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Food Aid Costs and Prospects: An Analysis of Wheat, Corn, Vegetable Oil, and Corn Soy Blend

This report analyzes the costs and projections of food aid commodities, including wheat, corn, vegetable oil, and corn soy blend. It also examines the impact of market prices and freight rates on food aid costs. The results should provide some indications of future trends, though they should be interpreted with caution.

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Food Aid Costs and Prospects: An Analysis of Wheat, Corn, Vegetable Oil, and Corn Soy Blend

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  1. Food Aid Costs and ProspectsIFADCKansas City June 29, 2011 Pete Riley Economic and Policy Analysis Staff USDA/Farm Service Agency Washington, DC 20250 202-720-7787 Pete.Riley@wdc.usda.gov

  2. Wheat Supplies Ample, Although There are Quality Concerns percent

  3. Rice Ending Stocks in 2011/12 Forecast 21 million MT Higher Than Recent Low in 2004 percent

  4. Current Supply Concerns Mainly Focus on Corn percent

  5. Commodity Markets are Volatile: An Example from Dairy $ per cwt.

  6. Despite the Highest Stocks in 23 Years, U.S. Wheat Prices Doubled Last Season $ per bu. Daily Cash Prices from June 2010

  7. Food Aid Cost Data Summary, 2004-2010(for bulk and processed commodities combined) Costs Quantities Mil $ 1000 MT Source: FSA/KC Commodity Office

  8. Bulk vs. Processed Commodity Volume by Year Bulk Processed 1000 MT 1000 MT

  9. Bulk vs. Processed Commodity Costs by Year Bulk Processed Mil $ Mil $

  10. Freight Rates Have Dropped from 2008 Highs Bulk freight accounted for 35-40 percent of total costs Processed freight accounted for 25-30 percent of total costs

  11. Cost Analysis and ProjectionsMethodology and Caveats • Constructed simple models for key commodities to analyze relationship between food aid commodity costs and market prices. • Value of results vary by commodity. • Projections based on USDA baseline market prices for 5 years out. • Results need to be interpreted with caution, but should provide some rough indications of future trends. Note: These are not official USDA projections!

  12. Food Aid CostsWheat History and 5-Year Projection * $/MT

  13. Food Aid CostsCorn History and 5-Year Projection $/MT

  14. Food Aid CostsVegetable Oil History and 5-Year Projection $/MT

  15. Food Aid CostsCorn Soy Blend History and 5-Year Projection $/MT

  16. A Look at Commodity Plus Freight Costs: An Example for Wheat $/MT

  17. Very Wet and Flooding in North, Drought Across the South and Southern Plains

  18. Near Term Risk Factors Higher Prices Lower Prices Softer oil prices Reduced economic growth Less investor interest in commodities Strong global acreage response to high prices Favorable summer weather Higher-than-expected yields • More flood and/or drought damage • Poor summer growing weather • Limited early corn from the South and late Midwest crop • Late summer bidding war for old crop corn • Bigger corn imports by China

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