politics, trade and us beef outlook for 2018/19 · abu's to capture over half of world corn...
TRANSCRIPT
Politics, Trade and US Beef Outlook
for 2018/19Daniel W Basse
President AgResourceAugust 28, 2018
2018/19 Ag Market Themes• World Political/Economic “Order” is Changing to “Disorder!” Central Banks were
accommodative for the past decade with $12 Trillion of QE, low interest rates as they all worked in concert. Central Banks are now unwinding prior policies and ending their working relationships. And politically, we have Brexit, North Korea, President Trump, regional protectionism on trade and uncertain politicians. The markets will endure heightened financial risk/volatility into 2020 election.
• This Year’s Ag Black Swan is US Trade Sanctions. China was the largest US market for ag goods in 2017 at $19.6 Bil. China offered to secure an additional $30-35 Bil of US ag goods in coming years along with $35-40 Bil of energy. Trump Admin said yes and then no in a high stakes game of poker via IT protection/2025 fight.
• The US is the world’s high cost grain producer. Costs must come down or consolidation will accelerate. $12 Bil of US Trump Tariff aid mostly to soybeans.
• 2018 World meat production to be record large with the US cattle herd to expand into mid 2019 . No indication that world pork or poultry producers are considering ending their expansionary plans. Something to closely follow is African Swine Fever (ASF) that is just now impacting China hog herd.
• US interest rates rising amid improving US economy. US inflation rates rising which could push the US Fed to raise interest rates 4X in 2018, and 2X in 2019. US Fed Funds Rate peaks at 2.75-3.0%% in mid 2019.
2018 Ag Themes• A 20% drop in the value of the USD or a settlement of trade disputes are needed
to spark a lasting ag market recovery. Non US world ag production expanding amid Trump Trade Tariffs/USD. The US dollar is up 9% so far in 2018.
• US cattle prices to form peak in early 2019 ($120-124) with price declines into mid year. US beef supplies to be tightest between October/November.
• The world is producing record amounts of food, the key question going forward is whether future economic growth (outside of the US) can sustain larger demand? NEW DEMAND DRIVERS are needed to alter the oversupplied US ag Landscape! US Trade Tariffs add to US ag Instability near term. Can the Trump Administration “Lock Down” Chinese demand in years ahead? Otherwise, non US competitive pressures will accelerate.
World InflationHigher For First Time Since 2011
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One has to be Careful About being Too Bearish Commodities!
King US Dollar Is Based on Strong US Economy
Last 12 Months has lifted Non US Ag profit/productivity
South American Farmers Respond with Sizeable Soy/Corn seeding gains
Russian Wheat Farmers Enjoy 45% Gains –Double the rate for the US
Changes in Ag/Food/Energy/Macro Policy
Can China and India Drive Improved World Food Demand into 2026?
US Tariffs Rising to Threatening Levels
China has allowed Yuan to Decline 9.5% To Counter Tariffs
China Consumption of Meat is Flattening!
4 ASF Outbreaks that are 1,400 Miles Apart – Concentration Rate Huge
ASF Spread Thru Body Fluids and Biting Insects
Africa to Europe, Russia and Now China. Can the Pacific Block the US?
US Soybeans Most Expensive To China including Tariff
Two Distinct World Soy Markets –Brazilian Farmers Rejoice!
Chinese Crush Margins – Best in 2 Years! No Pain yet for Livestock
China Holds 50% of World’s Wheat Stocks
Blessed with Water- Africa Could be Self Sufficient? Infrastructure/Tech?
2027/28 World Grain Trade Forecast- Where are the Gains?
US Farm Borrowing Costs Approaching 1980 Record
Operational Crisis as Working Capital Availability Declines for US Farms
US Net Farm Income Forecast to Be Depressed into 2027
Thankfully, US Cattle Industry is not leveraged! Bankers Push Reduced Risk
World Grain Trade Stagnation!Corn/Wheat Trade Flat in 2017/18
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MMTs Corn Wheat
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Share World Exports (%)
MMT ABU's To Capture Over Half of World Corn Exports in 2017/18
Ukraine Exports (MMT) Argentina Exports (MMT) Brazil Exports (MMT) ABU's Share of Wrld Exp (%)
ABU Corn Exports: US Suffers
US Corn Export Demand To Gain on S Hemisphere Corn Shortfall
US Annual Corn Exports: Record Large in 2018/19?
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Mil Bu
World Wheat Exporters’ Stocks/Use Down Sharply
May 1st to July 15th Normal Rain
Warmest May 1st to July 15th on Record
Corn Crop Conditions Decline; US Corn Yield of 175-176 BPA?
US soybeans Similar with a Yield of 52.4 BPA.
December Corn Could Fall To $3.50 If Yield is 180 BPA
World Corn/Soy/Wheat Prices to Rise Slowly Over Time
US Is Not The World’s Low-Cost Corn Producer
http://farmdocdaily.illinois.edu/2018/06/international-benchmarks-for-corn-production.html
Ag Tech – Faith in Our Future !
Non Irrigated US Corn Contest Yield vs US Trendline Yield 386 – 515 BPA Irrigated!
US Beef and Cattle Outlook
Annual Cow/Calf Margin:
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$/Cow
Annual US Cattle Feeding Margin:
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Monthly Cattle Feeding Returns
Annual Packer Margins (2017 YTD)
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Record Kill Margins for August
US per Capita Meat Consumption
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LBS Beef Pork Poultry
4th Quarter Per Capita Beef Disappearance: Largest Since 2008
Weekly Cattle Kills
US Cattle Carcass Weights
3rd and 4th Quarter US Beef Production
Record US Beef Stocks in Freezer
Feeder Cattle Placements
Cumulative Weekly Mexican Feeder Cattle Imports
Monthly Feeder Cattle Placements
The Drop Credit: Weekly By-Product Value
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Quarterly US Beef Production
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Mil Lbs 2017 2018 5 Yr Avg
Quarterly US Beef Exports
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Mil Lbs 2017 2018 5 Yr Avg
Quarterly US Domestic Beef Use
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Mil Lbs 2017 2018 5 Yr Avg
4th Quarter Avg Live Cattle Price Model
Plains Cash Cattle Prices - $100-103 Low In the 4th Quarter?
Copright © 209
$50$60$70$80$90
$100$110$120$130$140$150$160$170$180
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$/CWT
Thank You
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