Cost of Production Outlook Southern Outlook Conference Atlanta, GA September 23, 2008 Lori Wilcox...
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Transcript of Cost of Production Outlook Southern Outlook Conference Atlanta, GA September 23, 2008 Lori Wilcox...
Cost of Production Outlook
Southern Outlook ConferenceAtlanta, GA
September 23, 2008
Lori Wilcox
www.fapri-mu.org
Overview
• Macroeconomic impacts• Prices paid by farmers index• Costs of production• Net return implications• FAPRI Baseline process
0
50
100
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500
Jan '04
Apr '04
Jul '04
Oct '04
Jan '05
Apr '05
Jul '05
Oct '05
Jan '06
Apr '06
Jul '06
Oct '06
Jan '07
Apr '07
Jul '07
Oct '07
Jan '08
Apr '08
Jul '08
Cent
s per
Gal
lon
US Monthly Retail Diesel PricesJan. 2004 to Aug. 2008
$1 per gallon increase over the past 10 months with some
recent decline
$2.50+ per gallon increase over the past 4 years
Source: http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$/Th
ousa
nd C
ubic
Fee
tMonthly US Natural Gas Wellhead Price
Jan. 2004 - Jun. 2008
Source: http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_m.htm
June 2008 = $10.82 a historical high followed by $10.33 in Oct. 2005
Source: http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_m.htm
1,200,000
1,300,000
1,400,000
1,500,000
1,600,000
1,700,000
1,800,000
MM
cfMonthly US Natural Gas Production
Jan. 2004 - Jun. 2008
2008 avg production = 1,700,000(MMcf)• within 3% of 1970’s avg.•18% above 1980’s avg.• 11% above 1990’s avg.
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PPI Macro DataIndex 1990-92=100
PPIFULW
PPINGAW
PPICLUMW
PPIRUBW
PPIMETW
PPIW
PPIELPW
PPICHMW
PPIAUTOW
PPIRPPW
Source: Global Insight, August 2008
August FAPRI-MU Baseline
• WTI crude range $130 to $105/barrel ($120 avg.)– September 22, 2008 futures - $120.92/barrel
• Natural gas range $9 to $10 per Mbtu– September 22, 2008 futures - $7.94
Putting the Pieces Together
Macro
Prices Paid
Cost ofProd.
NetReturns
Source: USDA/NASS Agricultural Prices
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300
400
500
600
Inde
x 199
0-1
992=
100
US Fertilizer Price GrowthPrices Paid by Farmers 1998-2008
Mixed Fertilizer Nitrogen Fertilizer Potash & Phosphate
2nd Qtr 2008 fertilizer prices are 300-400% higher than
average prices for 2002
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200
300
400
500
600
700
800
900
1000U
S D
olla
rs/T
on
Weekly Fertilizer Prices - fob
Ammonia
Urea
CAN
Source: Yara
Fertilizer PricesUS $/ton
US April Survey Price Data (USDA)
2006 2007 2008 2008 (Qtr2) est.
DAP $337 $442 $850 $867
Anhydrous Ammonia $521 $523 $755 $862
Superphosphate $324 $418 $800 $1,036
Source: USDA/NASS Agricultural Prices
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100
200
300
400
500
600
700
1998 2000 2002 2004 2006 2008 2010 2012
Ind
ex 1
990-
92=1
00
Prices Paid Index, Fertilizer and Fuel
All Fert.
Nitrogen Fert.
Fuel
Phos&Potash
Source: FAPRI-MU August 2008 Update
0
50
100
150
200
250
1998 2000 2002 2004 2006 2008 2010 2012
Ind
ex: 1
990-
92=1
00Prices Paid Index, Farm Machinery, Autos,
and Building Materials
Farm Mach.
Autos/Trucks
Building Materials
Source: FAPRI-MU August 2008 Update
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50
100
150
200
250
1998 2000 2002 2004 2006 2008 2010 2012
Ind
ex: 1
990-
92=1
00
Prices Paid Index, Agricultural Chemicals
Herbicide
Insecticide
Fungicide
Source: FAPRI-MU August 2008 Update
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50
100
150
200
250
300
350
1998 2000 2002 2004 2006 2008 2010 2012
Ind
ex: 1
990-
92=1
00
Prices Paid Index, Seed
Source: FAPRI-MU August 2008 Update
Prices Paid by Farmers - % Changes2007 2008 2009 2010
Seeds 13.8% 23.4% 6.7% 1.1%
Fertilizer 25.7% 80.0% 25.1% 6.8%
Mixed Fertilizer 38.8% 92.7% 29.4% 7.8%
Nitrogen Fertilizer 15.8% 59.5% 21.7% 5.8%
Potash and Phosphate 31.6% 115.1% 27.3% 7.0%
Agricultural Chemicals 2.0% 14.3% 5.4% 1.3%
Herbicides 0.0% 13.5% 4.9% 0.9%
Insecticides 4.4% 11.7% 4.4% 1.1%
Fungicides/Other 6.2% 19.2% 8.1% 2.7%
Fuels 10.9% 58.2% 2.2% -3.7%
Supplies & Repairs 3.2% 5.7% 3.1% 1.2%
Autos & Trucks -1.0% 13.7% 5.5% 1.5%
Farm Machinery 5.2% 11.1% 2.2% 0.4%
Building Material 1.8% 12.9% 4.0% 0.8%
Farm Services 4.4% 10.6% 1.9% -0.8%
Rent 7.1% 20.1% 6.2% 0.0%
Interest 11.6% 17.9% 5.2% 9.7%
Taxes 8.0% 20.1% 3.3% 0.8%
Wage Rates 3.4% 4.3% 2.9% 2.4%
Source: FAPRI-MU August 2008 Update
Putting the Pieces Together
Macro
Prices Paid
Cost ofProd.
NetReturns
ERS Regions beginning in 1995
CR,SG,WH,SB,CT
CR,WH,SB,SK
CR,WH,SB,SK
CR,SG,SB
CR,WH,SB,CT,PN
SG,WH,SB,RC,CT
CR,SG,WH,SB,CT,PN
WH,RC,CT,SK
WH
Lake States
Corn Belt
Northeast
Southeast I
N. Plains
Southeast IIS. Plains
Delta
Pacific
ERS Regions Prior to 1995 – Followed State Boundaries
Regional Mapping
• FAPRI-MU – US cost of production model based on current ERS
regional designations– US crop model based on state production mapped
to COP model regions– Continued expansion of state-level model
components (including those for ACRE) • Incentive to maintain current mapping
Corn and Soybean Variable COP
Source: FAPRI-MU August 2008 Update
2007 2008 2009 2010 2011CORN:
U.S. 239.88$ 349.40$ 400.23$ 414.85$ 420.73$ Heartland 234.57$ 342.52$ 394.59$ 410.16$ 416.19$ Northern Crescent 251.45$ 368.60$ 424.06$ 440.21$ 446.27$ Eastern Uplands 245.53$ 365.95$ 426.54$ 445.16$ 451.49$ Southern Seaboard 240.40$ 349.26$ 401.50$ 417.08$ 423.02$ Praire Gateway 272.88$ 392.31$ 435.82$ 445.03$ 450.40$ Northern Plains 198.23$ 281.15$ 316.63$ 326.03$ 330.56$
SOYBEANS:U.S. 109.88$ 148.54$ 162.87$ 166.27$ 168.98$ Heartland 102.56$ 138.41$ 152.18$ 155.61$ 158.26$ Northern Crescent 125.64$ 175.60$ 195.67$ 200.87$ 204.00$ Eastern Uplands 119.74$ 169.59$ 190.84$ 196.69$ 199.87$ Southern Seaboard 132.82$ 180.87$ 201.57$ 207.46$ 211.19$ Mississippi Portal 142.78$ 187.75$ 203.18$ 206.51$ 209.86$ Prairie Gateway 126.44$ 170.64$ 181.56$ 182.21$ 184.54$ Northern Plains 99.71$ 134.52$ 147.45$ 150.52$ 152.98$
Variable Cost = Operating Cost + Hired Labor
US $/Acre
2007 2008 2009 2010 2011COTTON:
U.S. 428.69$ 559.25$ 617.51$ 635.89$ 647.51$ Heartland 476.94$ 623.50$ 694.44$ 718.50$ 732.44$ Southern Seaboard 463.80$ 618.27$ 697.12$ 724.19$ 737.84$ Mississippi Portal 582.17$ 754.42$ 836.92$ 864.15$ 880.45$ Prairie Gateway 283.27$ 367.48$ 397.54$ 405.25$ 412.15$ Fruitful Rim 756.58$ 970.79$ 1,057.61$ 1,084.12$ 1,103.56$
RICE:U.S. 493.49$ 697.90$ 769.94$ 784.79$ 795.28$ Mississippi Portal 430.09$ 614.85$ 675.71$ 686.49$ 694.66$ Fruitful Rim 604.13$ 811.38$ 893.00$ 913.79$ 929.35$
Cotton and Rice Variable COP
Source: FAPRI-MU August 2008 Update Variable Cost = Operating Cost + Hired Labor
US $/Acre
Wheat and Sorghum Variable COP
Source: FAPRI-MU August 2008 Update
2007 2008 2009 2010 2011WHEAT:
U.S. 100.36$ 151.03$ 174.90$ 181.97$ 184.74$ Heartland 128.66$ 208.55$ 252.87$ 267.44$ 271.50$ Northern Crescent 147.71$ 233.72$ 280.45$ 295.58$ 300.05$ Southern Seaboard 170.93$ 269.91$ 323.62$ 341.05$ 346.11$ Mississippi Portal 135.01$ 200.38$ 233.43$ 243.70$ 247.37$ Prairie Gateway 92.50$ 139.85$ 160.45$ 166.01$ 168.20$ Fruitful Rim 164.52$ 244.31$ 272.73$ 278.65$ 281.99$ Basin & Range 123.09$ 186.13$ 218.75$ 229.28$ 233.16$ Northern Plains 89.51$ 130.87$ 151.97$ 158.84$ 161.78$
SORGHUM:U.S. 132.28$ 188.47$ 209.33$ 213.96$ 216.61$ Heartland 141.99$ 214.73$ 251.78$ 263.41$ 267.36$ Eastern Uplands 203.66$ 304.89$ 335.84$ 339.91$ 342.63$ Mississippi Portal 169.56$ 240.31$ 271.49$ 280.25$ 284.20$ Prairie Gateway 138.76$ 197.74$ 218.50$ 222.72$ 225.42$
Variable Cost = Operating Cost + Hired Labor
US $/Acre
Seed17%
Fertilizer49%
Chemicals8%
Custom4% Fuel
15%
Repairs4%
Labor1%
Interest2%
U.S. Corn Variable Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $239.88 $349.40 $337.51 $400.23
Fertilizer $99.72 $172.06 $166.75 $214.54
Fuel $32.42 $51.42 $47.13 $52.60
Variable Cost = Operating Cost + Hired Labor
Seed32%
Fertilizer21%
Chemicals12%
Custom5%
Fuel18%
Repairs8%
Labor2%
Interest2%
U.S. Soybean Variable Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $109.88 $148.54 $139.44 $162.87
Fertilizer $15.26 $30.92 $24.73 $39.58
Fuel $17.12 $26.92 $25.84 $27.43
Variable Cost = Operating Cost + Hired Labor
Seed15%
Fertilizer20%
Chemicals14%
Custom6%
Fuel12%
Repairs4%
Labor24%
Ginning3%
Interest2%
U.S. Cotton Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $428.69 $559.25 $509.41 $617.51
Fertilizer $58.42 $111.70 $92.66 $144.31
Fuel $42.41 $66.66 $63.98 $67.94
Variable Cost = Operating Cost + Hired Labor
Seed7%
Fertilizer26%
Chemicals10%
Custom13%
Fuel30%
Repairs4%
Labor5%
Interest2%
U.S. Rice Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $493.49 $697.90 $638.77 $769.94
Fertilizer $96.61 $185.57 $153.25 $240.04
Fuel $133.83 $210.39 $201.91 $214.40
Variable Cost = Operating Cost + Hired Labor
Seed8%
Fertilizer47%
Chemicals7%
Custom5%
Fuel20%
Repairs9%
Labor2% Interest
2%
U.S. Wheat Variable Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $100.36 $151.03 $136.14 $174.90
Fertilizer $37.29 $71.31 $59.15 $92.13
Fuel $19.36 $30.44 $29.22 $31.02
Variable Cost = Operating Cost + Hired Labor
Seed16%
Fertilizer25%
Chemicals22%
Custom2%
Fuel17%
Repairs7%
Labor3%
Interest2%
U.S. Peanut Cost of Production - 2008
2007 2008(FAPRI) 2008(USDA) 2009(FAPRI)
Variable Cost $429.84 $580.48 $536.79 $638.26
Fertilizer $71.52 $143.92 $115.94 $183.74
Fuel $63.27 $99.79 $95.46 $101.93
Variable Cost = Operating Cost + Hired Labor
Putting the Pieces Together
Macro
Prices Paid
Cost ofProd.
NetReturns
U.S. Corn Market Returns
95/9
697
/98
99/0
001
/02
03/0
405
/06
07/0
809
/10
11/1
2 $-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Gross ReturnsNet Returns$/
Acr
e
Source: FAPRI-MU August 2008 Update
(Does not include Government Payments)
U.S. Soybean Market Returns
95/9
697
/98
99/0
001
/02
03/0
405
/06
07/0
809
/10
11/1
2 $-
$100
$200
$300
$400
$500
$600
Gross ReturnsNet Returns$/
Acr
e
Source: FAPRI-MU August 2008 Update
(Does not include Government Payments)
U.S. Wheat Market Returns
95/9
697
/98
99/0
001
/02
03/0
405
/06
07/0
809
/10
11/1
2 $-
$50
$100
$150
$200
$250
$300
$350
Gross ReturnsNet Returns$/
Acr
e
Source: FAPRI-MU August 2008 Update
(Does not include Government Payments)
U.S. Cotton Market Returns
95/9
697
/98
99/0
001
/02
03/0
405
/06
07/0
809
/10
11/1
2 $(200)
$(100)
$-
$100
$200
$300
$400
$500
$600
$700
$800
Gross ReturnsNet Returns$/
Acr
e
Source: FAPRI-MU August 2008 Update
(Does not include Government Payments)
U.S. Rice Market Returns
95/9
697
/98
99/0
001
/02
03/0
405
/06
07/0
809
/10
11/1
2 $(200)
$-
$200
$400
$600
$800
$1,000
$1,200
Gross ReturnsNet Returns$/
Acr
e
Source: FAPRI-MU August 2008 Update
(Does not include Government Payments)
FAPRI Baseline Process
• November 2008 – Preliminary Baseline• December 2008 – Baseline Review• Jan./Feb. 2009 – Final Baseline
– Deterministic and Stochastic– Presented to Congress by early March
• University of Missouri, Iowa State University, Texas A&M University, University of Arkansas, Texas Tech University, & Arizona State University