Outlook Sharon Raszap Skorbiansky Agricultural Economist Economic - - PowerPoint PPT Presentation

USDA 2020/21 U.S. Grains and Oilseeds Outlook

February 21, 2020

Sharon Raszap Skorbiansky Agricultural Economist Economic Policy and Analysis Division USDA Farm Production and Conservation Business Center Presented on behalf of the Grains and Oilseeds Interagency Committees

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What we’ll be talking about today

1) The 2020 setting

• Macro (GDP and exchange rate)
• Trade (China Phase I deal, coronavirus, African Swine Fever)
• Weather
• Farm financial pressure (crop margins)

2) 2020 Crop Highlights

• Corn
• Soybeans
• Wheat

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Source: World Bank Global Economic Prospects, January 2020. 2019 is not final, 2020-22 are forecasts

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Global growth to recuperate; China growth to decline

5.0 5.2 5.4 5.6 5.8 6.0 6.2 6.4 6.6 6.8 7.0 2016 2017 2018 2019 2020 2021 2022 China 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2016 2017 2018 2019 2020 2021 2022 Real GDP, % Change Previous Year World U.S.

Argentinian Pesos Brazilian Real

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Recent upturn in dollar

What a U.S. Dollar buys you:

10 20 30 40 50 60 70 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5

Phase I Deal…what’s the deal?

Commitments by China to increase purchases over 2017 baselines:

• Agricultural goods (2017

= $24 billion):

• +$12.5 billion in 2020
• +$19.5 billion in 2021
• Energy goods

(2017 = $9.1 billion)

• +$18.5 billion in 2020
• +$33.9 billion in 2021

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15 30 45 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Billion dollars Historical Phase I Deal

Agricultural & Related Products

Total corn, soy, wheat prevented planting hit record high in 2019

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2 4 6 8 10 12 14 16 18 20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Million Acres Corn Soybeans Wheat

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It’s wet and could continue to be wet

Source: Climate Prediction Center, National Oceanic and Atmospheric Administration

Increasing 3-crop planted area

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Total corn, soybeans, and wheat acreage

226 211 224 150 160 170 180 190 200 210 220 230 240 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020f Million Acres

Corn down, wheat up, soy slightly up

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$3.6 $8.8 $4.9 2 4 6 8 10 12 14 16 2012 2013 2014 2015 2016 2017 2018 2019e 2020f Dollars per Bushel Soybeans Wheat Corn

Weak margins to persist

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Note: Margins exclude government payments. 2019/20 is not final, 2020/21 is a forecast. 0.00 100.00 200.00 300.00 400.00 500.00 600.00 '10 '12 '14 '16 '18 '20 '10 '12 '14 '16 '18 '20 '10 '12 '14 '16 '18 '20 corn soy wheat Dollars per Acre

Returns over Operating Costs:

U.S. Corn 2020/21 Highlights

• Planted area is forecast at 94 million acres, 5 percent above 2019/20
• Production is forecast at 15.5 billion bushels, 13 percent above

2019/20

• Food, Seed, and Industrial (FSI) is forecast to increase to 6.8 billion

bushels, 20 million bushels above 2019/20

• Feed and residual is forecast to increase to 5.8 billion bushels, 275

million bushels above 2019/20

• Exports are forecast to increase to 2.1 billion bushels, 375 million

bushels above 2019/20

• Ending Stocks are forecast to increase to 2.7 billion bushels, up 745

million bushels from 2019/20

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Lower corn stocks, but total supply to increase

2 4 6 8 10 12 14 16 18 20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Billion Bushels Production Beginning Stocks

Corn consumption is increasing slightly

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2 4 6 8 10 12 14 16 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Billion Bushels Ethanol Other FSI Exports Feed & Residual

Global corn export share has declined

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0% 10% 20% 30% 40% 50% 60% 20 40 60 80 100 120 140 160 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Exports, Million Meric Tons United States Argentina Brazil Ukraine U.S. Share (right)

U.S. corn price is currently competitive

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Source: International Grains Council (IGC) 125 135 145 155 165 175 185 195 205 215 Dollars per Metric Ton Argentina Black Sea Brazil United States

U.S. Soybean 2020/21 Highlights

• Planted area is forecast at 85 million acres, 12 percent above

2019/20

• Production is forecast at 4.2 billion bushels, 18 percent above

2019/20

• Crush is forecast at 2.1 billion bushels, an increase of 25 million

bushels from 2019/20

• Exports are forecast to rise to 2.1 billion bushels, a 225 million

bushel increased from 2019/20

• Ending stocks are forecast to decrease to 320 million bushels,

down 484 million bushels from 2019/20

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Soybean supply increase on higher production

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1,000 2,000 3,000 4,000 5,000 6,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million Bushels Production Beginning Stocks

Soybean use is increasing

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500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million Bushels Crush Seed & Residual Exports

In 2018/19, U.S. soybean exports to China decreased, increased for ROW

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10 20 30 40 50 60 70 '15/16 '16/17 '17/18 '18/19 '19/20 '20/21 Million Metric Tons Sales to China Sales to ROW Total

?

Accumulated as

• f Feb. 6, 2020

U.S. Wheat 2020/21 Highlights

• Planted area is forecast at 45 million acres, less than 1 percent lower

from 2019/20

• Production is forecast at 1.8 billion bushels, 4 percent lower from

2019/20

• Feed and residual use is forecast at 120 million bushels, down 30

million from 2019/20

• Food use is forecast to increase to 958 million bushels, only 3 million

higher from 2019/20

• Exports are forecast to stay constant at 1.0 billion bushels, as the U.S.

has become relatively more competitive in international wheat markets

• Ending Stocks are forecast to tighten by about 160 million bushels to

777 million bushels, a five-year low

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Wheat supply is down

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500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million Bushels Production Beginning Stocks Imports

Winter wheat sowings—second lowest

• n record after 1909

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10 20 30 40 50 60 70 80 90 100 1909 1921 1933 1945 1957 1969 1981 1993 2005 2014 2020 Million Acres All Wheat Winter Wheat

Small dip in wheat consumption

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500 1,000 1,500 2,000 2,500 3,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million Bushels Food Exports Seed Feed & Residual

Global wheat competition remains

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0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Percent of Global Wheat Trade Argentina Australia Canada European Union Russia United States

Thank you!

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Returns from ethanol

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• 0.5

0.5 1 1.5 2 2.5 Return Over Operating Costs ($/gallon) Fixed Costs Source: Iowa State University, Center for Agricultural and Rural Development

• Feb. 2019
• Feb. 2020

Soybean to Corn Price Ratio