Crop Outlook for 2011 Cerro Gordo and Worth

Crop Outlook for 2011 Cerro Gordo and Worth County Corn and Soybean Clinics Northwood and Clear Lake, Iowa Jan. 28, 2011 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. 4 88. 2 Area Planted (mil. acres) Yield (bu. /acre) 150. 7 153. 9 164. 7 152. 8 Production (mil. bu. ) 13, 038 12, 092 13, 092 12, 447 Beg. Stocks (mil. bu. ) 1, 304 1, 624 1, 673 1, 708 Imports (mil. bu. ) 20 14 8 20 Total Supply (mil. bu. ) 14, 362 13, 729 14, 774 14, 175 Feed & Residual (mil. bu. ) 5, 913 5, 182 5, 140 5, 200 Ethanol (mil. bu. ) 3, 049 3, 709 4, 568 4, 900 Food, Seed, & Other (mil. bu. ) 1, 338 1, 316 1, 371 1, 380 Exports (mil. bu. ) 2, 437 1, 849 1, 987 1, 950 Total Use (mil. bu. ) 12, 737 12, 056 13, 066 13, 430 Ending Stocks (mil. bu. ) 1, 624 1, 673 1, 708 745 4. 20 4. 06 3. 55 5. 30 Season-Average Price ($/bu. ) University Extension/Department of Economics Source: USDA

U. S. Soybean Supply and Use 2007 2008 2009 2010 Area Planted (mil. acres) 64. 7 75. 7 77. 5 77. 4 Yield (bu. /acre) 41. 7 39. 7 44. 0 43. 5 Production (mil. bu. ) 2, 677 2, 967 3, 359 3, 329 Beg. Stocks (mil. bu. ) 574 205 138 151 Imports (mil. bu. ) 10 13 15 15 Total Supply (mil. bu. ) 3, 261 3, 185 3, 512 3, 495 Crush (mil. bu. ) 1, 803 1, 662 1, 752 1, 655 Seed & Residual (mil. bu. ) 93 106 108 110 Exports (mil. bu. ) 1, 159 1, 279 1, 501 1, 590 Total Use (mil. bu. ) 3, 056 3, 047 3, 361 3, 355 Ending Stocks (mil. bu. ) 205 138 151 140 10. 10 9. 97 9. 59 11. 70 Season-Average Price ($/bu. ) University Extension/Department of Economics Source: USDA

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

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

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

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

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

2010 U. S. Corn Exports 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

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

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

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

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

Corn University Extension/Department of Economics

Soybeans University Extension/Department of Economics

Iowa Corn Prices vs. Costs University Extension/Department of Economics

Iowa Soybean Prices vs. Costs University Extension/Department of Economics

States with Room to Grow State North Dakota South Dakota Missouri Million acres 2. 249 1. 400 0. 930 Competing Crops Wheat, corn, soy Rice, cotton, soy Arkansas Illinois Texas Georgia Mississippi North Carolina Louisiana 0. 715 0. 535 0. 466 0. 395 0. 284 0. 283 Rice, cotton, soy Wheat, corn, soy Cotton, rice, soy Cotton, corn, soy Rice, cotton, soy University Extension/Department of Economics

New Crop Futures Price Movements June 1 Jan. 27 Change Wheat Corn Soybeans MGE Sept. CME Dec. CME Nov. ($/bu. ) 5. 81 4. 04 9. 22 9. 78 68% University Extension/Department of Economics 5. 83 44% 13. 26 44% Cotton ICE Dec. ($/lb. ) 0. 75 1. 14 51%

University Extension/Department of Economics

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

Seasonal Pattern University Extension/Department of Economics

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; Ethanol & Biodiesel tax credits renewed ØWill supply be able to keep pace with demand? Ø 2010/11: USDA: Futures (as of 1/27/2011): Corn $5. 30, Soy $11. 70 Corn $5. 45, Soy $12. 07 Ø 2011/12: Futures (as of 1/27/2011): Corn $5. 66, Soy $12. 71 University Extension/Department of Economics

Common Crop Insurance Policy • Known as COMBO • In effect for 2011 crops • Combines major policy plans • Simplifies guarantees and payments • Clarifies enterprise and whole farm units • Clarifies replant and prevented planting University Extension/Department of Economics

OLD NEW Actual Production History (APH) Yield Protection (YP) Crop Revenue Coverage (CRC) Revenue Assurance with harvest price option (RA-HPO) Revenue Protection (RP) Revenue Assurance (RA) Income Protection (IP) University Extension/Department of Economics Revenue Protection with harvest price exclusion (RP-HPE)

Yield Protection (YP) • Same as old APH (or MPCI) policy • No change to APH yield determination • Projected price is the average closing futures price during February (same as for revenue insurance) – Corn: December contract – Soybeans: November contract University Extension/Department of Economics

Revenue Protection (RP) • • Same as old CRC and RA-HPO No change to APH yield determination Projected price is the same Harvest price is average of October futures price – Old RA corn coverage used November University Extension/Department of Economics

Corn Insurance Prices Harvest prices have been higher 3 out of last 11 years University Extension/Department of Economics

Soy Insurance Prices Harvest prices have been higher 6 out of last 11 years University Extension/Department of Economics

Prevented Planting/Replant Payments • Based on Feb. futures price, not October • Replant payments are no longer based on actual costs • Replant Payments: – Corn: 8 bu. x Feb. price, per acre – Soybeans: 3 bu. x Feb. price, per acre University Extension/Department of Economics

Good Performance Refund • Recent proposal by RMA that could be in place for the 2011 crop year • Would provide a refund to producers for good crop insurance performance – Less than 2 years of losses over ten years (2000 -09) – Have paid in more than they have received • Preliminary rules are under discussion now • Total refunds in the $75 million range • Estimated average refund for qualifiers ~ $1000 – Refunds will be between $25 and $25, 000 per producer 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/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ University Extension/Department of Economics