Grain Market Outlook Agricultural Exposition Goodland, Kansas February 21, 2008 Daniel OBrien & Mike...
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Transcript of Grain Market Outlook Agricultural Exposition Goodland, Kansas February 21, 2008 Daniel OBrien & Mike...
Grain Market Grain Market OutlookOutlook
Agricultural ExpositionAgricultural ExpositionGoodland, KansasGoodland, Kansas
February 21, 2008February 21, 2008
Daniel O’Brien & Mike WoolvertonDaniel O’Brien & Mike WoolvertonK-State Research and ExtensionK-State Research and Extension
[email protected]@oznet.ksu.edu [email protected]@agecon.ksu.edu
Historic vs Current Grain Historic vs Current Grain Prices Prices
2000-06 USDAAverage 2007/08
Wheat $3.35 $6.45 – $6.85
Corn $2.24 $3.75 – $4.25
Grain Sorghum $2.20 $3.65 – $4.15
Soybeans $5.66 $10.00 – $10.80
Sunflowers $11.57 /cwt $20.60 – $21.90
1 National marketing year average price per unit, 2000-2006.
WheatWheatMarketsMarkets
Current Wheat Market Current Wheat Market FactorsFactors
World wheat stocks at a 30 year low
Global shortage of quality milling wheat Strong support for U.S. Hard Red Spring Wheat prices
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 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 March 2008 HRW Wheat FuturesFutures
KCBT: April 2006-February 2008“2008 Old Crop March HRW Contract”
Contract Volume & Open Interest
Goodland, Kansas Goodland, Kansas Cash Wheat PricesCash Wheat Prices
Mueller Grain, Goodland, KansasApril 13, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
Basis: $0.62/bu underKC March 2008 Wheat
July 2008 HRW Wheat July 2008 HRW Wheat FuturesFutures
KCBT: April 2006-February 2008“2008 New Crop July HRW Contract”
Contract Volume & Open Interest
Goodland, Kansas Goodland, Kansas New Crop Wheat PricesNew Crop Wheat Prices
Frontier Ag Inc., Goodland, KansasFeb. 22, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
FC Basis: $0.75 /bu underJuly 2008 KC Wheat
March 2008 Hard Red March 2008 Hard Red Spring WheatSpring Wheat
KCBT: April 2006-February 2008“2008 Old Crop March HRW Contract”
Contract Volume & Open Interest
U.S. Wheat Supply-DemandU.S. Wheat Supply-Demand 2005/06 2006/07 2007/08 Planted Ac. (mln.) 57.2 57.3 60.4 Harvested Ac (mln.) 50.1 46.8 51.0 Yield (bu./ac.) 42.0 38.7 40.5 Beg. Stocks 540 571 456 Production 2,105 1,812 2,067
Total Supplies 2,727 2,505 2,613 Food 914 933 945 Seed 78 81 86 Exports 1,009 909 1,200 Feed & Residual 154 125 110
Total Use 2,155 2,049 2,341 End Stocks (%S/U) (26%) 571 (22%) 456 (12%) 272 U.S. Ave. Farm $ $3.42 $4.26 $6.45-$6.85
U.S. Wheat ProductionU.S. Wheat Production1973-2007 1973-2007 + Projected 2008+ Projected 2008
2.12.1
2.6
2.22.4
2.62.72.8
2.1
0.0
1.0
2.0
3.0
4.0
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Bill
ion
Bus
hels
Projected increase in U.S. Wheat Production in 2008/09(More U.S. Wheat Acres x Trend Yields)
World Wheat Supply-DemandWorld Wheat Supply-Demand2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
621 624
116 148
593 616
111 125
604 619
106 110
0
200
400
600
800
Production Use Exports Ending Stocks
Mill
ion
Met
ric
Ton
s
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
"Some" Price Rationing of Wheat Export Purchases
30 year low for World Wheat Ending Stocks
(since 1977/78)
Exports of World Wheat Exports of World Wheat ExportersExporters
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
0
5
10
15
20
25
30
35
Mill
ion
Met
ric
Ton
s
EU-27 U.S. Canada Australia Argentina FSU-12
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
U.S. & FSU 12 Only Major Exporters to increase Sales in 2007/08
U.S. Wheat Stocks/Use% vs U.S. Wheat Stocks/Use% vs PricePrice
$3.99$3.72
$4.50
$3.56
$3.42
$4.26
$6.65
0
20
40
60
80
100
120
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
% S
tock
s/U
se
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
U.S
. W
hea
t $
U.S. Wheat Ending Stocks to Use % U.S. Wheat Price
Record 2007/08 U.S. Wheat Price: $6.45 - $6.85 /bu @ 12% Stocks/Use
Soybean Soybean &&
Oilseed Oilseed MarketsMarkets
Current Oilseed Market Current Oilseed Market FactorsFactors
Brazilian soybean area up only 1% Recent South American rains helping soybean crop
High soymeal-soyoil prices & exports High soyoil prices damaging U.S. soydiesel
industry Weak U.S. dollar & lower ocean freight
rates helping soybean exports Attracting speculative interest to U.S.
commodity markets Critically low U.S. carryover
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 March 2008 Soybean FuturesFutures
CBOT: October 2006-February 2008“2008 Old Crop Soybean Contract”
Contract Volume & Open Interest
Goodland, Kansas Cash Goodland, Kansas Cash Soybean $sSoybean $s
Frontier Ag Inc., Goodland, KansasFeb. 21, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
Basis: $1.54 ½ /bu under CBOT March 2008 Soybeans
Cash Sunflower PricesCash Sunflower Prices
Northern Sun - ADM., Goodland, KansasFeb. 22, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
November 2008 Soybean November 2008 Soybean FuturesFutures
CBOT: January 2006-February 2008“2008 Old Crop Soybean Contract”
Contract Volume & Open Interest
Goodland, KansasGoodland, KansasNew Crop Soybean PricesNew Crop Soybean Prices
Frontier Ag Inc., Goodland, KansasFeb. 21, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
FC Basis: $1.25 under CBOT NOV 2008 Soybeans
New Crop Sunflower New Crop Sunflower PricesPrices
Northern Sun - ADM., Goodland, KansasJune 7, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
U.S. Soybean Supply-U.S. Soybean Supply-DemandDemand
2005/06 2006/07 2007/08 Planted Ac. (mln.) 72.0 75.5 63.6 Harvested Ac (mln.) 71.3 74.6 62.8 Yield (bu./ac.) 43.0 42.7 41.2 Beg. Stocks 256 449 574 Production 3,063 3,188 2,585
Total Supplies 3,322 3,647 3,165 Crushings 1,739 1,806 1,835 Exports 940 1,118 1,005 Seed 93 78 86 Residual 101 70 79
Total Use 2,873 3,073 3,005 End Stocks (%S/U) (16%) 449 (19%) 574 (5%) 160 U.S. Ave. Farm $ $5.66 $6.43 $10.00-$10.80
U.S. Soybean Planted U.S. Soybean Planted AcreageAcreage
1973-2007 1973-2007 + Projected 2008+ Projected 2008
74.370.971.4 75.5
63.670.0
0
25
50
75
100
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
Marketing Year
Mill
ion
Acr
es
Recovery in U.S. Soybean Acres Expected for 2008/09
U.S. Soybean ProductionU.S. Soybean Production1973-2007 1973-2007 + Projected 2008+ Projected 2008
2.62.9
3.23.12.92.7
2.5
2.12.22.3
1.81.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Bill
ion
Bus
hels
Higher U.S. Soybean Production Expected for 2008/09
World Soybean Supply-World Soybean Supply-DemandDemand
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
220 215
64 53
236 225
71 62
220236
7646
0
50
100
150
200
250
300
Production Use Exports Ending Stocks
Mill
ion
Met
ric
Ton
s
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
Decreasing World ProductionIncreasing Use & ExportsDeclining Ending Stocks
Exports of World Soybean Exports of World Soybean ExportersExporters
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
0
10
20
30
40
U.S. Brazil Argentina
Mill
ion
Met
ric
Ton
s
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
Not as large an increase in Brazilian soybean production as expected has diminished Export prospects & pushed World Soybean $Prices higher
Record Prospects for Argentina Soy Exports
U.S. Soybean Stocks/Use% U.S. Soybean Stocks/Use% vs Pricevs Price
$6.64$6.81
$7.57 $7.83$7.42 $7.35
$10.40
$6.43
$7.34
0
5
10
15
20
25
30
35
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
% S
tock
s/U
se
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
U.S
. S
oyb
ean
$
Stocks/Use% U.S. Soybean Price
Record High U.S. Soybean Price: $10.00 - $10.80 /bu
Feedgrain Feedgrain
Markets:Markets:Corn & Corn & Grain Grain
SorghumSorghum
Current Feedgrain Market Factors
U.S. Feedgrain stocks are adequate Feedgrain supplies not as tight as for wheat & soybeans Large 2008 crop (12.5–13.0 billion bu) needed to meet
demand
U.S. Ethanol demand continues strong Strong demand from overseas export buyers
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 FuturesMarch 2008 Corn Futures
CBOT: February 2006-February 2008“2008 Old Crop Corn Contract”
Contract Volume & Open Interest
Goodland, Kansas Goodland, Kansas Corn Cash PricesCorn Cash Prices
Mueller Grain, Goodland, KansasApril 13, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
Basis: $0.32 1/2 /bu underCBOT March 2008 Corn
Goodland, KansasGoodland, KansasCash Grain Sorghum PriceCash Grain Sorghum Price
Frontier Ag Inc., Goodland, KansasFeb. 23, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
Basis: $0.57/bu underCBOT March 2008 Corn
December 2008 Corn December 2008 Corn FuturesFutures
CBOT: Jan 2006-February 2008“2008 New Crop Corn Contract”
Contract Volume & Open Interest
Goodland, KansasGoodland, KansasNew Crop Corn PricesNew Crop Corn Prices
Mueller Grain, Goodland, KansasApril 19, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
FC Basis: $0.30 /bu underCBOT December 2008 Corn
Goodland, KansasGoodland, KansasNew Crop Grain Sorghum New Crop Grain Sorghum
PricesPricesFrontier Ag Inc., Goodland, KansasFeb. 22, 2007 – Feb. 20, 2008Source: DTN Bid Analyzer
FC Basis: $0.53/bu underCBOT December 2008 Corn
U.S. Corn Supply-DemandU.S. Corn Supply-Demand 2005/06 2006/07 2007/08 Planted Ac. (mln.) 81.8 78.3 93.6 Harvested Ac (mln.) 75.1 70.6 86.5 Yield (bu./ac.) 148.0 149.1 151.1 Beg. Stocks 2,114 1,967 1,304 Production 11,114 10,535 13,074
Total Supplies 13,237 12,514 14,393 Ethanol 1,603 2,117 3,200 Other Food, Seed, Indust. 1,378 1,371 1,355 Exports 2,134 2,125 2,450 Feed & Residual 6,155 5,598 5,950
Total Use 11,270 11,210 12,955 End Stocks (%S/U) (17%) 1,967 (12%) 1,304 (11%) 1,438 U.S. Ave. Farm $ $2.00 $3.04 $3.75-$4.25
U.S. Grain Sorghum Supply-U.S. Grain Sorghum Supply-DemandDemand
2005/06 2006/07 2007/08 Planted Ac. (mln.) 6.5 6.5 7.7 Harvested Ac (mln.) 5.7 4.9 6.8 Yield (bu./ac.) 68.5 56.2 74.2 Beg. Stocks 57 66 32 Production 393 278 505
Total Supplies 450 343 537 Food, Seed, Indust. 50 45 35 Exports 194 157 285 Feed & Residual 140 109 175
Total Use 384 311 495 End Stocks (%S/U) (17%) 66 (10%) 32 (9%) 42 U.S. Ave. Farm $ $1.86 $3.29 $3.65-$4.15
U.S. Corn Planted AcreageU.S. Corn Planted Acreage1973-2007 1973-2007 + Projected 2008+ Projected 2008
88.0
93.6
50.0
60.0
70.0
80.0
90.0
100.0
'73 '75'77 '79 '81'83 '85 '87'89 '91'93'95 '97 '99 '01'03 '05'07 '09
Marketing Year
Million
Acr
es
U.S. Corn ProductionU.S. Corn Production1973-2007 1973-2007 + Projected 2008+ Projected 2008
9.5
7.9 8.28.9
9.910.1
11.8 12.513.1
0.0
3.0
6.0
9.0
12.0
15.0
'73 '75 '77 '79 '81'83 '85 '87 '89 '91'93 '95 '97 '99 '01'03 '05 '07
Marketing Year
Bill
ion
Bus
hels
Record 2007 Corn ProductionProjected Decrease in 2008
U.S. Ethanol Industry at a U.S. Ethanol Industry at a GlanceGlance
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 ExportsU.S. Corn Exports1973/74 thru 2007/08 Marketing Years1973/74 thru 2007/08 Marketing Years
2.152.232.372.40 2.45
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
Billion
Bush
els
325 Million Bu Increase (15%) in 2007/08 over 2006/07 ?
Exports of World Coarse Grain Exports of World Coarse Grain ExportersExporters
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
0
10
20
30
40
50
60
70
80
U.S. Argentina Australia Canada Brazil China FSU-12
Mill
ion
Met
ric
Ton
s
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
U.S. is the only major Supplier with marked increase in Exports in 2007/08 Mktg Year
Limited prospects for other Coarse Grain Exporters
4.37 mmt LESSChina CoarseGrain Exports
1.15 mmt MORE Canada Coarse
Grain Exports
U.S. Corn Stocks/Use% vs U.S. Corn Stocks/Use% vs PricePrice
$3.02
$3.12$3.21
$3.24
$2.42
$2.00
$3.04
$4.00
0
10
20
30
40
50
60
70
'73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Marketing Year
% S
tock
s/U
se
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
U.S
. C
orn
$
Stocks/Use% U.S. Corn Price
2007/08 Record High: $3.75 - $4.25 / bu
@ 11% Stocks/Use
Long Run Long Run
Grain Grain MarketMarket
PerspectiPerspectivesves
Land in CropsLand in Crops (Millions of acres)(Millions of acres)
55 yr. Ave.yr. Ave. 07/08USDA07/08USDA Proj. 08/09Proj. 08/09
CornCorn 79.6 79.6 93.6 93.6 88.0 88.0 (-6%)(-6%) SoybeansSoybeans 74.2 74.2 63.6 63.6 70.0 70.0 (+10%)(+10%)
HayHay 62.4 62.4 61.8 61.8 61.8 61.8 (--)(--)
WheatWheat 59.5 59.5 60.4 60.4 62.2 62.2 (+3%)(+3%)
CottonCotton 14.1 14.1 10.8 10.8 10.0 10.0 (-7%)(-7%)
Grain Sorghum 8.1 Grain Sorghum 8.1 7.7 7.7 7.4 7.4 (-(-4%)4%)
Principle Crops Principle Crops 297.9 297.9 297.9 297.9 299.4299.4CRPCRP 35.9 35.9 34.9 34.9 (-3%)(-3%)
Total crop land in the United States – 441.6 million acresTotal crop land in the United States – 441.6 million acres
Crop Acres Coming Out of Crop Acres Coming Out of CRPCRP
2007–2017 (2007–2017 (Source: USDA, FSA)Source: USDA, FSA)
1.0
0.5
0.9 1.0
1.4 1.3
1.1
0.90.8 0.8
0.4
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.7520
07
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Mil
lio
n A
cres
Long Run Grain Prices Long Run Grain Prices 2000-06 USDA Long RunAverage 2007/08 Projection
Wheat $3.35 $6.45 – $6.85 $5.00
Corn $2.24 $3.70 – $4.30
$3.50
Grain Sorghum $2.20 $3.60 – $4.20 $3.40
Soybeans $5.66 $9.90 – $10.90 $7.50
Sunflowers $11.57 $19.60 – $21.20 $15.50
1 National marketing year average price per unit, 2000-2006.
Questions???Questions???
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