Global Grain Markets Global Agriculture Conference Spencer Iowa

Global Grain Markets Global Agriculture Conference Spencer, Iowa February 26, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate. edu 515 -294 -9911 Department of Economics

U. S. Corn Supply and Use +574 -638 -686 $3. 90 Department of Economics Source: USDA-WAOB, Feb. 2009

U. S. Soybean Supply and Use -35 +50 $9. 00 Department of Economics +0. 25 $9. 25 Source: USDA-WAOB, Feb. 2009

Drought in South America Department of Economics Source: USDA-WAOB, Feb. 2009

Argentine Drought Impacts (Early Reports) 2007 Production Corn Soybeans 20. 9 million tons 46. 2 million tons January 2009 USDA Estimates Corn 16. 5 million tons Soybeans 49. 5 million tons -21% +7% Current USDA Estimates Corn 13. 5 million tons Soybeans 43. 8 million tons -35% -5% January Estimates from Buenos Aires Cereal Exchange (BACE) Corn 12. 3 to 13. 7 million tons -35 to -41% Soybeans 34. 5 to 38. 2 million tons -17 to -25% Feb. Estimate from BACE Department of Economics Soy 40 million tons -13% Source: Dow Jones Newswires

Chinese Corn Production Department of Economics Source: USDA-WAOB, Jan. 2009

Soybeans in China Department of Economics Source: USDA-PSD, Jan. 2009

Livestock Adjustments Sows farrowing: Sept-Nov 2008 2. 99 million, 6% from last year Dec-Feb 2009 2. 97 million, 3% from last year Mar-May 2009 3. 01 million, 2% from last year Broiler-type eggs set: 204 million, 7% from last year Broiler chicks placed: 167 million, 6% from last year Cattle and calves on feed: 11. 3 million, Department of Economics 6% from last year Sources: Various USDA-NASS reports

Ethanol Margins Department of Economics Source: ISU, CARD

Biodiesel Margins Department of Economics Source: ISU, CARD

Renewable Fuels Standard (RFS) Department of Economics Crop Year Billion Bushels 2008 3. 57 2009 4. 11 2010 4. 43

U. S. Blended Motor Gasoline Consumption Department of Economics Source: Energy Information Administration

Outside Influences (Jan. 2007 = 1) Department of Economics

Outside Influences (Sept. 2008 = 1) Department of Economics

Corn & Soybean Area Growth rate of 1. 55 million acres per year Department of Economics

CRP Expiring Contracts Department of Economics Source: USDA-FSA

Input Costs Department of Economics Source: USDA, Agricultural Prices, Jan. 2009

Ammonia Prices Department of Economics Source: http: //www. fertilizerworks. com/html/market/ The. Market. pdf

Iowa Corn Prices vs. Costs Department of Economics Source: USDA-NASS and Duffy and Smith, http: //www. extension. iastate. edu/agdm/crops/pdf/a 1 -21. pdf

Iowa Soybean Prices vs. Costs Department of Economics Source: USDA-NASS and Duffy and Smith, http: //www. extension. iastate. edu/agdm/crops/pdf/a 1 -21. pdf

Estimates for 2009 Iowa Costs Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel (bu/acre) ($/bu) 205. 00 691. 61 160 4. 32 205. 00 490. 60 50 9. 81 ($/acre) Corn 486. 61 Soybean 285. 60 December 2009 Corn Futures November 2009 Soy Futures Department of Economics = $4. 0375 (2/25/09) = $8. 38 (2/25/09) Source: Duffy and Smith, http: //www. extension. iastate. edu/agdm/crops/pdf/a 1 -20. pdf

Exchange Rates (Jan. 2003 = 1) Department of Economics Source: USDA, ERS

2007 World Corn Exports Drought issues for 2008 crops Department of Economics Source: USDA, FAS

2007 World Soybean Exports Drought issues for 2008 crops Department of Economics Source: USDA, FAS

Pace of Corn Export Sales Department of Economics Source: USDA, FAS

2008 U. S. Corn Exports Department of Economics Source: USDA, FAS

Pace of Soybean Export Sales Department of Economics Source: USDA, FAS

2008 U. S. Soybean Exports Department of Economics Source: USDA, FAS

U. S. Stocks-to-Use Ratios Department of Economics

World Stocks-to-Use Ratios Department of Economics

Finishing Out the 2008 Crop Year ØGeneral economic conditions ØA lot of recent market trade has been tied to reaction to the financial crisis and the world’s response ØEconomic slowdown raises concern about export and energy demand ØMost important ag. statistic: Exchange rates or South American production ØCurrent futures are indicating 2008 season-average prices of $3. 75 -4. 25 for corn and $8. 75 -9. 25 for soybeans ØStress on South American crops has provided some support for prices Department of Economics

Thoughts for 2009 and Beyond ØMany of the storylines from 2008 will continue ØTight stocks for corn (worldwide) and soybeans (U. S. ) ØThe competition for acreage ØEthanol’s buildout & livestock’s adjustment ØEnergy price & general economy concerns ØMarket volatility will remain high ØLink to the energy markets ØMore market players with different trading objectives ØGiven current factors, the 2009 outlook is for crop prices around $3. 75 for corn and $8. 00 -8. 25 for soybeans ØKey factor: Economic growth returns by mid 2010 Department of Economics

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