Field Crop Webinar Series - Corn, Wheat and Soybean Price Outlook

February 17, 2020

MSU Extension agricultural economist Dr. Jim Hilker looked at the price outlook for both the 2019-20 and 2020-21 crop marketing years for corn, wheat, and soybeans and consider potential pricing strategies.   He also considered what the price outlook may mean for the PLC/ARC program decision which must be made by March 15.

Video Transcript

- [Jim] Good evening, Eric, thank you very much, and welcome to all the participants. We'll go at it. Where are we here? First of all, I'd like to review the long-term a little bit, this goes back 20 years. If you go back to the first portion here as, just, basically, is about a 250 average futures price, about 235 average cash price. And that pretty much looked just like this period all the way back to 1980, other than like '83, '88, and '95 where we had a spike due to production shortfalls. As we moved into 2007 and ethanol became a big thing, and lots of the world wanted more soybeans, it really tightened up the futures, or increased the futures sharply. We've kind of reached a new plateau, and we've been in that a little bit under $4.00 futures now since about half way through 2000 and '14. Which, of course, translates in the cash price as about 30 cents under that. Over time, since 1900 we've had four different demand shifts like this after World War I, World War II, and the 1970s. So, really, this is what we're kind of looking at into the future. I suspect, I think, it'll go up slowly. But, that's what we're up against as we go down the road. This year, if we look down at the very last line, after the poor prices in 2014 here, we dropped off from the acreage we had had for three or four years, which we'd built up to with a very good returns. We dropped to this 318, 319 numbers. And then, last year, we dropped about 17,000 under that, 17 million acres under that. This is for all the principal crops. With 13 million of those acres being, coming out of corn and soybeans in the way of prevented plantings. I mean, you can see how sharp that is. My guess, it's a one-year thing. As we go into next year, the 2020, which we'll talk about a bit later, I think principal crops may not get back to the 319, but, it'll get very close to it. As we go through, there's a lot of negatives on these numbers. In Michigan, it's a little hard to read. We plant about 5.5 million acres of the 13 principal crops, and we were down over 800,000 this year. As you see, for our state size, that's one of the biggest numbers being down, and the biggest portion, by far, that was prevent, prevent plant. So it hit us, Ohio, Indiana, and North Dakota the worst. But, as you see, there's prevent plant acres all over the place. There were actually, as of December, when those numbers were recorded, we still had eight million acres of corn left to be harvested. I think most of 'em are harvested by now, the same was a couple million acres of soybeans. And we also saw some of those around Michigan, as we went through December into January. They're actually gonna do a second survey in just these five states, with Michigan being one of 'em. And they'll survey the people who still said the still had crops out, to try and get a more accurate number. People were asked to say how many acres they still had out and what's their guess to be yields. But as time went by, I'm sure those yield estimates changed. While I don't see a big change in numbers, there is some chance that the US yield numbers will go down a bit. As we look into this year, we ended up planting almost 90 million acres of corn. Which was the same amount of corn that we intended to plant in March. So where did all those prevented planting corn acres go? They were prevented planting, they were reported as prevented planting, but, what happened is other acreage that would have been planted with soybeans or something else were planted the corn, so we still got the number of corn acres that we expected. The whole 13 million, as we'll see later, came out of soybeans in the number of actual acres planted, which made some sense, as stocks and soybeans were even worse than corn. What happened to the yield? This is last year, at the bottom is ears per acres, you see that was down. That's this axis here, in pounds per ear. Now, this is one, two, three, four, five, the last six years. It doesn't go back further than that. But, we suffered on both weight and number of ears per acre. However, if we look at corn for grain yield, at 168 bushels an acre, there's one, two, three, four, five, only five times were we higher than that, and one time just barely. I think it amazes us how good the corn that was planted turned out. That doesn't mean that we didn't have a lot of poor yields in the country. But, there was also some very good ones. Michigan, again, took a hit worse than some others at 149 bushels an acre average this year. That's down about 10 bushels an acre from what I'd call our trend yield, just under a 160. And if you can happen to see that minus four, we've now had two poor yields in a row, at 153 last year, when the rest of the country had near record. The other Ohio, Indiana, and Illinois also took very big hits in their yields. Illinois was 200 last year, their trend yield is probably about 195. Iowa, and Missouri... Excuse me, Iowa and Missouri are two places that didn't take a whole lot of a hit this year. And that's one of the things that kept the yields up as, up as high as, as they were for the country as a whole. Again, Michigan is down two, and as we'll talk later, that's one of the reasons for our strong basis. Again, this is just putting total production. We're down this year. But, there's only been five years higher than this over time. So while this took care of some of our extra stocks, with an amount of stocks we brought into the year, we still had an awful lot. The USDA, in their January report, also changed the size of the 2018 corn crop, as it didn't match up with quarterly stocks report, nor did it match up with feed and residual, the number of animals that are actually feeded. I think it was a correct change. They lowered the amount of feed somewhat. To make up for that, two things happened. The corn crop was cut 80 million acres, which is a fraction of a percent, so that's not a real big thing. And ending stocks were increased by 107 million bushels. We even brought more into this year than we previously thought. So beginning stocks coming in this year were 2.2 million bushels, which is basically about 15% of what we use in each year. Production was down sharply. But, still, not terrible. When we look at total supply, which was beginning stocks and production, we're about a half a billion bushels lower than a year ago. So now we're gonna start talking about feed use as we go through, but I want to note that ethanol was a change in the February report. And I'll talk about that a little bit more, but, I want to point out that is a stronger point as we go. So here we have a lot of years and a lot of numbers. This is the projection for '19-'20. That's September 1 through September 1 of this year, so we're just shy of a half way through. We brought in the large stocks, I said, so we have a half a billion less bushels. And let's look at feed use Feed use is expected to be up. And the reason it's expected to be up, and this stock number just talks about how much we came in, is we expect beef production was up in 2019. We expect it to be up another 1% or 2% as we go into, through 2020. Pork production's expected to be up about 3%. Broilers are expected to be up a couple percent. So in total we expect meat production to be up about 3 1/2% from last year. The reason I point that out here, is that means the more meat we're producing, the more corn we need to feed, and that's why the feed numbers projected to be higher than a year ago. We don't expect a whole lot of change in prices, as we go through in livestock prices, we go through 2020. An important report came out the end of January called the Cattle Inventory Report. All cattle and calves came in the same as last January 1. All calves and heifers came in just under it. And the change there was beef cows kept for breeding is down slightly to even from a year ago. Cow/calf returns have been marginal, so there was no expansion last year for the first time in about five years. That's why the beef productions expect to be up a little bit this year. I don't expect it to be up much more in 2021. But if we have decent meat demand as we go through the year, I think that'll start increasing again as we go into 2000 and '22. Meat trade's important, because, that's one reason we continue to expand. Beef exports over the next year are expected to go up, about 278 million pounds, which you see is about 7% or 8%. Part of that is due to the Australia's had to liquidate a big part of their beef herd due to droughts, and fire, and other things. And now, they have too much rain in some areas. As we look at pork, we expect pork exports to go up. I expect some of that might be to China, or other places in that region. As we all know, that pork production is down sharply in those areas with the disease. Broilers are gonna hang in there, so this is a pretty good sign. At the same time, we'll be importing less beef. So that's why beef prices will hang in there, despite having a little bit more beef production. Milk, I'm not gonna get into the milk outlook. But, we do expect to produce more milk. Most of that extra production is due to efficiencies. But, there will be a few more milk cows out there. So that's why, as we three years increasing in feed use for a livestock. So the next big item here is food, seed, and industrial uses and the biggest one of those is ethanol. Feed and, I expect, seed use to go up a little bit. And we'll talk about that, because, I expect us to plant even more corn acres a little bit. Food use has been dormant for several years. So if we're gonna increase food, seed and industrial uses, that's really coming from this ethanol use. We had expected ethanol use in '19-'20 to be about the same as last year, but, we've seen a little pickup recently in actually how much is being produced. So the USDA raised that somewhat. It is cautionary, though, as we went through this fall, this red here means excellent cash flow. We go above this black line and we're actually getting economic profits. Where you're getting a good return on their equity, as well. Most of these plants are paid for, so this, any time the red gets up in this region, they're making pretty good money. As we came early in this year it's down. I think the extra production we're seeing now is cranked up with the good returns as we went through the fall. Those returns are gonna have to come back, I think, if we're gonna meet that ethanol production number. So the next big number here after ethanol, is domestic use is expected to be up about 100 million bushels from a year ago, is exports. As you can see, exports are forecast to be down sharply. Part of that is due to the rest of the world production. As you see, they're up about 5.3 million metric tons, which is about 200 million bushels. The world is down, because we're down. Brazil had a record crop in '18/'19. They're looking for another record crop in '19/'20. They have two seasons, which we'll talk about just a minute. The first season, it's known, it's excellent. The second season, they're just planting, so we still have that risk as we go through the year, whether we make, whether they make this 101 million metric tons. China had another good year, especially, with their hog numbers. They tend to store it when they have extra. So I don't see that as particularly a competitor against us. The Soviet Union had a pretty good year. Ukraine had a good year. Russia had an excellent year. And those are a lot of our competition. I think this is really interesting, look at this, if you go back to Brazil back to 1990, this blue line here is their first season corn production, which really takes place in our fall. And the red is their second season, which takes place in our, our spring, and it's, you know, pretty early maturing varieties. As you see, as we started from then, the second season kept getting bigger, and bigger, and bigger. They've learned how to grow it. It's excellent, it's in that hotter, dryer areas. And the first season went off again. But, it's really this amount that you see over the blue lines, especially at this point here, that is our export competition. As you see, the first season here was a little better than last year. Hectares were down some, but the yield was excellent. Hectares are up for this second corn crop. And this here is based on average yields. If they get good yields, it could go up to here, or poor yields, it could go back down. But that's where they're getting their production. What's our exports to date? Our exports to date are less than half of a year ago. As you can see, 11 and a half million metric tons compared to 23 million metric tons. The week ending, we did pick up this past week, but last week was poor. We're gonna have to have numbers something like this, in order to meet the lower estimate. Here's a picture of the same thing. The red line is the four-year forecast. Last year's corn exports were pretty good. This little jerk here is when the government was shut down a year ago. This is this year's. We're starting to pick up a little bit. In order to get to our trend, we're gonna have to pick up a little bit more as we go through the rest of the year. And that could well happen. If you look at export sales today, they're about three quarters of year ago. So if those numbers keep picking up, although we'd like it to be a little big bigger than 38, get around a 40 million bushels a week, we could make the export estimate. The other thing that's happening, a couple other things are happening over exports, one, is the price is higher and people buy more when prices, buy less when prices are high. The US Dollar Index has been going up recently. Although, that, over time, that's adjusted in the market. But, in the short run, that means it cost more to buy corn from this country, until the price comes down in this country. Or down in another country. So this is hurting us here in the short run, not in our export sales too bad. But, it, it is a wind against exports. As you see here, this is monthly going back 20 years. If we look at 20 years, it's not nearly as much. It's kind of an average value of the dollar. One thing that really helped over the period of high prices from 2007 through 2014 was a very low value of the dollar through most of that period. If we look at world corn supply and use in total, feed use expected to be up, trades expected to be down. But the good news is ending stocks are expected to be down, and they're expected to be down about eight, that be eight, about 15%, which is pretty good. If we get this number down, that's good for the, good for the world prices. So when we add this not very good export number after having three pretty good export numbers, we have, as we said here, total supply is down a half a million. Use is up, is down about a quarter million. So what happens here is we, ending stocks go down. But, not as much of ending stocks hadn't. So they go down about a quarter million a bushel, because, use went down, almost entirely exports by a quarter million bushels. That turns into a price estimate in fundamental sense of about $3.85. We come over here to our, our 13.4% of use. You come in here, and you get that $3.85 price. This is historically, as ending stocks to use rates drop, we go up sharply. If they come the other way, we go down slowly. If we look at what futures closed on Friday, there was no trading today, as it's Presidents Day, a holiday for the futures markets, as well as, many others. If we look what the markets wants to pay for storage, they're paying hardly four cents. So what that's doing, is two cents a month. That's the market saying that's all I'll pay you on a national sense. And if we look at Michigan numbers across the way, the basis' don't get stronger, and the market's saying I'm not sure I want you to sell corn, I mean, store corn. I kinda want the corn right now. And we see that in parts of Michigan, especially, where near our ethanol, and we've had positive basis through the year, and those continue. So when you make marketing decisions of whether you should price today or later, the market's saying I'm not gonna pay you much for storage, maybe a tiny bit for on-farm storage, where on-farm costs are extremely low. But, if you're really bullish about the market, we gotta be watching for the futures. So those who had it in commercial storage, if you do get optimistic, you really ought to be on a basis contract or futures, versus paying for storage. The basis, as you hear, for the country is very strong. On average, it's still, you know, 12 or 13 cents under. In Michigan, we have one of the strongest basis around. Many parts of Michigan are positive. And a big deal of that, is poor crops in this year in Ohio and Indiana, and two years of poor crops in Michigan. So we're getting some of that paid back to us in a basis, not as much as if we could get futures prices up more. Technically, the market's been flat for some time. It's been in a, an area kind of waiting for something to happen. I don't see any big news coming along quickly. There will be a survey coming out in early March called The Planning Intentions Report. And those numbers will be released towards the end of March. Which is the next time we'll really get a lot of information. So, technically, I don't see the market telling us anything. I do think, in a technical sense, this is kinda the bottom in here. If we have a bounce, I'd look for it to be up a little bit or stay the same, versus any big plunge. If we look into the 2020-21 year, I think we'll plant over three million more acres, and many people are looking at four million more. The USDA will be coming out with their 2020-2021, their first forecast on Friday. I think they'll be in the same ballpark. But, maybe another million acres, given their long-term forecast that they released last Friday. My trend yield. If we look at it, it'd be about 175 bushels. This is last year, if I put a trend through the last 30 years, or so, I come in to about 175 bushels an acre trend yield. If that happens, we'll have the second largest production on record, with a trend yield at 93 million bushels, and some acres, some people are looking at 94. So that'll jump us up almost a billion acres in supply, so we need to use a bunch next year. Feed use I have going up a little bit. As you recall, I don't expect beef production to be going up much next year. You don't have the beef cows having calves, it's hard to increase that production. Ethanol is expected to stay in about the same range every year, for now. So if we get a bump, that bump needs to come in exports. I think we will have that bump. I think we'll go back into the time of '16-'17, where we had lower prices. Because, you see down here, I think we'll have lower prices. Ending stocks in the US I expect to go up. Stocks to use I expect to go up, and that turns into about $3.55 a bushel. As you see here, 'til you go up to about '15, you're not even, you're in that 350 range. December 20 corn futures haven't really given us a pricing opportunity recently. I don't see it happening real quick. If we broke out of this number here, I might start thinking about it. If we get anywhere near the $4.00 range, or around the $4.00 range, that'd be a time to start thinking about, perhaps, pricing some December corn futures for next year's crop. If we look how that matches up with the futures, the futures, you know, March of 398. You take it for the country as a whole about 30 cents off of that, or 40 cents, you're down to that 365. And 365 is a little higher than my 355. So, right now, even at the lower futures prices we've seen recently, the market is a little higher than my fundamentals. And that's one of the reasons, if we do get a jump in there, it's a time to start thinking about it. As we go down the future, we'll talk more about later, the market is expecting very marginal changes up as we go through December of 2023. If we look at wheat, it's kinda the same story over the long run. Prices went up for wheat at the same time. That was mostly due to fewer acres being planted, as we'll talk about. Last year we planted 31 million acres. Harvested 24. Which was, this 31 is, it's the lowest planted on record, as we'll look at in a minute, but this yield is very good. Spring we were down a couple million acres, I think we'll get that back next year, because, it was weather induced, not price induced. We don't plant hardly any durum, but I think that could be double next year. Again, that was weather problems. Not that they wanted to plant that few many acres. All wheat was 37.2, down 6% from a year ago. However, the yield, as you see, was the second highest on record. Kansas had over 50 bushels an acre again. Right in here, 52. Which is, they've only had over 50 bushels an acre twice, and they produce up most of our Hard Red Winter Wheat. They didn't make big changes in the estimate. Exports have been going pretty well in wheat, and we'll talk about that as we go through. We brought in about the same amount of beginning stocks this year as last year. We had a bigger crop. So supply was almost identical as a year ago. Food use is stagnant in wheat, and has been for several years. Seed use, we expect to be about the same, as I don't, and you'll see, you'll see that's right when you see your wheat planting numbers here next, when we go towards the end of this one. So exports is the thing, we expect exports to go up, being the second highest in four years, and we're seeing that happen. And we're seeing it happen despite the world having a very good wheat crop. The US, we're up this year, not fantastic. The rest of the world is close to a record. And the biggest part of that is the European Union is way up. And then, our export competition, Ukraine and Russia, and that's who really goes against us. Australia is another country that competes against us, their numbers are down. And that's one of the reasons why our exports are up. If we look, the year-to-date, last year at this point it was 15 million metric tons, now 17. Our exports are going along pretty good. This is last year, we're way above it, we're expected to stay above it. The shipments have been pretty good, as well as, export sales to date, that's the chart previous to this one. Plus everything that's been contracted, so it does look like we'll get that higher wheat number. And the wheat year is actually from June 1 until May 31st, so we already know the first eight months or so of this year. And it's exports are lookin' pretty good. Soft Red Winter Wheat is the one that's kind of a laggard, it's about the same as yes... Excuse me, that's, yeah, Soft Red Winter. Here's the Australian one. As you see, and I talked about early, their '19/'20 crop is down. And it remains to be seen what they'll do here in the future. So with a huge world wheat crop, ending stocks in the world are expected to go up. So in March 31st we expect more wheat stocks than the year before. So now we, we look at use, I mean, we look at ending stocks. Ending stocks are expected to be down somewhat. Partially, on feed use, as we have more poor wheat this year to feed. And, in a relative sense, wheat price a little weaker compared to corn. So a little bit more was fed and exports up. Ending stocks are expected to be down. That's a 43% of the use. But, given where we are this year, the USDA and myself, and we already have eight months of prices, and they're expected to be $4.55. That matches up with futures right now. This year is kinda over, so we'll look now at the, next year's crop. The basis has been relatively strong, but, just at the top part of average. Wheat futures made a nice bump up for the first of the year. We're off a little here. Those wheat fundamentals are probably still a little bit weaker than what the futures are. If March futures sneak anywhere near their highs, they'll probably be a pricing opportunity. But, most of us probably don't have much 2019 wheat left. As we look at-- - [Eric] Jim, I've got a question here. - [Jim] Sure. - [Eric] If Hard Red Winter Wheat has a bigger export number compared to White, why is Red Wheat a cheaper price? - [Jim] Because, despite more exports, we have, that's our biggest number. We have bigger stocks of Hard Red Winter, even after the good export use. Going back to Kansas, them having about four to five bushels an acre higher than their normal trend yield, overpowered the stronger exports. But, the stronger exports are keeping prices from being even lower. So as we plant winter wheat, this next year we planted even less than the year before. As we look here, we look at these numbers, these numbers are being kept track since 1909. And other than an odd year in '19, '010, '11, or '12, or something, that's the lowest we've ever seen on record. They started keeping all wheat acres in 1919, and we've never planted less wheat than we did last year. So this year we expected to plant even less winter wheat. There's two things going on here, poor return. But, as we know, it was hard to get wheat in this fall. Michigan was down 40,000 acres out of a half a million. Illinois couldn't get theirs in, Indiana struggled to get theirs in. Ohio got a little bit more planted, but, that's not a high number for them. Nebraska's big, and they're down. South Dakota is down of winter wheat. Kansas, our biggest state did get planted. You might say why are they our biggest wheat state at 50 bushels an acre? It's because they, over most of the, much of the state they really can't grow good corn or soybean. So as we look into 1920 here, 2020, I'm only a 100 years off. Despite winter wheat planted acres being down just a little bit, I think we'll have spring wheat and durum wheat up about three, to give us about one more. I think we'll go back to a trend yield. We'll harvest a higher proportion, there was a bunch of wheat that just didn't get harvested this year, a little bit more than normal. So we bring in our lower beginning stocks. We have about the same amount of production, lower yield, a little touch more acres. But, our total supply is down going in, as we go into after June, at June 1st. Food use, not much different as it hasn't been. I think we'll finally use more seed in '20, as I think we will end up planting a little more wheat as we go into 2021. Feed use is... I made an error, it's in this total here. It's about, about 100 bushels. Exports, I think, will be pretty strong next year, not quite as good as this year, as I expect some other countries to recover. And remember, wheat will, wheat stocks are up, are projected to be up. Despite that, our ending stocks I expect to be down. And prices I expect to be up around the $5.00 range. Now, this is a $5.00 average of Soft Red Winter, which is about 20%, 30%, 25% Hard Red, which is about 50%. And spring and durum, which is the remainder of the total. As we look at wheat futures in '20, you can, as we go into this area here, take about 40 or 50 cent basis off there. And right now the wheat market's offering just a little bit more than my fundamentals, but match up pretty close. Again, if they match up pretty close here, that means this is probably a pretty good price up here. So if we have a little runaway, due to something going into the spring, it might be time to price a little bit of value 2020 production. As we go into the soybean outlook, same story, we're kind of on a new plateau. The difference is, is even though, you know, corn prices are higher than they were for 30 years before 2007, soybean prices are gonna average higher. If we look at returns per acre, due to increased cost, our returns really are back to the returns we saw before 2000 and seven. When we're down here, they're probably a little worse. Here they're about the same. We only planted 76 million acres of wheat. We were planning to plant close to 89 million acres of wheat last year. Again, that's where all the, that's where the prevented planting of corn and soybeans ended up in less soybeans. We were down in both grams per pod, as well as, pods per square feet, when we look at the country as a whole. So the yield was down. But, again, it was the sixth highest on, on record. These genetics and the farmers management of corn and soybeans in this very difficult year is nothing short of amazing. Our yield's down about 6.5 bushels from last year's 41. Last year was probably close, just a little bit under trend. You see trend yields were down through Ohio, Indiana, and Illinois. Iowa's were down a little bit, but not, not bad. So that's where we came in with decent yields, compared to a horrible year. But, still cut production. Again, just like the yields, the production's down. But, it's the biggest of any time since 2013. The USDA made exports are finally picking up a little bit, or were. So the USDA raised our export to production, which we'll talk about a little bit more. As we go through, so we have our total production here down sharply. But, we brought in a lot more. So almost a billion bushels down, but, we brought in a half a billion more, so we're only about a half a billion down in total supply. Crushings are gradually growing. They're growing for two reasons. One of 'em is the livestock, and we'll look at the other two shortly. Exports are expected to be up from last year. And ours you'll see running up right now. But, there's no way they can get back to where they, they were, and we'll talk about that as we go through. The other thing that's happening, is this biodiesel the past year from here to here. Most other than one little blip, we are above this black line, which means there's still economic profit in the biodiesel, so that gradually keeps growing each year. The world says, we get the world soybean production, we were down sharply, as can be seen here. But, the rest of the world was up. Not near enough, as you see, to make up for our shortfall. Argentina was down a tiny bit from their record crop last year, still a very good crop, and that's pretty much known. Brazil is having a record crop, their first season crop was amazing. And now they're looking at their second season crop as we go through. As we look at that, a record soybean area is being planted. But, it could still be increased next year. And a lot of money has come from Mexico and China, to make sure that's happening, or the best they can. December drought in a little area, but, we got some rains in January. So we have above trend yields in the fall. As we come into the spring, it's just being planted and yet to be, yet to be seen. Here's an interesting chart on just soybean area. Several years ago, at about 2015, Brazil started matching us and kinda stayed the same as us, until this year. I expect us to go back where we were last year, which still won't quite match up with Brazil's soybean acreage, but, gets back in the same ballpark. Exports to date, as you can see, are up sharply, they're up five million metric tons of percentage wide, that's pretty large. The exports were going up, this last week was a problem, I expect a lot of that's due to with the Coronavirus, the, there's some exporting things, so you don't want to put too much rate into this one week. But, we really need to get shipments picking up here, in order to make it. Exports to date are, are just barely enough above, enough above last year, it looks like we will make the new numbers. But, it doesn't look like it can be. We do have the trade agreement, the trade agreement. There is no way the math adds up to get 40 to 60, a billion bushels on a billion dollars worth of exports to China, when the most we've ever done is 24 million metric, I mean, 24 billion dollars. I do think soybean exports will still go up a little bit to China, even though they don't need it with their hog herd down 35% to 45%. China is known to store, so they'll make an effort. But, in the end, the market will win. They can't store up too many stocks, because, they would go to waste. Part of that extra, so we... But, we probably will export more pork to China, or at least there's hope for that. So that should be a positive to the meat market, as we go through the next year. And some of that showed up in that, portrayed earlier I talked about. Soyoil is up year to date. Soymeal is up year to date. I wanted to point those out, because, that's also one of the reasons why crush is up. And some of these are new markets, so that's a good sign. As we look at world supply and use, due to the much poor world crop, due to the poor US crop, ending stocks are expected to be down, and that's a good sign. Brazilian, Argentina and Brazilian stocks are expected to be up. Given their huge crop, that's not real hot. The USDA is expecting China to import, somehow, five and a half million more metric tons, which is about 200 million bushels. A chunk of that will have to come from us, because, it can't all come from Argentina and Brazil. So I think we'll see some marginal increases in Chinese exports from the US. And anything is better than nothing. And I do think more beans will make it into China without a tariff. As we look at these exports being up, and that is significant, I can see that number maybe going up just a little bit more. So use is up a half a billion, or a couple hundred from last year. Total supply is down, so ending stocks are expected to drop dramatically. Which you would expect from, given ending stocks to use. And I expect prices to be up about 8.75, and, in fact, I'm really thinking they're gonna be closer to 8.90, we're kind of on a downswing. But, significantly up from last year, so that's a good sign, with exports going up. How does that match up with the futures markets? It's about the same, if we take some of these prices take the basis off it, the world, the country's basis right now, it's about minus 60 cents. So you take minus 60 cents off some of these July numbers here, and you're in the 860 area. But, we sold some higher priced beans. Bean futures are the same as, a little bit lower than my fundamentals. So let's see what the technical market's looking like right now. - Jim, I've got a, a couple questions before you move on too far. - [Jim] Yes? - [Eric] One is referring to Zeeland. Lee says that they fired up last Monday, how is that going to help our market, and our domestic, excuse me, domestic and export? - [Jim] Is this New Zealand? - [Eric] The Zeeland. - [Jim] Oh! That's fantastic news! You're talking about up in Alma, the new Zeeland plant right smack in the middle of the state. - [Eric] Yup. - [Jim] Over the next couple months, fired up is not quite going full production. But, that should happen in a few months. I think that's excellent for the state of Michigan. Our basis is weak on like our corn basis, where we have a number of ethanol plants. My guess is, this will, could add considerably. Now, some of that basis, you know, land and other things might be bid up a little bit. But, I wouldn't be surprised if in the local area, and in that general area, which will actually help the whole state, because, this, this plant's about three times the size as the plant over in Zeeland. I wouldn't be surprised if that adds about at least a nickel, a dime over time to the basis. If you add a dime to your basis on a thousand acre farm over 30 years, and put all that money in a bank at a decent return on your money, you'd have about a half a million dollars. I think that's a really positive... It's not gonna make up for the low prices, but, over a period of time, that stronger basis will be of great benefit to Michigan. You had a second question? - [Eric] Actually, I've got two more. - Okay. - So, one is, within a marketing year, is there a seasonal tendency for the soybean/corn ratio to move up or down? - [Jim] Generally, not so much in it. The next thing that'll make the corn and soybean ratio move is the Planting Intentions Report, or Prospective Plantings, I guess, is technically the name, that will be released at the end of March. And my guess is those planted acreages will come in with soybeans much closer to 2.5 times, or 2.45 times the price of corn than it is right now. If that does happen, then maybe we'll see a few more soybean acres planted relative to corn when it actually happens. But that's kind of the biggest time, when we have new information, is really what changes the corn/soybean ratio. Of course, it changed, the other thing that could change it, going through spring, is what happens to Brazilian corn and soybean crops as we go through their second season. - [Eric] I'm gonna, I'm gonna hold onto the last couple of comments and questions here until the end, so you can keep going. - [Jim] As we go through, it's down, we think the price will be $8.85. That matches up, as we talked about here, pretty good. As we go into actually, okay, next year, I expect about nine million more acres of soybeans being planted, a trend yield, with less beginning stocks. I think we're really looking at this $8.85 as we go through the year. Seed uses isn't, isn't that high, obviously. But, exports go up a little bit again. $8.85 still isn't quite 2.5 times the, my 255, but it's getting closer. And I think we'll see, back to relative price, even closer as we, as we move in. As we look at how does that match up here, we take March and take it off, and that would... The simple way of what futures are telling me, it's about 880 prices next year. So soybean futures and fundamentals, at this time, are very close to the same. Technically, I don't see a lot happening. I see a touch more upside than downside. So if we go on a run, we might take advantage of it. As we look at the... And I want to say a little bit about the farm program, I mean, the Farm Bill sign-up, so I need to really get rolling here. As we look at little bit at long-term, I have about six different things in here. But, let's, so I took an average of those six. And the markets really thinking corn prices are gonna be in this 3.60 arena. You look at Hilker, I think, will be a little higher, because, I think we'll move back towards cost. We look at soybeans, they're really looking at the composite into 8.70, and working their way up. I think soybeans will work their way up a little quicker, because, of relative prices, as we go into next year. What does this mean? I'll tell you what it means. Let's say, let's look at people who don't have a 100% prevent plan, or don't have low row farm yields. It look likes you need to be signing up for PLC for wheat. ARC County for soybeans, because, neither of the two years, well, both of the two years PL, they'll be PLC payments. Neither of the two years they'll be PLC payment for soybeans. Corn, we go back down to here on February 20th, NASS will release the County Yield estimates. That's the number you want to plug into the Farm Bill calculator, to give you your best answer. And remember, sign-up now, you can change your mind later. The winner of everything, when this number comes out, if you're county yields are down more than 23% to 26%, it pretty much beats everything. If you have low yield farms, look at ARC-IC. 100% plant, look at ARC-IC. You can Google MSU Farmbill, and it, and find our calculator. I do want to point something out, and this is critical. Roger Betz and myself, Jim Hilker, made an error in how we earlier calculated how you add farms that are not 100% prevented plant to farms that are 100% prevented plant. The actual correct way of doing it brings a lot more money to the farm then we previously knew. There's so much in that Farm Bill, we apologize for missing it. Basically, what happens, and why it's critical, if you have 100% prevent plant acres, all of those acres are zero revenue. If you have another farm then, you count their revenue from whatever was planted. Not what was prevented plan on the other one, was planted. You average those two revenues together. And if you average, it takes, you can average a lot of revenue with zero revenues before you get a high revenue. So it looks like, if you have some zero prevented plant, and then some other acreage where you've got part of it planted. Or some other acreage where you didn't get very good yields. You look at this calculator, plug-in all those farms, and there's a good chance that you could get maximum ARC-IC payments, which are the most for sure things we have on way more acres than we previously thought, or the people that we were working with previously thought. Is this complicated? Yes. But, in tough years like this, we can't afford to leave money on the table. We will be doing a crop webinar, to let our Ag Agents across the state to know how it works. And we will get a video up on the, on the Farm Bill webpage, hopefully, sometime this week, explaining it, and showing how you can work it out on this, on this calculator. Thanks, Eric. What are the questions? - [Eric] All right, thank you, Jim. I have one question. What is your gut feeling on the potential for grain hemp? - [Jim] My gut feeling is over the next five to 10 years, after the market channels are developed, that it will fit in to some of our production practices. At this point in time, I would not grow it without it being a contract grower who supplies the seed for you, tells you how to do it, and tells you what type of return they're going to give you. - [Eric] Okay, all right. I would like to invite everyone to go ahead and type in your questions into the Q&A. And while you are doing that, Jim, I'm just gonna pass along some well wishings from a few folks here. Lee Thalen is wondering how long you've been doing this? He says the first time he heard you he had hair, and that was a long time ago. - [Jim] February 10 of 1982. 38 years. - [Eric] And Clyde Taylor also says, congratulations. And John Geegler had the honor of meeting you once at a marketing center in Mason. And he says, thank you, for your years of service and expertise for Michigan producers and students. - [Jim] I appreciate the well wishes. I don't think I coulda had a better career. Thank you, all. - [Eric] I will ask one question. - [Jim] Okay. - [Eric] So folks that are probably looking at at least some sort of gap in the economics department at MSU, and, you know, for some period of time we won't be having someone like you to give outlooks. What would you say is the, for somebody who is trying to make decisions, or trying to look into, you know, what the next year or two are gonna look like, number one, what metric or metrics do you think would be the best for them to be identifying. And then, number two, where would they find that information? - [Jim] Just the... First, the outlook part of that. If you're looking for the same kind of fundamental outlook that I talk about, Farmdocs in Illinois is probably the closest to the way I do it. That won't bring in the basis and storage, because, oftentimes, our basis picture is different than theirs. So to make up for that, probably, the best way you can do it, is calling around to a number of different elevators. Make relationship with several elevator operators. To try to see where they think the market's going. I always like to look to see if the futures market looks like it's paying storage, i.e. how much spread between futures. But, then, I also find some source and webpages of what kind of basis is being offered. Remember, we can always, we know what the basis is today, and we know what is historically. And it's much easier to predict and make good basis decisions, than to try and guess the future, where we're really trying to guess both the weatherness concrete, but, the weather in the rest of the world, as well as, the politics through the world.

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