Supply and Demand Estimates and Profitability Outlook

 

 
 
The following is a summary of the USDA's monthly World Agricultural Supply and Demand Estimates (WASDE) report. Domestic balance sheets for corn, soybeans, cotton, and wheat are displayed along with price reaction in futures markets for each commodity on the day of the report release. Additionally, supply and demand estimates for key importing and exporting countries are provided for the current month along with change in estimates from the previous report. The Profitability Outlook section contains estimated returns per acre for each commodity based  on 2017 Tennessee state average/trend yields and current price offerings (note: cotton prices include a seed and hauling rebate). Variable expenses are based on the University of Tennessee Extension 2018 Row Crop Budgets. Prices are updated monthly; expenses are updated as warranted during the year and may be different than the expenses contained in the 2018 Row Crop Budgets. This section provides an estimation of the current relative profitability amongst major row crops in Tennessee.
 
The report is prepared monthly by Dr. Aaron Smith and Chuck Danehower.
 

 


 

December 11, 2018 - USDA World Supply and Demand Estimates

 

Corn

Market Reaction: March 2019 corn futures closed up ¾ cents at $3.84 ¾ with a trading range for the day of $3.81 ¼ to $3.86. December 2019 corn futures closed up 1 ¾ cents at $4.04 with a trading range for the day of $4.00 ½ to $4.04. Only two changes were made to the domestic balance sheet a 5 million bushel decrease in imports and a 50 million bushel decrease in ethanol use. World stocks were up 51 million bushels (46 million domestic + 6 million foreign).

USDA Summary: This month’s 2018/19 U.S. corn outlook is for lower corn used for ethanol, reduced imports, and larger ending stocks. Imports are lowered based on observed trade to date. Corn used to produce ethanol is reduced 50 million bushels to 5.6 billion, based on the most recent data from the Grain Crushings and Co-Products Production report and weekly ethanol production data as reported by the Energy Information Administration for the month of November. These data imply corn used for ethanol during the September to November quarter declined relative to the prior year for the first time since 2012. With no other use changes, ending stocks are up 45 million bushels from last month. The season-average corn price received by producers is unchanged at a midpoint of $3.60 per bushel but the range is narrowed 5 cents on each end to $3.25 to $3.95 per bushel.

Global coarse grain production for 2018/19 is forecast higher. The 2018/19 foreign coarse grain outlook is for larger production, and virtually unchanged consumption and ending stocks relative to last month. Foreign corn production is forecast higher with increases for Ukraine, the EU, and Thailand more than offsetting reductions for South Africa and Canada.  EU corn production is higher reflecting a larger forecast for Romania. Ukraine corn production is raised based on harvest results to date, and if realized, this month’s yield forecast would surpass the previous record set during 2016/17 by nearly 20 percent. South Africa corn production is lowered as dry planting conditions are expected to reduce area. Canada corn output is down on declines in both area and yield.  Corn exports are raised for Ukraine, but lowered for Mexico. Imports are raised for Vietnam, Canada, Japan, Iran, and Colombia, with partially offsetting reductions for Libya and Venezuela. Foreign corn ending stocks are higher than last month, mostly reflecting increases for the EU, Mexico, Vietnam, Ukraine, and Japan, that more than offset declines for Brazil, Canada, and South Africa.

 

 

2014/15

2015/16

2016/17

2017/18 Est.

2018/19 Projected November

2018/19 Projected December

2018/19 Change From Previous Month

Change 2017/18 to 2018/19


Planted and Harvested Acres & Yield

Acres Planted (Million Acres)

90.6

88

94

90.2

89.1

89.1

0.0

-1.1

Acres Harvested (Million Acres)

83.1

80.8

86.7

82.7

81.8

81.8

0.0

-0.9

U.S. Average Yield (Bu/Acre)

171.0

168.4

174.6

176.6

178.9

178.9

0.0

2.3


Supply (Million Bushels)

Beg. Stocks

1,232

1,731

1,737

2,293

2,140

2,140

0

-153

Production

14,216

13,602

15,148

14,604

14,626

14,626

0

22

Imports

32

68

57

36

50

45

-5

9

Total Supply

15,479

15,401

16,942

16,934

16,816

16,811

-5

-123


Use & Ending Stocks (Million Bushels)

Feed and Residual

5,280

5,114

5,470

5,298

5,500

5,500

0

202

Ethanol

5,200

5,224

5,432

5,605

5,650

5,600

-50

-5

Food, Seed & Industrial

1,401

1,424

1,453

1,453

1,480

1,480

0

27

Exports

1,867

1,901

2,294

2,438

2,450

2,450

0

12

Total Use

13,748

13,664

14,649

14,793

15,080

15,030

-50

237

U.S. Ending Stocks

1,731

1,737

2,293

2,140

1,736

1,781

45

-359

Foreign Stocks

9,260

10,523

11,495

11,253

10,370

10,376

6

-877


Price and Stocks to Use Ratio

U.S. Avg. Season Price ($/Bu)

$3.70

$3.61

$3.36

$3.36

$3.20-$4.00

$3.25-$3.95

$0.00

$0.24

U.S. Stocks/Use

12.59%

12.71%

15.65%

14.78%

11.51%

11.85%

0.3%

-2.93%


Source: USDA-WASDE December 11, 2018


 

World Corn Supply and Use (Million Bushels) 2018/19 (December)

Country / Region

Beginning Stocks

Production

Imports

Domestic Feed

Domestic Total

Exports

Ending Stocks

World

13,393

43,301

6,289

27,508

44,537

6,553

12,157

US

2,140

14,626

45

5,500

12,580

2,450

1,781

Foreign

11,253

28,676

6,244

22,008

31,957

4,103

10,376

Argentina

94

1,673

0

335

488

1,102

176

Brazil

355

3,720

39

2,205

2,618

1,142

355

South Africa

103

472

0

228

461

75

40

Egypt

72

268

382

539

638

0

84

EU

388

2,378

827

2,520

3,268

59

266

Japan

55

0

610

468

610

0

55

Mexico

226

1,024

657

1,004

1,720

51

135

Southeast Asia

91

1,158

669

1,472

1,785

31

102

South Korea

74

3

402

315

405

0

73

Canada

93

547

47

335

547

63

78

China

8,761

10,078

197

7,637

10,866

2

8,168

Ukraine

56

1,378

1

217

272

1,102

60

ROW

885

5,976

2,412

4,733

8,279

476

783

World Corn Supply and Use (Million Bushels) December-November 2018/19

Country / Region

Beginning Stocks

Production

Imports

Domestic Feed

Domestic Total

Exports

Ending Stocks

World

-28

38

102

81

-41

32

51

US

-

-

-5

-

-50

-

45

Foreign

-28

38

107

81

9

32

6

Argentina

-

-

-

-

-

-

-

Brazil

-59

-

-

-

-

-

-59

South Africa

-

-39

-

-31

-35

-

-4

Egypt

2

-

-

-

-

-

2

EU

14

35

-

20

20

-

30

Japan

-

-

20

12

12

-

8

Mexico

10

-

-

-

-

-8

18

Southeast Asia

2

7

39

39

41

1

6

South Korea

-

-

-

-

-

-

-

Canada

-

-24

28

8

8

-

-4

China

-

-

-

-

-

-

-

Ukraine

-

59

-

8

12

39

8

ROW

2

0

20

26

-48

0

0

 

Source: USDA-WASDE December 11, 2018

 

Cotton

Market Reaction: March 2019 cotton futures closed up 0.14 cents at 80.02 with a trading range for the day of 79.11 to 80.66 cents. December 2019 cotton futures closed up 0.19 cents at 77.82 with a trading range for the day of 77.41 to 78.13 cents. Average US yield was increased 8 lb/acre. Foreign stocks were up 480,000 bales and domestic stocks were up 100,000.

USDA Summary: This month’s 2018/19 U.S. cotton forecasts include slightly higher production and ending stocks. Production is raised 180,000 bales due mainly to a 300,000-bale increase in Texas.  Domestic mill use and exports are unchanged.  Ending stocks, forecast at 4.4 million bales in 2018/19, are 100,000 bales above both last month and the 2017/18 estimate. The forecast range for the marketing year average price received by producers is unchanged from November, 71 to 77 cents per pound, with a midpoint of 74 cents. 

The global 2018/19 forecasts compared with last month include lower production, lower consumption, higher trade, and slightly higher ending stocks.  Global production is 645,000 bales lower with smaller crops in Pakistan, China, India, Turkmenistan, and Turkey. These changes more than offset a 1.0-million-bale increase in Brazil and smaller increases in the United States and Cote d’Ivoire. Global consumption is 1.3 million bales lower largely due to a 1.0-million-bale decline for China, but consumption is also lower in Pakistan, Turkey, and Uzbekistan.  Global trade is 600,000 bales higher, with imports up in Pakistan, India, and Malaysia, while exports are higher from Brazil, Argentina, Cote d’Ivoire, India, and Uzbekistan. Projected 2018/19 global ending stocks are nearly 600,000 bales higher this month, but at 73.2 million bales are down 7.3 million bales from the year before.

 

2014/15

2015/16

2016/17

2017/18 Est.

2018/19 Projected November

2018/19 Projected December

2018/19 Change From Previous Month

Change 2017/18 to 2018/19


Planted and Harvested Acres & Yield

Acres Planted (Million Acres)

11.04

8.58

10.07

12.61

14.04

14.04

0

1.43

Acres Harvested (Million Acres)

9.35

8.07

9.51

11.1

10.37

10.37

0

-0.73

U.S. Average Yield (lbs/acre)

838

766

867

905

852

860

8

-45


Supply (Million Bales)

Beg. Stocks

2.35

3.65

3.8

2.75

4.3

4.3

0

1.55

Production

16.32

12.89

17.17

20.92

18.41

18.59

0.18

-2.33

Imports

0.01

0.03

0.01

0

0.01

0.01

0

0.01

Total Supply

18.68

16.57

20.98

23.68

22.71

22.89

0.18

-0.79


Use & Ending Stocks (Million Bales)

Domestic

3.58

3.45

3.25

3.23

3.3

3.3

0

0.07

Exports

11.25

9.15

14.92

15.85

15

15

0

-0.85

Total Use

14.82

12.6

18.17

19.07

18.3

18.3

0

-0.77

U.S. Ending Stocks

3.65

3.8

2.75

4.3

4.3

4.4

0.1

0.1

Foreign Stocks

108.09

91.11

77.65

76.15

68.31

68.31

0

-7.84

Chinese Stocks

66.92

58.2

45.92

38.02

29.87

30.37

0.5

-7.65


Price and Stocks to Use Ratio

U.S. Avg. Season Price ($/lb)

$0.613

$0.612

$0.68

$0.69

$0.71-$0.77

$0.71-$0.77

$0.000

$0.054

U.S. Stocks/Use

25%

30%

15%

25%

23%

24%

0.55%

-0.89%

Chinese Stocks/Use

197%

166%

119%

102%

70%

73%

2.90%

-29.24%


Source: USDA-WASDE December 11, 2018

 

World Cotton Supply and Use (Million 480 lb Bales) 2018/19 (December)

Country / Region

Beginning Stocks

Production

Imports

Domestic Use

Exports

Loss

Ending Stocks

World

80.45

118.74

41.71

125.63

41.73

0.35

73.19

US

4.3

18.59

0.01

3.3

15

0.19

4.4

Foreign

76.15

100.15

41.71

122.33

26.73

0.16

68.79

Central Asia

2.72

5.47

0

3.61

2.21

0

2.37

Afr. Fr. Zone

1.8

5.86

0

0.14

5.45

0

2.07

Australia

2.94

2.5

0

0.04

3.6

0

1.81

Brazil

8.66

11

0.08

3.5

5.8

0

10.43

India

8.68

27.5

1.6

25.3

4.4

0

8.08

Mexico

0.66

1.73

0.9

1.95

0.6

0.03

0.71

China

38.02

27

7

41.5

0.15

0

30.37

EU

0.27

1.66

0.71

0.75

1.53

0.05

0.32

Turkey

1.88

4.3

2.9

7

0.4

0

1.68

Pakistan

2.83

7.4

2.9

10.6

0.15

0.03

2.36

Indonesia

0.62

0

3.65

3.6

0.01

0

0.66

Thailand

0.18

0

1.18

1.15

0

0.03

0.18

Bangladesh

1.86

0.14

8.1

8

0

0.01

2.08

Vietnam

1.19

0

7.6

7.5

0

0

1.29

ROW

3.84

5.59

5.08

7.69

2.43

0.01

4.38

World Cotton Supply and Use (Million 480 lb Bales) December-November 2018/19

Country / Region

Beginning Stocks

Production

Imports

Domestic Use

Exports

Loss

Ending Stocks

World

0.06

-0.65

0.6

-1.25

0.6

0.08

0.58

US

-

0.18

-

-

-

0.08

0.1

Foreign

0.06

-0.83

0.6

-1.25

0.6

-

0.48

Central Asia

0.06

-0.2

-

-0.15

0.1

-

-0.09

Afr. Fr. Zone

-

0.13

-

-

0.1

-

0.02

Australia

-

-

-

-

-0.1

-

0.1

Brazil

-

1

-

-

0.3

-

0.7

India

-

-0.5

0.1

-

0.1

-

-0.5

Mexico

-

0

-

0.05

-

-

-0.05

China

-

-0.5

-

-1

-

-

0.5

EU

-

-

-

-

-

-

-

Turkey

-

-0.2

-

-0.1

-

-

-0.1

Pakistan

-

-0.6

0.3

-0.2

-

-

-0.1

Indonesia

-

-

-

0.05

-

-

-0.05

Thailand

-

-

0.05

0.05

-

-

-

Bangladesh

-

-

-

-

-

-

-

Vietnam

-

-

-

-

-

-

-

ROW

0

0.04

0.15

0.05

0.1

0

0.05


Source: USDA-WASDE December 11, 2018


 

 
 

Soybeans

Futures Market Reaction: January 2019 soybean futures were up 5 ¼ cent at $9.15 with a trading range for the day of $9.06 to $9.17 ¼. November 2019 soybean futures closed up 4 ¾ cents at $9.61 ¾ with a trading range for the day of $9.52 ¾ to $9.63 ¼. No major movements in domestic soybean fundamentals. Trade negotiations with China and South American growing conditions will continue to dictate price direction.

USDA Summary: Total U.S. oilseed production for 2018/19 is forecast up slightly due to an increase for cottonseed. Soybean supply and use projections for 2018/19 are unchanged from last month. With soybean exports and crush unchanged, soybean ending stocks are projected at a record 955 million bushels. The U.S. season- average soybean price for 2018/19 is forecast at $7.85 to $9.35 per bushel, unchanged at the midpoint. Soybean meal and oil price forecasts are also unchanged at $290 to $330 per short ton and 28.0 to 32.0 cents per pound, respectively. 

Global 2018/19 oilseed production is forecast up with greater soybean production for Brazil and Nigeria. Brazil’s soybean production is projected up 55 million bushels to 4.483 billion, reflecting higher yields in the Center-West region where crops have benefitted from favorable weather conditions. Higher global soybean production is partly offset by a reduction to rapeseed, mainly due to lower area projections for Australia and India based on recent government data. Global 2018/19 soybean exports are increased 26 million bushels to 5.736 billion. Soybean exports are increase 147 million bushels for Brazil but are lowered for Argentina, Canada, and Paraguay.   Larger competitive supplies in Brazil are expected to slow the export pace and increase the stocks held by other exporters, particularly Argentina.


 

2014/15 

2015/16

2016/17

2017/18 Est.

2018/19 Projected November

2018/19 Projected December

2018/19 Change From Previous Month

Change 2017/18 to 2018/19


Planted and Harvested Acres & Yield

Acres Planted (Million Acres)

83.3

82.7

83.4

90.1

89.1

89.1

0.0

-1.0

Acres Harvested (Million Acres)

82.6

81.7

82.7

89.5

88.3

88.3

0.0

-1.2

U.S. Average Yield (Bu/Acre)

47.5

48

52

49.3

52.1

52.1

0.0

2.8


Supply (Million Bushels)

Beg. Stocks

92

191

197

302

438

438

0

136

Production

3,927

3,926

4,296

4,411

4,600

4,600

0

189

Imports

33

24

22

22

25

25

0

3

Total Supply

4,052

4,140

4,515

4,734

5,063

5,063

0

329


Use & Ending Stocks (Million Bushels)

Crushing

1,873

1,886

1,901

2,055

2,080

2,080

0

25

Exports

1,842

1,942

2,166

2,129

1,900

1,900

0

-229

Seed and Residual

146

115

146

112

128

128

0

16

Total Use

3,862

3,944

4,214

4,296

4,107

4,107

0

-189

U.S. Ending Stocks

191

197

302

438

955

955

0

517

Foreign Stocks

2,658

2,687

3,282

3,284

3,163

3,283

120

-1


Price and Stocks to Use Ratio

U.S. Average Season Price ($/Bu)

$10.10

$8.95

$9.47

$9.33

$7.60-$9.60

$7.85-$9.35

$0.00

-$0.73

U.S. Stocks/Use

4.95%

4.99%

7.17%

12.66%

23.25%

23.25%

0.00%

10.60%


Source: USDA-WASDE December 11, 2018


 

World Soybean Supply and Use (Million Bushels) 2018/19 (December)

Country / Region

Beginning Stocks

Production

Imports

Domestic Crush

Domestic Total

Exports

Ending Stocks

World

3,722

13,566

5,602

11,324

12,917

5,735

4,238

US

438

4,600

25

2,080

2,208

1,900

955

Foreign

3,284

8,966

5,577

9,244

10,709

3,835

3,283

Argentina

1,268

2,039

154

1,580

1,761

184

1,518

Brazil

924

4,483

7

1,569

1,653

2,976

784

Paraguay

7

360

0

143

146

213

8

China

865

588

3,307

3,399

4,027

4

729

EU

56

99

581

610

671

10

55

Japan

8

10

121

86

129

0

10

Mexico

7

12

185

195

196

0

8

ROW

149

1,375

1,221

1,662

2,125

448

171

World Soybean Supply and Use (Million Bushels) December-November 2018/19

Country / Region

Beginning Stocks

Production

Imports

Domestic Crush

Domestic Total

Exports

Ending Stocks

World

59

62

7

22

-15

24

119

US

-

-

-

-

-

-

-

Foreign

59

62

7

21

-15

24

119

Argentina

10

-

-

-

-

-110

121

Brazil

59

55

-

-

-37

147

4

Paraguay

-2

-

-

-2

-2

-4

4

China

-

-

-

-

-

-

-

EU

-12

-

-

-

-

-1

-12

Japan

-

-

-

-

-

-

-

Mexico

-

-

1

-

-

-

1

ROW

4

7

6

24

24

-8

2

Source: USDA-WASDE December 11, 2018
 
 

Wheat

Futures Market Reaction: March 2019 wheat futures closed down 4 ¼ cents at $5.21 with a trading range for the day of $5.17 ½ to $5.29. July 2019 wheat futures closed down 1 ¼ cents at $5.36 with a trading range for the day of $5.31 ¼ to $5.40 ¼. Global wheat fundamentals are moving in a positive direction relative to a year ago however revisions to the current marketing year month-over-month have been negative for improved price prospects.

USDA Summary: The outlook for 2018/19 U.S. wheat this month is for unchanged supplies, lower exports, and higher ending stocks. Wheat exports are lowered 25 million bushels to 1.0 billion with all of the reduction in Hard Red Winter (HRW) on historically low exports for this class in the first half of the 2018/19 marketing year (MY). The reduction in HRW is partially offset by higher exports of Hard Red Spring and Soft Red Winter. Projected 2018/19 ending stocks are raised 25 million bushels to 974 million, which are still down 11 percent from last year. Based on NASS monthly prices reported to date and price expectations for the remainder of the MY, the projected season-average farm price is up $0.05 per bushel at the midpoint with the range narrowed to $5.05 to $5.25.

World 2018/19 wheat supplies are increased 29 million bushels as additional Russian carry- in stocks and a larger Canadian crop more than offset a reduction in Australian production.   Based on the updated ABARES estimate, Australia’s production is lowered by 18 million bushels to 625 million. This would be the lowest Australian wheat output since 2007/08. Canada’s wheat production is raised 11 million bushels to 1.168 billion, based on the latest estimate by Statistics Canada. Projected global 2018/19 trade is lower, as reduced Australian, EU, and U.S. exports are partly offset by higher Russian exports, which are increased 55 million bushels to 1.341 billion. Russia and other Black Sea suppliers continue to displace EU and U.S. exports in several markets in the first half of 2018/19 but are expected to be less competitive in the second half based on reduced exportable supplies. Australia’s wheat exports are lowered 37 million bushels to 386 million as its export prices are expected to remain uncompetitive and more supplies are consumed domestically for feed. Global ending stocks are raised 51 million bushels to 9.851 billion, primarily on increases for the EU and the United States but are 4 percent lower than last year’s record 10.285 billion.


 

2014/15

2015/16

2016/17

2017/18 Est.

2018/19 Projected November

2018/19 Projected December

2018/19 Change From Previous Month

Change 2017/18 to 2018/19

 

Planted and Harvested Acres & Yield

Acres Planted (Million Acres)

56.8

55

50.1

46

47.8

47.8

0

1.8

Acres Harvested (Million Acres)

46.4

47.3

43.9

37.5

39.6

39.6

0

2.1

U.S. Average Yield (Bu/Acre)

43.7

43.6

52.7

46.3

47.6

47.6

0

1.3


Supply (Million Bushels)

Beg. Stocks

590

752

976

1,181

1,099

1,099

0

-82

Production

2,026

2,062

2,309

1,740

1,884

1,884

0

144

Imports

151

113

118

157

140

140

0

-17

Total Supply

2,768

2,927

3,402

3,078

3,123

3,123

0

45


Use & Ending Stocks (Million Bushels)

Food

958

957

949

964

970

970

0

6

Seed

79

67

61

63

69

69

0

6

Feed

114

149

161

50

110

110

0

60

Exports

864

778

1,051

901

1,025

1,000

-25

99

Total Use

2,015

1,951

2,222

1,979

2,174

2,149

-25

170

U.S. Ending Stocks

752

976

1,181

1,099

949

974

25

-125

Foreign Stocks

7,243

7,944

8,411

9,187

8,851

8,877

26

-310


Price and Stocks to Use Ratio

U.S. Avg. Season Price ($/Bu)

$5.99

$4.89

$3.89

$4.72

$4.90-$5.30

$5.05-$5.25

$0.05

$0.43

U.S. Stocks/Use

37.32%

50.03%

53.15%

55.53%

43.65%

45.32%

1.67%

-10.21%


Source: USDA-WASDE December 11, 2018

 
 

World Wheat Supply and Use (Million Bushels) 2018/19 (December)

Country / Region

Beginning Stocks

Production

Imports

Domestic Feed

Domestic Total

Exports

Ending Stocks

World

10,286

26,948

6,459

5,216

27,383

6,517

9,851

US

1,099

1,885

140

110

1,149

1,000

974

Foreign

9,187

25,064

6,319

5,106

26,234

5,517

8,877

Argentina

37

717

0

4

213

522

19

Australia

209

625

6

202

331

386

123

Canada

227

1,168

17

158

342

882

188

EU

519

5,056

239

1,947

4,593

808

413

Brazil

48

176

276

18

445

11

44

China

4,823

4,869

147

661

4,519

44

5,275

Sel. Mideast

463

693

654

184

1,444

27

340

N. Africa

538

778

944

83

1,687

25

549

Pakistan

177

937

0

44

930

37

148

Southeast Asia

185

0

919

292

924

39

141

India

485

3,663

7

184

3,601

18

536

Russia

436

2,572

18

661

1,488

1,341

197

Kazakhstan

87

551

2

81

257

312

71

Ukraine

46

919

1

88

320

606

39

ROW

906

2,340

3,089

499

5,142

457

793

World Wheat Supply and Use (Million Bushels) December-November 2018/19

Country / Region

Beginning Stocks

Production

Imports

Domestic Feed

Domestic Total

Exports

Ending Stocks

World

35

-4

-1

37

-20

-53

51

US

-

-

-

-

-

-25

25

Foreign

35

-4

-1

37

-20

-28

26

Argentina

-

-

-

-

-

-

-

Australia

-

-18

-

18

18

-37

-

Canada

-

11

-

11

11

-

-

EU

-

-

-

-

-

-37

37

Brazil

-

-

-

-

-

-

-

China

-

-

-

-

-

-

-

Sel. Mideast

-

-

-

7

7

-11

4

N. Africa

-

-

-

-

-

-

-

Pakistan

-

-

-

-

-

-

-

Southeast Asia

-

-

-

-

-

-

-

India

-

-

-

-

-

-

-

Russia

37

-

-

-

-

55

-18

Kazakhstan

-

-

-

-

-

-

-

Ukraine

-

-

-

-

-

-

-

ROW

-2

4

-1

0

-57

2

4


Source: USDA-WASDE December 11, 2018
 

2018 Estimated Returns - Non-Irrigated

The profitability outlook has been updated after the release of the December 11, 2018 USDA WASDE reports. This month’s profitability update continues the transition to 2019 as producers have made or will soon be making decisions on 2019 crop selection. Yields used for non-irrigated estimates are a 5 year Tennessee state average year plugging in the 2018 state average projection of 173 bushels per acre for corn, 48 bushels per acre for soybeans, 1034 pounds per acre cotton, and 63 bushels per acre wheat. Prices used for 2019 are estimates based on 2019 harvest futures prices. Based on these yields and prices, soybeans and corn are projected to have positive net returns over variable, land, and fixed costs. Cotton and wheat/soybeans are projected to have positive returns over variable and land costs but not able to cover the estimated fixed costs. Costs are based on the 2018 UT Extension Row Crop budgets with adjustments made where warranted.  It depends on a producer’s situation on what is showing to be the most profitable crop. Producers with cash rent or owned ground will want to look at Returns Over Variable Expenses as their land cost will be fixed and if their machinery cost are truly fixed and no equipment changes will be made. Producers with share rent will want to plug in their appropriate share rent if their equipment cost are fixed. Producers who may be making some equipment changes may want to look at Net Returns. Visit with your supplier on input cost expectations. Please contact your local County Extension office or Area Specialist – Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems. I would like to point out the cotton price of 73 cents that is being used in the profitability outlook. The price of 73 cents is made up of a cash price of 71 cents and gin rebates (seed & hauling) of 2 cents. Gin rebates for seed and hauling are an estimate as those are generally not known until harvest time and could be in the range 0f 0 -5 cents. Producers should look at these returns as what could be if no adjustments are made in their operation and consider it a warning sign that adjustments will need to be made in 2018 to be sustainable. These estimates do not consider any USDA or crop insurance payments from the new farm bill. Please contact your local County Extension office or Area Specialist – Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems.  Cotton prices include revenue for cottonseed and hauling. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: Cotton - $ 102, Soybeans - $38, Corn - $136 (includes 170 units of N), and Wheat/Soybeans - $99. These cost reflect a slight increase from 2018 to 2019. Cost of production will continue to be adjusted as information becomes available. Weed control costs with resistant weeds have also been difficult to estimate. These costs will vary greatly among producers and individual fields.  Production costs are estimates based on the 2018 University of Tennessee Crop Budgets with adjustments made where needed. Please visit with your farm supplier on estimated cost in your area. Producers with owned land and or cash rent can use Returns Over Variable as a guide in decision making. Producers with share rent ground should use Returns Over Variable and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue minus 25% of crop insurance cost is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. Producers who are not making major equipment changes can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid.


Cotton

Soybeans

Corn

Wheat/Soybeans

Yield

1019 lbs.

47 bu.

165 bu.

68 bu./35 bu.

Price (as of 12/11/18)

$0.73 lb.

$9.17 bu.

$3.86 bu.

$5.45 bu./$9.17 bu.

Revenue

$744

$431

$637

$692

Variable Expenses

$437

$226

$355

$422

Returns Over Variable

$307

$205

$282

$269

Land Costs (25% of Revenue-25% crop insurance)

$183

$105

$156

$169

Returns Over Variable and Land Costs

$123

$99

$126

$100

Fixed Costs
Depreciation & interest on machinery

$134

$64

$57

$111

Returns Over Specified Costs

-$10

$35

$69

-$11

Breakeven Price at Average Yield and Specified Cost

$0.74

$8.42

$3.44

$5.60/$9.18


  

2018 Estimated Returns - Irrigation

Considering irrigation, Returns Over Variable, Land, and Fixed cost are positive for soybeans and corn. Returns Over Variable and Land Costs are positive for cotton and wheat/soybeans, but not enough to cover fixed costs.  An individual producer’s machinery and equipment costs will have a strong influence on profitability. Producers should look at these returns as what could be if no adjustments are made in their operation and consider that adjustments may need to be made in 2018 to be sustainable. The table below is an estimate of returns for crops under irrigation. Since irrigated yields are not as of yet kept separate in Tennessee, yields below are an estimate of irrigated yields.  Note that due to an increase in dryland cotton and corn 5-year state average yields, irrigated yields have been increased in this projection over the previous year.  Irrigation fixed costs and energy costs will vary greatly among producers and systems. These projections include in variable expenses energy costs for irrigation of $30 per acre for corn, $26 per acre for cotton, and $20 per acre for soybeans. Irrigation repairs and maintenance are estimated at $16 per acre for corn, $14 per acre for cotton, and $10 per acre for soybeans. Fixed costs of $86 per acre for irrigation equipment are used. Please contact your local County Extension office or Area Specialist – Farm Management for assistance in developing your own budget or farm financial plan. This table below should be used as a guide as yields, prices, and expenses will vary among producers and locations. Expenses will vary among producers and production systems.  For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: Cotton - $106, Soybeans - $38, Corn - $176 (includes 240 units of N), and Wheat/Soybeans - $99. Cost of production will continue to be adjusted as information becomes available. Hopefully, we will see costs reduced or possibly suitable generic products available.   Weed control costs with resistant weeds have also been difficult to estimate. These costs will vary greatly among producers and individual fields.  Production costs are estimates based on the 2018 University of Tennessee Crop Budgets with adjustments made where needed. Please visit with your farm supplier on estimated cost in your area. Producers with owned land and or cash rent can use Returns Over Variable and Fixed IR Costs as a guide in decision making. Producers with share rent ground should use Returns Over Variable, Fixed IR Costs and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue minus 25% of crop insurance cost minus 25% of the irrigation equipment fixed cost is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. A management cost of $30 per acre is included in Fixed Costs – management labor, depreciation & interest on machinery. This is an additional $15 above the dryland crop management labor. Producers who are not making major equipment changes can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid.


Cotton

Soybeans

Corn

Wheat/Soybeans

Yield

1200 lbs.

60 bu.

210 bu.

68 bu./45 bu.

Price (as of 12/11/18)

$0.73 lb.

$9.17 bu.

$3.86 bu.

$5.45 bu./$9.17 bu.

Revenue

$876

$550

$811

$783

Variable Expenses( include energy cost)

$486

$257

$456

$453

Fixed Irrigation Costs per Acre

$86

$86

$86

$86

Returns Over Variable & Fixed IR Costs

$304

$207

$268

$244

Land Costs (25% of Revenue-25% crop insurance-25% fixed irrigation costs)

 

$195

$114

$178

$170

Returns Over Variable, IR Fixed Cost and Land Costs

$109

$93

$90

$74

Fixed Costs- management labor,
depreciation & interest on machinery

$149

$79

$72

$126

Returns Over Specified Costs

-$39

$14

$18

-$52

Breakeven Price at Average Yield and Specified Cost

$0.76

$8.93

$3.77

$5.60/$10.10

​​
  

Past Monthly Comments:   

 
December 12, 2017