1. Ag Outlook for 2012 Iowa Realtors Land Institute Meeting Clive, Iowa
Dec. 5, 2011
Chad Hart
Assistant Professor/Grain Markets Specialist 1 1

2. Source: USDA

3. Cattle and Hog Prices
Source: CME Group

4. 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
Source: Shane Ellis, ISU Extension

5. Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC 6

6. Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC 7

7. 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
Source: Shane Ellis, ISU Extension

8. Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC 9

9. Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC 10

10. Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC 14

11. Source: USDA

12. Thoughts for 2012 and Beyond
Continued economic recovery is a major key for livestock prices
Meat demand is recovering
Meat supplies tightened up with smaller herds/flocks
Feed costs have kept margins tight
The combination implies livestock expansion will take awhile
Poultry is currently backing off, Hogs are expanding slightly, and Cattle will not start expanding for a few years

13. U.S. Corn Supply and Use 2008 2009 2010 2011 Area Planted (mil. acres)
86.0
86.4
88.2
91.9
Yield
(bu./acre)
153.9
164.7
152.8
146.7
Production
(mil. bu.)
12,092
13,092
12,447
12,310
Beg. Stocks
1,624
1,673
1,708
1,128
Imports 14 8 28 15
Total Supply
13,729
14,774
14,182
13,453
Feed & Residual
5,182
5,125
4,792
4,600
Ethanol
3,709
4,591
5,021
5,000
Food, Seed, & Other
1,316
1,370
1,407
1,410
Exports
1,849
1,980
1,835
1,600
Total Use
12,056
13,066
13,054
12,610
Ending Stocks
843
Season-Average Price
($/bu.)
4.06
3.55
5.18
6.70
Source: USDA-WAOB 19 19

14. U.S. Soybean Supply and Use
2008
2009
2010
2011
Area Planted
(mil. acres)
75.7
77.5
77.4
75.0
Yield
(bu./acre)
39.7
44.0
43.5
41.3
Production
(mil. bu.)
2,967
3,359
3,329
3,046
Beg. Stocks
205
138
151
215
Imports 13 15 14
Total Supply
3,185
3,512
3,495
3,275
Crush
1,662
1,752
1,648
1,635
Seed & Residual
106
110
130
120
Exports
1,279
1,499
1,501
1,325
Total Use
3,047
3,361
3,280
3,080
Ending Stocks
195
Season-Average Price
($/bu.)
9.97
9.59
11.30
12.60
Source: USDA-WAOB 20 20

15. World Corn Production
Source: USDA-WAOB 21 21

16. World Soybean Production
Source: USDA-WAOB 22 22

17. Corn vs. Wheat
Source: CME Group, 12/2/2011

18. Change of Export Pace

19. Renewable Fuels Standard (RFS)
Crop
Year
Billion Bushels
2011
4.64
2012
4.86
2013
5.07
2014
5.29 27 27

20. Corn Grind for Ethanol
Source: DOE-EIA

21. Ethanol Blending Advantage

22. Biodiesel Production
Source: DOE-EIA

23. Projected 2011 Season-Average Corn Price

24. Projected 2011 Season-Average Soy Price

25. Iowa Corn Prices vs. Costs

26. Iowa Soybean Prices vs. Costs

27. Principal Crop Area
Source: USDA-NASS

28. States with Room to Grow
Number is the difference in planted acres between 2008 and 2011

29. Iowa Crop Margins

31. 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, Chinese inflation
Supply/demand concerns
Smaller than anticipated U.S. crops, worries about dry conditions
Biofuel growth and energy demand
Corn has the upper hand in the acreage competition
Will supply be able to keep pace with demand?
2011/12: USDA: Corn $6.70; Soy $12.60
Futures (as of 12/2/11): Corn $5.73; Soy $11.24
2012/13:
Futures (as of 12/2/11): Corn $5.35; Soy $11.04

32. Crop Insurance Two big changes for 2012
Re-rating for corn and soybeans
Trend adjustment option for APH yields
Both will impact Iowa producers

33. Average Corn Premium Rate Changes
Source: RMA

34. Average Soybean Premium Rate Changes
Source: RMA

35. Trend Adjusted APH Yields
Source: Dr. William Edwards, ISU

36. Farm Bill
With the super committee’s failure, the farm bill returns to its normal timeline and method of deliberation
However, a few nuggets have leaked out about possible farm bill directions
None of these may make it into the final bill, but we know they have been proposed

37. Farm Bill Proposals
Eliminate direct payments, counter-cyclical payments, ACRE, and SURE
Create Ag Risk Coverage (ARC) program to protect against low prices and/or yields
87% of producer’s 5-year Olympic average revenue
Max. payment of 12% of revenue
Has price-only option
Payment limits of $105,000 for ARC and no payments for producers with a AGI over $950,000

38. Farm Bill Proposals Complete overhaul of dairy programs
Gradually reduce CRP to 25 million acres
Tighten requirements on some nutrition programs
Continue many bioenergy programs

39. The following slides are land values and rents are from Dr. Mike Duffy
His slides, my interpretation

49. Land Summary Land values are at record levels
Increases have been strong but will be affected as fundamentals change
Land ownership will become more dispersed and land management will become more concentrated
Odds of farmland experiencing a collapse similar to the 1980s or the urban real estate market are not high
Farmland is a good long term investment and will likely remain that way for the foreseeable future
Farmers are the majority of land purchasers; they buy land to own it, not to sell it

50. 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: