Associate Professor/Crop Marketing Specialist Ag Market Outlook Oct. 31, 2018 Chad Hart Associate Professor/Crop Marketing Specialist chart@iastate.edu 515-294-9911 1 1

Net Farm Income Source: USDA

Farm Debt Source: Federal Reserve

Ag Economic Summary Agricultural production and consumption has grown rapidly over the past several years. But when production exceeds consumption, prices fall. Crop revenues peaked in 2012-13, while livestock revenues crested in 2014-15, leading to record farm incomes. Since then net farm income has been cut in half. While the percentage loss in substantial, net farm income remains above levels from the early 2000’s. Farmers and ranchers have partially compensated for the loss in income by taking on higher debt loads. Farm and ranch balance sheets are eroding and financial stress is building for some producers, but the financial issues are not as severe as during the 1980’s. The squeeze is on farm finances and for some producers, the squeeze may be too much.

Iowa’s Economy as an Example

Links to Manufacturing Farm Machinery

Links to Government Dept. of Ag.

Links to Real Estate Farm Leases

Links to Finance and Insurance Crop Insurance

Links to the Rest of the Economy

Why do U.S. farmers need export markets? That’s where the customers are That’s where the economic growth is That’s where the consumption growth is We produce surpluses We only eat high on the hog Exports are crucial to farm income

96% of the world’s population lives outside the US Source: CIA World Factbook

Population growth 2017 to 2050 Source: World Bank

Economic growth rates Source: CIA World Factbook

Top ten US ag export markets, 2016 Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Top 10 ag exporting states, 2016 Source: USDA Economic Research Service, “State Export Data”

Soybean Market Shares Sales for 2017 crop Sales for 2018 crop Source: USDA-FAS

Beef Export Shifts Source: USDA-FAS

Pork Export Shifts Source: USDA-FAS

Sorghum Export Shifts Source: USDA-FAS

Soybean Export Shifts Source: USDA-FAS

Corn Export Shifts Source: USDA-FAS

Wheat Export Shifts Source: USDA-FAS

Rice Export Shifts Source: USDA-FAS

Cotton Export Shifts Source: USDA-FAS

Ethanol Exports Source: EIA

Population vs. arable land Share of global Share of global population arable land China 19% 5% India 17% 10% US 4% 13%

Arable land

U.S. Corn Supply and Use 2015 2016 2017 2018 Δ2018 Area Planted (mil. acres) 88.0 94.0 90.2 89.1 0.0 Yield (bu./acre) 168.4 174.6 176.6 180.7 -0.6 Production (mil. bu.) 13,602 15,148 14,604 14,778 -49 Beg. Stocks 1,731 1,737 2,293 2,140 138 Imports 67 57 36 50 Total Supply 15,401 16,942 16,934 16,968 89 Feed & Residual 5,120 5,470 5,302 5,550 -25 Ethanol 5,224 5,432 5,601 5,650 Food, Seed, & Other 1,422 1,453 1,480 Exports 1,898 2,294 2,438 2,475 75 Total Use 13,664 14,649 14,793 15,155 Ending Stocks 1,813 39 Season-Average Price ($/bu.) 3.61 3.36 3.50 0.00 Source: USDA-WAOB 31 31

U.S. Soybean Supply and Use 2015 2016 2017 2018 Δ2018 Area Planted (mil. acres) 82.7 83.4 90.1 89.1 -0.4 Yield (bu./acre) 48.0 52.0 49.3 53.1 0.3 Production (mil. bu.) 3,926 4,296 4,411 4,690 -4 Beg. Stocks 191 197 302 438 44 Imports 24 22 25 Total Supply 4,140 4,515 4,734 5,153 40 Crush 1,886 1,901 2,055 2,070 Seed & Residual 122 146 112 138 Exports 1,936 2,166 2,129 2,060 Total Use 3,944 4,214 4,268 Ending Stocks 885 Season-Average Price ($/bu.) 8.95 9.47 9.33 8.60 0.00 Source: USDA-WAOB 32 32

U.S. Wheat Supply and Use Source: USDA-WAOB 33 33

U.S. Cotton Supply and Use Source: USDA-WAOB 34 34

Projected Corn Yields Top: 2018 Yield Estimate Bottom: Change from last month Units: Bushels per acre Source: USDA-NASS 35 35

Projected Soybean Yields Top: 2018 Yield Estimate Bottom: Change from last month Units: Bushels per acre Source: USDA-NASS 36 36

Projected Cotton Yields Top: 2018 Yield Estimate Bottom: Change from last month Units: Pounds per acre Source: USDA-NASS

World Corn Production Source: USDA-WAOB 38 38

World Soybean Production Source: USDA-WAOB 39 39

World Wheat Production Source: USDA-WAOB 40 40

World Cotton Production Source: USDA-WAOB 41 41

U.S. Meat Production & Prices Source: USDA-WAOB 42 42

Pork Production Source: USDA-NASS

Beef Production Source: USDA-NASS

Ethanol Production Source: EIA

Current Corn Futures Source: CME Group, 10/30/2018

Current Soybean Futures Source: CME Group, 10/30/2018

Current Wheat Futures Source: CME Group, 10/30/2018

Current Cotton Futures Source: NYMEX, 10/30/2018

2018/19 Crop Margins Based on futures prices

Iowa Corn Revenues vs. Costs Based on USDA prices

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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/