1. University Extension/Department of Economics Crop Outlook for 2011 2010 Ag Outlook and Management Seminars Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. University Extension/Department of Economics U.S. Corn Supply and Use Source: USDA 2007200820092010 Area Planted(mil. acres)93.586.086.588.2 Yield(bu./acre)150.7153.9164.7154.3 Production(mil. bu.)13,03812,09213,11012,540 Beg. Stocks(mil. bu.)1,3041,6241,6731,708 Imports(mil. bu.)2014810 Total Supply(mil. bu.)14,36213,72914,79214,257 Feed & Residual(mil. bu.)5,9135,1825,1595,300 Ethanol(mil. bu.)3,0493,7094,5684,800 Food, Seed, & Other(mil. bu.)1,3381,3161,3701,380 Exports(mil. bu.)2,4371,8491,9871,950 Total Use(mil. bu.)12,73712,05613,08413,430 Ending Stocks(mil. bu.)1,6241,6731,708827 Season-Average Price($/bu.)4.204.063.555.20

3. University Extension/Department of Economics Source: USDA-NASS

4. University Extension/Department of Economics Source: USDA-NASS

5. University Extension/Department of Economics Translates to a yield in the 170-175 bu. range Translates to a yield around 160 bu. Source: USDA-NASS

6. University Extension/Department of Economics U.S. Soybean Supply and Use 2007200820092010 Area Planted(mil. acres)64.775.777.577.7 Yield(bu./acre)41.739.744.043.9 Production(mil. bu.)2,6772,9673,3593,375 Beg. Stocks(mil. bu.)574205138151 Imports(mil. bu.)10131510 Total Supply(mil. bu.)3,2613,1853,5123,536 Crush(mil. bu.)1,8031,6621,7521,665 Seed & Residual(mil. bu.)93106108117 Exports(mil. bu.)1,1591,2791,5011,570 Total Use(mil. bu.)3,0563,0473,3613,351 Ending Stocks(mil. bu.)205138151185 Season-Average Price($/bu.)10.109.979.5911.45 Source: USDA

7. University Extension/Department of Economics Source: USDA-NASS

8. University Extension/Department of Economics Source: USDA-NASS

9. University Extension/Department of Economics Source: USDA-NASS Within a bushel of each other

10. University Extension/Department of Economics World Corn Production Source: USDA

11. University Extension/Department of Economics Corn – Argentina & Brazil Source: USDA

12. University Extension/Department of Economics World Soybean Production Source: USDA

13. University Extension/Department of Economics Soybeans – Argentina & Brazil Source: USDA

14. University Extension/Department of Economics La Niña Winter Source: NOAA

15. University Extension/Department of Economics Clearing Old Stocks Source: USDA The current stocks set-up is reminiscent of the transition between the 2006 and 2007 crops.

16. University Extension/Department of Economics Livestock Situation Poultry production –46% of total red meat and poultry –Year-to-date 2010 Broilers +3.6%, Turkey -4.4% 7-weeks: Chick placement +3.4% / Egg set +5.4% –Forecast for 2011 & 2012 (yr/yr % change) Production Consumption Broilers+2.5 & +3.1+1.5 & +2.0 Turkeys+3.0 & +4.5-1.3 & +6.1 Source: John Lawrence, ISU Extension

17. University Extension/Department of Economics Pork Summary Breeding herd liquidation slowed, but production efficiency offset some decline Higher grain prices will postpone expansion Export demand expected to be stronger in 2011 and beyond Industry downsizing will idle some facilities Manage margins Source: John Lawrence, ISU Extension

18. University Extension/Department of Economics Cattle Summary Demand recovers slowly with the economy Tight supplies should support prices Herd liquidation continues into 2012+ –Higher cost for cowherds –Higher cost of gain pressure calf prices Narrow feeding margins Manage risk through transition Source: John Lawrence, ISU Extension

19. University Extension/Department of Economics Hog Crush Margin Source: Shane Ellis, ISU Extension The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 poundsPig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pigSoybean meal: 150 pounds per pig

20. University Extension/Department of Economics Cattle Crush Margin Source: Shane Ellis, ISU Extension The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 poundsFeeder weight: 750 pounds Corn: 50 bushels per head

21. University Extension/Department of Economics Historical Export Levels Source: USDA, FAS Week 11 of marketing year

22. University Extension/Department of Economics Exchange Rates (Jan. 2010 = 1) Source: USDA, ERS

23. University Extension/Department of Economics Corn Export Sales Source: USDA, FAS

24. University Extension/Department of Economics 2010 U.S. Corn Exports Source: USDA, FAS

25. University Extension/Department of Economics Corn Export Shifts Source: USDA, FAS

26. University Extension/Department of Economics Soybean Export Sales Source: USDA, FAS

27. University Extension/Department of Economics 2010 U.S. Soybean Exports Source: USDA, FAS

28. University Extension/Department of Economics Soy Export Shifts Source: USDA, FAS

29. University Extension/Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels 20094.11 20104.43 20114.64 20124.86

30. University Extension/Department of Economics Ethanol Margins Source: ISU, CARD

31. University Extension/Department of Economics Ethanol Margins Source: ISU, CARD

32. University Extension/Department of Economics Ethanol Blending Advantage

33. University Extension/Department of Economics Fuel Prices

34. University Extension/Department of Economics Crude Oil Prices Sources: EIA, NYMEX

35. University Extension/Department of Economics Gasoline Consumption Source: EIA, Annual Energy Outlook

36. University Extension/Department of Economics RFS Coverage

37. University Extension/Department of Economics Projected 2010 Season-Average Corn Price

38. University Extension/Department of Economics Projected 2010 Season-Average Soy Price

39. University Extension/Department of Economics Corn

40. University Extension/Department of Economics Soybeans

41. University Extension/Department of Economics Corn Futures Trade Source: CFTC

42. University Extension/Department of Economics Soybean Futures Trade Source: CFTC

43. University Extension/Department of Economics Projected 2011 Season-Average Corn Price

44. University Extension/Department of Economics Projected 2011 Season-Average Soy Price

45. University Extension/Department of Economics Iowa Corn Prices vs. Costs Even with the recent knock, futures have prices in the $5 range Even with higher fertilizer costs, corn’s profitable

46. University Extension/Department of Economics Iowa Soybean Prices vs. Costs Futures have season-average prices above $11 for ’10 and ‘11

47. University Extension/Department of Economics Principal Crop Area Source: USDA-NASS

48. University Extension/Department of Economics States with Room to Grow StateMillion acresCompeting Crops North Dakota2.009Wheat, corn, soy South Dakota1.020Wheat, corn, soy Arkansas0.880Rice, cotton, soy Missouri0.335All of the above Illinois0.311Wheat, corn, soy Kentucky0.311Wheat, corn, soy Louisiana0.290Rice, cotton, soy North Carolina0.284Cotton, corn, soy Kansas0.264Wheat, corn, soy Tennessee0.256Wheat, corn, soy

49. University Extension/Department of Economics New Crop Futures Price Movements WheatCornSoybeansCotton MGE Sept.CME Dec.CME Nov.ICE Dec. ($/bu.) ($/lb.) June 15.814.049.220.75 Nov. 98.255.5212.451.00 Change42%37%35%33% WheatCornSoybeansCotton MGE Sept.CME Dec.CME Nov.ICE Dec. ($/bu.) ($/lb.) June 15.814.049.220.75 Nov. 127.785.0911.770.89 Change34%26%28%18%

50. University Extension/Department of Economics This Year Soy $11.43 Corn $4.87

51. University Extension/Department of Economics Decision Chart Basis Weakens Basis Strengthens Futures Decrease Futures Increase Expected Change Basis Contract Sell Cash and Buy Futures Call Options Minimum Price Contract, Fixed Basis Store & Wait to Price Delayed Price Contract Minimum Price Contract, Variable Basis Cash Sale Forward Contract Hedge Hedge to Arrive Put Options

52. University Extension/Department of Economics Pre-Harvest Strategies Source: Farm Futures magazine 72% 68% 52% 68% 72% 52% 56%

53. University Extension/Department of Economics Thoughts for 2011 and Beyond  General economic conditions  Continued economic recovery is a major key for crop prices  Fears of Chinese inflation and credit tightening have hit the markets  Long-term oil price remain in the $90 range  Supply/demand concerns  South America: La Niña impacts  Biofuels: E10, E12, or E15; Do the tax credits get extended/renewed?  Will supply be able to keep pace with demand?  2010/11:USDA:Corn $5.20, Soy $11.45 Futures (as of 11/12/2010):Corn $5.06, Soy $11.73  2011/12: Futures (as of 11/12/2010):Corn $4.90, Soy $11.31

54. University Extension/Department of Economics Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/