January 12, USDA World Supply and Demand Estimates

Transcription

1 January 12, USDA World Supply and Demand Estimates Corn Market Reaction: March 2018 corn futures closed down 2 ½ cents at $3.46 ¼ with a trading range for the day of $3.45 ½ to $3.50. December 2018 corn futures closed down 2 ¼ cents at $3.80 ½ with a trading range for the day of $3.79 ¾ to $3.83 ½. Increased US yield was a bit of a surprise, however, the long term picture remains unchanged. For old crop, large global and US stocks will continue to suppress prices and maintain the existing trading range. For new crop, weather and continued decreases in estimated foreign carryover stocks will dictate if price improvements are in the cards for 2018/19. USDA Summary: This month s U.S. corn outlook is for larger production, increased food, seed, and industrial use (FSI), lower feed and residual use, and greater stocks. Corn production is estimated at billion bushels, up 26 million from last month as an increase in yield to a record bushels per acre is partially offset by a 0.4-million-acre reduction in harvested area. Among the major producing states, yields are estimated to be record high in Illinois, Minnesota, and Ohio. FSI is raised 10 million bushels, reflecting an estimated amount of corn used for glucose and dextrose during September-November that was above expectations. Feed and residual use is down 25 million bushels to 5,550 million based on indicated disappearance during September-November as reflected by the December 1 stocks. With supply rising and use falling, corn stocks are up 40 million bushels from last month. The seasonaverage corn price received by producers is projected at $3.25 per bushel, up 5 cents at the midpoint based on observed prices to date. Global coarse grain production for is forecast higher. This month s foreign coarse grain outlook is for lower production and consumption and greater trade relative to last month. Foreign corn production is forecast lower with reductions for Russia, Vietnam and the Philippines more than offsetting an increase for Pakistan. Russia s corn production is down based on harvest results to date. Vietnam corn production is reduced as the impact of heavy rain during the growing season in the northern production area was worse than previously expected. Major global trade changes for include lower corn exports for Russia, partially offset by an increase for Thailand. Brazil s 2016/17 corn exports are reduced based on observed shipments to date for the local marketing year that started in March Imports for are lowered for Iran but increased for Vietnam and the Philippines. Foreign corn ending stocks are higher than last month, mostly reflecting increases for Brazil and Pakistan. Global corn stocks, at billion, are up 98 million from last month.

2 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) 2013/ / / /17 Est. Projected December Projected January Planted and Harvested Acres & Yield Change From Previous Month Change 2016/17 to Supply (Million Bushels) Beg. Stocks 821 1,232 1,731 1,737 2,295 2, Production 13,829 14,216 13,602 15,148 14,578 14, Imports Total Supply 14,686 15,479 15,401 16,942 16,922 16, Use & Ending Stocks (Million Bushels) Feed and Residual 5,040 5,280 5,114 5,467 5,575 5, Ethanol 5,124 5,200 5,224 5,439 5,525 5, Food, Seed & Industrial 1,369 1,401 1,424 1,450 1,460 1, Exports 1,920 1,867 1,901 2,293 1,925 1, Total Use 13,454 13,748 13,664 14,649 14,485 14, U.S. Ending Stocks 1,232 1,731 1,737 2,293 2,437 2, Foreign Stocks 5,653 6,529 6,726 6,712 5,597 5, ,057 U.S. Avg. Season Price ($/Bu) $4.46 $3.70 $3.61 $3.36 Price and Stocks to Use Ratio $2.85- $3.55 $2.95- $3.55 $0.05 -$0.10 U.S. Stocks/Use 9.16% 12.59% 12.71% 15.65% 16.82% 17.12% 0.3% 1.47% Source: USDA-WASDE January 12, 2018

3 Country / Region World Corn Supply and Use (Million Bushels) (January) Beginning Stocks Production Imports Feed Total Exports Ending Stocks World 9,005 41,122 5,751 25,612 41,995 5,965 8,132 US 2,293 14, ,550 12,545 1,925 2,477 Foreign 6,712 26,518 5,701 20,062 29,450 4,040 5,655 Argentina 227 1, , Brazil 416 3, ,047 2,421 1, South Africa Egypt EU 297 2, ,205 2, Japan Mexico 213 1, , Southeast Asia 125 1, ,421 1, South Korea Canada China 3,965 8, ,535 9, ,132 Ukraine ROW 1,011 5,801 2,302 4,578 7, World Corn Supply and Use (Million Bushels) January-December Country / Region Beginning Stocks Production Imports Feed Total Exports Ending Stocks World US Foreign Argentina Brazil South Africa Egypt EU Japan Mexico Southeast Asia South Korea Canada China Ukraine ROW Source: USDA-WASDE January 12, 2018

4 Cotton Market Reaction: March 2018 cotton futures closed down 0.97 cents at with a trading range for the day of 80.3 to cents. December 2018 cotton futures closed down 0.08 cents at with a trading range for the day of 74 to cents. Examining year-over-year changes to Chinese stocks-to-use ratio (182% in 2013 to 99% in 2017) and foreign cotton stocks ( million bales in 2013 to in 2017) provides a strong reason for improved prices. These reductions have largely been due to improved cotton demand and rising synthetic fiber prices. USDA Summary: This month s U.S. cotton forecasts include slightly lower production and ending stocks. Production is reduced 177,000 bales due to small declines in regions outside the Delta. Ending stocks are reduced 100,000 bales, while domestic mill use and exports are unchanged. The forecast for the marketing year average price received by producers is raised 3 cents per pound, to a midpoint of 69 cents. Offsetting changes in foreign production and consumption characterize the global cotton forecasts this month. Global production is raised 1.0 million bales as a 1.4-million-bale increase for China is only partly offset by small decreases in India, the United States, and Australia. Global consumption is raised 1.2 million bales largely due to a 1.0-million-bale increase for China. World consumption is forecast to grow at a 5.2 percent annual rate in, more than double its long-run level. Projected world ending stocks are changed slightly this month, down 200,000 bales from December, but at 87.8 million bales are still forecast marginally higher than the year before.

5 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (lbs/acre) 2013/ / / /17 Est Projected December Projected January Planted and Harvested Acres & Yield Change From Previous Month Change 2016/17 to Supply (Million Bales) Beg. Stocks Production Imports Total Supply Use & Ending Stocks (Million Bales) Exports Total Use U.S. Ending Stocks Foreign Stocks Chinese Stocks U.S. Avg. Season Price ($/lb) $0.779 $0.613 $0.612 $0.68 Price and Stocks to Use Ratio $0.63- $0.69 $0.67- $0.71 $0.030 $0.010 U.S. Stocks/Use 17% 25% 30% 15% 32% 31% -0.55% 16.27% Chinese Stocks/Use 182% 197% 166% 129% 102% 99% -2.29% % Source: USDA-WASDE January 12, 2018

6 World Cotton Supply and Use (Million 480 lb Bales) (January) Beginning Ending Country / Region Stocks Production Imports Use Exports Loss Stocks World US Foreign Central Asia Afr. Fr. Zone Australia Brazil India Mexico China EU Turkey Pakistan Indonesia Thailand Bangladesh Vietnam ROW Country / Region World Cotton Supply and Use (Million 480 lb Bales) January-December Beginning Stocks Production Imports Use Exports Loss Ending Stocks 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, 2018

7 Soybeans Futures Market Reaction: March 2018 soybean futures were up 10 ½ cents at $9.60 ½ with a trading range for the day of $9.44 ½ to $9.62 ¾. November 2018 soybean futures closed up 12 cents at $9.83 ½ with a trading range for the day of $9.67 ½ to $9.84 ¾. Reduced production in Argentina was more than offset by increased production in Brazil. Soybean markets will continue to focus on South American production estimates. US ending stocks were increased 25 million bushels. USDA Summary: U.S. oilseed production for is estimated down 0.9 million from last month. Smaller soybean, peanut, and cottonseed crops are partly offset by increases for canola and sunflowerseed. Soybean production is estimated at 4,392 million bushels, down 33 million on lower yields. Harvested area is estimated at 89.5 million acres, up fractionally from the previous forecast. Yield is estimated at 49.1 bushels per acre, down 0.4 bushels, led by reductions for Kansas, North Dakota, and South Dakota. The soybean crush forecast is raised 10 million bushels to 1,950 million. Soybean meal production is unchanged as the higher crush is offset by a lower extraction rate. Soybean exports are reduced 65 million bushels to 2,160 million, reflecting lagging sales commitments through December and increased competition with higher soybean production and export forecasts for Brazil. Ending stocks are projected at 470 million bushels, up 25 million from the previous forecast. The U.S. season-average farm price for soybeans is projected at $8.80 to $9.80 per bushel, unchanged at the midpoint. The soybean oil price forecast of 32 to 35 cents per pound is lowered 1 cent at the midpoint. The soybean meal price forecast is unchanged at $295 to $335 per short ton. Global oilseed production is projected up. Soybean production is raised 4 million bushels to billion bushels on gains for Brazil and the EU that are partly offset by lower production for Argentina and the United States. The Brazil soybean crop is increased 73 million bushels to billion reflecting higher yield estimates in recent government reports. Soybean production for Argentina is reduced 37 million bushels to billion on lower area planted to date, particularly in northern Argentina. Global oilseed trade for is projected down from last month. Lower U.S. soybean and Australian rapeseed shipments are partly offset by increased soybean exports for Brazil and rapeseed for Ukraine. Global oilseed ending stocks are projected up mainly on higher soybean stocks for Brazil and the United States and higher rapeseed stocks for Australia. Partly offsetting are lower soybean stocks for Argentina and sunflowerseed stocks for the EU.

8 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) 2013/ / / /17 Est. Projected December Projected January Planted and Harvested Acres & Yield Change From Previous Month Change 2016/17 to Supply (Million Bushels) Beg. Stocks Production 3,358 3,927 3,926 4,296 4,425 4, Imports Total Supply 3,570 4,052 4,140 4,515 4,752 4, Use & Ending Stocks (Million Bushels) Crushing 1,734 1,873 1,886 1,899 1,940 1, Exports 1,638 1,842 1,942 2,174 2,225 2, Seed and Residual Total Use 3,478 3,862 3,944 4,213 4,306 4, U.S. Ending Stocks Foreign Stocks 2,211 2,658 2,670 3,244 3,167 3, U.S. Average Season Price ($/Bu) $13.00 $10.10 $8.95 $9.47 Price and Stocks to Use Ratio $8.60- $10.00 $8.80-$9.80 $0.00 -$0.17 U.S. Stocks/Use 2.65% 4.95% 4.99% 7.17% 10.33% 11.06% 0.73% 3.90% Source: USDA-WASDE January 12, 2018

9 Country / Region World Soybean Supply and Use (Million Bushels) (January) Beginning Stocks Production Imports Crush Total Exports Ending Stocks World 3,545 12,808 5,518 11,076 12,657 5,592 3,622 US 302 4, ,950 2,088 2, Foreign 3,244 8,416 5,493 9,126 10,569 3,432 3,152 Argentina 1,338 2, ,648 1, ,329 Brazil 913 4, ,543 1,679 2, Paraguay China ,564 3,491 4, EU Japan Mexico ROW 161 1,330 1,065 1,516 1, World Soybean Supply and Use (Million Bushels) January-December Country / Region Beginning Stocks Production Imports Crush Total Exports World Ending Stocks US Foreign Argentina Brazil Paraguay China EU Japan Mexico ROW Source: USDA-WASDE January 12, 2018

10 Wheat Futures Market Reaction: March 2018 wheat futures closed down 12 ¾ cents at $4.20 ½ with a trading range for the day of $4.18 ¾ to $4.36. July 2018 wheat futures closed down 12 ¼ cents at $4.46 ½ with a trading range for the day of $4.45 to $4.60 ¾. ending stocks increased 29 million bushels due to reductions in feed and seed use. The global picture remains unchanged with flat demand and record large global stocks. Do not expect any significant price improvements without a production disruption. USDA Summary: Projected U.S. wheat ending stocks are raised 29 million bushels on increased supplies and decreased use. Seed use is lowered 4 million bushels on the winter wheat planted area released today in the NASS Winter Wheat and Canola Seedings report. Wheat feed and residual use for is lowered 20 million bushels and reflects disappearance for June - November as indicated by the December 1 and revised September 1 stocks released in the NASS Grain Stocks report. All wheat exports are unchanged at 975 million bushels; however, a 10 million bushel decrease in Hard Red Spring exports is offset by 5-million-bushel increases each for Soft Red Winter and White wheat. Total supplies are raised 5 million bushels on higher imports while production and the season-average farm price are unchanged. Global wheat supplies for are lowered 29 million bushels on reduced beginning stocks, more than offsetting increased production. World beginning stocks are lowered 96 million bushels mostly on a large 2016/17 production cut for Australia, reflecting updated Australia Bureau of Statistics data. World production for is raised 66 million bushels led by a 73- million-bushel increase for Russia and a 29-million-bushel increase for Pakistan. Partially offsetting is a 33-million-bushel reduction for the EU. All these production changes reflect updated government data. Global exports are lowered 48 million bushels led by reductions for Australia and the EU that reflect decreased supplies and increase market competition. Russian exports, in contrast, are raised 55 million bushels to a record billion on increased supplies and competitive prices. Global use for is lowered fractionally and ending stocks are lowered 15 million bushels to billion, which remain record large.

11 Acres Planted (Million Acres) Acres Harvested (Million Acres) U.S. Average Yield (Bu/Acre) 2013/ / / /17 Est. Projected December Projected January Planted and Harvested Acres & Yield Supply (Million Bushels) Change From Previous Month Change 2016/17 to Beg. Stocks ,181 1, Production 2,135 2,026 2,062 2,309 1,741 1, Imports Total Supply 3,026 2,768 2,927 3,402 3,071 3, Use & Ending Stocks (Million Bushels) Food Seed Feed Exports 1, , Total Use 2,436 2,015 1,951 2,222 2,111 2, U.S. Ending Stocks , Foreign Stocks 6,524 7,243 7,904 8,105 8,902 8, U.S. Avg. Season Price ($/Bu) $6.87 $5.99 $4.89 $3.89 Price and Stocks to Use Ratio $4.50- $4.70 $4.50- $4.70 $0.00 $0.75 U.S. Stocks/Use 24.22% 37.32% 50.03% 53.15% 45.48% 47.39% 1.91% -5.76% Source: USDA-WASDE January 12, 2018

12 Country / Region World Wheat Supply and Use (Million Bushels) (January) Beginning Stocks Production Imports Feed Total Exports Ending Stocks World 9,286 27,815 6,621 5,266 27,253 6,645 9,848 US 1,181 1, , Foreign 8,105 26,075 6,466 5,166 26,141 5,670 8,859 Argentina Australia Canada 251 1, EU 396 5, ,094 4, Brazil China 4,080 4, , ,712 Sel. Mideast , N. Africa , , Pakistan Southeast Asia India 360 3, , Russia 398 3, ,653 1, Kazakhstan Ukraine ROW 827 2,456 3, , Country / Region World Wheat Supply and Use (Million Bushels) January-December Beginning Stocks Production Imports Feed Total Exports 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, 2018 Ending Stocks

13 2018 Estimated Returns Non-Irrigated The profitability outlook has been updated after the release of the January 12, 2018 USDA WASDE reports. Yields used for non-irrigated estimates are a 5 year Tennessee state average year plugging in the 2017 state average projection of 171 bushels per acre for corn, 51 bushels per acre for soybeans, 1031 pounds per acre cotton, and 71 bushels per acre wheat. Prices used for 2018 are current forward prices for 2018 harvest. Based on these yields and prices, soybeans and corn are projected to have positive net returns over variable, land, and fixed costs. Cotton and wheat/soybeans are projected to have positive returns over variable and land costs but not able to cover the estimated fixed costs. An individual producer s machinery and equipment costs will have a strong influence on profitability. Producers with own or cash rent ground may want to consider wheat and double crop soybeans in their rotation. It may also be viable in a share rent situation. Costs are based on the 2018 UT Extension Row Crop budgets with adjustments made where warranted. Milo prices are an estimate as very few quotes are available. It depends on a producer s situation on what is showing to be the most profitable crop. Producers with cash rent or owned ground will want to look at Returns Over Variable Expenses as their land cost will be fixed and if their machinery cost are truly fixed and no equipment changes will be made. Producers with share rent will want to plug in their appropriate share rent if their equipment cost are fixed. Producers who may be making some equipment changes may want to look at Net Returns. 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 74 cents that is being used in the profitability outlook. The price of 74 cents is made up of a cash price of 69 cents and gin rebates (seed & hauling) of 5 cents. 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 2018 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 - $ 94, Soybeans - $35, Corn - $128 (includes 170 units of N), Milo - $86, and Wheat/Soybeans - $94. 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 2018 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

14 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 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 982 lbs. 47 bu. 161 bu. 90 bu. 70 bu./35 bu. Price (as of 1/12/18) $0.74 lb. $9.70 bu. $3.60 bu. $3.30 bu. $4.51 bu./$9.70 bu. Revenue $727 $456 $580 $297 $655 Variable Expenses $428 $224 $347 $239 $417 Returns Over Variable $298 $232 $233 $58 $239 Land Costs (25% of Revenue-25% crop insurance) Returns Over Variable and Land Costs Fixed Costs Depreciation & interest on machinery $179 $112 $142 $73 $160 $119 $120 $91 -$15 $79 $134 $64 $57 $64 $111 Returns Over Specified Costs -$15 $57 $34 -$79 -$32 Breakeven Price at Average Yield and Specified Cost $0.75 $8.49 $3.39 $4.18 $5.19/$9.32

15 2018 Estimated Returns Irrigation Considering irrigation, profitability is positive for soybeans over variable, land and fixed cost. Returns Over Variable and Land Costs are positive for cotton, corn and wheat/soybeans, but not enough to cover fixed costs. An individual producer s machinery and equipment costs will have a strong influence on profitability. Producers should look at these returns as what could be if no adjustments are made in their operation and consider that adjustments may need to be made in 2018 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. Note that due to an increase in dryland cotton and corn 5 year state average yields, irrigated yields have been increased in this projection. Irrigation fixed costs and energy costs will vary greatly among producers and systems. These projections include in variable expenses energy costs for irrigation of $30 per acre for corn, $26 per acre for cotton, and $20 per acre for soybeans. Irrigation repairs and maintenance are estimated at $16 per acre for corn, $14 per acre for cotton and milo, and $10 per acre for soybeans. Fixed costs of $86 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. 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. Hopefully, we will see 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 2018 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 2018 Estimated Returns Irrigation Cotton Soybeans Corn Milo Wheat/Soybeans Yield 1200 lbs. 60 bu. 210 bu. 130 bu. 70 bu./45 bu. Price (as of 1/12/18) $0.74 lb. $9.70 bu. $3.60 bu. $3.30 bu. $4.51 bu./$9.70 bu. Revenue $888 $582 $756 $429 $752 Variable Expenses( include energy cost) $477 $255 $445 $298 $447 Fixed Irrigation Costs per Acre $86 $86 $86 $86 $86 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 $325 $241 $224 $45 $219 $198 $122 $164 $85 $163 $127 $120 $60 -$39 $56 $149 $79 $72 $79 $126 Returns Over Specified Costs -$22 $41 -$12 -$118 -$70 Breakeven Price at Average Yield and Specified Cost $0.76 $9.02 $3.66 $4.21 $5.19/$10.41