Crop Outlook for 2011 2010 Ag Outlook and

Crop Outlook for 2011 2010 Ag Outlook and Management Seminars Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate. edu 515 -294 -9911 University Extension/Department of Economics

U. S. Corn Supply and Use 2007 2008 2009 2010 93. 5 86. 0 86. 5 88. 2 Area Planted (mil. acres) Yield (bu. /acre) 150. 7 153. 9 164. 7 154. 3 Production (mil. bu. ) 13, 038 12, 092 13, 110 12, 540 Beg. Stocks (mil. bu. ) 1, 304 1, 624 1, 673 1, 708 Imports (mil. bu. ) 20 14 8 10 Total Supply (mil. bu. ) 14, 362 13, 729 14, 792 14, 257 Feed & Residual (mil. bu. ) 5, 913 5, 182 5, 159 5, 300 Ethanol (mil. bu. ) 3, 049 3, 709 4, 568 4, 800 Food, Seed, & Other (mil. bu. ) 1, 338 1, 316 1, 370 1, 380 Exports (mil. bu. ) 2, 437 1, 849 1, 987 1, 950 Total Use (mil. bu. ) 12, 737 12, 056 13, 084 13, 430 Ending Stocks (mil. bu. ) 1, 624 1, 673 1, 708 827 4. 20 4. 06 3. 55 5. 20 Season-Average Price ($/bu. ) University Extension/Department of Economics Source: USDA

University Extension/Department of Economics Source: USDA-NASS

University Extension/Department of Economics Source: USDA-NASS

Translates to a yield in the 170 -175 bu. range Translates to a yield around 160 bu. University Extension/Department of Economics Source: USDA-NASS

U. S. Soybean Supply and Use 2007 2008 2009 2010 Area Planted (mil. acres) 64. 7 75. 7 77. 5 77. 7 Yield (bu. /acre) 41. 7 39. 7 44. 0 43. 9 Production (mil. bu. ) 2, 677 2, 967 3, 359 3, 375 Beg. Stocks (mil. bu. ) 574 205 138 151 Imports (mil. bu. ) 10 13 15 10 Total Supply (mil. bu. ) 3, 261 3, 185 3, 512 3, 536 Crush (mil. bu. ) 1, 803 1, 662 1, 752 1, 665 Seed & Residual (mil. bu. ) 93 106 108 117 Exports (mil. bu. ) 1, 159 1, 279 1, 501 1, 570 Total Use (mil. bu. ) 3, 056 3, 047 3, 361 3, 351 Ending Stocks (mil. bu. ) 205 138 151 185 10. 10 9. 97 9. 59 11. 45 Season-Average Price ($/bu. ) University Extension/Department of Economics Source: USDA

University Extension/Department of Economics Source: USDA-NASS

University Extension/Department of Economics Source: USDA-NASS

Within a bushel of each other University Extension/Department of Economics Source: USDA-NASS

World Corn Production University Extension/Department of Economics Source: USDA

Corn – Argentina & Brazil University Extension/Department of Economics Source: USDA

World Soybean Production University Extension/Department of Economics Source: USDA

Soybeans – Argentina & Brazil University Extension/Department of Economics Source: USDA

La Niña Winter University Extension/Department of Economics Source: NOAA

Clearing Old Stocks The current stocks set-up is reminiscent of the transition between the 2006 and 2007 crops. University Extension/Department of Economics Source: USDA

Livestock Situation • Poultry production – 46% of total red meat and poultry – Year-to-date 2010 • Broilers +3. 6%, Turkey -4. 4% • 7 -weeks: Chick placement +3. 4% / Egg set +5. 4% – Forecast for 2011 & 2012 (yr/yr % change) • Broilers • Turkeys Production +2. 5 & +3. 1 +3. 0 & +4. 5 University Extension/Department of Economics Consumption +1. 5 & +2. 0 -1. 3 & +6. 1 Source: John Lawrence, ISU Extension

Pork Summary • Breeding herd liquidation slowed, but production efficiency offset some decline • Higher grain prices will postpone expansion • Export demand expected to be stronger in 2011 and beyond • Industry downsizing will idle some facilities • Manage margins University Extension/Department of Economics Source: John Lawrence, ISU Extension

Cattle Summary • Demand recovers slowly with the economy • Tight supplies should support prices • Herd liquidation continues into 2012+ – Higher cost for cowherds – Higher cost of gain pressure calf prices • Narrow feeding margins • Manage risk through transition University Extension/Department of Economics Source: John Lawrence, ISU Extension

Hog Crush Margin The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pig Soybean meal: 150 pounds per pig University Extension/Department of Economics Source: Shane Ellis, ISU Extension

Cattle Crush Margin The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head University Extension/Department of Economics Source: Shane Ellis, ISU Extension

Historical Export Levels Week 11 of marketing year University Extension/Department of Economics Source: USDA, FAS

Exchange Rates (Jan. 2010 = 1) University Extension/Department of Economics Source: USDA, ERS

Corn Export Sales University Extension/Department of Economics Source: USDA, FAS

2010 U. S. Corn Exports University Extension/Department of Economics Source: USDA, FAS

Corn Export Shifts University Extension/Department of Economics Source: USDA, FAS

Soybean Export Sales University Extension/Department of Economics Source: USDA, FAS

2010 U. S. Soybean Exports University Extension/Department of Economics Source: USDA, FAS

Soy Export Shifts University Extension/Department of Economics Source: USDA, FAS

Renewable Fuels Standard (RFS) Crop Year Billion Bushels 2009 4. 11 2010 4. 43 2011 4. 64 2012 4. 86 University Extension/Department of Economics

Ethanol Margins Source: ISU, CARD University Extension/Department of Economics

Ethanol Margins Source: ISU, CARD University Extension/Department of Economics

Ethanol Blending Advantage University Extension/Department of Economics

Fuel Prices University Extension/Department of Economics

Crude Oil Prices Sources: EIA, NYMEX University Extension/Department of Economics

Gasoline Consumption University Extension/Department of Economics Source: EIA, Annual Energy Outlook

RFS Coverage University Extension/Department of Economics

Projected 2010 Season-Average Corn Price University Extension/Department of Economics

Projected 2010 Season-Average Soy Price University Extension/Department of Economics

Corn University Extension/Department of Economics

Soybeans University Extension/Department of Economics

Corn Futures Trade University Extension/Department of Economics Source: CFTC

Soybean Futures Trade University Extension/Department of Economics Source: CFTC

Projected 2011 Season-Average Corn Price University Extension/Department of Economics

Projected 2011 Season-Average Soy Price University Extension/Department of Economics

Iowa Corn Prices vs. Costs Even with the recent knock, futures have prices in the $5 range Even with higher fertilizer costs, corn’s profitable University Extension/Department of Economics

Iowa Soybean Prices vs. Costs Futures have season-average prices above $11 for ’ 10 and ‘ 11 University Extension/Department of Economics

Principal Crop Area University Extension/Department of Economics Source: USDA-NASS

States with Room to Grow State North Dakota South Dakota Arkansas Million acres 2. 009 1. 020 0. 880 Competing Crops Wheat, corn, soy Rice, cotton, soy Missouri Illinois Kentucky Louisiana North Carolina Kansas Tennessee 0. 335 0. 311 0. 290 0. 284 0. 264 0. 256 All of the above Wheat, corn, soy Rice, cotton, soy Cotton, corn, soy Wheat, corn, soy University Extension/Department of Economics

New Crop Futures Price Movements June 1 12 Nov. 9 Change Wheat Corn Soybeans MGE Sept. CME Dec. CME Nov. ($/bu. ) 5. 81 4. 04 9. 22 7. 78 5. 09 11. 77 8. 25 5. 52 12. 45 34% 26% 28% 42% 37% 35% University Extension/Department of Economics Cotton ICE Dec. ($/lb. ) 0. 75 0. 89 1. 00 18% 33%

This Year Soy $11. 43 Corn $4. 87 University Extension/Department of Economics

Decision Chart • Basis Contract • Sell Cash and Buy Futures • Call Options • Minimum Price Contract, Fixed Basis Futures Increase Basis Weakens Expected Change • Cash Sale • Forward Contract Futures Decrease University Extension/Department of Economics • Store & Wait to Price • Delayed Price Contract • Minimum Price Contract, Variable Basis Strengthens • Hedge to Arrive • Put Options

Pre-Harvest Strategies 56% 52% 52% 68% 72% 68% 68% University Extension/Department of Economics 72% Source: Farm Futures magazine

Thoughts for 2011 and Beyond ØGeneral economic conditions ØContinued economic recovery is a major key for crop prices ØFears of Chinese inflation and credit tightening have hit the markets ØLong-term oil price remain in the $90 range ØSupply/demand concerns ØSouth America: La Niña impacts ØBiofuels: E 10, E 12, or E 15; Do the tax credits get extended/renewed? ØWill supply be able to keep pace with demand? Ø 2010/11: USDA: Corn $5. 20, Soy $11. 45 Futures (as of 11/12/2010): Corn $5. 06, Soy $11. 73 Ø 2011/12: Futures (as of 11/12/2010): Corn $4. 90, Soy $11. 31 University Extension/Department of Economics

Thank you for your time! Any questions? My web site: http: //www. econ. iastate. edu/~chart/ Iowa Farm Outlook: http: //www. econ. iastate. edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ University Extension/Department of Economics