North Carolina Corn Board Meeting March 15, 2018 US and NC Outlook and Expected Profitability: Corn, Soybeans, and Wheat Nick Piggott Dept of Agricultural & Resource Economics North Carolina State University Email: nick_piggott@ncsu.edu Presentation: North Carolina Corn Board Meeting   March 15, 2018

2018 U.S. agricultural economy setting new lower levels from historical highs

 US agriculture is now experiencing a cost-price squeeze--a period of increasing costs and simultaneous decreasing prices.

NC Major Row Crop Acreage: 2008-2017 Past ten years reveals, over the pre- and during-feed grain initiative, a decline in total acres of 11.6% with a decline in feed grain acres (23%). Corn acres have slightly declined 1.1% but did experience increases in 2013 and 2016 over 2008 levels. Wheat acreage has declined by 47% but this masks a significant run-up between 2010 and 2013 when wheat acres more than doubled but then significantly declined back to 2010 levels by 2017. Sorghum acreage increased by 25% this also masks that acreage spiked to 70K and 80K in 2012 and 2013 in the initial two years of the feed grain initiative 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 20% greater whereas the decline in NC wheat acres was 28% greater Bucking the national trend NC planted cotton (-27.3%), sorghum (13.9%), soybeans (-7%) and total (-6.8%) acres moved in the opposite direction than what was planted at the national level.

The Favorable Changes in Acreage in 2016 Were Not Echoed in 2017 NC planted acreage changes in 2017 were mostly detrimental to feed grains with a 11% decline in corn acres and a 56% decline in sorghum acres. Wheat acres increasing 7.1% was the only favorable change. Total feed grain acres declined 7.2%. Cotton acres increased 34% due to price improvements in 2017 versus 2016.

Corn Futures C-Dec18 Lower resistance around $3.80/bu late Nov Market gains additional $0.32/bu—bidding for acres

Soybean Futures S-Nov18 Lower resistance around $9.70/bu, then $9.90/bu and recently $10.25/bu Market gains additional $0.80/bu—bidding for acres

Soybean Futures S-Nov18 Upward momentum gaining $0.33 since early Feb Solid price floor of $9.70 in place

New Crop 2018 Soybean v. Corn (3/15/2018)=$10.37/$4.08=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 2018 with: S-Nov 18/C-Dec18=2.5>2.4 Indicates the market is leaning toward bidding for more soybean acres at the expense of corn acres.

Wheat Futures W-Jul18 Since late Sep market has given back $0.55/bu. Two resistance points at $4.50

Decision Tool: Planting Decisions

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

New Enterprise Budgets Posted https://ag-econ.ncsu.edu/grain-budgets/ Current Budgets:

Updated Soybean and Corn Basis Data Posted https://ag-econ. ncsu

Final Thoughts Cost-price squeeze is impacting US agricultural economy Significant beginning stocks of corn and soybeans coming in 2018 is weighing heavily on upward potential Futures charts reveal some marketing opportunities currently for 2018 as corn and soybeans bid for acres. The increase in corn basis in NC is encouraging for feed grain acreage profitability. Currently, corn’s bottom line is more attractive than soybeans for NC producers. Cotton’s bottom line more favorable than soybeans and so potential for additional cotton acres.

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