1. November 2010 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/farmmanagement.htm

2. Presentation Objectives Summarize Iowa’s 2010 Corn & Soybean Yield Estimates Highlight 2010 Crop Insurance Coverage and new Common Policy for 2011 Update Futures Market Carry, Basis & Cost of Storage Highlight Crop Margin Trends & Forecast 2011 Crop Margins Discuss 5 Strategies for Managing 2010 & 2011 Crop Margins Provide 5 Crop Risk Management Strategies & 5 Websites

3. 185 54 178 53 175 52 173 55 167 50 175 52 156 52 98 46 121 48 Iowa 2010 Crop Yield Estimates Source: USDA NASS, Iowa Field Office, Nov. 9 th, 2010

4. Acres Insured in 2010 Corn and Soybeans--Iowa Source: USDA Risk Management Agency, Oct. 2010

5. Corn Indemnity Prices (Revenue Coverage) Source: USDA Risk Management Agency, Oct. 2010 Feb. Avg. $3.99/bu Oct. Avg. $5.46/bu

6. Soybean Indemnity Prices: (Revenue Coverage) Source: USDA Risk Management Agency, Oct. 2010 Feb. Avg. $9.23/bu Oct. Avg. $11.63/bu

7. 2011 Policies Convert Automatically Crop Revenue Coverage (CRC) Revenue Assurance with Harvest Price Option (RA-HPO) Revenue Protection (RP) Revenue Assurance (RA) with Base Price only (RA-BP) Revenue Protection with harvest price exclusion (RPE) Source: USDA Risk Management Agency, Oct. 2010

8. 2009/10 Estimated2010/2011 Projected Area Planted Area Harvested Yield Beginning Stocks Production Imports Supply, Total Feed & Residual Food, Seed & Industrial Domestic Use, Total Exports Use, Total Ending Stocks Average Farm Price U.S. Corn Supply/Demand & Price 86.5 $3.55 79.6 164.7 1,673 13,110 8 14,792 5,159 5,938 11,098 1,987 13,084 1,708 88.2 $4.80-$5.60 81.3 154.3 1,708 12,540 10 14,257 5,300 6,180 11,480 1,950 13,430 827 Midpoint $5.20/bu Source: USDA WASDE Report, Nov. 9 th, 2010

9. $5.80/bu 18% $5.10/bu 65% $5.00/bu 17% Corn Cash Price & Probability Forecast ’10-’11 Marketing Year Source: Wisner, ISU Biofuels Economist, Nov. 11 th, 2010

10. Nearby Corn Chart Source: www.jimwyckoff.com, Nov.12 th, 2010 Nov. 9 th : Key Reversal Higher High, Lower Low & Markete Closes Lower Other support levels: $5.00 & $4.60

11. July$5.50 May$ 5.46 Mar$5.39 Dec.$5.26 Corn Futures Carry Dec. 2011 $4.99 Source: www.cmegroup.com Nov. 17 th, 2010 Decline in Carry since summer, but still rewards On-farm Storage if little to no interest accruing. Capture the carry with sales for the deferred contract months.

12. Corn Basis Trends Source: www.farmfutures.com November 2010

13. Local Corn Basis History - Conrad Source: www.cashgrainbids.com November 2010

14. Source: Johnson, ISU Extension, November 2010 Corn Storage Costs Assumption: Corn is Valued at $5/bu. - Financed @ 5% APR.20.30.32.50.44.69.56.89 Storing monthly beyond harvest costs 4¢ to 7¢ per bushel

15. 2009/10 Estimated2010/2011 Projected Area Planted Area Harvested Yield Beginning Stocks Production Imports Supply, Total Crush Exports Seed Residual Use, Total Ending Stocks Average Farm Price U.S. Soybean Supply/Demand & Price 77.5 $9.59 76.4 44.0 138 3,359 15 3,512 1,752 1,501 90 18 3,361 151 77.7 $10.70 - $12.20 76.8 43.9 151 3,375 10 3,536 1,665 1,570 88 29 3,351 185 Source: USDA WASDE Report, Nov. 9 th, 2010 Midpoint $11.45/bu

16. $12.30/bu 18% $11.50/bu 65% $11.25/bu 17% Soybean Cash Price & Probability Forecast ’10-’11 Marketing Year Source: Wisner, ISU Biofuels Economist, Nov. 11 th, 2010

17. Nearby Soybean Chart Source: www.jimwyckoff.com, Nov.12 th, 2010 Nov. 9 th & 12 th : Key Reversal Up & Down in the same week

18. July$12.12 May $12.11 Mar $12.12 Jan.$12.05 Nov. 17 th, 2010 Soybean Futures Carry Lack of Carry, little incentive to hold soybeans beyond winter months without on-farm storage and little debt Source: www.cmegroup.com Nov. 2011 $11.27

19. Soybean Basis Trends Source: www.farmfutures.com November 2010

20. Source: Johnson, ISU Extension, November 2010 Soybean Storage Costs Assumption: Soybeans are Valued at $11/bu. - Financed @ 5% APR.10.28.38.46.66.64.94 Storing monthly beyond harvest costs 6¢ to 9¢ per bushel

21. 5. Global Production Prospects 6. U.S. & Global Economic Recovery 7. Biofuel Tax Credits 8. Random Shocks 1. Global Demand 2. Hedge & Index Fund Positions 3. Technical Signals 4. Outside Markets: Dollar, Crude Oil Factors that Impact Futures Price Source: Wisner & Hart, ISU Economists, Nov. 2010

22. 2011 U.S. Planted Acreage Forecast * Forecast Source: Wisner, ISU Biofuels Economist, Nov. 11 th, 2010

23. Corn Margin Trends Estimate Forecast Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010

24. 2011 Margin Estimates: Corn following Soybeans Overhead $59 Power Costs $102 Direct Costs $327 Crop Value $900 = 180 bu/A X $5/bu Direct Pmt. $23 Cash Rent $250 Cash Rent $200 $488 $923 $435 Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010

25. Soybean Margin Trends Estimate Forecast Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010

26. 2011 Margin Estimates: Soybeans following Corn Overhead $50 Power Costs $90 Direct Costs $173 Crop Value $550 = 50 bu/A X $11/bu Direct Pmt. $23 $313 $573 Cash Rent $250 Cash Rent $200 $260 Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010

27. 5 Crop Risk Management Strategies Source: Johnson, ISU Extension, Dec. 2010 Use Cash Flow Needs, Basis & Storage Costs to Drive 2010 Sales Know Your Cost of Production & Manage Profit Margins Lock-in 2011 Crop Costs, Make Pre-Harvest Sales Use Revenue Protection (RP) and Consider Additional Hail Coverage Use a Variety of Marketing Tools: Cash, Forward Contracts, HTA, Futures & Options

28. Crop Risk Management Web Sites Crop Risk Management - ISU Polk County Monthly Crop Marketing Newsletter & Webcast, Updates on Crop Insurance, Government Farm Program, Grain Contracts and Farmland Leasing www.extension.iastate.edu/polk/farmmanagement Ag-Decision Maker – ISU Extension (Decision Tools, Newsletters, Publications and Voiced Media) www.extension.iastate.edu/agdm Farm Doc - U of Illinois Extension Economics www.farmdoc.illinois.edu Ag Manager – K-State Extension Economics www.agmanager.info @g Online – Successful Farming Magazine www.agriculture.com /farm-management Source: Johnson, ISU Extension, Dec. 2010