ag outlook webinar · ag outlook webinar, may 15, 2020 beef & pork production declined sharply...
TRANSCRIPT
May 15, 2020
Ag Outlook Webinar
James Mintert, Director, Center for Commercial Agriculture
Michael Langemeier, Associate Director, Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
Beef & Pork Production Declined Sharply in AprilBut Showed Signs of Rebounding Recently
0.700.750.800.850.900.951.001.051.101.151.20
01/11 02/29 04/18 06/06 07/25 09/12 10/31 12/19
Billion Pounds
Week Ending
U.S. Total Beef and Pork ProductionWeekly, Federally Inspected Plants
201920205 Yr Avg
Source: USDA & LMIC
Ag Outlook Webinar, May 15, 2020
And Poultry Production Has Rebounded
0.85
0.95
1.05
1.15
1.25
1.35
1/11 2/29 4/18 6/6 7/25 9/12 10/31 12/19
Billion Lbs
Week Ending
U.S. Total Poultry ProductionWeekly, Federally Inspected Plants
2019 2020 5 Yr Avg
Source: USDA & LMIC Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
Annual Retail Meat Supplies Tighten Compared to 2019But Expected to Remain Ample
195
200
205
210
215
220
225
230
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Pounds
Year
Annual Red Meat & Poultry Supplied to U.S. ConsumersPer Capita, 1990-2020
Purdue Center for Commercial AgricultureSource: USDA & LMIC, 2020 USDA Forecast
Ag Outlook Webinar, May 15, 2020
Wholesale Pork Values Rose Sharply As Pork Production Declined
50
60
70
80
90
100
110
120
JAN APR JUL OCT
$ Per Cwt.WEEKLY PORK CUTOUT VALUE
Avg. 2014-18 2019 2020
Source: USDA-AMS, Compiled by LMIC
Ag Outlook Webinar, May 15, 2020
Hog Prices Bottomed in April & Have Climbed Sharply Over Last 4 Weeks
40
50
60
70
80
90
100
JAN APR JUL OCT
$ Per CwtBASE SLAUGHTER HOG PRICES
National, Weighted Average Carcass Price, Weekly
Avg. 2014-18 2019 2020
Source: USDA-AMS & LMIC
Ag Outlook Webinar, May 15, 2020
Slumping Beef Production Pushed Boxed Beef Values Up Sharply
200
250
300
350
400
450
500
JAN APR JUL OCT
$ Per Cwt.
BOXED BEEF CUTOUT VALUE
Choice 600-900 Lbs., Carcass, Negotiated, Weekly
Avg. 2014-18 2019 2020
Source: USDA-AMS & LMIC
Ag Outlook Webinar, May 15, 2020
Fed Cattle Prices Up Nearly $10 Since Bottoming in April
95100105110115120125130135140145
JAN APR JUL OCT
$ Per Cwt.
SLAUGHTER STEER PRICES
5 Market Weighted Average, Weekly
Avg. 2014-18 2019 2020
Source: USDA-AMS & LMIC
Ag Outlook Webinar, May 15, 2020
USDA Forecasts Record Large Corn Production in 2020Assumes Farmers Follow Planting Intentions & Trend Yields
15.15
14.6114.34
13.66
15.99
10
11
12
13
14
15
16
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Billion Bu.
Harvest Year
Total U.S. Corn Production
Source: USDA-WASDE Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
Planting Intentions & Trend Yield Would Push 2020 Soybean Production Up 16% From 2019
4.43
3.56
4.12
2.5
3.0
3.5
4.0
4.5
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Billion Bu.
Harvest Year
U.S. Soybean Production
Source: USDA-WASDE Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
2nd Largest Corn Acreage in Post WWII Era
97.30
89.70
96.99
70
75
80
85
90
95
100
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Million Acres
Harvest Year
U.S. Corn Planted Acreage
Source: USDA WASDE & Prospective Plantings Purdue Center for Commercial Agriculture
2/3 of corn acreage estimated to have been planted as of Sunday, 5.10.20
Ag Outlook Webinar, May 15, 2020
2020 Soybean Planting Intentions7.4 Million Acres Above 2019’s Acreage
89.2
76.1
83.5
60
65
70
75
80
85
90
95
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Million Acres
Harvest Year
U.S. Soybean Planted Acreage
Source: USDA Purdue Center for Commercial Agriculture
38% of soybean acreage estimated to have been planted as of Sunday, 5.10.20
Ag Outlook Webinar, May 15, 2020
March Planting Intentions vs. What Farmers Actually Plant
March Planting Intentions
• Corn: 97 million acres
• Soybeans: 83.5 million acres
• But conditions have changed since March 1st
• Will farmers alter their plans from March intentions?
Ag Outlook Webinar, May 15, 2020
Soybean to Corn Price RatioIllinois Cash Prices, Weekly, January – May 2020
2.002.102.202.302.402.502.602.702.802.90
01/0
2/20
01/0
9/20
01/1
6/20
01/2
3/20
01/3
0/20
02/0
6/20
02/1
3/20
02/2
0/20
02/2
7/20
03/0
5/20
03/1
2/20
03/1
9/20
03/2
6/20
04/0
2/20
04/0
9/20
04/1
6/20
04/2
3/20
04/3
0/20
05/0
7/20
Source: LMIC
Ratio
Prices have shifted in favor of soybeans since late winter
How Many Acres Intended for Corn Will Shift to Soybeans?
Ag Outlook Webinar, May 15, 2020
What About Demand for Corn? How Long Will Weak Demand Environment Persist
Key Corn Demand Issues
1. Ethanol Demand
2. Export Demand
3. Feed Demand
Ag Outlook Webinar, May 15, 2020
Ethanol Margins Have Been Improving Since Late March…Will They Continue to Improve?
$0.36
($0.12)
$0.16
($0.20)
($0.10)
$0.00
$0.10
$0.20
$0.30
$0.40
9/3/19 10/3/19 11/2/19 12/2/19 1/1/20 1/31/20 3/1/20 3/31/20 4/30/20
$/Gallon
Date
Estimated Daily Ethanol Plant MarginsReturn Over Operating Costs, $/Gallon of Ethanol
September 3, 2019-May 8, 2020
Source: CARD, Iowa State University Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
USDA Reduced Expected Corn Usage for Ethanol in 2019But Forecasts A Recovery in Ethanol Demand During 2020 Crop Year
During 2020 Marketing Year?
4.955.20
0.0
1.0
2.0
3.0
4.0
5.0
6.0
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Billion Bu.
Harvest Year
Corn Used for Ethanol
Source: USDA WASDE Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
Weak Ethanol Demand Pressured Corn Basis Levels Lower
Ag Outlook Webinar, May 15, 2020
USDA Projecting 2019 Crop Exports Will Fall 14% Below 2018’s & Then Rebound
Above 2018’s in 2020 Crop Year…Implies Demand Recovery in Importing Countries
2.44
2.07
1.78
2.15
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Billion Bu.
Harvest Year
U.S. Corn Exports .
Source: USDA-WASDE Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
USDA Projecting Strong Feed Demand for Both 2019 & 2020 Crops
6.16
4.32
5.70
6.05
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
00 02 04 06 08 10 12 14 16 18 20
Billion bu.
Harvest Year
U.S. Feed & Residual Corn Usage
Source: USDA WASDE
Ag Outlook Webinar, May 15, 2020
Corn SummaryCorn Production in 2020 Likely To Set A New Record
Ethanol Demand Collapsed in March-April, How Rapidly Will It Recover?
• Weak Ethanol Demand Could Linger Until Economy Shows Signs of Recovery
2019 Crop Exports Forecast to Fall 14% Below 2018’s
• USDA’s Forecast of 21% Increase in Exports During 2020 Crop Year Could Be Optimistic
Big Question Marks Surround Rate of Export Recovery and Ethanol Usage
Ag Outlook Webinar, May 15, 2020
Rising Ending Stocks Spells Weaker Prices$3.20 2020 MYA Price Forecast, Lowest MYA Since 2006
Weak Ethanol Demand Could Push 2019 Carryover Up Near 17%
15%
22%
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
0%
3%
6%
9%
12%
15%
18%
21%
24%
10 11 12 13 14 15 16 17 18 19 20
$/bushel% of Usage
Harvest Year
Corn Price vs. U.S. Ending Stocks . Ending Stocks as % of Total Usage .
Corn Ending StocksCorn Avg Farm Price
Source: USDA WASDE
Ag Outlook Webinar, May 15, 2020
What About Demand for Soybeans? Uncertain International Trade Environment Is Key
Key Soybean Demand Issues
1. Export Demand
2. Crush Demand
Ag Outlook Webinar, May 15, 2020
USDA Expects Soybean Exports to Rebound in 2020 to Near 2 Billion Bushels22% Increase From 2019 Crop Year’s Forecast
2.13
1.751.68
2.05
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Billion Bu.
Crop Year
U.S. Soybean Exports
Source: USDA Purdue Center for Commercial Agriculture
Ag Outlook Webinar, May 15, 2020
Soybean Summary
• 2020 Could Be Largest Crop Since 2015
• Exports Running Below Pace Needed to Hit Target
• Domestic Crush Demand Supported By Large Livestock Inventories
• USDA Forecasting Strong Recovery in 2020 Crop Year Exports…Will Export Demand Be That Strong?
Ag Outlook Webinar, May 15, 2020
$4.00
$5.50
$7.00
$8.50
$10.00
$11.50
$13.00
$14.50
0%
5%
10%
15%
20%
25%
05 07 09 11 13 15 17 19
MYA PriceStocks %
Year
Soybean Price vs. Ending StocksEnding Stocks as a % of Total Usage
Ending Stocks (%)
Avg Farm Price
Source: USDA,WASDE Purdue Center for Commercial Agriculture
2019 Ending Stocks Could Be Larger Than Projected Previously$8.20 MYA Projection for 2020 Is Lowest MYA Since 2006
Will Exports Recover Enough to Push Carryover Down in 2020?
Ag Outlook Webinar, May 15, 2020
Net Return ProjectionsDefinitions
• Net Farm Income– Gross revenue minus cash expenses and depreciation; excludes operator and
family labor, and opportunity costs
• Net Return to Land– Gross revenue minus cash expenses (except rent), depreciation, and opportunity
costs (except opportunity cost on owned land)
• Earnings– Gross revenue minus cash expenses, depreciation, and opportunity costs
Ag Outlook Webinar, May 15, 2020
-$200-$150-$100
-$50$0
$50$100$150$200$250$300
07 08 09 10 11 12 13 14 15 16 17 18 19P 20P
Net Farm Income Sources, Corn/Soybean Rotation ($ per Acre)West Central Indiana Case Farm
Government Payments Crop Insurance Crop Net Returns Net Farm Income
Estimated 2020 Gov’t Payments Does Not Include Possible COVID-19 Payments
Ag Outlook Webinar, May 15, 2020
33
-110-$150
-$100
-$50
$0
$50
$100
$150
$200
$250
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019P2020P
Difference in Earnings per AcreWest Central Indiana (Corn Minus Soybeans)
Ag Outlook Webinar, May 15, 2020
Estimated ARC-CO and PLC Payments per AcreWhite County, Indiana
Corn: PLC
2019: $13
2020: $65
Soybeans: ARC-CO
2019: $28
2020: $14
Ag Outlook Webinar, May 15, 2020
Contribution Margin
• Gross Revenue – Variable Production Costs
• Same as Return Over Variable Cost
Ag Outlook Webinar, May 15, 2020
2020 Budget Comparisons for CornSource: Purdue Crop Cost & Return Guide
Budget Item January 2020($ per acre)
May 13, 2020($ per acre)
Difference($ per acre)
Crop Revenue $781 $675 -$106
ARC-CO/PLC $6 $40 $34
Combined Revenue $787 $715 -$72
Variable Costs $436 $434 -$2
Contribution Margin $351 $281 -$70
ARC-CO/PLC Payments are based upon base acres and are assumed to be the same for corn and soybeans
Ag Outlook Webinar, May 15, 2020
2020 Budget Comparisons for SoybeansSource: Purdue Crop Cost & Return Guide
Budget Item January 2020($ per acre)
April 20, 2020($ per acre)
Difference($ per acre)
Crop Revenue $579 $533 -$46
ARC-CO/PLC $6 $40 $34
Combined Revenue $585 $573 -$12
Variable Costs $247 $244 -$3
Contribution Margin $338 $329 -$9
ARC-CO/PLC Payments are based upon base acres and are assumed to be the same for corn and soybeans
Ag Outlook Webinar, May 15, 2020
Corn Prices Required to Produce Per Acre Returns Equivalent to SoybeansSoybean Price Low Productivity
(C=133; SB=44)Avg. Productivity(C=165; SB=54)
High Productivity(C=198; SB=65)
$7.50 $3.75 $3.66 $3.52$8.00 $3.92 $3.82 $3.68$8.50 $4.08 $3.99 $3.85$9.00 $4.25 $4.15 $4.01$9.50 $4.41 $4.32 $4.17
Soybeans More Profitable vs. Continuous Corn in Eastern Corn Belt
Ag Outlook Webinar, May 15, 2020
Corn Prices Required to Produce Per Acre Returns Equivalent to SoybeansSoybean Price Low Productivity
(C=141; SB=44)Avg. Productivity(C=176; SB=54)
High Productivity(C=211; SB=65)
$7.50 $3.42 $3.34 $3.21
$8.00 $3.58 $3.49 $3.36
$8.50 $3.73 $3.64 $3.52
$9.00 $3.89 $3.80 $3.67
$9.50 $4.04 $3.95 $3.83
Soybeans Look More Attractive Than Rotation Corn in Eastern Corn BeltWill Farmers Shift Some Acreage Intended for Corn to Soybeans
Ag Outlook Webinar, May 15, 2020
$0$50
$100$150$200$250$300$350$400$450$500
07 08 09 10 11 12 13 14 15 16 17 18 19 20P
Cash Rent and Net Return to Land, West Central IndianaNet Return to Land Cash Rents
May 15, 2020
Next Ag Outlook WebinarJune 12, 2020
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