Iowa State University Extension. Dr. Robert Wisner: Grain Outlook 3/15/06

Transcription

1 Iowa State University Extension Dr. Robert Wisner: Grain Outlook 3/15/06

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3 Brazil mid-feb. 2006

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14 Tree in Parana,, Brazil (No. 2 soybean state) Dates are approximate

15 Key Corn Variables for Fertilizer costs & crop rotations Ethanol trends very positive Bird flu? China corn exports? Weather: U.S. & World?

16 Gap: $6.20 May 2006 Soybeans

17 Nov Soybeans

18 May 2006 Corn Gaps: $2.338 & $2.448 (Sept. & Aug. 05) Offer Contracts

19 Price Objectives: Gaps: June 04: $2.665, $2.64, High of $2.69 On June 1, December 2006 Corn Offer Contracts

20 Monthly CRB Index

21 Feed Grain Outlook Large U.S. supplies Gradual strength in W. Corn Belt Basis & corn price into planting season Stronger recovery in drought areas & near ethanol plants 1.3 billion bushel reserve tempers possible 06 yield problems Wheat concerns Tightening supply in 08-10

22 World Supply Changes Vs. Last Year Soybeans +6.6% U.S. +2% Wheat +1% Feed Grain -1.0% U.S. Corn +3%

23 Monthly Natural Gas Futures

24 Mar. 06 Natural Gas Futures 53% drop from high

25 $ Per Ton U.S. Anhydrous Amonia prices : Rising Fertilizer cost boosts corn cost about 11% of corn price vs. 5% for SB

26 13% of U.S. Wheat TX.-Ok.

27 World stocks down 5% in 06: USDA

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29 USDA Oct. Chinese Corn Export Projections vs. Final Exports Oct. (Mil. Metr. Tons) Final (6.0 on 12/8)? Avg Avg. = 119 mil. Bu. Too low

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35 Lyon Plymouth * Sioux Woodbury * * * * Osceola O Brien * Monona Harrison Cherokee Ida Crawford Shelby Pottawattamie Mills * Fremont * * * * Dickenson Clay * * BuenaVista Page Sac Carroll Montgomery Emmet Palo Alto Pocahontas Audubon Guthrie Cass * * Calhoun * Adair Kosuth Greene Webster Boone Winnebago Worth Mitchell HowardWinnesh iek Allamakee Hancoc k Polk Storyr Floyd CerroGordo Wright Franklin * Hamilton Hardin * * Dalla s Madis on Warren Jasper Appanoose Chickasaw Tama Bremer BlackHawk Wapello Fayette Benton n Poweshiek Iowa Linn Washington Jefferson Henry VanBuren Lee Jones Louisa Mucatine Des Moines Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned, 3/20/06 Butler Marshal l Grundy Adams Union Clarke Lucas Monroe Taylor * * Humbol dt * * * * * * * * * Ringgold Decatur Wayne * * * * * * Marion Mahask Keokuk a * Davis Buchana n ** Johnson Clayton ** Delawa re * * Cedar * Dubuque * Jackson Clinton n Scott *

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37 Current & planned Iowa Corn Processing Plants, Normal Iowa corn production, & supplies available to ship out of state Mil. bu. available to ship out of state is from normal production after large carryover stocks have been used provided corn acreage remains at 2005 level. The market is likely to buy more corn acres In future years.

38 Est. Corn Available for Export, 2003 and Proj. 2008, Mil. Bu. Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Proj. Proj I 08 II Iowa Proj. Proj I 08 II Key Assumption: Corn 2004 level 117

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42 Iowa Corn Acres Projected from Non-soy Sources in 2010 To corn from oats, hay 0.2 Mil. A. CRP land: 0.8 out of 1.2 mil. A. expire in going to corn/soybean rotation (50% to corn = 0.4 mil. A.) Yield potential on this land: 80% of state Avg.

43 Total Iowa Acreage & Crop Rotations: Constant Corn Exports Total corn-sb acreage: Corn 11.7 mil. A., SB Current, Corn 12.5 mil. A., SB , Corn: 15.9 million acres Soybeans: 7.8 million acres Iowa crop rotations: Average in 2001: 48.5% soybeans, 51.5% corn Average in 2005: 44% soybeans, 56% corn Projected average by 2010: 33% soybeans, 67% corn

44 Total Iowa Acreage & Crop Rotations: China Imports Corn Total corn-sb acreage, 2010: Corn: 16.7 million acres Soybeans: 6.9 million acres Iowa crop rotations: Average in 2001: 48.5% soybeans, 51.5% corn Average in 2005: 44% soybeans, 56% corn Projected average by 2010: 29.2% soybeans, 70.8% corn

45 What Could Alter the Projected Acreage Pattern? Accelerated Growth in Corn Yields Some Ethanol Projects Put on Hold (not in sight currently) More CRP or Hay Acres Going to Corn Iowa Losing Corn Export Share (What states will make up difference?) Ethanol production from biomass, sugar, or imports Plants not operating at full capacity Reduced Livestock feeding

46 Cumulative Corn Export Sales 3/02/06 Mil. Bu. Japan +9% 453 Africa -11% 140 Taiwan +25% 124 Other Asia +34% 134 W. Hemisphere +8% 424 Unknown +109% 51 Total +9% 1,276

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51 Potential U.S. DGS demand by % of ration 5.30 mil. T. 18% of ration 5.52 mil. T. of ration 4.48 mil. T. Total mil.t. Potential production 32.5 Mil. T.

52 Soybean Outlook Large U.S. SB crop but < 2004 S. America 05 crop underestimated? Current good conditions in S. America Projected drop in Brazil/Argent. Soy Acres but 06 crop up 330 mil. Bu. Next years: more DGS competion Biodiesel Asian Soy Rust & bird flu?

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54 (Both Down) (Brazil Down, Arg. up) + -

55 Includes projections

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58 Cumulative U.S. Soybean Export Sales 3/02/06 vs. yr. ago China -20% 319 mil. Bu. Africa +12% 24 EU -58% 65 Japan -4% 77 Taiwan +27% 48 Other Asia -24% 72 W. Hemisphere -1% 106 Unknown -56% 16 Total -22% 740 SBM +1%; SBO -35%

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62 Key Developments to Watch Bird Flu S. America: rust, weather, acres Index funds U.S. $ Soy Diesel

63 WHY INSURANCE IS IMPORTANT WITH PRE-HARVEST PRICING Worst-case: over-sold, with high prices Few bushels means high cost/bu. High price means loss from buying back elevator contract Insurance that fits with forward sales: CRC or RA with harvest-price Option: --maintains long cash position

64 Prices declined in 71% of the years & rose in 31% of the years.

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66 Revenue Insurance Corn, soybeans: Minimum Revenue is % of Historical Yield x Feb. Avg. of New-Crop Price CRC Coverage increases if Harvest Futures are Above Feb. Avg. RA has this feature as an add-on Result: provides replacement value on lost bushels

67 Revenue Insurance is An Important Companion Tool for Marketing Not a substitute for marketing Helps take advantage of attractive prices when they are available Helps deal with risk of over-selling a crop not yet harvested History says best pricing opportunities often (but not always) occur well before harvest

68 Crop Insurance Comparisons 2006 Corn Soybeans Historical yld. 150 bu./a. Net Indemnity Pmt. 45 bu./a. Net Indemnity Pmt. APH Price 2.00/bu. $5.15 APH Prem. $4.88/bu. Wapello co., $3.87 Wapello co., IA IA CRC Price $2.59 $6.18 CRC Prem. $9.64/bu. Wapello co., $6.77 Wapello co., IA IA % Insured 75% 75% Harv. Yield 80bu./A. 33 bu./a. Harv. Fut. CRC APH CRC APH Price I $2.15/bu. $ $60.12 $5.45/bu. $ $0.01 Harv. Fut. CRC APH CRC APH Price II $3.00/bu. $87.86 $60.12 $6.45/Bu. -$1.93 -$ h t Insurance costs, Blackhawk county: Corn: APH $4.01, CRC $8.28, SB $3.15 & $5.74 t

69 Adding Put Options to Crop Insurance Options money/a. Put harv. & 5.45 futures Put harv. & 6.45 futures Approx. 2/24/06, 50 bu./a. $12.50 Corn $0.45/bu. or $22.50/A. Beans $.55/bu. Or $$8.25/A. Corn: $00 Soybeans $00 Approx. 2/24/06, 15 bu./a. $6.75 Corn Options net +$10.00/A. SB Net: +$1.50/A. Corn net -$12.50/A. SB Net: -$6.75/A.

70 Marketing Considerations Offer Contracts: an important Mktg. tool Old-crop corn: July $.20 above March, Sept. $.27 above March Basis likely stronger in April-early July Creates potential profit from farm storage Cash bids: Mallard, 49 Under for current delivery; 45 Under for June-July delivery New-Generation Grain Contracts

71 Marketing Considerations Old-crop beans: July $. 195 above March, Sept. $.175 above March Basis likely stronger in April-July Creates modest potential profit from farm storage Cash bids: Mallard, 51 Under for current delivery; July delivery bids, 55 Under Oct. delivery: corn 47 under, SB 50 under

72 Nov. Soybeans: History as a guide for offer contracts Price Number of years Percent of years $7.20 4/ / / / / / / / / / / Based on trades over life of November futures History is no guarantee of future performance

73 Corn: History as a guide for offer contracts Price Number of years Percent of years $3.20 3/ / / / / / / / / / Based on trades over life of December futures History is no guarantee of future performance

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75 ...and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Stanley R. Johnson, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa.