1. Feed Price Outlook/Strategy Ideas
Managing Through Stress: A Livestock Information Event
Webcast throughout Iowa
Feb. 4, 2013
Chad Hart
Associate 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
97.2
Yield
(bu./acre)
153.9
164.7
152.8
147.2
123.4
Production
(mil. bu.)
12,092
13,092
12,447
12,360
10,780
Beg. Stocks
1,624
1,673
1,708
1,128
989
Imports 14 8 28 29
100
Total Supply
13,729
14,774
14,182
13,516
11,869
Feed & Residual
5,182
5,125
4,795
4,548
4,450
Ethanol
3,709
4,591
5,019
5,011
4,500
Food, Seed, & Other
1,316
1,370
1,407
1,426
1,367
Exports
1,849
1,980
1,834
1,543
950
Total Use
12,056
13,066
13,055
12,527
11,267
Ending Stocks
602
Season-Average Price
($/bu.)
4.06
3.55
5.18
6.22
7.40
The corn market is tight and keeps getting tighter.
Source: USDA-WAOB 2 2

3. U.S. Soybean Meal Supply and Use
2009
2010
2011
2012
Production
(thou. short tons)
41,707
39,251
41,025
38,200
Beg. Stocks
235
302
350
300
Imports
160
180
216
250
Total Supply
42,101
39,732
41,591
38,750
Domestic
30,640
30,301
31,550
29,750
Exports
11,160
9,081
9,741
8,700
Total Use
41,800
39,382
41,291
38,450
Ending Stocks
Season-Average Price
($/short ton)
311.27
345.52
393.53
445.00
Soybean meal demand has held strong in the face of drought-driven high prices.
Source: USDA-WAOB 3 3

4. Prices
The crop/feed markets have backed off the record highs, but feed pricing is still a major challenge for livestock producers.

5. World Corn Production Source: USDA-WAOB
Corn production in the rest of the world is expected to increase slightly as the Southern hemisphere chases those high prices.
Source: USDA-WAOB 5 5

6. Corn Grind for Ethanol
Other sectors of demand, such as ethanol, have backed off as well. The drought didn’t necessarily play favorites.

7. Current Corn Futures 6.74 5.57 5.36 Source: CME Group, 1/28/2013
Using corn as the leading feed indicator, feed prices are expected to decline significantly until we are well into And the general outlook for the next couple of years is for sustained higher feed costs.
5.36
Source: CME Group, 1/28/2013

8. Acreage Shift by State Top: Planted in 2012 Bottom: Change from 2011
Weather was great for planting in 2012 (just not for producing). To hold acreage we will need great planting weather again.
Top: Planted in 2012
Bottom: Change from 2011
Units: 1,000 acres
Source: USDA-NASS

9. Lingering drought concerns still overhang feed markets.

10. 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
So livestock margin protection is key to surviving and building on There are several marketing moves to protect margins: futures hedges, forward contracts, options, etc. Often the issue is to take advantage when positive margins appear. For example, futures seem to be offering breakeven margins for mid-2013 and mid-2014 currently.
Source: ISU Extension

11. Price Volatility
Options, while expensive, offer producers the opportunity to capture value from the potential of lower feed costs. As the graph shows, the volatility in the current corn market indicates a significant potential for corn prices to move to extreme levels (above $9 or before $4.50). Call options for corn can protect livestock producers from the impact of high corn prices, but allow them to partially capture the benefits of lower corn prices if they occur.

12. Thoughts for 2013 and Beyond
Supply/demand concerns
Soil moisture issues
Biofuel and export strength
Worldwide response to drought-induced pricing
2012/13
USDA
Futures
(1/28/13)
2013/14
Corn
$7.40
$6.74
$5.57
Soybeans
$14.25
$13.92
$12.45
Risk management
Know what your margins are and what the markets are offering
Lock in positive margins when you can

13. 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: