Extension and Outreach/Department of Economics

Ag. Markets: Bubble or Balloon?

US Bank Ag. ConferenceAshland, Nebraska

Sept. 25, 2012

Chad HartAssociate Professor/Grain Markets Specialist

chart@iastate.edu515-294-9911

Extension and Outreach/Department of Economics

Prices

Extension and Outreach/Department of Economics

U.S. Meat Production & Prices

Source: USDA-WAOB

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

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

Wheat Projections

Source: FAPRI-MO

2013 2014 2015 2016 2017

Area Planted (mil. acres) 57.2 54.3 52.0 51.0 50.9

Yield (bu./acre) 45.6 46.0 46.4 46.9 47.3

Production (mil. bu.) 2,240 2,153 2,078 2,059 2,071

Beg. Stocks (mil. bu.) 700 727 746 746 738

Imports (mil. bu.) 124 116 114 114 115

Total Supply (mil. bu.) 3,063 2,995 2,938 2,920 2,925

Feed & Residual (mil. bu.) 168 146 152 147 144

Seed (mil. bu.) 73 70 69 69 69

Food & Other (mil. bu.) 958 972 984 993 1,001

Exports (mil. bu.) 1,139 1,061 987 972 977

Total Use (mil. bu.) 2,337 2,249 2,192 2,182 2,191

Ending Stocks (mil. bu.) 727 746 746 738 733

Season-Average Price ($/bu.) 7.01 6.22 5.98 6.01 6.07

Extension and Outreach/Department of Economics

AVERAGE VALUESAVERAGE VALUESall grades 1950−2011

Extension and Outreach/Department of Economics

AVERAGE VALUESAVERAGE VALUESadjusted for inflation

Extension and Outreach/Department of Economics

PERCENTAGE CHANGE PERCENTAGE CHANGE from previous year, 1950−2011

Extension and Outreach/Department of Economics

PERCENTAGE CHANGEPERCENTAGE CHANGE

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

Land Value & Cash Rental Rate Trends

Source: ISU Extension Economics

Extension and Outreach/Department of Economics

Land Allocation

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

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 Economics

Population2010   2020   2050

(billion) (billion) (billion)World 6.831 World 7.558 World 9.202

China 1.330

China 1.385

India 1.657

India 1.173

India 1.326

China 1.304

U.S. 0.310 U.S. 0.341 U.S. 0.439Indonesia 0.243

Indonesia 0.268

Indonesia 0.313

Brazil 0.201

Brazil 0.223 Ethiopia 0.278

Pakistan 0.177

Pakistan 0.204

Pakistan 0.276

Bangladesh 0.158 Nigeria 0.182 Nigeria 0.264

Nigeria 0.152Bangladesh 0.181

Brazil 0.260

Russia 0.139Russia 0.132

Bangladesh 0.234

Japan 0.127

Mexico 0.125 Congo 0.189

Source: U.S. Census Bureau, International Data Base

Extension and Outreach/Department of Economics

GDP Growth

Source: USDA-ERS

Extension and Outreach/Department of Economics

GDP Growth

Source: USDA-ERS

Extension and Outreach/Department of Economics

World Meat Consumption

Source: USDA-PSD

0

100

200

300

400

500

600

Bill

ion

po

un

ds

Beef Pork Chicken Turkey

Extension and Outreach/Department of Economics

Liquid Fuel Usage2007 2015 2020 2025 2030 2035

(Million Barrels Oil Equivalent per

Day) (Percent of 2007 Value)

United States 20.6 98% 100% 102% 104% 107%

Canada 2.3 96% 96% 96% 100% 104%

Mexico 2.1 105% 110% 114% 129% 138%

Europe 15.3 92% 88% 88% 89% 90%

Japan 5.0 84% 86% 86% 84% 82%

China 7.6 132% 153% 178% 201% 222%

India 2.8 114% 129% 139% 154% 168%

Africa 3.1 113% 116% 126% 135% 148%

Central and South America 6.0 110% 112% 117% 125% 133%

World 86.1 103% 107% 113% 121% 128%

Source: DOE-EIA

Extension and Outreach/Department of Economics

Population2010   2020   2050

(billion) (billion) (billion)World 6.831 World 7.558 World 9.202

China 1.330

China 1.385

India 1.657

India 1.173

India 1.326

China 1.304

U.S. 0.310 U.S. 0.341 U.S. 0.439Indonesia 0.243

Indonesia 0.268

Indonesia 0.313

Brazil 0.201

Brazil 0.223 Ethiopia 0.278

Pakistan 0.177

Pakistan 0.204

Pakistan 0.276

Bangladesh 0.158 Nigeria 0.182 Nigeria 0.264

Nigeria 0.152Bangladesh 0.181

Brazil 0.260

Russia 0.139Russia 0.132

Bangladesh 0.234

Japan 0.127

Mexico 0.125 Congo 0.189

Source: U.S. Census Bureau, International Data Base

Extension and Outreach/Department of Economics

10 Largest Economies (GDP Rank)2020 2030 2040 2050

US US China China

China China US US

Japan India India India

Germany Japan Japan Brazil

India Germany Brazil Japan

France Brazil Germany Russia

UK France Russia Mexico

Brazil Russia France Germany

Italy UK UK Indonesia

Canada Italy Mexico France

Source: PwC, The World in 2050, January 2011

Extension and Outreach/Department of Economics

Population vs. arable land

share of global share of global population arable land

China 19% 5%

India 17% 10%

US 5% 13%

Extension and Outreach/Department of Economics

Arable Land

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/