1. Assistant Professor/Grain Markets Specialist
2012 Crop Market Outlook
Butler County Fair
Allison, Iowa
June 20, 2012
Chad Hart
Assistant Professor/Grain Markets Specialist 1 1

2. U.S. Corn Supply and Use 2008 2009 2010 2011 2012 Area Planted
(mil. acres)
86.0
86.4
88.2
91.9
95.9
Yield
(bu./acre)
153.9
164.7
152.8
147.2
166.0
Production
(mil. bu.)
12,092
13,092
12,447
12,358
14,790
Beg. Stocks
1,624
1,673
1,708
1,128
851
Imports 14 8 28 20 15
Total Supply
13,729
14,774
14,182
13,506
15,656
Feed & Residual
5,182
5,125
4,793
4,550
5,450
Ethanol
3,709
4,591
5,021
5,050
5,000
Food, Seed, & Other
1,316
1,370
1,407
1,405
1,425
Exports
1,849
1,980
1,835
1,650
1,900
Total Use
12,056
13,066
13,055
12,655
13,775
Ending Stocks
1,881
Season-Average Price
($/bu.)
4.06
3.55
5.18
6.10
4.60
These are the latest numbers from USDA. The current projections show record supply and record demand, but the supply surge is larger. There are three key numbers to watch over the next month. Acreage will be updated at the end of June. Yields and exports will likely shift (downward) in July.
Source: USDA-WAOB 2 2

3. U.S. Soybean Supply and Use
2008
2009
2010
2011
2012
Area Planted
(mil. acres)
75.7
77.5
77.4
75.0
73.9
Yield
(bu./acre)
39.7
44.0
43.5
41.5
43.9
Production
(mil. bu.)
2,967
3,359
3,329
3,056
3,205
Beg. Stocks
205
138
151
215
175
Imports 13 15 14
Total Supply
3,185
3,512
3,495
3,286
3,395
Crush
1,662
1,752
1,648
1,660
1,645
Seed & Residual
106
110
130
116
125
Exports
1,279
1,499
1,501
1,335
1,485
Total Use
3,047
3,361
3,280
3,111
3,255
Ending Stocks
140
Season-Average Price
($/bu.)
9.97
9.59
11.30
12.30
13.00
For soybeans, a tight market continues to get tighter. USDA ratcheted down demand for the new crop to hold 2012/13 ending stocks at 140 million bushels.
Source: USDA-WAOB 3 3

4. Corn Emergence Source: USDA-NASS
The quick pace of this year’s crops has put downward pressure on prices. The 2012 corn crop was one of the fastest to plant and emerge. Usually, early planting translates to higher yields.
Source: USDA-NASS

5. Soybean Emergence Source: USDA-NASS
The 2012 soybean crop has also went in quickly.
Source: USDA-NASS

6. Crop Conditions Source: USDA-NASS
But dry conditions through May and early June have weakened the crops, as the crop conditions show. The crops still have plenty of time to rebound, but will need timely rains throughout the growing season.
Source: USDA-NASS

7. Projection from Corn Conditions
Early projections based on crop conditions are noisy estimates (a lot can happen to change the crop). In general, the early downgrading of conditions usually signals a below-trend line crop.

8. Projection from Soy Conditions
Early projections based on crop conditions are noisy estimates (a lot can happen to change the crop). In general, the early downgrading of conditions usually signals a below-trend line crop.

9. The latest seasonal outlook shows continuing dry conditions across the southern Corn Belt. If that happens, the corn and soybean crop estimates will decline sizably.
Source: NOAA-CPC

10. World Corn Production Source: USDA-WAOB
World corn production is on the upswing as the high prices over the last year provided incentives for corn farmers worldwide to increase production. The biggest shifts are in Argentina, Mexico, Canada, South Africa, and China.
Source: USDA-WAOB 10 10

11. World Soybean Production
Soybean prices have also spurred on increased soybean plantings worldwide. South America will lead the charge.
Source: USDA-WAOB 11 11

12. Corn vs. Wheat Source: CME Group, 6/19/2012
Looking at feed demand, wheat’s competition with corn in the feed market is lessening as the wheat-corn price relationship returns to more normal levels.
Source: CME Group, 6/19/2012

13. 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
While hog margins are not strong right now, the outlook is for better returns in 2013.
Source: Shane Ellis, ISU Extension

14. Cattle Crush Margin
The Crush Margin is the return after the feeder steer and corn costs.
Live weight: pounds Feeder weight: 750 pounds
Corn: 50 bushels per head
Cattle returns also look better next year.
Source: Shane Ellis, ISU Extension

15. U.S. Meat Production & Prices
With the exception of beef, meat production is back on the upswing. That should translate into stronger feed demand in the future.
Source: USDA-WAOB 15 15

16. Corn Export Shifts Source: USDA-FAS
Corn exports for the 2011 crop have been slow, with only Mexico and China buying more. USDA recently lowered its export estimate by 50 million bushels.
Source: USDA-FAS

17. Soy Export Shifts Source: USDA-FAS
2011 soybean exports are also lower, but have been improving for the last few months. The key market here is China and they have purchased a lot of soybeans recently.
Source: USDA-FAS

18. Change of Export Pace
Both crops are slightly off the pace to meet USDA projections.

19. Corn Advance Export Sales
But advance sales for corn are ahead of last year’s pace.
Source: USDA-FAS

20. Soy Advance Export Sales
The same is true for soybeans.
Source: USDA-FAS

21. Corn Grind for Ethanol Source: DOE-EIA
With biofuels, ethanol production remains strong.
Source: DOE-EIA

22. Ethanol Stocks Source: DOE-EIA
And stocks have begun to decline as we enter the heart of the summer driving season.
Source: DOE-EIA

23. U.S. Blended Gasoline Consumption
7.6 bil. gal.
But the industry still faces blend wall issues as fuel consumption has dropped with the economy and the E-10 market is basically full.
7.4 bil. gal.
Source: DOE-EIA, via USDA-ERS

24. Projected 2011 Season-Average Corn Price
Cost
The 2011 corn crop looks to be the most profitable corn crop we have ever had with prices averaging nearly $2 per bushel more than costs.

25. Projected 2011 Season-Average Soy Price
Cost
The 2011 soybean crop was also highly profitable.

26. Projected 2012 Season-Average Corn Price
The 2012 corn crop still has profitable prices, but the profits are being squeezed. The potential for a record crop and the lack of economic recovery have lowered prices, while costs have increased.
Cost

27. Projected 2012 Season-Average Soy Price
Cost
Soybeans still have significant profit potential, but we have seen large swings in prices that will likely continue.

28. Iowa Corn Prices vs. Costs
Corn margins are returning to their long-run average, around zero.

29. Iowa Soybean Prices vs. Costs
Soybean margins are also tightening, but not as quickly.

30. Iowa Crop Margins
Given current prices and trend yields, both crops could provide returns of roughly $60-80 per acre in Iowa.

31. 2012 Crop Prices
The rebound in Chinese demand for soybeans helped provide soybeans a boost this spring. Those stronger prices have maintained soybean returns as corn slipped.

32. Current Corn Futures 5.97 5.45 5.39 5.18 Source: CME Group, 6/19/2012
Based on current futures prices, national season-average cash price estimates for corn are $5.97 for the 2011 crop, $5.45 for 2012, $5.39 for 2013, and $5.18 for So longer-term prices are settling in at the high $4 to $5 range.
5.39
5.18
Source: CME Group, 6/19/2012

33. Current Soybean Futures
13.09
12.36
For soybeans, the estimates are $12.36 for the 2011 crop, $13.09 for 2012, $11.92 for 2013, and $11.69 for 2014.
11.92
11.69
Source: CME Group, 6/19/2012

34. 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, China?
Supply/demand concerns
Still need timely rains
Biofuel growth and energy demand
Will supply be able to keep pace with demand?
Nearly 96 million acres of corn might do the trick
Roughly 74 million acres of soybeans might not
2011/12: USDA: Corn $6.10; Soy $12.30
Futures (as of 6/19/12): Corn $5.97; Soy $12.36
2012/13: USDA: Corn $4.60; Soy $13.00
Futures (as of 6/19/12): Corn $5.45; Soy $13.09

35. Thank you for your time. Any questions. My web site: http://www. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: