1. Crop Market Outlook 4th Annual Beginning Farmers Conference Ames, Iowa
February 7, 2009
Chad Hart
Assistant Professor/Grain Markets Specialist 1

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

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

4. World Corn Production
Source: USDA-WAOB, Jan. 2009

5. World Soybean Production
Source: USDA-WAOB, Jan. 2009

6. Drought in South America
Source: USDA-WAOB, Dec. 2008

7. Argentine Drought Impacts (Early Reports)
2007 Production
Corn million tons
Soybeans 46.2 million tons
Current USDA Estimates
Corn million tons -21%
Soybeans 49.5 million tons +7%
Estimates from Buenos Aires Cereal Exchange
Corn to 13.7 million tons -35 to -41%
Soybeans 34.5 to 38.2 million tons -17 to -25%
Livestock consolidation is underway and with it comes lower feed demand. The recent reduction in crop prices can help ease consolidation pressure, but the economic weakness is also taking its toll on meat demand.
Source: Dow Jones Newswires

8. Chinese Corn Production
Source: USDA-WAOB, Jan. 2009

9. Soybeans in China
Source: USDA-PSD, Jan. 2009

10. Crop Basis Patterns Sources: CARD, Iowa State; IA Dept. of Ag.
While basis patterns are closing in on more historically normal levels, energy prices will likely maintain somewhat weaker basis than usual.
Sources: CARD, Iowa State; IA Dept. of Ag.

11. Livestock Adjustments
Sows farrowing:
Sept-Nov million, down 6% from last year
Dec-Feb million, down 3% from last year
Mar-May 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
Livestock consolidation is underway and with it comes lower feed demand. The recent reduction in crop prices can help ease consolidation pressure, but the economic weakness is also taking its toll on meat demand.
Sources: Various USDA-NASS reports

12. Ethanol Margins
Source: ISU, CARD

13. Biodiesel Margins
Source: ISU, CARD

14. Renewable Fuels Standard (RFS)
Calendar Year
Billion Bushels
2009
3.75
2010
4.29
2011
4.50
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 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 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. 14 14

15. U.S. Blended Motor Gasoline Consumption
One of the biggest factors influencing the biofuel industry is the overall usage of fuel. This graph shows the dramatic decline in projected gasoline consumption for this year and next. The higher energy prices earlier this year had a definite impact.
Source: Energy Information Administration

16. Outside Influences (Jan. 2007 = 1)
Agriculture’s link to the energy markets has been a strong one. Corn and soybean prices have tracked with oil prices since late in 2006.

17. Outside Influences (Sept. 2008 = 1)

18. 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.

19. CRP Expiring Contracts
Some CRP land has also come back into production. This graph shows the acreage with expiring CRP contracts. The contracts expire at the end of September in each year. So the land that can come out of CRP in 2008 can not enter production until 2009 at the earliest. Currently CRP has 34.7 million acres. But the 2008 farm bill has set 32 million acres as the top for CRP, starting in So an additional 2.7 million must come out over the next two years.
Source: USDA-FSA

20. Input Costs Source: USDA, Agricultural Prices, Dec. 2008
Input costs have risen dramatically, especially over the past year.
Source: USDA, Agricultural Prices, Dec. 2008

21. The Rise and Fall of Fertilizer Prices
Source:
TheMarket.pdf

22. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/
TheMarket.pdf

23. Iowa Corn Prices vs. Costs
Average return over the time period, -7 cents per bushel. Current corn prices for Iowa are around estimated costs.
Source: USDA-NASS and Duffy and Smith,

24. Iowa Soybean Prices vs. Costs
Average return over the period, 31 cents per bushel. Current Iowa prices still slightly above estimated costs.
Source: USDA-NASS and Duffy and Smith,

25. Estimates for 2009 Iowa Costs
Non-land
Cost
Land Cost
Total Cost
Expected Yield
Cost per Bushel
($/acre)
(bu/acre)
($/bu)
Corn
486.61
205.00
691.61
160
4.32
Soybean
285.60
490.60 50
9.81
December 2009 Corn Futures = $4.16 (2/2/09)
November 2009 Soy Futures = $9.25 (2/2/09)
Source: Duffy and Smith,

26. Crop Exports
Source: USDA, PSD

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

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

29. 2007 World Corn Exports Drought issues for 2008 crops
Source: USDA, FAS

30. 2007 World Soybean Exports Drought issues for 2008 crops
Source: USDA, FAS

31. Pace of Corn Export Sales
Source: USDA, FAS

32. 2008 U.S. Corn Exports
Source: USDA, FAS

33. Pace of Soybean Export Sales
Source: USDA, FAS

34. 2008 U.S. Soybean Exports
Source: USDA, FAS

35. U.S. Stocks-to-Use Ratios

36. World Stocks-to-Use Ratios
But the world has higher than usual soybean stocks. Corn stocks have been tight worldwide for several years.

37. 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 $ for corn and $ for soybeans
Stress on South American crops has provided some support for prices

38. 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 $ for soybeans
Key factor: Economic growth returns by early 2010

39. 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: