Transcript WHEAT OUTLOOK Midwest Outlook Conference 2005

Grain Market Outlook
Agricultural Exposition
Goodland, Kansas
February 21, 2008
Daniel O’Brien & Mike Woolverton
K-State Research and Extension
[email protected]
[email protected]
Historic vs Current Grain Prices
Wheat
Corn
Grain Sorghum
Soybeans
Sunflowers
1 National
2000-06
Average
$3.35
$2.24
$2.20
$5.66
$11.57 /cwt
USDA
2007/08
$6.45 – $6.85
$3.75 – $4.25
$3.65 – $4.15
$10.00 – $10.80
$20.60 – $21.90
marketing year average price per unit, 2000-2006.
Wheat
Markets
Current Wheat Market Factors

World wheat stocks at a 30 year low

Global shortage of quality milling wheat


Weak U.S. dollar & Lower Ocean Freight Rates Helping
U.S. wheat exports



Wheat export regulations in Argentina & Russia
Attracting speculative interest to U.S. commodity markets
U.S. wheat acreage & production concerns in ’08


Strong support for U.S. Hard Red Spring Wheat prices
HRS vs soybeans in upper Great Plains; HRW production
Need for greater 2008 U.S. / World wheat production
in to rebuild stocks.
March 2008 HRW Wheat Futures
KCBT: April 2006-February 2008
“2008 Old Crop March HRW Contract”
Contract Volume & Open Interest
Goodland, Kansas
Cash Wheat Prices
Mueller Grain, Goodland, Kansas
April 13, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
Basis: $0.62/bu under
KC March 2008 Wheat
July 2008 HRW Wheat Futures
KCBT: April 2006-February 2008
“2008 New Crop July HRW Contract”
Contract Volume & Open Interest
Goodland, Kansas
New Crop Wheat Prices
Frontier Ag Inc., Goodland, Kansas
Feb. 22, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
FC Basis: $0.75 /bu under
July 2008 KC Wheat
March 2008 Hard Red Spring Wheat
KCBT: April 2006-February 2008
“2008 Old Crop March HRW Contract”
Contract Volume & Open Interest
U.S. Wheat Supply-Demand
2005/06
Planted Ac. (mln.)
Harvested Ac (mln.)
Yield (bu./ac.)
Beg. Stocks
Production
Total Supplies
Food
Seed
Exports
Feed & Residual
Total Use
End Stocks (%S/U)
U.S. Ave. Farm $
2006/07
2007/08
57.2
57.3
60.4
50.1
46.8
51.0
42.0
38.7
40.5
540
571
456
2,105
1,812
2,067
2,727
2,505
2,613
914
933
945
78
81
86
1,009
909
1,200
154
125
110
2,155
2,049
2,341
(26%) 571 (22%) 456 (12%) 272
$3.42
$4.26 $6.45-$6.85
U.S. Wheat Production
1973-2007 + Projected 2008
4.0
Projected increase in U.S. Wheat Production in 2008/09
(More U.S. Wheat Acres x Trend Yields)
2.8
Billion Bushels
3.0
2.6
2.7
2.2
2.0
2.6
2.4
2.1 2.1 2.1
1.0
0.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
World Wheat Supply-Demand
2005/06 thru 2007/08 Marketing Years
800
Million Metric Tons
621
600
593 604
"Some" Price Rationing of
Wheat Export Purchases
624 616 619
30 year low for World
Wheat Ending Stocks
(since 1977/78)
400
200
116 111 106
148 125
110
Exports
Ending Stocks
0
Production
'2005/06 Mktg Yr
Use
'2006/07 Mktg Yr
'2007/08 Mktg Yr
Exports of World Wheat Exporters
2005/06 thru 2007/08 Marketing Years
35
U.S. & FSU 12 Only Major Exporters
to increase Sales in 2007/08
Million Metric Tons
30
25
20
15
10
5
0
EU-27
U.S.
'2005/06 Mktg Yr
Canada
Australia Argentina
'2006/07 Mktg Yr
FSU-12
'2007/08 Mktg Yr
U.S. Wheat Stocks/Use% vs Price
% Stocks/Use
100
$7.00
Record 2007/08 U.S. Wheat Price:
$6.45 - $6.85 /bu @ 12% Stocks/Use
$6.65
$6.00
$5.00
$4.50
80
$3.99
$3.72
60
$4.26
$3.56
$4.00
$3.42
$3.00
40
$2.00
20
$1.00
0
$0.00
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
U.S. Wheat Ending Stocks to Use %
U.S. Wheat Price
U.S. Wheat $
120
Soybean
&
Oilseed
Markets
Current Oilseed Market Factors

Brazilian soybean area up only 1%


High soymeal-soyoil prices & exports


Attracting speculative interest to U.S. commodity markets
Critically low U.S. carryover


High soyoil prices damaging U.S. soydiesel industry
Weak U.S. dollar & lower ocean freight rates
helping soybean exports


Recent South American rains helping soybean crop
Only 19 days inventory on hand at end of 2007/08
Need for U.S. acreage & production increase in
2008 to rebuild stocks
March 2008 Soybean Futures
CBOT: October 2006-February 2008
“2008 Old Crop Soybean Contract”
Contract Volume & Open Interest
Goodland, Kansas Cash Soybean $s
Frontier Ag Inc., Goodland, Kansas
Feb. 21, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
Basis: $1.54 ½ /bu under
CBOT March 2008 Soybeans
Cash Sunflower Prices
Northern Sun - ADM., Goodland, Kansas
Feb. 22, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
November 2008 Soybean Futures
CBOT: January 2006-February 2008
“2008 Old Crop Soybean Contract”
Contract Volume & Open Interest
Goodland, Kansas
New Crop Soybean Prices
Frontier Ag Inc., Goodland, Kansas
Feb. 21, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
FC Basis: $1.25 under
CBOT NOV 2008 Soybeans
New Crop Sunflower Prices
Northern Sun - ADM., Goodland, Kansas
June 7, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
U.S. Soybean Supply-Demand
2005/06 2006/07
Planted Ac. (mln.)
Harvested Ac (mln.)
Yield (bu./ac.)
Beg. Stocks
Production
Total Supplies
Crushings
Exports
Seed
Residual
Total Use
End Stocks (%S/U)
U.S. Ave. Farm $
2007/08
72.0
75.5
63.6
71.3
74.6
62.8
43.0
42.7
41.2
256
449
574
3,063
3,188
2,585
3,322
3,647
3,165
1,739
1,806
1,835
940
1,118
1,005
93
78
86
101
70
79
2,873
3,073
3,005
(16%) 449 (19%) 574
(5%) 160
$5.66
$6.43 $10.00-$10.80
U.S. Soybean Planted Acreage
1973-2007 + Projected 2008
100
Recovery in U.S. Soybean Acres Expected for 2008/09
Million Acres
75
71.4
74.3
70.9
75.5
70.0
63.6
50
25
0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
Marketing Year
U.S. Soybean Production
1973-2007 + Projected 2008
3.5
Billion Bushels
3.0
2.5
2.0
Higher U.S. Soybean Production Expected for 2008/09
2.7 2.9
2.5
2.3 2.2
2.1
1.5
3.1 3.2
2.9
2.6
1.8
1.5
1.0
0.5
0.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
World Soybean Supply-Demand
2005/06 thru 2007/08 Marketing Years
Million Metric Tons
300
250
220
236
220
215 225
200
236
Decreasing World Production
Increasing Use & Exports
Declining Ending Stocks
150
100
76
64 71
50
53 62 46
0
Production
'2005/06 Mktg Yr
Use
Exports
'2006/07 Mktg Yr
Ending Stocks
'2007/08 Mktg Yr
Exports of World Soybean Exporters
2005/06 thru 2007/08 Marketing Years
Million Metric Tons
40
Not as large an increase in Brazilian soybean production as expected has
diminished Export prospects & pushed World Soybean $Prices higher
30
Record Prospects for
Argentina Soy Exports
20
10
0
U.S.
'2005/06 Mktg Yr
Brazil
'2006/07 Mktg Yr
Argentina
'2007/08 Mktg Yr
U.S. Soybean Stocks/Use% vs Price
35
$12.00
Record High U.S. Soybean Price: $10.00 - $10.80 /bu
$10.40
$10.00
25
20
$7.57 $7.83
$6.64
$7.42
$7.35
$7.34
$8.00
$6.81
$6.43
$6.00
15
$4.00
10
5
$2.00
0
$0.00
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Stocks/Use%
U.S. Soybean Price
U.S. Soybean $
% Stocks/Use
30
Feedgrain
Markets:
Corn &
Grain Sorghum
Current Feedgrain Market Factors

U.S. Feedgrain stocks are adequate




U.S. Ethanol demand continues strong
Strong demand from overseas export buyers



Feedgrain supplies not as tight as for wheat & soybeans
Large 2008 crop (12.5–13.0 billion bu) needed to meet demand
Reduced production in Argentina (dry Dec-Jan) & Mexico (lower
area than expected), increases in South Africa (good rains)
South hemisphere corn export competition to increase seasonally.
Expected competition for U.S. crop acres vs
other crops in Spring 2008 (“bidding” occurring Feb-April)
March 2008 Corn Futures
CBOT: February 2006-February 2008
“2008 Old Crop Corn Contract”
Contract Volume & Open Interest
Goodland, Kansas
Corn Cash Prices
Mueller Grain, Goodland, Kansas
April 13, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
Basis: $0.32 1/2 /bu under
CBOT March 2008 Corn
Goodland, Kansas
Cash Grain Sorghum Price
Frontier Ag Inc., Goodland, Kansas
Feb. 23, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
Basis: $0.57/bu under
CBOT March 2008 Corn
December 2008 Corn Futures
CBOT: Jan 2006-February 2008
“2008 New Crop Corn Contract”
Contract Volume & Open Interest
Goodland, Kansas
New Crop Corn Prices
Mueller Grain, Goodland, Kansas
April 19, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
FC Basis: $0.30 /bu under
CBOT December 2008 Corn
Goodland, Kansas
New Crop Grain Sorghum Prices
Frontier Ag Inc., Goodland, Kansas
Feb. 22, 2007 – Feb. 20, 2008
Source: DTN Bid Analyzer
FC Basis: $0.53/bu under
CBOT December 2008 Corn
U.S. Corn Supply-Demand
Planted Ac. (mln.)
Harvested Ac (mln.)
Yield (bu./ac.)
Beg. Stocks
Production
Total Supplies
Ethanol
Other Food, Seed, Indust.
Exports
Feed & Residual
Total Use
End Stocks (%S/U)
U.S. Ave. Farm $
2005/06
2006/07
2007/08
81.8
75.1
148.0
2,114
11,114
13,237
1,603
1,378
2,134
6,155
11,270
(17%) 1,967
$2.00
78.3
70.6
149.1
1,967
10,535
12,514
2,117
1,371
2,125
5,598
11,210
(12%) 1,304
$3.04
93.6
86.5
151.1
1,304
13,074
14,393
3,200
1,355
2,450
5,950
12,955
(11%) 1,438
$3.75-$4.25
U.S. Grain Sorghum Supply-Demand
Planted Ac. (mln.)
Harvested Ac (mln.)
Yield (bu./ac.)
Beg. Stocks
Production
Total Supplies
Food, Seed, Indust.
Exports
Feed & Residual
Total Use
End Stocks (%S/U)
U.S. Ave. Farm $
2005/06
2006/07
2007/08
6.5
5.7
68.5
57
393
450
50
194
140
384
(17%) 66
$1.86
6.5
4.9
56.2
66
278
343
45
157
109
311
(10%) 32
$3.29
7.7
6.8
74.2
32
505
537
35
285
175
495
(9%) 42
$3.65-$4.15
U.S. Corn Planted Acreage
1973-2007 + Projected 2008
100.0
93.6
88.0
Million Acres
90.0
80.0
70.0
60.0
50.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
Marketing Year
U.S. Corn Production
1973-2007 + Projected 2008
15.0
Billion Bushels
12.0
9.0
13.1
12.5
11.8
Record 2007 Corn Production
Projected Decrease in 2008
7.9
8.2
8.9
9.5
10.1
9.9
6.0
3.0
0.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
U.S. Ethanol Industry at a Glance
2006





2008
Number of operating ethanol plants:
97
139 Under construction or expanding:
35
69
Announced plants:
300(17%) 100(?)
Current production capacity: (BGPY) 4.8
7.9
Projected production capacity:
11.7 BGPY end of 2008
13.5 BGPY end of 2009
Feedstock Use Proportion:
Corn
97%
Sorghum
2%
Other
1%
U.S. Corn Exports
1973/74 thru 2007/08 Marketing Years
3.5
325 Million Bu Increase (15%) in 2007/08 over 2006/07
Billion Bushels
3.0
2.5
2.40
2.37
2.23
?
2.45
2.15
2.0
1.5
1.0
0.5
0.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Exports of World Coarse Grain Exporters
2005/06 thru 2007/08 Marketing Years
80
U.S. is the only major Supplier with marked
increase in Exports in 2007/08 Mktg Year
Million Metric Tons
70
60
50
Limited prospects for other Coarse Grain Exporters
40
30
1.15 mmt MORE
Canada Coarse
Grain Exports
20
4.37 mmt LESS
China Coarse
Grain Exports
10
0
U.S.
Argentina Australia
'2005/06 Mktg Yr
Canada
Brazil
'2006/07 Mktg Yr
China
FSU-12
'2007/08 Mktg Yr
U.S. Corn Stocks/Use% vs Price
70
$4.50
% Stocks/Use
60
50
$3.12
40
$4.00
$4.00
$3.50
$3.21
$3.24
$3.04
$3.02
$2.42
30
20
$3.00
$2.50
$2.00
$2.00
10
$1.50
0
$1.00
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Stocks/Use%
U.S. Corn Price
U.S. Corn $
2007/08 Record High:
$3.75 - $4.25 / bu
@ 11% Stocks/Use
Long Run
Grain
Market
Perspectives
Land in Crops
(Millions of acres)
5 yr. Ave.
Corn
79.6
Soybeans
74.2
Hay
62.4
Wheat
59.5
Cotton
14.1
Grain Sorghum
8.1
Principle Crops 297.9
CRP
07/08USDA
Proj. 08/09
93.6
63.6
61.8
60.4
10.8
7.7
297.9
35.9
88.0 (-6%)
70.0 (+10%)
61.8 (--)
62.2 (+3%)
10.0 (-7%)
7.4 (-4%)
299.4
34.9 (-3%)
Total crop land in the United States – 441.6 million acres
Crop Acres Coming Out of CRP
2007–2017 (Source: USDA, FSA)
1.75
1.4
1.25
1.3
1.1
1.0
0.9 1.0
1.00
0.9
0.8 0.8
0.75
0.5
0.50
0.4
0.25
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
0.00
2007
Million Acres
1.50
Long Run Grain Prices
Wheat
Corn
Grain Sorghum
Soybeans
Sunflowers
1 National
2000-06
Average
$3.35
$2.24
$2.20
$5.66
$11.57
USDA
Long Run
2007/08
Projection
$6.45 – $6.85
$5.00
$3.70 – $4.30
$3.50
$3.60 – $4.20
$3.40
$9.90 – $10.90
$7.50
$19.60 – $21.20
$15.50
marketing year average price per unit, 2000-2006.
Questions???
K-State Extension Agricultural Economics:
www.AgManager.info