Crop Insurance Today May 2015 - (Page 11)

Figure 9. U.S. Farm Prices for Crops & Livestock 2011=100 160 Index of Animal & Animal Product Prices 140 120 100 80 60 Index of Crop Prices 40 20 5 4 201 3 201 2 201 1 201 0 201 9 201 8 200 7 compared with the 2013/14 carryover, which turned out to be a historically low 2.6 percent of use. The tight supply prevented soybean prices from falling as much as corn during 2013/14 and was an important factor in explaining the shift in 2014 planted acres from corn to soybeans. For 2014/15, USDA forecasts soybean stocks will jump to 10 percent of total use, and prices will average $10.10 per bushel, down 22 percent from the year earlier. Corn carryover is forecast to rise from 9.2 percent to 13.4 percent of use with 2014/15 corn farm prices averaging $3.70 per bushel, down 200 6 200 5 200 4 200 3 200 2 200 1 200 200 200 0 0 17 percent from the year earlier and a bit less than the drop in soybean prices. Wheat exports are expected to drop in 2014/15 as EU competition heats up and the value of the dollar increases, leading to a moderate increase in carryover stocks with prices expected to average about $6.00 per bushel, down about 12 percent from the year earlier. Soaring U.S. cotton production in 2014 is forecast to raise cotton carryover by 80 percent in 2014/15 and reduce average farm prices to 60 cents per lb, compared with 77.9 cents averaged during 2013/14. Sitting on enormous stocks, China, Figure 10. U.S. Prices & Carryover Stocks as a Share of Total Use % of Use Soybeans 30 $/Bu. 16.00 % of Use 30 Corn $/Bu. 8.00 14.00 25 7.00 12.00 20 10.00 6.00 20 5.00 8.00 15 6.00 10 4.00 3.00 10 4.00 1.00 0.00 14 20 10 20 06 20 02 20 8 19 9 19 9 4 0 90 14 20 06 20 02 20 98 19 94 19 90 0.00 19 0 2.00 2.00 5 19 another year of stock increases in 2014/15 is also playing out in the world cotton market. Despite the large boost in U.S. production, global cotton production is down slightly, as a number of countries all experienced small declines. Still, global production remains above expected use and stocks are expected to increase eight percent to 110 million bales, with China continuing to shape the market, as it is expected to hold over 65 million bales, nearly 60 percent of the world total. To put the 2014 grain and oilseed market in perspective, the 2000-2013 average global stocks-to-use ratio is 20.5 percent. The estimated level at the end of 2014/15 is estimated at 21.5 percent. Thus while carryover as a share of use is the highest since the 2009/10 season, the buildup is not wildly excessive and is more a return to normalcy after the rare drought-affected 2012 year. The steady carryover rise over the past two years in the face of somewhat slow consumer demand sets the stage for a price environment that may lie between the past few years and the lower levels of the earlier 2000s. Figure 9 depicts the overall movements for the aggregate indices of prices received by U.S. farmers for crops and for animals and animal products on a monthly basis since 2000. As global crop production rebounded in 2013 and 2014 following the 2012 U.S. drought, and global economic growth proved sluggish, crop prices declined sharply. Meanwhile, livestock prices had been in the doldrums in the mid to later 2000s as feed price increases, driven by ethanol growth and Southern Plains dryness, led to reduced herds and larger meat supplies. These herd reductions then tightened production capacity, reducing meat production in 2012-14 which boosted prices. With feed prices falling, farmers began holding back animals to expand production, and livestock prices continued to stay strong, although starting to decline in late 2014 and early 2015. Animal number expansion is likely to help build a demand base for feed grains over the next few years as ethanol-driven demand stagnates. The supply and demand situation for corn and soybeans is illustrated in Figure 10. With record production, the increase in expected U.S. carryover stocks is clearly much larger than for the world. The increase for soybeans is especially dramatic, particularly when CROPINSURANCE TODAY® 11

Crop Insurance Today May 2015

Table of Contents for the Digital Edition of Crop Insurance Today May 2015