markets, policy, and outlook

Extension and Outreach/Department of Economics

Markets, Policy, and Outlook

Iowa Corn GrowersCoralville, IowaSept. 7, 2012

Chad HartAssociate Professor/Grain Markets Specialist

chart@iastate.edu515-294-9911

Extension and Outreach/Department of Economics

U.S. Corn Supply and Use2008 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 (mil. bu.) 1,624 1,673 1,708 1,128 1,021

Imports (mil. bu.) 14 8 28 25 75

Total Supply (mil. bu.) 13,729 14,774 14,182 13,511 11,875

Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,550 4,075

Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 4,500

Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,390 1,350

Exports (mil. bu.) 1,849 1,980 1,835 1,550 1,300

Total Use (mil. bu.) 12,056 13,066 13,055 12,490 11,225

Ending Stocks (mil. bu.) 1,673 1,708 1,128 1,021 650

Season-Average Price ($/bu.) 4.06 3.55 5.18 6.25 8.20

Source: USDA-WAOB

Extension and Outreach/Department of Economics

U.S. Soybean Supply and Use2008 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 (mil. bu.) 205 138 151 215 145

Imports (mil. bu.) 13 15 14 15 20

Total Supply (mil. bu.) 3,185 3,512 3,495 3,286 2,857

Crush (mil. bu.) 1,662 1,752 1,648 1,690 1,515

Seed & Residual (mil. bu.) 106 110 130 101 116

Exports (mil. bu.) 1,279 1,499 1,501 1,350 1,110

Total Use (mil. bu.) 3,047 3,361 3,280 3,141 2,742

Ending Stocks (mil. bu.) 138 151 215 145 115

Season-Average Price ($/bu.) 9.97 9.59 11.30 12.45 16.00

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Prices

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

5/2

1/2

01

2

6/4

/20

12

6/1

8/2

01

2

7/2

/20

12

7/1

6/2

01

2

7/3

0/2

01

2

8/1

3/2

01

2

8/2

7/2

01

2

$ p

er

bu

she

l

11.50

12.25

13.00

13.75

14.50

15.25

16.00

16.75

$ p

er

bu

she

l

Corn Soybeans

Extension and Outreach/Department of Economics

Crop Conditions

Source: USDA-NASS

20253035404550556065707580

% G

oo

d to

Exc

elle

nt

Corn Soybeans

Extension and Outreach/Department of Economics

Corn Harvested Acre Adjustments

Extension and Outreach/Department of Economics

Projected Corn Yields

Extension and Outreach/Department of Economics

Objective Corn Yield Data

Source: USDA-NASS

Extension and Outreach/Department of Economics

World Corn Production

Source: USDA-WAOB

Extension and Outreach/Department of Economics

World Soybean Production

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Hog Crush Margin

Source: ISU Extension

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 futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig

Extension and Outreach/Department of Economics

Cattle Crush Margin

Source: ISU Extension

The Crush Margin is the return after the feeder steer and corn costs.Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head

Extension and Outreach/Department of Economics

U.S. Meat Production & Prices

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Corn Exports

Source: USDA-FAS

0

500

1,000

1,500

2,000

2,500

9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1

Mill

ion

bu

sh

els

Week

2009 2010 2011

Extension and Outreach/Department of Economics

Soy Exports

Source: USDA-FAS

0

400

800

1,200

1,600

9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1

Mill

ion

bu

sh

els

Week

2009 2010 2011

Extension and Outreach/Department of Economics

Corn Advance Export Sales

Source: USDA-FAS

Japan19%

Mexico28%

South Korea3%

Taiwan1%Egypt

0%

China10%

Unknown33%

Other6%

Extension and Outreach/Department of Economics

Soy Advance Export Sales

Source: USDA-FAS

China64%

EU1%

Japan1%

Mexico3%

Taiwan1%

Indonesia1%

Unknown26%

Other3%

Extension and Outreach/Department of Economics

Corn Grind for Ethanol

84

86

88

90

92

94

96

98

100

102

104

Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12

Mill

ion

bush

els

Extension and Outreach/Department of Economics

Ethanol Stocks

Source: DOE-EIA

650

700

750

800

850

900

950

1000

Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12

Mill

ion

gallo

ns

Extension and Outreach/Department of Economics

U.S. Blended Gasoline Consumption

Source: DOE-EIA, via USDA-ERS

7.6 bil. gal.

7.4 bil. gal.

Extension and Outreach/Department of Economics

Projected 2012 Season-Average Corn Price

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

12

/14

/20

10

2/1

4/2

01

1

4/1

4/2

01

1

6/1

4/2

01

1

8/1

4/2

01

1

10

/14

/20

11

12

/14

/20

11

2/1

4/2

01

2

4/1

4/2

01

2

6/1

4/2

01

2

8/1

4/2

01

2

$ p

er

bu

she

l

Futures USDA

Extension and Outreach/Department of Economics

Projected 2012 Season-Average Soy Price

10.5011.0011.5012.0012.5013.0013.5014.0014.5015.0015.5016.0016.50

12

/14

/20

10

2/1

4/2

01

1

4/1

4/2

01

1

6/1

4/2

01

1

8/1

4/2

01

1

10

/14

/20

11

12

/14

/20

11

2/1

4/2

01

2

4/1

4/2

01

2

6/1

4/2

01

2

8/1

4/2

01

2

$ p

er

bu

she

l

Futures USDA

Extension and Outreach/Department of Economics

Prices

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

5/2

1/2

01

2

6/4

/20

12

6/1

8/2

01

2

7/2

/20

12

7/1

6/2

01

2

7/3

0/2

01

2

8/1

3/2

01

2

8/2

7/2

01

2

$ p

er

bu

she

l

11.50

12.25

13.00

13.75

14.50

15.25

16.00

16.75

$ p

er

bu

she

l

Corn Soybeans

Extension and Outreach/Department of Economics

5.80

6.00

6.20

6.40

6.60

6.80

7.00

7.20

7.40

7.60

7.80

8.00

8.20

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Mar

-14

Jun-

14

Sep

-14

Dec

-14

Mar

-15

Jun-

15

Sep

-15

Dec

-15

$ pe

r bu

shel

Current Corn Futures

Source: CME Group, 9/6/2012

7.44

6.24

5.64

Extension and Outreach/Department of Economics

12.50

13.00

13.50

14.00

14.50

15.00

15.50

16.00

16.50

17.00

17.50

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Mar

-14

Jun-

14

Sep

-14

Dec

-14

Mar

-15

Jun-

15

Sep

-15

$ pe

r bu

shel

Current Soybean Futures

Source: CME Group, 9/6/2012

16.23

13.1712.44

Extension and Outreach/Department of Economics

Early Prices for 2013 Crops

4.50

5.00

5.50

6.00

6.50

5/1

/20

12

5/1

5/2

01

2

5/2

9/2

01

2

6/1

2/2

01

2

6/2

6/2

01

2

7/1

0/2

01

2

7/2

4/2

01

2

8/7

/20

12

8/2

1/2

01

2

9/4

/20

12

$ p

er

bu

she

l

10.50

11.20

11.90

12.60

13.30

$ p

er

bu

she

l

Corn Soybeans

Extension and Outreach/Department of Economics

Total Acreage Shift

Source: USDA-NASS

Extension and Outreach/Department of Economics

Acreage Shift by State

Source: USDA-NASS

Top: Planted in 2012Bottom: Change from 2011Units: 1,000 acres

Extension and Outreach/Department of Economics

Acreage Shift by Crop

Source: USDA-NASS

Acreage change from 2011Units: 1,000 acres

Extension and Outreach/Department of Economics

Thoughts for 2013 and BeyondSupply/demand concerns

Soil moistureSouth America gets 1st chance to respond to drought pricingWill supply be able to keep pace with demand?

Drought is pulling supply downBut high prices are diminishing demand

General economic conditionsContinued worldwide economic recovery is a key for crop pricesUS job recovery, European financial concerns, China?

2012/13: USDA: Corn $8.20; Soy $16.00Futures (as of 9/6/12): Corn $7.44; Soy $16.23

2013/14: Futures Corn $6.24; Soy $13.172014/15: Futures Corn $5.64; Soy $12.44

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Total Cost Expected Yield bu/A Cost Per Bushel

Corn After Corn

Corn After Beans

Beans After Corn

2013 Crop Cost Estimates

$832

$778

$567

165

180

50

$5.04

$4.32

$11.34

Source: ISU Extension Economics, July 2012

Extension and Outreach/Department of Economics

Corn Projections

Source: FAPRI-MO

2013 2014 2015 2016 2017

Area Planted (mil. acres) 96.1 93.1 93.2 92.7 92.8

Yield (bu./acre) 163.2 165.7 167.9 170.2 172.4

Production (mil. bu.) 14,386 14,159 14,354 14,468 14,676

Beg. Stocks (mil. bu.) 645 1,510 1,675 1,766 1,789

Imports (mil. bu.) 25 25 25 25 25

Total Supply (mil. bu.) 15,056 15,695 16,054 16,259 16,490

Feed & Residual (mil. bu.) 4,852 4,855 4,964 5,022 5,082

Ethanol (mil. bu.) 5,386 5,649 5,665 5,643 5,657

Food, Seed, & Other (mil. bu.) 1,435 1,460 1,473 1,472 1,490

Exports (mil. bu.) 1,890 2,055 2,186 2,322 2,445

Total Use (mil. bu.) 13,546 14,020 14,288 14,470 14,675

Ending Stocks (mil. bu.) 1,510 1,675 1,766 1,789 1,815

Season-Average Price ($/bu.) 5.20 4.86 4.74 4.74 4.75

Extension and Outreach/Department of Economics

Soybean Projections

Source: FAPRI-MO

2013 2014 2015 2016 2017

Area Planted (mil. acres) 77.0 76.0 76.4 77.1 77.4

Yield (bu./acre) 43.8 44.5 44.9 45.5 46.0

Production (mil. bu.) 3,326 3,333 3,385 3,459 3,510

Beg. Stocks (mil. bu.) 110 182 186 180 177

Imports (mil. bu.) 15 15 15 15 15

Total Supply (mil. bu.) 3,452 3,530 3,586 3,653 3,702

Crush (mil. bu.) 1,683 1,719 1,740 1,762 1,780

Seed & Residual (mil. bu.) 128 131 133 136 138

Exports (mil. bu.) 1,460 1,494 1,533 1,578 1,609

Total Use (mil. bu.) 3,270 3,344 3,406 3,476 3,526

Ending Stocks (mil. bu.) 182 186 180 177 176

Season-Average Price ($/bu.) 11.28 11.05 11.26 11.41 11.57

Extension and Outreach/Department of Economics

Land Allocation

Source: FAPRI-MO

Extension and Outreach/Department of Economics

U.S. Per-Capita Meat Consumption

Source: FAPRI-MO

Extension and Outreach/Department of Economics

U.S. Pork Projections

Source: FAPRI-MO

Extension and Outreach/Department of Economics

U.S. Beef Projections

Source: FAPRI-MO

Extension and Outreach/Department of Economics

Food Price Projections

Source: FAPRI-MO

Extension and Outreach/Department of Economics

Senate Proposal, 2013-2017

Source: FAPRI-MO

$ per acre

Extension and Outreach/Department of Economics

House Proposal, 2013-2017

Source: FAPRI-MO

$ per acre

Extension and Outreach/Department of Economics

Planted Acres, 2013-2017

Source: FAPRI-MO

Million acres

Extension and Outreach/Department of Economics

Prices, 2013-2017

Source: FAPRI-MO

Extension and Outreach/Department of Economics

Gov. Expenditures, 2013-2017

Source: FAPRI-MO

$ million

Extension and Outreach/Department of Economics

Change in Expenditures, 2013-2017

Source: FAPRI-MO

Extension and Outreach/Department of Economics

Payments as a Share of Receipts

Source: FAPRI-MO

Extension and Outreach/Department of EconomicsSource: Babcock, ISU

Extension and Outreach/Department of Economics

Iowa Corn Yields

Source: USDA-NASS

0

20

40

60

80

100

120

140

160

180

200

Bu

she

ls p

er

acr

e

Extension and Outreach/Department of Economics

Land Value & Cash Rental Rate Trends

Source: ISU Extension Economics

Extension and Outreach/Department of Economics

Positive Factors for Land Values

Extension and Outreach/Department of Economics

Negative Factors for Land Values

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Grain Transportation

Source: USDA-AMS

Extension and Outreach/Department of Economics

Grain Transportation

Source: USDA-AMS

Extension and Outreach/Department of Economics

Lock Breakdowns

Source: Steven Stockton

Extension and Outreach/Department of Economics

Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/