Commodity Market Outlook: Corn, Forage, Wheat & Cattle

Transcription

1 Commodity Market Outlook: Corn, Forage, Wheat & Cattle Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado State University Montrose, Colorado March, 2016 Outline Long term Price Outlook Corn Forage Wheat Cattle Sheep & Lambs Others Short term Price Comments. General Economy I would love to stand here and tell you, $5.00 corn, $8.00 wheat and $3.00 calves for the rest of your life. But this is a competitive economy and agriculture is a competitive industry. 1

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4 Summary High prices in were the result of Strong demand. Supply disruptions. World wide volatility but by underlying growth. Moving forward ?: Plentiful supplies of everything. Weak to little demand growth. Strong dollar. It s not the 1980 s but there are similarities. Weaker prices & margins. 4

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8 Weekly Corn Contract $8.00 $5.00 The trading range for corn is $3.35-$4.50/bu. Except 8

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10 DEC 2015 Corn Contract Blue was the correct trading range & green can happen again but not for long 10

11 Bottom line on corn basis: strong for as big as the crop was. Good demand and movement. Big weak basis in regions with excellent sorghum crop. 11

12 Forecast $ /bu DEC 2016 Corn Contract We will trade $3.75- $4.05 until there is a reason not to. We could move up to $4.10, $4.20, & $4.45 but Sell rallies 12

13 Corn Outlook Market price is where fundamentals say it should be. Acreage next year? Rotation with soybeans? Cash flow & debt? Demand? Trade? Storage? Basis? Price outlook $3.65 $4.00/bu. And we ve had the two big crops. Aggressive sales on any weather driven rally. $4.20 & $4.50. Weekly KC Wheat Contract 13

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15 JUL 2016 KC Wheat Contract Forecast $ /bu 15

16 Wheat Outlook World: Building stocks. U.S.: huge stocks but reduced acres. World weather? But soft exports due to strong dollar. Basis? Forecasts: JUL $5.00 with range $ /bu. And aligned with fundamentals. Aggressive $5.20 & $5.75. Likely storage opportunity into late

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18 Mil. Tons 120 US ALL HAY STOCKS December Data Source: USDA NASS, Compiled & Forecasts by LMIC G-NP-22 08/12/15 Mil. Tons 30 US ALL HAY STOCKS May 1 (Beginning of Crop Year) Data Source: USDA NASS, Compiled & Forecasts by LMIC G-NP-21 08/12/15 18

19 PERCENT CHANGE ALL HAY ACRES ( ) U.S. Total: 1% Data Source: USDA-NASS 2/2/2015 GL_GR310 Greeley, CO Thu Mar USDA-CO Dept of Ag Market News Colorado Hay Report Compared to the last week, prices steady to weak on slow trade. All prices reported are FOB at the stack or barn unless otherwise noted. Prices reflect load lots of hay. Northeast Colorado Areas Alfalfa Small Squares: Supreme (10.00 per bale). Grass Small Squares: Premium ( per bale); Utility (5.00 per bale). Southeast Colorado Areas Alfalfa Large Squares: Utility Small Squares: Premium ( per bale). Sorghum Sudan Round: Good San Luis Valley Area No reported quotes for all other classes of hay. Southwest Colorado Areas Alfalfa Large Squares: Supreme ; Good/Premium Grass Small Squares: Premium (7.00 per bale). Orchard Grass 3-tie: Premium (14.00 per bale). Small Squares: Premium (8.00 per bale). Mountains and Northwest Colorado Areas Grass Small Squares: Premium (5.50 per bale). No reported quotes for all other classes of hay. 19

20 Forage Outlook Plentiful except for high quality. Excellent hay: Alfalfa $150 $175/T. Grass $85 $100/T. Low quality hay: <$60 $80/T. Back to more small bales 20

21 Other Crops Oilseeds: The one market with long term growth potential. Record large crop last year in S. Am. Sorghum: Superb crop last year. Growth will depend on feed use & exports. Millet: Domestic demand growth potential. Decreased acres but increased production. Malting barley: Excellent premiums past several years. Weather related but weather other places. Potatoes: Excellent production this year. Soft trade. Sugar: World versus domestic prices. Substantial long term world pressure on prices. Dry Beans: Increased acres & soft trade. Hops: This is the only commodity that I hear persistent discussion of limited availability 21

22 Weekly Live Cattle Contract This market is looking for a bottom trading range $ /cwt. $170 Monthly Live Cattle Contract 22

23 Weekly Feeder Cattle Contract This market will drift lower trading range $ /cwt. $240 Monthly Feeder Cattle Contract 23

24 Cattle Outlook Fed cattle market will trend down: Domestic demand was strong. International demand & trade are weak. Abundant supplies of competing meats. Feeder cattle and calf prices will weaken for the next several years: Herd building. 24

25 OCT 2015 Live Cattle Contract OCT 2015 Feeder Cattle Contract I can see a rally this spring until summer with greening of grass like we saw in Sell your calves on the video in 2016 if that happens! 25

26 Mil. Head CATTLE ON FEED OVER 120 DAYS US Total, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/ Data Source: USDA NASS, Compiled & Analysis by LMIC C-N-12 03/18/16 Mil. Head 2.5 FEEDLOT PLACEMENTS US Total, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/ Data Source: USDA NASS C-N-08 03/18/16 26

27 Pounds LIVE WEIGHT STEER AND HEIFER Texas/Oklahoma Panhandle Area, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS & USDA NASS C-S-26 03/25/16 Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Annual, Using CPI 1990= Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC 27

28 Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX First Quarter, Using CPI 1990= Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Fourth Quarter, Using CPI 1990= Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC 28

29 1000 MT 6 US EXPORTS OF BEEF MUSCLE CUTS Weekly /4/14 7/5/14 1/10/15 7/11/15 1/9/16 Canada Japan Mexico Korean Rep. Data Source: USDA AMS & USDA APHIS 03/24/ MT 19 TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTS Weekly /5/13 7/6/13 1/4/14 7/5/14 1/10/15 7/11/15 1/9/16 Data Source: USDA FAS 03/24/16 29

30 Mil. Pounds US BEEF AND VEAL IMPORTS Carcass Weight, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg Data Source: USDA ERS & USDA FAS I-N-15 02/09/16 Mil. Pounds US BEEF AND VEAL EXPORTS Carcass Weight, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg Data Source: USDA ERS & USDA FAS I-N-16 02/09/16 30

31 Mil. Pounds 200 US NET BEEF IMPORTS Carcass Weight, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg Data Source: USDA ERS & USDA FAS, Compiled & Analysis by LMIC I-N-31 02/09/16 Bil. Pounds 3.5 US BEEF AND VEAL NET IMPORTS Carcass Weight, Annual Data Source: USDA ERS & USDA FAS, Compiled & Analysis by LMIC I-N-28 02/09/16 31

32 Mil. Head JANUARY 1 TOTAL COW INVENTORY U.S., Annual Data Source: USDA NASS C-N-02A 02/01/16 Mil. Head 42 CALF CROP July Estimates, U.S., Annual = 34.3 Million Head +2.3 Percent Data Source: USDA NASS C-N-18B 02/01/16 32

33 Mil. Head 7.0 HEIFERS HELD AS BEEF COW REPLACEMENTS January 1, U.S % Data Source: USDA NASS C-N-38 02/01/16 Mil. Head 6.0 HEIFERS HELD AS BEEF COW REPLACEMENTS July 1, U.S % Data Source: USDA NASS C-N-37 02/01/16 33

34 PERCENT CHANGE IN CATTLE INVENTORY U.S., January Data Source: USDA NASS, Analysis by LMIC C-N-48 02/01/16 $ Per Cwt AVERAGE ANNUAL CATTLE PRICES Southern Plains lb Steer Calves lb Feeder Steers Fed Steers Data Source: USDA AMS, Compiled and Forecasts by LMIC C-P-06 02/12/16 34

35 $ Per Cow ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual Data Source: USDA & LMIC, Compiled by LMIC C-P-66 02/12/16 $ Per Cow ESTIMATED AVERAGE COW CALF COSTS Total Cash Cost Plus Pasture Rent, Annual Data Source: USDA & LMIC, Compiled by LMIC 02/12/16 35

36 Date LMIC Cattle Price & Quantity Forecasts % Change Production % Change Consumption Fed Cattle 7 800# Feeder 5 600# Calf 2015: VI $ $ $ $ $ $ : I $ $ $ : II $ $ $ : III $ $ $ : VI $ $ $ $ $ $ : I $ $ $ : II $ $ $ : III $ $ $ : VI $ $ $ $ $ $ OCT 2016 Live Cattle Contract 36

37 OCT 2016 Feeder Cattle Contract Mil. Head 8 BREEDING EWES 1 YEAR & OLDER Projections, January 1, U.S., Annual Data Source: USDA NASS S-N-03 02/01/16 37

38 $ Per Cwt. 175 SLAUGHTER LAMB PRICES Wooled, lbs, San Angelo, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS 02/08/16 $ Per Cwt. 220 SLAUGHTER LAMB PRICES Calculated Formula Live (April 2009 to present), Weekly Data Source: USDA AMS 38

39 Thou. Head 53 SHEEP & LAMB SLAUGHTER Federally Inspected, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS & USDA NASS S-S-00 02/26/16 Thou. Head 4.0 MATURE SHEEP SLAUGHTER Federally Inspected, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS & USDA NASS S-S-03 02/26/16 39

40 Thou. Head 50 LAMB AND YEARLING SLAUGHTER Federally Inspected, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS & USDA NASS S-S-05 02/26/16 Thou. Head 76 LAMB AND YEARLING DRESSED WEIGHT Federally Inspected, Weekly JAN APR JUL OCT Avg Data Source: USDA AMS & USDA NASS S-S-06 02/26/16 40

41 Cents / Pounds 180 AVERAGE WOOL PRICE U.S., Grease, Annual Data Source: USDA/NASS W-P-14 04/27/15 $ Per Pound 3.60 MONTHLY AVERAGE U S WOOL PRICE 26 Micron (USDA 56s), Clean, FOB JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg Data Source: USDA AMS W-P-01 12/09/15 41

42 $ Per Pound 4.50 MONTHLY AVERAGE U S WOOL PRICE 22 Micron (USDA 64s), Clean, FOB JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg Data Source: USDA AMS W-P-03 12/09/ MONTHLY AVERAGE WOOL PRICE 26 Micron (USDA 56s), Clean Australian deliv. to South Carolina vs. U.S. FOB Australia U.S. Data Source: USDA AMS W-P-04 12/09/15 42

43 Sheep, Lamb & Wool Outlook Expansion Lower prices. Modest longer term trade issues. No wreck similar to cattle No weight problem. No market ready inventory problem. Also not immune going forward. Strong wool market. Input Market Outlook Summary Soft everything. Even land valuations Risks moderating. Softening fuel costs with no volatility Fertilizer Chemicals Supply industries remain operating undercapacity & unwilling to take risk. We haven t had this much cheap energy in a while. Let s see what happens. 43

44 Weekly Crude Oil Contract $150 $35 $40-$60 44

45 Percent Change QTRLY GROSS DOMESTIC PRODUCT (GDP) Real Dollar (2005) Change from Previous Quarter Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC 03/25/16 45

46 Percent 11.0 U.S. UNEMPLOYMENT RATE Seasonally Adjusted, Quarterly Data Source: Bureau of Labor Statistics, Compiled & Analysis by LMIC 11/13/15 93/76 = So foreign buyers of our commodities face a 22% increase in prices before even they get a chance to buy the commodities. It s not as bad as in the early-2000 s or the entire 1980s. But it s worse than the Great Recession. 46

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49 Weekly S&P 500 Index Contract Outlook Summary Corn: $ /bu. for 2016/17. Acres & weather? Hay: if you have a bidder then sell it Wheat: $ /bu. for next harvest. All other crops: good stocks & weak trade. Cattle: A different kind of wow Fed: $ /cwt. Feeders: $ /cwt. Calves: $ /cwt. Sheep & Lamb follow beef & other meats. 49

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