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GRAIN OUTLOOK

GRAIN OUTLOOK. Mike Woolverton Kansas State University mikewool@agecon.ksu.edu. WHEAT. PRODUCTION PROJECTIONS, U.S., 2006/07. All Wheat – 1.812 bil. Bu. – down 14% Hard Winter – 682 mil. Bu. – down 27% Hard Spring – 432 mil. Bu. – down 7% Soft Red – 390 mil. Bu. – up 26%

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GRAIN OUTLOOK

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  1. GRAIN OUTLOOK Mike Woolverton Kansas State University mikewool@agecon.ksu.edu

  2. WHEAT

  3. PRODUCTION PROJECTIONS, U.S., 2006/07 • All Wheat – 1.812 bil. Bu. – down 14% • Hard Winter – 682 mil. Bu. – down 27% • Hard Spring – 432 mil. Bu. – down 7% • Soft Red – 390 mil. Bu. – up 26% • White – 254 mil. Bu. – down 15% • Durum – 53 mil. Bu. - down 48%

  4. PRODUCTION PROJECTIONS, MAJOR WHEAT EXPORTERS, 2006/07 (MMT) 2006/072005/06 • EU-25 117.24 (-4%) 122.59 • United States 49.32 (-14%) 57.28 • Canada 26.3 (+1%) 25.98 • Australia 10.5 (-57%) 24.5 • Argentina 13.25 (+6%) 12.5 Total World Prod. 586.81 (-6%) 621.86

  5. Wheat Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 59.7 57.2 57.3 Harvest A. (mil.) 50.0 50.1 46.8 Bu./A. 43.2 42.0 38.7 Production 2,158 2,105 1,812 Imports 71 82 105 Carryover 546 540 571 Total Supply 2,775 2,727 2,488 Utilization: Feed and Residual 201 200 145 Food 895 915 920 Seed 79 78 80 Exports 1,060 1,009 925 Total Utilization 2,235 2,155 2,070 Carryover 540 (24%) 571 (26%) 418 (20%) U.S. Farm Price $3.40 $3.42 $4.15-$4.55

  6. Current Market Influences - Wheat • Low Carryover • Australian Drought (-57%) • Winter Wheat Plantings

  7. GRAIN SORGHUM

  8. Sorghum Estimates, USDA, Nov. 2006 YieldProduction U.S. 54.2 288.5 mil. Kansas 55.0 132.0 mil. (75.0) (195.0 mil.)

  9. Sorghum Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 7.5 6.5 6.3 Harvest A. (mil.) 6.5 5.7 5.3 Bu./A. 69.9 68.7 54.2 Production 454 394 288 Imports 0 0 0 Beginning Carryover 34 57 65 Total Supply 487 451 354 Utilization: Feed and Residual 191 141 95 Food, seed, industrial 55 50 55 Exports 184 195 150 Total Utilization 430 386 315 Ending Carryover 57 (13%) 65 (17%) 39(12%) U.S. Farm Price $1.79 $1.86 $2.80-$3.20

  10. Current Market Influences – Grain Sorghum • Demand from ethanol producers • Demand from livestock feeders • Export demand – Mexico and Spain

  11. CORN

  12. WORLD COARSE GRAIN STOCKS TO USAGE RATIO

  13. Consumption in 2006/07 forecast to set new record. Production down slightly from 2005/06. Stocks forecast to reach 23-year lows. World Corn Use Outpaces Production Million MT

  14. Corn Estimates, USDA, Nov. 2006 YieldBushels U.S. 151.2 10.7 bil. Kansas 123.0 387 mil. (135.0) (465.8 mil.)

  15. Corn Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 80.9 81.8 78.6 Harvest A. (mil.) 73.6 75.1 71.0 Bu./A. 160.4 147.9 151.2 Production 11,807 11,112 10,745 Imports 11 9 10 Beginning Carryover 958 2,114 1,971 Total Supply 12,776 13,235 12,725 Utilization: Feed and Residual 6,162 6,136 6,050 Food, seed, industrial 2,686 2,981 3,540 Ethanol for fuel 1,323 (12%) 1,603 (14%) 2,150 (18%) Exports 1,814 2,147 2,200 Total Utilization 10,662 11,264 11,790 Ending Carryover 2,114 (20%) 1,971 (17%) 935 (8%) U.S. Farm Price $2.06 $2.00 $2.80-$3.20

  16. Ethanol Industry at a Glance • Number of operating ethanol plants: 108 • Plants under construction or expansion: 62 • Announced plants: 100+* • 2005 production: 3.9 billion gallons • Current production capacity: 5.1 BGPY • Projected production capacity: 7.7 BGPY in 2007 • (RFS Program mandate 7.5 BG by 2012) • Size: Newer plants 100 MGPY • Process: wet or dry • Daily water usage – 1.5 million gallons • Feedstock percentage: Corn 97 Sorghum 2 Other 1

  17. Distiller’s Grain Facts • Each bushel of corn dry grind processed for ethanol yields about 1/3 bushel of distiller’s grain. • Distiller’s grain retains one-third of the nutrient value of corn. • In N. America: 45% dairy 37% beef 13% swine 5% poultry

  18. Current Market Influences - Corn • Demand from ethanol producers • Competition for acres • Strong export demand

  19. SOYBEANS

  20. Soybean Estimates, USDA, Nov. 2006 YieldProduction U.S. 43.0 3.204 bil. Kansas 31.0 93 mil. (37.0) (105.5 mil.)

  21. Soybean Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 75.2 72.0 75.6 Harvest A. (mil.) 74.0 71.3 74.5 Bu./A. 42.2 43.0 43.0 Production 3,124 3,063 3,204 Imports 6 3 4 Beginning Carryover 112 256 449 Total Supply 3,242 3,322 3,657 Utilization: Crushings 1,696 1,739 1,780 Seed 88 93 91 Exports 1,103 947 1,145 Residual 99 95 75 Total Utilization 2,986 2,874 3,091 Ending Carryover 256 (9%) 449 (16%) 565 (18%) U.S. Farm Price $5.74 5.66 $5.40-$6.40

  22. Current Market Influences - Soybeans • Competition for acres • Large Carryover • Brazilian plantings • Bio-diesel potential

  23. Crop Price Relationships 12/4 Ratio Ratio Price if ratio is… 10 yr. ave. 12/4NormalNew Corn $3.63 - - - - Soybeans $6.59 2.49 1.82 $9.00 $7.26 Wheat $5.21 1.44 1.44 $5.21 $3.63

  24. Corn Acreage Calculation Corn Demand 07/081 13,999 mil. Bu. Supply with DDGS credit2-1,953 Needed corn production 12,046 mil. Bu. Acres needed to plant3 86.2 mil. A. (Trend line yield 147.5 bpa) Acres planted in 06/07 78.6 mil. Additional acres in 07/08 7.6 mil. 1 Assumes all uses except ethanol production remain the same as 06/07. Includes one billion bushels of carryover stocks. 2 Assumes DDGS retain 30% of the feed value of corn and all DDGS are used for livestock feed. 3 Assumes the percentage of acres planted to acres harvested remains at 91%. Need to harvest 78.41 million acres.

  25. Land in Crops(Millions of acres, Most recent three year average) Corn 78.6 Soybeans 75.6 Hay 63.4 Wheat 57.3 Cotton 15.3 Grain Sorghum 6.3 Total 296.5 Total crop land in the United States – 348.7 million acres

  26. Market Psychology Producers – This is too good to be true; hold current crop, sell next year’s crop Buyers – Future uncertain; cover needs now rather than later Speculative Funds – Get out of oil; buy ag. commodities…but getting nervous Critical Months: Jan.- Feb.; April–May; July-Aug.

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