USDA 2020/21 February 21, 2020 U.S. Grains and Oilseeds Outlook Sharon Raszap Skorbiansky Agricultural Economist Economic Policy and Analysis Division USDA Farm Production and Conservation Business Center Presented on behalf of the Grains and Oilseeds Interagency Committees 1
What we’ll be talking about today 1) The 2020 setting • Macro (GDP and exchange rate) • Trade (China Phase I deal, coronavirus, African Swine Fever) • Weather • Farm financial pressure (crop margins) 2) 2020 Crop Highlights • Corn • Soybeans • Wheat 2
Global growth to recuperate; China growth to decline 7.0 3.5 Real GDP, % Change Previous Year 6.8 World U.S. China 3.0 6.6 6.4 2.5 6.2 2.0 6.0 1.5 5.8 5.6 1.0 5.4 0.5 5.2 0.0 5.0 2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022 Source: World Bank Global Economic Prospects, January 2020. 2019 is not final, 2020-22 are forecasts 3
Recent upturn in dollar What a U.S. Dollar buys you: Argentinian Pesos Brazilian Real 70 4.5 4.3 60 4.1 50 3.9 3.7 40 3.5 30 3.3 3.1 20 2.9 10 2.7 2.5 0 4
Phase I Deal…what’s the deal? Commitments by China to Agricultural & Related Products Historical Phase I Deal increase purchases over 2017 baselines: 45 • Agricultural goods (2017 = $24 billion): Billion dollars • +$12.5 billion in 2020 30 • +$19.5 billion in 2021 • Energy goods 15 (2017 = $9.1 billion) • +$18.5 billion in 2020 0 • +$33.9 billion in 2021 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 5
Total corn, soy, wheat prevented planting hit record high in 2019 20 18 16 14 Million Acres 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Corn Soybeans Wheat 6
It’s wet and could continue to be wet 7 Source: Climate Prediction Center, National Oceanic and Atmospheric Administration
Increasing 3-crop planted area Total corn, soybeans, and wheat acreage 240 230 226 224 220 211 210 Million Acres 200 190 180 170 160 150 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020f 8
Corn down, wheat up, soy slightly up 16 14 12 Dollars per Bushel 10 Soybeans $8.8 8 6 Wheat $4.9 4 $3.6 Corn 2 0 2012 2013 2014 2015 2016 2017 2018 2019e 2020f 9
Weak margins to persist Returns over Operating Costs: 600.00 500.00 Dollars per Acre 400.00 300.00 200.00 100.00 0.00 '10 '12 '14 '16 '18 '20 '10 '12 '14 '16 '18 '20 '10 '12 '14 '16 '18 '20 corn soy wheat Note: Margins exclude government payments. 2019/20 is not final, 2020/21 is a forecast. 10
U.S. Corn 2020/21 Highlights • Planted area is forecast at 94 million acres, 5 percent above 2019/20 • Production is forecast at 15.5 billion bushels, 13 percent above 2019/20 • Food, Seed, and Industrial (FSI) is forecast to increase to 6.8 billion bushels, 20 million bushels above 2019/20 • Feed and residual is forecast to increase to 5.8 billion bushels, 275 million bushels above 2019/20 • Exports are forecast to increase to 2.1 billion bushels, 375 million bushels above 2019/20 • Ending Stocks are forecast to increase to 2.7 billion bushels, up 745 million bushels from 2019/20 11
Lower corn stocks, but total supply to increase 20 18 16 14 Billion Bushels 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Production Beginning Stocks 12
Corn consumption is increasing slightly 16 14 12 Billion Bushels 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ethanol Other FSI Exports Feed & Residual 13
Global corn export share has declined 160 60% 140 50% Exports, Million Meric Tons 120 40% 100 80 30% 60 20% 40 10% 20 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 United States Argentina Brazil Ukraine U.S. Share (right) 14
U.S. corn price is currently competitive 215 205 195 Dollars per Metric Ton 185 175 165 155 145 135 125 Argentina Black Sea Brazil United States Source: International Grains Council (IGC) 15
U.S. Soybean 2020/21 Highlights • Planted area is forecast at 85 million acres, 12 percent above 2019/20 • Production is forecast at 4.2 billion bushels, 18 percent above 2019/20 • Crush is forecast at 2.1 billion bushels, an increase of 25 million bushels from 2019/20 • Exports are forecast to rise to 2.1 billion bushels, a 225 million bushel increased from 2019/20 • Ending stocks are forecast to decrease to 320 million bushels, down 484 million bushels from 2019/20 16
Soybean supply increase on higher production 6,000 5,000 Million Bushels 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Production Beginning Stocks 17
Soybean use is increasing 5,000 4,500 4,000 3,500 Million Bushels 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Crush Seed & Residual Exports 18
In 2018/19, U.S. soybean exports to China decreased, increased for ROW 70 Accumulated as of Feb. 6, 2020 60 Million Metric Tons 50 40 30 ? 20 10 0 '15/16 '16/17 '17/18 '18/19 '19/20 '20/21 Sales to China Sales to ROW Total 19
U.S. Wheat 2020/21 Highlights • Planted area is forecast at 45 million acres, less than 1 percent lower from 2019/20 • Production is forecast at 1.8 billion bushels, 4 percent lower from 2019/20 • Feed and residual use is forecast at 120 million bushels, down 30 million from 2019/20 • Food use is forecast to increase to 958 million bushels, only 3 million higher from 2019/20 • Exports are forecast to stay constant at 1.0 billion bushels, as the U.S. has become relatively more competitive in international wheat markets • Ending Stocks are forecast to tighten by about 160 million bushels to 777 million bushels, a five-year low 20
Wheat supply is down 4,000 3,500 3,000 Million Bushels 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Production Beginning Stocks Imports 21
Winter wheat sowings — second lowest on record after 1909 100 90 80 70 Million Acres 60 50 40 30 20 10 0 1909 1921 1933 1945 1957 1969 1981 1993 2005 2014 2020 All Wheat Winter Wheat 22
Small dip in wheat consumption 3,000 2,500 2,000 Million Bushels 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Food Exports Seed Feed & Residual 23
Global wheat competition remains 30% Percent of Global Wheat Trade 25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Argentina Australia Canada European Union Russia United States 24
Thank you! 25
Returns from ethanol 2.5 2 1.5 1 0.5 0 -0.5 Return Over Operating Costs ($/gallon) Fixed Costs 26 Source: Iowa State University, Center for Agricultural and Rural Development
Soybean to Corn Price Ratio Feb. 2019 Feb. 2020
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