1. Crop Situation & Outlook
Iowa Institute for Cooperatives Annual Meeting
Ames, Iowa
November 24, 2009
Chad Hart
Assistant Professor/Grain Markets Specialist 1

2. U.S. Corn Supply and Use 2007 2008 2009 Area Planted (mil. acres) 93.5
86.0
86.4
Yield
(bu./acre)
150.7
153.9
162.9
Production
(mil. bu.)
13,038
12,101
12,921
Beg. Stocks
1,304
1,624
1,674
Imports 20 14 10
Total Supply
14,362
13,739
14,605
Feed & Residual
5,913
5,254
5,400
Ethanol
3,049
3,677
4,200
Food, Seed, & Other
1,338
1,276
1,280
Exports
2,437
1,858
2,100
Total Use
12,737
12,065
12,980
Ending Stocks
1,625
Season-Average Price
($/bu.)
4.20
4.06
3.55
USDA’s 2009 projections based on conditions around Oct. 1. It would be the 2nd largest corn crop, just behind Guesses on freeze damage range from 100 to 300 million bushels. Demand is projected to recover across the board (higher feed, ethanol, and export demand), but we may want to watch feed demand. Ethanol demand is about 100 million bushels above mandate levels. Export demand is being helped with some smaller customers buying early. Ending stocks currently shown as flat, but will likely decline with the freeze impact. Current price estimate of $3.35/bushel had been higher than the market before the freeze, but is now well below market levels.
Source: USDA 2 2

3. But the concern was the slowed maturity of the crop
But the concern was the slowed maturity of the crop. Many points in South Dakota, Minnesota, Wisconsin, Illinois, Indiana, and Ohio still at Milk and Dough stages in early October. The freeze may have damaged much of this corn.
Source: USDA 3 3

4. U.S. Corn Harvest Progress
The continuing flow of moisture in the Midwest has dramatically slowed harvest. Looking back through data since 1985, this is the slowest harvest on record (1992 was the slowest before this).
Source: USDA 4 4

5. U.S. Soybean Supply and Use
2007
2008
2009
Area Planted
(mil. acres)
64.7
75.7
77.5
Yield
(bu./acre)
41.7
39.7
43.3
Production
(mil. bu.)
2,677
2,967
3,319
Beg. Stocks
574
205
138
Imports 10 13 8
Total Supply
3,261
3,185
3,465
Crush
1,803
1,662
1,695
Seed & Residual 93
101
175
Exports
1,159
1,283
1,325
Total Use
3,056
3,047
3,195
Ending Stocks
270
Season-Average Price
($/bu.)
10.10
9.97
9.20
USDA’s 2009 projections based on conditions around Oct. 1. It would be the largest soybean crop. Guesses on freeze damage range from 100 to 200 million bushels. Even with the freeze damage, we’re looking at a top 5 crop. Crush demand is projected to recover slightly, based on soybean meal export demand. Export demand has remained strong as China continues to buy. Ending stocks currently shown up roughly 90 million, but will likely fall back with the freeze impact. Current price estimate of $9.00/bushel had been higher than the market before the freeze, but is now well below market levels.
Source: USDA 5 5

6. Similar concerns on crop maturity.
Source: USDA 6 6

7. U.S. Soybean Harvest Progress
The continuing flow of moisture in the Midwest has dramatically slowed harvest. Looking back through data since 1985, this is the slowest harvest on record (1985 was the slowest before this). Still harvesting at Christmas?
Source: USDA 7 7

8. World Corn Production Source: USDA
World corn production has projected to be flat, with the U.S. increase offsetting a drop in the rest of the world. The freeze probably shifted corn production below last year’s level. Half of the drop in the rest of the world is in China (drought).
Source: USDA 8 8

9. World Soybean Production
World soybean production is projected to be up, with increases in the U.S., Brazil, and Argentina.
Source: USDA 9 9

10. Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS
The dollar had been on a long-run slide, but turned around quickly last fall. The slide has resumed again and the dollar may approach the lows of 2008 by the end of As the dollar falls, our agricultural exports look less expensive to the rest of the world and exports tend to increase. USDA export projections are up with the fall of the dollar.
Source: USDA, ERS

11. Exports & Advance Sales (1st 11 weeks of marketing year)
Early soybean sales to China are double last year’s pace. China, thus far, has purchased the equivalent of Iowa’s soybean production. So export strength continues in that market. Corn sales are roughly in line with last year. Hopeful signs include early purchases by some non-traditional markets.
Source: USDA, FAS

12. Crude Oil Prices Sources: EIA, NYMEX
Crude oil is working its way back up, providing room for higher ethanol and crop prices.
Sources: EIA, NYMEX

13. Renewable Fuels Standard (RFS)
Crop
Year
Billion Bushels
2008
3.57
2009
4.11
2010
4.43
2011
4.64
Over the near term, corn-grain ethanol is the big biofuel. The table shows the corn needed to create enough ethanol to meet the conventional biofuel targets. For the 2008 crop year, the mandate called for 3.57 billion bushels of corn for ethanol. We used 3.7 billion bushels. For the 2009 crop year, the mandate points to 4.11 billion bushels and projected usage is at 4.2 billion bushels. By 2015, we are looking at roughly 5 billion bushels worth of demand. 13 13

14. Ethanol Blending Advantage
Ethanol blending margins have mostly stayed positive, so blenders have continued to pull in ethanol. Margins above 4.5 cents indicate blending is economical without the tax credit. Ethanol blending margin = (wholesale gasoline price + federal taxes) – (90%*wholesale gasoline price + 10%*wholesale ethanol price + federal taxes – tax credit).

15. Draft Lifecycle GHG Reductions
The big policy argument right now is indirect land use (bright green part of the bars). Without the indirect land use effect, current biofuels would meet GHG emission goals. Policy may be changed by Congress.
Source: EPA, May 2009 15

16. Corn
The next few years have changed that relationship. Crop prices are now much more responsive to tighter stocks.

17. Corn Futures Trade Source: CFTC
Another factor is a recent return of the funds in the market.
Source: CFTC 17 17

18. Ratio: Nov. 2010 Soy/Dec. 2010 Corn
Futures prices for the 2010 crop have been favoring corn recently. Average around 2.5, above 2.5 favor soybeans.
Source: CBOT

19. Iowa Corn Prices vs. Costs
Early numbers from Mike Duffy show corn costs backing down to 2008 crop year levels.

20. Iowa Soybean Prices vs. Costs
Soybean costs also fall, but hold above 2008 crop year levels.

21. Thoughts for 2009 and Beyond
General economic conditions
Recession: Are we done yet?
Projected economic recovery is a major key for crop prices for the 2009 marketing year
Continued weakness in the dollar helping exports
Most important ag. statistics: Harvest progress, crop production, feed demand
USDA is indicating 2009 season-average prices in the neighborhood of $3.55 for corn and $9.20 for soybeans
Futures Nov. 23: Corn $3.73, Soy $9.87
2010/11 based on futures Nov. 23: Corn $4.17, Soy $9.85

22. 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: