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“Implication of 2012 drought for US , Ukraine and global markets: the FAPRI outlook

“Implication of 2012 drought for US , Ukraine and global markets: the FAPRI outlook. By William H. Meyers and Kateryna Goychuk Howard Cowden Professor and PhD Candidate Agricultural and Applied Economics FAPRI at MU Grain Congress 16 October Kyiv, Ukraine.

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“Implication of 2012 drought for US , Ukraine and global markets: the FAPRI outlook

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  1. “Implication of 2012 drought for US , Ukraine and global markets: the FAPRI outlook By William H. Meyers and Kateryna Goychuk Howard Cowden Professor and PhD Candidate Agricultural and Applied Economics FAPRI at MU Grain Congress 16 October Kyiv, Ukraine

  2. Is this the new normal?World Bank Price Indices 2005=100

  3. Agenda • What is the FAPRI market outlook? • Implications for Grain markets

  4. From different times and sources

  5. What is a baseline and how is it used? • It is not a forecast • It is a projection based on a set of reasonable assumptions about • Macroeconomic outlook • Technology outlook • Policy outlook

  6. Oil price assumed to moderate

  7. Ethanol growth slows, Jan 2012 Source: USDA FAPRI-MU baseline, January 2012

  8. So what happened this year? • US and Kaz-Rus-Ukr drought greatly changed market outlook • FAPRI updated the baseline in August • Briefly review that change • A taste of August 2012 outlook

  9. Drop in US corn yield, bu/ac --three in a row!

  10. Not just maize, but wheat too (USDA WASDE Oct 11, 2012)

  11. Big drop in world grain supply

  12. As in 2010, prices react to drop

  13. U.S. maize farm price projections, Jan 2012 Sources: FAPRI-MU baseline, Jan. 2012; USDA, May 2012; CME Dec. contracts, June 8, 2012

  14. U.S. maize farm price projections, August 2012 Sources: FAPRI-MU baseline, Jan. and Aug 2012; USDA, Oct 2012; CME Dec. contracts, Oct 11 2012

  15. Ethanol also adjusts to high price Source: USDA FAPRI-MU baseline, January 2012 and August 2012 update

  16. World Grain Prices, Aug update

  17. World Oilseed Prices, Aug update

  18. Stochastic results show uncertainty Source: FAPRI-MU August 2012 stochastic baseline, Refiners’ acquisition price

  19. Price volatility to continue Source: FAPRI-MU August 2012 stochastic baseline. Maize FOB Gulf prices

  20. Maize price uncertainty Source: FAPRI-MU August 2012 stochastic baseline, US FOB GULF PRICE

  21. Wheat Price Uncertainty Source: FAPRI-MU August 2012 stochastic baseline, HRW WHEAT US FOB GULF

  22. Soybean Price Uncertainty Source: FAPRI-MU August 2012 stochastic baseline

  23. Agenda • What is the FAPRI market outlook? • Implications for Grain markets

  24. What to expect • Continued prices higher than before the 2007/08 price surge • Continued price volatility from year to year and from week to week • Beware of many uncertainties that can impact markets at any time.

  25. Unknowns and uncertainties High volatility likely to continue Major uncertainties in the markets Policy proposals and policy reactions Oil/Energy prices Exchange rates World price surges Financial crises Weather events/climate change

  26. Contact information:email: meyersw@missouri.eduanalysis of outlook, ethanol mandate and US farm bill impacts atweb: www.fapri.missouri.edu Diakuju! !

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