Marketing Corn and Soybeans During the Growing Season Quarterly Zoom Marketing Meeting, June 13, 2018 Dr. S. Aaron Smith Crop Marketing Specialist, Assistant Professor, and Extension Economist Department of Agricultural and Resource Economics University of Tennessee Institute of Agriculture aaron.smith@utk.edu Crop Economics http://cropeconomics.tennessee.edu/
Overview Current market factors Quick supply and demand update Corn pricing Soybean pricing
Current Market Factors Bullish Global demand Domestic demand Argentina's smaller crop Global economic expansion Bearish USD strength Interest rates Weather to date Unknown Trade (China, NAFTA, and other) Currency exchange (Brazil, Argentina) Weather moving forward
Within the last 2 weeks U.S. Trade War with China Joint Statement of the U.S. and China Regarding Trade Consultations Hold on Tariffs. Deal to lift sanctions on Chinese telecom giant ZTE. China announced previously promised cut in tariffs on imported cars and auto parts. China scrapped an ongoing antidumping investigation on U.S. sorghum. President - Tweeted massive amounts of agricultural product will be flowing to China one of the best things to happen to our farmers in many years. The White House walked back the on hold declarations on the $50 billion in tariffs on Chinese goods; announced tariffs will be imposed June 30 th, final list to be announced by June 15. Source: Muhammad SEEC Presentation
Corn Supply and Demand June WASDE 2018/19 Projected May 2018/19 Projected June Change Previous Month Change Previous Year 2014/15 2015/16 2016/17 2017/18 Est. Planted and Harvested Acres & Yield Acres Planted (Million) 90.6 88 94 90.2 88 88 0.0-2.2 Acres Harvest (Million) 83.1 80.8 86.7 82.7 80.7 80.7 0.0-2.0 U.S. Yield (Bu/Acre) 171.0 168.4 174.6 176.6 174 174 0.0-2.6 Supply (Million Bushels) Beg. Stocks 1,232 1,731 1,737 2,293 2,182 2,102-80 -191 Production 14,216 13,602 15,148 14,604 14,040 14,040 0-564 Total Supply 15,479 15,401 16,942 16,942 16,272 16,192-80 -750 Use & Ending Stocks (Million Bushels) Feed and Residual 5,280 5,114 5,472 5,500 5,375 5,350-25 -150 Ethanol 5,200 5,224 5,432 5,575 5,625 5,675 50 100 Food, Seed & Industrial 1,401 1,424 1,451 1,465 1,490 1,490 0 25 Exports 1,867 1,901 2,293 2,300 2,100 2,100 0-200 Total Use 13,748 13,664 14,649 14,840 14,590 14,615 25-225 U.S. Ending Stocks 1,731 1,737 2,293 2,102 1,682 1,577-105 -525 Foreign Stocks 6,529 6,685 6,664 5,484 4,583 4,512-71 -972 Price and Stocks to Use Ratio U.S. Avg. Price ($/Bu) $3.70 $3.61 $3.36 $3.25-$3.55 $3.30-$4.30 $3.40-$4.40 $0.00 $0.40 U.S. Stocks/Use 12.59% 12.71% 15.65% 14.78% 11.53% 10.79% -0.7% -3.99%
Planted (million acres) 50 45 40 35 30 25 20 15 10 5 0 Brazilian Corn Acres Planted, 2000/01 to 2017/18 6.00 2 nd Crop Corn 28.53 26.06 1 st Crop Corn Source: CONAB 12.51
Timing the Brazilian crop makes it to the global market.
December Corn Futures and Tennessee Production Stages 550 Pre-planting 2018 2017 2016 2015 2014 Planting & Emergence Tassel, Pollination, & Silk Dough, Dent, & Mature Harvest Post-Harvest Price (cents/bu) 500 450 400 350 300 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec
Continued volatility driven by weather and trade uncertainty!
0.40 Monthly Average Corn Basis, 2013-2017 0.30 Basis ($/bu) 0.20 0.10 0.00-0.10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -0.20 Memphis Lower-Mid
Corn - Net Return Table ($/acre) $550 Cost of Production Yield (bu/acre) 100 110 120 130 140 150 160 170 180 190 200 2.00 (350) (330) (310) (290) (270) (250) (230) (210) (190) (170) (150) 2.25 (325) (303) (280) (258) (235) (213) (190) (168) (145) (123) (100) 2.50 (300) (275) (250) (225) (200) (175) (150) (125) (100) (75) (50) 2.75 (275) (248) (220) (193) (165) (138) (110) (83) (55) (28) 0 3.00 (250) (220) (190) (160) (130) (100) (70) (40) (10) 20 50 3.25 (225) (193) (160) (128) (95) (63) (30) 3 35 68 100 3.50 (200) (165) (130) (95) (60) (25) 10 45 80 115 150 Price 3.75 (175) (138) (100) (63) (25) 13 50 88 125 163 200 ($/bu) 4.00 (150) (110) (70) (30) 10 50 90 130 170 210 250 4.25 (125) (83) (40) 3 45 88 130 173 215 258 300 4.50 (100) (55) (10) 35 80 125 170 215 260 305 350 4.75 (75) (28) 20 68 115 163 210 258 305 353 400 5.00 (50) 0 50 100 150 200 250 300 350 400 450 5.25 (25) 28 80 133 185 238 290 343 395 448 500 5.50 0 55 110 165 220 275 330 385 440 495 550 5.75 25 83 140 198 255 313 370 428 485 543 600
Soybean Supply and Demand June WASDE 2018/19 Projected May 2018/19 Projected June Change From Previous Month Change 2017/18 to 2018/19 2014/15 2015/16 2016/17 2017/18 Est. Planted and Harvested Acres & Yield Acres Planted (Million) 83.3 82.7 83.4 90.1 89 89 0.0-1.1 Acres Harvest (Million) 82.6 81.7 82.7 89.5 88.2 88.2 0.0-1.3 U.S. Yield (Bu/Acre) 47.5 48 52 49.1 48.5 48.5 0.0-0.6 Supply (Million Bushels) Beg. Stocks 92 191 197 302 530 505-25 203 Production 3,927 3,926 4,296 4,392 4,280 4,280 0-112 Total Supply 4,052 4,140 4,515 4,718 4,835 4,810-25 92 Use & Ending Stocks (Million Bushels) Crushing 1,873 1,886 1,901 2,015 1,995 2,000 5-15 Exports 1,842 1,942 2,174 2,065 2,290 2,290 0 225 Seed and Residual 146 115 139 133 135 135 0 2 Total Use 3,862 3,944 4,213 4,213 4,420 4,425 5 212 U.S. Ending Stocks 191 197 302 505 415 385-30 -120 Foreign Stocks 2,658 2,687 3,240 2,893 2,771 2,813 42-80 Price and Stocks to Use Ratio U.S. Season Price ($/bu) $10.10 $8.95 $9.47 $9.40 $8.75-$11.25 $8.75-$11.25 $0.00 $0.60 U.S. Stocks/Use 4.95% 4.99% 7.17% 12.66% 9.39% 8.70% -3.27% -3.95%
Argentina will continue to reduce its soybean export tax despite their planned efforts to enact deficit cuts under its $50 billion funding deal with the IMF.
U.S. soybean exports by destination market: 2017 (Total exports = $21.6 billion)
Price (cents/bu) 1300 1250 1200 1150 1100 1050 1000 950 900 November Soybeans Futures and Tennessee Production Stages Pre-Planting 2018 2017 2016 2015 2014 Planting & Emergence Blooming & Setting Pods Dropping Leaves & Mature Harvest & Post- Harvest 850 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov
$0.95 Decline in 2+ weeks
0.30 Tenessee Soybean Basis 2013-2017 0.20 Price ($/bu) 0.10 0.00 (0.10) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (0.20) (0.30) Northwest Lower-mid
Soybean - Net Return Table ($/acre) $415 Cost of Production Yield (bu/acre) 20 25 30 35 40 45 50 55 60 65 70 7.50 (265) (228) (190) (153) (115) (78) (40) (3) 35 73 110 7.75 (260) (221) (183) (144) (105) (66) (28) 11 50 89 128 8.00 (255) (215) (175) (135) (95) (55) (15) 25 65 105 145 8.25 (250) (209) (168) (126) (85) (44) (3) 39 80 121 163 8.50 (245) (203) (160) (118) (75) (33) 10 53 95 138 180 8.75 (240) (196) (153) (109) (65) (21) 23 66 110 154 198 9.00 (235) (190) (145) (100) (55) (10) 35 80 125 170 215 Price 9.25 (230) (184) (138) (91) (45) 1 48 94 140 186 233 ($/bu) 9.50 (225) (178) (130) (83) (35) 13 60 108 155 203 250 9.75 (220) (171) (123) (74) (25) 24 73 121 170 219 268 10.00 (215) (165) (115) (65) (15) 35 85 135 185 235 285 10.25 (210) (159) (108) (56) (5) 46 98 149 200 251 303 10.50 (205) (153) (100) (48) 5 58 110 163 215 268 320 10.75 (200) (146) (93) (39) 15 69 123 176 230 284 338 11.00 (195) (140) (85) (30) 25 80 135 190 245 300 355 11.25 (190) (134) (78) (21) 35 91 148 204 260 316 373
So Now What? Stay the course Do not make a hasty decision (avoid emotional decisions) Now is not the time to rush into the market Stick with you marketing plan Crop insurance/forward pricing/harvest sales/storage Know your cost of production and how it changes through the season (simple matrix) Know your local basis and harvest basis June 29 Acreage Report could be interesting Evaluate opportunities should they present themselves
Email: aaron.smith@utk.edu Crop Economics: http://cropeconomics.tennessee.edu/ Questions? THANK YOU!