Assistant Professor/Grain Markets Specialist Feed Price Outlook Ames, Iowa February 16, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1

U.S. Corn Supply and Use $3.90 +574 -638 -686 Source: USDA-WAOB, Feb. 2009 2 2

Brief Comparison 2006/07 2007/08 2008/09 Corn Feed 5591 5938 5300 2006/07 2007/08 2008/09 Corn Feed 5591 5938 5300 Price 3.04 4.20 3.90 Wheat Feed 117 15 230 Price 4.26 6.48 6.80 Sorghum Feed 113 164 220 Price 3.29 4.08 3.20 Note: Feed in million bushels, Price in $/bushel Source: USDA-WAOB, Feb. 2009

Soybean Meal Supply and Use $285 For the 2008/09 marketing year, production and total use are down 7.7% Source: USDA-WAOB, Feb. 2009

Monthly Price Ratios Data: 1980-2008 USDA-NASS

Corn Price Ratios (Jan. 2007 = 1) $4.15/bu

Hay Price Ratios (Jan. 2007 = 1) All Hay Price $136/ton

Drought in South America Source: USDA-WAOB, Feb. 2009

Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

Renewable Fuels Standard (RFS) Crop Year Billion Bushels 2008 3.57 2009 4.11 2010 4.43 Corn-based ethanol goes in as conventional biofuel. The tables show the amounts of corn needed to meet the conventional biofuel portion of the RFS with corn-grain ethanol. The Renewable Fuels Association lists current ethanol production capacity at 10.95 billion gallons, with another 2.8 billion gallons under construction. So ethanol capacity is large enough to meet the RFS for the next few years. 2009 is the 1st year for the biodiesel portion of the RFS, with 500 million gallons of biodiesel needed to meet the mandate. In 2007, we produced roughly 450 million gallons. And the U.S. has enough biodiesel capacity on the ground today to produce over 2 billion gallons of biodiesel from a variety of sources. 10 10

Corn & Soybean Area Growth rate of 1.55 million acres per year While total land devoted to crop production has been fairly steady over the past few years, the amount of land planted to corn and soybeans has been on the rise. Minor feed grains and cotton have been giving up ground.

Input Costs Source: USDA, Agricultural Prices, Jan. 2009 Input costs have risen dramatically, especially over the past year. Source: USDA, Agricultural Prices, Jan. 2009

Finishing Out the 2008 Crop Year General economic conditions A lot of recent market trade has been tied to reaction to the financial crisis and the world’s response Economic slowdown raises concern about export and energy demand Most important ag. statistic: Exchange rates or South American production Current futures are indicating 2008 season-average prices of $3.75-4.25 for corn and $285-315 for soybean meal Stress on South American crops has provided some support for prices

Thoughts for 2009 and Beyond Watch 2009 plantings Early surveys show crop producers leaning to soybeans Could see record soybean plantings (2008 was a record) Crop production costs are a major issue Biofuel follow-through Energy markets are down, how fast will they recover? There are ways to temporary get around the RFS Given current factors, the 2009 outlook is for crop prices around $4.00 for corn and $250-275 for soybean meal Key factor: Economic growth returns by early 2010

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/faculty/hart/ Iowa Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/