Grain and Cotton Outlook,
2016
Darren Hudson, Combest Chair, TTU
Mark Welch, Extension Economist, Texas A&M AgriLife Extension
John Robinson, Extension Economist, Texas A&M AgriLife Extension
Some Overall Considerations
• Stronger U.S. dollar => more pressure on U.S. exports
• Slower Chinese economy => economic slowdown for the world?
• European economic weakness
• Some potential for increases in interest rates (although, I wonder if
the Fed will actually do that in the face of above)
• All of these factors mean pressure on U.S. commodity prices.
Key Questions for 2016
• What will be the path of the US dollar?
• Will cattle on feed numbers continue to improve?
• What will be the path of input costs?
• Can I cash flow my crop at the anticipated insurance price guarantee?
• Will there be changes to the cotton program?
Grain Outlook
Per Capita Grain Use—The Good News
400
390
380
370
360
kg
350
340
330
320
310
300
barley, corn, millet, mixed grains, oats, rice, rye, sorghum, soybeans, and wheat
USDA, Foreign Agricultural Service, PSD, 9/1/2015
387
Grain Stocks—The Bad News
140
140
120
120
100
100
80
72
80
60
60
40
40
20
0
Corn
Days of Use
20
0
20-yr avg
10-yr avg
Corn has 72 days of use on hand, slightly
below its 20 year average.
113
Wheat
Days of Use
20-yr avg
10-yr avg
Wheat as 113 days of use on hand,
slightly above its 20 year average.
For comparison, cotton has about 330 days of use on hand…
Price Effects—MYA Price for Corn
$/bu
8.00
6.89
7.00
6.00
5.00
4.66
4.00
3.65
3.00
2.38
2.00
WASDE, Updated 8/12/2015
Pre WWI
World Trade
WWI to WWII
Biofuel Era
2014
2010
2006
2002
1998
1994
1990
1986
1982
1978
1970
1966
1962
1958
1954
1950
1942
1938
1934
1930
1926
1922
1918
1914
1910
1906
1902
1898
1894
1890
1886
1882
1878
1874
1870
SAFP
Post WWII
1946
0.78
0.46
1866
0.00
1.29
1974
1.00
80/81
81/82
82/83
83/84
84/85
85/86
86/87
87/88
88/89
89/90
90/91
91/92
92/93
93/94
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
U.S. Corn Disappearance
Million Bushels
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Source: USDA WASDE, 8/12/2015
1980/1981
1981/1982
1982/1983
1983/1984
1984/1985
1985/1986
1986/1987
1987/1988
1988/1989
1989/1990
1990/1991
1991/1992
1992/1993
1993/1994
1994/1995
1995/1996
1996/1997
1997/1998
1998/1999
1999/2000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
U.S. Sorghum—The Bright Side?
Million bushels
800
700
600
500
400
300
200
100
0
Ending Stocks
USDA, WASDE, 8/12/15
Food, Seed, and Industrial
Feed and Residual
Exports
U.S. Wheat Price
$/bu
9.00
8.00
7.00
6.31
6.00
5.00
5.10
4.00
3.33
3.00
2.00
0.00
1.12
0.90
1908
1911
1914
1917
1920
1923
1926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
1.00
1.77
MY Avg Price
WASDE, 8/12/15
Pre WWI
WWI to WWII
Post WWII
World Trade
Biofuel Era
80
/8
81 1
/8
82 2
/8
83 3
/8
84 4
/8
85 5
/8
86 6
/8
87 7
/8
88 8
/8
89 9
/9
90 0
/9
91 1
/9
92 2
/9
93 3
/9
94 4
/9
95 5
/9
96 6
/9
97 7
/9
98 8
/9
99 9
/0
00 0
/0
01 1
/0
02 2
/0
03 3
/0
04 4
/0
05 5
/0
06 6
/0
07 7
/0
08 8
/0
09 9
/1
10 0
/1
11 1
/1
12 2
/1
13 3
/1
14 4
/1
15 5
/1
6
U.S. Wheat Use
Million Bushels
2,000
1,750
1,500
1,250
1,000
750
500
250
0
Ending Stocks
WASDE, 8/12/15
Feed and Residual
Exports
Food and Seed
U.S. Wheat Price in Yen—The Impacts of a
Strong Dollar
10
750
9
700
650
8
$/bu
600
7
550
6
500
5
450
4
400
Price of Wheat USD
Price of Wheat Yen
No. 1 HRW, ordinary protein, Kansas City, MO
USDA Wheat Data, USDA Agricultural Exchange Rate Data Set, X-rates.com
yen/bu
Cotton
6.00
1970/1971
1971/1972
1972/1973
1973/1974
1974/1975
1975/1976
1976/1977
1977/1978
1978/1979
1979/1980
1980/1981
1981/1982
1982/1983
1983/1984
1984/1985
1985/1986
1986/1987
1987/1988
1988/1989
1989/1990
1990/1991
1991/1992
1992/1993
1993/1994
1994/1995
1995/1996
1996/1997
1997/1998
1998/1999
1999/2000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
Lbs./Population
Per Capita Cotton Use
10.00
9.00
8.00
7.00
Source: USDA/ERS/WASDE
2015 Balance Sheet
Influenced by 1. cumulative heat units, 2. dry/warm maturation
weather in Sept/Oct, 3. date of first freeze, etc., U.S. production
could vary from 13 to 16 million bales.
A realized forecast of El Niño moisture in the Fall could reduce
yield potential and degrade quality (adding to the world
oversupply of low grade cotton).
This variable is subject to Chinese stocks policy, foreign
production, and perhaps the supply of quality new crop fiber.
Current bottom line is mildly stock reducing,
year-over-year (historically price supporting)
Typical Price Patterns with Carryover
74
74
Stable Carryover
72
(’95, ’97, ’98, ’99)
70
68
70
68
66
64
Smaller Carryover
(’89, ’90, ’93, ’94, ’02, ’03,
‘09, ‘13)
62
62
Dec’15
Settlement
Price (daily)
60
58
60
58
Larger Carryover
56
54
56
54
(’91, ’92, ’96, ’00, ’01, ’04, ‘05,
‘06, ‘07, ‘12, ‘14)
J
F
M
A
M
66
64
J
J
A
S
O
N
D
Cents/Lb. (daily)
Cents/Lb. (monthly)
72
‘15 and ‘16 Price Behavior
68
Dec. ‘15
67
Cents/Lb.
66
65
64
63
Dec. ‘16
62
61
J
F
M
A
M
J
J
Daily
January 2, 2015 – September 4, 2015
A
S
Chinese Stocks
China’s plan for selling 1M tonnes
during Summer 2015 represents a
9% year-over-year reduction.
Chinese Stocks and U.S. Price
Points to a much
slower drawdown
And a higher
average price
Conclusions
• Nothing indicates major changes in grains or cotton markets
• Higher cattle on feed and ethanol use will bolster corn markets
• Higher ending stocks will limit upside for wheat
• Will China continue to import sorghum??
• El Niño will likely improve soil moisture—higher yields and lower
abandonment
• Fall moisture could impact cotton harvest and degrade quality—increase
world supply of lower grade cotton and lower price further
• Key to success will be managing input costs and optimizing crop
insurance to lower per acre costs of production