FSA-EPAS1GRAINS AND OILSEEDS OUTLOOK2013 Agricultural Outlook ForumPete RileyEconomic and Policy Analysis StaffUSDA/Farm Service AgencyWashington, DC 20250202-720-7787Pete.Riley@wdc.usda.govFebruary 22, 2013FSA-EPASToday’s PresentationAcreage, including CRP UpdateYields and ProductionHighlights of Supply and Demand Balance SheetsCorn and Soybean Yield Scenarios UnderAlternative Weather Assumptions2FSA-EPAS2012 Principal Crop Plantings were 326.3 millionAcres, the Highest Since 2002305310315320325330Mil.acres• Year to year increase was 11.2million acres, the largest since1996.• Very strong price incentivesand favorable (dry) plantingconditions account for the largegain.• Acreage for every principalcrop except cotton showed anincrease over 2011.• Principal crops include all major fieldcrops, hay, minor oilseeds, potatoes,dry beans, tobacco, sugarcane andbeets, peas and lentils, millet, and rye.3FSA-EPASSince 2008, Corn and Soybeans Have Accountedfor More than Half of Principal Acres6065707580859095100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mil. acresThe Big Story is the Increase inCorn Planted Area6065707580859095100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mil. acresSoybean Area Set Record in2009, and Remains High4FSA-EPASLosing Acreage: Wheat and HayTrending Down505254565860626466 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mil. acres2010 Wheat PlantingsWere the Lowest Since 1970505254565860626466 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Mil. acres2011 All Hay Harvested AcresWere the Lowest on Record *Alfalfa acres (included in total)hit a 64-year low in 20125* Records date from 1909.FSA-EPASConservation Reserve Program (CRP)Acres Are Declining0510152025303540 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013Mil. acresCRP enrolled acres• CRP conserves soil, water, andwildlife resources by takingenvironmentally sensitive landout of crop production, under10-15 year contracts.• Land is planted to long-term,conserving covers, mainlygrass and trees.• Current total enrolled is 27.1million acres, down 9.7 millionfrom 2007 peak.• 2008 Farm Bill lowered cap onacres from 39.2 million to 32.0million.6FSA-EPASCRP Acres: Concentrated in the Plains7FSA-EPASWhat Land Left the CRP in 2012?6.5 million acres expired, but about 3.4 million was reenrolled and some new acres were also enrolledState1000acres1 NorthDakota 5832 Montana 4833 Minnesota 1524 Kansas 1495 Missouri 1466 SouthDakota 1307 Iowa 1138 Nebraska 959 Colorado 9410 Texas 69Other 439UnitedStates 2,455Will the land be cropped in 2013?• Some will go into corn and soybeans,given high prices, but little would beconsidered prime land.• While most CRP acres were in grass,the land still needs preparation beforecrops can be planted.• Traditionally, a large share has stayedin grass immediately after CRP,reflecting both its location, and timeand costs to prepare for crops.• Net expired acres available for 2013cropping total nearly 2.5 million.8FSA-EPAS2013 Acreage Projections: Slight Decline inCorn, Small Gains in Soybeans and Wheat2011 2012 2013 FWheat 54.4 55.7 56.0Soybeans 75.0 77.2 77.5Corn 91.9 97.2 96.53 crops 221.3 230.1 230.0Another year of large plantingssupported by strong new-crop prices:• Corn down slightly from lastyear’s 75-year high on more normalspring planting weather.• Despite favorable priceincentives, HRW area down due todrought. SRW acres are up, whilespring wheat expected to decline.• Soybeans increase with attractiveprices relative to year ago and relativeto corn, more double croppingpotential, and decline in cotton acres.9Million acresFSA-EPASCorn and Soybean Yields and Production toRebound with Normal Weather10YieldsBushels/acre2011 2012 2013FWheat 43.7 46.3 45.2Soybeans 41.9 39.6 44.5Corn 147.2 123.4 163.6ProductionMil.bushels2011 2012 2013FWheat 1,999 2,269 2,100Soybeans 3,094 3,015 3,405Corn 12,360 10,780 14,530• Wheat yield (based on trend)down from 2012 record.• Harvested HRW acres to fall onpoor weather .• Wheat crop projected 7 percentlower.• Soybean production projected torise 13 percent as yield recoversfrom drought.*• Corn production projected tojump 35 percent as yield recoversby 40 bushels per acre.**Corn and soybean yieldsbased on weather model.FSA-EPASWheat Supplies to Fall on LowerBeginning Stocks and Smaller Crop05001,0001,5002,0002,5003,0003,500Mil. Bu.Wheat suppliesProductionBegin stocksImports• Wheat supplies projected to fall7 percent, lowest since2007/08.• Beginning stocks for 2013/14expected to slip under 700million bushels for the firsttime in 4 years.• 2013 production of 2.1 billionbushels would be just under theprevious 3-year average.11FSA-EPASWheat Exports Expected to Decline asCompetitor Production Rebounds02004006008001,0001,2001,400Mil. Bu.U.S. exports• While U.S. supply falls, mostcompeting exporters areprojected to have larger crops,led by the Black Sea region andthe EU.• There will be good opportunitiesfor U.S. exports in the first halfof the marketing year, as newcrop winter wheat is harvestedbefore the main competitorcrops.• However, the longer termdowntrend in U.S. export marketshare is expected to continue.12FSA-EPASWheat Ending Stocks Projected to DeclineBut Outlook is Far from Tight02004006008001,0001,200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Wheat ending stocks• Stocks are projected at 639million bushels, the lowestsince 2007/08.• Total use projected to slide 7percent from 2012/13, withdeclines in exports anddomestic use.• The ratio of stocks-to-use isprojected at 28 percent, downjust marginally from the 28.2percent forecast for 2012/13.13FSA-EPASSoybean Supply Expected to bethe Highest in 7 Years05001,0001,5002,0002,5003,0003,5004,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Soybean supplyproductionbegin stocksimports.• Despite very low beginningstocks, bigger crop will raisesupply 11 percent and would bethe second highest ever.• 2013 production projected toslightly eclipse prior recordhigh of 2009.14FSA-EPASSoybean Crush Projected to Increase 3 Percent1,3501,4001,4501,5001,5501,6001,6501,7001,7501,8001,850Mil. Bu.Soybean crush• 2013/14 crush rebounds from9- year low.• Soybean meal feeding toincrease modestly on lowerprices and some expansion inpoultry and pork.• Despite increased crush,soybean oil supplies areprojected to decline for thefourth straight year--to thelowest since 2004/05--on verylow carryin stocks.15FSA-EPASSoybean Exports to Grow on ContinuedStrong Import Demand by China02004006008001,0001,2001,4001,600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Exports.• U.S. exports projected up 12percent, matching previousrecord highs.• China’s growth driven bystrong demand for veg. oil forfood and improved feed rationsusing more protein meal.• Despite supply gains and lowerprices, export competition willremain intense as SouthAmerican production reboundsfrom last year’s poor crops.16FSA-EPASSoybean Ending Stocks Projectedto Double in 2013/140100200300400500600700 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Ending stocks• Soybean ending stocks areprojected at 250 millionbushels, double the levelforecast for 2012/13, and thehighest since 2006/07.• The stocks-to-use ratio wouldrise to 7.6 percent, comparedwith the historically low levelof 4.1 percent forecast for2012/13.17FSA-EPAS2013 Corn Supply Expected to be Record Large02,0004,0006,0008,00010,00012,00014,00016,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Corn supplyproductionbegin stocksimports.• Despite the lowest forecastcarryin stocks since 1995/96,corn supply projected up 28percent to 15.2 billion bushels.• Although planted area isexpected to fall slightly,harvested area is expected to bethe highest since 1933.• Area of corn cut for silage orabandoned will decrease withbetter growing conditions.18FSA-EPASFeed and Residual Use to Increase in 2013/14On Larger Corn Supply and Lower Prices• Feeding to increase with lowerfeed costs and growth inpoultry and pork production.• Sharp increase in residualdisappearance with hugeincrease in the crop.• Beef sector prospects hamperedby drought impacts and tightercattle supplies.• Any recovery in foragesupplies will also influencegrain feeding.• Small expansion in feeding ofdistillers’ grains expected withmore ethanol production.1901,0002,0003,0004,0005,0006,0007,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Corn feed and residualFSA-EPASOnly Modest Rebound in Ethanol in 2013/14Reflects Decline in Gasoline Use and “Blend Wall”• Potential market for ethanolconstrained by declininggasoline consumption.• The “blend wall” refers to amarket saturated at the 10-percent blend (E10).• Ethanol exports are notexpected to recover to 2011highs, with higher productionin Brazil and EU trade barriers.• Imports of sugarcane ethanolfrom Brazil are increasing.• No significant expansionexpected for E15 or E85.2001,0002,0003,0004,0005,0006,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Corn used for ethanolFSA-EPASFalling Gasoline Use ConstrainsEthanol Expansion211201301401501601701802004 2006 2008 2010 2012 2014 2016 2018 2020 2022Bil. Gal.2007 Gasoline Consumption Projections (Guidingthe 2007 Energy Bill) vs. Actual /Current Forecast2007 projectioncurrentGap between actual andprojected was 16 billiongallons in 20122012: 134.0 bil. gal2013 F: 133.8 bil .galFSA-EPASWhat Accounts for DecliningGasoline Consumption?Fewer Miles Driven Efficiency Gains22• Virtually all new vehicles getmore miles per gallon.• For example, the Ford 150 seriespick up (the top selling vehicleover the last decade), gets 18 mpgfor 2013, up from 16 in 2003, a12.5 percent improvement.**Example of 6-cylinder automatic• Vehicle miles driven peaked in2007.• Recession explains initial decline,but there are other factors:- High gasoline prices.- Aging baby boomers.- Teenagers delaying driving.- Population shifts to urbanareas.FSA-EPASCorn Export Recovery LimitedAs Competition Remains Strong• Exports for the current 2012/13year are forecast at just 900million bushels, the lowestsince 1971/72.• U.S. shipments are projectedto rise, but stay relatively lowat 1,500 million bushels.• The recent downtrend reflectsvery high U.S. prices and lossof market share, as farmersworldwide have responded tohigh price signals.2305001,0001,5002,0002,5003,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Corn exports.FSA-EPASHigh Prices Trigger Sharp Increase in CornExports by Non-Traditional Exporters051015202530354045502000 2002 2004 2006 2008 2010 2012 FMil. Bu.Corn exports, selectedexporters, 2000-2012BrazilUkraineIndiaParaguayRussiaSerbia• Record high corn prices havetriggered a strong productionresponse in the rest of theworld.• Foreign export gains have beenled by Brazil and Ukraine.• Much of Brazil’s gains reflectwinter corn production thatdoes not directly compete withsoybeans.• Some countries normally notcompetitive due to high pricesand/or quality concerns havestepped up shipments.24FSA-EPASU.S. Market Share Plummets While GlobalCorn Trade is Near Record High0%10%20%30%40%50%60%70%80%90%020406080100120PercentMil. MTWorld corn trade and U.S. market share, 1970-2012Market shareTrade25FSA-EPASCorn Ending Stocks to Build as SupplyGain Outpaces Increase in Use05001,0001,5002,0002,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 FMil. Bu.Corn ending stocks• Stocks projected to more thantriple from 2012/13, to nearly2.2 billion bushels, slightlyhigher than 1992/93 and2004/05.• Total use is projected at 13billion bushels, up 16 percentfrom sharply curtailed use in2012/13, but still slightly belowrecord use of earlier years.• Stocks build as sharp exportcompetition, the plateau inethanol, and the declining cattleherd limit a full rebound in use.26FSA-EPAS2013 Prices Will Decline with Record CornSupply and Increase in Soybean Crop2011 2012 2013 FWheat $7.24 $7.90 $7.00Soybeans $12.50 $14.30 $10.50Corn $6.22 $7.20 $4.80• Wheat price decline moderated bylarge share marketed during thesummer months when corn priceswill still be high.• The soybean price expected to bethe lowest since 2009/10, underheavy pressure from the cornmarket.• Corn prices expected to fall sharplyfrom the 2012/13 record, given thedramatic production increase.• While harvest-time cash corn pricescould fall toward $4.00, someforward sales will support the farmprice at a higher level.27Prices received by farmers$ per bushelFSA-EPASRisks Around the Forecasts• Uncertain transition from the very tight old crop situation:– South American crop production.– Brazil export logistics.– Degree and duration of the new crop risk premium.– Timing/availability of new-crop supplies.• Actual planted acreage for 2013.• Volatility in oil and energy markets.• Foreign producers’ response to falling prices.• China:– Will it continue to increase soybean buying?– Will China ramp up corn imports as prices become more attractive?• Weather.28FSA-EPASYield Scenarios From Weather ModelsAssume Plus or Minus One Standard Deviation* for Rainfalland Temperature in Most Critical Growing PeriodCorn Soybeans29•Average July rain = 3.87 in.•Average July temp. = 73.9 F.Low Yield: 154.0 bu./ac.•Rain 2.67 in.•Temp. 76.4 F.High yield: 170.1 bu./ac.•Rain 5.08 in.•Temp. 71.4 F.•Average July-Aug. rain = 3.80 in./month.•Average July-Aug. temp. = 73.1 F.Low yield: 42.9 bu./ac.•Rain 3.08 in.•Temp. 75.2 F.High yield: 45.6 bu./ac.•Rain 4.52 in.•Temp.71.1 F.* Standard deviation = 1.21in. (rain), 2.5 degrees (temp).* Standard deviation = 0.72 in. (rain), 2.0 degrees (temp)FSA-EPASCorn Yield Scenario Balance SheetsLow Trend HighYield(bu./ac.) 154.0 163.6 170.1‐‐‐‐‐mil.bu.‐‐‐‐‐Production 13,630 14,530 15,140Feedandresidual 5,100 5,400 5,600Ethanol 4,575 4,675 4,725Exports 1,350 1,500 1,600Totaluse 12,460 13,010 13,360Endingstocks 1,827 2,177 2,437Price($/bu.) $5.80 $4.80 $4.2030FSA-EPASCorn Yield ScenariosSupply• Low yield production of 13.6 billion bu. would still beat 2009 recordhigh of 13.1 billion bu. by 500 million.• High yield case pushes production to 15.1 billion bu., 2 billion bu.higher than the old record.Utilization• Most response seen in feed and residual in either case.• In the low case, there would also be little or no pasture recovery.• Ethanol expansion constrained by blend wall.• Export potential similarly constrained by large foreign supplies.Ending Stocks and Price• Big stocks increase even in low yield scenario will push price downsharply.31FSA-EPASSoybean Yield Scenario Balance SheetsLow Trend HighYield(bu./ac.) 42.9 44.5 45.6‐‐‐‐‐mil.bu.‐‐‐‐‐Production 3,285 3,405 3,495Crush 1,635 1,660 1,680Exports 1,435 1,500 1,545Totaluse 3,205 3,295 3,360Endingstocks 220 250 275Price($/bu.) $11.60 $10.50 $9.7532FSA-EPASSoybean Yield ScenariosSupply• Low yield production of 3.3 billion bu. would still result in a year toyear increase of 270 million bu.• The high yield scenario would increase the potential record size of thecrop by 90 million bu. from the trend yield.Utilization• Strong domestic demand for protein limits adjustment in crush.• Crush also supported by mandated biodiesel use.• Export effects muffled by strong demand by China.Ending Stocks and Price• Impact is modest in both cases, with much of the price effect drivenby corn.33