Farmland Policy and Economics 7th Annual Protect Rathbun Lake Meeting Allerton, Iowa Sept. 13, 2012 Chad Hart Associate Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1 1

U.S. Corn Supply and Use 2008 2009 2010 2011 2012 Area Planted (mil. acres) 86.0 86.4 88.2 91.9 96.4 Yield (bu./acre) 153.9 164.7 152.8 147.2 122.8 Production (mil. bu.) 12,092 13,092 12,447 12,358 10,727 Beg. Stocks 1,624 1,673 1,708 1,128 1,181 Imports 14 8 28 25 75 Total Supply 13,729 14,774 14,182 13,511 11,983 Feed & Residual 5,182 5,125 4,793 4,400 4,150 Ethanol 3,709 4,591 5,021 5,000 4,500 Food, Seed, & Other 1,316 1,370 1,407 1,390 1,350 Exports 1,849 1,980 1,835 1,540 1,250 Total Use 12,056 13,066 13,055 12,330 11,250 Ending Stocks 733 Season-Average Price ($/bu.) 4.06 3.55 5.18 6.25 7.90 These are the latest numbers from USDA. Record production and demand is gone and was replaced by record prices. All sectors of demand took major cuts. Ending stocks are projected to be at pipeline levels. Source: USDA-WAOB 2 2

U.S. Soybean Supply and Use 2008 2009 2010 2011 2012 Area Planted (mil. acres) 75.7 77.5 77.4 75.0 76.1 Yield (bu./acre) 39.7 44.0 43.5 41.5 35.3 Production (mil. bu.) 2,967 3,359 3,329 3,056 2,634 Beg. Stocks 205 138 151 215 130 Imports 13 15 14 16 20 Total Supply 3,185 3,512 3,495 3,287 2,785 Crush 1,662 1,752 1,648 1,705 1,500 Seed & Residual 106 110 91 114 Exports 1,279 1,499 1,501 1,360 1,055 Total Use 3,047 3,361 3,280 3,157 2,670 Ending Stocks 115 Season-Average Price ($/bu.) 9.97 9.59 11.30 12.45 16.00 For soybeans, a tight market continues to get tighter. USDA ratcheted down demand for the new crop to hold 2012/13 ending stocks at 115 million bushels. As with corn, all sectors of demand took a big cut. Source: USDA-WAOB 3 3

Prices Prices have risen with the temperatures.

U.S. Meat Production & Prices Higher feed costs have led to lower meat production projections. Source: USDA-WAOB 5 5

Corn Exports Source: USDA-FAS Corn exports for the 2011 crop have been slow, with only Mexico and China buying more. Source: USDA-FAS

Soy Exports Source: USDA-FAS 2011 soybean exports are also lower, but have been improving for the last few months. The key market here is China and they have purchased a lot of soybeans recently. Source: USDA-FAS

Corn Grind for Ethanol Negative margins at some ethanol plants have dragged down production.

Current Corn Futures 7.18 6.14 5.61 Source: CME Group, 9/12/2012 Based on current futures prices, national season-average cash price estimates for corn are $7.18 for the 2012 crop, $6.14 for 2013, and $5.61 for 2014. 5.61 Source: CME Group, 9/12/2012

Current Soybean Futures 16.20 For soybeans, the estimates are $16.20 for the 2012 crop, $13.09 for 2013, and $12.46 for 2014. 13.09 12.46 Source: CME Group, 9/12/2012

Positive Factors for Land Values 11

Land Value & Cash Rental Rate Trends 2002 2083 124 2003 2275 128 2004 2269 131 2005 2914 135 2006 3204 137 2007 3908 148 2008 4468 176 2009 4371 183 2010 5064 184 2011 6708 214 2012 252 Source: ISU Extension Economics 12

Total Acreage Shift Source: USDA-NASS We brought back a lot of acres in 2012. Can we hold them in 2013? Source: USDA-NASS

Acreage Shift by State Top: Planted in 2012 Bottom: Change from 2011 Weather was great for planting in 2012 (just not for producing). To hold acreage we will need great planting weather again. Top: Planted in 2012 Bottom: Change from 2011 Units: 1,000 acres Source: USDA-NASS

Acreage Shift by Crop Acreage change from 2011 Units: 1,000 acres Cotton will likely give up acreage again. But with crop prices strong across the board, the acreage battle could be interesting in 2013. Source: USDA-NASS

Cotton will likely give up acreage again Cotton will likely give up acreage again. But with crop prices strong across the board, the acreage battle could be interesting in 2013. Source: USDA-FSA

CRP in Iowa Source: USDA-FSA Cotton will likely give up acreage again. But with crop prices strong across the board, the acreage battle could be interesting in 2013. Source: USDA-FSA

Senate Conservation Proposal Cotton will likely give up acreage again. But with crop prices strong across the board, the acreage battle could be interesting in 2013. Source: CBO

House Conservation Proposal Cotton will likely give up acreage again. But with crop prices strong across the board, the acreage battle could be interesting in 2013. Source: CBO

Senate Proposal, 2013-2017 $ per acre Source: FAPRI-MO

House Proposal, 2013-2017 $ per acre Source: FAPRI-MO

Thoughts for 2013 and Beyond Supply/demand concerns Soil moisture South America gets 1st chance to respond to drought pricing Will supply be able to keep pace with demand? Drought is pulling supply down But high prices are diminishing demand General economic conditions Continued worldwide economic recovery is a key for crop prices US job recovery, European financial concerns, China? 2012/13: USDA: Corn $8.20; Soy $16.00 Futures (as of 9/12/12): Corn $7.18; Soy $16.20 2013/14: Futures Corn $6.14; Soy $13.09 2014/15: Futures Corn $5.61; Soy $12.46

Thank you for your time. Any questions. My web site: http://www. econ 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/