1. Department of Economics Crop Outlook and Grain Flow Shifts Iowa Cooperative Managers’ Association Johnston, Iowa February 10, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

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

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

4. Department of Economics Grain Marketers Survey 2.05 billion bushels of corn were produced during the 2006/07 marketing year. –82% sold, 11% utilized on the farm, 7% remaining for future sales 510 million bushels of soybeans were produced –92% sold, 1% used on the farm, 7% expected to be marketed Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

5. Department of Economics Producer Markets for Corn Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

6. Department of Economics Shifting Markets for Corn percent Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

7. Department of Economics Producer Markets for Soybeans Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

8. Department of Economics Shifting Markets for Soybeans percent Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

9. Department of Economics Grain Handlers Survey About 1.09 billion bushels of corn and 311 million bushels of soybeans were processed or shipped. More than 2 million tons of ethanol co- products were handled during the 2006/07 marketing year. Corn shipments –1999/2000:43% by truck, 57% by rail –2006/07: 66% by truck, 30% by rail Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

10. Department of Economics Handler Markets for Corn Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

11. Department of Economics Shifting Markets for Corn Handlers percent Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

12. Department of Economics Handler Markets for Soybeans Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

13. Department of Economics Shifting Markets for Soy Handlers percent Source: Yu and Hart 2006/07 Iowa Grain and Biofuel Flow Survey

14. Department of Economics Sources: Various USDA-NASS reports Livestock Adjustments Sows farrowing: Sept-Nov 2008 2.99 million, down 6% from last year Dec-Feb 2009 2.97 million, down 3% from last year Mar-May 2009 3.01 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

15. Department of Economics Ethanol Margins Source: ISU, CARD

16. Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels 20083.57 20094.11 20104.43

17. Department of Economics U.S. Blended Motor Gasoline Consumption Source: Energy Information Administration

18. Department of Economics Outside Influences (Jan. 2007 = 1)

19. Department of Economics Outside Influences (Sept. 2008 = 1)

20. Department of Economics Crop Exports Source: USDA, PSD

21. Department of Economics Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

22. Department of Economics Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

23. Department of Economics Source: Dow Jones Newswires Argentine Drought Impacts (Early Reports) 2007 Production Corn20.9 million tons Soybeans46.2 million tons Current USDA Estimates Corn16.5 million tons-21% Soybeans49.5 million tons+7% Estimates from Buenos Aires Cereal Exchange Corn12.3 to 13.7 million tons-35 to -41% Soybeans34.5 to 38.2 million tons-17 to -25%

24. Department of Economics Chinese Corn Production Source: USDA-WAOB, Jan. 2009

25. Department of Economics Soybeans in China Source: USDA-PSD, Jan. 2009

26. Department of Economics 2007 World Corn Exports Source: USDA, FAS Drought issues for 2008 crops

27. Department of Economics 2007 World Soybean Exports Source: USDA, FAS Drought issues for 2008 crops

28. Department of Economics Pace of Corn Export Sales Source: USDA, FAS

29. Department of Economics 2008 U.S. Corn Exports Source: USDA, FAS

30. Department of Economics Pace of Soybean Export Sales Source: USDA, FAS

31. Department of Economics 2008 U.S. Soybean Exports Source: USDA, FAS

32. Department of Economics U.S. Stocks-to-Use Ratios

33. Department of Economics Estimates for 2009 Iowa Costs Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel ($/acre)(bu/acre)($/bu) Corn 486.61205.00691.611604.32 Soybean 285.60205.00490.60509.81 December 2009 Corn Futures = $4.2175 (2/9/09) November 2009 Soy Futures = $9.43 (2/9/09) Source: Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-20.pdf

34. Department of Economics 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 $3.75-4.25 for corn and $9.25-9.75 for soybeans  Stress on South American crops has provided some support for prices

35. Department of Economics 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 $8.50-8.75 for soybeans  Key factor: Economic growth returns by early 2010

36. Department of Economics Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/faculty/hart/ Iowa Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/ Grain and Biofuel Flow Survey Report: http://www.card.iastate.edu/publications/DBS/PDFFiles/08sr102.pdf