mike@themoneyfarm.com
2014-15 Market Perspective
or
What do we do now Ollie??
Last December Every Headline Was
Bearish!
• New farm crisis? Iowa farmers expected to lose money
over next four years –Des Moines Register
• Iowa corn and soybean growers can expect to see a $1.4
billion hit to farm income this year alone
• Record Wheat Harvest Curbs Costs for Domino’s Pizza:
Commodities – Bloomberg
• Canola futures in Winnipeg declined sharply by Can-$15
during the past two trading days, despite the strength
in soybeans – Oil World
• Canadian 13/14 canola ending stocks to set record level
• Minn-Dak CEO says growers will likely lose money in
2014 – Fargo Forum
One Bullish Headline!
The rising standard of living and the shift to
more consumer-oriented economies in the
emerging markets result in a reversal of the
decline in agricultural commodity prices. Corn
goes to $5.25 a bushel, wheat to $7.50 and
soybeans to $16.00.
Byron R. Wien, Vice Chairman, Blackstone
Advisory Partners
Things to Consider
• World consumption of grains and oilseeds
increasing annually regardless of prices,
economies, world turmoil
• World inventories will increase in 2013-14
but will still be historically small – except
oilseeds
• There will again be price volatility
• It is now about weather & yields
Total World Grains
Will get smaller again on April 9th
Record world corn consumption
despite high prices
Expected to continue to increase
Prohibited GMO variety??
Possible 2014/15 Corn Outlook
U.S. Corn Supply/Demand (million bushels)
USDA May
My 2014/15
Guess
Planted Acres
91.7
90.2
Harvested Acres
84.3
83
Yield
165.3*
162
Production
13,935
13,446
1,146
1,146
Supply
15,111
14,622
Total Demand
13,385
13,400
1,726
1,222
Carry In
Ending Supplies
December Corn Futures
Tightest ever w/ record imports!
Record large world supplies!
World consumes what it produces!
China’s import growth continues
unabated despite talk of slowing
economy, poor crush margins,
etc., etc.
Total World Soybeans
Possible 2014/15 Soybean Outlook
U.S. Corn Supply/Demand (million bushels)
USDA May
My 2014/15
Guess
Planted Acres
81.5
83
Harvested Acres
80.5
82
Yield
45.2*
44
Production
3,635
3,608
Carry In
130
130
Imports
15 (90)
15
Supply
3,780
3,753
Total Demand
3,450
3,450
330
303
Ending Supplies
November Soybeans
Mpls December Wheat
Stats Canada Impact
Chicago December Wheat
Kansas City December Wheat
Possible 2014/15 Wheat Outlook
U.S. Wheat Supply/Demand (million bushels)
USDA May
My 2014/15
Planted Acres
55.8
55
Harvested Acres
45.9
45
Yield
42.7
43
1,963
1,935
Carry In
583
583
Imports
160
160?
2,706
2,678
2,166 (-285)
2,200
558
478
Production
Supply
Total Demand
Ending Supplies
U.S. Wheat Issues
• Hard red winter wheat - very tight and maybe
quality issues (light test weight, high protein,
sprout?)
• Soft red winter wheat – good crop but no
demand?
• Hard red spring wheat – Canada’s 2013
hangover?
World Wheat Issues
• EU has been and will be aggressive soft
wheat seller drawing stocks down
• Russia/Ukraine will sell first tonnage “cheap”,
balance will depend on crop size
• Southern Hemisphere wheat crop ?? El
Nino??
• World demand still growing, but competing
with cheaper corn for feed consumption
Why Has Demand Been So Strong?
“Middle Class” Outside the U.S. Expected to
Double by 2022 – To Nearly 1 Billion Households
Foreign households w/real PPP incomes greater than $20,000 a year
Millions of Households
1000
800
600
400
Developing
countries
200
0
Source: Global Insight’s Global Consumer Markets data as analyzed by OGA
Developed
countries (ex US)
Developing Countries With Fastest Growing Middle
Class
24% of households in these countries are middle class. By 2022, this could increase to 51%
Households with real PPP incomes greater than $20,000 (millions)
China
122
India
56
Russia
18
Brazil
13
Mexico
6
Indonesia
2011
4
Turkey
Proj. gains by 2021
4
Thailand
3
Egypt
3
South Korea
2
0
25
50
75
100
Source: Global Insight’s Global Consumer Markets data as analyzed by OGA
125
150
175
200
Meat Consumption Growth Focused in Developing Nations
Meat increase in developing countries is 36% vs. 7% in developed
Change in Meat Consumption (2011 vs. 2001)
43%
7%
-1%
12%
40%
6%
30%
19%
78%
61%
39%
Data Source: USDA - PS&D
48%
Things to Consider
• U.S. old crop soybean supplies will stay very
tight
• Corn supplies not as burdensome as many had
predicted – strong demand at lower prices
• U.S. Wheat is very tight but Canada still has to
find a home for 2013 crop
• Big World Crops in 2014 Keeps Markets Bearish
• The world is still a production problem away
from sharply higher prices (John Deere CEO)
The next bearish hurdles?
• USDA June 30 Reports
– Acreage revisions
– How much less corn and more soybeans?
• Quarterly stocks
– The magical 300 to 400 million bushels of corn?
– Soybean supplies?
– Wheat feed usage?
• Weather & yields?
mike@themoneyfarm.com