Department of Agricultural EconomicsPurdue University
2014 U.S. Grain Outlook
Chris Hurt
Purdue Extension ServiceAugust 2013, [email protected]
Department of Agricultural EconomicsPurdue University
$2 to $3
$4
$7.50 $8$8.50
’10 = 153 bu./ac‘11 = 147 bu./ac‘12 = 123 bu./ac
Moderation to What?
Base Today:$5.00 corn
$12.00 beans2.0% 10-Year Treasury
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/140
5
10
15
20
25
30
35
40
45
50
8.4 7.8
13.014.9 16.3 16.1
20.2
26.6
34.6
39.3
45.246.7 47.3
43.8
U.S. Acres Required for Chinese Soybean Exports; Ethanol (ddgs ad-justed); and Chinese Corn Purchases
U.S. Harvest Year
Mill
ion
Acr
es
Department of Agricultural EconomicsPurdue University
1.5M acre/year
5.8M acre/year
1.1M acre/year
1,600,000
1,700,000
1,800,000
1,900,000
2,000,000
2,100,000
2,200,000
2,300,000
2,400,000
1972/73=1,872
1981/82=2,115 1996/07=
2,104
2002/03=2,033
2005/06= 2,141
2013/14=2,288
World Harvested ACRES 13 Major Crops Total: (Millions)
147 Million acres added in 8 years (7%)
243 Million acres added in 9 years
-3,000
2,000
7,000
12,000
17,000
22,000
27,000
32,000
37,000
42,000 40,199.1
27,992.1
21,747.718,332.7
15,483.614,606.4
8,853.8
3,938.91,433.2
766.0 662.2 412.7
Change in Area Harvested in 13 major World crops 2013/14 vs. 2005/06 (Million Acres) Total +147 million acres
Department of Agricultural EconomicsPurdue University
12%14%16%18%20%22%24%26%28%30%32%34%36%
23.5%
26.9%
15.1% 14.6% 15.0%14.2%
16.1%
World Stocks to Use %: USDA August 2013Wheat
Soybeans
Corn
Department of Agricultural EconomicsPurdue University
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 130
20406080
100120140160180200
72
51
91
41
61
18
37
5470 66 71
59
4234
7264
42 46 51 4832 29 23
53
1624 20 15
25
83
U.S. Ending Stocks in Days: Corn, Soybeans, Wheat
CornSoybeansWheat
Department of Agricultural EconomicsPurdue University
Corn: USDA
8/12/13 09/10 10/11 11/12 12/13 13/14 Million Bushels Carry in 1,673 1,708 1,128 989 719 Production 13,110 12,447 12,358 10,780 13,763 Total Supply 14,791 14,182 13,514 11,934 14,512 Feed & Residual 5,166 4,792 4,547 4,450 5,100 FSI Non-Fuel 1,370 1,406 1,426 1,400 1,450 FSI Fuel (Ethanol) 4,560 5,021 5,011 4,650 4,900 Export 1,987 1,835 1,541 715 1,225 Total Use 13,083 13,054 12,525 11,215 12,675 Ending Stocks 1,708 1,128 989 719 1,837 US Farm Price $3.55 $5.18 $6.22 $6.95 $4.90
$6.75-$7.15$4.50 - $5.30
Department of Agricultural EconomicsPurdue University
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13100
110
120
130
140
150
160
170
118.5
108.6
131.4
100.7
138.6
113.5
127.1126.7
134.4133.8136.9138.2
129.3
142.2
160.3
147.9149.1151.1
153.9
164.7
152.8
147.2
123.4
154.4
U.S. Corn YieldsB
ushe
ls/A
cre
Department of Agricultural EconomicsPurdue University
6/2/
13
6/9/
13
6/16
/13
6/23
/13
6/30
/13
7/7/
13
7/14
/13
7/21
/13
7/28
/13
8/4/
13
8/11
/13
8/18
/13
8/25
/13
9/1/
13
9/8/
13
9/15
/13
9/22
/13
9/29
/13
240
260
280
300
320
340
360
380
400 U.S. Corn Crop Ratings: USDA
'06'07'08'0920102011'1213
Department of Agricultural EconomicsPurdue University
Iowa Ill Neb Mn Indiana SD U.S.0
10
20
30
40
50
60
70
80
90
100
50
57
75
58
7371
64
58
68
76
63
8176
68
53
64 63 62
7673
63
49
68 67
61
77
70
64
Corn Ratings 6 Largest States: % Good/Excellent
Department of Agricultural EconomicsPurdue University
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 136
7
8
9
10
11
12
13
14
7.937.48
9.48
6.34
10.05
7.40
9.239.219.76
9.439.92
9.518.97
10.09
11.81
11.11
10.53
13.07
12.09
13.11
12.4512.36
10.78
13.76
U.S. Corn ProductionB
illion
Bus
hels
Department of Agricultural EconomicsPurdue University
$4.46
Department of Agricultural EconomicsPurdue University
Department of Agricultural EconomicsPurdue University
August 23 to 29 Precip Moisture
Department of Agricultural EconomicsPurdue University
Harvest 13 Harvest 14 Harvest 15 Harvest 16$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$4.50
$4.83 $4.81 $4.73
Corn Cash Harvest Bids Based on Futures August 15, 2013
Average = $4.72
Department of Agricultural EconomicsPurdue University
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 1332
34
36
38
40
42
44
34.134.2
37.6
32.6
41.4
35.3
37.6
38.938.9
36.6
38.1
39.6
38.0
33.9
42.2
43.0 42.7
41.7
39.7
44.043.5
39.6
42.6
U.S. Soybean YieldsB
ushe
ls/A
cre
Department of Agricultural EconomicsPurdue University
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 131.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
1.931.99
2.19
1.87
2.52
2.17
2.38
2.692.742.65
2.762.89
2.76
2.45
3.123.063.19
2.68
2.97
3.51
3.33
3.093.02
3.26
U.S. Soybean ProductionB
illio
n B
ushe
ls
Department of Agricultural EconomicsPurdue University
Soybeans: USDA
8/12/13 09/10 10/11 11/12 12/13 13/14 Million Bushels Carry in 138 151 215 169 125 Production 3,359 3,329 3,094 3,015 3,255 Total Supply 3,512 3,495 3,325 3,219 3,395 Seed & Residual 108 132 88 94 115 Crush 1,752 1,648 1,703 1,685 1,675 Exports 1,501 1,500 1,365 1,315 1,385 Total Use 3,361 3,280 3,156 3,094 3,175 Ending Stock 151 215 169 125 220
Farm Price $9.59 $11.30 $12.50 $14.40 $11.35
$10.35-
$12.35
Department of Agricultural EconomicsPurdue University
$11.62
Department of Agricultural EconomicsPurdue University
Harvest 13 Harvest 14 Harvest 15 Harvest 16$7
$8
$9
$10
$11
$12
$13$12.39
$11.67$11.21
$10.84
Bean Cash Harvest Prices Based on Futures August 15, 2013
Average = $11.53
Department of Agricultural EconomicsPurdue University
Wheat: USDA
8/12/13 09/10 10/11 11/12 12/13 13/14 Million Bushels Carry in 657 976 862 743 718Production 2,218 2,207 1,999 2,269 2,114Total Supply 2,993 3,279 2,974 3,135 2,962Feed & Residual 148 133 164 388 280Other Domestic 988 995 1,017 1,020 1,031Exports 881 1,289 1,050 1,009 1,100Total Use 2,017 2,417 2,231 2,417 2,411
End Stocks 976 862 743 718 551Farm Price $4.87 $5.70 $7.24 $7.80 $7.00 $6.40-$7.60
Department of Agricultural EconomicsPurdue University
Department of Agricultural EconomicsPurdue University
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0
$50
$100
$150
$200
$250
$300
$350
0
1
2
3
4
5
6
7
8
$113
$156
$333
$234
$136
$332$357
$297
$250$234 $242 $249
4.18
5.11 5.10
4.103.72
3.20 3.002.62
3.00
3.50
4.004.50
Estimated Ownership Returns/Acre to Average Quality Indiana Land, August 15, 2013
Returns/Acre
Discount Rate 10Yr Treasury
Inte
rest
%
Department of Agricultural EconomicsPurdue University
Next 4 Years:
Time to be cautious for some and aggressive for others?
Tea Leaves 2013-2016Moderation-with a Downward Slope??
Department of Agricultural EconomicsPurdue University
Weaker tone for Crop ProducersWho’s Vulnerable?-High % of Hi cash rent-Weak financial position-High costs for whatever reason-Recent large land purchases?
Strategies:-Turn more cautious-Focus on driving costs down-Delay pricing inputs-No multiple year locking in inputs-Forward price product more aggressively-Earn storage returns
Weaker tone for Input Suppliers-Lower fertilizer prices/volume-Lower seed prices & more competition-Lower cash rents-Lower machinery demand-Lenders: Declining loan volumes in $
-Reduce inventories-Caution about ordering-No new capital investments-Collect accounts payable
Improved tone: Margins and Volume -Grain Handlers-Grain & Soybean Processors-Animal product producers & suppliers-Food consumers: Slower food price inflation-Foreign buyers
-Rejoice!-Improve financial position-Become more aggressive-Consider expansion