Corn Outlook August 2006

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Corn Outlook - August 2006
Midwest Outlook Conference August 16, 2006 By
John KruseEmail KruseJ_at_missouri.edu
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(No Transcript)
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Percentage Change in Iowa Corn Production from
2005 to 2006
Northwest Corn -8.6Soybeans -18.2
North Central Corn -1.2Soybeans -14.3
Northeast Corn -0.5Soybeans -12.8
West Central Corn -11.2Soybeans -21.6
Central Corn -3.7Soybeans -20.7
East Central Corn 19.7Soybeans -9.6
Southwest Corn 4.7Soybeans -12.0
South Central Corn -4.0Soybeans -6.4
Southeast Corn 20.2Soybeans -2.5
State Total Production Change Corn -0.8, -17.3
million bushels Soybeans -15.1. -80.4 million
bushels
Source Iowa NASS August 2006 Crop Production
Report
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Percentage Change in Missouri Corn Production
from 2005 to 2006
Northeast - CRD 30 Corn 77.2 Soybeans
12.0
Northwest CRD 10 Corn -4.2
Soybeans -6.9
North Central CRD 20 Corn 11.2 Soybeans
1.7
West Central - CRD 40 Corn 14.7 Soybeans
-15.3
East Central - CRD 60 Corn 30.8 Soybeans
17.6
Central - CRD 50 Corn 8.1 Soybeans 3.1
Southeast - CRD 90 Corn 15.7 Soybeans
19.4
Southwest - CRD 70 Corn 22.9 Soybeans
5.9
South Central - CRD 80 Corn -31.2 Soybeans
8.2
State Total Production Change Corn 9.3, 30.7
million bushels Soybeans 3.8. 7.0 million
bushels
Source Missouri NASS August 2006 Crop
Production Estimates
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U.S. Average Corn Yield and Production Estimates
By Week Based on Crop Condition
Source FAPRI Crop Condition Model, Seth Meyer
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FAPRI yield was based on trend, we would update
to the 152.2 number now.
Does this account for the substitution of DDGs
for corn in cattle rations?
Can we get there?
Will stocks be higher?
Are price projections to high for 06/07?
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U.S. Grain Consuming Animal Units
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U.S. Corn Feed Use Displaced by Corn By-Products
These estimates may be low. FAPRI is
revisiting the substitution of DDGs in livestock
rations.
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Crude Oil Prices
Source Global Insight, August 8, 2006
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Ethanol Dry Mill Gross Profit Marginand Corn
Used for Ethanol Production
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Ethanol Summary

• Current market and policy conditions encourage
  very rapid growth in biofuels
• Risks for biofuel industry
• Downturn in petroleum prices
• Run-up in grain, vegetable oil prices
• Unfavorable change in policies
• Risks for farm sector
• Volatility if too much, too fast
• Livestock sector (and other users) in short crop
  year
• Long-run link in prospects for ag. and energy
  markets

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Factors Driving Increased 2005/06 Corn Export
Demand

• Weaker Chinese exports allowed the U.S. to export
  more corn to South Korea
• Lower ocean transportation rates
• Poor crop in Argentina
• Continued demand growth in Central America

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2005/06 U.S. Corn Exports By Destination Year to
Date (Sept 2005 to June 2006)
Canada 56 mil bu, -28.8
Taiwan, 160 mbu, 9.7
Japan, 518 mbu, 0.4
S. Korea, 168 mbu 181.9
Algeria, 36 mbu, 8.5
Egypt, 116 mbu, 2.6
Mexico, 214 mbu 5.2
Columbia, 85 mbu, 29.3
Total U.S. Corn Exports through June 2006 for the
2005/06 MY 1.7 bbu, 12.8The listed countries
account for about 80 of U.S. corn
exports. Source USDA/ERS/FATUS August 2006
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U.S. Corn Exports By Destination in 2004/05
Canada 92 mil bu
Taiwan, 171 mil bu
Japan, 610 mil bu
Syria, 51 mil bu
S. Korea, 83 mil bu
Algeria, 40 mil bu
Egypt, 152 mil bu
Mexico, 230 mil bu
Columbia, 80 mil bu
Others, 302 mil bu
Total U.S. Corn Exports in 2004/05 1.810
billion bu.The listed countries account for 83
of U.S. corn exports. Source USDA/ERS/FATUS
February 11, 2006
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Accumulated Corn Exports and Outstanding Sales
Source USDAs Weekly Export Sales Report
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Prospects for 2006/07 U.S. Corn Exports

• Upside
• Continued weakening of the U.S. dollar

• Downside
• Higher barge and rail transportation costs
• Displacement from DDG exports

• Wild Cards
• Chinese corn exports???
• Improved Argentine corn crop???

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Transportation Cost of Moving Grain from
Minnesota to Japan
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Transportation Cost of Moving Grain from
Minnesota to Japan via the Gulf
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Reasons for Higher Barge Rates

• Fuel Prices
• Increased grain exports lock congestion
• Competition from non-agricultural products
• Barge retirements, few grain barges constructed
  in recent years
• Persistent low water condition on the Mississippi
  and Missouri Rivers

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Price Index of U.S. Corn Asian Markets
Calculated as (U.S. Corn Gulf Price
Transportation Cost)Trade Weighted Exchange Rate
for Corn
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Chinese corn supply and use
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Wide Price Basis May Continue

• FAPRI received several call regarding the
  unusually wide basis this summer for soft red
  winter wheat.
• Some farm groups are concerned that this wide
  basis will persist into the fall for corn and
  soybeans.
• The following two graphs present the spatial
  price differences from the Gulf illustrating the
  spread in prices due to higher transportation
  costs suggesting that the wide basis may persist
  while transportation cost remain high.
• Other reasons for the spread between cash market
  prices and the nearby futures have been
  suggested.

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Source Terminal prices were compiled by Cash
Grain Bids.
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Source Terminal prices were compiled by Cash
Grain Bids.
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2006/07 Corn Outlook Risks

• Supply Side Risks
• Corn crop size - could the crop get larger?

• Demand Side Risks
• Feed demand
• Corn displacement from DDGs
• Avain flu
• Ethanol demand
• Crude oil prices
• Policy Changes
• Export demand
• High Barge Rates
• Displacement from DDGs
• Argentine corn production
• Chinese corn production

• Price Outlook Risks
• Downside
• Larger corn crop
• Feed demand displacement from DDGs
• Weaker than projected exports
• Transportation cost keep basis unusually wide
• Upside
• Even stronger ethanol demand
• Stronger exports

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On our website

• Expected Impacts of Increased Ethanol Production
• Presentation by Pat Westhoff at the
  Breimyer Seminar, "BioFuels An
• Agricultural Revolution?," Columbia, MO,
  July 18, 2006.
• FAPRI July 2006 Baseline Update for U.S.
  Agricultural Markets
• FAPRI-UMC Report 12-06 This report
  presents a summary of the five-
• year baseline outlook update for major
  U.S. agricultural commodity
• markets
• Expect more to come in months ahead at
  www.fapri.missouri.edu