Feedgrain Market Feedgrain Market Outlook Outlook & Pricing & Pricing Opportunities Opportunities Grain Sorghum School Grain Sorghum School Ness City, Kansas Ness City, Kansas February 29, 2008 February 29, 2008 Daniel O’Brien & Mike Woolverton Daniel O’Brien & Mike Woolverton K-State Research and Extension K-State Research and Extension [email protected][email protected][email protected][email protected]
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Feedgrain Market Outlook & Pricing Opportunities Grain Sorghum School Ness City, Kansas February 29, 2008 Daniel OBrien & Mike Woolverton K-State Research.
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Feedgrain Market Feedgrain Market OutlookOutlook
& Pricing & Pricing OpportunitiesOpportunities
Grain Sorghum SchoolGrain Sorghum SchoolNess City, KansasNess City, Kansas
February 29, 2008February 29, 2008Daniel O’Brien & Mike WoolvertonDaniel O’Brien & Mike WoolvertonK-State Research and ExtensionK-State Research and Extension
11Estimates for corn, soybeans, wheat, and cotton from the USDA Commodity Estimates for corn, soybeans, wheat, and cotton from the USDA Commodity Outlook Forum, released February 22, 2008.Outlook Forum, released February 22, 2008.
22 Total crop land in the United States – 441.6 million acres Total crop land in the United States – 441.6 million acres
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)
Southern hemisphere corn export competition to increase seasonally.
Expected competition for U.S. crop acres vs other crops in Spring 2008 (“bidding” during Feb-May)
MAY 2008 Corn FuturesMAY 2008 Corn Futures
Contract Volume & Open Interest
CBOT: April 2006-February 2008“2008 MAY Old Crop Corn Contract”
Ness City, KansasNess City, KansasCash Grain Sorghum PriceCash Grain Sorghum Price
De Bondurant Grain Co., Ness City, KansasMarch 2, 2007 – February 28, 2008Source: DTN Bid Analyzer
$4.97/bu on 2/28/08Basis: $0.46/bu underCBOT March 2008 Corn
Ness City, KansasNess City, KansasCash Corn PriceCash Corn Price
De Bondurant Grain Co., Ness City, KansasMarch 2, 2007 – February 28, 2008Source: DTN Bid Analyzer
$5.30/bu on 2/28/08Basis: $0.13/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
Wakeeney, KansasWakeeney, KansasNew Crop Grain Sorghum New Crop Grain Sorghum
Total Use Over Trend in 2007/08 Due to Ethanol, Exports, etc.
World Coarse Grain Supply-World Coarse Grain Supply-DemandDemand
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
977 992
107164
982 1010
115 137
1052
120 126
1062
0
300
600
900
1200
1500
Production Use Exports Ending Stocks
Mill
ion
Met
ric
Ton
s
'2005/ 06 Mktg Yr '2006/ 07 Mktg Yr '2007/ 08 Mktg Yr
World Coarse Grain S-D driven by U.S. Feedgrain S-D Trends:
Record World Corn Exports,…Lowest Ending Stocks in 30 Yrs
Production of World Coarse Production of World Coarse Grain ExportersGrain Exporters
2005/06 thru 2007/08 Marketing Years2005/06 thru 2007/08 Marketing Years
0
50
100
150
200
250
300
350
400
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
Major Increase in U.S. Coarse Grain Production
Record '07 Canada Corn
Crop
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
World Corn Supply & DemandWorld Corn Supply & Demand
200
250
300
350
400
450
500
550
600
650
700
750
Production Consumption
Global production Global production up 9% from up 9% from 2006/07. Use up 2006/07. Use up 7%7%
Production will be Production will be 5.5.3737 MMT (212 mil. MMT (212 mil. Bu.) less than Bu.) less than UsageUsage
World Ending World Ending Stocks to decrease Stocks to decrease 5.5.3737 MMT from last MMT from last year, down to 13 % year, down to 13 % of Usage.of Usage.
Million MT
U.S. Corn Ending Stocks U.S. Corn Ending Stocks CornCorn Ending Stocks as a % of UsageEnding Stocks as a % of Usage
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.
MAY 2008 HRW Wheat MAY 2008 HRW Wheat FuturesFutures
KCBT: February 2007-March 2008“2008 MAY Old Crop HRW Contract”
Contract Volume & Open Interest
Ness City, Kansas Ness City, Kansas Cash Wheat PricesCash Wheat Prices
De Bondurant Grain Co., Ness City, KansasMarch 1, 2007 – Feb. 28, 2008Source: DTN Bid Analyzer
$11.55 /bu on 2/28/08Basis: $0.80/bu underKC March 2008 Wheat
July 2008 HRW Wheat July 2008 HRW Wheat FuturesFutures
KCBT: April 2006-February 2008“2008 JULY New Crop HRW Contract”
Contract Volume & Open Interest
Scott City, Kansas Scott City, Kansas New Crop Wheat PricesNew Crop Wheat Prices
Scott Coop Assn., Scott City, KansasMarch 1, 2007 – February 28, 2008Source: DTN Bid Analyzer