FAPRI Outlook: Prospects and Uncertainties for the Next Decade

Transcription

1 FAPRI Outlook: Prospects and Uncertainties for the Next Decade William H. Meyers Howard Cowden Professor of Agricultural and Applied Economics and Co-Director, FAPRI University of Missouri Project LINK Meeting New York, NY 2 October 21

2 Agenda What is going on now? 28 again??? What is ahead for grain markets? FAPRI Baseline analysis Recent updates Major uncertainties

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7 Growth & Drop in KRU Net Grain Exports, mmt Source: USDA

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11 Can 28 happen again in 21? Not likely, so don t panic (yet) Why prices are rising Oct. production estimates PRODUCTION Reduced wheat production mainly in Kazakhstan, Russia, World wheat -4.7 mmt Ukraine and EU World coarse grains -17. mmt Trade restriction, mainly World rice +11. mmt Russia World grain produntion-46.7 mmt Reduced maize in USA SUPPLY=PDN + Stocks BUT grains stocks are higher World wheat supply -9.5 mmt than in 27/8 World coarse grains mmt AND many other factors are World rice mmt more benign than in 28 World grain supply -7.7 mmt

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13 Grain production, million metric tons (WASDE Oct 8, 21) 25 million metric tons /7 27/8 Wheat 28/9 Coarse Grains 29/1 Rice 21/11e

14 /7 27/8 Wheat 28/9 Coarse Grains 29/1 Rice 21/11e

15 Grain stocks, million metric tons (WASDE Oct 8, 21) 6 million metric tons /7 27/8 Wheat 28/9 Coarse Grains 29/1 Rice 21/11e

16 Grain stocks to use ratios (WASDE Oct 8, 21) 35% 3% 25% 2% 15% 1% 5% % 26/7 Wheat 27/8 28/9 Coarse Grains 29/1 Rice 21/11e Total Grains

17 Agenda What is going on? 28 again??? What is ahead for grain markets? FAPRI Baseline analysis Recent updates Major uncertainties

18 Unknowns and uncertainties High volatility likely to continue Major uncertainties in the markets Oil/Energy prices Exchange rates Global financial crisis and recovery, impacts on demand growth Restoration of trade and trade financing Policy interventions Weather events

19 Oil price uncertainty is great 16 Dollars per barrel /4 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Refiners' acquisition price, September-August year 9th percentile Average of 5 outcomes Page 66 of US Baseline Briefing Book 1th percentile

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21 Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Dollars per barrel Dollars per bushel Corn and petroleum prices Corn Petroleum Corn price is nearby futures price. Petroleum price is for West Texas Intermediate. Sources: USDA s Agricultural Marketing Service and Energy Information Administration

22 Corn prices under different scenarios Corn market is sensitive both to oil prices and biofuel policies Note that corn prices are lower in long run with low oil prices and current biofuel policies than with EIA reference oil prices and no supportive tax credits and a nonbinding mandate

23 Agenda What is going on? 28 again??? What is ahead for grain markets? FAPRI Baseline analysis Recent updates Major uncertainties

24 Macro outlook and Policy in the Baseline GDP growth, exchange rates, inflation, etc come from January 21 IHS Global Insight forecasts Baseline assumes current policies remain in place Changes that may come as result of WTO agreement or new legislation is a scenario of change from this baseline

25 Technology and weather in the Baseline The baseline assumes average rates of technological change. Mainly this means that crop yields increase in line with historical trends and prices. Similar assumptions for the productivity of livestock. Normal weather is assumed BUT historical yield variations are used for sensitivity analysis

26 Real GDP % Growth Percent World Developing Developed United States 219

27 Dollars per barrel Energy prices recover after 29 decline West Texas intermediate spot Refiners' acquisition - composite USDA 12/9 Page 8 of US Baseline Briefing Book and USDA outlook report

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29 Ethanol's share of corn use rises 7 Billion bushels /4 5/6 7/8 9/1 11/12 13/14 15/16 17/18 September-August marketing year Feed use Exports Ethanol use Page 1 of US Baseline Briefing Book 19/2

30 World Rapeseed Oil Consumption Thousand mt kg/person 3, , 3. 2, , , 1. 5, 1999/.5 23/4 27/8 Food and Other Use 211/12 Industrial Use 215/ /2 Per Capita Consumption

31 World Vegetable Oil Consumption Thousand mt 16, 14, 12, 1, 8, 6, 4, 2, 21/2 24/5 Soy Oil 27/8 Sunflower Oil 21/11 213/14 Rapeseed Oil 216/17 Peanut Oil 219/2 Palm Oil

32 World Vegetable Oil Prices Dollars per mt 1,8 1,6 1,4 1,2 1, /2 24/5 27/8 21/11 Soybean Oil, Rotterdam Sunflower Oil, Rotterdam 213/14 216/17 Rapeseed Oil, Hamburg Palm Oil, Rotterdam 219/2

33 World Oilseed Prices Dollars per mt /2 24/5 27/8 Soybeans 21/11 Rapeseed 213/14 216/17 Sunflower Seed 219/2

34 World Wheat Use Thousand mt kg per person 8, , , , / /5 27/8 Feed Use 21/11 Food Use 213/14 216/17 Per Capita Consumption 219/2

35 World Corn Use Million mt 1, kg/person /2 1 24/5 Feed Use 27/8 21/11 Food and Other Use 213/14 216/17 219/2 Per Capita Consumption

36 World Grain Prices Dollars per mt / 23/4 27/8 Corn, U.S. FOB Gulf Rice, FOB Bangkok 1% B Grade 211/12 215/16 Wheat, U.S. FOB Gulf FAO est 219/2

37 Agenda What is going on? 28 again??? What is ahead for grain markets? FAPRI Baseline analysis Recent updates of prices and supply Major uncertainties

38 FAPRI Projections of FOB Gulf maize and wheat prices, and spot Dollars per mt /2 8 /1 6 /1 4 /1 Wheat Oct 1 spot /1 /1 8 / 6 / 4 / 2 / / Wheat, U.S. FOB Gulf Corn, U.S. FOB Gulf Corn Oct 1 spot

39 16 14 dollars per barrel /3 4/5 6/7 8/9 1/11 12/13 14/15 16/16 crop year 9th percentile Average of 5 outcomes 1th percentile NYMEX-Dec 18/19

40 25 2 t 15 m r e p sr all 1 o d 5 2/3 4/5 6/7 8/9 1/11 12/13 14/15 16/16 18/19 crop year 9th percentile Average of 5 outcomes 1th percentile WASDE Oct 8 average CBOT-Dec less basis

41 3 dollars per mt /3 4/5 6/7 8/9 1/11 12/13 14/15 16/16 18/19 crop year 9th percentile Average of 5 outcomes 1th percentile CBOT-Dec less basis WASDE Oct 8 average

42 A more uncertain future Road to economic recovery? Timing and size of oil price volatility? Will biofuel policies remain or change? Will other policies, e.g. trade policy, be unstable? Will DDA be completed in near term? Climate change and policy impacts? 7. Wider range of possible outcomes 8. Larger impacts on low income consumers 9. Complicated decision making and planning For Governments 2. For Farm and Food Industry 1.

43 Thank you!