University Extension/Department of Economics Crop Outlook for Ag Outlook and Management Seminars Chad Hart Assistant Professor/Grain Markets Specialist

University Extension/Department of Economics U.S. Corn Supply and Use Source: USDA Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)13,03812,09213,11012,540 Beg. Stocks(mil. bu.)1,3041,6241,6731,708 Imports(mil. bu.) Total Supply(mil. bu.)14,36213,72914,79214,257 Feed & Residual(mil. bu.)5,9135,1825,1595,300 Ethanol(mil. bu.)3,0493,7094,5684,800 Food, Seed, & Other(mil. bu.)1,3381,3161,3701,380 Exports(mil. bu.)2,4371,8491,9871,950 Total Use(mil. bu.)12,73712,05613,08413,430 Ending Stocks(mil. bu.)1,6241,6731, Season-Average Price($/bu.)

University Extension/Department of Economics Source: USDA-NASS

University Extension/Department of Economics Source: USDA-NASS

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

University Extension/Department of Economics U.S. Soybean Supply and Use Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)2,6772,9673,3593,375 Beg. Stocks(mil. bu.) Imports(mil. bu.) Total Supply(mil. bu.)3,2613,1853,5123,536 Crush(mil. bu.)1,8031,6621,7521,665 Seed & Residual(mil. bu.) Exports(mil. bu.)1,1591,2791,5011,570 Total Use(mil. bu.)3,0563,0473,3613,351 Ending Stocks(mil. bu.) Season-Average Price($/bu.) Source: USDA

University Extension/Department of Economics Source: USDA-NASS

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 World Corn Production Source: USDA

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

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

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

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

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

University Extension/Department of Economics 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) Production Consumption Broilers+2.5 & & +2.0 Turkeys+3.0 & & +6.1 Source: John Lawrence, ISU Extension

University Extension/Department of Economics 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 Source: John Lawrence, ISU Extension

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

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

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

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

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

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

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

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

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

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

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

University Extension/Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels

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 Source: EIA, Annual Energy Outlook

University Extension/Department of Economics 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 Source: CFTC

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

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 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 Source: USDA-NASS

University Extension/Department of Economics States with Room to Grow StateMillion acresCompeting Crops North Dakota2.009Wheat, corn, soy South Dakota1.020Wheat, corn, soy Arkansas0.880Rice, cotton, soy Missouri0.335All of the above Illinois0.311Wheat, corn, soy Kentucky0.311Wheat, corn, soy Louisiana0.290Rice, cotton, soy North Carolina0.284Cotton, corn, soy Kansas0.264Wheat, corn, soy Tennessee0.256Wheat, corn, soy

University Extension/Department of Economics New Crop Futures Price Movements WheatCornSoybeansCotton MGE Sept.CME Dec.CME Nov.ICE Dec. ($/bu.) ($/lb.) June Nov Change42%37%35%33% WheatCornSoybeansCotton MGE Sept.CME Dec.CME Nov.ICE Dec. ($/bu.) ($/lb.) June Nov Change34%26%28%18%

University Extension/Department of Economics This Year Soy $11.43 Corn $4.87

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

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

University Extension/Department of Economics Thoughts for 2011 and Beyond  General economic conditions  Continued economic recovery is a major key for crop prices  Fears of Chinese inflation and credit tightening have hit the markets  Long-term oil price remain in the $90 range  Supply/demand concerns  South America: La Niña impacts  Biofuels: E10, E12, or E15; Do the tax credits get extended/renewed?  Will supply be able to keep pace with demand?  2010/11:USDA:Corn $5.20, Soy $11.45 Futures (as of 11/12/2010):Corn $5.06, Soy $11.73  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: Iowa Farm Outlook: Ag Decision Maker: