US and NC Outlook for Corn, Soybeans, and Wheat Nick Piggott Dept of Agricultural & Resource Economics North Carolina State University Email: nick_piggott@ncsu.edu Presentation: Executive Farm Management Program   April 5, 2017

2017 U.S. agricultural economy setting new lower levels from historical highs

US Net Cash income with a forecasted slight increase in 2017 over 2016 suggests the US agricultural economy is establishing a new lower level from the recent 2012 & 2013 record levels

NC Major Row Crop Acreage: 2006-2016 Past eleven years reveals, an increase in total acres of 2.7% with an increase in feed grain acres (6.7%) due to increases in wheat acres (16.3%) and sorghum acres (209%) acres between 2006 and 2016. Wheat acreage has increased by 16.3% over the eleven year period but this masks a significant run-up between 2010 and 2013 when wheat acres almost doubled but then significantly declined back to 2010 levels by 2016. It is encouraging the feed grain acres have increased helping with the NC feed grain deficit but the recent decline in wheat acres is a concern. Price incentives for more winter wheat production would significantly help the grain deficit problem. Copyright  Nick Piggott

Changes in NC and US Planted Acres in 2016 Very Different in % terms NC planted acreage changes in 2016 were consistently significant large and even bucked the trends nationally Magnified Differences The increase in NC corn acres was 22% greater whereas the decline in NC wheat acres was 19% greater Bucking the national trend NC planted cotton (-24.7%), sorghum (26.5%), soybeans (-10.4%) and total (-5.8%) acres moved in the opposite direction than what was planted at the national level.

Impacts on NC Corn Basis…

How Has the Feed Grain Initiative Done So Far?... So what is a guestimate/ballpark of the economic impact based on the increased new level of feed grain acres and increased basis in $$$$ $62 million more being paid to local NC feed grain producers 30-50 million more total feed grain bushels being produced which puts a dint of about 25% in the former 200 million bushel deficit

What if we could get wheat and sorghum acres back to recent levels? So what would the feed grain acres, production, and payments to producers look like if we could get wheat acres back to 2103 levels and grain sorghum acres to where we had hoped to be in 2014? $79 million more being paid to local NC feed grain producers total feed grain production approaches 200 million bushels which puts a dint of about 50% of the former 200 million bushel deficit

US Corn S & D in 2014-15

Corn Futures C-Dec17 Market gives up $0.20/bu Upper resistance around $4.00/bu late Feb Lower resistance around $3.80/bu late Mar

Defies economic theory????

Soybean Futures S-Nov17 Market gives up $0.80/bu Upper resistance around $10.30/bu up until late Feb Lower resistance around $9.50/bu early Apr

S-Nov/C-Dec > 2.4 plant more soybeans Around pre-planting time new crop corn and soybean futures engage in acreage bidding wars where: S-Nov/C-Dec > 2.4 plant more soybeans S-Nov/C-Dec < 2.4 plant more corn S-Nov/C-Dec 2.4 D are about the same or 0 Copyright  Nick Piggott

New Crop 2016 Soybean v. Corn (4/4/2017)=$9.55/$3.88=2.5 New crop soybean and corn futures tend to be more highly correlated especially in the Jan-Mar period when bidding for new crop acres. The two crops compete for the same acres. If trends in previous decade are reasonable predictors then the current new crop for 2017 with: S-Nov 16/C-Dec16=2.5>2.4 Indicates the market is leaning toward bidding for more soybean acres at the expense of corn acres.

Wheat Futures W-Jul17 Since mid Feb market has given back $0.50/bu. Breaking thru previous resistance of $4.40.

RECOMMENDED MARKETING STRATEGIES FOR DIFFERENT FUTURES PRICE AND BASIS RISK SITUATIONS Strong Current Basis Basis Contract Cash Forward Contract Low Current Futures Price High Current Futures Price Do Nothing Now Buy Put Option Futures Hedge or Buy Put Option Weak Current Basis

Final Thoughts Record corn and soybean production combined with significant additional ending stocks has contributed to lower prices and a second year of US net cash income in the low $90 billion’s which is significantly below the recent highs of $135 billion in 2012 & 2013. NC planted acreage changes in 2016 were consistently significant large and even bucked the trends national Magnified Differences The increase in NC corn acres was 22% greater whereas the decline in NC wheat acres was 19% greater Bucking the national trend NC planted cotton (-24.7%), sorghum (26.5%), soybeans (-10.4%) and total (-5.8%) acres moved in the opposite direction than what was planted at the national level. It is encouraging the feed grain acres have increased helping with the NC feed grain deficit but the recent decline in wheat acres is a concern. NC wheat acreage has essentially halved in 3 years. Futures charts combined with crop budget comparisons reveal limited marketing opportunities currently for 2017. Above average beginning stocks in corn, soybean, and wheat are placing significant downward pressure on prices. Potentially a weather market!

THANK YOU QUESTIONS?