Grain Marketing: Using Balance Sheets

Transcription

1 1 Fct Sheet 485 Grin Mrketing: Using Blnce Sheets Introduction Grin lnce sheets re estimtes of supply nd demnd. They re the key to understnding the grin mrkets. A grin frmer who understnds how to interpret lnce sheets is le to incorporte new mrket informtion s it develops nd to djust his or her price forecsts ccordingly. This fct sheet descries domestic nd world lnce sheets for corn, soyens nd whet. Domestic Blnce Sheets: Corn Tle 1 shows the domestic lnce sheets for corn for the current nd the lst three mrketing yers. As illustrted, totl supply - totl usge (demnd) = ending stocks. Totl supply consists of three fctors: stocks, production nd imports. Totl usge lso consists of three fctors: food/seed, feed/residul nd exports. Ending stocks re sudivided into two ctegories: privtely owned stocks nd Commodity Credit Corportion (CCC) stocks. Importnt Definitions Totl. This is the totl mount of corn tht ws or is expected to e ville during mrketing yer. The stocks figure is the mount of corn in inventory ville t the eginning of mrketing yer (for exmple, Septemer 1,19XX). The eginning stocks figure quoted in the supply section is equl to the ending stocks figure from previous mrketing yer. For exmple, the stocks figure of 4,040 million ushels for the mrketing yer is equl to the ending stocks. Production is the mount of corn hrvested or expected to e hrvested during mrketing yer. For the mrketing yer, 4,553 million ushels of corn re expected to e hrvested during the fll. Imports re the mount of corn imported or expected to e imported into the U.S. from foreign origins during mrketing yer. For exmple, for the , nd mrketing yers, the imports numer is the ctul mount of corn imported. For the yer, the imports figure is estimted through August 31,1989. Totl. This descries how the ville corn ws or is expected to e used. It is n estimte of demnd. The food/seed component is the mount of corn tht ws used or is expected to e used domesticlly for humn consumption or seed. Feed is the mount of corn tht ws used or is expected to e used domesticlly for niml consumption. Residul is ctchll ctegory tht is used to ensure tht the totl of the components dds up to totl usge. In Tle 1, the feed nd residul ctegories re comined. Exports re the mount of grin tht is exported to foreign destintions or is expected to e exported to foreign destintions during the mrketing yer. Ending Stocks. These re the mount of corn in inventory or expected to e in inventory t the end of mrketing yer (for exmple, August 31,19XX). Privtely owned stocks re the corn in ending inventory

2 2 which re under the control of grin producers. Privtely owned stocks consist of frmer owned reserves, stocks under lons, nd free stocks (grin stored y the producer which is not ttched to government progrm). CCC stocks re corn stocks owned nd controlled y the Commodity Credit Corportion. Tle 1 illustrtes close correltion etween the ending stocks figure nd the verge price received y frmers during mrketing yer. Price my e viewed s the mechnism which rtions supply. By lte fll, supply is fixed with the exception of imports. In periods of tight supply, prices rise nd ville supply is rtioned until the next hrvest. In periods of undnt supplies, prices fll or remin low to encourge the use of ville supply. During the mrketing yer, ending stocks were 4,040 million ushels nd frmers received n verge price of $2.35 per ushel. As ending stocks jumped to 4,882 million ushels the next mrketing yer, the verge price which frmers received for corn fell to $1.50 per ushel. Although the verge corn price for the mrketing yer is yet unknown, mny re expecting it to rnge from $2.40 to $2.80 ushel. This is response to the summer drought of 1988 nd its corresponding projected ending stocks of 1,407 million ushels (33 percent of the ending stocks). The corn mrketing yer runs from Septemer 1 to August 31. Projected Octoer 13,1988. Tle 1. Domestic supply nd usge report for corn (millions of ushels) Stocks ,040 4,882 4,260 Production 8,877 8,250 7,064 4,553 Imports Totl 10,536 12,291 11,950 8,817 Food/seed 1,160 1,191 1,224 1,210 Feed/residul 4,095 4,715 4,746 4,500 Exports 1,241 1,504 1,720 1,700 Totl 6,496 7,410 7,690 7,410 Ending Stocks 4,040 4,882 4,260 1,407 Privtely owned 3,494 3,439 3,425 n/ CCC stocks 546 1, n/ Averge Price ? Ending stocks cn e n indictor of the fundmentl economic sitution of mrket. Since ending stocks re the difference etween supply nd usge, they encompss oth supply nd demnd. Through ending stocks, new mrket informtion cn e esily incorported into frmer's nlysis of the mrket. For exmple, if the U.S. sells dditionl corn to Jpn in n unexpected sle, quick wy to summrize the significnce of the sle is to look t the impct on projected ending stocks. Similrly, informtion out the impcts of drought, increses or decreses in livestock or poultry numers, plnting or

3 3 hrvest prolems, or vriety of other types of informtion cn e quickly summrized through their impcts on ending stocks. Although not perfect mesure, ending stocks cn t lest give grin producer n indiction of whether the new informtion is significnt or insignificnt. Another indictor of the fundmentl sitution is the dys supply sttistic. Dys supply is computed directly from the lnce sheet y dividing projected ending stocks with projected totl usge, nd multiplying the product y 365. For exmple, for the mrketing yer the dys supply ws 202 dys ([ ] x 365). Becuse of the summer drought of 1988, the dys supply is expected to drop to 69 dys ([ ] x 365). The correltion etween verge price for the crop yer nd dys inventory is high, even higher thn with ending stocks. When using ending stocks, frmer should py ttention to its composition. Trigger prices, lon rtes nd the specifics of government progrms during prticulr yer, cn hve ig impct on the mount of stocks likely to ecome ville. Similrly, government policy regrding the disposition of CCC stocks cn hve lrge impcts. World Blnce Sheets:Corn Tle 2 gives n revited version of the world supply nd usge reports for the current nd the two previous mrketing yers. Like the domestic version, supply - demnd = ending stocks. However, since corn is grown in different prts of the world with different growing sesons, the mrketing yer concept is more complex. For exmple, South Americn grin producers re hrvesting their crop when U.S. producers re plnting, nd vice vers. World lnce sheets re sed on n ggregte of different mrketing yers. Also, insted of millions of ushels, world lnce sheets re reported in millions of metric tons. For corn, million metric tons equls pproximtely 40 million ushels.

4 4 Tle 2. World supply nd usge report for corn (millions of metric tons) c World Stocks U.S. stocks Foreign stocks World Production U.S. production Foreign production World Imports U.S. imports Foreign imports World Domestic for Feed U.S. domestic for feed Foreign domestic for feed World Domestic Totl U.S. domestic totl Foreign domestic totl World Exports U.S. exports Foreign exports Ending Stocks World U.S Foreign Exports of Mjor Foreign Exporters Argentin Chin South Afric Thilnd Imports of Mjor Foreign Importers Europen Common Mrket (EC-12) Jpn USSR Aggregte of differing locl mrketing yers. World imports nd exports my not lnce due to differences in mrketing yers, grin in trnsit, nd reporting discrepncies in some

5 5 countries. Estimted Octoer c Projected Octoer The interprettion of world lnce sheets is similr to the interprettion of domestic lnce sheets. In , the world hd 113 dys supply of corn ([ ending stocks ( world domestic totl usge world exports)] x 365) while in , the world is projected to hve 45 dys supply ([65.03 ( )] x 365). Correltion of ending stocks nd/or dys supply with world price is high, ut is less thn the correltion of domestic ending stocks nd/or dys stocks with domestic price. Since world lnce sheets give sttistics on mjor exporters nd importers, dditionl informtion cn e glened from the reports. For exmple, the reports show tht the principl corn exporters re the United Sttes, Argentin, Chin, South Afric nd Thilnd. For the mrketing yer, the United Sttes hd over two-thirds of ll world corn exports (43.69 U.S. exports world exports) with the mjor exporters ccounting for nother 15 percent ([4.10 Argentine exports Chinese exports South Africn exports +.80 Thilnd exports] world exports). Jpn, the Europen Common Mrket (EC-12) nd the USSR were the most importnt world uyers of corn ccounting for over 50 percent of world imports ([17.13 Jpnese imports EC-12 imports USSR imports] worid imports). While giving generl picture of the world grin mrkets, world lnce sheets re not s importnt s domestic lnce sheets for the individul grin frmer. U.S. exports hve more direct impct on locl csh corn prices nd re reflected on domestic lnce sheets. An understnding of worid lnce sheets, however, gives the frmer insight on the glol sitution nd lessens the proility of misleding n individul decisionmker with informtion not relevnt to locl prices. The interprettion of worid lnce sheets lso llows the frmer to provide more informed input to producer commodity nd loying orgniztions. Domestic Blnce Sheets: Soyens Tle 3 shows domestic supply nd usge reports for soyens for the current nd the three previous mrketing yers. Interprettion of the reports is very similr to the domestic lnce sheet for corn in Tle 1. The components of the supply section of the report re the sme s the corn lnce sheet. In the usge section of the reports, the ctegories re: crush, exports, seed/residul. These ctegories reflect different uses for the U.S. soyen crop. The reltionship etween supply, usge nd ending stocks is the sme s with corn lnce sheets. The correltion etween ending stocks nd verge price is similrly high. The computtion of dys supply in the reports show tht dys supply hs fllen every yer from high of 104 dys in , to low of 28 dys projected for With 28 dys supply projected for , reltively smll chnges in projected supply nd/or usge hve drmtic impcts on projected ending stocks. Hence, one would expect the mrkets to rect strongly to chnges in plnted crege, exports or nything which could ffect yields.

6 6 The soyen mrketing yer runs from Septemer 1 to August 31. Projected Octoer 13,1988. World Blnce Sheets: Soyens Tle 3. Domestic supply nd usge report for soyens (millions of ushels) Stocks Production 2,099 1,940 1,923 1,501 Imports Totl 2,415 2,476 2,359 1,803 Crush 1, ,177 1,020 Exports Seed/residul Totl 1,879 2,040 2,057 1,652 Ending Stocks Averge Price ? Tle 4 shows the world supply nd usge reports for soyens for the current nd the two previous mrketing yers. Interprettion of the reports is similr to the world lnce sheets for corn. For soyens, one million metric tons is equl to pproximtely 40 million ushels. The reports illustrte tht world ending stocks hve een dropping, with 34 percent drop expected to occur for the current mrketing yer. The United Sttes, Argentin nd Brzil re the mjor exporters, ccounting for nerly 90 percent or totl world exports during the mrketing yer. The EC-12 is the most importnt importer ut Jpn is lso importnt. Together they ccounted for nerly 63 percent of world imports during the mrketing yer.

7 7 Aggregte of differing locl mrketing yers. World imports nd exports my not lnce due to differences in mrketing yers, grin in trnsit, nd reporting discrepncies in some countries. Estimted Octoer c Projected Octoer Tle 4. World supply nd usge report for soyens (millions of metric tons) c World Stocks U.S. stocks Foreign stocks World Production U.S. production Foreign production World Imports U.S. imports Foreign imports World Domestic Crush U.S. domestic crush Foreign domestic crush World Domestic Totl U.S. domestic totl Foreign domestic totl World Exports U.S. exports Foreign exports Ending Stocks World U.S Foreign Exports of Mjor Foreign Exporters Argentin Brzil Imports of Mjor Foreign Importers Europen Common Mrket (EC-12) Jpn

8 8 Domestic Blnce Sheets: Whet Tle 5 presents the domestic lnce sheets for whet for the current nd the three previous mrketing yers. Interprettion is similr to the previously presented domestic lnce sheets. The components of the supply nd usge sections re the sme s the corn domestic lnce sheet. The tle illustrtes tht ending stocks for whet is not nerly s tight s soyen nd corn ending stocks. The summer drought of 1988 hd less of n impct on whet. The whet mrketing yer runs from June 1 to My 31. Projected Octoer 13,1988. World Blnce Sheets: Whet Tle 5. Domestic supply nd usge report for whet (millions of ushels) Stocks ,905 1,821 1,256 Production 2,425 2,092 2,105 1,812 Imports Totl 3,865 4,018 3,942 3,083 Food/seed Feed/residul Exports 915 1,004 1,592 1,450 Totl 1,960 2,197 2,687 2,555 Ending Stocks 1,905 1,821 1, Privtely owned 1,298 1,821 1, CCC stocks Averge Price ? Tle 6 presents world supply nd usge reports for whet for the current nd the two previous mrketing yers. Interprettion is similr to previously presented world lnce sheets. The world lnce sheets for whet illustrte tht the U.S., Argentin, Austrli, Cnd nd the EC-12 re the most importnt exporters, with the U.S ccounting for 38 percent of world exports during the mrketing yer. The Soviet Union nd Chin re the most importnt importers ccounting for 32 percent of world imports during

9 9 Tle 6. World supply nd usge report for whet (millions of metric tons) c World Stocks U.S. stocks Foreign stocks World Production U.S. production Foreign production World Imports U.S. imports Foreign imports World Domestic for Feed U.S. domestic for feed Foreign domestic for feed World Domestic Totl U.S. domestic totl Foreign domestic totl World Exports U.S. exports Foreign exports Ending Stocks World U.S Foreign Exports of Mjor Foreign Exporters Argentin Chin Austrli Cnd Europen Common Mrket (EC-12) Imports of Mjor Foreign Importers Chin USSR Aggregte of differing locl mrketing yers. Worid imports nd exports my not lnce due to differences in mrketing yers, grin in trnsit, nd reporting discrepncies in some

10 10 countries. Estimted Octoer c Projected Octoer Summry Domestic nd world lnce sheets re useful tools for understnding nd evluting the grin mrkets. Projected ending stocks provide useful mens of summrizing new informtion s it ecomes ville during the mrketing yer. The correltion etween domestic ending stocks nd the verge price received y frmers for their grin is high. World lnce sheets help frmers in gining etter understnding of the world grin mrketing systems. Frmers, who tke the time to understnd world lnce sheets, re etter le to evlute the usefulness of new informtion nd to provide etter input to producer nd/or commodity ssocitions. This Extension fct sheet is one in series of grin mrketing fct sheets. The series is designed to cover mny topics essentil to effective grin mrketing. Other fct sheets in the series re: FS 484 Developing Grin Mrketing Pln FS 486 Grin Mrketing: Helpful Hints FS 487 Grin Mrketing: Storge Decisions FS 488 Grin Mrketing: The Futures Mrket FS 489 Understnding Grin Bsis FS 490 Grin Mrketing Alterntives FS 491 Grin Futures: Questions nd Answers FS 492 Grin Mrketing: Using Options FS 493 Evluting Grin Mrketing Alterntives FS 494 Crop Pricing Summry FS 495 Mrylnd Corn: Historicl Bsis nd Price Informtion FS 496 Mrylnd Soyens: Historicl Bsis nd Price Informtion FS 497 Mrylnd Whet: Historicl Bsis nd Price Informtion FS 498 Producers' Guide to Grin Mrketing Terminology

11 11 Grin Mrketing: Using Blnce Sheets y Jmes R. Russell griculturl mrketing specilist Jmes C. Hnson frm mngement specilist Deprtment of Agriculturl & Resource Economics Issued in furthernce of Coopertive Extension work, cts of My 8 nd June 30, 1914, in coopertion with the U.S. Deprtment of Agriculture, University of Mrylnd, College Prk, nd locl governments, Thoms A. Fretz, Director of Mrylnd Coopertive Extension, University of Mrylnd. The University of Mrylnd is equl opportunity. The University s policies, progrms, nd ctivities re in conformnce with pertinent Federl nd Stte lws nd regultions on nondiscrimintion regrding rce, color, religion, ge, ntionl origin, gender, sexul orienttion, mritl or prentl sttus, or disility. Inquiries regrding complince with Title VI of the Civil Rights Act of 1964, s mended; Title IX of the Eduction Amendments; Section 504 of the Rehilittion Act of 1973; nd the Americns With Disilities Act of 1990; or relted legl requirements should e directed to the Director of Humn Resources Mngement, Office of the Den, College of Agriculture nd Nturl Resources, Symons Hll, College Prk, MD