fsa-epas 1 food aid costs and prospects ifadc kansas city june 29, 2011 pete riley economic and...
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FSA-EPAS1
Food Aid Costs and Prospects IFADC
Kansas City June 29, 2011
Pete RileyEconomic and Policy Analysis Staff
USDA/Farm Service Agency
Washington, DC 20250
202-720-7787
FSA-EPAS
Wheat Supplies Ample, Although There are Quality Concerns
2
percent
FSA-EPAS
Rice Ending Stocks in 2011/12 Forecast 21 million MT Higher Than Recent Low in 2004
3
percent
0
20
40
60
80
100
120
140
160
0
5
10
15
20
25
30
35
40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Mil MT
Global Rice Stocks and Stock-to-Use Ratio
stocks s/u ratio
FSA-EPAS
Current Supply Concerns Mainly Focus on Corn
4
percent
0
50
100
150
200
250
300
0
5
10
15
20
25
30
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Mil MT
Global Coarse Grains Stocks and Stocks-to-Use Ratio
stocks s/u ratio
FSA-EPAS5
Commodity Markets are Volatile: An Example from Dairy
Average U.S. Farm Price for Milk, 1980-2011F
10
12
14
16
18
20
22
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
$ per cwt.
FSA-EPAS6
Despite the Highest Stocks in 23 Years, U.S. Wheat Prices Doubled Last Season
$3
$4
$5
$6
$7
$8
$9
$10
SRW
HRW
$ per bu.
Daily Cash Prices from June 2010
FSA-EPAS
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2004 2005 2006 2007 2008 2009 2010
Commodity Freight
Food Aid Cost Data Summary, 2004-2010(for bulk and processed commodities combined)
Costs Quantities
7
Mil $
Source: FSA/KC Commodity Office
1000 MT
FSA-EPAS
Bulk vs. Processed Commodity Volume by Year
Bulk
0
500
1,000
1,500
2,000
2,500
3,000
2004 2005 2006 2007 2008 2009 2010
Processed
0
500
1,000
1,500
2,000
2,500
3,000
2004 2005 2006 2007 2008 2009 2010
8
1000 MT 1000 MT
FSA-EPAS
Bulk vs. Processed Commodity Costs by Year
Bulk Processed
9
Mil $ Mil $
FSA-EPAS
Freight Rates Have Dropped from 2008 Highs
Bulk freight accounted for 35-40
percent of total costs
$0
$50
$100
$150
$200
$250
2004 2005 2006 2007 2008 2009 2010
Bulk, average $/MT
Processed freight accounted for 25-30
percent of total costs
$0
$50
$100
$150
$200
$250
2004 2005 2006 2007 2008 2009 2010
Processed, average $/MT
10
FSA-EPAS
Cost Analysis and ProjectionsMethodology and Caveats
• Constructed simple models for key commodities to analyze relationship between food aid commodity costs and market prices.
• Value of results vary by commodity.
• Projections based on USDA baseline market prices for 5 years out.
• Results need to be interpreted with caution, but should provide some rough indications of future trends.
Note: These are not official USDA projections!
11
FSA-EPAS
Food Aid CostsWheat History and 5-Year Projection *
$0
$50
$100
$150
$200
$250
$300
$350
$400
2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016
* Not official USDA projections
12
$/MT
FSA-EPAS
Food Aid CostsCorn History and 5-Year Projection
13
$/MT
FSA-EPAS
Food Aid CostsVegetable Oil History and 5-Year Projection
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016
14
$/MT
FSA-EPAS
Food Aid CostsCorn Soy Blend History and 5-Year Projection
$0
$100
$200
$300
$400
$500
$600
2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016
15
$/MT
FSA-EPAS
$0
$100
$200
$300
$400
$500
$600
2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016
Freight rate assumptions: flat for first out year, then increasing 2 percent per year.
A Look at Commodity Plus Freight Costs: An Example for Wheat
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$/MT
FSA-EPAS17
Very Wet and Flooding in North, Drought Across the South and Southern Plains
FSA-EPAS
Near Term Risk Factors
Higher Prices
• More flood and/or drought damage
• Poor summer growing weather
• Limited early corn from the South and late Midwest crop
• Late summer bidding war for old crop corn
• Bigger corn imports by China
Lower Prices
• Softer oil prices
• Reduced economic growth
• Less investor interest in commodities
• Strong global acreage response to high prices
• Favorable summer weather
• Higher-than-expected yields
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