Grain Market Outlook Ag Profitability Conference Wakeeney, Kansas December 20, 2007 Mike Woolverton & Daniel OBrien K-State Research and Extension [email protected]@agecon.ksu.edu.

Grain Market Grain Market OutlookOutlook

Ag Profitability ConferenceAg Profitability ConferenceWakeeney, KansasWakeeney, Kansas

December 20, 2007December 20, 2007

Mike Woolverton & Daniel O’BrienMike Woolverton & Daniel O’BrienK-State Research and ExtensionK-State Research and Extension

[email protected]@agecon.ksu.edu [email protected] [email protected]

Historic vs Current Grain Historic vs Current Grain Prices, Prices,

Dollars per BushelDollars per Bushel

2000-07 2000-07 AverageAverage 12/17/0712/17/07

WheatWheat $3.36 $3.36 $9.56 $9.56CornCorn $2.27 $2.27 $4.24 $4.24Grain SorghumGrain Sorghum $2.20 $2.20

$4.19$4.19SoybeansSoybeans $5.64 $5.64 $10.93 $10.93

1 1 Average price per bushel, 2000-2007. Average price per bushel, 2000-2007. 2 2 Kansas City cash truck bids, 17 December 2007.Kansas City cash truck bids, 17 December 2007.

WheatWheatMarketsMarkets

Wakeeney, KS Cash Wheat Wakeeney, KS Cash Wheat PricesPrices

Midwest Coop, Wakeeney, KansasJan. 19 – Dec. 18, 2007Source: DTN Bid Analyzer

March 2008 HRW Wheat March 2008 HRW Wheat FuturesFutures

KCBT: April 2006-December 2007“2008 Old Crop March HRW Contract”

Contract Volume & Open Interest

July 2008 HRW Wheat July 2008 HRW Wheat FuturesFutures

KCBT: April 2006-December 2007“2008 New Crop July HRW Contract”


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 88 Exports 1,009 909 1,175 Feed & Residual 154 125 125

Total Use 2,155 2,049 2,333 End Stocks (%S/U) (26%) 571 (22%) 456 (12%) 280 U.S. Ave. Farm $ $3.42 $4.26 $6.20-$6.60

U.S. Wheat Planted Acreage

55.0

60.0

65.0

70.0

75.0

80.0

85.0

90.0

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07Harvest Year

Mill

ion

Acr

es

.

Source: USDAWASDE Report: 7.12.07

KSU Dept. of Ag Econwww.agmanager.info

U.S Wheat Yields

25.027.029.031.033.035.037.039.041.043.045.047.0

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07Year

Whe

at Y

ield

(B

u./A

cre)

.

2007 Estimate


U.S. Wheat Production

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07Year

Prod

ucti

on (

Bill

ion

Bu)

2007 Estimate


U.S. Wheat Exports

0.8

1.0

1.2

1.4

1.6

1.8

2.0

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

Year

Expo

rts

(Bill

ion

Bu.

)

.

2007 Estimate


Production of Major Wheat Production of Major Wheat ExportersExporters

Million Metric Tons Million Metric Tons 2006/072006/07 2007/082007/08

EU-27EU-27 124.80 124.80 120.50 120.50 United StatesUnited States 49.32 49.32 56.25 56.25 CanadaCanada 25.27 25.27 20.05 20.05 AustraliaAustralia 9.90 9.90 13.00 13.00

(12.7)(12.7) ArgentinaArgentina 15.20 15.20 15.00 15.00

World ProductionWorld Production 593.07 593.07 602.31 602.31

World Ending StocksWorld Ending Stocks 125.08 110.06 125.08 110.06

Soybean Soybean MarketsMarkets

Hays, KS Cash Soybean Hays, KS Cash Soybean $s$s

Midland Marketing - Hays, KansasJan. 19 – Dec. 18, 2007Source: DTN Bid Analyzer

March 2008 E-Soybean March 2008 E-Soybean FuturesFutures

CBOT: April 2006-December 2007“2008 Old Crop Soybean Contract”


November 2008 E-Soybean November 2008 E-Soybean FuturesFutures

CBOT: April 2006-December 2007“2008 Old Crop Soybean Contract”


U.S. Soybean Supply-U.S. Soybean Supply-DemandDemand

2005/06 2006/07 2007/08 Planted Ac. (mln.) 72.0 75.5 63.7 Harvested Ac (mln.) 71.3 74.6 62.8 Yield (bu./ac.) 43.0 42.7 41.3 Beg. Stocks 256 449 573 Production 3,063 3,188 2,594

Total Supplies 3,322 3,647 3,173 Crushings 1,739 1,806 1,830 Exports 940 1,118 995 Seed 93 78 86 Residual 101 71 77

Total Use 2,873 3,074 2,988 End Stocks (%S/U) (16%) 449 (19%) 573 (6%) 185 U.S. Ave. Farm $ $5.66 $6.43 $9.25-$10.25

U.S. Soybean Planted Acreage

45

50

55

60

65

70

75

80

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

Harvest Year

Mill

ion

Acre

s

.



U.S. Soybean Yields

20

25

30

35

40

45

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

Year

Soyb

ean

Yiel

d (B

u/Ac

re)

. Actual Yield Trend Yield

Source: USDA & KSUWASDE Report: 12.11.07


U.S. Soybean Production

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 07Harvest Year

Billi

on B

ushe

ls

Source: USDA & KSU Ag. Econ.WASDE Report: 12.11.07


USDA 2007 estimate assumes yield of 41.3 bu./acre

U.S. Soybean Exports

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07Year

Expo

rts

(Bill

ion

Bu.)

,



Soybean Price vs. Ending StocksEnding Stocks as a % of Total Usage

0%

5%

10%

15%

20%

25%

30%

35%

73 77 81 85 89 93 97 01 05

Year

Endi

ng S

tock

s (

% o

f U

sage

)

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

Average Farm

Price ($/Bu.)

Ending Stocks (%) Avg Farm Price



Wakeeney, KS Corn Cash Wakeeney, KS Corn Cash PricesPrices

Midwest Coop, Wakeeney, KSJan. 19 – Dec. 18, 2007Source: DTN Bid Analyzer

Wakeeney, KS Grain Wakeeney, KS Grain Sorghum Sorghum

Cash PricesCash Prices

Midwest Coop, Wakeeney, KSJan. 19 – Dec. 18, 2007Source: DTN Bid Analyzer

March 2008 E-Corn FuturesMarch 2008 E-Corn Futures

CBOT: April 2006-December 2007“2008 Old Crop Corn Contract”


December 2008 E-Corn December 2008 E-Corn FuturesFutures

CBOT: April 2006-December 2007“2008 New Crop Corn Contract”


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 86.1 Yield (bu./ac.) 148.0 149.1 153.0 Beg. Stocks 2,114 1,967 1,304 Production 11,114 10,535 13,168

Total Supplies 13,237 12,514 14,487 Ethanol 1,603 2,117 3,200 Other Food, Seed, Indust. 1,378 1,371 1,390 Exports 2,134 2,125 2,450 Feed & Residual 6,155 5,598 5,650

Total Use 11,270 11,210 12,690 End Stocks (%S/U) (17%) 1,967 (12%) 1,304 (14%) 1,797 U.S. Ave. Farm $ $2.00 $3.04 $3.35-$3.95

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 6.7 Yield (bu./ac.) 68.5 56.2 76.8 Beg. Stocks 57 66 32 Production 393 278 515

Total Supplies 450 343 547 Food, Seed, Indust. 50 45 35 Exports 194 157 275 Feed & Residual 140 109 180

Total Use 384 311 490 End Stocks (%S/U) (17%) 66 (10%) 32 (12%) 57 U.S. Ave. Farm $ $1.86 $3.29 $3.20-$3.80

U.S. Corn Planted Acreage

60

65

70

75

80

85

90

95

100

40 45 50 55 60 65 70 75 80 85 90 95 00 05

Harvest Year

Mill

ion

Acre

s

.

KSU Dept. of Ag Econwww.agmanager.infoSource: USDA WASDE: 12.11.07

U.S. Corn Yield

607080

90100110120130140

150160170

70 75 80 85 90 95 00 05Harvest Year

Corn

Yie

ld

(Bu.

/Acr

e)

Actual Yield

Trend Yield

Source: USDA & K-State Ag. Econ.WASDE Report: 12.11.07

2004 Yield = 160 bu./ac2005 Yield= 148 bu./ac2006 Yield= 149.1 bu./ac2007 Trend Yield = 154.1 bu./ac.USDA 2007 Proj. = 153.0 bu./ac.


Total U.S. Corn Production

4

5

6

7

8

9

10

11

12

13

14

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07Harvest Year

Prod

uctio

n (B

illio

n Bu

.)

.

Source: USDA & K-State Ag. Econ. WASDE Report: 12.11.07


USDA estimate assumes yield of 153.0 bu/acre

Dynamics of U.S. Corn UsageDynamics of U.S. Corn Usage USDA/WASDE USDA/WASDEUSDA/WASDE USDA/WASDE 2006/072006/07 2007/08 2007/08

est.est.

Feed and ResidualFeed and Residual 5,598 5,598 5,6505,6501 1 (+1%) (+1%) Food, Seed, and Industrial 1,371Food, Seed, and Industrial 1,371 1,3901,3902 2 (+1%)(+1%)Ethanol for FuelEthanol for Fuel 2,117 2,117 3,2003,200 (+51%) (+51%) Net ExportsNet Exports 2,125 2,125 2,450 (+15%)2,450 (+15%)Ending StocksEnding Stocks 1,3041,304 1,797 (+38%)1,797 (+38%)Total UsageTotal Usage 12,515 12,515 14,487 (+16%) 14,487 (+16%)ProductionProduction 10,535 10,535 13,168 (+25%) 13,168 (+25%)1 1 Assumes DDGS retain 30% of the feed value of corn and are included in the feed and Assumes DDGS retain 30% of the feed value of corn and are included in the feed and

residual category by the USDA. residual category by the USDA.

2 2 Industrial, food, and seed less ethanol. Industrial, food, and seed less ethanol.

World Corn Production & World Corn Production & ConsumptionConsumption

200

250

300

350

400

450

500

550

600

650

700

750

1979

/198

0

1981

/198

2

1983

/198

4

1985

/198

6

1987

/198

8

1989

/199

0

1991

/199

2

1993

/199

4

1995

/199

6

1997

/199

8

1999

/200

0

2001

/200

2

2003

/200

4

2005

/200

6

2007

/200

8

Production Consumption

Global production Global production up 9% from up 9% from 2006/07. Demand 2006/07. Demand up 6%.up 6%.

Production will Production will be 2.9 MMT (114 be 2.9 MMT (114 mil. Bu.) greater mil. Bu.) greater than than consumption.consumption.

Ending stocks Ending stocks forecast to forecast to increase slightly increase slightly from last year to from last year to 14 % of usage.14 % of usage.

Million MT

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 63.7 63.7 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 10.9 10.9 10.0 10.0 (-8%)(-8%)

Grain Sorghum 8.1 Grain Sorghum 8.1 7.7 7.7 7.4 7.4 (-(-4%)4%)

Principle Crops Principle Crops 297.9 297.9 298.1 298.1 299.4299.4CRPCRP 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, Millions of Acres2007–2017, Millions of AcresSource: USDA, FSASource: USDA, FSA

00.20.40.60.8

11.21.41.6

Cropland Coming Out of CRP (mln ac)

Grain Marketing Grain Marketing ConsiderationsConsiderations

WheatWheat – Global shortage of quality milling – Global shortage of quality milling wheat, reduced Australian and Argentinean wheat, reduced Australian and Argentinean production, and acres planted N. Hemisphere.production, and acres planted N. Hemisphere.

Corn/G.S.Corn/G.S. – Strong demand from overseas – Strong demand from overseas buyers, ethanol demand, and bid for acres.buyers, ethanol demand, and bid for acres.

SoybeansSoybeans – Dryness hurting Argentinean and – Dryness hurting Argentinean and Brazilian crops, hectares in Brazil up only 1%, Brazilian crops, hectares in Brazil up only 1%, and critically low carryover in the U.S.and critically low carryover in the U.S.

Factors to WatchFactors to Watch:: Tight global S/D balances for wheat and soybeansTight global S/D balances for wheat and soybeans Battle for acres this springBattle for acres this spring Harvest of Southern Hemisphere cropsHarvest of Southern Hemisphere crops

Questions???Questions???

K-State Extension Agricultural K-State Extension Agricultural Economics:Economics:

AgManager.infoAgManager.info

Grain Market Outlook Ag Profitability Conference Wakeeney, Kansas December 20, 2007 Mike Woolverton & Daniel OBrien K-State Research and Extension [email protected]@agecon.ksu.edu.

Documents

fsa slide

mt slide

wheat supplydemand slide

corn grain sorghum slide

corn supplydemand slide

soybean supplydemand

dtn bid analyzer slide

crop acres