1. 2017-18 Soybean Outlook and Risk Management Update
Midwest Outlook Conference
Indianapolis, Indiana
August 15, 2017
Todd D. Davis
Assistant Extension Professor
University of Kentucky

2. Outline Market Fundamentals Update
Crop progress and condition
Growing season weather
August WASDE Update
Projected RP Insurance Harvest Price
2017 Projected storage costs and projected return to storage
Balance Sheets Sensitivity Analysis
Pre-Harvest Risk Plan and Post-Harvest Risk Plan

3. November Soybean / December Corn Futures Monthly Average 2017 vs
November Soybean / December Corn Futures Monthly Average 2017 vs. Previous Years

5. 25% of expansion from the Dakotas
30% from the Top-5 States (IA, IL, MN, NE, IN)

18. U.S. Soybean Crop Condition Index for 2017 vs Previous Years

20. Regression model has significant error
at this point. Recent history demonstrates that
further surveys can lead to increased yields
regardless of the Crop Condition

21. G & E
IL = 63%
IA = 56%
MN = 74%
NE = 61%
IN = 56%
VP & P
IL = 11%
IA = 15%
MN = 6%
NE = 12%
IN = 14%

22. 2017-18 Soybean Situation and Outlook

24. Analysts’s surveyed expected yields in the range 46.9 to 48 bu/acre

27. USA vs. Argentina / Brazil Soybean Production (MMT)

28. US and South American Soybean Export Share
Source: USDA-FAS

29. China’s Soybean Domestic Consumption and Imports (all sources) (MMT)
Since 2008 (10/years): China’s soybean consumption has increased 110% and imports have increased about 130% (from all sources). Soybean meal consumption increased 127% while oil increased 80%

30. U.S. and World Soybean Stocks

31. Projected RP Harvest Price for Soybeans Using November 2017 Futures Contract Average Price (25th, 50th, 75th Percentiles)

32. Projected Indemnities for RP Insurance at the 85% Coverage Level

33. Projected Indemnities for RP Insurance at the 75% Coverage Level

34. 2017 Projected On-Farm Storage Costs: Soybeans
Oct. Soybean price = $9.20; Shrink = $0.023 (.25%)
Opp. Cost = $0.038/mo, Storage = $0.10
Updated: Aug 14, 2017

35. 2017 Projected Commercial Storage Costs: Soybeans
Oct. Soybean price = $9.20; Shrink = $0.046 (0.5%)
Opp. Cost = $0.038/mo, Storage = $0.25 to Jan 31, 2018 then an additional $0.04/bu/mo
Updated: Aug 14, 2017

36. 2017 Projected Return to Storage for Soybeans
January sales currently a promising profit and tax management strategy
Updated August 14, 2017

37. 2017 West KY Soybean Expected Profitability ($/bu) at Harvest and Storage
Updated August 14, 2017

38. 2017-18 US Soybean Balance Sheet Sensitivity Analysis

39. NOV 2017 Soybean Futures Contract

40. Soybean Pre-Harvest Risk Plan
Use budgeted storage costs to guide post-harvest sales

41. Western KY Soybean Spot Price (Indexed to October)
Use budgeted storage costs to guide post-harvest sales with sales most-likely in January. Storing until May might not cover additional storage costs.

42. Soybean Post-Harvest Plan
Use budgeted storage costs to guide post-harvest sales with sales most-likely in January

43. Futures Based MYA Price Forecast
Updated August 14, 2017

44. Summary and Conclusions
Weather still dominating the market news. Reduced condition from previous years could reduce yield from August
How much acreage was not planted?
Soybean yields are made in August. Will timely August rains save drier crops in the Western part of the Corn Belt?
Soybean market has little cushion if projections reverse course and are trimmed
A weather scare in South America would be helpful…

45. Storage decision
Don’t know the 2018 DP charges. However, it is worth budgeting commercial storage costs vs. expected basis appreciation and futures carry to pencil a return to commercial storage.
Cash flow and tax management may drive this timing decision
Basis may not appreciate as vigorously as in the time-frame. Earlier years rewarded storage until May.

46. Thank you! I would be happy to answer any questions that you may have.
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