Global Agricultural Outlook 200708

1
Global Agricultural Outlook 2007/08

• Keith Menzie
• World Agricultural Outlook Board
• Brasilia, Brazil
• September 24, 2007

2

• Supply Demand Estimates
• as of
• September 12, 2007

3
U.S. Biofuels Production 2007
Note Based on projected 2007 calendar year
ethanol and biodiesel production.
4
Ethanol and Gasoline Prices
Note Ethanol and regular gasoline prices are
the monthly Nebraska rack (wholesale terminal)
prices.
5
U.S. Corn Used for Ethanol
Note 2006/07 through 2010/11 are projections
from the September 12, 2007, World Agricultural
Supply and Demand Estimates report and the
February 2007 USDA Agricultural Projections to
2016.
6
Global Industrial Vegetable Oil Use
10 pct (2 m tons)
7
Industrial use continues to grow with biodiesel
expansion, nears 20 percent of total vegetable
oil consumption . . .
8
December 2007 Corn up 40 from harvest 06 to
planting 07!
40 corn price rally
9
What is the response for 2007/08?

• Ethanol production, high corn prices drive corn
  area to 60 year highs!

10
U.S. Corn Planted Area
Note 2007 planted area is an estimate from the
Acreage report, June 29, 2007.
11
U.S. Corn Supply and Demand
12
U.S. Domestic Corn Use
Note 2006/07 and 2007/08 are projections from
the World Agricultural Supply and Demand
Estimates report, September 12, 2007.
13
U.S. Corn Ending Stocks and Farm Price
14
U.S. Corn Ending Stocks and Farm Price
15
World Corn Production
16
World Corn Ending Stocks-to-Use
17
Oilseeds
18
Review of 2006/07

• Record global oilseed production
• Record U.S. soybean planted area and production
• 2nd year of lower planted area in Brazil
• Sharply higher production in Argentina
• U.S., Arg. soybean exports increase as Brazil
  declines
• Record global crush
• Record soybean import demand in China (through 10
  months)
• Record global oilseed stocks in fall 2007?
• Sharply higher U.S. oilseed stocks esp. soybeans
  (record high?)
• Record high soybean oil stocks, summer 2007

19
Review of 2006/07

• Oilseed complex prices higher than expected given
  stock levels
• But rapidly expanding ethanol production and
  expectations of more in 2007/08 pushed corn
  prices sharply higher through Spring 2007
• As a result, the soybean/corn price ratio at
  planting dropped below 2!

20
November 2007 Soybeans up 25 from 06 harvest
to 07 planting
25 rise in 5 months
21
December 2007 Corn up 40 from harvest 06 to
planting 07!
Bean/Corn ratio below 2
40 corn price rally
22
U.S. Soybean-Corn Price Ratio
23
What is the response for 2007/08?

• U.S. soy producers sharply reduce area in 2007,
  by more than anticipated early
• South American soy producers are expected to
  increase planted area modestly (subject to
  change)
• Limited gains for other oilseeds, offsetting
  changes for rapeseed and sun

24
U.S. Soybean Planted Area
Note 2007 planted area is an estimate from the
Acreage report, June 29, 2007.
25
U.S. Soybean Supply and Demand
26
U.S. Soybean Oil Supply and Demand
27
U.S. soybean production for 2007 dips to near
2003 drought level
Production down 550 mil bu
28
Expect recovery in soybean area in Brazil
29
What is going on in Brazil?

• High soybean prices partly offset by strong
  currency vs. U.S. dollar

30
Brazilian Currency Valuation vs. U.S. Dollar
31
Effect of Real Devaluation on Price
32
Effect of Real Devaluation on Price
20 vs last year
33
What is going on in Brazil?

• High soybean prices partly offset by strong
  currency vs. U.S. dollar
• Transportation costs

34
What is going on in Brazil?

• High soybean prices partly offset by strong
  currency vs. U.S. dollar
• Transportation costs
• Rust control

35
What is going on in Brazil?

• High soybean prices partly offset by strong
  currency vs. U.S. dollar
• Transportation costs
• Rust control
• Environmental concerns

36
What is going on in Brazil?

• However, much higher soybean prices recently may
  alter plans!?!

37
Argentina Soybean Harvested Area
38
Brazil, Argentina SoybeanHarvested Area
39
Soybean Production Trends
Million Tons
40
Rare annual reduction in global soybean production
-15 million tons
41
World Soybean Production
42
EU rapeseed production increases, but less than
expected as an 8 yield drop offsets a 17 area
increase
1 million tons
43
Canadian canola production also affected by
weather as 10 area increase is offset by an 8
yield reduction
fractional
44
Australia rapeseed production recovers from
severe drought
1 million tons
45
Combined China and India Rapeseed unchanged from
2006/07 . . .
46
Global rapeseed production recovers moderately
from 2006/07
3 million tons
47
Sunseed production higher in Argentina, but
offset by lower FSU output on lower area
-1.5 million tons
48
Global sunflowerseed production declines from
record production for 2005 and 2006
-3 million tons
49
Global oilseed production 1st production
decline since 1995/96
-15 million tons
50
Stocks and Use Outlook for 2007/08

• Soybean exports increase sharply for Brazil,
  Argentina as U.S. declines
• Record soybean import demand in China driven by
  protein and vegetable oil demand
• Global protein meal and oil consumption gains
• Reduced wheat feeding (EU), biodiesel gains (EU,
  U.S.)
• Sharply lower U.S. stocks of soybeans and soybean
  oil
• Sharp decline in global oilseed stocks fall 2008
  (mainly soy)
• Prices for the oilseeds complex remain high

51
Projected Growth Rates
Source Oxford Economics
52
China Soybean Import Dependence Expected to
Continue to Increase
Million Tons
Percent
53
China is Projected to Account for 45 of Global
Soybean Imports
Million Tons
54
China Soybean Imports
Million Tons
55
China Soybean Imports by Source
Million Tons
56
South American share of soybean trade increases
as U.S. declines
Bz Ar share up 10 points to 55
57
Brazil soybean exports world share has been
growing
58
Soybean production increases in Argentina are
directed mainly to crush
59
although the production shortfall in U.S. will
lead to higher Argentina seed exports for 2007/08
60
Argentina continues to dominate major 3 soybean
meal exporters with 52 pct share, up from 5-yr
avg 45 pct
61
Argentina Soybean Meal Exports
62
Argentina continues to dominate major 3 soybean
oil exports with 62 pct share vs 52 pct 5-yr avg
63
Global soybean meal consumption growth
accelerates in 2007/08
6 percent growth
64
Growth in Soybean Meal Consumption Led by China,
EU, U.S.
65
Growth in Soybean Meal Consumption Led by China,
EU, U.S.
These countries account for 2/3 of soybean meal
consumption growth in 2007/08
66
EU soybean meal consumption growth returns after
several years of limited gains
2.5 million ton (7.5) increase
67
What is going on in EU?
68
What is going on in EU?

• Reduced wheat production

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What is going on in EU?

• Reduced wheat production
• Declining wheat stocks

70
What is going on in EU?

• Reduced wheat production
• Declining wheat stocks
• Higher wheat prices

71
What is going on in EU?

• Reduced wheat production
• Declining wheat stocks
• Higher wheat prices
• Reduced wheat feeding

72
What is going on in EU?

• Reduced wheat production
• Declining wheat stocks
• Higher wheat prices
• Reduced wheat feeding
• Expanding roll for sbm feeding in rations

73
EU Wheat Production Declines for 3rd Year
74
Leading to sharply lower EU stocks
75
and reduced wheat feeding
3 million ton decline
76
China soybean meal consumption rises again,
doubled in 6 years
Million Tons
9
77
Global Vegetable Oil Disappearance
4 pct (4.5 m tons)
78
Global Industrial Vegetable Oil Use
10 pct (2 m tons)
79
Industrial use continues to grow with biodiesel
expansion, nears 20 percent of total vegetable
oil consumption . . .
80
EU Industrial Use of Vegetable Oil
7 of global vegetable oil production used by EU
for BD
Million Tons
81
Outlook for biodiesel in the U.S.
82
U.S. soybean oil used in biodiesel production
83
Biodiesel share of U.S. domestic soybean oil use
84
Monthly Soy Biodiesel Production
85
U.S. Biodiesel Production Capacity
3.22
2.56
1.11
86
Declining U.S. soybean oil stocks
Bil lbs.
87
December 2007 Soybean Oil up 40 percent since
last Fall
88
U.S. Biodiesel Production Margin
89
U.S. Biodiesel Net ExportsMarch July 2007
Net exports 18 of 2007/08 production (434 mil.
lbs)
90
U.S. soybean oil used in biodiesel production
91
Global oil stocks to use declines as growth in
use exceeds production
6 pct
92
Global oilseed stocks decline sharply from record
levels
-14.6 mil tons
93
Soybean, Product Price Outlook
94

• Wheat

95
World Wheat Production
96
U.S. Wheat Supply and Demand
97
Global wheat stocks declines as growth in use
exceeds production
112 million tons
98
World Wheat Ending Stocks-to-Use
99
Soft Red Winter Wheat Futures Prices
Source Chicago Board of Trade settlement prices.
100
Summary

• High commodity prices into 2008
• Competition for acres in the U.S. in 2008 will be
  strong, favoring soybeans especially if any
  production shortfall in South America

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Questions?
http//www.usda.gov/oce/weather/
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