Department of Economics Crop Market Outlook November 2008 Chad Hart Assistant Professor/Grain Markets Specialist

Department of Economics U.S. Corn Supply and Use Source: USDA-WAOB, Nov $4.75$

Department of Economics U.S. Soybean Supply and Use Source: USDA-WAOB, Nov $10.45$

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

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

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

Department of Economics Sources: Various USDA-NASS reports Livestock Adjustments Sows farrowing: Sept-Nov million, down 5% from last year Dec-Feb million, down 3% from last year Broiler-type eggs set: 195 million, down 8% from last year Broiler chicks placed: 168 million, down 4% from last year Feedlot placements: 2.06 million, down 3% from last year (2 nd lowest since 1996)

Department of Economics Ethanol Margins Source: ISU, CARD

Department of Economics Biodiesel Margins Source: ISU, CARD

Department of Economics Renewable Fuels Standard (RFS) Calendar Year Billion Bushels Crop Year Billion Bushels

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

Department of Economics Outside Influences (Jan = 1)

Department of Economics Outside Influences (Sept = 1)

Department of Economics Corn & Soybean Area Growth rate of 1.55 million acres per year

Department of Economics CRP Expiring Contracts Source: USDA-FSA

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

Department of Economics The Rise and Fall of Fertilizer Prices Source: TheMarket.pdf

Department of Economics Urea Prices Source: TheMarket.pdf

Department of Economics Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith,

Department of Economics Iowa Soybean Prices vs. Costs Source: USDA-NASS and Duffy and Smith,

Department of Economics Crop Costs for Central Illinois Source: Schnitkey, July 2008 CornSoybeans % Change % Change ($/acre) Fertilizer %Fertilizer % Fuel and Oil192637%Crop Ins.81250% Crop Ins %Utilities3433% Seed627826%Seed425326% Utilities4525%Fuel and Oil % Total Non- land Costs %Total Non- land Costs %

Department of Economics Rough Estimates for 2009 Iowa Corn Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel ($/acre)(bu/acre)($/bu) December 2009 Corn Futures = $4.41 (11/7/08)

Department of Economics Rough Estimates for 2009 Iowa Soybeans Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel ($/acre)(bu/acre)($/bu) November 2009 Soybean Futures = $9.47 (11/7/08)

Department of Economics Crop Exports Source: USDA, PSD

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

Department of Economics World Stocks-to-Use Ratios

Department of Economics Crop Price Variability Price distributions for corn based on October prices for the following July futures October 2005 for July 2006: $2.26 per bushel, 20% volatility October 2008 for July 2009: $4.50 per bushel, 44% volatility

Department of Economics Risk Management  Crop insurance  Yield insurance: APH  Revenue insurance: CRC, RA, IP  Area insurance: GRP, GRIP  Government programs  CCP or ACRE  Marketing loans  SURE  Futures and options

Department of Economics Thoughts for 2008  General economic conditions  A lot of recent market trade has been tied to reaction to the financial crisis and the world’s response  Economic slowdown raises concern about export and energy demand  Energy demand  Higher energy prices did constrain demand  Will it recover?  Most important ag. statistic: Crude oil price or Dow Jones Index  Current futures are indicating 2008 season-average prices of $ for corn and $ for soybeans

Department of Economics Thoughts for 2009 and Beyond  Many of the storylines from the past few years will continue  Tight stocks for both corn and soybeans  The competition for acreage  Ethanol’s buildout & livestock’s adjustment  Energy price & general economy concerns  Market volatility will remain high  Link to the energy markets  More market players with different trading objectives  Given current factors, the 2009 outlook is for crop prices around $4.50 for corn and $9.50 for soybeans

Department of Economics Thank you for your time! Any questions?