Grain Oilseed and Biofuel Outlook for 2009 Osage

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Grain, Oilseed, and Biofuel Outlook for 2009 Osage, Iowa December 18, 2008 Chad Hart

Grain, Oilseed, and Biofuel Outlook for 2009 Osage, Iowa December 18, 2008 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] edu 515 -294 -9911 Department of Economics

U. S. Corn Supply and Use +50 -300 -100 +350 $4. 40 Department of

U. S. Corn Supply and Use +50 -300 -100 +350 $4. 40 Department of Economics -0. 40 $4. 00 Source: USDA-WAOB, Dec. 2008

U. S. Soybean Supply and Use -30 +30 $9. 85 Department of Economics -0.

U. S. Soybean Supply and Use -30 +30 $9. 85 Department of Economics -0. 85 $9. 00 Source: USDA-WAOB, Dec. 2008

World Corn Production Department of Economics Source: USDA-WAOB, Dec. 2008

World Corn Production Department of Economics Source: USDA-WAOB, Dec. 2008

World Soybean Production Department of Economics Source: USDA-WAOB, Dec. 2008

World Soybean Production Department of Economics Source: USDA-WAOB, Dec. 2008

Crop Basis Patterns Department of Economics Sources: CARD, Iowa State; IA Dept. of Ag.

Crop Basis Patterns Department of Economics Sources: CARD, Iowa State; IA Dept. of Ag.

Livestock Adjustments Sows farrowing: Sept-Nov 2008 3. 01 million, down 5% from last year

Livestock Adjustments Sows farrowing: Sept-Nov 2008 3. 01 million, down 5% from last year Dec-Feb 2009 2. 98 million, down 3% from last year Broiler-type eggs set: 203 million, down 8% from last year Broiler chicks placed: 159 million, down 10% from last year Feedlot placements: 2. 44 million, down 11% from last year Department of Economics Sources: Various USDA-NASS reports

Ethanol Margins Department of Economics Source: ISU, CARD

Ethanol Margins Department of Economics Source: ISU, CARD

Biodiesel Margins Department of Economics Source: ISU, CARD

Biodiesel Margins Department of Economics Source: ISU, CARD

Renewable Fuels Standard (RFS) Calendar Year Billion Bushels Crop Year Billion Bushels 2009 3.

Renewable Fuels Standard (RFS) Calendar Year Billion Bushels Crop Year Billion Bushels 2009 3. 75 2008 3. 57 2010 4. 29 2009 4. 11 2011 4. 50 2010 4. 43 Department of Economics

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

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

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

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

Outside Influences (Sept. 2008 = 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

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

CRP Expiring Contracts Source: USDA-FSA Department of Economics

CRP Expiring Contracts Source: USDA-FSA Department of Economics

Input Costs Department of Economics Source: USDA, Agricultural Prices, Nov. 2008

Input Costs Department of Economics Source: USDA, Agricultural Prices, Nov. 2008

The Rise and Fall of Fertilizer Prices Department of Economics Source: http: //www. fertilizerworks.

The Rise and Fall of Fertilizer Prices Department of Economics Source: http: //www. fertilizerworks. com/html/market/ The. Market. pdf

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

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,

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,

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

Crop Costs for Central Illinois Corn 2008 2009 Soybeans % Change 2008 ($/acre) 2009

Crop Costs for Central Illinois Corn 2008 2009 Soybeans % Change 2008 ($/acre) 2009 % Change ($/acre) Fertilizer 118 215 82% Fertilizer 45 98 118% Fuel and Oil 19 26 37% Crop Ins. 8 12 50% Crop Ins. 20 27 35% Utilities 3 4 33% Seed 62 78 26% Seed 42 53 26% Utilities 4 5 25% Fuel and Oil 18 22 22% 388 529 36% Total Nonland Costs 239 321 34% Total Nonland Costs Source: Schnitkey, July 2008 Department of Economics

Rough Estimates for 2009 Iowa Corn Non-land Cost Land Cost Total Cost ($/acre) Expected

Rough Estimates for 2009 Iowa Corn Non-land Cost Land Cost Total Cost ($/acre) Expected Yield Cost per Bushel (bu/acre) ($/bu) 513. 05 190. 00 703. 05 165 4. 26 513. 05 225. 00 738. 05 165 4. 47 December 2009 Corn Futures = $4. 3525 (12/17/08) Department of Economics

Rough Estimates for 2009 Iowa Soybeans Non-land Cost Land Cost Total Cost ($/acre) Expected

Rough Estimates for 2009 Iowa Soybeans Non-land Cost Land Cost Total Cost ($/acre) Expected Yield Cost per Bushel (bu/acre) ($/bu) 268. 10 190. 00 458. 10 49 9. 35 268. 10 225. 00 493. 10 49 10. 06 November 2009 Soybean Futures = $8. 96 (12/17/08) Department of Economics

Crop Exports Department of Economics Source: USDA, PSD

Crop Exports Department of Economics Source: USDA, PSD

Exchange Rates (Jan. 2007 = 1) Department of Economics Source: OANDA. com

Exchange Rates (Jan. 2007 = 1) Department of Economics Source: OANDA. com

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

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

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

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

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

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

World Stocks-to-Use Ratios Department of Economics

World Stocks-to-Use Ratios Department of Economics

Thoughts for 2008 ØGeneral economic conditions ØA lot of recent market trade has been

Thoughts for 2008 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 ØEnergy demand ØHigher energy prices did constrain demand ØWill it recover? ØMost important ag. statistic: Crude oil price or Dow Jones Index ØCurrent futures are indicating 2008 season-average prices of $3. 50 -4. 00 for corn and $8. 50 -9. 00 for soybeans Department of Economics

Thoughts for 2009 and Beyond ØMany of the storylines from 2008 will continue ØTight

Thoughts for 2009 and Beyond ØMany of the storylines from 2008 will continue ØTight stocks for both corn and soybeans 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 $4. 00 for corn and $8. 75 for soybeans ØKey factor: Economic growth returns by late 2009 Department of Economics

Thank you for your time! Any questions? http: //www. econ. iastate. edu/faculty/hart/ Department of

Thank you for your time! Any questions? http: //www. econ. iastate. edu/faculty/hart/ Department of Economics