Commodity Market Outlook: Corn, Forage, Wheat & Cattle ABM Outlook (2)-1.pdf · – World‐wide...

Commodity Market Outlook:Corn, Forage, Wheat & Cattle

Stephen R. KoontzProfessor & extension economist

Department of Agricultural & Resource EconomicsColorado State University

[email protected]://webdoc.agsci.colostate.edu/koontz

Greeley, ColoradoMarch, 2016

Outline

• Long‐term Price Outlook– Corn– Forage– Wheat– Cattle– Sheep & Lambs– Others…

• Short‐term Price Comments.• General Economy

I would love to stand here and tell you, “$5.00 corn, $8.00 wheat and $3.00

calves – for the rest of your life.”

But this is a competitive economy and agriculture is a competitive industry.

Summary

• High prices in 2007‐2013 were the result of– Strong demand.– Supply disruptions.– World‐wide volatility but by underlying growth.

• Moving forward 2016‐2020?:– Plentiful supplies of everything.– Weak‐to‐little demand growth.– Strong dollar.

• It’s not the 1980’s – but there are similarities.• Weaker prices & margins.

Monthly Corn Contract

Weekly Corn Contract

The trading range for corn is $3.35-$4.50/bu. Except…

$8.00

$5.00

Weekly Crude Oil Contract

$150

$35$40-$60

DEC 2015 Corn Contract

Blue was the correct trading range & green can happen again but not for long…

Bottom line on corn basis: strong for as big as the crop was. Good demand and movement. Big weak basis in regions with excellent sorghum crop.

Forecast $3.65-4.20/bu…

DEC 2016 Corn Contract

We will trade $3.75-$4.05 until there is a reason not to. We could move up to $4.10, $4.20, & $4.45 but… Sell rallies…

Corn Outlook

• Market price is where fundamentals say it should be.

• Acreage next year? Rotation with soybeans? Cash flow & debt?

• Demand? Trade? Storage?• Basis?• Price outlook – 16/17 @ $3.65‐$4.00/bu. And we’ve had the two big crops.

• Aggressive sales on any weather‐driven rally. Resistance @ $4.20 & $4.50.

Weekly KC Wheat Contract

Monthly KC Wheat Contract

Bottom line on wheat basis: weak for the reduced acres. Poor demand and movement.

JUL 2016 KC Wheat Contract

Forecast $4.25-4.75/bu…

Wheat Outlook

• World: Building stocks.• U.S.: huge stocks but reduced acres.• World weather?• But soft exports due to strong dollar.• Basis?• Forecasts: JUL 2016 @ $5.00 with range $4.50‐5.25/bu. And aligned with fundamentals.

• Aggressive sales @ $5.20 & $5.75. Likely storage opportunity into late 2016.

G-NP-1908/12/15

100

110

120

130

140

150

160

170

180

190

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Mil. Tons

US ALL HAY SUPPLYCrop Year

Production May 1 Stocks

Data Source: USDA‐NASS, Compiled & Forecasts by LMIC

Livestock Marketing Information Center

G-NP-2008/12/15

110

120

130

140

150

160

170

180

190

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Mil. Tons

US ALL HAY SUPPLY & DISAPPEARANCECrop Year

Hay Supply Disap.



G-NP-2208/12/15

70

80

90

100

110

120

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Mil. Tons

US ALL HAY STOCKSDecember 1



G-NP-2108/12/15

5

10

15

20

25

30

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Mil. Tons

US ALL HAY STOCKSMay 1 (Beginning of Crop Year)



40

60

80

100

120

2011 2013 2015

Mil. Tons

US HAY STOCKS AND PRODUCTIONCrop Year

December 1 Hay Stocks Alfalfa Hay Production Other Hay Production


Livestock Marketing Information Center08/12/15

2014 DECEMBER 1 HAY STOCKS(1000 Tons)

Livestock Marketing Information CenterData Source: USDA-NASS

2/2/2015

U.S. Total: 92052

PERCENT CHANGE DECEMBER 1 HAY STOCKS(2013-2014)


2/2/2015

U.S. Total: 3%

2015 MAY 1 HAY STOCKS(1000 Tons)


5/12/2015

U.S. Total: 24517

PERCENT CHANGE MAY 1 HAY STOCKS(2014-2015)


5/12/2015

U.S. Total: 27.9%

2014 ALL HAY ACRES(1000 Acres)


2/2/2015

U.S. Total: 57,029

2014 ALFALFA HAY ACRES(1000 Acres)


2/2/2015

U.S. Total: 18,445

PERCENT CHANGE ALFALFA HAY ACRES(2013-2014)


2/2/2015

U.S. Total: 4.4%

2014 OTHER HAY ACRES(1000 Acres)


2/2/2015

U.S. Total: 38,647

PERCENT CHANGE OTHER HAY ACRES(2013-2014)


2/2/2015

U.S. Total: ‐4%

PERCENT CHANGE ALL HAY ACRES(2013-2014)


2/2/2015

U.S. Total: ‐1%

GL_GR310Greeley, CO Thu Jan 21 2016 USDA-CO Dept of Ag Market NewsColorado Hay Report

Compared to the last week, hay movement limited and prices steady. The bulk of the market activity is on contracted hay. Demand good on Dairy quality alfalfa. Demand and movement light on lower quality alfalfa. Grass hay trade activity mostly on small squares. All prices reported are FOB at the stack or barn unless otherwise noted. Prices reflect load lots of hay.

Northeast Colorado AreasAlfalfaLarge Squares: Good 125.00; Fair 100.00; Utility 80.00 DEL.Small Squares: Supreme 229.00 (8.00 per bale); Utility 133.00 (4.00 per bale).

GrassSmall Squares: Premium 183.00 (5.50 per bale).

Corn StalksLarge Squares: Good 55.00-60.00 DEL

Southeast Colorado AreasAlfalfaLarge Squares: Good 120.00, 140.00-150.00 DEL; Fair 110.00; Utility 70.00.

Timothy GrassSmall Squares: Premium 154.00-167.00 (5.00 per bale), Retail 277.00-300.00 (9.00 per bale).

San Luis Valley AreaAlfalfa -- Large Square: Supreme 180.00.Alfalfa/Grass -- Large Square: Utility 100.00.

Southwest Colorado AreasAlfalfaLarge Squares: Supreme 175.00; Premium to Good 160.00; Utility 75.00.

Mountains and Northwest Colorado AreasGrassLarge Squares: Premium 110.00-135.00; Fair 100.00.

GL_GR310Greeley, CO Thu Feb 25 2016 USDA-CO Dept of Ag Market NewsColorado Hay ReportCompared to the last week, hay movement light with prices steady on grass hay and lower quality alfalfa. Very little movement on Dairy quality alfalfa. Demand light. All prices reported are FOB at the stack or barn unless otherwise noted. Prices reflect load lots of hay.

Northeast Colorado AreasAlfalfaLarge Squares: Utility 85.00 DEL.No reported quotes for all other classes of hay.

Southeast Colorado AreasAlfalfaSmall Squares: Premium 200.00 (6.45-6.90 per bale).

Sorghum SudanRound: Good 85.00.No reported quotes for all other classes of hay.

San Luis Valley AreaNo reported quotes for all other classes of hay.

Southwest Colorado AreasGrassSmall Squares: Premium 245.00 (8.00 per bale, Certified Weed Free).

Orchard GrassSmall Squares: Premium 265.00 (8.00 per bale).No reported quotes from all other classes of hay.

Mountains and Northwest Colorado AreasNo reported quotes for all other classes of hay.

GL_GR310Greeley, CO Thu Mar 03 2016 USDA-CO Dept of Ag Market NewsColorado Hay ReportCompared to the last week, hay movement continued light with prices steady to weak on inactive trade. The bulk of hay trades are at auction markets. All prices reported are FOB at the stack or barn unless otherwise noted. Prices reflect load lots of hay.

Northeast Colorado AreasAlfalfaLarge Squares: Utility 110.00.

Wheat StrawLarge Squares: Good 55.00.

Southeast Colorado AreasAlfalfaSmall Squares: Premium 200.00 (6.45-6.90 per bale).

Sorghum SudanRound: Good 80.00.

HaygrazerLarge Squares: Good 80.00.

San Luis Valley AreaNo reported quotes for all other classes of hay.

Southwest Colorado AreasNo reported quotes from all other classes of hay.

Mountains and Northwest Colorado AreasGrassLarge Squares: Utility 50.00-65.00.Small Squares: Premium 200.00 (5.50 per bale).Round: Utility 50.00-65.00.

Forage Outlook

• Plentiful except for high‐quality.• Excellent hay:

– Alfalfa $150‐$175/T.– Grass $85‐$100/T.

• Low‐quality hay: <$60‐$80/T.• Back to more small bales…

Other Crops

• Oilseeds: The one market with long‐term growth potential.– Record large crop last year in S. Am.

• Sorghum: Superb crop last year.– Growth will depend on feed use & exports.

• Millet: Domestic demand growth potential.– Decreased acres but increased production.

• Malting barley: Excellent premiums past several years.– Weather related but weather other places.

• Potatoes: Excellent production this year.– Soft trade.

• Sugar: World versus domestic prices.– Substantial long‐term world pressure on prices.

• Hops:– This is the only commodity that I hear persistent discussion of limited

availability…

Weekly Live Cattle Contract

$170This market is looking for a bottom – trading range $120-145/cwt.

Monthly Live Cattle Contract

Weekly Feeder Cattle Contract

$240This market will drift lower –trading range $130-170/cwt.

Monthly Feeder Cattle Contract

Cattle Outlook

• Fed cattle market will trend down:– Domestic demand was strong.– International demand & trade are weak.– Abundant supplies of competing meats.

• Feeder cattle and calf prices will weaken for the next several years:– Herd building.

OCT 2015 Live Cattle Contract

OCT 2015 Feeder Cattle Contract

I can see a rally this spring until summer with greening of grass – like we saw in 2015. Sell your calves on

the video in 2016 if that happens!

1009691

86 86 82 7975 75 77 80 81 85 83

91 88 85 8580 77 75 77 79 81

8692

0

20

40

60

80

100

120

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Index Value

RETAIL ALL FRESH BEEF DEMAND INDEXAnnual, Using CPI 1990=100

Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC


10095 94

86 87 83 8675 77 76 80 80 83 83

91 87 85 85 82 8174 77 79 80 80

93

0

20

40

60

80

100

120

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Index Value

RETAIL ALL FRESH BEEF DEMAND INDEXFirst Quarter, Using CPI 1990=100



10094

88 87 8581

76 74 76 79 8085 87 83

9387 88 89

8275 78 78

82 83

94 93

0

20

40

60

80

100

120

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Index Value

RETAIL ALL FRESH BEEF DEMAND INDEXFourth Quarter, Using CPI 1990=100



02/12/16

0

1

2

3

4

5

6

1/4/14 7/5/14 1/10/15 7/11/15 1/9/16

1000 MT

US EXPORTS OF BEEF MUSCLE CUTSWeekly

Canada Japan Mexico Korean Rep.

Data Source: USDA‐AMS & USDA‐APHIS


02/12/16

7

9

11

13

15

17

19

1/5/13 7/6/13 1/4/14 7/5/14 1/10/15 7/11/15 1/9/16

1000 MT

TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTSWeekly

Data Source: USDA‐FAS


I-N-1502/09/16

125

150

175

200

225

250

275

300

325

350

375

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Mil. Pounds

US BEEF AND VEAL IMPORTSCarcass Weight, Monthly

Avg. 2009‐13 2014 2015

Data Source: USDA‐ERS & USDA‐FAS


I-N-1602/09/16

150

160

170

180

190

200

210

220

230

240

250


Mil. Pounds

US BEEF AND VEAL EXPORTSCarcass Weight, Monthly

Avg. 2009‐13 2014 2015

Data Source: USDA‐ERS & USDA‐FAS


I-N-3102/09/16

‐100

‐50

0

50

100

150

200


Mil. Pounds

US NET BEEF IMPORTSCarcass Weight, Monthly

Avg. 2009‐13 2014 2015

Data Source: USDA‐ERS & USDA‐FAS, Compiled & Analysis by LMIC


I-N-2802/09/16

‐1.0

‐0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1992 1995 1998 2001 2004 2007 2010 2013 2016

Bil. Pounds

US BEEF AND VEAL NET IMPORTSCarcass Weight, Annual

Data Source: USDA‐ERS & USDA‐FAS, Compiled & Analysis by LMIC


C-N-02A02/01/16

36

37

38

39

40

41

42

43

44

45

46

1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Mil. Head

JANUARY 1 TOTAL COW INVENTORYU.S., Annual

Data Source: USDA‐NASS


C-N-18B02/01/16

33

34

35

36

37

38

39

40

41

42

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

Mil. Head

CALF CROPJuly Estimates, U.S., Annual



+2.3 Percent2015 = 34.3 Million Head

C-N-3802/01/16

4.5

5.0

5.5

6.0

6.5

7.0

1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Mil. Head

HEIFERS HELD AS BEEF COW REPLACEMENTSJanuary 1, U.S.

+3.3 %



C-N-3702/01/16

4.0

4.5

5.0

5.5

6.0

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

HEIFERS HELD AS BEEF COW REPLACEMENTSJuly 1, U.S.



+6.7 %

C-N-4802/01/16

‐4

‐3

‐2

‐1

0

1

2

3

4

1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

PERCENT CHANGE IN CATTLE INVENTORYU.S., January 1

Data Source: USDA‐NASS, Analysis by LMIC


C-P-0602/12/16

50

75

100

125

150

175

200

225

250

275

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

$ Per Cwt

AVERAGE ANNUAL CATTLE PRICESSouthern Plains

500‐600lb Steer Calves 700‐800lb Feeder Steers Fed Steers

Data Source: USDA‐AMS, Compiled and Forecasts by LMIC


C-P-6602/12/16

‐100

0

100

200

300

400

500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

$ Per Cow

ESTIMATED AVERAGE COW CALF RETURNSReturns Over Cash Cost (Includes Pasture Rent), Annual

Data Source: USDA & LMIC, Compiled by LMIC


0

100

200

300

400

500

600

700

800

900

1000

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

$ Per Cow

ESTIMATED AVERAGE COW CALF COSTSTotal Cash Cost Plus Pasture Rent, Annual

Data Source: USDA & LMIC, Compiled by LMIC

Livestock Marketing Information Center 02/12/16

Date % Change Production

% Change Consumption

Fed Cattle 7‐800# Feeder

5‐600# Calf

2015: VI +1.4 ‐0.6 $127.72 $177.29 $203.512015 ‐2.3 ‐0.0 $148.12 $208.21 $251.252016: I +3.1 +3.0 $136‐137 $161‐163 $195‐1972016: II +1.3 +0.1 $138‐140 $165‐169 $197‐2022016: III +4.1 +0.9 $132‐135 $160‐165 $196‐2032016: VI +2.7 +2.0 $131‐135 $158‐165 $189‐1982016 +2.8 +1.1 $134‐137 $161‐165 $194‐2002017: I +5.2 +1.5 $131‐136 $158‐166 $191‐2012017: II +4.9 +0.3 $133‐140 $159‐168 $192‐2042017: III +3.3 +0.9 $127‐134 $155‐165 $187‐2002017: VI +4.8 +1.4 $127‐135 $152‐163 $181‐1952017 +4.5 +1.0 $130‐136 $157‐165 $190‐198

LMIC Cattle Price & Quantity Forecasts

OCT 2016 Live Cattle Contract

OCT 2016 Feeder Cattle Contract

S-N-0302/01/16

2

3

4

5

6

7

8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mil. Head

BREEDING EWES 1 YEAR & OLDERProjections, January 1, U.S., Annual



115

125

135

145

155

165

175

JAN APR JUL OCT

$ Per Cwt.

SLAUGHTER LAMB PRICESWooled, 110‐130 lbs, San Angelo, Weekly

Avg. 2010‐14 2015 2016

Data Source: USDA‐AMS


80

100

120

140

160

180

200

220

2011 2012 2013 2014 2015 2016

$ Per Cwt.

SLAUGHTER LAMB PRICESCalculated Formula Live (April 2009 to present), Weekly



S-S-0002/26/16

28

33

38

43

48

53

JAN APR JUL OCT

Thou. Head

SHEEP & LAMB SLAUGHTERFederally Inspected, Weekly

Avg. 2010‐14 2015 2016

Data Source: USDA‐AMS & USDA‐NASS


S-S-0302/26/16

1.0

1.5

2.0

2.5

3.0

3.5

4.0

JAN APR JUL OCT

Thou. Head

MATURE SHEEP SLAUGHTERFederally Inspected, Weekly

Avg. 2010‐14 2015 2016



S-S-0502/26/16

25

30

35

40

45

50

JAN APR JUL OCT

Thou. Head

LAMB AND YEARLING SLAUGHTERFederally Inspected, Weekly

Avg. 2010‐14 2015 2016



S-S-0602/26/16

62

64

66

68

70

72

74

76

JAN APR JUL OCT

Thou. Head

LAMB AND YEARLING DRESSED WEIGHTFederally Inspected, Weekly

Avg. 2010‐14 2015 2016



W-P-1404/27/15

20

40

60

80

100

120

140

160

180

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Cents / Pounds

AVERAGE WOOL PRICEU.S., Grease, Annual

Data Source: USDA/NASS


2.20

2.40

2.60

2.80

3.00

3.20

3.40

3.60


$ Per Pound

MONTHLY AVERAGE U S WOOL PRICE26 Micron (USDA 56s), Clean, FOB

Avg. 2009‐13 2014 2015


Livestock Marketing Information CenterW-P-0112/09/15

W-P-0212/09/15

3.10

3.30

3.50

3.70

3.90

4.10

4.30


$ Per Pound


Avg. 2009‐13 2014 2015



W-P-0312/09/15

3.30

3.50

3.70

3.90

4.10

4.30

4.50


$ Per Pound


Avg. 2009‐13 2014 2015



W-P-0412/09/15

1.80

2.30

2.80

3.30

3.80

4.30

4.80

5.30

2010 2011 2012 2013 2014 2015

MONTHLY AVERAGE WOOL PRICE26 Micron (USDA 56s), Clean

Australian deliv. to South Carolina vs. U.S. FOB

Australia U.S.



W-P-0612/09/15

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2010 2011 2012 2013 2014 2015

MONTHLY AVERAGE WOOL PRICE22 Micron (USDA 64s), Clean

Australian deliv. to South Carolina vs. U.S. FOB

Australia U.S.



Sheep, Lamb & Wool Outlook

• Expansion– Lower prices.– Modest longer term trade issues.

• No wreck similar to cattle– No weight problem.– No market‐ready inventory problem.– Also not immune going forward.

• Strong wool market.

Input Market Outlook Summary

• Soft everything. Even land valuations…• Risks moderating.• Softening fuel costs with no volatility

– Fertilizer…– Chemicals…

• Supply industries remain operating under‐capacity & unwilling to take risk.

• We haven’t had this much cheap energy in a while. Let’s see what happens.

Weekly Crude Oil Contract

$150

$35$40-$60

Weekly Natural Gas Contract

David Kohl’s: Worst Farm Management Practices

• Investment into nonproductive assets.• High family living cost or withdrawals from the business.

• Spending your way out of income taxes.• Poor financial record systems.• Co‐mingling business and personal expenses.• Bigness on the brain!• Mismanagement of a family member’s return.• Skipping the details.• Attempting to hit a home run each time at bat!• Refusal to learn.

Ed Usset’s: “A Fresh Start” Marketing

• Have a plan.– Planning & wishing are different.

• Find a dime.– This year’s big moves will be smaller than prior years.

• Know your costs of production.– What is your target profit or rate of return?

• Eliminate mistakes.– What did you do wrong last year?

• Look ahead.– Be proactive not reactive.

Marketing?

• Forward selling needs to be considered one day of the week each week of the year.

• Set a target, be reasonable, & sell some when you can get that.

• Write it down.• Do your fundamentals.• Do your technical analysis.• Sell when they say sell & buy when they say buy.• Marketing will not fix production/cost problems.

‐2.50

‐2.00

‐1.50

‐1.00

‐0.50

0.00

0.50

1.00

1.50

2.00

2.50

2000 2002 2004 2006 2008 2010 2012 2014

Percent Change

QTRLY GROSS DOMESTIC PRODUCT (GDP)Real Dollar (2005) Change from Previous Quarter

Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC


11/13/15

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percent

U.S. UNEMPLOYMENT RATESeasonally Adjusted, Quarterly

Data Source: Bureau of Labor Statistics, Compiled & Analysis by LMIC


40

50

60

70

80

90

100

110

120

Jan‐78 Jan‐81 Jan‐84 Jan‐87 Jan‐90 Jan‐93 Jan‐96 Jan‐99 Jan‐02 Jan‐05 Jan‐08 Jan‐11 Jan‐14

Index

Domestic U.S. Consumer Confidence Monthly, Index year 1966 = 100

Data Source: Thomson Reuters/University of Michigan


08/11/2014

93/76 = 1.224. So foreign buyers of our commodities face a 22% increase in prices before even they get a chance to buy the commodities.

It’s not as bad as in the early-2000’s or the entire 1980s. But it’s worse than the Great Recession.

Weekly S&P 500 Index Contract

Trends Summary

• 2007‐14 were due to demand growth & weather‐related supply shocks.

• Caught‐up & recovered from both.• Return to more normal prices & margins.• Plentiful supplies & stocks of everything.• Strong dollar & weak trade.• Soft international economies.• Cheaper energy & fertilizer & rent(?) & seed (??).• Back to cost‐control knitting.

Outlook Summary

• Corn: $3.50‐3.85/bu. for 2016/17. Acres & weather?

• Hay: if you have a bidder then sell it• Wheat: $4.00‐4.75/bu. for next harvest.• Cattle: A different kind of wow…

– Fed: $125‐140/cwt.– Feeders: $145‐165/cwt.– Calves: $175‐200/cwt.

• Sheep & Lamb follow beef & other meats.

Contact and Link Information

[email protected]

http://webdoc.agsci.colostate.edu/koontz/

Commodity Market Outlook: Corn, Forage, Wheat & Cattle ABM Outlook (2)-1.pdf · – World‐wide...

Documents

Transcript of Commodity Market Outlook: Corn, Forage, Wheat & Cattle ABM Outlook (2)-1.pdf · – World‐wide...