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Ethanol & Grain Market Outlook for 2007-09 9/04/07

Ethanol & Grain Market Outlook for 2007-09 9/04/07. By Dr. Robert Wisner, University Professor of Economics and Coles Professor of International Agriculture Iowa State University Ames, Iowa, U.S.A. Grain Marketing Considerations for 2007-09. Tight storage & transportation ahead

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Ethanol & Grain Market Outlook for 2007-09 9/04/07

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  1. Ethanol & Grain Market Outlook for 2007-099/04/07 By Dr. Robert Wisner, University Professor of Economics and Coles Professor of International Agriculture Iowa State University Ames, Iowa, U.S.A.

  2. Grain Marketing Considerations for 2007-09 Tight storage & transportation ahead Weakening corn basis likely @ harvest Markets offering excellent storage returns (if you have bin space) – for both corn & beans – to summer ‘08 Consider leaving basis open for summer ’08 delivery Expect strong basis around ethanol plants Expect blow-off top in wheat to impact corn, bean markets -- when it happens Be conservative on 2008 & ’09 marketings

  3. Grain Marketing for 2007-09, II Expect stronger cash corn mkt. into winter Wheat, SB pulling acres out of corn Bean mkt. danger: big jump in Brazil Acres Biofuels is global development World grain & livestock mkts.: big adjustments ahead Ethanol growth increases mkt. sensitivity to weather

  4. Risk Factors: Corn & Bean Markets Severe grain transport stress – Miss. River (Tenn.-Ky. River prices corn $2.58/bu. 9/05/07) Limited ethanol blending capacity & transportation Big jump in South American acres Collapse in world oil markets (doubtful) Deteriorating global economy (doubtful)

  5. Key Chart Formations December corn – Gaps @ $3.58 & $3.95 55% retrenchment, Dec. 07 corn: $3.16 Nov. ’07 SB – Gap @$9.31/bu. Dec. Chicago wheat – many down-side gaps

  6. Dec. ’07 wheat reaches record highs

  7. Weekly Corn Futures $3.10/bu.

  8. October ’07 Ethanol Futures

  9. October ’07 Unleaded Gasoline

  10. Nov. ’07 SB Gap

  11. 41 countries encourage biofuelsMajor Countries with Ethanol Fuels • U.S. • Brazil • Canada • China • EU-27 • Thailand Countries considering ethanol fuels • South Africa • Ukraine • Japan

  12. USDA 07-08

  13. '07-08 Ethanol Proj. Other Constr'n

  14. 72 Potential Iowa Plants 11 Just across IA Borders Capacity: 159% of 2006 Crop Iowa Corn Processing Plants, Current & Planned, 7/25/07

  15. Needed Yld. @ 2007 Acres June 2007 334 bu./A. @ ethanol plant rated cap. ? New trend?

  16. Total 11,693 mil. Bu.

  17. Ethanol Blending Wall?(Are we there yet?) • Market incentive to increase blending capacity • What happens when avg. Midwest blend is 10%? • More shipments to coasts – at higher cost

  18. Will increased South American exports more than offset U.S. decline?

  19. Potential area to be cleared for crops

  20. August 2007 Crop Production

  21. *

  22. 2007

  23. Model Forecast: $3.11/bu. U.S. ’07-08 & $3.20 for ’08-09

  24. Proj. Proj.

  25. Source: FAPRI, Univ. of Missouri

  26. Source: FAPRI, Univ. of Missouri

  27. Source: FAPRI, Univ. of Missouri

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