1. Which is Hotter? The Markets or Your Field
Farm Progress Show
Boone, Iowa
August 30, 2012
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
96.4
Yield
(bu./acre)
153.9
164.7
152.8
147.2
123.4
Production
(mil. bu.)
12,092
13,092
12,447
12,358
10,779
Beg. Stocks
1,624
1,673
1,708
1,128
1,021
Imports 14 8 28 25 75
Total Supply
13,729
14,774
14,182
13,511
11,875
Feed & Residual
5,182
5,125
4,793
4,550
4,075
Ethanol
3,709
4,591
5,021
5,000
4,500
Food, Seed, & Other
1,316
1,370
1,407
1,390
1,350
Exports
1,849
1,980
1,835
1,550
1,300
Total Use
12,056
13,066
13,055
12,490
11,225
Ending Stocks
650
Season-Average Price
($/bu.)
4.06
3.55
5.18
6.25
8.20
These are the latest numbers from USDA. Record production and demand is gone and was replaced by record prices. All sectors of demand took major cuts. Ending stocks are projected to be at pipeline levels.
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
76.1
Yield
(bu./acre)
39.7
44.0
43.5
41.5
36.1
Production
(mil. bu.)
2,967
3,359
3,329
3,056
2,692
Beg. Stocks
205
138
151
215
145
Imports 13 15 14 20
Total Supply
3,185
3,512
3,495
3,286
2,857
Crush
1,662
1,752
1,648
1,690
1,515
Seed & Residual
106
110
130
101
116
Exports
1,279
1,499
1,501
1,350
1,110
Total Use
3,047
3,361
3,280
3,141
2,742
Ending Stocks
115
Season-Average Price
($/bu.)
9.97
9.59
11.30
12.45
16.00
For soybeans, a tight market continues to get tighter. USDA ratcheted down demand for the new crop to hold 2012/13 ending stocks at 115 million bushels. As with corn, all sectors of demand took a big cut.
Source: USDA-WAOB 3 3

4. Prices
Prices have risen with the temperatures.

5. Crop Conditions Source: USDA-NASS
But dry conditions have weakened the crops, as the crop conditions show. The USDA update reflects the scale of yield loss as they have taken over 40 bushels from corn and nearly 8 bushels from soybeans.
Source: USDA-NASS

6. Corn Harvested Acre Adjustments
USDA has accounted for some loss in corn harvested due to silage chopping and abandonment. Next month’s update will likely show more acres being lost.

7. Projected Corn Yields
These are based on conditions around Aug. 1.

8. Objective Corn Yield Data
USDA crop adjusters found grain weights well below those for the last 8 years.
Source: USDA-NASS

9. World Corn Production Source: USDA-WAOB
Global corn production took a hit last month, with Canada, Europe, and the former Soviet Union all seeing reductions in potential corn production.
Source: USDA-WAOB 9 9

10. World Soybean Production
Soybean prices have spurred on increased soybean plantings worldwide. South America will lead the charge.
Source: USDA-WAOB 10 10

11. 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
Projected hog margins are well south of breakeven.
Source: ISU Extension

12. 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 look better next year, but feed costs remain a major concern.
Source: ISU Extension

13. U.S. Meat Production & Prices
Higher feed costs have led to lower meat production projections.
Source: USDA-WAOB 13 13

14. Corn Exports Source: USDA-FAS
Corn exports for the 2011 crop have been slow, with only Mexico and China buying more.
Source: USDA-FAS

15. Soy Exports 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

16. Corn Advance Export Sales
Advance sales have backed off as prices have risen.
Source: USDA-FAS

17. Soy Advance Export Sales
Soybean advance sales have held up better.
Source: USDA-FAS

18. Corn Grind for Ethanol
Negative margins at some ethanol plants have dragged down production.

19. Ethanol Stocks Source: DOE-EIA
But stocks have begun to decline as we are in the heart of the summer driving season.
Source: DOE-EIA

20. 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

21. Projected 2012 Season-Average Corn Price
The drought has brought in some very strong and profitable prices.
Cost

22. Projected 2012 Season-Average Soy Price
Cost
The same is true for soybeans.

23. Iowa Corn Prices vs. Costs
For those that have a crop, corn margins have exploded.

24. Iowa Soybean Prices vs. Costs
Soybean margins have also opened with the drought.

25. Prices
Prices have risen with the temperatures.

26. Current Corn Futures 7.54 6.15 5.58 Source: CME Group, 8/29/2012
Based on current futures prices, national season-average cash price estimates for corn are $7.54 for the 2012 crop, $6.15 for 2013, and $5.58 for 2014.
5.58
Source: CME Group, 8/29/2012

27. Current Soybean Futures
16.09
For soybeans, the estimates are $16.09 for the 2012 crop, $12.86 for 2013, and $12.35 for 2014.
12.86
12.35
Source: CME Group, 8/29/2012

28. Thoughts for 2012 and Beyond
Supply/demand concerns
We got some rain, too little, too late
Biofuel growth and energy demand, RFS?
Will supply be able to keep pace with demand?
Drought is pulling supply down
But high prices are diminishing demand
General economic conditions
Continued worldwide economic recovery is a key for crop prices
US job recovery, European financial concerns, China?
2012/13: USDA: Corn $8.20; Soy $16.00
Futures (as of 8/29/12): Corn $7.54; Soy $16.09
2013/14: Futures Corn $6.15; Soy $12.86
2014/15: Futures Corn $5.58; Soy $12.35

29. 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: