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July 22, 2024
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Call Spread
Current Defered Basis
Months of Storage
Storage … gt; Call Call Expected Basis ($0.200) A-T-M Strike $6.00 … overall market rallies but not basis gains.The call spread involves …
September 1, 2006
Beef Cattle
annualized cost on a per acre basis use the Annualized Cost Analysis …
May 1, 2012
KFMA Newsletters
importance of
creating a cost-basis balance sheet and a market …
November 1, 2008
KFMA Newsletters
over your
lifetime form the basis for calculating your
Social …
July 1, 2008
KFMA Newsletters
information on a harvested acre basis for each
participating farm …
July 11, 2016
Risk Management Strategies
storage, I am expecting a wide basis on fall crops too, unless …
September 23, 2016
Risk Management Strategies
insurance rates are about 100 basis
points lower. The rate …
August 7, 2019
Risk Management Strategies
would be made
on a per-acre basis, regardless of the specific …
September 1, 2015
KFMA Newsletters
Mark Wood
How many have heard of the Farm Financial Standards Council?
What influence could this group have on your operation?
Can you benefit from the work of “the council”?
I have heard of the Farm Financial Standards Council (FFSC) over the years while participating with fellow agricultural
economists in National Farm Business Analysis meetings. I have not taken specific interest in FFSC until this summer. I
decided to attend the 2015 summer conference in Kennewick, WA this late July to learn more…..
A bit of history:
The Farm Financial Standards Council was established January, 1989 as a result of the farm crisis of the 1980s. The
desire of FFSC was and still is “dedicated to helping farmers by promoting uniform financial reporting and analysis in the
agriculture industry.” The members of the FFSC are predominantly accountants and bankers. One of the reasons I am
interested in participating with the FFSC is to encourage an ag economist perspective to the activities of the council.
There are Farm Business Analysis representatives from Kansas, Illinois and Kentucky currently on the membership, but
we are few.
http://www.agmanager.info/kfma/ September 2015 E‐newsletter 6
What they do:
Most of the activities of FFSC are focused on maintaining their financial guidelines. Two publications encompass the
guidelines. The first is “2015 Financial Guidelines for Agriculture, Standard”. This represents the more traditional
accounting the majority of bankers and farmers are likely to follow. The Kansas Farm Management Association system is
in agreement with nearly all of this publication. The second publication is “Management Accounting Guidelines for
Agriculture, Standard”. This represents a more advanced “real time” accounting that incorporates what I consider a full
accrual approach to farm records.
What is their influence over organizations like KFMA?
The Kansas Farm Management Association System incorporates traditional cash records with accrual adjustments at the
interval of the analysis processing. KFMA does have the capabilities within our analysis program to provide annual,
quarterly, and monthly processing of whole farm and enterprise analysis on an accrual basis. The process of dissect …
December 27, 2017
Grain Market Outlook
… s ranged from $3.47 to $3.64 per bushel – with basis ranging from
$0.85 under … are markedly above marketing loan
rates, basis levels are still “wide and weak” compared to historic Kansas wheat basis patterns.
Key World Wheat Supply‐Demand Findings in the December 12th USDA WASDE Report
For the “new crop” 2017/18 marketing year (MY) beginning on June 1, 2017, the USDA projected the following.
First, that World wheat total supplies would be 1,010.5 million metric tons (mmt) with total use of 742.1 mmt
– both being record high levels for “new crop” MY 2017/18.
Second, that World wheat exports will also trend marginally lower to 182.15 mmt in the “new crop” 2017/18
marketing year – down from a record high of 183.2 mmt last year, but still up from 172.8 mmt two years ago.
Third, that World wheat ending stocks would be a record high 268.4 mmt in “new crop” MY 2017/18 ‐ up from
the previous record of 255.3 mmt in MY 2016/17, and from 241.4 mmt in MY 2015/16.
Fourth, that World wheat percent ending stocks‐to‐use (S/U) would be 36.24% ‐ up from 34.5% last year, and
from 33.9% two years ago – rising to the highest level since 36.25% in MY 1998/99.
Perspectives on Current World Wheat Stock Levels
For a perspective on how historically large World total wheat stocks and World wheat percent stocks‐to‐use
now are, consider that in MY 2007/08 the 34‐year low in World wheat ending stocks of 128.2 mmt and at least
a 57‐year low in percent ending stocks‐to‐use of 20.9% stocks/use both occurred. The 2007/08 marketing year
was the last significant World wheat “short crop” marketing year to have occurred.
The “tight supply‐demand” situation in MY 2007/08 compares to the most recent USDA projections of 268.4
mmt ending stocks and 36.2% ending stocks‐to‐use projected for “new crop” MY 2017/18. The present “large
crop‐over supply” situation in World and U.S. wheat markets continues to have a prevalent limiting influence
on U.S. and World wheat prices – even with recent drought‐fueled moves higher in the market.
“World Less China” Wheat Market Situation
The broader “large crop‐over supply‐low price” situation in the World wheat market may be “obscuring” at
some important underlying market issues.
Page | 2
While the aggregate supply of wheat in World markets has grown, the supply of wheat from a “World Less
China” perspective is projected to have actually “contracted” or “diminished” further in “new crop” MY
2017/18. “World‐Less‐China” wheat percent (%) stocks‐to‐use have declined to the tightest level since at least
MY 2012/13 when U.S. wheat cash prices averaged a record high $7.77 /bu. If this “China supply isolation
factor” eventually leads to noticeably tighter available global supplies of openly exportable wheat in the next
12 months, it could have a significant positive impact on U.S. and World wheat market prices.
However, unless there is this change in the broader, overriding focus of the World wheat market away from
aggregate global supplies to available “World‐Less‐China” supplies – it is likely that significant World wheat
production problems and/or trade disruptions would need to occur in year 2018 in order to have wheat prices
recover significantly in 2018. Such disruptions elsewhere would likely cause the market to then focus on the
limited availability of food quality wheat outside of China in the World market. Also, ongoing strength in the
U.S. dollar exchange rate continues to be a negative factor limiting the competitive affordability of U.S. wheat
exports in World markets.
U.S. Wheat Supply/Demand for “New Crop” MY 2017/18 & “Next Crop” MY 2018/19
The USDA released their wheat production, supply‐demand and price projections for the U.S. for “new crop”
MY 2017/18 in the December 12th WASDE report, and for “next crop” MY 2018/19 in its November 28th Long
Term Agricultural Projections.
U.S. wheat plantings are forecast to be 45.000 million acres (ma) in 2018, down from 46.012 ma in 2017, and
50.119 ma in 2016, to the lowest level since the early 1900s. Harvested acres are forecast at 38.3 ma in 2018
(85.11% harvested‐to‐planted), up from 37.586 ma (81.69% harvested‐to‐planted) in 2017, but down from
43.850 ma in 2016.
The 2018 U.S. average wheat yield is estimated at 47.4 bu/ac, up from 46.3 bu/ac in 2017, but down from the
2016 record of 52.7 bu/acre.
Wheat production in the U.S. in 2018 is forecast to be 1.815 billion bushels (bb), up from 1.741 bb in 2017, but
down from 2.309 bb in 2016. After adjustments by Kansas State University from the December 12th WASDE
report, projected “next crop” MY 2018/19 total supplies are forecast at 2.910 bb, down from 3.071 bb in “new
crop” MY 2017/18, and down from 3.402 bb in MY 2016/17. U.S. Wheat total use of 2.072 bb is forecast for
“next crop” MY 2018/19, down from 2.111 bb in “new crop” MY 2017/18, and from 2.222 bb in MY 2016/17.
With previously mentioned KSU adjustments from the December 12th WASDE report, the USDA projected
“next crop” MY 2018/19 ending stocks to be 838 million bushels (mb) (40.44% stocks/use), down from 960 mb
in “new crop” MY 2017/18 (45.48% stocks/use), and 976 mb in MY 2016/17 (50.03% stocks/use).
United States’ wheat prices are projected to average $4.60 /bu in “next crop” MY 2018/19, unchanged from
“new crop” MY 2017/18, but up from $3.89 in MY 2016/17, and comparable to $4.89 /bu in MY 2015/16, and
$5.99 /bu in MY 2014/15. It is estimated by Kansas State University that these USDA projections for “new
crop” MY 2017/18 have a 75% probability of occurring.
Two Alternative KSU U.S. Wheat S/D Forecast for “New Crop” MY 2017/18
To represent possible alternative outcomes from the USDA’s December 12th projection, two potential KSU‐
Scenarios for U.S. wheat supply‐demand and prices are presented for “new crop” MY 2017/18.
Page | 3
KSU Scenario 1) “Lower Export” Scenario (15% probability) assumes for “new crop” MY 2017/18 that the
following outcome occurs. This scenario assumes that there will be 46.012 ma planted, 81.69% harvested‐to‐
planted, 37.586 ma harvested, 46.3 bu/ac average yield, 1.741 bb production, 3.071 bb total supplies, 775 mb
exports, 120 mb feed & residual use, 1.911 bb total use, 1.160 bb ending stocks, 60.70% Stocks/Use, & $4.10
/bu U.S. wheat average price.
KSU Scenario 2) “Higher U.S. Wheat Exports” Scenario (10% probability) assumes for “new crop” MY 2017/18
that the following outcome happens. This scenario assumes that there will be 46.012 ma planted, 81.69%
harvested‐to‐planted, 37.586 ma harvested, 46.3 bu/ac average yield, 1.741 bb production, 3.071 bb total
supplies, 1.150 bb exports, 120 mb feed & residual use, 2.286 bb total use, 785 mb ending stocks, 34.34%
Stocks/Use, & $5.10 /bu U.S. wheat average price.
…