September 13, 2018

Fall Crop Outlook Webinar

Chris Hurt, Professor, Department of Agricultural Economics

Michael Langemeier, Associate Director, Center for Commercial Agriculture

James Mintert, Director, Center for Commercial Agriculture

Fall Crop Outlook Webinar, September 13, 2018

In Spring 2018 Optimism Returned – “Ag Was Turning the Corner”

Reasons for optimism in Spring 2018

1. Declining grain inventories

2. Strong U.S. & world economic growth

3. Result: Strong new crop cash bids: $10 soybeans and $4 corn

Summer & Fall 2018 perfect weather, high yields & tariffs

Spring 2018: Ag Emerging from Financial Darkness

Fall Crop Outlook Webinar, September 13, 2018

164.4

171174.6

176.6181.3

100

110

120

130

140

150

160

170

180

90 92 94 96 98 00 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Bu./Acre U.S. Corn Yield: 1990-2018

+2.9 bpa vs. Aug. estimate & nearly 4 bpa above pre-release est.

Fall Crop Outlook Webinar, September 13, 2018

9.99.5

9.0

10.1

11.811.1

10.5

13.1

12.1

13.112.412.4

10.8

13.8 14.213.6

15.114.614.8

7

9

11

13

15

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Billion Bu.

Year

U.S. Corn Production

Fall Crop Outlook Webinar, September 13, 2018

Corn

USDA181.3 bu.+2.9 bu.

9/12/18 USDA16/17 17/18 18/19

Carry In 1,737 2,293 2,002 Production 15,148 14,604 14,827 (+241)Total Supply 16,942 16,937 16,879Feed & Residual 5,467 5,450 5,575 (+50)FSI Non-Fuel 1,450 1,460 1,480FSI Fuel (Ethanol) 5,439 5,600 5,650 (+25) Export 2,293 2,425 (+25) 2,400 (+50)Total Use 14,649 14,935 15,105Ending Stocks 2,293 2,002 (-25) 1,774 (+90)US Farm Price $3.36 $3.40 $3.50 (-.10)

$3.35-$3.45 $3.00-$4.00

Fall Crop Outlook Webinar, September 13, 2018

42.9%

9.2%

13.4%

11.7%

9.1%

19.8%

0%

10%

20%

30%

40%

50%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18Year

U.S. Ending Stocks to Use: Corn & Soybeans

Wheat

Corn

Soybeans

Fall Crop Outlook Webinar, September 13, 2018

0.35 0.370.45 0.47 0.53 0.51

0.45

0.11 0.14

-$0.30-$0.20-$0.10$0.00$0.10$0.20$0.30$0.40$0.50$0.60

O N D J F M A M J J A

Estimated Net Corn Storage Returns:

On-FarmStorage

Futures $3.53 to $3.80 = +$.27Basis $ -.35 to $ .00 = +$.35Cash $3.18 to $3.84 = +$.62

Speculation???? +$.25 to $.75

Commercial storage costs = $0.18/bu.thru end of Nov., then =$.03/month after

Fall Crop Outlook Webinar, September 13, 2018

34.134.2

37.6

32.6

41.4

35.3

37.638.938.9

36.638.1

39.638.0

33.9

42.243.042.741.7

39.7

4443.541.9

40

44

47.548

52

49.1

52.8

y = 0.5286x + 33.068R² = 0.7348

303234363840424446485052

90 92 94 96 98 0 2 4 6 8 10 12 14 16 18

Bu/Acre U.S. Bean Yield 1990-2018+1.2 bpa vs. Aug. estimate & 0.3 bpa above pre-release est.

Fall Crop Outlook Webinar, September 13, 2018

2.8 2.9 2.82.5

3.1 3.1 3.2

2.73.0

3.53.3

3.1 3.03.4

3.9 3.94.3 4.4

4.7

1.01.52.02.53.03.54.04.5

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Billion Bu.

Year

U.S. Soybean Production

Fall Crop Outlook Webinar, September 13, 2018

Soybeans

USDA 52.8 bu.+1.2 bu.

9/12/18 USDA16/17 17/18 18/19

Carry in 197 302 395Production 4,296 4,392 4,693 (+107)

Total Supply 4,515 4,715 5,113Seed & Residual 140 136 136Crush 1,899 2,055 (+15) 2,070 (+10)Exports 2,174 2,130 (+20) 2,060Total Use 4,213 4,321 4,268Ending Stock 302 395 (-35) 845 (+60)

Farm Price $9.47 $9.35 $8.60 (-.30)

$7.35-$9.85

Fall Crop Outlook Webinar, September 13, 2018

050

100150200250300350

Sept O N D Jan F M A M J J A

16/17

'17/18

U.S. missing key months to export soybeans to China

U.S. Soybean Exports to China: Million Bushels

Fall Crop Outlook Webinar, September 13, 2018

-$1.66-$2.00-$1.75-$1.50-$1.25-$1.00-$0.75-$0.50-$0.25$0.00$0.25$0.50

1/3/18 2/3/18 3/3/18 4/3/18 5/3/18 6/3/18 7/3/18 8/3/18 9/3/18 10/3/18

Soybean Prices: U.S. Gulf Minus Brazil Port Price

Fall Crop Outlook Webinar, September 13, 2018

0.00 -0.03

0.29 0.340.41

0.48

0.63 0.630.71 0.68

0.30 0.32

-$0.20-$0.10$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.80$0.90

O N D J F M A M J J A

Estimated Net Soybean Storage Returns: On-Farm Storage

Commercial Storage

Futures $8.40 to $8.89 = +$.49Basis $ -.65 to -$.15 = +$.50Cash $7.75 to $8.74 = +$.99Speculation: Settle tariffs? +$.50 to $1.25??

Commercial storage costs = $0.18/bu.thru end of Nov., then =$.03/month after

Fall Crop Outlook Webinar, September 13, 2018

Market Facilitation Payments: USDA: August 27

Initial Payment Pay On USDA % of

Initial MFP Payment/Ac

Rate % Pmnt M$ Payments U.S. INDSoybeans $1.65 per bu 50% $3,630 77.3% $43.56 $49.50 Pork $8.00 per head 50% $290 6.2%Cotton $0.06 per pound 50% $277 5.9%Sorghum $0.86 per bu 50% $157 3.3% $30.57 Dairy $0.12 per cwt 50% $127 2.7%Wheat $0.14 per bu 50% $119 2.5% $3.35 $4.97 Corn $0.01 per bu 50% $96 2.0% $0.91 $0.96

$4,696 100.0%

Fall Crop Outlook Webinar, September 13, 2018

Corn MFP Beans MFP

$0.005 $0.825

2017 2018 2018 2017 2018 2018

Yield 180 192 192 54 60 60

Price $3.55 $3.65 $3.655 $9.55 $8.80 $9.625

Revenue $639 $701 $702 $516 $528 $578

18 vs. 17 $62 $63 $12 $62

Indiana: Higher Revenues and Returns than Last Year

Fall Crop Outlook Webinar, September 13, 2018

Crop Marketing Strategies

1) Avoid pricing at harvest: Weak Futures & Weak Basis

2) Strong price premiums for late-spring or early-summer

3) Price speculation possibilities:-Corn 25 to 50 cents -Soybeans 50 cents to $1.25 if tariffs are settled

4) Use Market Facilitation Payment & FSA Loans to help cash flow

Fall Crop Outlook Webinar, September 13, 2018

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Fall Crop Outlook Webinar, September 13, 2018

Purdue Crop Basis Tool

Fall Crop Outlook Webinar, September 13, 2018

Purdue Crop Basis Tool

Fall Crop Outlook Webinar, September 13, 2018

Change in Production Costs from 2013 to 2019Source: Purdue Crop Budgets, High Productivity Soils

Crop $ per Acre $ per Bushel

Corn -$29 -$0.41

Soybeans -$14 -$0.22

Wheat -$20 -$0.86

Fall Crop Outlook Webinar, September 13, 2018

Corn Prices Required to Produce Per Acre Returns Equivalent to SoybeansSoybean Price Low Productivity

(C=131; SB=43)Avg. Productivity

(C=164; SB=54)High Productivity

(C=196; SB=65)

$7.50 $3.86 $3.77 $3.65

$8.00 $4.02 $3.94 $3.82

$8.50 $4.19 $4.10 $3.98

$9.00 $4.35 $4.27 $4.15

$9.50 $4.52 $4.43 $4.31

$10.00 $4.68 $4.60 $4.48

Current Prices Favor Rotation Soybeans Over Continuous Corn

Fall Crop Outlook Webinar, September 13, 2018

Corn Prices Required to Produce Per Acre Returns Equivalent to SoybeansSoybean Price Low Productivity

(C=139; SB=43)Avg. Productivity

(C=174; SB=54)High Productivity

(C=209; SB=65)

$7.50 $3.51 $3.45 $3.32

$8.00 $3.66 $3.60 $3.47

$8.50 $3.82 $3.76 $3.63

$9.00 $3.97 $3.91 $3.78

$9.50 $4.13 $4.07 $3.94

$10.00 $4.28 $4.22 $4.10

Continuous Soybeans and Rotation Corn Comparison

September 13, 2018

Next Webinar:2019 Ag Outlook

December 19, 2018

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