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GRAIN OUTLOOK Mike Woolverton Kansas State University

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Presentation on theme: "GRAIN OUTLOOK Mike Woolverton Kansas State University"— Presentation transcript:

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% All Wheat – 1.812 bil. Bu. – down 14% Hard Winter – 682 mil. Bu. – down 27% Hard Winter – 682 mil. Bu. – down 27% Hard Spring – 432 mil. Bu. – down 7% Hard Spring – 432 mil. Bu. – down 7% Soft Red – 390 mil. Bu. – up 26% Soft Red – 390 mil. Bu. – up 26% White – 254 mil. Bu. – down 15% White – 254 mil. Bu. – down 15% Durum – 53 mil. Bu. - down 48% 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 EU-25 117.24 (-4%) 122.59 United States 49.32 (-14%) 57.28 United States 49.32 (-14%) 57.28 Canada 26.3 (+1%) 25.98 Canada 26.3 (+1%) 25.98 Australia 10.5 (-57%) 24.5 Australia 10.5 (-57%) 24.5 Argentina 13.25 (+6%) 12.5 Argentina 13.25 (+6%) 12.5 Total World Prod.586.81 (-6%) 621.86 Total World Prod.586.81 (-6%) 621.86

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9 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 Production 2,158 2,105 1,812 Imports 71 82 105 Imports 71 82 105 Carryover 546 540 571 Carryover 546 540 571 Total Supply 2,775 2,7272,488 Total Supply 2,775 2,7272,488Utilization: Feed and Residual 201 200 145 Feed and Residual 201 200 145 Food 895 915 920 Food 895 915 920 Seed 79 78 80 Seed 79 78 80 Exports 1,060 1,009 925 Exports 1,060 1,009 925 Total Utilization 2,235 2,1552,070 Carryover 540 (24%) 571 (26%) 418 (20%) U.S. Farm Price $3.40 $3.42 $4.15-$4.55

10 Current Market Influences - Wheat Low Carryover Low Carryover Australian Drought (-57%) Australian Drought (-57%) Winter Wheat Plantings Winter Wheat Plantings

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12 GRAIN SORGHUM

13 Sorghum Estimates, USDA, Nov. 2006 YieldProduction U.S.54.2288.5 mil. Kansas55.0132.0 mil. (75.0) (195.0 mil.)

14 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 Imports 0 0 0 Beginning Carryover 34 57 65 Beginning Carryover 34 57 65 Total Supply 487 451 354 Total Supply 487 451 354Utilization: Feed and Residual 191 141 95 Feed and Residual 191 141 95 Food, seed, industrial 55 50 55 Food, seed, industrial 55 50 55 Exports 184 195 150 Exports 184 195 150 Total Utilization 430 386 315 Ending Carryover 57 (13%) 65 (17%) 39 (12%) Ending Carryover 57 (13%) 65 (17%) 39 (12%) U.S. Farm Price $1.79 $1.86 $2.80-$3.20

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

16 CORN

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19 WORLD COARSE GRAIN STOCKS TO USAGE RATIO

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

21 Corn Estimates, USDA, Nov. 2006 YieldBushels U.S.151.210.7 bil. Kansas123.0387 mil. (135.0)(465.8 mil.) (135.0)(465.8 mil.)

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28 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 Imports 11 9 10 Beginning Carryover 958 2,114 1,971 Beginning Carryover 958 2,114 1,971 Total Supply 12,77613,23512,725 Total Supply 12,77613,23512,725Utilization: Feed and Residual 6,162 6,136 6,050 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%) 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 Exports 1,814 2,147 2,200 Total Utilization 10,662 11,26411,790 Ending Carryover 2,114 (20%) 1,971 (17%) 935 (8%) Ending Carryover 2,114 (20%) 1,971 (17%) 935 (8%) U.S. Farm Price $2.06 $2.00 $2.80-$3.20

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

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

31 Distillers Grain WDG – wet distillers grain WDG – wet distillers grain DDG – dried distillers grain DDG – dried distillers grain WDGS – wet with solubles WDGS – wet with solubles DDGS – dried with solubles DDGS – dried with solubles DDGS Ave. Nutrients (Percentage): DDGS Ave. Nutrients (Percentage): Dry matter 89.3 Crude protein30.9 Crude fat10.7 Crude fiber 7.2 Ash 6.0 Lysine.9 Phosphorous.75

32 Distillers Grain Production and Use ( MMT) Production Domestic Export 05/06 8.357.4.94 06/07 10.89.2 est. 1.6 est. 11/12 20.0 est. 12.0 est. 8.0 est.

33 Current Market Influences - Corn Demand from ethanol producers Demand from ethanol producers Competition for acres Competition for acres Strong export demand Strong export demand

34 SOYBEANS

35 Soybean Estimates, USDA, Nov. 2006 YieldProduction U.S.43.03.204 bil. Kansas31.093 mil. (37.0)(105.5 mil.)

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41 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 Imports 6 3 4 Beginning Carryover 112 256 449 Beginning Carryover 112 256 449 Total Supply 3,242 3,3223,657 Total Supply 3,242 3,3223,657Utilization: Crushings 1,696 1,7391,780 Crushings 1,696 1,7391,780 Seed 88 93 91 Seed 88 93 91 Exports 1,103 947 1,145 Residual 99 95 75 Exports 1,103 947 1,145 Residual 99 95 75 Total Utilization 2,986 2,8743,091 Ending Carryover 256 (9%) 449 (16%) 565 (18%) Ending Carryover 256 (9%) 449 (16%) 565 (18%) U.S. Farm Price $5.74 5.66 $5.40-$6.40

42 Current Market Influences - Soybeans Competition for acres Competition for acres Large Carryover Large Carryover Brazilian plantings Brazilian plantings Bio-diesel potential Bio-diesel potential

43 Crop Price Relationships 12/4 Ratio Ratio Price if ratio is… 12/4 Ratio Ratio Price if ratio is… 10 yr. ave. 12/4 Normal New 10 yr. ave. 12/4 Normal New 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

44 Corn Acreage Calculation Corn Demand 07/08 1 13,999 mil. Bu. Supply with DDGS credit 2 -1,953 Needed corn production12,046 mil. Bu. Acres needed to plant 3 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.

45 Land in Crops (Millions of acres, Most recent three year average) Corn78.6 Soybeans75.6 Hay63.4 Wheat57.3 Cotton15.3 Grain Sorghum 6.3 Total 296.5 Total crop land in the United States – 348.7 million acres

46 Market Psychology Producers – This is too good to be true; hold current crop, sell next years 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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