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Crop Market Outlook

Cory Walters
Department of Agricultural Economics
cwalters7@unl.edu
Price

Supply 1

Supply 2

Demand
Quantity
USDA SUPPLY/DEMAND BALANCE SHEET FOR CORN

Acres Planted
Acres Harvested
Bu./Harvested Acre
Beginning Stocks
Production
To...
December 2014 Corn Price
Distribution

Average = $4.68/bu
Crop Insurance Information
• Corn Projected price = 4.61 (volatility = .19)
– Implied price floor (put option) across diff...
New Crop Corn Outlook
• Entered the year with tight stocks, which held prices up.
Prices have since fallen due to the larg...
Soybeans
USDA SUPPLY/DEMAND BALANCE SHEET FOR SOYBEANS

Acres Planted
Acres Harvested
Bu./Harvested Acre
Beginning Stocks
Productio...
November 2014 Soybean Price
Distribution

Average = $11.65/bu
Crop Insurance Projected Price
• Soybean Projected price = $11.34 (volatility =
.13)
– Implied price floor (put option) ac...
New Crop Soybeans Outlook
• Prices have strengthened over the past month
• Demand appears strong with about 7%
increase ov...
Wheat
USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT
2011/12 2012/13 E 2013/14 P
Million Acres
Acres Planted
54.4
55.7
56.2
Acres Ha...
USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT
2011/12 2012/13 E 2013/14 P
Million Acres
Acres Planted
54.4
55.7
56.2
Acres Ha...
July 2014 KC Wheat Price
Distribution

Average = 6.82
Wheat Outlook
• February 2, 2014 winter wheat conditions
– 3% very poor, 15% poor, 36% fair, 40% good, and
6% excellent

•...
Overall Outlook
• Chances of losing money in commodity markets is much
stronger this year than last
– Crop insurance will ...
Back Page

Thank you

Cory Walters
Assistant Professor
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
Crop Market Outlook - Cory Walters - March 2014
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Crop Market Outlook - Cory Walters - March 2014

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Dr. Cory Walters discusses the crop market outlook for 2014 and beyond.

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Transcript of "Crop Market Outlook - Cory Walters - March 2014"

  1. 1. Crop Market Outlook Cory Walters Department of Agricultural Economics cwalters7@unl.edu
  2. 2. Price Supply 1 Supply 2 Demand Quantity
  3. 3. USDA SUPPLY/DEMAND BALANCE SHEET FOR CORN Acres Planted Acres Harvested Bu./Harvested Acre Beginning Stocks Production Total Supply Use: Feed and Residual Food, seed, & industrial Ethanol for fuel Exports Total Use (Demand) Ending Stocks Ending Stocks, % of Use U.S. Season Avg. Farm Price, $/ Bu. Source: USDA, WASDE 13/14 11/12 12/13E P Millions of Acres 91.9 97.2 95.3 84.0 87.4 87.7 147.2 123.4 158.8 Millions of Bushels 1,128 989 821 12,358 10,780 13,925 13,515 11,932 14,781 4,547 6,437 5,009 1,543 12,527 989 7.9 $6.22 4,335 6,044 4,648 731 11,111 % -2.0% 0.3% 28.7% -17.0% 29.2% 23.9% 5,300 22.3% 6,400 5.9% 5,000 7.6% 1,600 118.9% 13,300 19.7% 821 1,481 80.4% 7.4 11.1 50.7% $6.89 $4.50 -34.7%
  4. 4. December 2014 Corn Price Distribution Average = $4.68/bu
  5. 5. Crop Insurance Information • Corn Projected price = 4.61 (volatility = .19) – Implied price floor (put option) across different coverage levels (assumes APH realized yield) • 85% = $3.91 • 80% = $3.69 • 75% = $3.46 • Most popular insurance type – Revenue Protection – get both implied put and call option • Be sure to consider Trend Adjustment (TA) Endorsement
  6. 6. New Crop Corn Outlook • Entered the year with tight stocks, which held prices up. Prices have since fallen due to the large crop – Demand has returned and appears strong • Index funds currently buying futures contracts – Help support prices • Speculators are existing their net ‘short’ position. – Another indication we have hit strong price support • Why not an futures price inverse going into harvest? – Might be starting to form
  7. 7. Soybeans
  8. 8. USDA SUPPLY/DEMAND BALANCE SHEET FOR SOYBEANS Acres Planted Acres Harvested Bu./Harvested Acre Beginning Stocks Production Total Supply Use: Crushing Exports Seed & Residuals Total Use Ending Stocks Ending Stocks, % of Use U.S. Season Average Farm Price, $/Bu Source: USDA, WASDE 2011/12 2012/13 E 2013/14 P % Millions of Acres 75.0 77.2 76.5 -0.9% 73.8 76.2 75.9 -0.4% 41.9 39.8 43.3 8.8% Millions of Bushels 215 169 141 -16.6% 3,094 3,034 3,289 8.4% 3,325 3,239 3,459 6.8% 1,703 1,362 88 3,155 1,689 1,320 90 3,099 169 5.4 $12.50 141 4.5 $14.40 1,700 1,510 109 3,309 0.7% 14.4% 21.1% 6.8% 150 6.4% 4.5 -0.4% $12.70 -11.8%
  9. 9. November 2014 Soybean Price Distribution Average = $11.65/bu
  10. 10. Crop Insurance Projected Price • Soybean Projected price = $11.34 (volatility = .13) – Implied price floor (put option) across different coverage levels (assumes APH realized yield) • 85% = $9.64 • 80% = $9.07 • 75% = $8.51
  11. 11. New Crop Soybeans Outlook • Prices have strengthened over the past month • Demand appears strong with about 7% increase over last year – Strong export expectations • Speculators are net ‘long’ and becoming stronger – How long can this last? • Futures market shows traditional new crop inverse – incentivizing purchasers to wait to harvest for product
  12. 12. Wheat
  13. 13. USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT 2011/12 2012/13 E 2013/14 P Million Acres Acres Planted 54.4 55.7 56.2 Acres Harvested 45.7 48.9 45.2 Bu./Harvested Acre 43.7 46.3 47.2 0.9% -7.6% 1.9% Beginning Stocks Production Imports Total Supply Use: Food/Seed Feed & Residual Exports Total Use 1,017 164 1,050 2,231 1,018 388 1,007 2,414 1,034 250 1,175 2,459 1.6% -35.6% 16.7% 1.9% Ending Stocks Ending Stocks, % of Use U.S. Season Aver. Farm Price, $/ Bu. 743 33.3 $7.24 718 29.7 $7.77 559 22.7 $6.80 -22.1% -23.6% -14.3% Source: USDA, WASDE 862 1,999 112 2,974 Million Bushels 743 718 2,266 2,130 123 170 3,131 3,018 % -3.4% -6.0% 38.2% -3.6%
  14. 14. USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT 2011/12 2012/13 E 2013/14 P Million Acres Acres Planted 54.4 55.7 56.2 Acres Harvested 45.7 48.9 45.2 Bu./Harvested Acre 43.7 46.3 47.2 0.9% -7.6% 1.9% Beginning Stocks Production Imports Total Supply Use: Food/Seed Feed & Residual Exports Total Use 1,017 164 1,050 2,231 1,018 388 1,007 2,414 1,034 250 1,175 2,459 1.6% -35.6% 16.7% 1.9% Ending Stocks Ending Stocks, % of Use U.S. Season Aver. Farm Price, $/ Bu. 743 33.3 $7.24 718 29.7 $7.77 559 22.7 $6.80 -22.1% -23.6% -14.3% Source: USDA, WASDE 862 1,999 112 2,974 Million Bushels 743 718 2,266 2,130 123 170 3,131 3,018 % -3.4% -6.0% 38.2% -3.6%
  15. 15. July 2014 KC Wheat Price Distribution Average = 6.82
  16. 16. Wheat Outlook • February 2, 2014 winter wheat conditions – 3% very poor, 15% poor, 36% fair, 40% good, and 6% excellent • US ending stocks are down but up globally • Unrest in Ukraine – represents about 6% of world wheat export market • Speculators recently changed from net short to net long.
  17. 17. Overall Outlook • Chances of losing money in commodity markets is much stronger this year than last – Crop insurance will help stop bleeding but wont stop it from occurring – What is your plan if revenue is less than cost? • Use forward contracts in conjunction with your crop size expectations – Larger crop size = more pressure to higher levels of forward contracting • Large crop will likely translate into positive benefits from storage and wider harvest basis • Dates to remember – monthly WASDE, Grain Stocks and Prospective Plantings on March 31st, and Acreage and Grain Stocks on June 30th.
  18. 18. Back Page Thank you Cory Walters Assistant Professor
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