Grains Outlook for 2014 SAEA Crops Outlook Organized Symposium Dallas, TX February 4, 2014

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2 Grains Outlook for 2014 SAEA Crops Outlook Organized Symposium Dallas, TX February 4, 2014 Dr. Nathan B. Smith (UGA) and Dr. Mark Welch (TAMU)

3 Corn

4 Corn Situation Record production. Leveling off of corn-starch ethanol industry. Reduction in gasoline use. End of blender s tax credit and import ban. 10% blend wall reached. Major challenge now facing the industry is how to create a second-stage growth phase.

5 U.S. Corn Supply and Demand Mil bu 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 17.5% 11.6% 12.8% 13.9% 13.1% 12.4% 8.6% 7.9% 7.4% 2004/ / / / /13 50% % 30% 20% 10% 0% Ending Stocks Production Domestic Use and Exports Stocks:Use Source: January 10, 2013 WASDE and previous years USDA reports.

6 96/97 97/98 98/99 99/00 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 13/14 Million bushels Change in Pattern for Corn Use? 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Feed and Residual Ethanol Exports Food Seed and Other Industrial Source: USDA WASDE Report, 1/10/2014

7 Feed and Residual Use GCAU mil % Beef, all-time low 29.6% Pork, record high 33.9% Poultry GCAU: -1.4% Feed/GCAU: % mt/gcau Dairy Cattle on Feed Other Cattle Hogs Poultry Other Livestock Feed per GCAU Plus DDGs USDA Feed Grain Database and Agricultural Marketing Resource Center, January 27, 2014

8 U.S. Ethanol Production Million gallons per day /2014 daily average = mil gal per day Implies use of 4,905 mil bu of corn (2.8 gal/bu) January USDA estimate = 5,000 mil bu /14 average to12/13: +8.1% 13/14 average to 3-yr: +2.9% / / year Avg Energy Information Administration, Weekly Petroleum Status Report, data for week ending 1/24/2014 Ethanol conversion rate, Agricultural Marketing Resource Center, Iowa State University

9 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Ethanol Profitability per gallon Agricultural Marketing Resource Center, Iowa State University $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Corn Natural Gas Other VC FC Revenue December 2013 prices: corn $4.35/bu, +0%; natural gas $4.79/1000 ft 3, +0%; ddgs $212/ton, +3%; ethanol $2.30/gallon, +17%

10 U.S. Ethanol Consumption Mil gallons 1,200 3-yr avg: bil gal 2012/13: bil gal 2013/14: +5% over 12/13 and +4% avg 1,100 1, Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 3-yr avg 2012/ /14 EIA, Short Term Energy Outlook, January

11 Source: Dr. Bob Wisner, Professor Emeritus, Iowa State University

12 Million Metric Tons 1200 Global Corn Supply and Demand Global Corn Supply and Demand 35.0% % % % % % Global Supply Global Use Ending Stocks Stock-to-Use Ratio Source: USDA WASDE Report, 1/10/2014

13 -Argentina 2 nd largest exporter -Brazil, Ukraine, Romania and South Africa increase production/exports when US crop short

14 Export Sales Commitments for the week 1/23/2014: 72.4 million bushels Average weekly export sales this marketing year: 36.6 million bushels Pace to reach MY Export Sales Target of 1,450 million bushels: 6.3 million bushels Mil bu 1,500 1,400 1,300 1,200 1,100 1, U.S. Corn Export Sales Commitments, 2013/2014 MY Cumulative Net Sales Weekly Net Sales

15 China Corn Trade 1,000 MT 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 #2 Exporter #5 Importer Exports Imports WASDE, 1/10/2014

16 Bushels Per Acre U.S. Corn Yields y = x

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18 2014/15 Corn Projections 2013/ /15 Low Med High Area Planted 95.4M 90.6M 93M 95M Area Harvested 87.7M 83.8M 86M 87.9M Yield per Harv Acre ,000,000 Bushels Production 13,925 12,989 13,760 14,504 Total Supply 13,925 14,620 15,391 16,135 Total Disappear 13,150 13,250 13,400 13,550 Ending Stocks 1,631 1,370 1,978 2,591

19 U.S. Corn S&D Dec 13 Percent change in quantity demanded with 1% change corn price: -0.2% Bob Wisner, Iowa State University Or 1% chg. in corn supply = 5% chg. in price With all other market factors unchanged 13/14 14/15 14/15 14/15 Planted Acreage (Mil. Acs.) Harvested Acreage (Mil. Acs.) Yield (Bushels) Supply Million Bushels Beginning Stocks Production Imports , ,792 14, ,792 13, ,792 13, Total Supply 14,842 15,867 15,642 15,432 Disappearance Feed and Residual Food, Seed & Industrial Exports 5,200 6,400 1,450 5,500 6,500 2,000 5,500 6,500 2,000 5,500 6,500 2,000 Total Use 13,050 14,000 14,000 14,000 Ending Stocks 1,792 1,867 1,642 1,432 Carryover/Use (%) Oct avg futures ($/Bu.)

20 Corn Considerations South America shifting back to soybeans. Exports, livestock feeding and size of U.S. and foreign corn crops will influence corn prices in the future. Fertilizer prices flat. Coming to an end of the Ag Super Cycle. Next market mover March 1 Stocks and Prospective Plantings on March 31

21 Wheat

22 Wheat Situation US (million) Planted Acres Harvest Acres Yield (bu/ac) U.S. Winter Wheat plantings down 3% at mil. acres.

23 Million Bu US Wheat Production & Use Production Feed and Residual Exports Food and Seed Ending Stocks

24 U.S. Wheat Stocks 000 bu 2,500,000 2,000,000 1,500,000 1,000,000 5-year avg 2012/ / , Sep 1-Dec 1-Mar 1-Jun NASS: 1/10/2014

25 World Wheat Production Billion bushels U.S. Foreign WASDE 1/10/2014

26 US Wheat Price and Wheat Stocks of Major Exporters 000 mt $/bushel 90, ,000 70, , ,000 40, , ,000 10, / / / / / / /2015 Argentina Australia Canada EU US FSU-12 SAFP 3 Yr chg ,106 +4,793 +2,764-3,000 +2,336 -$0.97 Source: USDA, Foreign Agricultural Service, PS&D, 1/10/2014

27 20-Oct 27-Oct 3-Nov 10-Nov 17-Nov 24-Nov 1-Dec 8-Dec 15-Dec 22-Dec 29-Dec 5-Jan 12-Jan 19-Jan 26-Jan 2-Feb 9-Feb 16-Feb 23-Feb 2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr 20-Apr 27-Apr 4-May 11-May 18-May 25-May 1-Jun 8-Jun 15-Jun 22-Jun 29-Jun 6-Jul 13-Jul 2014 U.S. Winter Wheat Crop Condition Ratings % CCI Trend: Very Poor Poor Fair Good Excellent 2014 Average

28 10/20 10/27 11/3 11/10 11/17 11/24 12/1 12/8 12/15 12/22 12/29 1/5 1/12 1/19 1/26 2/2 2/9 2/16 2/23 3/2 3/9 3/16 3/23 3/30 4/6 4/13 4/20 4/27 5/4 5/11 5/18 5/25 6/1 6/8 6/15 6/22 6/ Texas Winter Wheat Condition Ratings % CCI Average: 30 bu Very Poor Poor Fair Good Excellent 2014 Average

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30 Wheat Futures Monthly Nearest

31 Wheat Price Outlook US wheat supply decreasing but so it price. Concerns with wheat condition in the Midwest (winter damage vs winter kill). Fewer winter wheat seedings. Fewer spring wheat seedings? Lower prices due to world supplies increasing.

32 Thank You Nathan Smith

33 World Per Capita Grain Use kg barley, corn, millet, mixed grains, oats, rice, rye, sorghum, soybeans, and wheat PSD, 1/10/2014