2012 Crop Market Outlook AFBF Commodity Outlook Conference Baltimore, Maryland Oct. 11, 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 96.9 Yield (bu./acre) 153.9 164.7 152.8 147.2 122.0 Production (mil. bu.) 12,092 13,092 12,447 12,358 10,706 Beg. Stocks 1,624 1,673 1,708 1,128 988 Imports 14 8 28 75 Total Supply 13,729 14,774 14,182 13,514 11,769 Feed & Residual 5,182 5,125 4,793 4,562 4,150 Ethanol 3,709 4,591 5,021 5,000 4,500 Food, Seed, & Other 1,316 1,370 1,407 1,421 1,350 Exports 1,849 1,980 1,835 1,543 1,150 Total Use 12,056 13,066 13,055 12,526 11,150 Ending Stocks 619 Season-Average Price ($/bu.) 4.06 3.55 5.18 6.22 7.80 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 77.2 Yield (bu./acre) 39.7 44.0 43.5 41.9 37.8 Production (mil. bu.) 2,967 3,359 3,329 3,094 2,860 Beg. Stocks 205 138 151 215 169 Imports 13 15 14 16 20 Total Supply 3,185 3,512 3,495 3,325 3,050 Crush 1,662 1,752 1,648 1,703 1,540 Seed & Residual 106 110 130 92 115 Exports 1,279 1,499 1,501 1,360 1,265 Total Use 3,047 3,361 3,280 3,155 2,920 Ending Stocks Season-Average Price ($/bu.) 9.97 9.59 11.30 12.50 15.25 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

U.S. Wheat Supply and Use 2008 2009 2010 2011 2012 Area Planted (mil. acres) 63.2 59.2 53.6 54.4 55.7 Yield (bu./acre) 44.9 44.5 46.3 43.7 Production (mil. bu.) 2,499 2,218 2,207 1,999 2,269 Beg. Stocks 306 657 976 862 743 Imports 127 119 97 112 130 Total Supply 2,932 2,993 3,279 2,974 3,142 Food 927 919 926 941 950 Seed 78 69 71 76 73 Feed & Residual 255 150 132 164 315 Exports 1,015 879 1,289 1,050 1,150 Total Use 2,275 2,018 2,417 2,231 2,488 Ending Stocks 654 Season-Average Price ($/bu.) 6.78 4.87 5.70 7.24 8.10 Source: USDA-WAOB 4 4

U.S. Cotton Supply and Use 2008 2009 2010 2011 2012 Area Planted (mil. acres) 9.47 9.15 10.97 14.74 12.36 Yield (lb./acre) 813 777 812 790 795 Production (mil. bales) 12.82 12.19 18.10 15.57 17.29 Beg. Stocks 10.05 6.34 2.95 2.60 3.35 Imports 0.00 0.01 0.02 Total Supply 22.87 18.53 21.06 18.19 20.64 Domestic Use 3.59 3.55 3.90 3.30 3.40 Exports 13.26 12.04 14.38 11.71 11.60 Total Use 16.85 15.59 18.28 15.01 15.00 Ending Stocks 5.60 Average Farm Price ($/lb.) 0.478 0.629 0.815 0.883 0.680 Source: USDA-WAOB 5 5

Price Ratios Since May 1

Crop Conditions Source: USDA-NASS

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

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

Projected Soybean Yields These are based on conditions around Sept. 1.

Objective Soybean Yield Data USDA crop adjusters found pod numbers well below those for the last 8 years. Source: USDA-NASS

Winter Wheat Production Source: USDA-NASS

Other Spring Wheat Production Source: USDA-NASS

Durum Wheat Production Source: USDA-NASS

Projected Cotton Yields Source: USDA-NASS

World Corn Production Source: USDA-WAOB Global corn production took a hit last month, with Canada and Europe seeing reductions in potential corn production. Source: USDA-WAOB 16 16

World Soybean Production Soybean prices have spurred on increased soybean plantings worldwide. South America will lead the charge. Source: USDA-WAOB 17 17

World Wheat Production Source: USDA-WAOB 18 18

World Cotton Production Source: USDA-WAOB 19 19

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

Cattle Crush Margin The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head Cattle returns look better next year, but feed costs remain a major concern. Source: ISU Extension

U.S. Meat Production & Prices Higher feed costs have led to lower meat production projections. Source: USDA-WAOB 22 22

Corn Export Shifts Source: USDA-FAS

Soy Export Shifts Source: USDA-FAS

Wheat Export Shifts Source: USDA-FAS

Cotton Export Shifts Source: USDA-FAS

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

Ethanol Stocks Source: DOE-EIA And stocks have built up in recent weeks, weakening price projections. 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

Current Corn Futures 6.90 5.93 5.58 Source: CME Group, 10/10/2012

Current Soybean Futures 14.37 12.70 12.29 Source: CME Group, 10/10/2012

Current Wheat Futures 8.09 8.16 Source: KCBOT, 10/10/2012

Current Cotton Futures Source: ICE, 10/10/2012

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

Thoughts for 2012 and Beyond Supply/demand concerns Soil moisture issues Biofuel and export strength Worldwide response to drought-induced pricing 2012/13 USDA Futures (10/10/12) 2013/14 Corn $7.90 $6.90 $5.93 Soybeans $16.00 $14.37 $12.70 Wheat $8.10 $8.09 $8.16 Cotton $0.70 ~$0.75

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/