the great north american drought: industry impacts one year later

Download The Great North American Drought: Industry Impacts One Year Later

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Scientists and historians have called the 201213 dry spell, which caused more than 60% of the continental United States to experience drought conditions, the worst drought since the 1950s. Last years drought will have a lasting impact on industry, causing a serious ripple effect on food availability, regional stability, and industry sectors around the globe. Join this one-hour webcast, where IHS economists will analyze the constrained agriculture supply and the lasting impacts from the drought. The presentation will answer questions, including: - What will the Fall of 2013 supply and demand market outlook look like? - What are the price risks? - What are the implications for the prolonged downturn in the beef production cycle? - What are the potential implications of adding supply capacity without a new supply shock? - How will ongoing weather variability affect your global supply chain? This webcast will help you develop informed market forecasts, and identify risks affecting the bottom line for farmers, corporations, and governments. Get answers to your questions from leading industry economists. A recording of this presentation can be viewed here: http://www.slideshare.net/ihs_supplychain/the-great-north-american-drought-industry-impacts-one-year-later-26356696

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  • 1.The Great North American Drought: Industry Impacts One Year Later August 8, 2013 Welcome to Todays Webcast

2. Copyright 2013 IHS Inc. All Rights Reserved. Before We Get Started Ask questions any time Type questions into the Ask a Question area, click submit The slides advance automatically throughout the event Need help? Click the Help(?) icon below 3. Copyright 2013 IHS Inc. All Rights Reserved. Live Tweet Todays Webcast: #IHSWebcast Join the Conversation: Follow @IHS4SupplyChain on Twitter 3 4. Copyright 2013 IHS Inc. All Rights Reserved. We Want Your Feedback on Todays Topics 4 Everyone completing the entire survey at the conclusion of todays live event will be entered into a drawing to win a 5. Copyright 2013 IHS Inc. All Rights Reserved. Todays Speakers 5 Mr. Ryland Maltsbarger Principal Economist, Agriculture IHS Supply Chain Pricing & Purchasing Ryland Maltsbarger is a principal economist of the IHS Pricing & Purchasing Agriculture Service. He supervises the long-term Global Crops and Livestock Services along with the monthly update of the quarterly price forecast. Ryland is directly responsible for the global sugar and cotton forecasts. Other duties include the publication and forecast of the Global Crops Cost of Production Service. Ryland joined IHS in 2008 as an economist. His service with the company has included the creation of the global sugar partial-equilibrium model along with the expansion of the global cotton model. He created the system behind the quarterly price forecast as well as the format for the publication. Other projects have included work on 2050 Global Crops service and expansion and reformatting of the Global Crops Cost of Production Service. 6. Copyright 2013 IHS Inc. All Rights Reserved. Todays Speakers 6 Mr. Brandon Kliethermes Senior Economist, Agriculture IHS Supply Chain Pricing & Purchasing Brandon Kliethermes is an economist with IHS Agriculture Pricing & Purchasing group. Brandon's key area of focus is the continued development, maintenance, and forecasting of US crops. He also provides daily and weekly commentary on current issues affecting agricultural markets worldwide. Brandon created and maintains the Global Insight Softs Commodity Price Index (GISCPI) to evaluate weekly prices changes for food components such as feed grains, food grains, meals and oils, dairy, fiber, sugar, and meats and products. Brandon joined IHS Global Insight in April 2010 after completing an M.S. in Agriculture Economics in December 2009 and a B.S. in Agriculture Economics in 2008, both from the University of Missouri-Columbia. Brandon has held positions as a licensed commodity broker for Allendale Inc. and worked under the board members at the Kansas City Board of Trade. His agricultural background and continued involvement with production agriculture gives him a unique perspective for market/industry analysis. 7. US & Global Agriculture Market Outlook Great North American drought: Industry impacts one year later Ryland Maltsbarger & Brandon Kliethermes IHS Agricultural Service 8 August 2013 8. Copyright 2013 IHS Inc. All Rights Reserved Outline Introduction US outlook Supply implications World grains World oilseeds US cattle Multi-client study 9. Copyright 2013 IHS Inc. All Rights Reserved Large impacts of last half-decade: corn and wheat Once upon time Then came the four shocks 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 World grain prices increased modestly Grain prices began fluctuating markedly, corn prices almost tripled, wheat prices more than doubled Corn and wheat area harvested experienced very slight increase While corn area grew almost 10 times faster, wheat area did not change much Corn and wheat yield improved very marginally Yields outpaced their trend growth for both grains (growth was twice as fast) Demand-driven shocks 1-US Biofuel mandate 2-Financial crises Supply-driven shocks 3-Drought (FSU-12, EU-27, CAN) 4-Drought (US, ARG) 10. Copyright 2013 IHS Inc. All Rights Reserved. US drought and recovery: May 2012 2013 Abnormally Dry Drought Moderate Drought Severe Drought Extreme Drought - Exceptional 11. Copyright 2013 IHS Inc. All Rights Reserved. US drought and recovery: August 2012 2013 Abnormally Dry Drought Moderate Drought Severe Drought Extreme Drought - Exceptional 12. Copyright 2013 IHS Inc. All Rights Reserved. IHS GISCPI The IHS Global Insight Soft Commodity Price Index (GISCPI) has pulled back from its 2012 highs from the drought. The most recent break lower was in reaction to old crop futures collapsing from net long liquidation from traders, which spilled over into grains. The IHS GISCPI falls to an index value of 1.8 by first-quarter 2014. 13. Copyright 2013 IHS Inc. All Rights Reserved. Where we are today The US weather forecast looks to keep pollination stress to a minimum this year. Weather in Russia and Ukraine has been conducive for an early start to the harvest, but dry warm weather in late spring had cut production outlooks slightly. Brazils summer corn crop has sidestepped a major yield-reducing scenario. Weekly wheat imports from China have shocked the trade. As a result, the US Department of Agriculture has increased 2013/14 Chinese wheat imports to 8.5 million metric tons. Bottom line: commodity prices are being pressured by the growing reality that world grain balance sheets may actually loosen. 14. Copyright 2013 IHS Inc. All Rights Reserved. Quarterly price outlook Downward trend for corn and soybean prices while wheat sees seasonal price gains. Our lower price outlook is also conditional on average growing weather in 2014. 15. Copyright 2013 IHS Inc. All Rights Reserved. Past corn area revisionsUSDA Given prior years of delayed plantings, corn area typically falls in the October WASDE report. Using 2009 as a proxy, revisions in abandonment might actually offset planted area losses. Current USDA harvested percentage is at 91.5%. 16. Copyright 2013 IHS Inc. All Rights Reserved. Past soybean area revisionsUSDA Unlike corn, soybean area is variable and a wet year such as 2008 showed producers moved to soybeans. On a percentage basis, soybean abandonment changes very minimally year to year. The current USDA harvested percentage is at 99%. 17. Copyright 2013 IHS Inc. All Rights Reserved. Area scenario and price midpointscorn Bearish: Planted area is adjusted higher to 97.5 million acres with harvested area at 89.2 million acres. Yield is 156.5 bushels per acre. Bullish: Planted area is reduced to 96.7 million acres with harvested area at 88.0 million acres. Yield is 155 bushels per acre. June acreage: Planted area is at 97.4 million acres and harvested area at 89.1 million acres. Yield is 156.5 bushels per acre. 18. Copyright 2013 IHS Inc. All Rights Reserved. Area scenario and price midpoints soybeans Bearish: Planted area is adjusted higher to 79.2 million acres with harvested area at 78.4 million acres. Yield is 44 bushels per acre. Bullish: Planted area is reduced to 77.1 million acres with harvested area at 75.5 million acres. Yield is 43.5 bushels per acre. June acreage: Planted area is at 77.7 million acres and harvested area at 76.9 million acres. Yield is 44.5 bushels per acre. 19. Copyright 2013 IHS Inc. All Rights Reserved. Increased area planted supply capacity Potential implications of adding supply capacity without another supply downturn Area pulled from pasture and Conservation Reserve Program (CRP) remain in row crop production for the next few years. Producers continue to hope for higher prices in the following 12 months. One factor to consider is as world production increases, supply disruptions in the two hemispheres may offset supply gluts in each other. In this example IHS looks strictly at the price impact of three prolonged years of higher-than-expected planted area for the United States only. 20. Copyright 2013 IHS Inc. All Rights Reserved. Implications of increased capacitycorn Supply scenario 2014/15 2015/16 2016/17 Production (Million bushels) 14,216 14,181 14,123 Feed and residual 5,208 5,175 5,236 Exports 2,153 2,280 2,171 Ending stocks 1,632 1,496 1,390 Average farm price (Dollars per bushel) $3.83 $4.06 $4.22 May forecast Production (Million bushels) 13,527 13,438 13,906 Feed and residual 5,042 5,018 5,165 Exports 1,968 1,789 1,901 Ending stocks 1,402 1,189 1,214 Average farm price (Dollars per bushel) $4.41 $4.60 $4.50 Percentage change Production (Million bushels) 5% 6% 2% Feed and residual 3% 3% 1% Exports 9% 27% 14% Ending stocks 16% 26% 15% Average farm price -13% -12% -6% Scenario: Corn planted area falls from 97.4 million acres in 2013/14 to 94.3 million acres in 2014/15, 91.8 million acres in 2015/16, and 90.2 million acres in 2016/17. Harvested percentage remains constant at 91% and yields fall in line with the May forecast. Corn for ethanol remains aligned with the May forecast at 5 billion bushels, but a lower farm price increases food seed and industrial use by under 1%. Risk surrounding the robust export path would pressure prices to a greater extent . 21. Copyright 2013 IHS Inc. All Rights Reserved. Implications of increased capacitysoybeans Supply scenario 2014/15 2015/16 2016/17 Production (Million bushels) 3,497 3,516 3,519 Crush 1,820 1,824 1,809 Exports 1,465 1,541 1,579 Ending stocks 264 249 225 Average farm price (Dollars per bushel) $8.23 $8.45 $9.23 May forecast Production (Million bushels) 3,351 3,408 3,481 Crush 1,796 1,796 1,803 Exports 1,438 1,538 1,573 Ending stocks 246 214 212 Average farm price (Dollars per bushel) $9.01 $9.37 $9.57 Percentage change Production 4% 3% 1% Crush 1% 2% 0% Exports 2% 0% 0% Ending stocks 7% 16% 6% Average farm price -9% -10% -3% Scenario: Soybean planted area is flat with 2013/14 at 77.7 million acres in 2014/15, 77.1 million acres in 2015/16, and 76.3 million acres in 2016/17. Harvested percentage rem

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