1. Grain Market Outlook Arkansas council of ag DECEMBER 2016
Ted Nelson
Risk Management Consultant, INTL FCStone Financial Inc. – FCM Division
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2. Disclaimer
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4. MANAGED MONEY

5. WORLD HECTACRES

6. CORN OUTLOOK

7. Corn Highlights Harvest 16 in books what now? The 3Ds Black Swans
Crop size-15 Bil +.
Chinese stockpile the wild card?
Huge export sales/inspections but with SA coming online will this continue?
The 3Ds
Deflation – Due to excess investment in commodity production .
Divergence – US economy vs World = stronger USD.
Deleveraging – over investment in Ag Sector both US and offshore.
Black Swans
Demand still a moving target.
2017/2018 Acres?
South America production?
New administration, what lies ahead?

9. Corn Fundamentals

10. Corn Fundamentals

11. Corn Fundamentals
Plateaued

12. Corn Fundamentals

13. Corn Fundamentals

14. Corn Fundamentals

15. Corn Fundamentals

16. Corn Fundamentals
Arkansas survey 178 bu/ac*
Record yield*

17. Corn Fundamentals

18. Corn Fundamentals

19. Corn Fundamentals
13 years=184% growth
16years=66% growth

21. Corn Fundamentals
46% Growth since 2005

22. Corn Fundamentals

24. CORN FORWARD LOOK Fundamentals
US supply side is now a “known” fundamental.
Stocks dislocation between ECB and WCB = basis and spreads
US corn producer holding stocks at these price levels.
Demand and price
US holding reign in export market but SA coming online.
Domestic feeding margins poor for hogs/beef ok for poultry.
World livestock expansion driving feed grain prices.
Over the Horizon
Corn use for ethanol plateauing, legislative moves on RFS?
Lower prices seeing corn acres switch to oilseeds globally.
Overstated feed demand on S/D?
Record corn crop will have a large feed wheat market to contend with.

26. SOYBEAN OUTLOOK

27. BEAN HIGHLIGHTS Record 16 harvest Money flow Black Swans
Total crop size?
Initial quality good, but how will later beans turn out ?
Huge export sales/inspections but with SA coming online will this continue?
Unlike corn, bean demand very consistent and well known, but China is known for surprises
Money flow
Dollar ending 2016 on highs, with other world currencies devaluing does US beans get out priced?
Black Swans
Chinese crusher margins?
2017/2018 Acres?
S.A. production?
New administration, what lies ahead?
Where is Veg oil headed?

28. Catching up?
Major change in Brazil logistics – Northern Arc ports shipped 20 mmt of grain in 2015 vs 13 mmt in 2014 an increase of 54%, with new facilities opening this year look for another jump – takes the pressure off the southern ports and gives importers more flexibility for both beans and corn going forward – road systems still an issue but this will continue to facilitate the expansion of bean acres in Brazil.

29. Bean Fundamentals

30. Bean Fundamentals

31. Bean Fundamentals

32. Bean Fundamentals
If acres approach 88mil it would be 37% increase since 96’

33. Bean Fundamentals

34. Bean Fundamentals

35. Bean Fundamentals

36. Bean Fundamentals
344% increase from 96’

37. Bean Fundamentals

40. RICE OUTLOOK

41. RICE HIGHLIGHTS
US export program, USDA looking for a 4mil cwt increase in rough exports.
World Production/Demand, with lower wheat/corn complex will we see market share go to the protein grains?
US dollar, will we see a lower dollar or will rate hike talk keep us elevated?
US domestic demand
Large wheat carry out will keep pressure on Rough Rice futures
With final production est. at need to see flat price and dollar do the work on demand.
Basis will be correlated with domestic quality, any RR futures rallies need to be sold.
Will more Iraqi business come this year? SE Asia rice currently works into Mexico, US rice needs to compete.

42. Rice Technical RRU16 23% decline through the summer
Market gave 3 chances to take some risk off the table.

43. Rice Fundamentals

44. Rice Fundmentals
304.7

45. Rice Fundamentals

46. Rice Fundamentals
121% increase in yield since 2000

47. Rice Fundamentals
Rice Fundamentals

48. Rice Fundamentals

49. Rice Fundamentals

50. COTTON OUTLOOK

51. COTTON HIGHLIGHTS
Negative trend suspect to a growing crop and acres/unfeasible export program
Managed money position 80K contracts long, when it breaks everyone will be trying to get through the door
But seeing solid buying support between levels
In Dec WASDE production raised another 500K in Australia to 4.5mil, up 62% from initial USDA est.
US crop “grows” in Dec WASDE by 360K bales to 16.52mil
Exports are raised 200K and domestic production lowered 200K
With a 12.2Mil export goal, price “modification” needs to occur, for this to happen a good size sell off from funds would be required.

52. COTTON FUNDAMENTALS

53. COTTON FUNDAMENTALS

54. COTTON FUNDAMENTALS

55. COTTON FUNDAMENTALS

56. COTTON FUNDAMENTALS

57. COTTON FUNDAMENTALS

58. COTTON FUNDAMENTALS

59. COTTON FUNDAMENTALS

60. COTTON FUNDAMENTALS

61. Risk Management Consultant Email: Theodore.nelson@intlfcstone.com
THANK YOU!
Ted Nelson
Risk Management Consultant