Associate Professor/Crop Marketing Specialist Ag Market Outlook Nov. 12, 2018 Chad Hart Associate Professor/Crop Marketing Specialist chart@iastate.edu 515-294-9911 1 1

U.S. Corn Supply and Use 2015 2016 2017 2018 2019 Area Planted (mil. acres) 88.0 94.0 90.2 89.1 92.0 Yield (bu./acre) 168.4 174.6 176.6 178.9 176.5 Production (mil. bu.) 13,602 15,148 14,604 14,626 14,930 Beg. Stocks 1,731 1,737 2,293 2,140 1,736 Imports 67 57 36 50 Total Supply 15,401 16,942 16,934 16,816 16,716 Feed & Residual 5,120 5,470 5,298 5,500 5,575 Ethanol 5,224 5,432 5,605 5,650 5,700 Food, Seed, & Other 1,422 1,453 1,480 1,490 Exports 1,898 2,294 2,438 2,450 2,425 Total Use 13,664 14,649 14,793 15,080 15,190 Ending Stocks 1,526 Season-Average Price ($/bu.) 3.61 3.36 3.60 3.90 Source: USDA-WAOB, w/ adjustment for Nov. reports 2 2

U.S. Soybean Supply and Use 2015 2016 2017 2018 2019 Area Planted (mil. acres) 82.7 83.4 90.1 89.1 82.5 Yield (bu./acre) 48.0 52.0 49.3 52.1 50.0 Production (mil. bu.) 3,926 4,296 4,411 4,600 4,090 Beg. Stocks 191 197 302 438 955 Imports 24 22 25 Total Supply 4,140 4,515 4,734 5,063 5,070 Crush 1,886 1,901 2,055 2,080 2,075 Seed & Residual 122 146 112 128 127 Exports 1,936 2,166 2,129 1,900 Total Use 3,944 4,214 4,107 4,277 Ending Stocks 793 Season-Average Price ($/bu.) 8.95 9.47 9.33 8.60 8.75 Source: USDA-WAOB, w/ adjustment for Nov. reports 3 3

Projected Corn Yields Top: 2018 Yield Estimate Bottom: Change from last month Units: Bushels per acre Source: USDA-NASS 4 4

U.S. Corn Harvest Data Source: USDA-NASS 5 5

Iowa Corn Harvest Data Source: USDA-NASS 6 6

Projected Soybean Yields Top: 2018 Yield Estimate Bottom: Change from last month Units: Bushels per acre Source: USDA-NASS 7 7

U.S. Soy Harvest Data Source: USDA-NASS 8 8

Iowa Soy Harvest Data Source: USDA-NASS 9 9

World Corn Production Source: USDA-WAOB 10 10

World Soybean Production Source: USDA-WAOB 11 11

U.S. Meat Production & Prices Source: USDA-WAOB 14 14

+12% +4% +10% +16% +12% Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center

+12% +4% +10% +16% +12% Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center

+9% +4% +11% +11% +6% Data Source: USDA-NASS and USDA-ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center

+9% +4% +11% +11% +6% Data Source: USDA-NASS and USDA-ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center

Pork Production Source: USDA-NASS

Pork Export Shifts Source: USDA-FAS

Profits since ‘14 have fueled herd expansion and facility investments… … Boosting capacity & Coordinating investment and throughput 2013 = +$6.21 [-$25.60 to +$24.57] 2014 = +$61.85 [+$13.15 to +$107.25] 2015 = +$7.93 [-$18.40 to +$26.25] 2016 = -$1.26 [-$35.52 to +$32.92] 2017 = +$11.95 [-$12.68 to +$47.62] 2018f = -$4.49 [-$40.71 to +$26.66] 2019f = +$4.54 [-$19.97 to +$28.03] Source: Lee Schulz, Iowa State University Projected with Basis Adjusted Futures

Data Source: USDA-NASS, Slaughter capacity by Dr. Steve Meyer

Beef Production Source: USDA-NASS

Beef Export Shifts Source: USDA-FAS

Historically large margins in ‘14-’15 drove rapid expansion Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center

‘17 returns highest since ’03 – just lower than phenomenal ‘14… … Below breakeven returns projected for ‘18 & ‘19 2014 = +$197.24 [+$41 to +$269] 2015 = -$225.12 [-$530 to +$43] 2016 = -$110.62 [-$359 to +$113] 2017 = +$144.86 [-$74 to +$415] 2018f = -$32.36 [-$97 to +$103] 2019f = -$64.95 [-$161 to +$19] Source: Lee Schulz, Iowa State University Projected with Basis Adjusted Futures

Risks to Livestock Outlook: the usual suspects plus some Major export disruption Trade – Retaliatory tariffs, USMCA ratification Labor – Plants, farms, immigration policy Productivity/Weights – +/- numbers/pounds Feed costs – 2 crop failures to match ‘12-’13 Demand: Will we see growth in ‘19? Domestic: Preferences? Wages/incomes? Substitutes? Exports: $US? Trade issues? More deals? Slaughter capacity? Market for big supply?

Corn Export Sales Source: USDA-FAS

Corn Export Shifts Source: USDA-FAS

Soybean Export Sales Source: USDA-FAS

Soybean Export Shifts Source: USDA-FAS

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

Soybean Meal Export Shifts Source: USDA-FAS

Ethanol Production Source: EIA

Ethanol Exports Source: EIA

Current Corn Futures 4.04 3.71 Source: CME Group, 11/9/2018

Current Soybean Futures 9.27 8.67 Source: CME Group, 11/9/2018

2018/19 Crop Margins Based on futures prices

2019/20 Crop Margins w/ 2018 Costs Based on futures prices

Iowa Corn Prices vs. Costs Based on USDA prices and ISU costs

Iowa Soybean Prices vs. Costs Based on USDA prices and ISU costs

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LMIC Dairy Production and Price Quarterly Forecasts (10/25/18) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC