January 12, USDA World Supply and Demand Estimates

Transcription

1 January 12, USDA World Supply and Demand Estimates Corn This month s U.S. corn outlook is for lower production, reduced feed and residual use, increased corn used to produce ethanol, and smaller stocks. Corn production is estimated at billion bushels, down 78 million from last month on lower harvested area and a reduction in yield to bushels per acre. Imports are raised based on the pace of corn imports through November. Feed and residual use is lowered 50 million bushels to 5,600 million based on the smaller crop, increased corn used to produce ethanol, greater sorghum feeding, and indicated disappearance during September-November as reflected by the December 1 stocks. Corn used to produce ethanol is raised 25 million bushels to 5,325 million based on the most recent data from the Grain Crushings and Co-Products Production report which estimated the amount of corn used to produce ethanol during September-November to be record high. With supply falling faster than use, corn ending stocks are lowered 48 million bushels from last month. The projected range for the season-average corn price received by producers is raised 5 cents on both ends to $3.10 to $3.70 per bushel. Global coarse grain production for is forecast lower. This month s foreign coarse grain outlook is for marginally lower production, higher consumption, and increased trade relative to last month. Serbia corn production is raised reflecting the latest information from the Foreign Agricultural Service office in Belgrade. Partly offsetting is lower corn production for Bolivia where the impact of a severe drought during the growing season was worse than previously expected. Major global trade changes for this month include lower projected corn exports for India, more than offset by increases for Serbia and the EU. Imports are raised for Bolivia, but lowered for Indonesia. Foreign corn ending stocks are virtually unchanged from last month, with reductions for Indonesia, Mexico, and the EU offset by an increase for Canada. Market Reaction: March 2017 corn futures closed up 1 cent at $3.58 ¼ with a trading range for the day of $3.53 to $3.60. December 2017 corn futures closed up ¼ cent at $3.86 with a trading range for the day of $3.81 ½ to $3.88 ½. Corn continues to be ranged bound with the December contract trading between $3.75 and $3.90. Nothing in today s report will trigger a breakout in either direction.

2 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) 2012/ / / /16 Est. Projected December Projected January Planted and Harvested Acres & Yield Change 2015/16 to Change From Previous Month Supply (Million Bushels) Beg ,232 1,731 1,738 1, Production 10,755 13,829 14,216 13,601 15,226 15,148 1, Imports Total Supply 11,904 14,686 15,479 15,400 17,013 16,940 1, Use & Ending (Million Bushels) Feed and Residual 4,315 5,040 5,280 5,131 5,650 5, Ethanol 4,641 5,124 5,200 5,206 5,300 5, Food, Seed & Industrial 1,397 1,369 1,401 1,429 1,435 1, Exports 730 1,920 1,867 1,898 2,225 2, Total Use 11,083 13,454 13,748 13,664 14,610 14, U.S. Ending 821 1,232 1,731 1,737 2,403 2, Foreign 4,619 5,653 6,509 6,531 6,346 6, U.S. Avg. Season Price ($/Bu) $6.89 $4.46 $3.70 $3.61 Price and to Use Ratio $3.05- $3.65 $3.10- $3.70 -$0.21 $0.05 U.S. /Use 7.41% 9.16% 12.59% 12.71% 16.45% 16.15% 3.7% -0.30% Source: USDA-WASDE January 12, 2017

3 Country / Region World Corn Supply and Use (Million Bushels) (January) Beginning Production Imports Feed Total Exports Ending World 8,268 40,861 5,343 24,645 40,429 5,829 8,700 US 1,737 15, ,600 12,360 2,225 2,355 Foreign 6,531 25,713 5,288 19,045 28,069 3,604 6,345 Argentina 41 1, Brazil 230 3, ,949 2,303 1, South Africa Egypt EU 269 2, ,181 2, Japan Mexico , Southeast Asia 173 1, ,368 1, South Korea Canada China 4,361 8, ,260 8, ,185 Ukraine 23 1, ROW 870 5,426 2,152 4,158 7, World Corn Supply and Use (Million Bushels) January-December Country / Region Beginning Production Imports Feed Total Exports Ending World US Foreign Argentina Brazil South Africa Egypt EU Japan Mexico Southeast Asia South Korea Canada China Ukraine ROW Source: USDA-WASDE January 12, 2017

4 Cotton The U.S. cotton outlook shows larger production, exports, and ending stocks relative to last month. Production is raised 435,000 bales to nearly 17.0 million, due mainly to higher production in Texas. mill use is unchanged, but exports are raised to 12.5 million bales and ending stocks to 5.0 million. The forecast range for the marketing year average price received by producers is narrowed 1 cent on each end to 65 to 69 cents per pound, with the midpoint unchanged at 67 cents. Larger production is the main factor driving a 1.5-million-bale increase in projected global ending stocks. In addition to the increase for the United States, production is raised 1.0 million bales for China, where inspection data indicates higher production than previously anticipated for the Xinjiang region, partially offset by a decrease for Pakistan, which is based on ginning arrivals. Consumption is reduced for India, Mexico, and Turkey, mostly offset by an increase for China. World trade is raised slightly, due mainly to higher projected imports by Pakistan and Bangladesh. Higher exports are projected for the United States and India, partially offset by decreases for Uzbekistan and Australia. World ending stocks are now projected at 90.6 million bales. Market Reaction: March 2017 cotton futures closed down 0.80 cents at with a trading range for the day of to 73.8 cents. December 2017 cotton futures closed down 0.26 cents at with a trading range for the day of to cents. Increased projected cotton stocks compared to last month will not aid cottons attempt to maintain prices near 75 cents.

5 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (lbs/acre) 2012/ / / /16 Est. Projected December Projected January Planted and Harvested Acres & Yield Change 2015/16 to Change From Previous Month Supply (Million Bales) Beg Production Imports Total Supply Use & Ending (Million Bales) Exports Total Use U.S. Ending Foreign Chinese U.S. Avg. Season Price ($/lb) $0.73 $0.779 $0.613 $0.612 Price and to Use Ratio $0.64- $0.70 $0.65- $0.69 $0.058 $0.00 U.S. /Use 23% 17% 25% 30% 31% 32% 1.49% 0.68% Chinese /Use 140% 182% 197% 166% 134% 133% % -0.47% Source: USDA-WASDE January 12, 2017

6 World Cotton Supply and Use (Million 480 lb Bales) (January) Country / Region Beginning Production Imports Use Exports Loss Ending World US Foreign Central Asia Afr. Fr. Zone Australia Brazil India Mexico China EU Turkey Pakistan Indonesia Thailand Bangladesh Vietnam ROW World Cotton Supply and Use (Million 480 lb Bales) January-December Beginning Production Imports Use Exports Loss Ending Country / Region World US Foreign Central Asia Afr. Fr. Zone Australia Brazil India Mexico China EU Turkey Pakistan Indonesia Thailand Bangladesh Vietnam ROW Source: USDA-WASDE January 12, 2017

7 Soybeans U.S. oilseed production for is estimated down from last month. Lower soybean and peanut production is partly offset with higher canola, sunflowerseed, and cottonseed crops. Soybean production is estimated at a record 4,307 million bushels, down 54 million from last month on lower yields. Harvested area is estimated at 82.7 million acres, down 0.3 million from the previous forecast with lower planted area. Yield is estimated at a record 52.1 bushels per acre, down 0.4 bushels. Soybean supplies are down 60 million bushels on lower production and imports. With exports and crush unchanged, ending stocks are projected at 420 million bushels, down 60 million from last month. Although soybean crush is unchanged, soybean meal production is reduced on a lower extraction rate. Soybean meal exports are also reduced on lagging sales. Soybean oil balance sheet changes include increased production on a higher extraction rate, and increased ending stocks. The U.S. season-average farm price forecast for soybeans is projected at $9.00 to $10.00 per bushel, from $8.70 to $10.20, up 5 cents at the midpoint. The soybean meal price forecast is unchanged at $305 to $345 per short ton. The soybean oil price forecast of 34 to 37 cents per pound is lowered 0.5 cents at the midpoint. The global oilseeds supply and demand estimates include higher production and exports compared to last month. Oilseed production is projected up on increases for cottonseed, rapeseed, and sunflowerseed partly offset by reductions for soybeans and peanuts. Soybean production is lowered 7 million bushels as increases for Brazil and China are offset by declines in Bolivia, Uruguay, and the United States. The largest change to production is a 73-millionbushel increase to billion for Brazil, where beneficial rain has resulted in improved yield prospects. Global oilseed trade is projected up from last month. Increased soybean exports for Brazil more than offset lower soybean exports for Bolivia and Uruguay and lower rapeseed exports for Canada. Global oilseed crush is projected higher on increased soybean crush for Argentina and India and increased rapeseed crush for Canada. Global oilseed stocks are projected down, mainly on lower soybean stocks for the United States. Futures Market Reaction: March 2017 soybean futures were up 28 ¾ cents to $10.40 ¼ with a trading range for the day of $10.06 to $10.41 ¼. November 2017 soybean futures closed up 18 ½ cents at $10.16 ½ with a trading range for the day of $9.91 to $10.17 ½. Soybeans were the clear winner in the latest round of USDA reports. Reductions in U.S. projected ending stocks appear to indicate the USDA has again over estimated soybean stocks early in the marketing year. Brazilian production was increased 73 million bushels, however further South American increases could materialize in future WASDE reports. Pricing 20-30% of 2017 production with futures prices above $10.00 is a prudent risk management decision.

8 2012/ / / /16 Est. Projected December Projected January Planted and Harvested Acres & Yield Change 2015/16 to Change From Previous Month Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) Supply (Million Bushels) Beg Production 3,042 3,358 3,927 3,926 4,361 4, Imports Total Supply 3,252 3,570 4,052 4,140 4,588 4, Use & Ending (Million Bushels) Crushing 1,689 1,734 1,873 1,886 1,930 1, Exports 1,317 1,638 1,842 1,936 2,050 2, Seed and Residual Total Use 3,111 3,478 3,862 3,944 4,108 4, U.S. Ending Foreign 1,948 2,211 2,677 2,639 2,564 2, Price and to Use Ratio U.S. Average Season Price ($/Bu) $14.40 $13.00 $10.10 $8.95 $8.70- $10.20 $9.00- $10.00 $0.55 $0.05 U.S. /Use 4.53% 2.65% 4.95% 4.99% 11.68% 10.22% 5.23% -1.46% Source: USDA-WASDE January 12, 2017

9 Country / Region World Soybean Supply and Use (Million Bushels) (January) Beginning Production Imports Crush Total Exports Ending World 2,836 12,414 5,053 10,668 12,138 5,140 3,025 US 197 4, ,930 2,058 2, Foreign 2,639 8,107 5,028 8,738 10,080 3,091 2,605 Argentina 1,174 2, ,642 1, ,168 Brazil 685 3, ,488 1,620 2, Paraguay China ,160 3,178 3, EU Japan Mexico ROW 105 1,267 1,039 1,498 1, World Soybean Supply and Use (Million Bushels) January-December Country / Region Beginning Production Imports Crush Total Exports Ending World US Foreign Argentina Brazil Paraguay China EU Japan Mexico ROW Source: USDA-WASDE January 12, 2017

10 Wheat U.S. all wheat ending stocks are raised this month and projected to reach the highest level since the late 1980 s. Feed and residual use is lowered 35 million bushels reflecting disappearance for June-November as implied by the December 1 stocks estimated in the Grain report. Seed use is lowered 8 million bushels on the winter wheat planted area released today in the Winter Wheat and Canola Seedings report. Total supplies for are lowered fractionally on lower beginning stocks while 2016 production is unchanged. Projected ending stocks for are raised 43 million bushels. The season-average farm price is raised $0.10 at the midpoint to $3.80 on higher-than-expected cash prices to date. However, this seasonaverage price would still be the lowest since Global wheat supplies for are raised 48 million bushels on a production increase that is only partially offset by lower beginning stocks. The largest increases are for Argentina, Russia, and the EU. Global exports are raised 44 million bushels led by increases for Argentina, Australia, and the EU. Partly offsetting is a reduction in Canadian exports reflecting the slow shipment pace so far this year. Global use for is raised 4 million bushels with increased food use partially offset by a reduction in feed and residual use. With total global supplies increasing faster than use, ending stocks are increased 44 million bushels to a new record of billion bushels. Futures Market Reaction: March 2017 wheat futures closed up 7 ½ cents at $4.26 ¼ with a trading range for the day of $4.14 ½ to $4.30. July 2017 wheat futures closed up 6 ¼ cents at $4.53 ½ with a trading range for the day of $4.42 ¾ to $4.56 ½. Compared to the previous marketing year global wheat stocks are projected up 469 million bushels (210 domestic and 259 foreign). Even with reduced domestic acreage it is unlikely that prices will get above $5.00 without a major production disruption.

11 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) 2012/ / / /16 Est. Projected December Projected January Planted and Harvested Acres & Yield Supply (Million Bushels) Change 2015/16 to Change From Previous Month Beg Production 2,252 2,135 2,026 2,062 2,310 2, Imports Total Supply 3,118 3,026 2,768 2,927 3,410 3, Use & Ending (Million Bushels) Food Seed Feed Exports 1,012 1, Total Use 2,400 2,436 2,015 1,952 2,267 2, U.S. Ending ,143 1, Foreign 5,735 6,524 7,231 7,861 8,121 8, U.S. Avg. Season Price ($/Bu) $7.77 $6.87 $5.99 $4.89 Price and to Use Ratio $3.60- $3.80 $3.75- $3.85 -$1.09 $0.10 U.S. /Use 29.92% 24.22% 37.32% 50.26% 50.42% 53.33% 3.07% 2.91% Source: USDA-WASDE January 12, 2017

12 Country / Region World Wheat Supply and Use (Million Bushels) (January) Beginning Production Imports Feed Total Exports Ending World 8,836 27,657 6,355 5,423 27,186 6,542 9,307 US 976 2, , ,186 Foreign 7,861 25,347 6,230 5,198 25,937 5,567 8,120 Argentina Australia 219 1, Canada 190 1, EU 515 5, ,150 4, Brazil China 3,566 4, , ,100 Sel. Mideast , N. Africa , , Pakistan Southeast Asia India 534 3, , Russia 206 2, ,433 1, Kazakhstan Ukraine ROW 897 2,404 2, , World Wheat Supply and Use (Million Bushels) January-December Country / Region Beginning Production Imports Feed Total Exports Ending World US Foreign Argentina Australia Canada EU Brazil China Sel. Mideast N. Africa Pakistan Southeast Asia India Russia Kazakhstan Ukraine ROW Source: USDA-WASDE January 12, 2017

13 2017 Estimated Returns Non-Irrigated The profitability outlook has been updated after the release of the January 12, 2017 USDA WASDE reports. Yields used for non-irrigated estimates are a 5 year Tennessee state average year plugging in the 2016 state average projection of 151 bushels per acre for corn, 45 bushels per acre for soybeans, 1104 pounds per acre cotton, and 73 bushels per acre wheat. Costs are based on the 2017 UT Extension Row Crop budgets. Prices used for 2017 are incorporating forward 2017 harvest prices. Milo prices are an estimate as very few quotes are available. Based on these averages, 2017 will have negative profit margins at current harvest prices for 2017 considering variable, land, and fixed machinery cost for cotton, milo, and wheat/soybeans. Soybeans and corn have a small profit margin. Input costs look to be on the decline led by fertilizer. Input costs will be more known as we get further into the 2017 crop year. Visit with your supplier on input cost expectations. Please contact your local County Extension office or Area Specialist Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems. I would like to point out the cotton price of 71 cents that is being used in the profitability outlook. The price of 71 cents is made up of a cash price of 64 cents and gin rebates (seed & hauling) of 7 cents. The cash price of 64 cents is composed of a loan rate of cents and a 14.5 cent equity from the buyer. Note - When prices are low, cotton is redeemed out of the marketing loan program at the Adjusted World Price (AWP). This is effect helps create the loan option or equity price that producers receive. Currently, this price is in a cent range. Basically, this is a result of the way the cotton marketing loan program works. My observations and discussions with cotton buyers would indicate that when futures move above cents, then the prices to the producers would start to move up penny for penny. Producers should look at these returns as what could be if no adjustments are made in their operation and consider it a warning sign that adjustments will need to be made in 2017 to be sustainable. These estimates do not consider any USDA or crop insurance payments from the new farm bill. Please contact your local County Extension office or Area Specialist Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems. Cotton prices include revenue for cottonseed and hauling. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: Cotton - $ 97, Soybeans - $38, Corn - $121 (includes 170 units of N), Milo - $87, and Wheat/Soybeans - $93. Cost of production will continue to be adjusted as information becomes available. Weed control costs with resistant weeds have also been difficult to estimate. These costs will vary greatly among producers and individual fields. Production costs are estimates based on the 2017 University of Tennessee Crop Budgets with adjustments made where needed. Please visit with your farm supplier on estimated cost in your area. Producers with owned land and or cash rent can use Returns Over Variable as a guide in decision making. Producers with share rent ground should use Returns Over Variable and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue minus 25% of crop insurance cost is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. Producers who are not making major equipment changes

14 can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid Estimated Returns Non-Irrigated Cotton Soybeans Corn Milo Wheat/Soybeans Yield 962 lbs. 44 bu. 144 bu. 90 bu. 68 bu./32 bu. Price (as of 1/12/17) $0.71 lb. $10.20 bu. $3.70 bu. $3.40 bu. $4.55 bu./$10.20 bu. Revenue $686 $449 $533 $306 $636 Variable Expenses $430 $268 $339 $238 $395 Returns Over Variable $255 $201 $194 $68 $240 Land Costs (25% of Revenue-25% crop insurance) Returns Over Variable and Land Costs Fixed Costs Depreciation & interest on machinery $169 $110 $130 $74 $155 $86 $91 $64 -$6 $85 $130 $62 $56 $62 $99 Returns Over Specified Costs -$44 $29 $8 -$68 -$13 Breakeven Price at Average Yield and Specified Cost $0.76 $ 9.55 $3.64 $4.16 $5.13/9.43

15 2017 Estimated Returns Irrigation Considering irrigation, profitability is positive only for soybeans considering variable, land and fixed cost. Producers should look at these returns as what could be if no adjustments are made in their operation and consider it a warning sign that adjustments will need to be made in 2017 to be sustainable. The table below is an estimate of returns for crops under irrigation. Since irrigated yields are not as of yet kept separate in Tennessee, yields below are an estimate of irrigated yields. Irrigation fixed costs and energy costs will vary greatly among producers and systems. These projections include in variable expenses energy costs for irrigation of $28 per acre for corn, $24 per acre for cotton, and $18 per acre for soybeans and $15 per acre of irrigation repairs and maintenance. Fixed costs of $85 per acre for irrigation equipment are used. Please contact your local County Extension office or Area Specialist Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems. I would like to point out the cotton price of 71 cents that is being used in the profitability outlook. The price of 71 cents is made up of a cash price of 64 cents and gin rebates (seed & hauling) of 7 cents. The cash price of 64 cents is composed of a loan rate of cents and a 14.5 cent equity from the buyer. When prices are low, cotton is redeemed out of the marketing loan program at the Adjusted World Price (AWP). This is effect helps create the loan option or equity price that producers receive. Currently, this price is in a cent range. Basically, this is a result of the way the cotton marketing loan program works. My observations and discussions with cotton buyers would indicate that when futures move above cents, then the prices to the producers would start to move up penny for penny. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: Cotton - $101, Soybeans - $37, Corn - $159 (includes 240 units of N), Milo - $103, and Wheat/Soybeans - $93. Cost of production will continue to be adjusted as information becomes available. Depending on varieties, soybean costs could also be reduced but based on our budget, I have not done so at this time. Hopefully, we will see other costs reduced or possibly suitable generic products available. Weed control costs with resistant weeds have also been difficult to estimate. These costs will vary greatly among producers and individual fields. Production costs are estimates based on the 2017 University of Tennessee Crop Budgets with adjustments made where needed. Please visit with your farm supplier on estimated cost in your area. Producers with owned land and or cash rent can use Returns Over Variable and Fixed IR Costs as a guide in decision making. Producers with share rent ground should use Returns Over Variable, Fixed IR Costs and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue minus 25% of crop insurance cost minus 25% of the irrigation equipment fixed cost is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. A management cost of $30 per acre is included in Fixed Costs management labor, depreciation & interest on machinery. This is an additional $15 above the dryland crop management labor. Producers who are not making major equipment changes can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid.

16 2017 Estimated Returns Irrigation Cotton Soybeans Corn Milo Wheat/Soybeans Yield 1100 lbs. 60 bu. 190 bu. 130 bu. 68 bu./45 bu. Price (as of 1/12/17) $0.71 lb. $10.20 bu. $3.70 bu. $3.40 bu. $4.55 bu./$10.20 bu. Revenue $781 $612 $703 $442 $768 Variable Expenses( include energy cost) $477 $281 $432 $303 $429 Fixed Irrigation Costs per Acre $85 $85 $85 $85 $85 Returns Over Variable & Fixed IR Costs Land Costs (25% of Revenue-25% crop insurance-25% fixed irrigation costs) Returns Over Variable, IR Fixed Cost and Land Costs Fixed Costs- management labor, depreciation & interest on machinery $218 $246 $186 $53 $254 $172 $130 $151 $86 $167 $47 $116 $35 -$33 $87 $145 $77 $71 $77 $114 Returns Over Specified Costs -$99 $39 -$37 -$110 -$27 Breakeven Price at Average Yield and Specified Cost $0.80 $9.56 $3.89 $4.25 $5.13/$10.13