1 Oklahoma State University Corn &Wheat Situation and Outlook Corn &Wheat Situation and Outlook Kim B. Anderson

2 Kim’s Web site agecon.okstate.edu/anderson “Other articles” agecon.okstate.edu/anderson “Other articles”

3 Policy comes and policy goes but weather determines prices. Luther Tweeten Policy comes and policy goes but weather determines prices. Luther Tweeten

4 Corn production area

5 Soybean production area

6 Cotton production area

7 HRW wheat production area

8 SRW wheat production area

9 Corn

10 CornusedforEthanol billion bushels) Corn used for Ethanol (billion bushels) ’07/ bb ’08/ bb ’09/ bb ’06/ bb

11 U.S. Corn Situation (Billion Bushels)(Million Bushels) Planted Acres Harvested Acres Yield Production Year (91.0) (90.9) (87.8) (90.2) (91.0) (91.8) (90.3) (92.0) YR Avg Percentage harvested in parenthesizes

12 U.S. Corn Situation ProductionConsumption Ending Stocks U. S. Price Year (Billion Bushels) $ $ $ $ $ $ $ $ YR Avg $2.20

13 World Corn Situation ProductionConsumption Ending Stocks Year (Billion Bushels) YR Avg

Corn Production 2007 use + ethanol increase – 1 bb ending stocks = required production ÷ yield = acres harvested ÷ % harvested = required planted acres 12.6 bb bb – 1 bb = 12.3 bb ÷ 153 bu/ac = 80 ma ÷.91 = 88 million acres

15 CBT Corn Monthly Nearest Before ethanol Weather Ethanol

16 U.S. Corn Situation (Billion Bushels) 06/07 Month 07/08 Ending Stocks (Cents per Bushel) (± 30) USDA Cash Est. Price Range Open/Close CBT Nearby May June July Aug Sept Oct Nov

17 Key points  2007 corn production 13.2 billion bushels (bb).  2007 corn use 12.6 bb.  2007 ethanol corn use 3.2 bb.  2008 projected ethanol corn use 3.9 bb.  corn end stocks ~ 1.9 bb  $3.50 avg. annual price.  corn end stocks < 1.0 bb  $3.50 avg. annual price.  2008 planted acres 88 mil., production of 12.3 bb, ending stocks 1.0 bb & $3.70 avg. annual price.

18 Wheat

19 U.S. Wheat Situation (Billion Bushels)(Million Bushels) Planted Acres Harvested Acres Yield Production Year (85.0) (81.6) (76.0) (85.5) (83.8) (87.6) (81.7) (84.4) YR Avg (83.2) Percentage harvested in parenthesizes

20 ProductionConsumption Ending Stocks U. S. Price Year (Billion Bushels) U.S. Wheat Situation $ $ $ $ $ $ $ $ YR Avg $3.35

21 World Wheat Situation (Billion Bushels) ProductionConsumption Ending Stocks Year YR Avg

22 KCBT Monthly Nearest Before ethanol Weather Ethanol

23 KCBT March ‘08

24 KCBT July “08

25 U.S. Wheat Situation (Billion Bushels) 06/07 USDA Cash Est. Month 07/08 Ending Stocks (Cents per Bushel) (± 30) Price Range Open/Close KCBT Nearby May June July Aug Sept Oct Nov

26 U.S. Wheat Supply and Use Beginning stocks Production Supply, Total Exports Use, Total Ending Stocks Avg. farm price 307 2,350 2,657 1,050 2, $5.20 million bushels Kim’s 08/ ,067 2,608 1,150 2, $6.10 USDA 07/08

27  KCBT July wheat contract price $6.92  Elevator forward contract basis -$0.53  Forward contract offer $6.39  Buy KCBT July 690 call -$0.70  FC/Call minimum price $5.69  Buy KCBT July 690 Put (690¢ - 70¢) $6.20  Expected June 2008 basis -$0.45  Expected minimum price $5.75 June 2008 wheat delivery prices

28 Key Points  Weather is the major price factor.  Corn continues to set the floor for wheat prices.  U.S. and world wheat stocks below average.  Wheat planted acres increase ~5% (63 ma).  Wheat stocks increase in 2008/09 – below avg.  2008/09 wheat price range $3.75 to $8.50.  June 2008 wheat price ~ $5.80  $4.50 to $8.50.

29 Kim’s Web site agecon.okstate.edu/anderson

30

31 Kim’s rules for marketing  Keep it simple  Make a plan  Write the plan down  Have the discipline to follow the plan  Do not—ever, ever—listen to market outlook economists.

32 Sorghum

33 U.S. Sorghum Situation (Million Bushels) ProductionConsumption Ending Stocks U. S. Price Year $ $ $ $ $ $ $ $ YR Avg $2.20

34 (Million Bushels) Foreign Sorghum Situation ProductionConsumption Ending Stocks Year YR Avg

35 (Million Bushels) World Sorghum Situation ProductionConsumption Ending Stocks Year YR Avg

36 Key Point  Sorghum prices follow corn prices

37 Cotton

38 U.S. Cotton Situation ProductionConsumption Ending Stocks U. S. Price Year (Million Bales) ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ 7-YR Avg ¢

39 World Cotton Situation ProductionConsumption Ending Stocks Year (Million Bales) YR Avg

40 Cotton Relevant Numbers Current Projections Average Million Bales U.S. Ending Stocks World Ending Stocks

41  U.S. and world cotton stocks above average.  Cotton acreage planted to beans and corn.  Prices expected to average 55 cents. Key points

42

43 Soybean

44 U.S. Soybeans Situation (Billion Bushels)(Million Bushels) Planted Acres Harvested Acres Yield Production Year (97.4) (98.5) (98.1) (98.8) (98.4) (98.9) (98.8) (98.6) YR Avg (98.4) Percentage harvested in parenthesizes

45 U.S. Soybean Situation (Billion Bushels) ProductionConsumption Ending Stocks U. S. Price Year $ $ $ $ $ $ $ $ YR Avg $5.64

46 ProductionConsumption Ending Stocks Year Foreign Soybean Situation (Billion Bushels) YR Avg

47 ProductionConsumption Ending Stocks Year World Soybean Situation (Billion Bushels) YR Avg

48 CBT Soybeans Monthly Nearest Before ethanol & bio-diesel Weather Ethanol & bio-diesel

49 U.S. Soybean Situation (Million Bushels) 06/07 USDA Cash Est. Month 07/08 Ending Stocks (Cents per Bushel) (± 50) Price Range Open/Close CBT Nearby May June July Aug Sept Oct

50 Soybean Relevant Numbers Current Projections Average Billion Bushels U.S. Ending Stocks World Ending Stocks

51 Key points  U.S. soybean stocks below average.  World soybean stocks above average.  Expect Brazil to increase production.  Increased 2008 planted acres (70 ma)  Prices remain above average.

52 Key points  Ending stocks ~225 mb  $9 - $10  Ending stocks ~600 mb  $7