TAKE ADVANTAGE OF STRONGER PRICES - ag.ndsu.edu · Postharvest: scale-up sales of inventory and...
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TAKE ADVANTAGE OF STRONGER PRICES George Flaskerud NDSU Extension Economist October 16, 2002 http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/cropmkt.htm (OLK0203)
Transcript of TAKE ADVANTAGE OF STRONGER PRICES - ag.ndsu.edu · Postharvest: scale-up sales of inventory and...
TAKE ADVANTAGE OF STRONGER PRICES
George FlaskerudNDSU Extension Economist
October 16, 2002http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/cropmkt.htm
(OLK0203)
TOPI CSMarketing strategyStocksExportsBalance sheetPrice expectationsSpreads
BasisSeasonal patternsSell or store decisionProtein premiumsBreakevens
SPRING WHEAT 2002-03 POST HARVEST MARKETING STRATEGY
Loan itComplete sales by Nov 15 using futures fixed contract prior to NovTarget 545 Mpl Dec wheat for the highest price objective. This price objective was revised upward after the USDA stocks and production report on 9/30/02.
WORLD WHEAT SU PPL Y DOWN FOR THIRD CO N SE CUTIVE YEAR
SUPPLY
CONSUMPTION
PRODUCTION
Production problems in US, Canada and AUConsumption exceeded production somewhat past 3 yrs but supplies large enough to sustain consumptionWill consumption have to be rationed in 2002-03 as in 1994-95 and 1995-96?
Source: USDA 10/11/02
WHEAT STO CK S TIGHT E SPE CI ALLY AT WORLD LEVEL
US
WORLD
US
WORLD
US @ 17.5, nearing 1995-96 low of 15.8; world @ 21.9 is at 1972-74 lows of 21.3-22.82
Source: USDA 10/11/02
ST O CK S NEAR HIST ORI CAL LOWS IN MAJOR EXPO RTING CO UNTRIES
US
WORLDUS
CAN
EUARGAU
(WHT01, MEXSU)Source: USDA 10/11/02
HRS ST O CK S ARE ESPE CIALLY TIGHT HIST ORI CALLY
US
WORLD
HRWHRS
HRW, SRW, Wh & D also tight but not as tight as they have been historically.
SRW
Source: USDA 10/11/02
Wh D
EU WILL BE MAJOR COM PETITION IN WHEAT EX PORT MARKET
EU exports expected to be up 50% providing the most competition to SRW and the CBOT
Source: USDA 10/11/02
S& D 2002 AND CBOT FUTURE S PR I CE S FOR WHEAT
Pltd 60.4Hvstd 46.0Yield 35.3
Beg. Stocks 777Production 1,625Imports 85Supply 2,487
Domestic 1,166Exports 950Use 2,116
End. Stocks 371S/U Ratio 17.5%
Wheat 2002
95
888996 94
92
9197 93
98 90 99
(GRMKNS, SU8696, SDWCB)
00
01
410-430
USDA 10/11/02
CB T WHEAT FUTURE S PATTERNFOLLOW '94?
(spreads)
Depends on production by major exporters & WW planting conditions
MGE FUTURE S NEAR 10-YR HIGHS
(spreads)
PR EMIUM FOR HRS AT 10-YEAR HIGH
(SPREADS)
HARD RED SPRING WHEAT, 14% PROTEINMPLS TO-ARRIVE CASH
SMALLER THAN EXPECTED NEW CROP SUPPLY
1980-81
1988-89
1991-92
1996-97
MINOT #1, 14 PRO WHEAT BASISRELATIVE TO NEARBY MPLS FUTURES
PR OTEIN PR EMIUM S STRONGLY INFLUEN CED BY HRW PR OTEIN
ND HRS
Ks HRW
Protein premium not expected
BREAKEVEN SPG WHT PRICE S North Central Region 2002 Crop
Survival price–Total CASH costs of $89 plus $20 for family living less $12 gov't payments (DP, LDP, CCP)
–Divided by yield of 28 bushels per acre–Equals $3.46 per bushelAcceptable price–Total ECONOMIC costs of $107 plus $20 for family living less $12 gov't payments
–Divided by yield of 28 bushels per acre–Equals $4.11 per bushel
Prices generally at acceptable level
CA NADA DURUM (9/26/02)(Million Acres & Bushels)
Harv. Ac.Beg. StocksProductionImportsSupply
DomesticExportsUse
End. Stocks
2000-01 2001-02 2002-036.46 5.03 5.6065 106 60
207 110 1350 0 0
273 216 19539 23 32
128 133 132168 156 164106 60 31
Source: http://www.agr.ca/policy/winn/biweekly/English/index2e.htm (usdur)
U.S. DURUM (10/11/02)(Million Acres & Bushels)
Harv. Ac.Beg. StocksProductionImportsSupply
DomesticExportsUse
End. StocksSource: USDA
2000-01 2001-02 2002-033.57 2.79 2.7650 45 33
110 84 8025 34 35
185 163 14879 78 8661 52 35
140 130 12145 33 27
NOVEMBER DURUM PRICE S TEND TO BE AT OR NEAR PE AK
MILLING
TERMINAL
The uncertainty of durum production in Canada may again lead to a November peak in prices
CO RN 2002-03MARKETING STRATEGY
Harvest: sell off the combine. Replace sold grain with futures if Mar futures price is less than 270. Basis fixed contract is alternative for cash sales.Postharvest: scale-up sales of inventory and offsetting of futures, completing near 285 in Mar futures or by the end of February, whichever comes first. Use CCC loans to provide cash flow. Price objective revised down slightly after improvement in Oct s&d.
CO ARSE GRAIN ST O CK S HAVE TIGHTENED CO N SIDERABLY
US
WORLD US
WORLD
95
97 96 88
93 9190 9498
9992
89
S&D 2002 AND CBOT FUTURES PRICES FOR CORN
0001
USDA 10/11/02
280-300
Corn 2002Pltd 78.8Hvstd 70.5Yield 127.2
Beg. Stocks 1,599Production 8,970Imports 15Supply 10,584
Domestic 7,820Exports 2,000Use 9,820
End. Stocks 764S/U Ratio 7.8%
CORN FUTURES NEAR 10-YEAR HIGHS EXCL UDING 1995-96
(spreads)
HUNTER #2 CORN BASISRELATIVE TO NEARBY CBOT FUTURE
TARGET NOVEMBER FOR BARLEY SA LES
MALTING BARLEY
FEED BARLEYMALTING PREMIUM
October-December was the most profitable time to sell 1998-00 feed and malting barley based on prices received by ND farmers.
OAT S ST O CK S TIGHT BY ALL MAJOR SU PPLIER S
US
CANADA
USDA projecting mid-point average farm price 15 cts higher than year agoImported 1/3 of supply in 2001-02Source of imports during 2001-02–Canada 68%–Finland 16%–Sweden 13%
SO YBEAN S 2002-03MARKETING STRATEGY
Harvest: sell off the combine and replace sold grain with futures if March futures is less than 560. Basis fixed contract is alternative for cash sales.Postharvest: scale-up sales of inventory and offsetting of futures, completing by the end of February. High in the March contract of about 592 may be potential. Use CCC loans to provide cash flow. Consider May OTM call options to replace some sales.
U.S. SO YBEAN ST O CK S NEAR LOWS OF LA ST TWO DECA DES
US
WORLD US
WORLD
Source: USDA 10/11/02
S. A. SO YBEAN PR ODU CTION & EXPO RTS CO NTINUE TO CL IMB
US
WORLD
PRODUCTION
EXPORTS
Source: USDA 10/11/02
S&D 2002 AND CBOT FUTURES PRICES FOR SOYBEAN
88
96
9095
93
9291 89
87 9486
97
9899
Use this graph as a rough guide to prices. Stocks this tight in the past have warranted at least $6.00 in the futures.
0001
Soybeans 2002Pltd 73.0Harvested 71.8
Yield 37.0Beg. Stocks 208Production 2,654Imports 3
Supply 2,865Domestic 1,840Exports 850
Use 2,690End. Stocks 175S/U Ratio 6.5%
USDA 10/11/02
SOYBEAN FUTURE S MIDDLE OF 10-YEAR RANGE
(spreads)
HUNTER #1 SOYBEAN BASISRELATIVE TO NEARBY CBOT FUTURES
WORLD FLAX(Million Metric Tons, Oil World 9/6/02)
Beg. StocksProduction
EUCanadaUS
SupplyUseEnd. Stocks
EUCanadaUS
S/U Ratio %
2000-01 2001-02 2002-03.55 .42 .29
2.34 2.15 2.26.21 .14 .13.78 .77 .74.27 .29 .41
2.89 2.57 2.552.47 2.28 2.36.42 .29 .19.10 .07 .05.29 .19 .11.03 .02 .03
17.0 12.7 8.1Ag Canada on 9/26/02 forecast a 20-30% increase in the price for 2002-03
WORLD SUNFLOWERS(Million Metric Tons, Oil World 8/30/02)
Beg. Stocks2000-01 2001-02 2002-03
3.14 2.01 1.72Production
EUCentral EuropeRussiaUkraineUSArgentinaChina
SupplyUseEnd. StocksS/U Ratio %
23.11 21.50 24.003.33 2.99 2.802.13 2.27 2.513.91 2.67 3.303.46 2.34 3.001.61 1.58 1.502.95 3.80 4.301.95 1.75 1.90
26.25 23.51 25.7224.24 21.79 24.082.01 1.72 1.648.3 7.9 6.8
SNF PRICE SHOULD STRENGTHEN INTO SPRING, USE SOYOIL FUTURES
93
9495
96
97
99
98
00
01
World stocks tightness continuesCompetition for acres next springPrice averages:–1993/94 = 12.97–1994/95 = 10.01–1995/96 = 11.57–1996/97 = 10.52–1997/98 = 11.29–1998/99 = 8.51–1999/00 = 6.53–2000/01 = 6.62
WORLD RA PE SEED/CA NOLA(Million Metric Tons, Oil World 8/30/02)
Beg. StocksProduction
EUCanadaUSChinaAustralia
SupplyUseEnd. Stocks
EUCanada
S/U Ratio %
2000-01 2001-02 2002-035.63 3.63 3.1837.39 36.48 33.978.96 8.86 9.287.13 5.07 3.24.92 .94 .83
11.38 11.32 10.701.78 1.66 1.20
43.02 40.11 37.1539.39 36.93 34.833.63 3.18 2.32.32 .37 .23
1.05 1.00 .309.2 8.6 6.7
Ag Canada on 9/26/02 forecast a 20-29% increase in the price for 2002-03
CANOLA PRICE COULD SHOW INDEPENDENT STRENGTH
Canadian stocks require major rationing of useEU production less than expectedPrice averages:–1993/94 = 11.94–1994/95 = 12.25–1995/96 = 12.54–1996/97 = 13.09–1997/98 = 11.98–1998/99 = 10.07–1999/00 = 7.53–2000/01 = 7.46
94
9596
9793
99
980001
VELVA BASI S RELATIVE TO NEARBY WCE CANOLA FUTURES
See EB-75
EDIBLE BEANS SU PPLIES MUCH IMPR OVED EX CE PT FOR PINTO S
Edible production up 39% from year ago due to increase of 36% in harvested acres and 2% in yields (USDA 8/12/02)S/U of 5.3% for Pinto, 41% for Navy & 48% for Black projected by statpub.com (9/18/02)ND rain during Aug/Sep likely tightened stocks especially for PintosPost harvest price recovery most likely for PintosND prices on 10/16/02 were 14-15 Pintos, 10 Navy and 10-11 Black
That's AllFolks
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