Ag Outlook Webinar Chris Hurt, Professor, Department of Agricultural Economics Michael Langemeier, Associate Director, Center for Commercial Agriculture James Mintert, Director, Center for Commercial Agriculture December 19, 2018
Purdue Top Farmer Conference January 11, 2019 Pre-Conference, January 10 Beck Agricultural Center, West Lafayette, IN More info & register at purdue.ag/topfarmer December 19, 2018
Ag Economy Barometer: January 2018
Ag Economy Barometer: November 2018
Corn USDA 178.9 bu. 12/11/18 USDA 16/17 17/18 18/19 19/20 Carry In 1,737 2,293 2,140 1,781 Production 15,148 14,604 14,626 14,917 Total Supply 16,942 16,934 16,811 16.748 Feed & Residual 5,467 5,302 5,500 5,600 FSI Non-Fuel 1,450 1,453 1,480 1,500 FSI Fuel (Ethanol) 5,439 5,601 5,600 (-50) 5,635 Export 2,293 2,438 2,450 2,400 Total Use 14,649 14,793 15,030 15,135 Ending Stocks 2,293 2,140 1,781 (+45) 1,613 US Farm Price $3.36 $3.36 $3.60 $3.90 $3.25-$3.95 Possible Shift from 89.1 to 92 million acres and 178.9 to 176.5 bpa
30% 25% 20% 15% U.S. Ending Stocks to Use: Corn & Soybeans Corn Soybeans 14.5% 23.2% 10% 5% 9.2% 11.8% 10.2% 0% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Crop Year
$4.40 $4.00 $3.90 The $3.60 Bottom? $3.60
$4.00 $3.95 Corn Bids Central Indiana: December 17, 2018 Today's Bid 3.95 3.95 3.93 Today's Bid + Interest Costs 3.91 $3.90 $3.85 $3.80 3.76 3.76 $3.75 3.77 3.76 3.79 3.78 3.81 3.79 3.85 3.80 3.87 3.81 3.82 3.83 3.84 3.85 $3.70 Dec Jan Feb Mar Apr May Jun Jul Aug Sept
Corn Beans 2017 2018 2017 2018 Yield 180 194 54 60 Ind Price $3.56 $3.750 $9.61 $8.800 TradeAssistance $0.005 $0.825 $3.56 $3.755 $9.61 $9.625 Revenue/Acre $640.80 $728.47 $518.94 $577.50 18 vs. 17 $88 $59 Harvested Acres (Million) 5.2 m 5.9 m Indiana Farm Income 2017 = $1.6 billion + $700 million
Soybeans USDA 52.1 bu. Possible Shift from 89.1 to 82.5 million acres and 52.1 to 50 bpa 12/11/18 USDA 16/17 17/18 18/19 19/20 Carry in 197 302 438 955 Production 4,296 4,411 4,600 4,089 Total Supply 4,515 4,734 5,063 5,069 Seed & Residual 140 112 128 120 Crush 1,899 2,055 2,080 2,110 Exports 2,174 2,129 1,900 2,050 Total Use 4,213 4,296 4,107 4,280 Ending Stock 302 438 955 789 Farm Price $9.47 $9.33 $8.60 $8.80 $7.85-$9.35
Million Bushels 200 100 0-100 -200-300 -400-500 -600-700 China Change In Soybean Purchases 18/19 Vs. 17/18 as of 12/6/2018-1 S. Korea Japan 2 3 30 55 58 66 Taiwan Africa Mexico Million Bushels China Less -772 m Rest of World +305 m Total Purchases -467 m Other Asia Argentina 98 Europe Percent Sales to China -98% Total Sales -33% USDA Estimate -11% -800-900 -772
Soybean Prices: Brazil Port & U.S. Gulf: $/bu. $11.50 $10.50 $9.50 $8.50 Brazil Port U.S. Gulf $7.50 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 11/3/18 12/3/18
$/bu. $0.50 $0.25 $0.00 -$0.25 -$0.50 -$0.75 -$1.00 -$1.25 -$1.50 -$1.75 -$2.00 -$2.25 -$2.50 -$2.75 1/3/18 Soybean Prices: U.S. Gulf Minus Brazil Port Weekly, 1/3/18-12/12/18 2/3/18 3/3/18 4/3/18 5/3/18 6/3/18 7/3/18 8/3/18 9/3/18 -$2.45 10/3/18 11/3/18 12/3/18 -$0.20
350 300 250 200 150 100 50 0 Sept O Monthly U.S. Soybean Exports to China : Million Bu. 2.5 10 million N D Jan Reported 90 Day Agreement Chinese Gov t Buys 185 M to 300 M bu. Private sector buys Additional 75 M F M A M J 16/17 '17/18 '18/19" J A
$10.50 $9.40 $9.20 $8.50 $8.50
$9.20 $9.15 $9.10 $9.05 $9.00 $8.95 $8.90 $8.85 $8.80 $8.75 $8.70 $8.65 $8.60 $8.55 $8.50 8.62 8.62 Bean Bids Central Indiana: December 17, 2018: Cash Bid Today's Bid plus Interest 8.70 8.65 8.80 8.68 8.85 8.71 8.93 8.74 8.98 8.77 9.05 8.80 9.10 9.10 9.09 8.83 8.86 8.89 Dec Jan Feb Mar Apr May Jun Jul Aug Sept
What is My Cost of Production? Illustrated Below: High Productivity Soil Cost Category Rotation Corn Rotation Soybeans Land (Fixed) $1.26 $4.06 Fertilizer (Variable) $0.65 $0.92 Machinery (Var. and Fixed) $0.58 $1.69 Seed (Variable) $0.53 $1.03 Pesticides (Variable) $0.28 $0.77 Labor (Fixed) $0.20 $0.63 Sub-Total $3.50 $9.11 Total Cost per Bushel $4.02 $9.85
Current Prices Favor 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 $3.83 $3.74 $3.61 $8.00 $3.99 $3.91 $3.78 $8.50 $4.16 $4.07 $3.95 $9.00 $4.32 $4.24 $4.11 $9.50 $4.48 $4.40 $4.28 $10.00 $4.65 $4.57 $4.44
Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans Soybean Price Soybeans Versus Rotation Corn? Low Productivity (C=139; SB=43) Avg. Productivity (C=174; SB=54) High Productivity (C=209; SB=65) $7.50 $3.49 $3.43 $3.29 $8.00 $3.64 $3.58 $3.45 $8.50 $3.79 $3.74 $3.61 $9.00 $3.95 $3.89 $3.76 $9.50 $4.10 $4.05 $3.92 $10.00 $4.26 $4.20 $4.07
Ratio of Corn to Soybean Acreage in the U.S. Corn Belt Iowa, Illinois, and Indiana 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 Average Ratios: Iowa = 1.46 Illinois = 1.19 Indiana = 1.21 Iowa Illinois Indiana 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
2018 Farm Bill 2018 Farm Bill continues the programs of the 2014 Farm Bill (ARC; PLC) Choose PLC or ARC-CO for 2019 and 2020 crop years (2 year election) Starting in 2021 crop year, farms will make ARC/PLC election each year Crop Yields Used for PLC & ARC-CO Option to update PLC program yields more details to come Changes to ARC-CO yield computations trend adjusted Net effect, yields used to compute payments will increase
PLC Reference Prices 2018 Farm Bill (continued) Initial reference prices unchanged from 2014 -$3.70 (corn), $8.40 (soybeans) But 2018 Farm Bill includes an escalator clause which could be used to boost reference prices in future years For 2019-2020, the escalator appears unlikely to come into play reference prices will remain at $3.70 (corn) & $8.40 (soybeans) Choosing Between ARC-CO & PLC for 2019-2020 More analysis needed, initial reaction Corn: PLC could be attractive Soybeans: Tougher choice between ARC-CO & PLC
Purdue Top Farmer Conference January 11, 2019 Pre-Conference, January 10 Beck Agricultural Center, West Lafayette, IN More info & register at purdue.ag/topfarmer December 19, 2018