Crop & Livestock Outlook Farmers Coop Society Elite Member Meeting Sioux City, Iowa Dec. 9, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911 1 1

U.S. Corn Supply and Use 2012 2013 2014 2015 2015 Δ Area Planted (mil. acres) 97.3 95.4 90.6 88.4 Yield (bu./acre) 123.1 158.1 171.0 169.3 1.3 Production (mil. bu.) 10,755 13,829 14,216 13,654 99 Beg. Stocks 989 821 1,232 1,731 Imports 160 36 32 30 Total Supply 11,904 14,686 15,479 15,415 Feed & Residual 4,315 5,040 5,315 5,300 25 Ethanol 4,641 5,124 5,209 5,175 -75 Food, Seed, & Other 1,397 1,369 1,359 1,380 Exports 730 1,920 1,864 1,800 -50 Total Use 11,083 13,454 13,748 13,655 -100 Ending Stocks 1,760 199 Season-Average Price ($/bu.) 6.89 4.46 3.70 3.65 -0.15 Source: USDA-WAOB 2 2

U.S. Soybean Supply and Use 2012 2013 2014 2015 2015 Δ Area Planted (mil. acres) 77.2 76.8 83.3 83.2 Yield (bu./acre) 40.0 44.0 47.5 48.3 1.1 Production (mil. bu.) 3,042 3,358 3,927 3,981 93 Beg. Stocks 169 141 92 191 Imports 41 72 33 30 Total Supply 3,252 3,570 4,052 4,203 94 Crush 1,689 1,734 1,873 1,890 10 Seed & Residual 105 107 145 133 3 Exports 1,317 1,638 1,843 1,715 40 Total Use 3,111 3,478 3,861 3,738 53 Ending Stocks 465 Season-Average Price ($/bu.) 14.40 13.00 10.10 8.90 -0.25 Source: USDA-WAOB 3 3

Corn Yield Estimate Top: 2015 Estimated Yields Bottom: Change from last month Units: Bushels/acre Source: USDA-NASS

Soybean Yield Estimate Top: 2015 Estimated Yields Bottom: Change from last month Units: Bushels/acre Source: USDA-NASS

World Corn Production Source: USDA-WAOB 6 6

World Soybean Production Source: USDA-WAOB 7 7

U.S. Meat Production & Prices Source: USDA-WAOB 8 8

Corn Export Sales Source: USDA-FAS

Soybean Export Sales Source: USDA-FAS

Strength of the U.S. Dollar Source: Federal Reserve

Crude Oil Prices Sources: EIA and CME

Corn Grind for Ethanol

Current Corn Futures 3.75 3.55 Source: CME Group, 12/7/2015

Current Soybean Futures 8.61 8.59 Source: CME Group, 12/7/2015

2015/16 Crop Margins

2016/17 Crop Margins

Iowa Corn Prices vs. Costs

Iowa Soybean Prices vs. Costs

Thoughts for 2016 and Beyond Supply/demand concerns Feed and ethanol markets have alternatives (sorghum, wheat) Exports weaken as dollar strengthens and China slows Will El Niño last through our next crop cycle? Negative margins for 2015-2016 crops 2014/15 USDA 2015/16 Futures (12/7/15) 2016/17 Corn $3.70 $3.65 $3.55 $3.75 Soybeans $10.10 $8.90 $8.61 $8.59

Overarching Dairy Industry Economic Outlook Exports continue to be sluggish World dairy prices putting downward pressure— Particularly on butter Domestic consumption strong—Particularly full fat products (e.g., butter) No sign of cut back in domestic milk production First half of 2016 low farm milk prices Can world production cut back enough for recover in second half of 2016?

This margin is calculated as the All Milk price minus a ration approximately comprised of 60lbs of corn, 15lbs of SBM and 27lbs of alfalfa hay. It is meant to support 100lbs of milk production and the associated proportion of dry cows, hospital animals and young stock in the herd.

Dairy Trends World milk production high in 2015 U.S. milk production up following profitable 2014 EU quotas ended Stocks of dairy powders high World import demand lower Russian import ban China working through stocks from 2014 purchases Dairy prices very low in EU and NZ—not so much in U.S.

US Dairy Exports: Sluggish Year-To-Date Volume (Through July) Commodity Year-To-Date Volume (Through July) Year-To-Date Volume % Change NDM/SMP 330,761 -6.2% WMP 23,175 -35.7% Cheese 200,561 -13.2% Butter 14,698 -74.0% Dry Whey 117,266 -18.0% Lactose 210,900 6.6% MPC 18,709 -47.0% Aggregate Volume 1,109,762 -11.1% Aggregate Value 3.28 billion -27.7%

LMIC Milk Production and Price Quarterly Forecasts (12/7/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC Year Milk Cows % Chg. Prod. per Cow Milk Prod. Quarter (1,000 hd) Year Ago (lbs) (mil lbs) 2015 I 9,305 1.0 5,583 0.8 51,949 1.8 II 9,320 0.7 5,757 53,654 1.4 III 9,313 0.5 5,546 51,654 0.9 IV 0.2 5,500 51,178 0.4 9,311 0.6 22,386 208,435 1.2 2016 9,300 -0.1 5,600 0.3 52,080 9,285 -0.4 5,775 53,621 9,275 51,940 9,270 5,595 1.7 51,866 1.3 9,283 -0.3 22,570 209,507 2017 5,695 52,821 9,280 5,875 54,520 0.1 5,680 52,739 1.5 9,290 5,655 1.1 52,535 0.0 22,905 212,615

LMIC Milk Production and Price Quarterly Forecasts (12/7/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC Year Class III Price % Chg. All Milk Price NCE/CME 40# Block Price Quarter ($/cwt) Year Ago ($/lb) 2015 I 15.73 -30.4 17.00 1.54 II 16.24 -28.6 16.70 1.64 III 16.14 -29.3 16.93 1.68 IV 15.45-15.95 -25.9 16.75-17.25 1.64-1.69 16.10-16.35 -27.4 16.65-16.90 1.63-1.67 2016 16.00-17.00 4.9 16.50-17.50 1.67-1.72 16.50-18.00 6.2 17.25-18.50 1.62-1.67 16.75-18.25 8.4 17.75-19.25 1.65-1.75 17.00-18.50 13.1 18.25-19.75 1.68-1.78 16.75-17.75 6.3 17.75-18.75 2017 17.15-19.15 10.0 18.50-20.50 1.70-1.85 17.30-19.30 6.1 18.60-20.60 1.75-1.90 17.50-19.50 5.7 18.75-20.75 17.75-17.75 0.0 19.00-21.00 1.80-2.00 17.25-19.25 5.8 1.70-1.90

Overarching Beef Industry Economic Outlook Supplies Historically tight; but expansion well underway Supply of heavy cattle; has driven market lately Demand largely positive U.S. demand has been GOOD – Will it continue? Trade a bit of a drag but improving U.S. dollar impacts but lower prices on the way? Combined: Somewhat depends on… Perspective Sector of the industry

Quarterly Cattle & Beef Forecasts (LMIC: 12/7/2015)   Change Average Commercial from Dressed Beef Year Slaughter Year Ago Weight Production Quarter (1,000 hd) (%) (lbs) (mil lbs) 2015 I 6,967 -5.5 813 2.2 5,664 -3.5 II 7,227 -7.8 810 2.7 5,855 -5.3 III 7,288 -4.5 832 2.8 6,066 -1.8 IV 7,283 -0.6 841 2.3 6,123 1.7 28,765 -4.7 824 2.5 23,708 -2.2 2016 7,140 822 1.1 5,868 3.6 7,405 0.4 6,020 7,623 4.6 836 6,370 5.0 7,519 3.2 839 -0.2 6,309 3.0 29,687 828 24,567 2017 7,446 4.3 827 0.7 6,161 7,720 816 6,299 7,815 6,559 7,857 4.5 842 6,616 4.9 30,838 3.9 831 0.5 25,635

Quarterly Cattle & Beef Forecasts (LMIC: 12/7/2015)   Live Sltr. Change Steer Price from Feeder Steer Price Year 5-Mkt Avg Year Ago Southern Plains Quarter ($/cwt) (%) 7-800# 5-600# 2015 I 162.43 11.0 215.87 276.14 II 158.11 7.0 225.29 279.32 III 144.22 -9.0 214.38 246.04 IV 132-133 -20.0 183-184 214-216 149-150 -3.3 209-210 253-255 2016 140-144 -12.6 178-182 217-222 144-148 -7.7 181-186 221-228 138-143 -2.6 178-184 217-225 138-144 6.4 175-182 210-219 141-145 -4.3 179-183 217-223 2017 138-145 -0.4 173-181 213-223 138-146 -2.7 174-183 214-225 133-143 -1.8 171-181 212-223 134-145 -1.1 167-179 202-216 137-143 -2.1 173-179 212-220

Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center

Data Source: USDA/AMS

Economic Outlook Overview: Feedlots 2015 has been rough Structural concerns still persist: Excess capacity Heifer retention, feeder cattle supplies outside feedlots Supply of heavy cattle burdensome

Data Source: USDA-NASS Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

U.S. Beef Exports, Jan-Oct 2015 (Volume excluding by-products & variety meats) Oct-15/Sep-15 Oct-15/Oct-14 Year-to-Date Country Percent 1,000 lbs Mexico 14% 13% -72,469 -20% Japan -12% -41% -102,254 -18% Canada 16% -10% -39,635 -13% South Korea 24% -11% 13,385 5% Hong Kong 79% -93,350 -28% China (Taiwan) 20% -16% 2,785 3% Vietnam 65% 42% 2,871 43% Netherlands -1% 2,459 8% Philippines 28% -17% 2,510 10% United Arab Emirates 87% -3% 1,273 11% Dominican Republic 40% 37% 3,022 Chile 6% 7% -2,688 Italy -40% -582 -4% Other Countries 2% -6,337 -5% Total 18% -14% -289,010 -13.4% WASDE U.S.: 2014: 2,573 mil lbs 2015: 2,223 (-13.6%) 2016: 2,425 (+9.1%) Source: USDA/ERS

U.S. Beef Imports, Jan-Oct 2015 (Volume excluding by-products & variety meats) Oct-15/Sep-15 Oct-15/Oct-14 Year-to-Date Country Percent 1,000 lbs Australia -33% 292,365 34% Canada -6% 5% 33,975 7% New Zealand -17% 8% 91,299 17% Brazil -29% 20% 66,532 99% Uruguay 13% 57% 43,388 Mexico 9% 76,725 30% Nicaragua 53% -42% -13,396 -13% Argentina -100% -186 Costa Rica -14% -22% 1,811 Other Countries -8% 755 Total -18% 593,269 25% WASDE U.S.: 2014: 2,947 mil lbs 2015: 3,432 (+16.5%) 2016: 3,045 (-11.3%) Source: USDA/ERS

Cattle-Beef Wrap-Up Broad 2015/16 Profitability Situation & Outlook Industry at tipping point on role of tight supplies Cow-calf: Good (but not 2014) Backgrounding: Discouraging, with lots of $ tied up Feedlot: Struggle, with lots of $ tied up

Key factors impacting hog-pork market Crops/feedstuffs – ADVANTAGEOUS for the industry. Size of industry driven by last year’s profitability – Some calculated restraint? BIG changes in some state inventories – Rebuild and/or growth? Productivity to guide 2016 hog supply prospects – AND weights something to watch. U.S. consumer demand has been GOOD – Will it continue? International trade a bit of a drag but improving – U.S. dollar impacts but lower prices on the way?

USDA Quarterly Hogs and Pigs Report – United States September 25, 2015   2015 as % Pre-Report Actual - 2014 2015 of 2014 Range Estimate Inventories on Sep 1 * All hogs and pigs 65,979 68,395 103.7 103.0 - 104.7 103.6 0.1 Kept for breeding 5,920 5,986 101.1 99.0 - 101.0 100.3 0.8 Market 60,059 62,410 103.9 103.0 - 105.1 0.0 Under 50 pounds 20,390 20,291 99.5 98.8 - 101.0 100.2 -0.7 50-119 pounds 17,458 17,986 103.0 102.0 - 104.5 103.2 -0.2 120-179 pounds 12,112 13,080 108.0 104.9 - 108.4 106.6 1.4 180 pounds and over 10,098 11,053 109.5 107.9 - 111.2 109.7 Farrowing ** Jun – Aug sows farrowed 2,991 2,944 98.4 97.0 - 100.5 98.1 0.3 Sep – Nov intentions 2,994 2,920 97.5 95.7 - 99.5 97.2 Dec – Feb intentions 2,895 2,875 99.3 95.7 - 101.2 99.1 0.2 Jun – Aug Pig Crop * 30,402 30,585 100.6 99.0 - 103.0 100.4 Jun – Aug Pigs per Litter 10.16 10.39 102.3 101.9 - 103.0 102.4 -0.1 * 1,000 head ** 1,000 litters Data Source: USDA/NASS. Urner Barry pre-report estimates

8.9% (vs. ‘14 since 1st wk of Sep) New Pork Packing Plants (2017) Sioux City, IA ― Seaboard/Triumph Coldwater, MI ― Clements Foods 2015-YTD 8.7% (vs. 2014) 3.3% (vs. 2009-13) 8.9% (vs. ‘14 since 1st wk of Sep) Data Source: USDA/AMS. * Steve Meyer, Vice President, Pork Analysis, Express Markets Inc. Analytics.

Data Source: USDA/AMS

U.S. Pork Exports, Jan-Oct 2015 (Volume excluding by-products & variety meats) Oct-15/Sep-15 Oct-15/Oct-14 Year-to-Date Country Percent 1,000 lbs Japan -10% -4% -40,063 Mexico 3% 10% 134,708 12% Canada -15% -1% -15,458 -3% South Korea 50% -6% 104,843 34% China (Mainland) -9% 7% -92,686 -30% Hong Kong 126% 45% -12,032 -12% Australia -25% 87% 13,165 Philippines -11% 99% -24,900 -29% China (Taiwan) 29% 378% 11,199 49% Honduras 5% 11,100 27% Colombia 38% 6% -17,701 -16% Dominican Republic 1% 60% 14,422 36% Chile -22% -41% 2,144 Other Countries 23% -107,287 -39% Total 2% -18,544 -0.5% WASDE U.S.: 2014: 4,857 mil lbs 2015: 4,996 (+2.9% vs 2014) 2016: 5,225 (+4.6% vs 2015) Source: USDA/ERS

LMIC Pork Production and Price Quarterly Forecasts (12/7/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC Year Comm’l % Chg. Avg Carcass Comm’l Pork Quarter Slaughter Year Ago Weight Production 2015 I 28,723 5.9 215 0.8 6,161 6.5 II 27,848 8.9 213 -1.1 5,925 7.6 III 28,474 11.4 209 -1.5 5,957 9.8 IV 30,243 5.7 214 -0.2 6,478 115,288 7.9 -0.5 24,521 7.3 2016 29,161 1.5 6,257 1.6 27,536 0.2 5,877 -0.8 28,319 0.1 5,929 30,435 0.6 0.3 6,537 0.9 115,451 24,600 2017 29,909 2.6 6,431 2.8 28,163 2.3 6,023 2.5 28,495 210 5,976 31,335 3.0 6,742 3.1 117,902 2.1 25,172

LMIC Pork Production and Price Quarterly Forecasts (12/7/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC Year Nat’l Wtd % Chg. Quarter Avg Base Price Year Ago 2015 I 68.55 -25.0 51.41 II 73.52 -34.3 55.14 III 74.60 -32.3 55.95 IV 63-64 -29.5 47-48 70-71 -30.2 52-53 2016 64-66 -5.2 48-50 74-78 3.4 56-59 75-80 4.0 56-60 65-71 7.1 49-53 71-73 2.1 53-55 2017 62-69 0.8 47-52 70-78 -2.6 53-59 70-79 -3.9 60-70 -4.4 45-53 66-74 -2.8 50-56

Choice All Fresh Pork Broiler Turkey Oct-15/Sep-15 0.0% -0.3% 1.4% 0.8% 1.3% Oct-15/Oct-14 -0.2% 1.8% -4.2% -1.2% -6.5% Data Source: USDA/ERS, BLS

Thank you for your time. Any questions. My web site: http://www2. econ Thank you for your time! Any questions? My web site: http://www2.econ.iastate.edu/faculty/hart/ Iowa Farm Outlook: http://www2.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/