Crop Market Outlook - Cory Walters - March 2014
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description
Dr. Cory Walters discusses the crop market outlook for 2014 and beyond.
Transcript of Crop Market Outlook - Cory Walters - March 2014
Quantity
Price
Demand
Supply 1
Supply 2
USDA SUPPLY/DEMAND BALANCE SHEET FOR CORN
11/12 12/13E13/14
P %Millions of Acres
Acres Planted 91.9 97.2 95.3 -2.0%Acres Harvested 84.0 87.4 87.7 0.3%
Bu./Harvested Acre 147.2 123.4 158.8 28.7%Millions of Bushels
Beginning Stocks 1,128 989 821 -17.0%Production 12,358 10,780 13,925 29.2%
Total Supply 13,515 11,932 14,781 23.9%Use:
Feed and Residual 4,547 4,335 5,300 22.3%Food, seed, & industrial 6,437 6,044 6,400 5.9%Ethanol for fuel 5,009 4,648 5,000 7.6%Exports 1,543 731 1,600 118.9%
Total Use (Demand) 12,527 11,111 13,300 19.7%
Ending Stocks 989 821 1,481 80.4%Ending Stocks, % of Use 7.9 7.4 11.1 50.7%U.S. Season Avg. Farm Price, $/ Bu. $6.22 $6.89 $4.50 -34.7%Source: USDA, WASDE
December 2014 Corn Price Distribution
Average = $4.68/bu
Crop Insurance Information• Corn Projected price = 4.61 (volatility = .19)
– Implied price floor (put option) across different coverage levels (assumes APH realized yield)
• 85% = $3.91• 80% = $3.69• 75% = $3.46
• Most popular insurance type – Revenue Protection – get both implied put and call option
• Be sure to consider Trend Adjustment (TA) Endorsement
New Crop Corn Outlook• Entered the year with tight stocks, which held prices up.
Prices have since fallen due to the large crop– Demand has returned and appears strong
• Index funds currently buying futures contracts– Help support prices
• Speculators are existing their net ‘short’ position.– Another indication we have hit strong price support
• Why not an futures price inverse going into harvest?– Might be starting to form
Soybeans
USDA SUPPLY/DEMAND BALANCE SHEET FOR SOYBEANS2011/12 2012/13 E 2013/14 P %
Millions of AcresAcres Planted 75.0 77.2 76.5 -0.9%Acres Harvested 73.8 76.2 75.9 -0.4%
Bu./Harvested Acre 41.9 39.8 43.3 8.8%Millions of Bushels
Beginning Stocks 215 169 141 -16.6%Production 3,094 3,034 3,289 8.4%
Total Supply 3,325 3,239 3,459 6.8%Use:
Crushing 1,703 1,689 1,700 0.7%Exports 1,362 1,320 1,510 14.4%Seed & Residuals 88 90 109 21.1%
Total Use 3,155 3,099 3,309 6.8%
Ending Stocks 169 141 150 6.4%Ending Stocks, % of Use 5.4 4.5 4.5 -0.4%U.S. Season Average Farm Price, $/Bu
$12.50 $14.40 $12.70 -11.8%
Source: USDA, WASDE
November 2014 Soybean Price Distribution
Average = $11.65/bu
Crop Insurance Projected Price• Soybean Projected price = $11.34 (volatility =
.13)– Implied price floor (put option) across different
coverage levels (assumes APH realized yield)• 85% = $9.64• 80% = $9.07• 75% = $8.51
New Crop Soybeans Outlook• Prices have strengthened over the past month• Demand appears strong with about 7%
increase over last year – Strong export expectations
• Speculators are net ‘long’ and becoming stronger– How long can this last?
• Futures market shows traditional new crop inverse – incentivizing purchasers to wait to harvest for product
Wheat
USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT2011/12 2012/13 E 2013/14 P %
Million AcresAcres Planted 54.4 55.7 56.2 0.9%Acres Harvested 45.7 48.9 45.2 -7.6%
Bu./Harvested Acre 43.7 46.3 47.2 1.9%
Million BushelsBeginning Stocks 862 743 718 -3.4%Production 1,999 2,266 2,130 -6.0%Imports 112 123 170 38.2%
Total Supply 2,974 3,131 3,018 -3.6%Use:
Food/Seed 1,017 1,018 1,034 1.6%Feed & Residual 164 388 250 -35.6%Exports 1,050 1,007 1,175 16.7%
Total Use 2,231 2,414 2,459 1.9%
Ending Stocks 743 718 559 -22.1%Ending Stocks, % of Use 33.3 29.7 22.7 -23.6%U.S. Season Aver. Farm Price, $/ Bu. $7.24 $7.77 $6.80 -14.3%Source: USDA, WASDE
USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT2011/12 2012/13 E 2013/14 P %
Million AcresAcres Planted 54.4 55.7 56.2 0.9%Acres Harvested 45.7 48.9 45.2 -7.6%
Bu./Harvested Acre 43.7 46.3 47.2 1.9%
Million BushelsBeginning Stocks 862 743 718 -3.4%Production 1,999 2,266 2,130 -6.0%Imports 112 123 170 38.2%
Total Supply 2,974 3,131 3,018 -3.6%Use:
Food/Seed 1,017 1,018 1,034 1.6%Feed & Residual 164 388 250 -35.6%Exports 1,050 1,007 1,175 16.7%
Total Use 2,231 2,414 2,459 1.9%
Ending Stocks 743 718 559 -22.1%Ending Stocks, % of Use 33.3 29.7 22.7 -23.6%U.S. Season Aver. Farm Price, $/ Bu. $7.24 $7.77 $6.80 -14.3%Source: USDA, WASDE
July 2014 KC Wheat Price Distribution
Average = 6.82
Wheat Outlook• February 2, 2014 winter wheat conditions
– 3% very poor, 15% poor, 36% fair, 40% good, and 6% excellent
• US ending stocks are down but up globally• Unrest in Ukraine – represents about 6% of
world wheat export market• Speculators recently changed from net short to
net long.
Overall Outlook• Chances of losing money in commodity markets is much
stronger this year than last– Crop insurance will help stop bleeding but wont stop it
from occurring– What is your plan if revenue is less than cost?
• Use forward contracts in conjunction with your crop size expectations– Larger crop size = more pressure to higher levels of
forward contracting• Large crop will likely translate into positive benefits from
storage and wider harvest basis• Dates to remember – monthly WASDE, Grain Stocks and
Prospective Plantings on March 31st, and Acreage and Grain Stocks on June 30th.
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Thank you
Cory WaltersAssistant Professor
