FAPRI agricultural commodity outlook
ByWilliam H. Meyers
Howard Cowden Professor of Agricultural and Applied EconomicsFAPRI at MU
UN DESA Expert Group Meeting on the World Economy21 October 2013New York, NY
World Bank food, energy, metals price indices, 1/00 to 7/13, 2005=100
With such volatility, what are US midwest farmer expectations?
Source: Farmer meeting in the midwest
August, 2013
$275/tonne
AgendaSome perspectiveOn the near termOn the longer term
Market outlook as of August 2013Possible impacts of policy developments
Drop in US corn yield, bu/ac ‐‐three years in a row!
80
90
100
110
120
130
140
150
160
170
Bush
els p
er acre
U.S. corn yieldTrend
Source: FAPRI calculations based on NASS data, October 2012
U.S. corn yields and prices
100
110
120
130
140
150
160
170
2009 2010 2011 2012 2013
Bush
els p
er acre
U.S. corn yield
Source: USDA WASDE, August 2013
0
1
2
3
4
5
6
7
8
09/10 10/11 11/12 12/13 13/14
Dollars per bus
hel
U.S. corn farm price
Global grain supply, use and stocks
2050
2100
2150
2200
2250
2300
2350
2400
2450
09/10 10/11 11/12 12/13 13/14
Million metric tons
World grain production
Production Use
Source: USDA WASDE, August 2013
390400410420430440450460470480490500
09/10 10/11 11/12 12/13 13/14
Million metric tons
World grain ending stocks
Ending stocks
Last years BIG decline (USDA WASDE Sept 12, 2013)Production (mil mt) 2011/12 2012/13 changeCoarse Grains 1154.0 1128.5 ‐25.5USA 323.7 286.0 ‐37.7FSU‐12 78.7 69.0 ‐9.7EU‐27 150.0 145.1 ‐4.9
Wheat 697.2 655.3 ‐41.9FSU‐12 115.0 77.2 ‐37.8EU‐27 and Aus. 168.0 155.1 ‐12.9USA 54.4 61.8 7.4
This years BIGGER increase (USDA WASDE Sept 12, 2013)Production (mil mt) 2012/13 2013/14 e changeCoarse Grains 1128.5 1245.5 117.0USA 286.0 367.8 81.8FSU‐12 69.0 85.2 16.2EU‐27 145.1 156.2 11.1
Wheat 655.3 708.9 53.6FSU‐12 77.2 108.0 30.8EU‐27 and Aus. 155.1 168.4 13.3USA 61.8 57.5 ‐4.3
Recent corn price movements
FAPRI baseline 13/14 $4.64
Things happen, recent soybeans…..
FAPRI baseline 13/14 $11.33
Success in growth, food consumption/security, rural incomes
Rising constraints raise issue on how sustainable growth isLand, water, labor are in tight supplyReal exchange rates are risingIncreasing government support
How much will demand grow?? Slowing population growth, but rapid urbanizationHigh income growth continuesConsumption base – room to grow but nearing saturation?
12
China: The setting for the next decade (FAO view)
China grain and oilseed imports
02468101214161820
2006
2008
2010
2012
2014
2016
2018
2020
2022
Million metric tons
Grain imports
Coarse grains Wheat Rice
Source: OECD/FAO outlook, June 2013
0
20
40
60
80
100
120
2006
2008
2010
2012
2014
2016
2018
2020
2022
Million metric tons
Oilseed sector imports
Oilseeds Meals Oils
Global crop use per capita
0
20
40
60
80
100
120
140
1990
1994
1998
2002
2006
2010
Kilo
gram
s per cap
ita
MaizeWheatRiceSoybeans
2010‐12 average
Kg/yr
Annualgrowth rateKg/yr
Percent growth rate
Maize 123 1.6 1.3%
Wheat 96 ‐0.2 ‐0.2%
Milledrice
65 0.0 0.0%
Soybeans 37 0.8 2.3%
Source: author calculations from PSD Online data. Trend is simple linear trend fit over 1990-2012.
Increases in per-capita feed use account for about 39% of the increase in per-capita use since 1990. Ethanol and other uses account for the rest.
Increased use of soymeal in livestock rations and soyoil in both food and industrial uses contributed to the growth in per-capita use.
World grain and oilseed production and use per capita
310
320
330
340
350
360
370
380
390
4001980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Kilo
gram
s per cap
ita
ProductionUse
Sources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
World grain and oilseed production and use per capita minus US ethanol
310
320
330
340
350
360
370
380
390
4001980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Kilo
gram
s per cap
ita
ProductionUseMinus US ethanolSources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
World less China grain and oilseed production and use per capita
310
320
330
340
350
360
370
380
390
400
4101980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Kilo
gram
s per cap
ita
Production
Use
Minus US ethanol
Sources: Westhoff calculations based on USDA PSD Online, June 2013 and U.S. Census Bureau estimates of world population.
U.S. maize ethanol & coproductuse
0
20
40
60
80
100
120
140
160
Million metric tons
FAPRI‐MU Jan.USDA Jul.
Sources: FAPRI-MU baseline, January 2013 and USDA WASDE, July 2013.
Increase from 2005/06 to 2010/11: 87 mil. mt
Increase from 2010/11 to 2022/23: 14 mil. mt
China real GDP per capita
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
2013 dollars per cap
ita
GDP/cap.
Source: IHS Global Insight, Jan. 2013
Doubled from 2004-2012 (10%/yr.)
Doubles again from 2012-2022 (7%/yr.)
20
China: Per capita meat + fish consumption rises to OECD levels
0102030405060708090100
1995 2000 2005 2010 2015 2020
Kg/pe
rson
/yea
r
China meat OECD meat China meat + fish OECD meat + fish
Source: Holger Matthey, FAO, based on the OECD/FAO Agricultural Outlook, June 2013
AgendaSome perspectiveOn the near termOn the longer term
Market outlook as of August 2013
Real GDP growth rates
Source: IHS Global Insight, July 2013
Oil and Natural Gas prices
Source: IHS Global Insight, July 2013
U.S. corn pricesFarm and futures prices
0
1
2
3
4
5
6
7
8
06/07 08/09 10/11 12/13 14/15 16/17 18/19
Dollars per bus
hel
FAPRI farm priceDec. futures price
Sources: FAPRI-MU baseline, Aug. 2013; CME Dec. contracts, Oct. 17, 2013
U.S. soybean pricesFarm and futures prices
0
2
4
6
8
10
12
14
16
06/07 08/09 10/11 12/13 14/15 16/17 18/19
Dollars per bus
hel
FAPRI farm priceNov. futures price
Sources: FAPRI-MU baseline, Aug. 2013; CME Nov. contracts, Oct. 17, 2013
Sharp Price Drop Expected After 3 Years of Low Yield
0
50
100
150
200
250
300
350
400
1990 1995 2000 2005 2010 2015 2020
Corn, #2 yellow, U.S. Gulf
Barley, Alberta
Sorghum, #2 yellow, U.S. Gulf
Feed grains prices, $/mt
Farmer expectations and FAPRI’s
Source: Farmer meeting in the midwest
August, 2013
FAPRI Outlook
$180/tonne $275/tonne
Improved Supplies After 2012 Ease Wheat Price
0
50
100
150
200
250
300
350
400
1990 1995 2000 2005 2010 2015 2020
Hard Red WinterSoft Red Winter
Wheat price, U.S. Gulf, $/mt
Oilseed Prices Stay Strong But Not at Record Levels
0
100
200
300
400
500
600
700
1990 1995 2000 2005 2010 2015 2020
Soybeans, #2 yellow, Central Illinois
Rapeseed, cif Hamburg
Oilseed prices, $/mt
Doing stochastic simulationsNeed to select a set of exogenous variables and get joint distributions
US crop yieldsEnergy and input pricesDemand equation errorsStock equation errorsExport equation errors which combine all foreign origin shocks such as supply, demand and exchange rate shocks
500 Random draws from these to generate 500 scenarios(Meyer et al paper in JIATD)
U.S. corn yields and pricesAverage and 3 of the 500 stochastic outcomes
100110120130140150160170180190200
2009 2011 2013 2015 2017
Bush
els p
er acre
U.S. corn yield
Actual/avg. Outcome #26Outcome #250 Outcome #375
Source: FAPRI-MU stochastic baseline, Jan. 2013
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2009 2011 2013 2015 2017Dollars per bus
hel
U.S. corn prices
Actual/avg. Outcome #26Outcome #250 Outcome #375
Some alternative US corn price outcomes
Source: Rough calculations based on FAPRI‐MU projections August 2013 and January 2013 stochastic baseline
U.S. farm level corn price
Source: Rough calculations based on FAPRI‐MU projections August 2013 and January 2013 stochastic baseline
AgendaSome perspectiveOn the near termOn the longer term
Market outlook as of August 2013Possible impacts of policy developments
Congressional farm bill proposalsBoth would eliminate many existing farm programs
Direct payments, countercyclical payments, ACREDairy price supports and MILC payments
Allocation of “savings”Reduce federal deficitCreate new programs that pay farmers when prices or revenues fall below a triggerHouse and Senate have different proposals for these new programs
Major difference on SNAP (food stamps)Senate makes relatively small cuts (<1%) House makes about $39 billion in cuts over 10 years (10x Senate cuts)
Renewable Fuel StandardEnergy Independence and Security Act
Establishes annual Renewable Fuel StandardMandates for biodiesel, cellulosic biofuels, all advanced biofuels and a totalNo specific “corn ethanol mandate”
EPA can waive portions of mandateHave done so for cellulosic, but without changing other mandatesFor 2014, expected to change other mandates, tooPerhaps (for first time) including share that can be met with corn ethanol
Renewable fuel standard, ethanol use and the blend wall
0
5
10
15
20
25
30
2009 2011 2013 2015 2017
Billion gallons
Total RFSGap for corn ethanol10% of fuel use
Source: FAPRI-MU baseline, Aug. 2013., based on provisions of the EISA and projected levels of motor gasoline use
Possible impacts of policiesUS farm bill changes unlikely to have much market impact but RFS mightEU policy changes may reduce production but also small impactLittle chance for Doha Round changesLarger impacts from energy prices, weather, and macro developments
Alternative views on oil prices
0
20
40
60
80
100
120
140
160
Dollars per barrel
IHS Global Insight*OECD/FAO**June futures, 5/8***BFAP assumption
*U.S. refiner’s acquisition price, Jan. 2013 estimate
**Brent crude as reported in OECD/FAO outlook publication
***Brent crude futures, June contracts, 5 August 2013.
Recent FAPRI analysesAugust baseline update:
http://www.fapri.missouri.edu/outreach/publications/2012/FAPRI_MU_Report_06_12.pdf
Senate and House Ag. Committee farm bill:http://www.fapri.missouri.edu/outreach/publications/2012/FAPRI_MU_Report_05_12_Rev.pdf
RFS waiver options:http://www.fapri.missouri.edu/outreach/publications/2012/FAPRI_MU_Report_11_12.pdf
Or just visit www.fapri.missouri.edu to see what’s new
Thank you!