Upload
felton
View
42
Download
3
Tags:
Embed Size (px)
DESCRIPTION
Market Equilibrium Fundamentals . Internal and external forces influencing the demand for a particular commodity Internal and external forces influencing supply Market equilibrium Example of US corn market. A nation’s food and fiber system consists of four sectors that provide - PowerPoint PPT Presentation
Citation preview
Market Equilibrium Market Equilibrium Fundamentals Fundamentals
Internal and external forces influencing Internal and external forces influencing the demand for a particular commoditythe demand for a particular commodity
Internal and external forces influencing Internal and external forces influencing supplysupply
Market equilibriumMarket equilibrium Example of US corn marketExample of US corn market
A nation’s food and fiber system consists of four sectors that providefood and fiber products to their ultimate consumer.
The farm input supply sector supplies variable and fixed inputs to farmers and have market power to establish the price.
Crop and livestock farmers sell their production into the food and fiber processing sector which also has power to influence price.
Processed food and fiber products move through wholesale and retail marketing channels.
The ultimate consumers of food and fiber products include households, businesses, governments and overseas buyers.
Let’s Focus on the Let’s Focus on the US Corn MarketUS Corn Market
John Deere,Pioneer Seed
Monsanto
UScorn
farmers
Food use
Feed use
Fuel use
Exports
Storage
Food manufacturers
Feedlot operations
Ethanol producers
Foreign countries
Elevators and bins
Local labormarket
Local banker
Annual Supply and Use of CornAnnual Supply and Use of Corn
Page 90
Growth in Demand for US CornGrowth in Demand for US Corn1995/96 1996/97 2005/06 2006/07 2007/08*
Domestic use for feed (Mil bu)Percent of total use
4,68255.1%
5,27760.2%
6,15554.6%
5,75050.6%
5,75045.30
Domestic use for food (mil bu)Percent of total use
1,17613.8%
1,24014.2%
1,35812.1%
1,35511.9%
1,37010.8%
Domestic use for seed (mil bu)Percent of total use
200.2%
210.2%
200.2%
200.2%
210.2%
Domestic use for fuel (mil bu)Percent of total use
3964.7%
4294.9%
1,60314.2%
2,15018.9%
3,20026.8%
Exports (mil bu)Percent of total use
2,22826.2%
1,79720.5%
2,13418.9%
2,10018.5%
235016.9%
Ending stock (mil bu)Stock-to-use ratio
3470.04
8830.10
1,9670.17
1,3040.10
1,9970.12
Season average price ($/bu) $3.24 $2.71 $2.00 $3.20 $3.20
* USDA latest projection for 2007.
Page 90
Page 90
$0$10$20$30$40
$50$60$70$80
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Nom
inal
dol
lars
per
bar
rel
Historical perspective on Historical perspective on crude oil pricescrude oil prices
Source: U.S. Department of Energy
PDVSA strikeIraq war
Asian growthIran/Iraq War
Iranian Revolution
Merging Demand and SupplyMerging Demand and SupplyPrice
Quantity
D S
PE
QE
Factors that changedemand: Other prices Consumer income Tastes and preferences Real wealth effect Global events
D*
QE*
PE*
Price
Quantity
D S
PE
QE
Factors that changesupply: Input costs Technology Government policy Price expectations Weather & disease Global events
QE*
PE*
S*
Merging Demand and SupplyMerging Demand and Supply
External ForcesExternal Forces• Farmers must form
expectations about future price trends when investing
• Many forces are beyond their control
• Understanding these market forces requires knowledge of the domestic and global economies
Any Questions?Any Questions?
John Deere,Pioneer Seed
Monsanto
UScorn
farmers
Food use
Feed use
Fuel use
Exports
Storage
Food manufacturers
Feedlot operations
Ethanol producers
Foreign countries
Elevators and bins
Local labormarket
Local banker
Understanding Macro ForcesUnderstanding Macro Forces
Page 90
MMAACCRROO
EECCOONNOOMMYY
Macroeconomic “Big 5”Macroeconomic “Big 5”1. The rate of growth in
economy (consumer income)
2. Interest rates3. Inflation rates4. Unemployment rate5. Exchange rates and
global demand
Let’s Look at the Let’s Look at the Macro EconomyMacro Economy