Grains Market Outlook

Transcription

1 Grains Market Outlook Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado State University 29 th Annual Ag & NR Conference April 27-28, 2017 Independent Bankers of Colorado, Community Bankers Association of Kansas, Nebraska Independent Community Bankers, and Independent Community Bankers of America Outline Weather situation & outlook Corn & Forage Oilseeds Wheat Inputs & Land Values Short term & Long term Price Outlook 1

2 Commodity Market Outlook Summary: 2017 Commodity Price Range Corn $3.85/bu. $3.65 $4.25 Wheat $4.00/bu. $3.50 $4.25 Soybeans $9.50/bu. $8.75 $10.00 Alfalfa Hay $130/T. $100 $150 Other Hay $70/T. $40 $80 Last Year s Forecast Summary Commodity Price Range National Annual Colorado Harvest Corn $3.50/bu. $3.25 $4.00 $3.40 $3.55 Wheat $4.50/bu. $4.35 $4.95 $3.85 $3.10 Soybeans $8.25/bu. $8.00 $8.75 $9.50 NA Alfalfa Hay $150/T. $135 $165 $138 $150 Other Hay $75/T. $50 $90 $117 $158 2

3 3

4 Outlook/Forecasting Approach What do the fundamentals say? (Base level) Premiums/Discounts for: Risk Weather Speculation Related markets What do the technical say? (Direction, Bounds, and Decisions) Bottom line? And cautions? Let s do the bottom line first. Big switch from corn to soybeans. This will hold corn prices steady. But don t bet against oilseeds. Fewer wheat acres. Hay production leveled off with big stocks. Problems will get little market relief. Outlook like before Normal to soft prices & with surprises come stronger prices. 4

5 Let s do the bottom line first. Inputs also softer prices & even some land rent softening. Economy persistent growth. In Colorado, whiskey s for drinking & water s for fighting Macro low inflation & higher low interest rates. International strong dollar & weak world economy. Impact is dis integration? 5

6 6

7 7

8 Forecasted wet across northern plains & northeast. Forecasted dry for eastern Corn Belt. No weather pattern forecasted into next winter. 8

9 9

10 Weekly Corn Contract $8.00 $5.00 The trading range for corn is $3.35-$4.50/bu. Except 10

11 Corn Outlook U.S. to plant 90.0 million acres in Expectations were million acres. World production & consumption of coarse grains grow. Consumption strong relative to production. Foreign stocks leveling off. U.S. stocks have rebuilt & will likely contract by 5% from 15.8% to 10.7%. Normal weather uncertainty. Up side & down side volatility. $3.65 $4.25/bu. corn. And cost of production 11

12 12

13 13

14 14

15 15

16 16

17 17

18 18

19 DEC 2015 Corn Contract DEC 2016 Corn Contract Normal Marketing Practices: Price will be soft most of the time, Except for short-lived scares. Producers will buy & sell in one or the other. 19

20 DEC 2017 Corn Contract 20

21 Hay & Forages Outlook Hay price followed corn & will be determined mainly by summer weather. Little further contraction of acres. Rebuilt & have normal stocks levels. Strong demand from beef & dairy price outlook & history. Strong quality premiums/discounts. 21

22 22

23 Mil. Tons 190 US ALL HAY SUPPLY & DISAPPEARANCE Crop Year Hay Supply Disap. Data Source: USDA NASS, Forecasts by LMIC Livestock Marketing Information Center G-NP-20 04/11/17 Mil. Tons 120 US ALL HAY STOCKS December Data Source: USDA NASS, Forecasts by LMIC Livestock Marketing Information Center G-NP-22 04/11/17 23

24 Mil. Tons 30 US ALL HAY STOCKS May 1 (Beginning of Crop Year) Data Source: USDA NASS, Forecasts by LMIC Livestock Marketing Information Center G-NP-21 04/11/17 PERCENT CHANGE ALL HAY ACRES ( ) U.S. Total: 5% Livestock Marketing Information Center Data Source: USDA-NASS 1/12/

25 PERCENT CHANGE NEW SEEDLINGS ACRES ( ) U.S. Total: 0.5% Livestock Marketing Information Center Data Source: USDA-NASS 1/12/2016 GL_GR310 Greeley, CO Thu Apr 13, 2017 USDA-CO Dept of Ag Market News Colorado Hay Report Compared to the last week, prices were higher with activity and demand light in all classes. Many producers are sold out of last year s crop. Price reflect load lots of hay. Northeast Colorado Areas Alfalfa Round Bales: Good Alfalfa/Grass Mix Large Squares: Good Southeast Colorado Areas Alfalfa Small Squares: Supreme (7.00 per bale). Grass Large Squares: Premium , retail. Small Squares: Premium (6.50 per bale), retail. Triticale Large Squares: Good San Luis Valley Area Alfalfa Large Squares: Premium Southwest Colorado Areas Grass Small Squares: Good (6.00 per bale). Orchard Grass Small Squares: Fair ( per bale). Orchard/Alfalfa Mix Small Squares: Premium (13.00 per bale). Mountains and Northwest Colorado Areas Grass Small Squares: Premium (5.50 per bale); Good Large Squares: Good

26 Weekly Soybean Contract Oilseeds Outlook U.S. to plant 89.5 million acres in Expectations were million acres. USDA forecast was 88.0 million acres was 83.4 million acres. World production & consumption of oilseeds grows. Foreign production & trade of oilseeds grows. World & U.S. stocks abundant and expanding. Some potential for volatility & downside. Supply & demand race continues $9.25/bu soybeans and $260/T meal for

27 27

28 28

29 29

30 30

31 31

32 NOV 2016 Soybean Contract NOV 2017 Soybean Contract 32

33 Weekly Soybean Meal Contract 33

34 34

35 Weekly Domestic Sugar Contract Weekly World Sugar Contract 35

36 Weekly KC Wheat Contract Wheat Outlook World production & consumption increase & stocks build. U.S. reduced acres. Foreign production? Doesn t matter too much. Weak basis all last year & months from harvest. And strong dollar. $3.75 $4.00/bu wheat. Market has limited upside potential. 36

37 37

38 38

39 39

40 40

41 41

42 42

43 JUL 2015 KC Wheat Contract 43

44 JUL 2016 KC Wheat Contract JUL 2017 KC Wheat Contract 44

45 Input Market Outlook Summary Almost all input prices continue to soften at the wholesale level. Substantially cheaper energy. Cheaper fertilizer & chemicals. Not seeing cheaper rents yet? Supply industries continue to operate undercapacity & unwilling to take risk. No inflation. But higher interest rates. Weekly Crude Oil Contract $140 $70-$110 $40 Futures Prices: DEC13 $88.65 DEC14 $86.60 DEC15 $85.12 DEC16 $84.24 DEC18 $82.75 $50 45

46 Weekly Natural Gas Contract 46

47 47

48 Corn Outlook Summary Bottom for a while. Chase those bean dollars! With normal weather: $3.85/bu average & $3.50/bu in the fall And modest volatility. Any weather problems & maybe $4.25/bu. Boy, those payments take a while! Forage Weather & corn. Small bales. La Nina. Quality. Location & freight. 48

49 Soybeans & Oilseeds Outlook Summary Big acres & strong world production. Exports & Chinese demand. $9.00/bu. Wheat Huge world stocks & huge U.S. stocks. Weak basis and strong dollar. $4.00 $4.25/bu. Cash much weaker. And little chance of improvement. Futures Prices 2017 Unsettling... But back to normal. Oilseeds are the market driver for next few years. Follow through on plantings? Weather? Reaction next year? Equity? Lending? 49

50 Short Term Outlook Get priced on the volatility. Corn: bottom here for a while. Forages: plentiful except quality. Oilseeds: market driver & yield v. trade. Wheat: is a weed. Again, it depends on this year s weather Domestic & world economies strengthen. Long Term Outlook Protein production & trade. World economy. Demand? Domestic economy. Again food demand? Costs of production? Land rent? Energy Inputs Capital Weather Low interest rates & inflation but The long term outlook for the commodity crop economy is cautious. 50

51 Contact and Link Information 51