Transcript Volatility and a Reversal of 2008`s Grain Price Pattern?

VOLATILITY AND A REVERSAL OF
2008’S GRAIN PRICE PATTERN?
AgResource Company
Daniel Basse
President
HTTP://WWW.AGRESOURCE.COM
Seminar Code: Sugar
CHICAGO WHEAT MARKET VOLATILITY ANNUAL PRICE RANGES 1959-2008
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CORN MARKET VOLATILITY
ANNUAL PRICE RANGES 1959-2008
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WEEKLY WHEAT, CORN PRICE
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THE ECONOMIC CRISIS QUICKENS
GLOBALIZATION
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GLOBAL POPULATION
Billion
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WORLD POPULATION DENSITY
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IMF REAL GDP GROWTH LATE 2008
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PER CAPITA GDP RATES IN US$
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COUNTRY % OF WORLD GDP
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US PER CAPITA GDP
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PER CAPITA FOOD CONSUMPTION
(KCAL PER CAPITA PER DAY)
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2008/09 WAS A DISAPPOITING YEAR
FOR WORLD GRAIN STOCKS!
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WORLD MAJOR CROP PRODUCTION
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WORLD MAJOR CROP DEMAND
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WORLD MAJOR CROP ENDING
STOCKS
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MAJOR CROP PRODUCTION NOT
KEEPING UP WITH DEMAND
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GLOBAL GRAIN ENDING STOCKS:
DAYS OF USE, CORN, SOYBEANS, WHEAT
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WORLD WHEAT OUTLOOK FOR 2009
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WORLD WHEAT PRODUCTION
MMT
MT/HA
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WORLD WHEAT DEMAND
MMT
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WORLD WHEAT STOCKS
MMT
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WORLD WHEAT TRADE
MMT
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WORLD WHEAT – DAYS OF
CARRYOVER
Days
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US WHEAT PLANTED ACRES
Mil Acres
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US WHEAT PRODUCTION
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US WHEAT END STOCKS
MMT
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US BY CLASS WHEAT STOCKS
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BLACK SEA VS CHICAGO - 93% R
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CHICAGO WHEAT FUTURES
CONVERGENCE
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WHEAT SUMMARY FOR 2008/09
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World wheat production expected to decline 35-45 MMTS
2009/10 on reduced seeding. The decline assumes normal
world weather and trendline yields. The odds of back-to-back
favorable world weather is historically low.
The Black Sea and Russia are likely to slow wheat exports from
here forward. Quality is an issue.
Argentine wheat exports remain shut and Brazil will have to
turn to other supplies in first half of 2009.
China embroiled in a drought that has to be monitored.
Longer term, wheat has formed a bottom and price strength is
likely to return as the market shifts its focus to a smaller new
crop and rising world demand. Indian and Pakistani crops will
not reach potential and US Plains is suffering from dryness. A
big bull market demands a crop problem for a bull market to be
sustained similar to 2007/08. Otherwise, price rallies with be
limited to $7.00-7.40 with support at $5.10-5.30.
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A WORLD FEED BULL MARKET LURKING
AFTER MARCH?
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WORLD CORN PRODUCTION
MMT
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WORLD CORN DEMAND
MMT
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WORLD CORN STOCKS
MMT
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WORLD CORN – DAYS OF CARRYOVER
Days
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GLOBAL WHEAT FED VS. GLOBAL CORN
TRADE
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GLOBAL WHEAT FEED DEMAND
MMT
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US ANNUAL CORN EXPORTS
MMT
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THE BLOOM IS OFF BIO FUELS:
US ETHANOL CORN CRUSH MARGIN
$/Bu.
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US CORN FEED/RESIDUAL USE
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MIDWEST CORN, SOYBEANS RETURNS/ACRE –
VALUE OF PRODUCTION LESS LAND COSTS
US $
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COST OF PRODUCTION – US CORN, SOYBEANS
EXCLUDING LAND COSTS
US $/Ton
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US CORN YIELD HISTORY
HYBRID SEED VS. GMO
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US CORN YIELD DEVIATION
FROM 20 YEAR TREND – CONSISTENCY?
Bu/Acre
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US CORN SEEDING NEEDED TO
SUPPLY FOOD & FUEL IN 2009
1,000 Acres
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US CORN STOCKS
Mil. Bu
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AVERAGE US CORN PRICES
US$
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CORN SUMMARY
Old crop demand destruction pressured price into
early 2009. Ethanol and livestock demand has
been hard hit via the worsening US economy.
 2009 Outlook more bullish as world feed wheat
supplies decline (boosting US exports) and
seeding fall short of market needs. A sort of a
supply driven bull market.
 The wildcards are world economic growth rates
and the price of unleaded gasoline. Current
expectations are low.
 AgResource forecasts a low in spot corn futures of
$3.30-3.40 and a high of $4.85-5.15 with normal
summer growing weather and trend yield.
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