wheat outlook presentation · exports domestic consumption ... ukraine 51.9 59.8 7.9 united states...
TRANSCRIPT
10/27/2017
1
2017/18 Wheat Outlook 2017 Ag Econ In‐service Training
Dr. S. Aaron Smith, Assistant Professor,
Department of Agricultural and Resource Economics,
University of Tennessee
Overview
• Domestic (U.S.) Supply and Demand• Tennessee
• Global Supply and Demand
• Price, Commodity Program Payments, and Crop Insurance
• 2018 Price Outlook
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2
U.S. SupplyReduced Acreage
Wheat Production by Type, US
Source: National Association of Wheat Growers
10/27/2017
3
10/27/2017
4
0
10
20
30
40
50
60
70
80
90
100
1919
1922
1925
1928
1931
1934
1937
1940
1943
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Acres (millions)
U.S. Planted and Harvested Wheat Acres, 1919‐2017
Harvested Planted
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5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1919
1922
1925
1928
1931
1934
1937
1940
1943
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
U.S. Wheat Harvested‐to‐Planted Ratio, 1919‐2017
Avg 86.9%
StDev 5.5%
Max 95.4%
Min 66.4%
2016 87.5%
2017 81.7%
4144
48444546444545
4750
5856
4644
46
3939
475052
585861
52565757
474444
37
4444434339
42444543
5449
423838
4244
52565856
4852
58
66666263
5854
4949
55575151524949
514846
434341424543
4041454743
374141
434240
3633
15
16
16
17181718
2117
2020
2019
1415
14
1215
17
1717
1717
19
16
201920
14
1314
10
11121110
8
910
109
11
9
8
913
1013
15
14
1816
14
16
17
1716
1213
15
15
1413
1817
161918
1817
20
19
16
15151616
1414
1415
1314
13
14
12121213
13
12
11
5
5
7
6 5 4 4
3
2
2
4
34
3 33
22
2
22
3 3
4
3
3 2 2
2
12
2
1 12 2
2
23
2
2
3
4
3
2
33
3
4
5
5
3
4
4
6
64
33
3
3
3 3
4 4
33 2
33
4
3
4
4 43 3
33
3 22
3
3
31 2
1 12
2
2
0
10
20
30
40
50
60
70
80
90
100
1926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Acres Planted (millions)
U.S. Wheat Acres Planted, 1926‐2017
WINTER SPRING, (EXCL DURUM) DURUM
U.S. wheat acres planted are at the lowest point in the
data set.
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Winter Yield = 0.4234x + 10.651R² = 0.94
Spring Yield = 0.3909x + 7.5883R² = 0.89
Durum Yield = 0.3548x + 7.7649R² = 0.78
0
10
20
30
40
50
601926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Yield (bu/acre)
U.S. Wheat Yields, 1926‐2017
Winter Spring Durum Linear (Winter) Linear (Spring) Linear (Durum)
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Production (Billion Bushels)
U.S. Wheat Production, 2006‐2017
OTHER STATES OKLAHOMA TEXAS KENTUCKY NORTH CAROLINA TENNESSEE VIRGINIA
ALABAMA ARKANSAS SOUTH CAROLINA GEORGIA MISSISSIPPI LOUISIANA FLORIDA
10/27/2017
8
456
306
657
976
863
743 718
590
752
976
1,181
960
0
200
400
600
800
1000
1200
1400
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Millions of Bushels
U.S. Marketing Year (June1 to May 31) Ending Stocks, 2006‐2017
TennesseeAcres, Yield, and Production
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9
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1980198219841986198819901992199419961998200020022004200620082010201220142016
Harvested
‐to‐Planted Ratio
Acres
Tennessee Wheat Acres Planted and Harvested, 1980‐2017
Planted Harvested H/P
Dyer
Polk
Carroll
Marion
Humphreys
Henderson
Montgomery
Lake
ChesterMeigs
AndersonJefferson
LoudonCannon
Unicoi
CheathamWashington
Pickett Hancock
Houston
Van Buren
SequatchieMoore
Hamblen
Trousdale
5,000 to 15,000
15,000 to 25,000
Acres Planted
0 to 5,000
25,000+
NA
Wheat Acres Planted In Tennessee, 2017 (FSA Certified)
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10
Polk
Carroll
Marion
Humphreys
Henderson
Montgomery
Lake
ChesterMeigs
AndersonJefferson
LoudonCannon
Unicoi
CheathamWashington
Pickett Hancock
Houston
Van Buren
SequatchieMoore
Hamblen
Trousdale
Weakley (3)22,203 acres
Robertson (2)38,183 acres
Dyer (5)18,399 acres
Gibson (1)45,299 acres
Haywood (4)20,855 acres
Tennessee Top 5 Planted Acres of Wheat, 2017 (FSA Certified)
Yield = 0.9365x + 31.238R² = 0.71
0
10
20
30
40
50
60
70
80
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Yield (bu/acre)
Tennessee Wheat Yield, 1980‐2017
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11
12
11
33
16
8
21
21
41
31
27
24
19
0 5 10 15 20 25 30 35 40 45
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Millions of Bushels
Tennessee Wheat Production, 2006‐2017
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U.S. DemandStable
Wheat Characteristics and Use
• Hard Red Winter• High protein, strong gluten• Breads, buns
• Hard Red Spring• Highest in protein, medium‐strong gluten, blending wheat• Pizza dough, pan breads, yeast breads, buns, croissants
• Soft Red Winter• Medium‐low protein, weak gluten
• Soft White (spring or winter)• Low protein, very weak gluten• Cakes, pastries, crackers, noodles, batters, flat breads
• Hard White• Medium‐high protein, medium‐strong gluten• Asian noodles, steam bread, yeast breads
• Durum• Pasta, macaroni, spaghetti
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0
500
1,000
1,500
2,000
2,500
3,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Millions of Bushels
U.S. Wheat Demand, 2006‐2017
Exports Domestic Consumption
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Days on Hand 81 48 105 177 133 122 109 88 136 182 194 166
0
50
100
150
200
250
U.S. Wheat Days on Hand [Ending Stocks/(Use/365)], 2006‐2017
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US Wheat Balance Sheet October 2017
2013/14 2014/15 2015/16 2016/17 Est.
2017/18 Projected
September
2017/18 Projected October
2017/18 Change From
Previous Month
Change 2016/17 to
2017/18Planted and Harvested Acres & Yield
Planted (Million Acres) 56.2 56.8 55 50.1 45.7 46 0.3 -4.1Harvested (Million Acres) 45.3 46.4 47.3 43.9 38.1 37.6 -0.5 -6.3U.S. Yield (bu/acre 47.1 43.7 43.6 52.7 45.6 46.3 0.7 -6.4
Supply (Million Bushels)Beg. Stocks 718 590 752 976 1,184 1,181 -3 205Production 2,135 2,026 2,062 2,309 1,739 1,741 2 -568Imports 173 151 113 118 150 150 0 32Total Supply 3,026 2,768 2,927 3,402 3,074 3,071 -3 -331
Use & Ending Stocks (Million Bushels)Food 955 958 957 949 950 950 0 1Seed 77 79 67 61 66 66 0 5Feed 228 114 149 157 150 120 -30 -37Exports 1,176 864 778 1,055 975 975 0 -80Total Use 2,436 2,015 1,951 2,222 2,141 2,111 -30 -111U.S. Ending Stocks 590 752 976 1,181 933 960 27 -221Foreign Stocks 6,524 7,243 7,887 8,247 8,736 8,892 156 645
Price and Stocks to Use RatioU.S. Avg. Price ($/Bu) $6.87 $5.99 $4.89 $3.89 $4.30-$4.90 $4.40-$4.80 $0.00 $0.75U.S. Stocks/Use 24.22% 37.32% 50.03% 53.15% 43.58% 45.48% 1.90% -7.67%
Global Supply & DemandTesting the theory you can’t get too much of a good thing
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15
0
100
200
300
400
500
600
700
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Millions of Acres
Wheat Acres Harvested, 1960‐2017
ROW United States
World Wheat Yields by Country (bu/acre)
Country10‐Year Average
Yield2017/18 Yield Difference from 10
Year Average
Argentina 43.6 46.5 2.9Australia 28.9 25.6 ‐3.3Canada 45.2 44.6 ‐0.6China 75.0 79.9 4.8European Union 82.1 84.3 2.2India 44.4 47.9 3.5Pakistan 40.6 43.1 2.6Russia 35.0 45.5 10.5Ukraine 51.9 59.8 7.9United States 45.8 46.2 0.4World 47.5 50.9 3.3
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Wheat Harvest Months
Country/Region Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
US
Canada
Mexico
Argentina
Brazil
EU
China
Middle East
Austrilia
New Zealand
Pakistan
India
Russia
Ukraine
South Africa
Source: Global Agricultural Monitoring ‐ https://cropmonitor.org/
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17
7.6 7.56.2
5.05.7 5.6 4.9 4.7
6.27.5 7.3 7.3
6.5 7.28.0
8.9 9.4 9.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Billions of Bushels
Global Wheat Production, Consumption, and Ending Stocks, 2000‐2017
Ending Stocks Production Domestic Consumption
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
bu/person/year
Global Wheat Consumption per Capita, 1960‐2017
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18
7%
6%
4%
4%
4%
75%
Top 5 Wheat Imports by Country, 2017/18 Marketing Year
Egypt Indonesia Algeria Brazil Bangladesh ROW
18%
16%
15%11%
10%
30%
TOP 5 WHEAT EXPORTERS BY COUNTRY, 2017/18 MARKETING YEAR
Russia European Union United States Canada Australia ROW
10/27/2017
19
129 126
102
85
9491
79 76
97
114111
105
94
103
113
124127
133
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Days on Han
d
Global Days on Hand [Ending Stocks/(Consumption/365)], 2000‐2017
World Wheat Supply and Use (Million Bushels) 2017/18 (October)
Country / RegionBeginning
Stocks Production Imports Domestic FeedDomestic
Total Exports Ending Stocks
World 9,428 27,602 6,575 5,199 27,177 6,615 9,852
US 1,181 1,741 150 120 1,136 975 960
Foreign 8,247 25,861 6,425 5,079 26,041 5,641 8,892
Argentina 12 643 0 4 217 423 16
Australia 247 790 6 129 257 661 124
Canada 252 992 17 110 301 772 188
EU 385 5,550 239 2,076 4,712 1,047 414
Brazil 87 187 268 18 430 37 76
China 4,080 4,777 110 478 4,262 29 4,676
Sel. Mideast 479 716 669 184 1,478 27 359
N. Africa 509 667 1,042 80 1,656 25 536
Pakistan 159 963 1 33 933 22 168
Southeast Asia 228 0 950 283 887 38 253
India 360 3,615 129 184 3,674 18 411
Russia 398 3,013 18 753 1,598 1,194 637
Kazakhstan 146 514 2 77 254 276 133
Ukraine 65 974 1 129 367 606 67
ROW 838 2,461 2,974 541 5,013 464 835
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20
Price, Commodity Program Payments, and Crop InsuranceControl input costs and take advantage of opportunities when the market presents them as the low price environment is likely to continue
$7.77
$4.60
0
1
2
3
4
5
6
7
8
9
1919
1922
1925
1928
1931
1934
1937
1940
1943
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Price ($/bu)
U.S. Average Farm Wheat Price, 1919‐2017
10/27/2017
21
10/27/2017
22
‐0.3
‐0.2
‐0.1
0
0.1
0.2
0.3
0.4
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Price ($/bu)
Average Monthly Deviation from the Marketing Year Average Wheat Price in Memphis, 2006‐2016
Commodity Program Payments (Wheat)
• ARC‐CO Payments• 2014: 7 Counties; payment rate $0‐$46.86 per base acre• 2015: 79 Counties; payment rate $0‐$52.26 per base acre• 2016: 86 Counties; payment rate $0‐$53.60 per base acre• Payments will decline in 2017 and substantially decline in 2018
• PLC Payments (Reference Price = $5.50)• 2014: $0 – $5.99 MYA• 2015: $0.61/bu – $4.89 MYA• 2016: $1.61/bu ‐ $3.89 MYA• 2017: $0.90/bu ‐ $4.60 MYA
****Payments are delayed one year… 2016 payments were received beginning Oct 1, 2017****
10/27/2017
23
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Acres
TennesseeBase, Planted, and Insured Acres
Base Acres FSA Planted ('14‐'16) NASS Planted ('14‐'16) RMA Insured ('14‐'16)
2014: 85,758 acres of wheat planted on generic base2015: 65,302 acres of wheat planted on generic base
RP, 2,053
YP, 336
YP‐CAT, 1,352
RPHPE, 4
SCOR, 10SCOY, 7ARP, 4 AYP, 11
AVERAGE ANNUAL NUMBER OF WHEAT INSURANCE POLICIES PURCHASED BY INSURANCE PLAN FOR CORN IN TENNESSEE,
2014‐2016
RP, 236,027
YP, 15,048
YP‐CAT, 90,757
RPHPE, 46
SCOR, 1,089SCOY, 0ARP, 47
AYP, 82
AVERAGE ANNUAL NUMBER OF ACRES INSURED BY INSURANCE PLAN FOR WHEAT IN TENNESSEE, 2014‐2016
0
100
200
300
400
500
600
700
800
900
1,000
50% 55% 60% 65% 70% 75% 80% 85%
Number of Policies
Buy‐up
Revenue Protection Crop Insurance For Wheat by Buy‐up Level Purchased in Tennessee, 2014‐2016
2014 2015 2016
0
50
100
150
200
250
50% 55% 60% 65% 70% 75% 80% 85%
Number of Policies
Buy‐up
Yield Protection Crop Insurance For Wheat by Buy‐up Level Purchased in Tennessee, 2014‐2016
2014 2015 2016
Tennessee Wheat – Crop Insurance Summary
10/27/2017
24
2018 Price OutlookWhen supply exceeds demand prices……..
Tennessee Considerations for 2018
• June/July cash contracts have averaged $4.80 (min $4.66, max $4.97) since September 1st, so…
• Can your producers make money at these prices?
• Is there sufficient justification to a plant and wait approach?• i.e. cover crop and terminate vs. bringing the crop to harvest
• Can wheat be used as an aid to control weeds, mitigate erosion, improve soil health and/or maintain soil moisture?
10/27/2017
25
Wheat - Net Return Table ($/acre)Assumes Cost of Production of $403.90/acre
Yield (bu/acre)
45 50 55 60 65 70 75 80 85 90 95
3.00 (269) (254) (239) (224) (209) (194) (179) (164) (149) (134) (119)
3.20 (260) (244) (228) (212) (196) (180) (164) (148) (132) (116) (100)
3.40 (251) (234) (217) (200) (183) (166) (149) (132) (115) (98) (81)
3.60 (242) (224) (206) (188) (170) (152) (134) (116) (98) (80) (62)
3.80 (233) (214) (195) (176) (157) (138) (119) (100) (81) (62) (43)
4.00 (224) (204) (184) (164) (144) (124) (104) (84) (64) (44) (24)
4.20 (215) (194) (173) (152) (131) (110) (89) (68) (47) (26) (5)
Price 4.40 (206) (184) (162) (140) (118) (96) (74) (52) (30) (8) 14
($/bu) 4.60 (197) (174) (151) (128) (105) (82) (59) (36) (13) 10 33
4.80 (188) (164) (140) (116) (92) (68) (44) (20) 4 28 52
5.00 (179) (154) (129) (104) (79) (54) (29) (4) 21 46 71
5.20 (170) (144) (118) (92) (66) (40) (14) 12 38 64 90
5.40 (161) (134) (107) (80) (53) (26) 1 28 55 82 109
5.60 (152) (124) (96) (68) (40) (12) 16 44 72 100 128
5.80 (143) (114) (85) (56) (27) 2 31 60 89 118 147
6.00 (134) (104) (74) (44) (14) 16 46 76 106 136 166
2018 Price Projections
Source 2018 Price
CBOT $4.75
CBO $4.84
FAPRI $4.79
WASDE $4.40‐$4.80
10/27/2017
26
Price Considerations and Key Issues for 2018
• Global supply of wheat remains record large
• Trade • Competition for exports from Russia and Ukraine
• Huge unknown in trade policy/bilateral/multilateral trade agreements
• U.S. winter wheat acres planted?
• Global competition with other grains • Supplies of corn, sorghum, barley, and rice will compete with wheat
• Look for continued low prices $4.00‐$5.00 per bushel
• Take advantage of marketing opportunities when they are presented
Thank you Questions?