International Crops Summary

Transcription

1 International Crops Summary

2 Agricultural commodity prices are considerably lower than two years ago, and are expected to bottom out in 2014/15 or 2015/16, depending on the specific commodity. Nevertheless, underlying costs will remain elevated, requiring higher output prices to maintain production in the long-term. However, petroleum costs have fallen dramatically in the last half of 2014 and into 2015, and will provide some cost relief before rising in the long term. The second consecutive record U.S. corn crop is driving prices lower and rebuilding stocks in 2014/15. Furthermore, the increase in the annual demand pull from ethanol is slowing. A more than 40% decline in corn prices is expected from the record level of 2012/13. Wheat and barley are typically produced in the same regions with similar variation in production and prices. It is taking longer for wheat and barley supplies to recover from the 2012/13 global production decline. Wheat and barley prices are both expected to decline nearly one-third from 2012/13 levels as they reach their respective low points in 2015/16. Oilseeds compete with major grains for area. As a result, weather impacts soybeans, rapeseed, and sunflowerseed similarly to grain and other crops grown in the same regions. The same general price movements expected for grains will also be exhibited by oilseeds. Soybean prices will follow a pattern similar to corn over the baseline period. Lower corn prices allow soybeans to compete for area, pushing soybean prices lower, as well. Consistent crops from South American producers will also pressure soybean prices lower. Soybeans will exhibit a more than 30% decline in prices in 2014/15 from two years earlier. In major producing regions, rapeseed competes with wheat and barley. But on the demand side, rapeseed products compete with those of other oilseeds. Rapeseed is expected to take a little longer than soybeans to find new price levels. By 2015/16, rapeseed prices are projected to see a 30% decline from 2012/13 prices, and a 40% decline from the peak of 2010/11. Sunflowerseed prices are mirroring the movements of rapeseed, falling 28% from 2012/13 and 37% from the high point reached in 2010/11. Soybean, rapeseed, and sunflowerseed meal prices reflect prices of other major livestock feed components. With the fall in grain prices, meal prices will move lower, even with expanding livestock production. Additionally, the decline in soybean, rapeseed, and sunflowerseed prices will aid meal price declines. Because the oilseeds are the largest cost categories for protein meal and vegetable oil production, the decline in oilseed prices will reduce meal and oil costs, allowing lower output prices while maintaining crushers margins. Soybean, rapeseed, and sunflowerseed meals are all expected to fall more than 30% of the peaks of recent years.

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4 Because soybean, rapeseed, and sunflowerseed oils are co-products with their respective meal counterparts, some common costs underlie both products. As a result, oil prices are expected to fall with the lower oilseed input costs while still allowing crushers to maintain long-run profitability. Vegetable oil prices hit peaks in 2010/11, two years earlier than grains or their protein meal counterparts. From their zeniths soy, rapeseed, sunflowerseed, and palm oil prices are expected to exhibit declines of approximately 40% to 45%. In addition to a lower cost structure for vegetable oils, the boom in palm oil production has resulted in rapidly increasing supplies on the world market, driving prices lower. Palm oil prices have adjusted back to a more typical relationship with other vegetable oils as production has recovered from constrained production in 2012/13. The combination of factors in the Chinese cotton market that began with reduced area and production in 2009, leading to that country dominating global trade for several years has subsided. As a result, global markets are again able to come into balance at much lower prices. The abnormally high levels of Chinese imports of the past three years enabled China to quadruple ending stocks. That country now holds approximately 60% of global inventories. Stock accumulation has ended, and China s imports have dropped dramatically. China now adds even more uncertainty to the cotton market. Depending on whether they continue to hold the current extremely high stocks will determine if imports stabilize or perhaps fall in the next few years if China decides to draw stocks down without a corresponding hike in domestic use. The increase in global cropped area that quickened in recent years is expected to slow. Lower prices will provide less incentive to expand plantings, especially if it requires new ground to be broken. There are still some regions that have available land for expansion, particularly in South American soybean and grain producing countries such as Argentina and Brazil. Area expansion will occur primarily in oilseeds and feedgrains, crops that are largely used to feed livestock. Even with yield growth at or slightly exceeding global population growth, current area will be inadequate to meet demand for income-driven livestock and dairy products. Wheat and rice, crops that are primarily utilized for human consumption, are traditional staples that are driven more by population growth than increases in income. Per capita consumption for these grains is nearly flat, and future demand will be met through yield growth. As a result, area of these grains is not expected to increase significantly through the baseline period.

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6 Yields of major grains, oilseeds, and fiber crops are expected to continue growing at long-term trend rates. This means productivity will expand around one percent per year, at or slightly above the global population growth rate, which is projected to dip below 1% per year around One percent yield growth will be sufficient for crops where demand is largely driven by population growth. As global per capita consumption of wheat, rice, and cotton are projected to increase little in the coming ten years, little area increase over the baseline period is expected. For crops that are driven by both population and income growth, increased production required to meet global demand will come from a combination of yield and area growth. As such, yield growth alone will be insufficient for oilseeds and feedgrains such as corn. As staples, global wheat and rice consumption and trade will increase primarily with population, regardless of rising incomes in most regions. The only regions that will see a positive income effect will be in the least developed nations that are currently moving out of subsistence diets to being able to purchase small amounts on local markets. Because wheat consumption is distributed well beyond major global production areas, it has been the most widely traded commodity among grains and oilseeds. In recent years, approximately 18% of global demand has been met by redistributing wheat from surplus nations to deficit areas. This percentage is maintained throughout the baseline. Rice production and consumption are much more geographically aligned than wheat. While consumption and trade occur around the world, Asia is by far the primary region for both supply and demand of rice. As a result, rice consuming nations are much more self-sufficient, on average than wheat consumers. Only around 4% of global rice consumption is met by trade. Demand and trade of corn that is used primarily in livestock feed rations is growing rapidly as meat and dairy product consumption is driven by income growth as well as population. However, corn production is not distributed as widely as consumption, and trade is expanding rapidly. The percentage of global demand met by trade is rising and will average around 11% over the next ten years. While sorghum is considered a feedgrain in the U.S., it is a traditional staple crop in areas such as Africa. As incomes increase and diets in rural areas shift away from sorghum, demand and trade for this grain will show only slow increases over the next decade. Barley trade is expected to rise very slowly throughout the projection period. There is expected to be some increase in demand for livestock feeding in producing countries of Eastern Europe and the former Soviet Union. This use will be the primary source of demand growth. However, global food use, especially for brewing is expected to be stable, at best, as demand for beer has weakened in recent years.

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8 With the increase of livestock, especially poultry and hogs, and dairy product consumption around the world, the demand for protein meals and oilseeds has risen dramatically. Some countries import soybeans, rapeseed, sunflowerseed and other oilseeds and crush them, meeting the majority of their meal and oil needs. However, trade in oilseed products is also increasing at a rapid pace. Soybeans account for the largest share of global oilseed demand, but the U.S., Argentina, and Brazil account for the majority of global production. As demand for soybeans and products increased, exports from these nations skyrocketed. Over the next ten years, more than 35% of global consumption of soybeans and nearly 30% of soymeal is expected to be met by trade. Rapeseed and products are much less dependent on global markets as consumption occurs more in producing regions, however, trade is also expanding. In the next ten years, almost 15% of global rapeseed demand will be met through trade, and approximately 12% of rapeseed meal. Canada supplies the majority of global rapeseed and rapeseed meal trade. The EU-28 has emerged as the world s largest exporter of sunflowerseed. However, trade is not as important in the sunflowerseed market, with only about 1% being sold on the world market. However, sunflowerseed meal consumption around the world is more dependent on trade, with nearly one-third of global consumption coming from the world market. Ukraine is the largest exporter. Palm oil has captured the largest share of global vegetable oil trade. Unlike soybean or rapeseed oil, palm oil is not a co-product with other oilseed products. The trees are fast growing in low-cost areas of the Pacific Rim and Asia and production has exploded. Two-thirds of global palm oil production is sold on the world market, coming primarily from Indonesia and Malaysia. Strength in international protein meal markets will help soybean oil trade to recover in coming years. Because soybean oil comprises 18% of the soybean, soybean crushers can more readily absorb the low prices that will be required to move soybean oil production, as long as meal prices remain relatively strong. In large part because Argentina produces for the world market, more than 15% of global production is sold internationally. Rapeseed crushers cannot absorb the competition from palm oil prices in the baseline as readily as soybean processors, as rapeseed has a nearly 40% oil content. As a result, rapeseed production and crushing will be somewhat constrained and rapeseed oil trade will increase relatively slowly.

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10 The increase in cotton trade from 2011/12 through 2013/14 is not expected to be sustained. In those years, China imported large quantities to build their inventories. Thus far in 2014/15, it appears that China s buying spree has subsided. The big question is what will China do with more than one year s inventories on hand? Will that nation continue to carry this level of stocks and therefore have little further impact on trade? Or will China draw down supplies and dampen global cotton trade in the short to medium term? Approximately 20% of global cotton production is expected to be sold on the world market over the next ten years, similar to the proportion traded prior to the run-up in trade over the past several years. The U.S. will remain the largest exporter over the projection period. Even with lower imports by China, that country is still expected to remain the world s largest importer. However, Bangladesh has been consistently increasing cotton utilization and imports and will be a source of growth in global cotton markets. The U.S. will remain the largest exporter over the projection period. Accompanying the recent decline in the prices of agricultural commodities has been a recovery in previously low inventories of several agricultural commodities, especially cotton, corn, and soybeans. Looking at global totals can give a distorted view of the ability of global markets to absorb domestic production shortfalls or spikes in domestic demand. China s grain policies encourage holding inventories to buffer against shortfalls. As a result, China s stocks-to-use ratios are considerably higher than the rest of the world. Stocks held in China are generally not available to the rest of the world to buffer year-to-year supply swings. Global inventories of cotton appear adequate even without considering those held by China. But how and when China decides to allocate those inventories will have potentially large impacts on the global cotton market.

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12 Agricultural Commodity Prices 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 (Dollars per metric ton) Wheat SRW, U.S. Gulf HRW, U.S. Gulf Standard grade, Rouen No. 2, Argentina Soft white, Australia No. 1 CWS, Canada Corn No. 2 yellow, U.S. Gulf Sorghum No. 2 yellow, U.S. Gulf Barley Barley Unit Value, Alberta Feed barley, Rouen Soybeans No. 1 yellow, Central Illinois for Rio Grande, Brazil for Buenos Aires, Argentina cif Rotterdam Soybean Meal Decatur, IL, 48% for Rio Grande, Brazil for Buenos Aires, Argentina cif Rotterdam Soybean Oil Decatur, IL , ,173 1,144 1, for Rio Grande, Brazil , ,210 1,162 1, for Buenos Aires, Argentina , ,211 1,164 1, Dutch fob , ,306 1,241 1, Rapeseed (canola) cif Hamburg Export, West Coast, Canada Rapeseed Meal for Hamburg Rapeseed Oil cif Rotterdam , ,367 1,258 1, Sunflowerseed cif Rotterdam Sunflowerseed Meal cif Rotterdam Sunflowerseed Oil fob NW Europe , ,404 1,254 1, Palm Oil Malaysia , ,154 1, Cotton Adjusted World Price

13 Agricultural Commodity Prices 14/15 15/16 16/17 17/18 18/19 19/20 20/12 21/22 22/23 23/24 24/25 (Dollars per metric ton) Wheat SRW, U.S. Gulf HRW, U.S. Gulf Standard grade, Rouen No. 2, Argentina Soft white, Australia No. 1 CWS, Canada Corn No. 2 yellow, U.S. Gulf Sorghum No. 2 yellow, U.S. Gulf Barley Barley Unit Value, Alberta Feed barley, Rouen Soybeans No. 1 yellow, Central Illinois for Rio Grande, Brazil for Buenos Aires, Argentina cif Rotterdam Soybean Meal Decatur, IL, 48% for Rio Grande, Brazil for Buenos Aires, Argentina cif Rotterdam Soybean Oil Decatur, IL for Rio Grande, Brazil for Buenos Aires, Argentina Dutch fob Rapeseed (canola) cif Hamburg Export, West Coast, Canada Rapeseed Meal for Hamburg, $/mt Rapeseed Oil cif Rotterdam Sunflowerseed cif Rotterdam Sunflowerseed Meal cif Rotterdam Sunflowerseed Oil fob NW Europe Palm Oil Malaysia Cotton Adjusted World Price

14 Global Area Harvested 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 (Million hectares) Grains Wheat Rice Corn Sorghum Barley Total grains modeled Oilseeds Soybeans Rapeseed Sunflowerseed Total oilseeds modeled Cotton Total crops modeled Global Trade 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 (Million metric tons) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil (Million bales) Cotton Figures are the sums of net exports by exporting countries.

15 Global Area Harvested 14/15 15/16 16/17 17/18 18/19 19/20 20/12 21/22 22/23 23/24 24/25 (Million hectares) Grains Wheat Rice Corn Sorghum Barley Total grains modeled Oilseeds Soybeans Rapeseed Sunflowerseed Total oilseeds modeled Cotton Total crops modeled Global Trade 14/15 15/16 16/17 17/18 18/19 19/20 20/12 21/22 22/23 23/24 24/25 (Million metric tons) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil (Million bales) Cotton Figures are the sums of net exports by exporting countries.

16 Global Stocks-To-Use 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 World (Percent) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil Cotton World, excluding China (Percent) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil Cotton

17 Global Stocks-To-Use 14/15 15/16 16/17 17/18 18/19 19/20 20/12 21/22 22/23 23/24 24/25 World (Percent) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil Cotton World, excluding China (Percent) Grains Wheat Rice Corn Sorghum Barley Oilseeds Soybeans Rapeseed Sunflowerseed Protein meals Soybean meal Rapeseed meal Sunflowerseed meal Vegetable oils Soybean oil Rapeseed oil Sunflowerseed oil Palm oil Cotton