soybean profitability & market prospects

SOYBEAN PROFITABILITY & MARKET PROSPECTS TOPEKA, KANSAS

FEBRUARY 12, 2014

Daniel O’Brien, Extension Ag Economist

Kevin Herbel, Ext Ag Economist/KFMA

SOYBEAN PROFITABILITY & MARKET PROSPECTS PITTSBURG, KANSAS

FEBRUARY 12, 2014

Daniel O’Brien, Extension Ag Economist

KSU SOYBEAN BUDGETS FOR NORTHEAST KANSAS

SOYBEAN PROFITS: NORTHEAST KS KANSAS FARM MANAGEMENT ASSOCIATION (2001-2012)

$1.31

($0.37)

$1.86 $1.44 $1.56

$0.55

$3.66 $3.62 $3.87

$3.38

$4.62

$2.99

$2.97

$1.12

$0.45

$4.48

$3.37 $3.13

($2.00)

($1.00)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

Pro

fit

/ Lo

ss (

$/b

u)

Soybeans NT Soybeans Corn NT Corn Sorghum Wheat

SOYBEAN ENTERPRISE BUDGETS NORTHEAST KANSAS KFMA (2007-2011, 2012)

Farm Management Guide – KSU Ag Economics MF-570

2014 Soybean Budget, Northeast Kansas

INCOME PER ACRE Yield Level, bu/ac A. Yield per acre 39 47 55 B. Price per bu. $11.23 $11.23 $11.23 F. Returns/acre ((A x B) + C + D + E) $437.97 $527.81 $617.65 COSTS PER ACRE 1. Seed $60.20 $60.20 $60.20 2. Herbicide 36.04 36.04 36.04 4. Fertilizer and Lime 42.76 49.93 57.55 6. Crop Insurance* 12.51 16.19 19.87 8. Miscellaneous 8.50 8.50 8.50 9. Custom Hire / Machinery Expense 85.58 89.26 92.94 10. Non-machinery Labor 30.00 30.00 30.00 12. Land Charge / Rent 109.00 145.00 181.00 G. SUB TOTAL $384.60 $435.12 $486.10 13. Interest on 1/2 Nonland Costs 8.96 9.43 9.92 H. TOTAL COSTS $393.55 $444.55 $496.01 I. RETURNS OVER COSTS (F - H) $44.42 $83.26 $121.44 J. TOTAL COSTS/BU (H/A) $10.09 $9.46 $9.02 K. RETURN TO ANNUAL COST (I+13)/G 13.88% 21.30% 27.06%

2014 KSU Soybean Budget – NE KS MF570 TABLE 1. Production Inputs – Soybeans MF-570

Yield Level (bu)

ITEM 39 47 55 Cost per Unit

Seed, lbs / acre 140 140 140 $0.43 /1,000

Fertilizer:

N (anhydrous, 82-0-0) 0 0 0 $0.39 /lb

N (28-0-0 or 32-0-0) 0 0 0 $0.55 /lb

P (Weighted liquid & dry) 28 34 40 $0.52 /lb

K 46 55 65 $0.45 /lb

Lime 500 500 500 $0.015 /lb

Herbicide

Glyphosate+Dicamba (Burndown) $9.61 $9.61 $9.61 $ /ac

Authority XL & Fierce (Preemerge) $19.90 $19.90 $19.90 $ /ac

Roundup Weather Max (Post) $6.53 $6.53 $6.53 $ /ac

2014 KSU Soybean Budget – Northeast KS MF570 TABLE 2. Machinery & Land Resources – Soybeans Yield Level (bu) ITEM 39 47 55 Custom Rate

Tillage/Planting/Chemical Applications: No-till Drill 1 1 1 $22.31 /ac Herbicide application 3 3 3 $7.26 /ac

Harvest Costs

Base charge 1 1 1 $32.05 /ac

Extra charge for yields over 34 34 34 $0.25 /bu

Hauling 39 47 55 $0.21 /bu

Non-Machinery Labor, Land & Interest Costs

Non-machinery labor 2.00 2.00 2.00 $15.00 /hr Land charge/rent per acre $109.00 $145.00 $181.00 Interest on capital 6.5%

KSU SOYBEAN BUDGETS FOR SOUTHEAST KANSAS

SOYBEAN PROFITS: SOUTHEAST KS KANSAS FARM MANAGEMENT ASSOCIATION (2001-2012)

$0.76 $0.15

$2.19

$1.33 $1.17 $0.71

$3.50 $3.62 $4.05 $4.25

$2.99

$4.54

$1.32 $0.54

$2.96

$0.91 $0.58

($0.57)

$4.57

$3.73

$4.76

$6.46

$2.24

$4.09

($1.00)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

Pro

fit

/ Lo

ss (

$/b

ush

el)

Soybeans DblC Soybeans Corn Sorghum Wheat

SOYBEAN ENTERPRISE BUDGETS SOUTHEAST KANSAS KFMA (2007-2012)

2014 Soybean Budget, Southeast Kansas INCOME PER ACRE Yield Level, bu/ac A. Yield per acre 27 36 45 B. Price per bu. $11.06 $11.06 $11.06 F. Returns/acre ((A x B) + C + D + E) $298.62 $398.16 $497.70 COSTS PER ACRE 1. Seed $55.90 $55.90 $60.20 2. Herbicide 31.83 31.83 31.83 4. Fertilizer and Lime 29.80 37.42 46.01 6. Crop Insurance* 7.07 11.37 15.66 8. Miscellaneous 7.00 7.00 7.00 9. Custom Hire / Machinery Expense 72.37 102.21 105.99 10. Non-machinery Labor 7.50 7.50 7.50` 12. Land Charge / Rent 54.00 72.00 90.00 G. SUB TOTAL $265.47 $325.22 $364.19 13. Interest on 1/2 Nonland Costs 6.87 8.23 8.91 H. TOTAL COSTS $272.34 $333.45 $373.10 I. RETURNS OVER COSTS (F - H) $26.28 $64.71 $124.60 J. TOTAL COSTS/BU (H/A) $10.09 $9.26 $8.29 K. RETURN TO ANNUAL COST (I+13)/G 12.49% 22.43% 36.66%

2014 KSU Soybean Budget – SE Kansas MF994 TABLE 1. Production Inputs – Soybeans MF-994 Yield Level (bu)

ITEM 27 36 45 Cost/Unit

Seed, lbs / acre 130 130 130 $0.43 /1,000

Fertilizer:

N (anhydrous, 82-0-0) 0 0 0 $0.39 /lb

N (28-0-0 or 32-0-0) 0 0 0 $0.55 /lb


K 32 42 53 $0.45 /lb

Lime 333 333 33 $0.015 /lb

Herbicide

Glyphosate+2, 4-D (Burndown) $3.97 $3.97 $3.97 $ /ac Authority XL, Fierce, Prefix (Preemerge) $22.97 $22.97 $22.97 $ /ac

Glyphosate (Postemerge) $4.89 $4.89 $4.89 $ /ac

TABLE 2. Machinery & Land – Soybeans MF-570

Yield Level (bu) ITEM 27 36 45 Custom Rate

Tillage/Planting/Chemical Applications: Chisel 0 1 1 $14.97 /ac Plant 1 1 1 $15.63 /ac Fertilizer application 1 1 1 $6.04 /ac Herbicide application 3 3 3 $6.23 /ac

Harvest Costs

Base charge 1 1 1 $26.88 /ac

Extra charge yields over 29 29 29 $0.23 /bu

Hauling 27 36 45 $0.19 /bu

Non-Machinery Labor, Land & Interest Costs Non-machinery labor 0.50 0.50 0.50 $15.00 /hr Land charge/rent per acre $54.00 $72.00 $90.00 Interest on capital 6.5%

2014 Double Crop Soybean Budget, SE KS INCOME PER ACRE Yield Level, bu/ac A. Yield per acre 17 22 27 B. Price per bu. $11.12 $11.12 $11.12 F. Returns/acre ((A x B) + C + D + E) $189.00 $244.59 $300.17 COSTS PER ACRE 1. Seed $64.50 $64.50 $64.50 2. Herbicide 10.40 10.40 10.40 4. Fertilizer and Lime 15.24 20.02 24.80 6. Crop Insurance* 0.00 0.00 0.00 8. Miscellaneous 7.00 7.00 7.00 9. Custom Hire / Machinery Expense 65.45 66.45 67.45 10. Non-machinery Labor 16.88 16.88 16.88 12. Land Charge / Rent 0.00 0.00 0.00 G. SUB TOTAL $179.47 $185.25 $191.03 13. Interest on 1/2 Nonland Costs 5.83 6.02 6.21 H. TOTAL COSTS $185.30 $191.27 $197.24 I. RETURNS OVER COSTS (F - H) $3.70 $53.32 $102.94 J. TOTAL COSTS/BU (H/A) $10.90 $8.69 $7.31 K. RETURN TO ANNUAL COST (I+13)/G 5.31% 32.03% 57.13%

2014 KSU Double Crop Soybeans – SE KS

TABLE 1. Production Inputs – Double Crop Soybeans Yield Level (bu)

ITEM 17 22 27 Cost / Unit

Seed, lbs / acre 150 150 150 $0.43 /1,000

Fertilizer:

N (anhydrous, 82-0-0) 0 0 0 $0.39 /lb

N (28-0-0 or 32-0-0) 0 0 0 $0.55 /lb


K 20 26 32 $0.45 /lb

Lime 0 0 0 $0.015 /lb

Herbicide Glyphosate+Sharpen (Burn down) $5.52 $5.52 $5.52 $ /ac

Glyphosate (Preemerge) $4.89 $4.89 $4.89 $ /ac

Table 2. Machinery/Land – Double Crop Soybeans

Yield Level (bu) ITEM 27 36 45 Custom Rate

Tillage/Planting/Chemical Applications: No-till Plant 1 1 1 $20.19 /ac Herbicide application 2 2 2 $6.22 /ac

Harvest Costs Base charge 1 1 1 $29.42 /ac

Extra charge for bu over 30 30 30 $0.24 /bu

Hauling 17 22 27 $0.20 /bu

Non-Machinery Labor, Land & Interest Costs

Non-machinery labor 1.13 1.13 1.13 $15.00 /hr Land charge/rent per acre $0.00 $0.00 $0.00 Interest on capital 6.5%

SOYBEAN MARKETS

“Current” MAR 2014 eSoybeans Thru 2/21/2014

$13.86½ /bu

“Next Crop” NOV 2014 eSoybeans Thru 2/21/2014

$11.60¼ /bu

$13.77¾ Sep. 3, 2013 $13.86½

$12.60 Jan. 30, 2014 $11.74 Aug. 7, 2013

$11.60¼

$10.88¼ Jan. 30, 2014

$13.15 Feb. 5, 2013

$13.00 June 3, 2013

SOYBEAN MARKET “DRIVERS”

¢ “Tight” U.S. Soybean Supply/Demand & “Strong” Chinese/World imports in “Old Crop” MY 2012/13

¢ Large 2013 U.S. Soybean Crop: 3.289 bln bu ð versus 2011 (3.09 bln bu) & 2012 (3.03 bln bu)

¢ ñ 2014 U.S. & South American soybean crops

¢ òñ Soybean $’s thru Winter-Spring 2014 depending on a) 2014 South American production,

b) Chinese imports, & c) 2014 U.S. soybean acres

SOYBEAN FUTURES & CASH$ TOPEKA, KS CASH BIDS & CROP INSURANCE, FEBRUARY 24, 2014

$13.87 $13.75 $13.58 $13.11 $12.22

$11.60 $13.52

$10.90 $11.29

$8.47 $7

$9

$11

$13

$15

$17 F

eb 1

4

Mar

14

Ap

r 14

May

14

Ju

ne

14

Ju

ly 1

4

Au

g 14

Sep

14

Oct

14

Nov

14

$ p

er b

ush

el

Futures $s Cash/FC RMA Feb Soy$ Soy-Ins 75% APH

An “Inverted” Market with no carrying charges

CBOT SOYBEAN FUTURES MONTHLY CONTINUOUS CHART: DECEMBER 2004 – JANUARY 2014

MAR-2014 $13.86½ Feb. 24, 2014 $13.86

$12.50

≈ $10.70

≈ $7.75

2013-14 U.S. SOYBEAN PRODUCTION

¢ Planted Area2013 = 76.5 million ac.

ð 2014USDA: 79.5 million

¢ Harvested Area2013 = 75.9 million ac.

ð 2014USDA: 78.5 million

¢ Yield2013 = 43.3 bu/ac

ð 2014 Expected YieldUSDA ≈45.2 bu/ac.

ð 2014KSU: 40.0 (low) – 43.0 (likely) – 44.3 (trend)

U.S. SOYBEAN ACRES: 2013-14

75.5

64.7

75.7 77.5 77.4 75.0 77.2 76.5 79.5 77.5 79.0 80.5

74.6 64.1

74.7 76.4 76.6 73.8 76.2 75.9 78.5 76.5 78.0 79.5

98.8% 99.1% 98.6% 98.6% 99.0% 98.3% 98.7% 99.1% 98.7% 98.7% 98.7% 98.7%

0%

20%

40%

60%

80%

100%

0

25

50

75

100

125

Mil

lio

n A

cres

Planted Acres Harvested Acres %Harvested/Planted

U.S. SOYBEAN YIELDS 2013-14 USDA 2014: 45.2 BU/AC; KSU 2014 TREND YIELD: 44.3 BU/AC

38 34

42 43 43 42 40 44 44 42 40 43.3 45.2

40.0 43.0 44.3

0

20

40

60

80

Yie

ld: B

u /

Acr

e

Yield KSU '14 Low KSU '14 Expected KSU '14 Trend

2014KSU

2013-14 U.S. SOYBEAN SUPPLIES

¢ Production2013 = 3.289 billion bu. (ñ8.4%)

ð 2014USDA: ≈ 3.550 bln bu. (trend yield, ñ acres)

¢ Total Supply2013/14 = 3.459 bln bu. (ñ6.8%)

ð 2014/15USDA: ≈ 3.715 bln bu. (ñ production)

U.S. SOYBEAN TOTAL SUPPLIES

0.57 0.21 0.14 0.15 0.22 0.17 0.141 0.150 0.150 0.150 0.150

2.68 2.97 3.36 3.33 3.09 3.03 3.289 3.550 3.060 3.355 3.513

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Bil

lio

n B

ush

els

Beginning Stocks Production Imports

2013/14 Supply 3.459 bln bu.

2014/15 Supply 3.525 bb (KSU)

2014/15 SupplyUSDA

3.719 bln bu.

U.S. SOYBEAN USE: 2013/14 & 2014/15

¢ Crush2013/14 = 1.700 bln bu. ð USDA2014/15: 1725 bln bu.

¢ Exports2013/14 = 1.510 bln bu. ð USDA2014/15: 1.600 bln bu.

¢ Seed, Residual2013/14 = 99 mln bu. ð USDA2014/15: 105 mln bu.

¢ Total Use2013/14 = 3.309 bln bu. ð USDA2014/15: 3.430 bln bu.

U.S. SOYBEAN USE & END STOCKS

1,808 1,803 1,662 1,752

1,648 1,703 1,689 1,700 1,725

1,116 1,159 1,279 1,499 1,501 1,365 1,320 1,510 1,600

574 205 138 151 215 169 141 150 285

0

500

1,000

1,500

2,000

2,500

3,000

Mil

lio

n B

ush

els

Marketing Years

Seed+Resid Crush Exports End Stocks

U.S. Soybean Exports (primarily to China) have been the major driver of soybean prices since MY 2006/07

U.S. SOYBEAN SUPPLY-DEMAND

USDA WASDE REPORT – FEBRUARY 10, 2014

2011/12 2012/13 2013/14 Planted Acres (mln.) 75.0 77.2 76.5 Harvested Acres 73.8 76.2 75.9 Yield (bu./ac.) 41.9 39.8 43.3 Beginning Stocks 215 169 141 Imports 16 36 30 Production 3,094 3,034 3,289

Total Supplies 3,325 3,239 3,459 Crushings 1,703 1,689 1,700 Exports 1,365 1,320 1,515 Seed & Residual 88 90 99

Total Use 3,155 3,099 3,309 Ending Stocks (%S/U)

(5.4%) 169 (4.6%) 141 (4.5%) 150 U.S. Avg. Farm $ $12.50 $14.40 $11.95-$13.45

KSU: U.S. SOYBEAN S/D IN 2014/15 February 10, 2014 plus KSU projections Lower Yld-Q

20% prob. Likely Yld-Q 60% prob.

Higher Yld-Q 20% prob.

Planted Acres (mln.) 77.5 79.0 80.5 Harvested Ac. (mln.) 76.5 78.0 79.5 Yield (bu./ac.)**** 40.0 43.0 44.3 Beginning Stocks 150 150 150 Imports 30 20 20 Production**** 3,060 3,355 3,513

Total Supplies 3,240 3,525 3,683 Crushings 1,630 1,725 1,750 Exports *Wildcard* 1,360 1,440 1,475 Seed & Residual 109 109 109


(4.5%) 141 (7.7%) 250 (10.5%) 343 U.S. Avg. Farm $ $12.50 $10.50 $9.50

USDA-KSU: U.S. SOYBEAN S/D 2014/15 February 21, 2014 plus KSU projections USDA Feb.

AgOutlook Likely Yld-Q 60% prob.

Higher Yld-Q 20% prob.

Planted Acres (mln.) 79.5 79.0 80.5 Harvested Ac. (mln.) 78.5 78.0 79.5 Yield (bu./ac.)**** 45.2 43.0 44.3 Beginning Stocks 150 150 150 Imports 15 20 20 Production**** 3,550 3,355 3,513

Total Supplies 3,715 3,525 3,683 Crushings 1,725 1,725 1,750 Exports *Wildcard* 1,600 1,440 1,475 Seed & Residual 105 109 109


(8.3%) 285 (7.7%) 250 (10.5%) 343 U.S. Avg. Farm $ $9.65 $10.50 $9.50

U.S. SOYBEAN %END STOCKS/USE

14

11 9

7 6 4.5

9

16

19

7 4.5 4.5

7 5.4 4.6 4.5

8.3

0

5

10

15

20

25

30

% E

nd

ing

Sto

cks-

to-U

se

Marketing Years

MY 2013/14 150 mln bu, 4.5% S/U

17 days inventory

USDA 2014/15 285 mln bu

8.3% S/U

U.S. SOYBEAN %STX/USE VS PRICE$

18.7 6.7 4.5 4.5 6.6 5.4 4.6 4.5 8.3 7.7 10.5

4.5

$6.43

$10.10 $9.97

$9.59

$11.30 $12.50

$14.40 $12.50

$9.65

KSU14

$10.50 60%

KSU14

$9.50 20%

KSU14 $12.50

20%

$0

$4

$8

$12

$16

0

15

30

45

60

75

U.S

. Pri

ce$

/ bu

% E

nd

Sto

cks-

to-U

se

Marketing Year

U.S. SOYBEAN $ VS STX-TO-USE MY 1973/74 – 2014/15 FEBRUARY 10 & 21, 2014 USDA PLUS KSU ESTS.

2007/08

2008/09

2009/10

2012/13 $14.40 @ 4.6% S/U

2013/14 $12.70 @ 4.5% S/U

$3

$5

$7

$9

$11

$13

$15

$17

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

U.S

. So

yb

ean

Pri

ce

U.S. Soybean % Ending Stocks-to-Use

2010/11

2003/04

2011/12

KSU 2014/15 $10.50 @ 7.7% S/U

USDA 2014/15 $9.65 @

8.3% S/U

WORLD SOYBEAN SUPPLY-DEMAND

219 229

78

52

212 221

77

43

264 252

92

70

239 257

92

53

268 258

100

59

288 269

109

73

0

100

200

300

400

Production Usage Exports End Stocks

Mil

lio

n M

etri

c T

on

s

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

World Soybean Stx/Use in MY 2013/14 = 27.1%

Compared to: 22.7% in MY 2012/13 20.8% in MY 2011/12 19.5% in MY 2008/09**

ñ Production, ñ Soybean Use

SOYBEAN EXPORTER SALES

41

29

13 9

41

30

9 12

37 36

7 11

36

42

8

14

41 45

8

15

0

15

30

45

60

U.S. Brazil Argentina Rest of World

Mil

lio

n M

etri

c T

on

s

2009/10 2010/11 2011/12 2012/13 2013/14

ñ Soybean exports in MY 2013/14 in the United States,

Brazil, Argentina & the Rest of World

SOYBEAN IMPORT PURCHASES MY 2009/10 – 2013/14 FEBRUARY 10, 2014 USDA WASDE REPORT

50

13

3 4

17

59

13

3 4

16

69

12

3 4

18

0

15

30

45

60

75

China EU-28 Japan Mexico Rest of World

Mil

lio

n M

etri

c T

on

s

2009/10 2010/11 2011/12 2012/13 2013/14

Chinese share of World Soybean Imports in MY 2013/14 = 65.5%

(vs 62.8% in MY 2012/13 & 63.4% in MY 2011/12)

“Flat”-or-”declining” import growth in most of the rest of the World

U.S. SOYBEAN $ VS WORLD %STX/USE MY 1973/74 – 2013/14 FEBRUARY 10, 2014 USDA WASDE

2007/08 2008/09

2009/10

2012/13 23.5% S/U $14.40/bu 2013/14

26.7% S/U $12.50 /bu

$3

$5

$7

$9

$11

$13

$15

$17

5 10 15 20 25 30 35 40 45

U.S

. So

yb

ean

Pri

ce

World Soybean % Ending Stocks-to-Use

2010/11

1976/77

2011/12

World % Stocks/Use Minimum “Floor”

“Old” 1970s 7%-10% “New” 1997/98+ 19-21%

SOYBEAN MARKET PROSPECTS

¢ South America Exports �  To compete seasonally with U.S.

ò U.S. exports in April-June 2014

¢ U.S. Soybean Acres in 2014?? �  77-82 million acres planted next year?

�  IF Corn acres ò – will lead to ñ U.S. soybean planted acres

¢ Chinese Export Demand �  “Strong but narrow” base of World

soybean export demand driven by China

WHAT “SURPRISES” COULD OCCUR?

A.  “Short” 2014 soybean crops in either South America or the United States o  Unpredictable weather patterns, etc.

B. Unexpected “Weakness” in Chinese Imports in 2014 o  Seems unlikely due to continuing strength in

Chinese soybean & soybean product imports

RMA PRICE DISCOVERY PERIODS

FOR 2014 WHEAT & SOYBEANS – PROJ. PRICE$

A.  2014 Kansas HRW Wheat �  JULY 2014 Kansas Wheat Futures (Base $ ≈ $7.02 /bu)

�  1st Discovery Period: 8/15/2013 – 9/15/2013

�  @ 75% APH: Price coverage = 75% x $7.02 /bu ≈ $5.26 �  @ 75% APH: 1/21/2014 JULY14 = 75% x $6.78 /bu ≈ $5.08

B.  2014 Kansas Soybeans �  NOV 2014 CBOT Soybean Futures

�  Discovery Period: 2/1/2014 – 2/28/2014 (Avg. ≈ $11.29 /bu)

�  @ 75% APH: Price coverage = 75% x $11.29 /bu ≈ $8.47

RMA PRICE DISCOVERY PERIODS FOR 2014 CORN & SORGHUM – PROJ. PRICE$

A.  2014 Kansas Corn �  DEC 2014 CBOT Corn Futures

�  Discovery Period: 2/1/2014 – 2/28/2014 (Average ≈ $4.60 /bu)


B.  2014 Kansas Grain Sorghum �  DEC 2014 CBOT Corn Futures (Feb. Avg. ≈ $4.44 /bu)

�  Price Adjustment Factor: 0.979 times DEC14 Corn

�  Discovery Period: 2/1/2014 – 2/28/2014 (Feb. Avg. ≈ $4.44 /bu)


QUESTIONS?

DANIEL O’BRIEN – EXTENSION AGRICULTURAL ECONOMIST

KANSAS STATE UNIVERSITY

[email protected]

KSUGRAINS ON TWITTER & FACEBOOK

WWW.AGMANAGER.INFO

soybean profitability & market prospects

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