Associate Professor/Grain Markets Specialist 2012 Crop Market Outlook Iowa Corn Growers Des Moines, Iowa August 25, 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) 153.9 164.7 152.8 147.2 123.4 Production (mil. bu.) 12,092 13,092 12,447 12,358 10,779 Beg. Stocks 1,624 1,673 1,708 1,128 1,021 Imports 14 8 28 25 75 Total Supply 13,729 14,774 14,182 13,511 11,875 Feed & Residual 5,182 5,125 4,793 4,550 4,075 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 1,550 1,300 Total Use 12,056 13,066 13,055 12,490 11,225 Ending Stocks 650 Season-Average Price ($/bu.) 4.06 3.55 5.18 6.25 8.20 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

Prices Prices have risen with the temperatures.

Crop Conditions Source: USDA-NASS But dry conditions have weakened the crops, as the crop conditions show. The USDA update reflects the scale of yield loss as they have taken over 40 bushels from corn and nearly 8 bushels from soybeans. Source: USDA-NASS

Corn Harvested Acre Adjustments USDA has accounted for some loss in corn harvested due to silage chopping and abandonment. Next month’s update will likely show more acres being lost.

Projected Corn Yields These are based on conditions around Aug. 1.

Objective Corn Yield Data USDA crop adjusters found grain weights well below those for the last 8 years. Source: USDA-NASS

World Corn Production Source: USDA-WAOB Global corn production took a hit last month, with Canada, Europe, and the former Soviet Union all seeing reductions in potential corn production. Source: USDA-WAOB 8 8

Hog Crush Margin The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pig Soybean meal: 150 pounds per pig Projected hog margins are well south of breakeven. Source: ISU Extension

U.S. Meat Production & Prices Higher feed costs have led to lower meat production projections. Source: USDA-WAOB 10 10

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

Corn Advance Export Sales Advance sales have backed off as prices have risen. Source: USDA-FAS

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

Ethanol Stocks Source: DOE-EIA But stocks have begun to decline as we are in the heart of the summer driving season. Source: DOE-EIA

U.S. Blended Gasoline Consumption 7.6 bil. gal. But the industry still faces blend wall issues as fuel consumption has dropped with the economy and the E-10 market is basically full. 7.4 bil. gal. Source: DOE-EIA, via USDA-ERS

Projected 2012 Season-Average Corn Price The drought has brought in some very strong and profitable prices. Cost

Iowa Corn Prices vs. Costs For those that have a crop, corn margins have exploded.

Prices Prices have risen with the temperatures.

Current Corn Futures 7.49 6.07 5.55 Source: CME Group, 8/24/2012 Based on current futures prices, national season-average cash price estimates for corn are $7.48 for the 2012 crop, $5.99 for 2013, and $5.46 for 2014. 5.55 Source: CME Group, 8/24/2012

Thoughts for 2012 and Beyond Supply/demand concerns We got some rain, too little, too late Biofuel growth and energy demand, RFS? 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 8/24/12): Corn $7.49; Soy $15.87 2013/14: Futures Corn $6.07; Soy $12.62 2014/15: Futures Corn $5.55; Soy $12.15

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/