Crop Outlook Pro Ag Fall 2011 Outlook Seminar Fort Dodge, Iowa Nov. 9, 2011 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1 1

U.S. Corn Supply and Use 2008 2009 2010 2011 Area Planted (mil. acres) 86.0 86.4 88.2 91.9 Yield (bu./acre) 153.9 164.7 152.8 146.7 Production (mil. bu.) 12,092 13,092 12,447 12,310 Beg. Stocks 1,624 1,673 1,708 1,128 Imports 14 8 28 15 Total Supply 13,729 14,774 14,182 13,453 Feed & Residual 5,182 5,125 4,792 4,600 Ethanol 3,709 4,591 5,021 5,000 Food, Seed, & Other 1,316 1,370 1,407 1,410 Exports 1,849 1,980 1,835 1,600 Total Use 12,056 13,066 13,054 12,610 Ending Stocks 843 Season-Average Price ($/bu.) 4.06 3.55 5.18 6.70 Source: USDA-WAOB 2 2

U.S. Soybean Supply and Use 2008 2009 2010 2011 Area Planted (mil. acres) 75.7 77.5 77.4 75.0 Yield (bu./acre) 39.7 44.0 43.5 41.3 Production (mil. bu.) 2,967 3,359 3,329 3,046 Beg. Stocks 205 138 151 215 Imports 13 15 14 Total Supply 3,185 3,512 3,495 3,275 Crush 1,662 1,752 1,648 1,635 Seed & Residual 106 110 130 120 Exports 1,279 1,499 1,501 1,325 Total Use 3,047 3,361 3,280 3,080 Ending Stocks 195 Season-Average Price ($/bu.) 9.97 9.59 11.30 12.60 Source: USDA-WAOB 3 3

Projected Corn Yields Source: USDA-NASS Iowa yields look to be better than last year, but nationwide yields are down. Source: USDA-NASS

With the dry conditions over the past couple of months, harvest has progressed quickly. Normally, that would pressure the market downward. But with the still relatively tight supplies, corn prices have held. Source: USDA-NASS

Projected Soybean Yields For soybeans, Iowa yields are down slightly and national yields are even more. Source: USDA-NASS

Source: USDA-NASS

World Corn Production Source: USDA-WAOB 8 8

World Soybean Production Source: USDA-WAOB 9 9

Corn vs. Wheat Source: CME Group, 11/8/2011 In feed markets, corn has become a high-priced feed product. Wheat and other feed materials have filled in some of corn’s traditional role in feeds as they are competitively priced. This affects not only domestic feed markets, but also international demand for corn. Source: CME Group, 11/8/2011

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 And hogs. Source: Shane Ellis, ISU Extension

Corn Export Sales Source: USDA-FAS With the price drop in September, importers came back into the corn market. Source: USDA-FAS

Corn Export Shifts Source: USDA-FAS Corn export demand is lower in our biggest market, Japan, as they recover from the triple whammy of earthquake, tsunami, and nuclear disaster. Egypt is also lower as wheat replaces corn in feed rations. China’s forays in the corn markets on lower price dips have supported some growth in export demand, but it is price sensitive. Source: USDA-FAS

Soybean Export Sales Source: USDA-FAS The September price drop did not stir a similar rebound in soybeans. Source: USDA-FAS

Soy Export Shifts Source: USDA-FAS With China heading to South America for new supplies, export demand has been very soft. Source: USDA-FAS

Renewable Fuels Standard (RFS) Crop Year Billion Bushels 2011 4.64 2012 4.86 2013 5.07 2014 5.29 While the Renewable Fuels Standard would indicate increasing demand for corn through ethanol, the industry has already raced to over 5 billion bushels of corn demand. 16 16

Corn Grind for Ethanol Source: DOE-EIA Corn grind for ethanol has been fairly steady over the past year and expectations are that it will remain in the 5 billion bushel range. Source: DOE-EIA

Ethanol Margins Margins remain solid for ethanol plants. Source: CARD

Ethanol Blending Advantage And blenders continue to see positive returns from ethanol as well. But the loss of the tax credit will squeeze those returns.

Projected 2011 Season-Average Corn Price But despite the weaker demand picture, there is still over 12.5 billion bushels of corn demand out there (that’s still a lot of demand). And prices over the last month have settled in at the $6.20 range for the 2011/12 season-average price.

Projected 2011 Season-Average Soy Price Similar story for soybeans. Relative to USDA, futures are indicating a weaker price outlook, in the $11.80 range for the 2011/12 season-average price.

Projected 2012 Season-Average Corn Price For 2012, corn prices are a little weaker, in the $5.90 range, as the market balances general economic concerns (mainly Europe) on the downside with drought prospects on the upside.

Projected 2012 Season-Average Soy Price Similar story to corn.

Iowa Corn Prices vs. Costs While costs are increasing, margins are still strongly positive for corn.

Iowa Soybean Prices vs. Costs The gap is much smaller for soybeans.

Principal Crop Area Source: USDA-NASS Both crops would like additional area, and it is available if Mother Nature allows. Source: USDA-NASS

States with Room to Grow The Dakotas, the lower Mississippi, and the Southern Plains have the room to grow, but that is also where the floods and drought hit. So while the land is available, it may not be assessable. Number is the difference in planted acres between 2008 and 2011

Iowa Crop Margins Corn holds a sizable return advantage over soybeans again (roughly the same as last year). But will yield drag on continuous corn limit corn’s ability to get more acres?

Soil moisture is a major issue as we plan for the 2012 crop Soil moisture is a major issue as we plan for the 2012 crop. We will need a recharge soon.

The near-term weather outlook shows some improvement in NW Iowa, but dry conditions holding in central and SE Iowa.

Thoughts for 2012 and Beyond General economic conditions Continued worldwide economic recovery is a major key for crop prices US job recovery, European financial concerns, Chinese inflation Supply/demand concerns Smaller than anticipated U.S. crops Biofuel growth and energy demand Corn still has the upper hand in the acreage competition Will supply be able to keep pace with demand? 2011/12: USDA: Corn $6.70; Soy $12.60 Futures (as of 11/8/11): Corn $6.32; Soy $11.71 2012/13: Futures (as of 11/8/11): Corn $5.95; Soy $11.85

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/