than caloric intake demand! China will become a more important drier of world ag demand as the world bio fuel industries mature. How will China s new farm policies impact world grain trade? And what impact will China s slowing economic growth hae on commodity trade? When will China import 8.5 MMTs of wheat and 5-7 MMTs of corn under WTO obligations? World Coarse Grain demand increased 99 MMTs during the 2013/14 crop year. Is the demand increase pipeline restocking or actual new feed/processing use?
World Market Driers for 2014? It s the species that will hold the profit potential for 2015 in agriculture! Inestors are looking for inestments that would expand the US cattle, hog herds and US poultry flock. Cheap corn is driing the rapid expansion. We are back to the days of pre ethanol and we ll hae to relearn the old ways. Significant rallies do not occur without dire weather or China returning as a sizeable world grain importer! Full carry in CBOT spreads, return to storage, and end users that are less anxious buyers after a period of pipeline refilling. Reduced olatility at the CBOT amid an exodus of speculatie traders/inestors. Farming for the Go t.
Why are We Here (Again)?
Creighton Uniersity Ag Indicators
Grain Market Price Performance. Futures Since January 12 60% 40% 20% 0% -20% -40% Corn Wheat -60% Sep 14 Jul 14 May 14 Mar 14 Jan 14 No 13 Sep 13 Jul 13 May 13 Mar 13 Jan 13 No 12 Sep 12 Jul 12 May 12 Mar 12 Jan 12
Soy, Canola and Sunflower Price Change Since Jan 13 20% Soybeans Canola Sunflower 10% 0% -10% -20% -30% -40% Jan 13 Mar 13 Feb 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 No 13 Dec 13 Jan 14 Mar 14 Feb 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14
The Ukraine Ciil War and Fund Demand bumped the grains higher into spring planting
Fund Managers Exiting AG!
Gross US Farm Income $ 250,000 200,000 150,000 100,000 50,000-2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980
Net US Farm Income 1950-2014 est $ 70,000 60,000 50,000 40,000 30,000 20,000 10,000-2013 2010 2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 1962 1959 1956 1953 1950
Midwest Corn, Soybeans Returns/Acre Value of Production Less Land Costs
Midwest Farm Cost Breakdown Operational Credit Crisis? Cost Component % Pre-Harest 5.6% Seed 13.2% Nitrogen 13.0% Phosphate 3.6% Potash 3.0% Lime 1.2% Herbicide 3.0% Insecticide 2.3% Crop Insurance 3.0% Miscellaneous 1.1% Interest 1.6% Harest Machinery 11.9% Labor 4.2% Land 33.3% Total Costs 100.0%
US Use of Storage Capacity on September 1st
The Fundamental Driers of the World Grain Bull?
Change in World Grain Use Since 2002 137 MMTs of Grain for Biofuels in 13
USDA Forecasts Flat US Ethanol Demand into 2022!
The Price Skews in Corn to be shifted downward in 2014 and beyond
Global Industrial Veg Oil Demand Growing, but at a Slower Pace MMTs US China Malaysia EU 25 20 15 10 5 0 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980
Soyoil s Heating Oil Relationship: Disconnecting /Lb Soyoil Heating Oil 80 $/Gal 4.50 70 4.00 60 50 40 30 20 10 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 0.00 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
CBOT Corn s. US WTI Crude Disconnecting? $/Bu Corn Crude Oil 9 8 7 6 5 4 3 2 1 0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 $/Bbl Oct-14 120 100 80 60 40 20 0
North American Cattle and Hog Numbers Since 1990 No Growth Mil Hogs Cattle 500 450 400 350 300 250 200 150 100 50 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
US Grain Export Share Struggling!
World Corn, Wheat and Soy Trade MMTs Corn Wheat Soybeans 180 160 140 120 100 80 60 40 20 0 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980
World Corn Trade South America and the Black Sea Soaring MMTs EU + US S America + Black Sea 70 60 50 40 30 20 10 0 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
ABU Corn Exports Reach 65% of The World Feed Grain Trade.
US Share of World Trade Corn, Wheat, Soy: 30% 70% 60% 50% 40% 30% 20% 10% 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980
The 3 Bear s for future US grain demand! World/US Bio Fuel Boom is now Mature! High Prices and thinning supply is leading to stagnation on world red meat consumption US export share is lowest on record for a non-drought year. If the US has normal weather going forward, it will hae to buy back that export share through price.
US Corn Demand to Hold Around 13.4-13.6 Mil Bu
CBOT Monthly Corn Volume and Week-to-Week Volatility in Retreat Mil 10 9 8 7 6 5 4 3 2 1-2015 2013 2011 2009 2007 2005 2003 2001 1999 1997 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1973
A New Range for US Corn? Nominal Corn Prices, 1866-2014) 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 Price Ag: 2013/14 = $4.50 2014/15 = $3.55 0.00 1865 1885 1905 1925 1945 1965 1985 2005 2025 31
World Grain Outlook 2014 2014/15
2014 Global Area Harested: 516 Mil HA up 4.5 Mil HA (11.2 Mil acres) Mil HA Soybeans Corn Wheat 500 450 400 350 300 250 200 150 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966
Mil HA 25 20 15 10-5 -10-15 Delta in Global Harested Area 9 Years of Growth between 1972-1981 - 8 Years to date ia 2014 5 0-20 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 1967 1965
2004 14 Change in Harested Major Grains: Up 72 Mil HA or 175 Mil Acres World 2003: 455 Mil HAs 7.5 1.4 0.4 2013: 517 Mil HAs 6.4 9.5 25.7 Asia South America FSU-12 Africa North America EU-28 Australia 17.5
World Major Crop Trend Yields 3.89 MT/HA Weighted Area Basis MT/HA 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 1966 1968 1970 1972 1974 1976 1978 1980 Corn Wheat Soybeans 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
There hae been years in which aderse weather impacts world crop yields! MT/HA 4 3.8 3.6 3.4 3.2 3 2.8 2.6 2.4 2.2 2 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980
Thousands 2012/13 World Grain Stocks Record Large! MMT 500 450 400 350 300 250 200 150 100 50 0 Corn Wheat Soybean 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966
World Population 7.25 Billion! Mil Persons 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
Global Per Capita Harested Ag Hectares 0.11 0.10 0.09 0.08 0.07 0.06 0.05 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
Global Coarse Grain, Wheat, and Oilseed Yield Rise! MTs/HA 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
Global Per Capita Corn, Wheat and Soy Demand Kg/Capita 290 270 250 230 210 190 170 150 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
Global Per Capita Corn, Wheat and Soy Demand Kg/Capita 290 270 250 230 210 190 170 150 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
2014 Global Per Capita Grain and Oilseed Stocks Largest since 2001! Kg/Capita 110 100 90 80 70 60 50 40 30 20 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964
World Grain Stock Increases Key Points! The world Biofuel Industry is mature. No new corn based ethanol plants are under construction in the US & ethanol consumption has reached the blend wall! Feed/Residual demand North American feed use leels are low due to years of eleated liestock slaughter and falling red meat consumption. The aging of America as the baby boomers turn 65-70 years old. US grain/soy export demand is at the lowest percentage on record in non drought year at 29%. With normal weather, the pressure builds for the US to lower grain cost to become more competitie. US 2014/15 US corn exports at 1,400 Mil Bu? Outside of the record large trade of soybean trade to China - the world lacks a bullish grain demand drier. This is a much different landscape than the prior bull period from 2006-2013. The market has encourage that 9-14 Mil acres of cropland are left idle or switched to forage crops into 2017. Historically difficult task to accomplish - especially with the ast majority of the US farmers to choose the PLC option ($3.70 corn and $8.40 soybeans). We are back farming for the Go t! HIGHER PRICES NOW HINGE UPONE RISING CALORIC INTAKE BEYOND THE 1.7% ANNUAL GAIN THAT HAS BEEN EVIDENT SINCE 1990! Or a supply dislocation such as aderse weather. A readjustment period lies ahead for world grain/oilseed farmers for the next 3-6 years.