Fall Crop Outlook Webinar Chris Hurt, Professor, Department of Agricultural Economics Michael Langemeier, Associate Director, Center for Commercial Agriculture James Mintert, Director, Center for Commercial Agriculture September 13, 2018
Spring 2018: Ag Emerging from Financial Darkness In Spring 2018 Optimism Returned Ag Was Turning the Corner Reasons for optimism in Spring 2018 1. Declining grain inventories 2. Strong U.S. & world economic growth 3. Result: Strong new crop cash bids: $10 soybeans and $4 corn Summer & Fall 2018 perfect weather, high yields & tariffs
Bu./Acre U.S. Corn Yield: 1990-2018 180 170 164.4 160 150 140 130 120 110 171 174.6 176.6 181.3 +2.9 bpa vs. Aug. estimate & nearly 4 bpa above pre-release est. 100 90 92 94 96 98 00 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Billion Bu. 15 13 11 9 U.S. Corn Production 13.8 14.2 13.6 13.1 13.1 11.8 12.1 12.412.4 11.1 10.5 10.8 9.9 10.1 9.5 9.0 15.1 14.6 14.8 7 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Year
Corn USDA 181.3 bu. +2.9 bu. 9/12/18 USDA 16/17 17/18 18/19 Carry In 1,737 2,293 2,002 Production 15,148 14,604 14,827 (+241) Total Supply 16,942 16,937 16,879 Feed & Residual 5,467 5,450 5,575 (+50) FSI Non-Fuel 1,450 1,460 1,480 FSI Fuel (Ethanol) 5,439 5,600 5,650 (+25) Export 2,293 2,425 (+25) 2,400 (+50) Total Use 14,649 14,935 15,105 Ending Stocks 2,293 2,002 (-25) 1,774 (+90) US Farm Price $3.36 $3.40 $3.50 (-.10) $3.35-$3.45 $3.00-$4.00
U.S. Ending Stocks to Use: Corn & Soybeans 50% 40% Wheat Corn Soybeans 42.9% 30% 20% 13.4% 19.8% 10% 0% 9.2% 9.1% 11.7% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Year
$0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 -$0.10 -$0.20 -$0.30 Estimated Net Corn Storage Returns: On-Farm Storage 0.35 0.37 0.45 0.47 0.53 0.51 0.45 0.11 0.14 Futures $3.53 to $3.80 = +$.27 Basis $ -.35 to $.00 = +$.35 Cash $3.18 to $3.84 = +$.62 Speculation???? +$.25 to $.75 O N D J F M A M J J A Commercial storage costs = $0.18/bu. thru end of Nov., then =$.03/month after
Bu/Acre U.S. Bean Yield 1990-2018 52 50 48 46 44 42 41.4 40 37.6 38 35.3 3634.134.2 34 32.6 32 30 +1.2 bpa vs. Aug. estimate & 0.3 bpa above pre-release est. 37.6 38.938.9 39.6 38.1 38.0 36.6 33.9 y = 0.5286x + 33.068 R² = 0.7348 42.2 43.0 44 43.5 42.7 41.7 41.9 39.7 40 47.5 48 44 52 49.1 52.8 90 92 94 96 98 0 2 4 6 8 10 12 14 16 18
Billion Bu. 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 U.S. Soybean Production 3.5 2.8 2.9 3.1 3.1 3.2 3.3 3.4 3.0 3.1 3.0 2.8 2.7 2.5 4.7 4.3 4.4 3.9 3.9 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Year
Soybeans USDA 52.8 bu. +1.2 bu. 9/12/18 USDA 16/17 17/18 18/19 Carry in 197 302 395 Production 4,296 4,392 4,693 (+107) Total Supply 4,515 4,715 5,113 Seed & Residual 140 136 136 Crush 1,899 2,055 (+15) 2,070 (+10) Exports 2,174 2,130 (+20) 2,060 Total Use 4,213 4,321 4,268 Ending Stock 302 395 (-35) 845 (+60) Farm Price $9.47 $9.35 $8.60 (-.30) $7.35-$9.85
350 300 250 200 150 100 50 0 U.S. Soybean Exports to China: Million Bushels U.S. missing key months to export soybeans to China 16/17 '17/18 Sept O N D Jan F M A M J J A
$0.50 $0.25 $0.00 -$0.25 -$0.50 -$0.75 -$1.00 -$1.25 -$1.50 -$1.75 -$2.00 Soybean Prices: U.S. Gulf Minus Brazil Port Price 1/3/18 2/3/18 3/3/18 4/3/18 5/3/18 6/3/18 7/3/18 8/3/18 9/3/18 10/3/18 -$1.66
$0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 -$0.10 -$0.20 0.00-0.03 Estimated Net Soybean Storage Returns: On-Farm Storage Commercial Storage 0.29 0.34 0.41 0.48 0.63 0.63 0.71 0.68 0.30 0.32 Futures $8.40 to $8.89 = +$.49 Basis $ -.65 to -$.15 = +$.50 Cash $7.75 to $8.74 = +$.99 Speculation: Settle tariffs? +$.50 to $1.25?? O N D J F M A M J J A Commercial storage costs = $0.18/bu. thru end of Nov., then =$.03/month after
Market Facilitation Payments: USDA: August 27 Initial Payment Pay On USDA % of Initial MFP Payment/Ac Rate % Pmnt M$ Payments U.S. IND Soybeans $1.65 per bu 50% $3,630 77.3% $43.56 $49.50 Pork $8.00 per head 50% $290 6.2% Cotton $0.06 per pound 50% $277 5.9% Sorghum $0.86 per bu 50% $157 3.3% $30.57 Dairy $0.12 per cwt 50% $127 2.7% Wheat $0.14 per bu 50% $119 2.5% $3.35 $4.97 Corn $0.01 per bu 50% $96 2.0% $0.91 $0.96 $4,696 100.0%
Indiana: Higher Revenues and Returns than Last Year Corn MFP Beans MFP $0.005 $0.825 2017 2018 2018 2017 2018 2018 Yield 180 192 192 54 60 60 Price $3.55 $3.65 $3.655 $9.55 $8.80 $9.625 Revenue $639 $701 $702 $516 $528 $578 18 vs. 17 $62 $63 $12 $62
Crop Marketing Strategies 1) Avoid pricing at harvest: Weak Futures & Weak Basis 2) Strong price premiums for late-spring or early-summer 3) Price speculation possibilities: -Corn 25 to 50 cents -Soybeans 50 cents to $1.25 if tariffs are settled 4) Use Market Facilitation Payment & FSA Loans to help cash flow
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Purdue Crop Basis Tool
Purdue Crop Basis Tool
Change in Production Costs from 2013 to 2019 Source: Purdue Crop Budgets, High Productivity Soils Crop $ per Acre $ per Bushel Corn -$29 -$0.41 Soybeans -$14 -$0.22 Wheat -$20 -$0.86
Current Prices Favor Rotation Soybeans Over Continuous Corn Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans Soybean Price Low Productivity (C=131; SB=43) Avg. Productivity (C=164; SB=54) High Productivity (C=196; SB=65) $7.50 $3.86 $3.77 $3.65 $8.00 $4.02 $3.94 $3.82 $8.50 $4.19 $4.10 $3.98 $9.00 $4.35 $4.27 $4.15 $9.50 $4.52 $4.43 $4.31 $10.00 $4.68 $4.60 $4.48
Continuous Soybeans and Rotation Corn Comparison Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans Soybean Price Low Productivity (C=139; SB=43) Avg. Productivity (C=174; SB=54) High Productivity (C=209; SB=65) $7.50 $3.51 $3.45 $3.32 $8.00 $3.66 $3.60 $3.47 $8.50 $3.82 $3.76 $3.63 $9.00 $3.97 $3.91 $3.78 $9.50 $4.13 $4.07 $3.94 $10.00 $4.28 $4.22 $4.10
Next Webinar: 2019 Ag Outlook December 19, 2018 Register for email notification at Purdue.edu/commercialag September 13, 2018