2014 Risk and Profit Conference General Session Speakers

GENERAL SESSION I Grain Market Situation and Outlook

Dan O’Brien, Kansas State University Daniel O’Brien was raised on a grain and livestock farm in south central Nebraska. He received bachelors and masters degrees in Agricultural Economics from the University of Nebraska-Lincoln. After completing his Ph.D. at Iowa State, he worked as the Extension Agricultural Economist at the Northwest Research and Extension Center in Colby and was Northwest Area Extension Administrative Director starting in 2003 before returning to his Extension Agricultural Economist position in January 2007. His ongoing extension and applied research interests and efforts are in the areas of a) grain market supply-demand analysis, bioenergy impacts and risk management strategies, b) grain industry market structure, conduct and performance – focusing on grain handling and transportation issues, and c) economic analysis of irrigated and dryland cropping systems, and associated cropland leasing arrangements.

Abstract/Summary As of mid-August, large crop prospects for feedgrains and soybeans in the U.S. and South America have caused market prices to move sharply lower. There is a risk of Kansas cash corn and grain sorghum prices falling below $4.00/$3.50 per bushel, respectively, at fall harvest. Kansas soybean prices are also at risk to fall below $10.00 per bushel at harvest if production prospects are unchanged. In a similar vein, wheat prices in Kansas are forecast to be weak through the remaining summer and early fall months, falling to the $5.50-$6.25 range absent any changes in current market outlook or winter wheat seeding prospects. Given this pessimistic perspective for grain price prospects this fall, how should Kansas grain producer-sellers approach the marketing of their 2014 harvested crops, and what factors should they consider in making their planting decisions for 2015 crops? This presentation will focus partly on the current market situation and what we can anticipate for grain market trends through fall-early winter, 2014. But it will also focus on the factors that are most likely to be key determinants for market direction through late winter - early spring 2015, and how Kansas grain producers may be able to manage their marketings in light of them.

GRAIN MARKET OUTLOOKFOR 2014-2015

KSU RISK & PROFIT CONFERENCE

AUGUST 21, 2014

Daniel O’Brien, Extension Ag Economist

FEED GRAIN MARKET “DRIVERS” Forecasts of a large 2014 U.S. corn crop &

growing end stocks has caused Kansas cash & forward bids to fall $4.00 (low since 2010)

Unknowns: Final 2014 U.S. feedgrain acreage, freeze risk, actual yields & production

World Corn/Coarse Grain Supplies & Ending Stocks in “new crop” 2014/15

Q?: With our focus on large supplies, is 2014/15 Corn Use being underestimated?

CORN FUTURES - FEEDGRAIN CASH$GARDEN CITY, KS CASH & FORWARD CONTRACT 8/20/2014

$4.62

$3.60 $3.68 $3.81 $3.89 $3.95 $4.02$3.98

$3.75

$3.38 $3.27$3.47 $2.76

$2.00

$3.00

$4.00

$5.00

$6.00

Futures $s Corn Cash/FC Milo Cash/FC Cn-Ins 75%

$0.0433 /m$0.0413 /m

$0.0325 /m

$0.0267 /m

CBOT CORN FUTURESMONTHLY CONTINUOUS CHART: JUNE 2005 – JULY 2014 + 8/20/2014 CLOSE

$3.00

$4.00

$5.00

SEPT 2014Close = $3.59 ¾

8/20/2014

WHEAT MARKET “DRIVERS”Growing “new crop” 2014/15 World wheat

supplies & end stocks have caused cash prices to fall to $6.00 /bu (equal to lows since July 2010)

Unknowns: Final U.S. 2014 spring wheat crop, Key foreign crops, & world wheat feeding decline

Earlier forecasts of an “El Nino”-related drought for SE Asia-Australia seem not to be occurring (at least not as strong)

Question: Will Black Sea region geopolitical conflicts impact wheat export markets?

KS WHEAT FUTURES & CASH$HUTCHINSON, KS CASH & FORWARD CONTRACT $’S, 8/20/2014

$6.38 $6.19 $6.31 $6.40 $6.44 $6.34$5.98 $5.89

$5.90

$4.79 $4.764

5

6

7

8

9

Futures $s Wheat Cash/FC Wheat-Ins 75%

$0.04 /m $0.0292 /m$0.0213 /m

KCBT WHEAT FUTURESMONTHLY CONTINUOUS CHART: JUNE 2005 – JULY 2014 + 8/20/2014 CLOSE

≈$4.60

≈$6.00

SEPT 2014Close = $6.18 ¾

on 8/20/2014

SOYBEAN MARKET “DRIVERS”Tight “old crop” 2013/14 U.S. soybean S-D &

“strong” Chinese/World imports have kept cash prices ≥ $11.50 /bu (but lowest since January 2012)

Unknowns: Final U.S. 2014 planted acreage, freeze risk, actual yields & production

Forecasts of higher U.S. & South Americansoybean crops in “new crop” 2014/15 have caused harvest bids to fall ≤ $10.00 /bu

Question: How will South American soybean prospects develop in early 2015?

SOYBEAN FUTURES & CASH$LAWRENCE, KS CASH & FC PRICES, 8/20/2014

$11.36 $11.20$10.38 $10.46 $10.53 $10.59 $10.63

$12.28

$10.08

$8.52$7.79

$6.00

$9.00

$12.00

$15.00

Futures $s Soybean Cash/FC Soybean-Ins 75%

$0.0387 /m $0.0338 /m$0.03 /m

$0.0212 /m

CBOT SOYBEAN FUTURESWEEKLY CONTINUOUS CHART: JUNE 2005 – JULY 2014 + 8/20/2014 CLOSE

$12.50

$11.00

≈ $8.00

SEPT 2014Close = $11.19 ¾

on 8/20/2014

RMA PRICE DISCOVERY PERIODSFOR 2015 CROPS – PROJECTED PRICESA. 2015 Kansas HRW Wheat JULY 2015 Kansas Wheat Futures (Currently ≈ $6.38 /bu) Discovery Period: 8/15/2014– 9/15/2014 At 75% APH: Price coverage = 75% x $6.38 /bu ≈ $4.79

B. 2015 Kansas Corn DEC 2015 CBOT Corn Futures (Currently ≈ $4.08½ /bu) Discovery Period: 2/1/2015 – 2/28/2015 At 75% APH: Price coverage = 75% x $4.08½ /bu ≈ $3.07

C. 2015 Kansas Soybeans NOV 2015 CBOT Soybean Futures (Currently ≈ $10.38 /bu) Discovery Period: 2/1/2015 – 2/28/2015 At 75% APH: Price coverage = 75% x $10.38 /bu ≈ $7.79

CORN MARKET

2014 U.S. CORN SUPPLIESPlanted Area (Prevented planting?)

91.6 million acres vs 90.6 ma adjusted

Harvested Area 83.8 million ac. vs 82.8 ma adjusted

Yield (late crop development issues?) KSU: 164 (low) – 167.4 (likely) – 170 (high) USDAAugust = 167.4 bu/ac

Production (record?) KSU: 13.6 – 14.1 billion bu (USDAAug = 14.032 bb)

Total Supply (record?) KSU: 14.8 – 15.3 billion bu (USDAAug = 15.243 bb)

U.S. CORN ACREAGE

93.586.0 86.4 88.2 91.9 97.2 95.4 91.6 90.6 89.1

86.5 78.6 79.5 81.4 84.0 87.4 87.7 83.83982.92481.552

0

30

60

90

120

150

180

Mill

ion

Acr

es

Planted Acres Harvested Acres

USDAAugust in 2014 = 91.641 ma plantedKSUA (1.0 ma prevent planting) = 90.641 ma plantedKSUB (2.5 ma prevent planting) = 89.141 ma planted

U.S. CORN YIELDSUSDA 2014 = 167.4 BU/AC

164.7

153 147123

158.8

167.4 164 167.4 170

0

50

100

150

200

250

300

Yiel

d: B

u / A

cre

Yields KSU14 Low KSU14 Likely KSU14 High

2014 U.S. Yield Projections

U.S. CORN TOTAL SUPPLIES

1.09 0.962.11 1.97

1.304 1.624 1.673 1.7081.128 0.99 0.82 1.18

10.1 11.811.1 10.5 13.0 12.1 13.1 12.4 12.4

10.813.9 14.0

0.160

0

2

4

6

8

10

12

14

16

Bill

ion

Bus

hels

Beginning Stocks Production Imports

U.S. CORN USE IN 2014/15 (???) Ethanol – 5.075 bln bu. (1%)

“Blend wall” / RFS / Exports?

Other FSI – 1.385 bb (nc)

Exports – 1.725 bb (10%) vs 1.920 bb in MY 2013/14

Feed+Residual – 5.250 bb (1%) vs 5.175 bb in MY 2013/14

Total Use – 13.435 bb (1%) vs 13.600 bb in MY 2013/14 (record)

U.S. CORN USE - WITH EST. DDGS #S

02468

1012141618

Bill

ion

buC

orn

Equ

ival

ents

Livestock Feed Use

DDGS Feed

Other FSI

Ethanol

Exports

End StocksDDGS Exports

U.S. CORN SUPPLY-DEMANDUSDA WASDE REPORT: AUGUST 12, 2014

2012/13 2013/14 2014/15 Planted Ac. (mln.) 97.2 95.4 91.6 Harvested Ac (mln.) 87.4 87.7 83.8 Yield (bu./ac.) 123.4 158.8 167.4 Beginning Stocks 989 821 1,181 Imports 160 35 30 Production 10,780 13,925 15,243

Total Supplies 11,929 14,781 15,243

Ethanol 4,648 4,900 5,075 Other FSI 1,405 1,385 1,385 Exports 730 1,920 1,725 Feed & Residual 4,325 5,120 5,250

Total Use 11,108 13,600 13,435

End Stocks (%S/U) (7.4%) 821 (8.7%) 1,181 (13.5%) 1,808

U.S. Avg. Farm $ $6.89 $4.40-$4.50 $3.55-$4.25

U.S. CORN END STOCKS & %S/U

8211,181

1,808

25.0

5.0

20.0

9.0

20.0

13.9 13.1

7.4

8.7

13.5

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0

4

8

12

16

20

24

28

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mill

ion

Bus

hels

% E

nd S

tock

s-to

-Use

Marketing Year

KSU-U.S. CORN S-D FOR MY 2013/14 Likely Yield

1.0 mln ac. Likely Yield 2.5 mln ac.

High Yield 1.0 mln ac.

Planted Ac. (mln.) 90.6 97.4 90.6Harvested Ac (mln.) 82.9 81.6 82.9Yield (bu./ac.) 167.4 167.4 170Beginning Stocks 1,181 1,181 1,181Imports 30 30 30Production 13,881 13,652 14,098

Total Supplies 15,092 14,863 15,309

Ethanol 5,200 5,200 5,200Other Food, Seed, 1,400 1,400 1,400Exports 1,800 1,800 1,800Feed & Residual 5,300 5,300 5,300

Total Use 13,700 13,700 13,700End Stocks (%S/U) (10.1%) 1,392 (8.4%) 1,163 (11.7%) 1,609

U.S. Avg. Farm $ ≈ $4.25 ≈ $4.50 ≈ $4.00

U.S. SORGHUM SUPPLY-DEMANDUSDA WASDE REPORT: AUGUST 12, 2014

2012/13 2013/14 2014/15 Planted Ac. (mln.) 6.2 8.1 7.5 Harvested Ac (mln.) 5.0 6.5 6.4 Yield (bu./ac.) 49.8 59.6 67.1 Beginning Stocks 23 15 25 Imports 10 0 0 Production 247 389 429

Total Supplies 279 404 455

Food, Seed, Indust. 95 79 120 Exports 76 ***205 ***190 Feed & Residual 93 75 110

Total Use 264 379 420

End Stocks (%S/U) (5.7%) 15 (6.6%) 15 (8.3%) 35

U.S. Avg. Farm $ $6.33 $4.25 $3.30-$4.00

U.S. CORN %STOCKS/USE VS PRICE$

11.6 12.8 13.9 13.18.6 7.9 7.4 8.7 13.5 10.1

$3.04

$4.20 $4.06

$3.55

$5.18

$6.22$6.89

$4.45$3.90

KSU$4.25

$0

$2

$4

$6

$8

0

20

40

60

80

100

U.S

. Cor

n P

rice

$ / b

u

% E

nd S

tock

s-to

-Use

Marketing Year

U.S. CORN $ VS % STOCKS-TO-USEMY 1973/74 - 2014/15 AUGUST 12, 2014 USDA WASDE

2007/082008/09

2009/10

2010/11

$1

$2

$3

$4

$5

$6

$7

$8

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

U.S

. Cor

n P

rice

U.S. Corn % Ending Stocks-to-Use

2012/13: 7.39% S/U, $6.89 /bu

2013/14: 8.68% S/U, $4.45 /bu2011/12

2014/15: $3.90 @ 13.45% S/U1995/96

WORLD COARSE GRAIN S-D

1,080 1,056

127 165 198

1,137 1,136

123 169

1,274

1,236

158207

1,2681,253

147

222

0

500

1,000

1,500

Production Usage Trade End Stocks

Mill

ion

Met

ric

Tons

2007/08 2008/09 2009/10

Large World Coarse Grain cropProspects (U.S. & Foreign)

World Coarse Grain Stks/Use• “Old Crop” 2013/14 = 16.8% • “New Crop” 2014/15 = 17.7%**

Highest since MY 2009/10 @ 17.8%

COARSE GRAIN EXPORTERS

2124

6 5

25

4

15

23

54

17

7 5

21

7

23 25

49

20

6 4

20

7

1923

0

10

20

30

40

50

60

Mill

ion

Met

ric

Tons

2012/13 2013/14 2014/15

COARSE GRAIN IMPORTERS

24

18

8

11

8 8

12

6

1

34

28

18

11 1210 10

16

11

1

34

29

19

11 1010 9

11 10

1

34

0

5

10

15

20

25

30

35

Mill

ion

Met

ric

Tons

2012/13 2013/14 2014/15

U.S. CORN $ VS WORLD %STKS/USEMY 1973/74 - 2014/15 AUGUST 12, 2014 USDA WASDE

2007/082008/09

2009/10

2010/11

$1

$2

$3

$4

$5

$6

$7

$8

10 15 20 25 30 35 40 45 50

U.S

. Cor

n P

rice

World Corn % Ending Stocks-to-Use

2012/13: 14.9% S/U & $6.89 /bu

2014/15: 17.7% S/U & $3.90 /bu

2006/07

2013/14: 16.8% S/U & $4.45 /bu

1973/74

13%-15% “Floor”

in World Corn% Stocks/Use

FEEDGRAIN MARKET PROSPECTS

Large 2014 Crops Expected DEC 2014 corn < $4.00 /bu

Final 2014 U.S. FeedgrainAcres, Yields, Production?

Planted Acres in 2015? Corn vs Soybeans vs other crops

2014/15 Market Prospects? A “storage-till-Spring” market –

holding grain & look for opportunities So. American Acres, Weather, & Crop

Prospects will move market till Spring

WHEAT MARKET

2014 U.S. WHEAT SUPPLIES

Planted Area - 56.5 mln ac.

Harvested Area – 46.2 mln ac. 81.9% Harvested-to-Planted Acres

Yield – 43.9 bu/ac vs. 47.2 bu/ac in 2013 (record high)

Production – 2.030 bln bu. vs. 2.130 bln bu. in 2014

Total Supply – 2.779 bln bu. vs. 3.016 bln bu. in 2014

U.S. WHEAT SEEDED ACREAGE

51.4 48.0 46.4 43.3 43.3 40.9 41.8 45.4 43.3 40.4 40.6 45.0 46.3 43.337.3 40.6 41.2 43.1 42.3 44.4

20.019.1

15.615.3 15.3 15.6 15.6

13.8 13.814.0 14.9

13.3 14.213.3

13.712.4 12.3 11.6 12.7

0

30

60

90

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mill

ion

Acr

es

Winter Wheat (HRW, SRW, White) Other Spring Wheat (HRS, SW) Durum

Question: Will U.S. wheat acreage or in 2015? Up 5%? Up More?

?

U.S. WHEAT ACREAGE

63.2 59.253.6 54.4 55.7 56.2 56.5

55.7 49.9 47.6 45.7 48.9 45.2 46.2

84.8%

81.6%76.0%

85.4%83.8%87.6%

81.6%

84.4%88.1%84.3%

88.9%84.0%

87.9%

80.4% 81.9%

0%

20%

40%

60%

80%

100%

0

25

50

75

100

125

% H

arve

sted

/Pla

nted

Mill

ion

Acr

es

Planted Ac Harvested Ac % Harvested of Planted

2014 Planted: 318,000 acres – Harvested: 1,083,000 acres2014 Prevented Planted (FSA): 1,360,2190 acres

U.S. WHEAT YIELDSU.S. 2014 = 43.9 BU/AC

43.2

35.0

44.2

38.6

40.2

44.9 46.346.3

47.2

43.9

0

10

20

30

40

50

60

Yiel

d: B

u / A

cre

Record High

U.S. WHEAT TOTAL SUPPLIES

0.46 0.310.66

0.98 0.86 0.743 0.718 0.590

2.05 2.502.22

2.212.00 2.266 2.130 2.030

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Bill

ion

Bus

hels

Beginning Stocks Production Imports

2014/15 U.S. WHEAT USE

Food Use – 960 Million bu. (1%) Population & milling quality driven

Exports – 925 mln bu. (21%) Strong World competition

Feed+Residual – 155 mb (31%) Down sharply vs last 2 years

Total Use – 2.116 Billion bu. (13%) 300+ mln bu./year from last 2 yrs

U.S. WHEAT USE SINCE MY 2004/05

910 917 938 948 927 919 926 941 945 950 960

1,0661,003 9081,263

1,015 8791,289

1,051 1,012 1,176 925

181 157 117

16255

150

132162 384 223

155

0

500

1,000

1,500

2,000

2,500

3,000

Mill

ion

Bus

hels

Marketing Years

Feed +ResidualSeed

Exports

Food

U.S. WHEAT USE & END STOCKS

2,3152,017

2,418 2,231 2,414 2,426 2,116

306976 862 743 718 590 663

13.2%

48.4%

35.6% 33.3%29.7%

24.3%

31.3%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

% E

ndin

g St

ocks

-to-

Use

Mill

ion

Bus

hels

Marketing YearsTotal Use End Stocks % End Stocks/Use

U.S. WHEAT END STOCKS & %S/U

376

950

306

976

718

590

66016

40

23

27

13

29

48

30

24

32

0

500

1,000

1,500

2,000

2,500

05

101520253035404550

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mill

ion

Bus

hels

% E

nd S

tock

s-to

-Use

Marketing Year

U.S. WHEAT SUPPLY-DEMAND AUG 12, 2014

2012/13 2013/14 2014/15 Planted Acres (mln.) 55.7 56.2 56.5 Harvested Ac. (mln.) 48.9 45.2 46.2 Yield (bu./ac.) 46.3 47.2 43.9 Beginning Stocks 743 718 590 Production 2,266 2,130 2,030 Imports 123 169 160

Total Supplies 3,131 3,016 2,779 Food & Seed 1,018 1,027 1,036 Exports 1,012 1,176 925 Feed & Residual 384 223 155

Total Use 2,414 2,426 2,116

End Stocks (%S/U) (29.7%) 718 (24.3%) 590 (31.3%) 663 U.S. Ave. Farm $ $7.77 $6.87 $5.80-$6.80

KSU-U.S. WHEAT S-D FOR MY 2013/14 USDA

August 2014 Lower

Exports Higher

Exports Planted Ac. (mln.) 56.5 56.5 56.5 Harvested Ac (mln.) 46.2 46.2 46.2 Yield (bu./ac.) 43.9 43.9 43.9 Beginning Stocks 590 590 590 Production 2,030 2,030 2,030 Imports 160 160 160

Total Supplies 2,779 2,779 2,779

Food & Seed Use 1,036 1,036 1,036 Exports**(Wildcard!) 925 ( 75*) 850 (125*) 1,150 Feed & Residual 155 155 155

Total Use 2,116 2,041 2,241 End Stocks (%S/U) (31.3%) 663 (36.2%) 738 (24.0%) 538 U.S. Avg. Farm $ $6.30 ≈$5.80 ≈$6.90

U.S. WHEAT % STX/USE VS PRICE$

2213

29

4836 33 30 24.3 31.3

$4.26

$6.48 $6.78

$4.87$5.70

$7.24 $7.77

$6.87 $6.30

$0

$2

$4

$6

$8

$10

0

25

50

75

100

125

150

U.S

. Pri

ce$

/ bu

% E

nd S

tock

s-to

-Use

Marketing Year

U.S. WHEAT $ VS U.S. STOCKS-TO-USEMY 1973/74 – “NEW CROP” MY 2014/15

2007/082008/09

2009/10

2010/11

USDA 2013/14$6.87 @

24.3% S/U

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100

U.S

. Whe

at P

rice

U.S. Wheat % Ending Stocks-to-Use

2011/12

2012/13

USDA 2014/15$6.30 @

31.3% S/U

WORLD WHEAT SUPPLY-DEMAND

613 615

117 129

687651

137

202

696 688

158197

165184

716 705

152

193

0

300

600

900

Production Usage Trade End Stocks

Mill

ion

Met

ric

Tons

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

“New Crop” MY 2014/15 End Stocks = 193 mmtEnd Stks/Use = 27.4% (3 yr hi)

Vs. “Benchmark” MY 2007/08 End Stocks = 129 mmtEnd Stks/Use = 21.0%

WORLD WHEAT SUPPLY-DEMAND

477 477 489 482 497 501 508 512 516 530 538 542 550 565 570

109 110 114 100 108 115 111 102 121 121 116 146 137 132 135207 204 170 136 156 154 134 129

169 202 198 197 176 184 193

35% 35%

28%23%

26% 25%22% 21%

27%31% 30% 29%

26% 26% 27%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

200

400

600

800

1,000

1,200

1,400

% E

ndin

g St

ocks

-to-

Use

Mill

ion

met

ric

tons

(mm

t)

FSI Use Feed & Resid End Stocks %Stx/Use

WORLD WHEAT FEED USE

111 102 121 121 116146 137 132 135

17.9 16.619.1 18.6 17.7

21.3 19.9 19.0 19.1

21.7 21.0

26.6

31.0 30.328.7

25.6 26.3 27.4

0

5

10

15

20

25

30

35

0

100

200

300

400

500

600

700

% o

f Tot

al U

se

Feed

Use

(mm

t)

Feed & Resid. %Feed/Total Use World %Stocks/Use

Last 3 years (2011-2013) wheat feeding average = 137.6 mmt (19.8% total use)Previous 3 years (2008-2010) average = 119.3 mmt (18.4% total use)

WORLD WHEAT EXPORTS

28

23

19 19

4

11

6 7

19

32 32

23

20

2

19

8 10

2225 25

2119

7

23

69

24

0

15

30M

illio

n M

etri

c To

ns

MY 2012/13 MY 2013/14 MY 2014/15

WORLD WHEAT IMPORTS

22 2116

7 5 73

63

2521

16

74

8 7

69

23 2017

7 6 72

69

0

15

30

45

60

75

NorthAfrica

MiddleEast

SE Asia Brazil EU-28 FSU-12 China Others

Mill

ion

Met

ric

Tons

MY 2012/13 MY 2013/14 MY 2014/15

U.S. WHEAT $ VS WORLD %STKS/USEMY 1973/74 – “NEW CROP” 2014/15

2007/082008/09

2009/10

2010/11

“New Crop” MY 2014/15

$6.30 @ 27.4% S/U

$2

$3

$4

$5

$6

$7

$8

$9

$10

20 22 24 26 28 30 32 34 36 38 40

U.S

. Whe

at P

rice

World Wheat % Ending Stocks-to-Use

“Old Crop” MY 2013/14$6.87 @ 26.3% S/U

2011/12

MY 2012/13$7.77 @ 25.6% S/U

WHEAT MARKET PROSPECTS

U.S. Winter Wheat Ac. in 2015? Wheat revenue & insurance coverage? Prospects for successful crops in the U.S.

Central & Southern Plains?

Risk to World Wheat Exporters’ Crops in 2014/15 “Unanticipated” problems that may occur

in U.S., Australia, Argentina, EU, Black Sea Region, Canada, etc.

Risk of Geopolitical Conflicts Black Sea, Middle East….

SOYBEAN MARKETS

2014 U.S. SOYBEAN SUPPLIESPlanted Area – 84.8 mln ac.

Up from 76.5 mln ac in 2013

Harvested Area – 84.1 mln ac. Prevented plantings = 1.0-2.5 mln ac

Yield – 45.4 bu/ac KSU: 42 (low) – 45.4 (likely) – 46 bu/ac (high)

Production – 3.816 bln bu. (record!) Questions till harvest, acres likely

Total Supply – 3.971 bln bu. (record!) Up from 3.508 bln bu in MY 2013/14

U.S. SOYBEAN ACREAGE

75.564.7

75.7 77.5 77.4 75.0 77.2 76.584.8 83.8 82.3

74.664.1

74.7 76.4 76.6 73.8 76.2 75.9 84.1 83.1 81.6

98.8% 99.1% 98.6% 98.6% 99.0% 98.3% 98.7% 99.1% 99.1% 99.1% 99.1%

0%

20%

40%

60%

80%

100%

0

25

50

75

100

125

150

% H

vst/P

lntd

Ac

Mill

ion

Acr

es

Planted Acres Harvested Acres %Harvested/Planted

KSU

U.S. SOYBEAN YIELDSUSDA 2014: 45.4 BU/AC

3834

42 43 43 42 4044 44 42 40 43 45.4 42 45.4 46

0

20

40

60

80

Yiel

d: B

u / A

cre

Yield KSU14 Low KSU14 Likely KSU14 High

2014 KSUUSDAAugust

U.S. SOYBEAN TOTAL SUPPLIES

0.57 0.210.14 0.15 0.22 0.17 0.141 0.140

2.682.97 3.36 3.33 3.09 3.03 3.289 3.816

0.010 0.0130.015 0.014 0.016 0.041

0.0800.015

0.0

1.0

2.0

3.0

4.0

5.0

Bill

ion

Bus

hels

Beginning Stocks Production Imports

U.S. SOYBEAN USE IN MY 2014/15 Crush – 1.755 bln bu. (2%)

Soybean Oil & Meal demand

Exports – 1.675 bln bu. (2%) Competition with South America

Seed & Residual – 111 mln bu.

Total Use – 3.541 bln bu. (5%) Total Use with Supply & $s

U.S. SOYBEAN USE & END STOCKS

1,808 1,8031,662

1,7521,648 1,703 1,689 1,725 1,755

1,116 1,159 1,2791,499 1,501 1,365 1,317

1,640 1,675

574205 138 151 215 169 141 140 430

0

500

1,000

1,500

2,000

Mill

ion

Bus

hels

Marketing Years

Seed+Residual Crush Exports End Stocks

U.S. SOYBEAN SUPPLY-DEMANDUSDA WASDE REPORT – AUGUST 12, 2014

2012/13 2013/14 2014/15 Planted Acres (mln.) 77.2 76.5 84.8 Harvested Acres ( l )

76.2 75.9 84.1 Yield (bu./ac.) 39.8 43.3 45.4

Beginning Stocks 169 141 140 Imports 41 80 15

Production 3,034 3,289 3,816

Total Supplies 3,243 3,509 3,971

Crushings 1,689 1,725 1,755 Exports 1,317 1,640 1,675 Seed & Residual 97 5 111

Total Use 3,103 3,369 3,541

Ending Stocks (4.5%) 141 (4.2%) 140 (12.1%) 430 U.S. Avg. Farm $ $14.40 $13.00 $9.35-$11.35

U.S. SOYBEAN END STOCKS, %S/U

335132

348

112

574

138 215 140

430

14.0

5.4

13.4

4.5

18.6

4.5

6.6

4.2

12.1

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

02468

101214161820

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mill

ion

Bus

hels

% E

nd S

tock

s-to

-Use

Marketing Year

KSU: U.S. SOYBEAN S/D: MY 2014/15 KSU: 1 ma

Planted Ac KSU: 1 ma Lower Yield

KSU: 2.5 ma Planted Ac

Planted Acres (mln.) 83.8 83.8 82.3 Harvested Ac. (mln.) 83.1 83.1 81.6 Yield (bu./ac.) 45.4 43.0 45.4

Beginning Stocks 140 140 140 Imports 15 15 15

Production 3,771 3,574 3,704

Total Supplies 3,926 3,729 3,859

Crushings 1,755 1,755 1,755 Exports *Wildcard* 1,675 1,675 1,675 Seed & Residual 111 111 111

Total Use 3,541 3,541 3,541

Ending Stocks (10.9%) 385 (5.3%) 188 (9.0%) 318 U.S. Avg. Farm $ $10.75 $12.55 $11.30

U.S. SOYBEAN %STX/USE VS PRICE$

18.76.7 4.5 4.5 6.6 5.4 4.5 4.2

12.1 10.9 9.0

$6.43

$10.10 $9.97 $9.59

$11.30$12.50

$14.40$13.00

$10.35$10.75

$11.30

$0

$3

$6

$9

$12

$15

0

12

24

36

48

60

U.S

. Pri

ce$

/ bu

% E

nd S

tock

s-to

-Use

Marketing Year

U.S. SOYBEAN $ VS STX-TO-USEMY 1973/74 – 2014/15 AUGUST 12, 2014 USDA REPORTS

2007/082008/09

2009/10

MY 2012/13$14.40 @4.5% S/U

MY 2014/15$10.35 @

12.1% S/U

$3

$5

$7

$9

$11

$13

$15

$17

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

U.S

. Soy

bean

Pri

ce

U.S. Soybean % Ending Stocks-to-Use

2010/11

2003/04

2011/12

MY 2013/14$13.00 @ 4.2% S/U

WORLD SOYBEAN SUPPLY-DEMAND

212 221

77

43

284270

113

67

305283

11386

0

100

200

300

Production Usage Exports End Stocks

Mill

ion

Met

ric

Tons

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

World Soybean Stx/Usein MY 2014/15 = 30.2%

Compared to:24.9% in MY 2013/1421.9% in MY 2012/13

19.5% in MY 2008/09**

SOYBEAN EXPORTER SALES

36

42

86

10

45 46

94

9

46 45

94

10

0

30

60

U.S. Brazil Argentina Paraguay ROW

Mill

ion

Met

ric

Tons

2012/13 2013/14 2014/15

SOYBEAN IMPORT PURCHASES

50

13

3 4

17

59

13

3 4

16

73

133 4

18

0

20

40

60

80

China EU-28 Japan Mexico ROW

Mill

ion

Met

ric

Tons

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

U.S. SOYBEAN$ VS WORLD %STX/USEMY 1973/74 – 2014/15 AUGUST 12, 2014

2007/082008/09

2009/10

2012/13: $14.40 @ 21.9% S/U

2013/14: $13.00

@ 24.9% S/U

$3

$5

$7

$9

$11

$13

$15

$17

5 10 15 20 25 30 35 40 45

U.S

. Soy

bean

Pri

ce

World Soybean % Ending Stocks-to-Use

2010/11

1976/77

2011/12 2014/15$10.35

@ 30.2% S/U

SOYBEAN MARKET PROSPECTS

South America Prospects 2015 crop acre choices in Fall ‘14 Prospects for large crop in 2015

driving prices in Winter-Spring

U.S. Soybean Acres in 2015? Breakeven: 2.3 Soy$/Corn$ Ratio

Soy Market Prospects-2014/15 A Large Supply year Low $’s China demand continuing (?!?!)

QUESTIONS?DANIEL O’BRIEN – EXTENSION AGRICULTURAL ECONOMIST

KANSAS STATE UNIVERSITY

DOBRIEN@KSU.EDU

KSUGRAINS ON TWITTER & FACEBOOK

WWW.AGMANAGER.INFO

75 76

77 78

79 80