1. Department of Economics Crop Issues for 2009 Issues 2009 Twin Lakes, Iowa February 3, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. Department of Economics U.S. Corn Supply and Use Source: USDA-WAOB, Jan. 2009 -50 $3.90 -0.10 $4.00 -100 +316 -50 +81

3. Department of Economics U.S. Soybean Supply and Use Source: USDA-WAOB, Jan. 2009 -30 $9.00 +50 +38 NC

4. Department of Economics Source: USDA-WAOB, Dec. 2008 Drought in South America

5. Department of Economics Source: Dow Jones Newswires Argentine Drought Impacts (Early Reports) 2007 Production Corn20.9 million tons Soybeans46.2 million tons Current USDA Estimates Corn16.5 million tons-21% Soybeans49.5 million tons+7% Estimates from Buenos Aires Cereal Exchange Corn12.3 to 13.7 million tons-35 to -41% Soybeans34.5 to 38.2 million tons-17 to -25%

6. Department of Economics Chinese Corn Production Source: USDA-WAOB, Jan. 2009

7. Department of Economics Soybeans in China Source: USDA-PSD, Jan. 2009

8. Department of Economics Sources: Various USDA-NASS reports Livestock Adjustments Sows farrowing: Sept-Nov 2008 2.99 million, down 6% from last year Dec-Feb 2009 2.97 million, down 3% from last year Mar-May 2009 3.01 million, down 2% from last year Broiler-type eggs set: 203 million, down 7% from last year Broiler chicks placed: 166 million, down 6% from last year Feedlot placements: 2.02 million, down 5% from last year

9. Department of Economics Ethanol Margins Source: ISU, CARD

10. Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels 20083.57 20094.11 20104.43

11. Department of Economics U.S. Blended Motor Gasoline Consumption Source: Energy Information Administration

12. Department of Economics Outside Influences (Jan. 2007 = 1)

13. Department of Economics Outside Influences (Sept. 2008 = 1)

14. Department of Economics Corn & Soybean Area Growth rate of 1.55 million acres per year

15. Department of Economics CRP Expiring Contracts Source: USDA-FSA

16. Department of Economics Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

17. Department of Economics Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

18. Department of Economics Estimates for 2009 Iowa Costs Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel ($/acre)(bu/acre)($/bu) Corn 486.61205.00691.611604.32 Soybean 285.60205.00490.60509.81 December 2009 Corn Futures = $4.23 (1/27/09) November 2009 Soy Futures = $9.355 (1/27/09) Source: Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-20.pdf

19. Department of Economics Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

20. Department of Economics Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

21. Department of Economics 2007 World Corn & Soy Exports Source: USDA, FAS Drought issues for 2008 crops CornSoybeans

22. Department of Economics Pace of Corn Export Sales Source: USDA, FAS

23. Department of Economics 2008 U.S. Corn Exports Source: USDA, FAS

24. Department of Economics Pace of Soybean Export Sales Source: USDA, FAS

25. Department of Economics 2008 U.S. Soybean Exports Source: USDA, FAS

26. Department of Economics U.S. Stocks-to-Use Ratios

27. Department of Economics World Stocks-to-Use Ratios

28. Department of Economics 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 $9.25-9.75 for soybeans  Stress on South American crops has provided some support for prices

29. Department of Economics Thoughts for 2009 and Beyond  Many of the storylines from 2008 will continue  Tight stocks for corn (worldwide) and soybeans (U.S.)  The competition for acreage  Ethanol’s buildout & livestock’s adjustment  Energy price & general economy concerns  Market volatility will remain high  Link to the energy markets  More market players with different trading objectives  Given current factors, the 2009 outlook is for crop prices around $4.00 for corn and $8.50-8.75 for soybeans  Key factor: Economic growth returns by early 2010

30. Department of Economics Crop Insurance Changes  Reduced premium subsidy rates for area crop insurance plans (GRP, GRIP)  Increased premium subsidy rates for enterprise and whole-farm units  Increased fees for catastrophic (CAT) coverage to $300 per crop per county  Standardized limit on harvest price moves  Can not be greater than 200% of base (or planting) price  Moved premium billing date to August 15 th, starting in 2012

31. Department of Economics Enterprise & Whole Farm Discounts Source: USDA, RMA EnterpriseWhole Farm Coverage Level Current Subsidy New Subsidy Current Subsidy New Subsidy 50%67%80%N/A 55%64%80%N/A 60%64%80%N/A 65%59%80%59%80% 70%59%80%59%80% 75%55%77%55%80% 48%68%48%71% 85%38%53%38%56%

32. Department of Economics GRIP & GRP Subsidies Source: USDA, RMA GRIPGRP Coverage Level Current Subsidy New Subsidy Current Subsidy New Subsidy 70%64%59%64%59% 75%59%55%64%59% 80%59%55%59%55% 85%55%49%59%55% 90%48%44%55%51%

33. Department of Economics 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/