Strategies for Putting the Marketing Puzzle Together

Strategies for Putting the Marketing Puzzle Together Food and Agricultural Policy Research Institute (FAPRI) Division of Applied Social Sciences University of Missouri www.fapri.missouri.edu November 11, 2018 Melvin Brees, Abner Womack, Daniel Jaegers, Matthew Green

U.S. corn supply and use 2017/18 (USDA Nov.8) 2018/19 (USDA Nov. 8) 2018/19 (FAPRI Nov. 2018) 2019/20 (FAPRI Nov.2018) Area planted (mil. acres) 90.2 89.1 89.1 91.5 Yield (bu./harvested acre) 176.6 178.9 178.9 174.1 Production (mil. bu.) 14,604 14,626 14,626 14,643 Feed and residual use (mil. bu.) 5,298 5,500 5,501 5,505 Ethanol and coproduct use 5,605 5,650 5,636 5,629 Other domestic use 1,450 1,480 1,459 1,465 Exports 2,438 2,450 2,440 2,114 Ending stocks 2,140 1,736 1,756 1,718 Marketing yr. avg. price ($/bu.) 3.36 3.20-4.00 3.59 3.78 Source: USDA WASDE, Nov 2018.

WASDE USDA Corn Summary Nov. 8, 2018 1) U.S. Average Farm Price Moderate Increase 2018-19 USDA: $3.60 ($3.20- $4.00) 2017 18 USDA: $3.36 2016-17 USDA: $3.36 2015-16 USDA: $3.61 2) U.S. Ending Stocks-Moderate decline 2018-19 USDA: (1,736 Million Bushels) 2017-18 USDA: (2,140 Million Bushels) 2016-17 USDA: (2,293 Million Bushels) 10 Year Average 08/09-17/18: (1,579 Million Bushels) 20 Year Average 98/99-17/18: (1,592 Million Bushels) 3) World Ending Corn Stocks Declining 2018-19 World: (308 Million Metric Tons) 2017-18 World: (341 Million Metric Tons) 2016-17 World: (350Million Metric Tons) 4) U.S. Export Slight Change 2018-2019 USDA: (2,450 Million Bushels) 2017-18 USDA: (2,438 Million Bushels) 2016-17 USDA: (2,294 Million Bushels)

10-Yr AVG Domestic and Global corn ending stocks declining. Corn World End Stocks (MMT) Chinese Stocks adjustment in Nov 18 WASDE results in increased 149 million tons of ending stocks for the 2018/19 marketing year! Updated Chart. Million Metric Tons 380 360 340 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 10-Yr AVG

10-Yr AVG Corn use continues to grow, ending stocks/use ratio declining to near average of previous 10 years.

1200 Corn World Production & Use 1100 1000 900 800 World Prod World Use Global corn and coarse grain use expected to exceed World production for second straight year! 700 600 1500 World Coarse Grains: Production & Use 1400 M M T 1300 1200 1100 Production Use 1000 900

Corn Futures Price 4.4 4.2 4 3.8 3.6 3.4 3.2 3 400 300 200 100 0-100 -200-300 -400-500 -600-700 Corn COT Net Position Axis Title Apr May Jun Jul Aug Sep Oct Nov Dec Jan 17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan18 Feb Mar April May Jun Jul Aug Sep Oct Nov Producer Merchandizer Swap Dealer Managed Money Other Reportable Non- Reportable

0.30 0.20 0.10 0.00-0.10-0.20-0.30-0.40-0.50-0.60 St Louis Corn Basis Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 0.30 0.20 0.10 0.00-0.10-0.20-0.30-0.40-0.50-0.60-0.70 Sept. 1 Oct. 1 Nov. 1 SE MO Corn Basis Dec. 1 Jan. 1 Feb. 1 Mar. 1 Apr. 1 May 1 Jun. 1 Jul. 1 Aug. 1 5-year AVG 17-18 18-19 5-year AVG 17-18 18-19 0.10 Kansas City Corn Basis 0.00 Central MO Corn Basis 0.00-0.10-0.20-0.10-0.20-0.30-0.30-0.40-0.50-0.60-0.40-0.50 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 5-year AVG 17-18 18-19 -0.60 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 5-year AVG 17-18 18-19

Old Crop (18-19) Corn FAPRI Baseline Ranges Nov, 2018 Aug 2018 FAPRI Price: Adjusted for $0.30 basis Futures Price Equivalent of 2017-2018 Projected Farm Price: $3.89 Futures Price Equivalent of FAPRI Range: $3.35 $4.40 @ 80 Futures Price Equivalent of Nov 8 USDA Range: $3.50- $4.30 Avg $3.90 90 th 80 th 70 th $4.77 $4.40 $4.18 Futures Market Planning Range for old Crop Corn Adjusted for -30 cent basis Dec 18 Futures on 11/28/2018 $3.60 Farm Price $4.47 $4.10 $3.88 30 th $3.89 $3.49 $3.59 $3.19 20 th $3.35 $3.05 10 th $3.13 $2.83

New Crop (19-20) Corn FAPRI Baseline Ranges Nov, 2018 Aug 2018 FAPRI Projected Farm Price: Adjusted for $0.20 basis Futures Price Equivalent of 2018-2019 Projected Farm Price: $3.98 Futures Price Equivalent of FAPRI Range: $3.41 - $4.52 @ 80 Futures Market Planning Range for New Crop Corn Adjusted for -20 cent basis Farm Price 90 th $4.90 $4.70 80 th 70 th $4.52 $4.29 DEC 19 Futures on 11/28/2018 $3.96 $4.32 $4.09 $3.98 $3.78 30 th $3.56 $3.36 20 th $3.41 $3.21 10 th $3.18 $2.98

U.S. soybean supply and use 2017/18 (USDA Nov 8) 2018/19 (USDA Nov 8) 2018/19 (FAPRI Nov 2018 2019/20 (FAPRI Nov,2018) Area planted (mil. acres) 90.1 89.1 89.1 84.7 Yield (bu./harvested acre) 49.3 52.1 52.1 48.6 Production (mil. bu.) 4,411 4,600 4,600 4,084 Crush (mil. bu.) 2,055 2,080 2,120 2,138 Other domestic use 112 138 130 119 Exports 2,129 1,900 1,957 1,981 Ending stocks 438 955 853 720 Marketing yr. avg. price ($/bu.) 9.33 7.60 9.60 8.4 8.84 Sources: USDA WASDE, Nov 2018.

WASDE-USDA Soybean Summary Nov 8, 2018 1) U.S. Average Farm Price- Significant Decline 2018-19 USDA: $8.60 ($7.60 - $9.60) 2017-18 USDA: $9.33 2016-17 USDA: $9.47 2) U.S. Ending Stocks- Significantly above 20 Year Average 2018-19 USDA: (955 Million Bushels) 2017-18 USDA: (438 Million Bushels) 2016-17 USDA: (302 Million Bushels) 10 Year Average 08/09-17/18: (207 Million Bushels) 20 Year Average 98/99-17/18: (247 Million Bushels) 3) World Ending Soybean Stocks- Significantly above 10 Year average 2018-19 World: (112 Million Metric Tons) 2017-18 World: (100 Million Metric Tons) 2016-17 World: (97 Million Metric Ton) 10 Year Average 08/09-17/18: (70 Million Metric Tons) 20 Year Average 98/99-17/18: (55 Million Metric Tons) 4) U.S. Export - Moderate decline 2018-19 USDA: (1,900 Million Bushels) 2017-18 USDA: (2,129 Million Bushels) 2016-17 USDA: (2,166 Million Bushels)

In just 4 years (since 13-14) domestic soybean ending stocks have increased from the smallest in 40-years to projected new record high! 10-Yr AVG 10-Yr AVG

Total soybean use expected to decline, ending stocks/use ratio to become very large. 10-Yr AVG

World soybean production expected to outrun increasing global use!

Soybean Futures Prices 12.00 11.50 11.00 10.50 10.00 9.50 9.00 8.50 8.00 300 200 Jan. 15 Feb. 15 Mar. 15 Apr. 15 Soybean: COT Net Positions May 15 Jun. 15 Jul. 15 Aug. 15 Sept. 15 Oct. 15 Nov. 15 Dec. 15 Jan. 15 Feb. 15 Mar. 15 Apr. 15 May 15 Jun. 15 Jul. 15 Aug. 15 Sept. 15 Oct. 15 Nov. 15 Dec. 15 Jan. 15 Feb. 15 Mar. 15 Apr. 15 May 15 Jun. 15 Jul. 15 Aug. 15 Thousand Contracts 100 0-100 -200-300 -400 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan18 Feb Mar April May Jun Jul Aug Sep Oct Nov Producer Merchandizer Swap Dealer Managed Money Other Reportable Non- Reportable

St Louis Soybean Basis SE MO Soybean Basis 0.80 0.80 0.60 0.60 0.40 0.20 0.00-0.20-0.40-0.60-0.80 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 0.40 0.20 0.00-0.20-0.40-0.60-0.80 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 5-yr Average 17-18 18-19 5-yr Average Series2 18-19 1.00 Kansas City Soybean Basis 1.00 Central MO Soybean Basis 0.50 0.50 0.00 0.00-0.50-0.50-1.00 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15-1.00-1.50 Sept. 1 Sept. 15 Oct. 1 Oct. 15 Nov. 1 Nov. 15 Dec. 1 Dec. 15 Jan. 1 Jan. 15 Feb. 1 Feb. 15 Mar. 1 Mar. 15 Apr. 1 Apr. 15 May 1 May 15 Jun. 1 Jun. 15 Jul. 1 Jul. 15 Aug. 1 Aug. 15 5-yr Average 17-18 18-19 5-yr Average 17-18 18-19

Old Crop (18-19) Soybean FAPRI Baseline Ranges Nov, 2018 Aug 2018 FAPRI Price: Adjusted for $0.60 basis Futures Price Equivalent of 2017-2018 Projected Farm Price: $9.00 Futures Price Equivalent of FAPRI Range: $7.43 - $10.66 @ 80 Futures Price Equivalent of Nov 8 USDA Price: Avg $9.20 90 th $11.71 Futures Market Planning Range for Old Crop Soybeans Adjusted for -60 cent basis Farm Price $11.11 80 th 70 th $10.66 $9.79 Nov 18 Futures on 11/28/2018 $8.90 $10.06 $9.19 $9.00 $8.40 30 th $7.95 $7.35 20 th 10 th $7.43 $6.73 $6.83 $6.13

New Crop (19-20) Soybean FAPRI Baseline Ranges Nov, 2018 Aug 2017 FAPRI Price: Adjusted for $0.45 basis Futures Price Equivalent of 2018-2019 Projected Farm Price: $9.29 Futures Price Equivalent of FAPRI Range: $7.68 - $10.99 @ 80 90 th 80 th 70 th $12.06 $10.99 $10.10 Futures Market Planning Range for New Crop Soybeans Adjusted for -45 cent basis Nov 19 Futures On 11/28/2018 $9.38 Farm Price $11.61 $10.54 $9.65 $9.29 $ 8.84 30 th $8.22 $ 7.77 20 th $7.68 $7.23 10 th $6.96 $6.51

10-YR AVG 10-Yr AVG

Global wheat use expected to exceed world production.