Southern Outlook Conference September 27, 2016

Mark Welch Extension Economist—Grain Marketing

JMWelch@tamu.edu (979)845-8011

Grain Outlook

390

300

310

320

330

340

350

360

370

380

390

400

+3.7 kg per person per year (about 8 lbs)

Corn for fuel 2006: 2 billion bu 2010: 5 billion bu

World Per Capita Grain Use

barley, corn, millet, mixed grains, oats, rice, rye, sorghum, soybeans, and wheat

kg

USDA, Foreign Agricultural Service, PSD, 9/14/2016

BRIC Countries, Average Income

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,00019

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

1420

1620

1820

20

Brazil Russia India China

World Bank, GNI per capita, 9/14/2016 http://data.worldbank.org/indicator/

Current US$

Rank, GDP #13, $1.3T #9, $1.8T #2, $10.9T #7, $2.1T

World Days of Use on Hand, 9/12/2016

79 78

0

20

40

60

80

100

120

140

Days of Use 20-yr avg

80 79

020406080

100120140

Days of Use 20-yr avg

123

106

0

20

40

60

80

100

120

140

Days of Use 20-yr avg

88 92

0

20

40

60

80

100

120

140

Days of Use 20-yr avg

Corn

Rice Wheat

Soybeans

Marketing Year Average Corn Prices

3.24

6.89

3.20

0.46 0.78

1.29

2.38

4.65

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

1866

1870

1874

1878

1882

1886

1890

1894

1898

1902

1906

1910

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

SAFP Pre WWI WWI to WWIIPost WWII World Trade Biofuel Era

$/bu

WASDE, Updated 9/12/2016

Marketing Year Average Corn Prices constant dollars (1982-84=100)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1913

1916

1919

1922

1925

1928

1931

1934

1937

1940

1943

1946

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

SAFP 5-yr MA

$/bu

WASDE, Updated 9/12/2016

U.S. Corn: Disappearance

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

80/8

181

/82

82/8

383

/84

84/8

585

/86

86/8

787

/88

88/8

989

/90

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

313

/14

14/1

515

/16

16/1

7

Million Bushels

Feed & Residual

Exports Food Seed Industrial

Source: USDA WASDE, 9/12/2016

Fuel

Ending Stocks

U.S. Sorghum Disappearance

0

100

200

300

400

500

600

700

800

1980

/198

119

81/1

982

1982

/198

319

83/1

984

1984

/198

519

85/1

986

1986

/198

719

87/1

988

1988

/198

919

89/1

990

1990

/199

119

91/1

992

1992

/199

319

93/1

994

1994

/199

519

95/1

996

1996

/199

719

97/1

998

1998

/199

919

99/2

000

2000

/200

120

01/2

002

2002

/200

320

03/2

004

2004

/200

520

05/2

006

2006

/200

720

07/2

008

2008

/200

920

09/2

010

2010

/201

120

11/2

012

2012

/201

320

13/2

014

2014

/201

520

15/2

016

2016

/201

7

Ending Stocks Food, Seed, and Industrial Feed and Residual Exports

Million bushels

USDA, WASDE, 9/12/2016

Corn and Grain Sorghum Consumed for Fuel Alcohol, 2015/16 Marketing Year

050

100150200250300350400450500

Sep-

15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Grain Sorghum

Corn

USDA, NASS, Grain Crushings and Co-Products Production

Mil bu

2016 December Corn Futures and Seasonal Index Patterns

9092949698100102104106108110

300320340360380400420440460

2016-C 20-yr avg 10-yr avg

Price Index

U.S. Planted Acres, 249 million (+1.7%)

0

50

100

150

200

250

300

192919321935193819411944194719501953195619591962196519681971197419771980198319861989199219951998200120042007201020132016est

Corn Soybeans Wheat Cotton Sorghum Rice

Million acres

USDA 7/12/2016 +6.9% +1.2% -7.0% +17.1% -15.3% +22.3%

y = -0.5086x + 1.1779 R² = 0.874

-10%

-5%

0%

5%

10%

15%

20%

1.9 2.0 2.1 2.2 2.3 2.4 2.5 2.6

Change in Corn Acres and Soybean to Corn RMA Base Price Ratio

2006-2015

2017 Nov Soybean:Dec Corn Price Ratio

2.00

2.25

2.50

2.75

3.00Plant Soybeans

Plant Corn

March Planting Intentions Survey

ARC Program Texas High Plains Corn Example, $/base acre

ARC: Agricultural Risk Coverage

U.S. Corn 2017/18 S&D 9/16/2016

World Wheat Production

0

5

10

15

20

25

30

U.S. Foreign

Billion bushels

WASDE 9/12/2016

4 record wheat crops in row

U.S. Wheat Use

0

250

500

750

1,000

1,250

1,500

1,750

2,000

80/81

81/82

82/83

83/84

84/85

85/86

86/87

87/88

88/89

89/90

90/91

91/92

92/93

93/94

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

13/14

14/15

15/16

16/17

Million Bushels

Ending Stocks Feed and Residual Exports Food and Seed

WASDE, 9/12/2016

U.S. Winter Wheat Acres

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

1909

1913

1917

1921

1925

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

USDA, Acreage 6/30/2016 Since 1996 ranged from +20% to -15% of avg.

RMA Wheat Price

3.52

4.52

5.88

8.77

5.42

7.14

8.62 8.78

7.02

6.30

5.20

4.59 4.81

5.62

8.87

6.35

4.79

8.18

6.75

7.22 7.17

5.31

4.50

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Base Price Harvest Price

$/bu

Base price setting period: August 15 through September 14 Harvest price setting period: June 1 through June 30

70% RP: $3.21 price floor

U.S. Wheat Planted Acres

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0

Model Actual

Million acres

Planted acres = f(last year’s wheat, corn, soybean prices, and trend R^2 = 0.92

Updated 9/19/2016

World Wheat Area Harvested and previous year’s SAFP

0123456789

0

100

200

300

400

500

600

Area Harvested Average Area SAFP

Rarely varies by +/- 5%

Source: USDA, FAS, PSD 9/15/16

Mil acres $/bu

ENSO Alert System Status: Not Active ENSO-neutral conditions are present. Equatorial sea surface temperature (SST) are near or below average in the east-central and eastern Pacific Ocean. ENSO-neutral conditions are slightly favored (between 55-60%) during the upcoming Northern Hemisphere fall and winter 2016-17.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Actual Measurements Predicted

°C

El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, 19 September 2016 http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/

El Nino Neutral La Nina

Oceanic Nino Index (ONI)

Latest actual weekly SST departure

PLC Program, Wheat Example

PLC: Price Loss Coverage

PLC Program for Wheat Dryland farm, 22 bu avg yield, $/base acre

July 2017 KC Wheat and Marketing Plan

400

450

500

550

600

650

700

5/2/

2016

5/13

/201

65/

26/2

016

6/9/

2016

6/22

/201

67/

6/20

167/

19/2

016

8/1/

2016

8/12

/201

68/

25/2

016

9/8/

2016

9/21

/201

610

/2/2

016

10/1

1/20

1610

/20/

2016

10/2

9/20

1611

/7/2

016

11/1

6/20

1611

/25/

2016

12/4

/201

612

/13/

2016

12/2

2/20

1612

/31/

2016

1/9/

2017

1/18

/201

71/

27/2

017

2/5/

2017

2/14

/201

72/

23/2

017

3/4/

2017

3/13

/201

73/

22/2

017

3/31

/201

74/

9/20

174/

18/2

017

4/27

/201

75/

6/20

175/

15/2

017

5/24

/201

76/

2/20

176/

11/2

017

6/20

/201

76/

29/2

017

7/8/

2017

Early Season Price Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest ¢/bu

BE (normal yield, grazing, PLC from 2016): $4.00 cash/$4.60 futures

JMWelch@tamu.edu, (979)845-8011 Mark Welch, Extension Economist--Grain Marketing