4 What is the DST?The Decision Support Tool (DST) is designed to provide the USB Farmer Directors and stakeholders with information and to guide them through a logical thought process to help make better in-season and annual budgeting decisions, where annual budgeting and planning processes are aligned with the organization’s long range strategic objectives.It is not meant as a substitute for the unique insights that every farmer director will bring to the process. It is not something that is going to make a decision for you, but it’s something that will assist you in making good strategic decisions for USB.
6 STRATlink Survey Questions STRATlink Survey – Guided Information Thought ProcessInformation from other DST elements is summarized in information modules preceding STRATlink questions, aimed to help directors make informed decisions regarding the survey budget allocation questions.Questions: Set 1 - Allocation across Strategic Objectives / Action TeamsImpact on Farmer ProfitabilityUSB Ability to ImpactResource NeedBudget Allocation by Strategic Objective / Action TeamThought Process
7 STRATlink ResultsThe two screenshots show how the allocations across action teams are displayed in the results section of the at the end of the STRATlink Survey.
8 STRATlink Survey Questions Questions: Set Allocation within Action Team by Target AreaAbility to Influence USB Strategic Objectives.Target Area Resource Need within Action Teams.Action Team Budget Allocation by Target Areas.Survey is repeated for Oil, Customer Focus, and Freedom to Operate
9 STRATlink ResultsThe two screenshots show how the allocations across target areas within action teams are displayed in the results section at the end of the STRATlink Survey. These are the results for the Meal action team, but the results pages for Oil, Customer Focus, and Freedom to Operate are similar.
10 Why is QSSB involvement important? USB Directors specifically asked for it – need your input.QSSBs have unique insights into regional-specific dynamics.The DST/STRATlink is a unique way to capture QSSB opinion.
12 Market Data Strategic insights vs. tactical considerations
13 Market Data: Strategic Insights Drawn from DST!
14 Strategy Versus Tactics They are often confused! Strategy: High level planning that uses the distinct advantages of an organization to allocate scarce resources to achieve specific goals.Tactics: A statement of specific actions, within the context of a strategy, that will lead to the achievement of goals.Information used in strategic decision making is similar but not the same as information used in tactical decisions.Timeframe differencesTrends (e.g. price trends versus price fluctuations, consumption trends versus consumption fluctuations, etc.)Global versus local“What” the data is telling us versus “how” we should react (with tactics) to the data.
15 Strategic InsightsOver time soybean acres in the US are expected to gain on corn.Meat consumption in the US has been flat.Domestic food use of soybean oil has been in decline.Biodiesel production has reached new levels.Given higher soybean acres and flat to lower domestic meal/oil levels, exports are going to be very important.Very tight US stocks.Controlling the supply chain as a way to achieve food security.
16 Over time soybean acres in the US are expected to gain on corn. Impact of leveling off of the RFS.Cotton and wheat have difficulty competing with corn/soy economics.Can the US compete with Brazil for soy acres?
17 The US is increasingly a corn-soy farm economy.
18 Flat domestic meat consumption has kept meal consumption flat. Meat exports have been a bright spot in the industry.DDG impact has reached a peak?Canola meal has made inroads-will this continue?Why has canola use grown?
19 Flat domestic meat consumption has kept animal numbers slow growth to flat.
20 Poultry had been the main driver of increased meal demand. Cattle hit especially hard by the drought.Poultry profitability has been sustained.Many hog producers were able to forward contract in 2012 and lock in margins.How hard hit were non-US livestock operators by high prices in 2012/13?
21 Per capita domestic food use of edible oils has been in decline. Slow growth economy and efficiencies have hurt per capita consumption of edible oils.Soy oil has lost ground to other oils. Trans fat and price issues?Can high oleic soy oil recapture market share? How best to deploy quality enhancements?
22 Canola and palm oil have displaced soybean oil in food uses. Canola and palm oil have gained ground relative to soy oil.Should we compete on price or quality dimensions or both?
23 The bright spot: Biodiesel production has reached new levels. Soy oil has the lions share of biodiesel production.There is a limited volume of animal based material available.How will future energy policy shape biodiesel production in the future?How best to develop additional new uses for soy oil?
24 Biodiesel margins have rebounded but have been volatile. A direct relationship between biodiesel usage and margins.Are there ways to boost biodiesel margins outside of the policy area?Will we need additional biodiesel capacity?
25 Given higher soybean acreage and production, soybean exports are going to be very important. Soybean exports could go to bil. bu. by 16/17 (see next slide).Which markets? China?Do we have the right infrastructure?
26 Long-term supplies look ample, but we have had very tight stocks and high prices the past two years. Have tight stocks/high prices done long-term damage to demand?Are we still viewed as a reliable supplier by both domestic and export customers?Given higher supplies in the future, how can we attract demand?Exporting beans/meal/oil versus exporting meat: which is better?
27 Controlling the supply chain as a way to achieve food security.
29 OverviewUS supplies tight in 2012/13 due to poor crop, strong demand before South American harvest.US soybean exports have fallen; meal exports competitive with Argentina until recently.US soybean oil stocks likely to drop sharply.2013 South American harvest record large.US soybean stocks to rebuild in 13/14 on better yields, larger export competition.Soybean and meal futures have moderated from record levels in Sep. 2012; US basis strong.Lower prices expected after 2013 US harvest.
30 2012 US Soybean Crop Smallest in 4 Years 2012 crop of 3,015 million bushels smallest since 2008Area up, but yield of bu./acre was smallest in 9 years2013 crop forecast at a record 3,388 million bushels on record acreage, yield of bu./acreOnly 24% planted as of May 19; 5-year average is 42%
31 Stocks Very Tight in 12/13, Rebuilding in 13/14 US supplies very tight due to small crop, strong exports before S. American harvestStocks/use ratio has been no lower than 4.5% since 1970; USDA’s forecast of 4.0% seems unrealisticImports forecast larger than normalLate planting may prolong the wait for this year’s cropLarger crop to allow stocks to rebuild in 2013/14
32 Soybean Exports Small After Strong Start 2012/13 US soybean exports started strong due to reduced competition from South American suppliesMar/Aug exports small due to high US prices, strong Brazil exportsSimilar pattern seen in 2003/04China has cancelled some purchases of US soybeans
33 Soybean Crush Very Front Loaded US soybean crush strong first half of 2012/13 on large meal exportsSimilar to 2009/10, which also followed S. America droughtTight supplies to restrain crush until this year’s harvest, similar to 2003/04Crush margins currently low due to high soybean prices
34 Soybean Basis Extremely Strong US cash soybean prices well above nearby futures with supplies very tightCentral Illinois basis has been above recent years since NovemberSoared this month because May futures (the nearby contract during Mar. & Apr.) were well above July futures, which became the nearby this month
35 2012/13 Meal Supplies Tight on Strong Exports Tight soybean supplies to limit 2012/13 crushDomestic meal use down on lower feeding rate (2011 crop had low protein content)Exports strong on reduced South America suppliesImports forecast at double normalSmaller exports, larger domestic use seen in 13/14
36 US Meal Competitive with Argentina Until Recently Argentina meal basis strong amid slow farmer selling of soybean cropBrazil basis weak, but soybean exports taking precedence thereUS basis strong, but competitive with Argentina until recentlyUS export sales strong longer than expected
37 Biodiesel Growth to Reduce Soybean Oil Stocks Small crush this summer to restrain 2012/13 soybean oil productionExports well above last yearEnding stocks forecast to drop to 1.7 billion poundsModeration in oil yield from record level to limit 13/14 productionLarger biodiesel production to offset smaller food use & exports, keeping stocks fairly tight
38 Biodiesel Production to Increase Further Biomass-based diesel usage mandate grows to bil. gal. in 2013 from 1.0 bil. in 2012Biodiesel also to help meet advanced biofuel mandateReturn of blender credit has boosted production marginsSoybean oil usage seen at billion pounds in 12/13, 5.50 billion in 13/14Industrial-grade corn oil usage rising, canola oil is price sensitive
39 Soybean Oil Stocks Expected to Plummet US soybean oil stocks currently large due to strong Sep/Feb crush, high oil yield of cropStocks forecast to plummet this summer as tight supplies restrain crush & biodiesel production growsStrong biodiesel production to limit extent that stocks rebuild in 2013/14
40 US Soybean Oil Prices Well Above South American US soybean oil basis strong with stocks likely to fallBrazil basis weakest since early 2009Argentina basis also weak due to drop in biodiesel exports to EuropeUS soybean oil exports likely small for the remainder of 2012/13 and during 2013/14
41 South American Soybean Crop Record Large South American soybean production increased from million tonnes in 2011/12 to million in 2012/13Increased area, rebound in yieldsBrazil production of million tonnes essentially matches US (82.1 million)2013/14 South American crop forecast at million tonnes
42 Brazils Soybean Exports Surge on Large Crop Record production on larger area, rebound in yieldsSoybean exports going strong (mainly to China)Crush expected to increase modestly on rebound in domestic soybean meal usageMeal exports slightly lower as soybean exports take precedenceGrowth in biodiesel production limiting soybean oil exports
44 Slow Farmer Selling of Argentina’s Large Crop 2013 production near 2010’s record on large area, rebound in yieldArgentina more export oriented than Brazil, especially for productsFarmer selling slow due to high inflationSlow start to export season for soybeans and mealEnding stocks to stay relatively largeSoybean oil exports to rise on larger supplies, reduced biodiesel exports to EU (biodiesel import tax expected)
45 Argentina Soybean Meal Exports Slow Argentina soybean meal exports below average for most of 2012/13 marketing year after drought reduced 2012 soybean cropDespite large crop, slow farmer selling has kept meal exports below normal so far in 2013/14Soybean exports also sluggish, but corn exports are large
46 China Drives Soybean Import Demand Growth Soybean exports from major exporters seen increasing 2.9 million tonnes in 2012/13Forecast to increase 2.3 million tonnes for China, 0.8 million for EuropeTotal projected to increase 9.0 million tonnes in 2013/14China seen increasing 9.6 million tonnes (rebuilding stocks)Europe down 2.0 million on larger meal imports
47 Meal Import Demand Down on Smaller Supplies World soybean meal import demand seen down 4.4 million tonnes in 2012/13Tight supplies, slow start for ArgentinaDown 2.9 million tonnes for Europe (importing more soybeans due to Argentina’s smaller meal exports)Larger supplies to allow improvement in 2013/14, especially for Europe
48 World Biodiesel Production Growth Slowing World biodiesel production increased only slightly in 2012Most of increase was in IndonesiaEU-27, US, Brazil and Argentina flatLarger increase expected in 2013US to account for most of growth (larger mandate)Argentina to drop on smaller exports
49 Palm Oil Dominates Vegetable Oil Trade Soybean oil exports have declined due to increased usage in biodiesel productionPalm oil trade forecast at 39 million tonnes in 2013/14 vs. 20 million just ten years earlierSunflower oil trade moderating from record in 2011/12Rapeseed/canola oil trade boosted by growth in Canada’s crushing capacity
50 China Lowering Stocks in 12/13, to Rebuild in 13/14 China soybean imports grew 6.9 million tonnes to 59.2 million in 11/12Smaller growth to 61.5 million tonnes expected in 2012/13Reduction in stocks, slower meal demand growth amid high pricesLarger meal exportsSoybean imports forecast at million tonnes in 2013/14 on lower prices, better meal demand growth and rebuilding of stocksSoybean oil imports rebounding, but still below late 2000s
51 China’s Stocks Reduced Amid High World Prices China’s soybean stocks at ports below 4 million tonnes for first time since Dec. 09Well below peaks near 7 million tonnes in 2011/12Large stocks allowing China to import less at high pricesStocks likely to rise in next few months as huge shipments arrive from S. America (mainly Brazil)
52 Soybean Futures to Decline into US Harvest Tight old-crop US supplies expected to limit downside for soybean futures until this year’s harvestStronger basis, wider old-/new-crop inverses will be needed to achieve necessary rationing if futures drop earlierLower prices expected in late & into 2014 if US yields rebound
53 Similar Outlook for Soybean Meal Tight supplies also likely to underpin soybean meal futures until new-crop soybeans are available to crushStrong exports could put rationing task on domestic livestock industrySoybean meal looks to have more downside potential than soybean oil
54 Decline in Stocks to Bolster Soybean Oil Prices Soybean oil futures expected to rise this summer as US soybean oil stocks plummetBasis has firmed, and likely will continue toFutures projected to decline as soybean prices drop this fallLess downside risk than soybeans and meal as biodiesel growth keeps soybean oil stocks fairly tight
55 Oilseeds Summary Old-crop US soybean supplies very tight Brazil’s soybean exports going strong; Argentina’s limited by slow farmer sellingChina’s soybean stocks declining in 2012/13, forecast to increase in 2013/14Tight US supplies to underpin soybean and product futures & basis levels until harvestLate planting to prolong the wait for 2013 cropSoybean and meal futures to drop into harvestLarge biodiesel production to limit rebound in soybean oil stocks and the downside for prices