Grain Outlook For 2004-05Grain Outlook For 2004-05Grain Outlook For 2004-05Grain Outlook For 2004-05

Dr. Robert WisnerDr. Robert WisnerIowa State UniversityIowa State University

Dr. Robert WisnerDr. Robert WisnerIowa State UniversityIowa State University

6/03/2004

Trade-weighted U.S. $ June 04

Up4.3% in three months

Feed Grain Outlook, 2003-04

• Near-Record Low world grain stocks • Foreign weather--bad last 2 years• China: reduced role as corn

exporter?• ‘04 plantings—slight corn increase,

less sorghum• Strong corn domestic & export

demand—longer term implications• Old & new crop prices highly volatile

Beans—Old crop more than new

4/02/04

3/10/04

10 mm. = 0.38 inches26 mm. = 1 inch

10 mm. = 0.38 inches26 mm. = 1 inch

Cumulative Export Sales, 2003-04 vs. Yr. Ago

5/13/04 % Chg. Proj. % Chg.•Corn +30 +29• Soybean meal -28 -29• Soybean oil -70 -62• Soybeans -14 -14•All Wheat +40 +37•Grain Sorghum +6 +13• New-crop corn sales 26 m.bu. vs. 69 mil. In 1995 & 243 mi. bu. in 1996

China Corn, USDA Export Projections vs. actual

Projections too low, except for 1998

October March

• 2002-03 38% 21% below actual• 2001-02 55% 65% below actual• 2000-01 45% 18% below actual• 1999-00 50% 20% below actual• 1998-99 17% 17% above actual• 1997-98 58% 17% below actual• 1996-97 87% 74% below actual

Figure 1. China Gross Corn Imports & USDA Projections

0

5

10

15

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

Mil

. M

etr

ic T

on

s

1997 1998 1999 2000 Actual

1 metric ton = 39.4 bushels

Inadequate data make China a hardMarket to project.

China corn yield & area harvested

0

10

20

30

40

50

60

70

80

90

1961 1966 1971 1976 1981 1986 1991 1996 2001

Bu.

Per

Acr

e

20

40

60

80

100

120

Mil. A

cres

Yield

Area Harvested

(Trend yield & 2003 Harv. A. = 135.8 Mil. Tons)

Figure 4.

Source: USDA, PSD

China corn production & area harvested

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

1961 1966 1971 1976 1981 1986 1991 1996 2001

Mil.

Bu.

20.0

40.0

60.0

80.0

100.0

120.0

Mil.

Acr

es

Corn Production

Area Harvested

Trend yield & 2003 acres would produce 820 mil. Bu. more than USDA projection

Corn Percent Good/Excellent 6/1/04

IA 65%ILL 79Ind 82Mn 57Ne 64Wi 57Mi 47 Ohio 75Mo 75

SD 72%ND 63KS 46Col 79NC 68 Tx 76 U.S. 68 Yr/Ago 68

400 mm = 15.4 inches; 300mm = 11.5 inches

U.S. CORN PLANTING PROGRESS, SELECTED YEARS AND NORMAL

0

20

40

60

80

100

120

APRIL2

APRIL3

APRIL4

MAY 1 MAY 2 MAY 3 MAY 4 JUNE 1 JUNE 2

Weeks

Per

cen

t P

lan

ted

1999

2002

2001

1999-03 Normal

2004

2000

U.S Yield % dev iat. from trend1983 -27.41984 +1.4 1993 -21.41995 -11.001996 -0.61999 +0.2 2000 +1.02001 +0.62002 -6.72003 +0.82004 trend: 143 bu.

For discussion of Soybean yield problems, see: http://www.biotech-info.net/first_generation_GMC.pdf

Figure 1. Total Planted Acreage of Major U.S. Grains, Cotton, and Soybeans, 1997-2004

210

215

220

225

230

235

240

245

250

255

260

1997 1998 1999 2000 2001 2002 2003 2004

Mil.

Acr

es

Planted Acreage, Major U.S. Grains, Soybeans, & Cotton, 1997-2004

0

50

100

150

200

250

1997

1998

1999

2000

2001

2002

2003

wisner

USDA

Inte

ntions

Mil.

Acr

es

Cotton

Oats & Barley

Sorghum

Wheat

Soybeans

Corn

On Average, farmers since 1996, planted 0.3% less corn than intended.

Assumes 60% of DDGS replaces corn, 40% replaces SBM

Questions for Corn Use• Tight supplies--which users can out-bid

others? • What happens with occasional low U.S. yields? -- 1980, 1983, 1988, 1993, 1995, 2002 • U.S. production shift, beans to corn? • Bring back part of 32 million CRP acres?• Impact on land values & Ag structure?• Impact on export firms?• More investments such as Cargill’s Caribbean ethanol dehydration plant?

How Much Cut in May-Aug. SMB Use in Pork vs. Y/A?

• Poultry—record profits: 5-6% cut?

• Other non-pork uses: 16-18% cut?

• Pork 12-14% cut?• Stocks beyond processors?• Imports above USDA project.?

For discussion of Soybean yield problems, see:

http://www.biotech-info.net/first_generation_GMC.pdf

•Very Low world grain reserve•Global grain exports may increase substantially -- if yields recover from 02 & 03 •China: a major uncertainty•Old crop corn export sales strong to Aug.•Ethanol expansion to continue strong, limiting future export growth potential•Charts: $3.26, $3.35, $3.70 if weather problem•Corn, wheat, protein meal prices explosive if major weather problems•Significant downside risk in summer, fall•Nov. SB gaps: $6.67, $6.57, $6.24

Key Points

http://www.econ.iastate.edu/faculty/wisner/