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The Outlook for 2010: Big Crops, Big Demands. CFNB Crop Insurance Meeting Storm Lake, Iowa Feb. 25, 2010 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911. U.S. Corn Supply and Use. Source: USDA. Source: USDA. U.S. Corn Harvest Progress. - PowerPoint PPT Presentation
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Department of Economics
The Outlook for 2010: Big Crops, Big Demands
CFNB Crop Insurance MeetingStorm Lake, Iowa
Feb. 25, 2010
Chad HartAssistant Professor/Grain Markets Specialist
Department of Economics
U.S. Corn Supply and Use
Source: USDA
2007 2008 2009 2010
Area Planted (mil. acres) 93.5 86.0 86.5 89.0
Yield (bu./acre) 150.7 153.9 165.2 160.9
Production (mil. bu.) 13,038 12,092 13,151 13,160
Beg. Stocks (mil. bu.) 1,304 1,624 1,673 1,719
Imports (mil. bu.) 20 14 10 15
Total Supply (mil. bu.) 14,362 13,729 14,834 14,894
Feed & Residual (mil. bu.) 5,913 5,246 5,550 5,350
Ethanol (mil. bu.) 3,049 3,677 4,300 4,500
Food, Seed, & Other (mil. bu.) 1,338 1,276 1,265 1,290
Exports (mil. bu.) 2,437 1,858 2,000 2,100
Total Use (mil. bu.) 12,737 12,056 13,115 13,240
Ending Stocks (mil. bu.) 1,624 1,673 1,719 1,654
Season-Average Price ($/bu.) 4.20 4.06 3.70 3.60
Department of EconomicsSource: USDA
Department of Economics
U.S. Corn Harvest Progress
Source: USDA
0
20
40
60
80
100
% H
arv
est
ed
5-Year Average 2009 1992
Department of Economics
U.S. Soybean Supply and Use
Source: USDA
2007 2008 2009 2010
Area Planted (mil. acres) 64.7 75.7 77.5 77.0
Yield (bu./acre) 41.7 39.7 44.0 42.9
Production (mil. bu.) 2,677 2,967 3,361 3,260
Beg. Stocks (mil. bu.) 574 205 138 210
Imports (mil. bu.) 10 13 8 8
Total Supply (mil. bu.) 3,261 3,185 3,507 3,478
Crush (mil. bu.) 1,803 1,662 1,720 1,655
Seed & Residual (mil. bu.) 93 101 177 168
Exports (mil. bu.) 1,159 1,283 1,400 1,325
Total Use (mil. bu.) 3,056 3,047 3,297 3,147
Ending Stocks (mil. bu.) 205 138 210 330
Season-Average Price ($/bu.) 10.10 9.97 9.45 8.80
Department of EconomicsSource: USDA
Department of Economics
U.S. Soybean Harvest Progress
Source: USDA
0
20
40
60
80
100
% H
arv
est
ed
5-Year Average 2009 1985
Department of Economics
Storage Issues
Source: Hurburgh and Elmore,ICM News, 10/15/09
Department of Economics
World Corn Production
Source: USDA
Department of Economics
Corn – Argentina & Brazil
Source: USDA
35
38
41
44
47
50
Mill
ion a
cre
s
1800
2100
2400
2700
3000
3300
Mill
ion b
ush
els
Area Harvested Production
Department of Economics
World Soybean Production
Source: USDA
Department of Economics
Soybeans – Argentina & Brazil
Source: USDA
65
75
85
95
105
Mill
ion a
cre
s
2700
3150
3600
4050
4500
Mill
ion b
ush
els
Area Harvested Production
Department of Economics
Hog Returns vs. Corn Prices
Sources: ISU Extension, Farrow-to-Finish;USDA-NASS
-50
-40
-30
-20
-10
0
10
20
30
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
$ p
er
head
2
3
4
5
6
$ p
er
bush
el
Department of Economics
Cattle Returns vs. Corn Prices
Sources: ISU Extension, Yearling Steers;USDA-NASS
-300
-250
-200
-150
-100
-50
0
50
100
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
$ p
er
head
2
3
4
5
6
$ p
er
bush
el
Department of Economics
Hog Crush Margin
Source: Dr. John Lawrence, 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
Department of Economics
Cattle Crush Margin
Source: Dr. John Lawrence, 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
Department of Economics
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Canada Mexico Brazil EU China South KoreaJapan Australia
Exchange Rates (Jan. 2003 = 1)
Source: USDA, ERS
Department of Economics
Corn Export Sales
Source: USDA, FAS
0
500
1,000
1,500
2,000
2,500
Week
Mill
ion b
ush
els
2007 2008 2009
Department of Economics
2009 U.S. Corn Exports
Source: USDA, FAS
Other25%
Taiwan6%
South Korea15%
Egypt4%
Mexico17%
Japan33%
Department of Economics
Soybean Export Sales
Source: USDA, FAS
0
200
400
600
800
1,000
1,200
1,400
Week
Mill
ion b
ush
els
2007 2008 2009
Department of Economics
2009 U.S. Soybean Exports
Source: USDA, FAS
Mexico5%
Japan4%
Other19%
EU8%
China64%
Department of Economics
Renewable Fuels Standard (RFS)
0
2
4
6
8
10
12
14
16
2009 2010 2011
Bill
ion g
allo
ns
Additional Advanced Biofuels Biodiesel
Cellulosic Biofuels Conventional Biofuels
CropYear
Billion Bushels
2008 3.57
2009 4.11
2010 4.43
2011 4.64
Department of Economics
Ethanol Margins
Source: ISU, CARD
Department of Economics
Ethanol Blending Advantage
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
1/3
/20
07
4/3
/20
07
7/3
/20
07
10/3
/20
07
1/3
/20
08
4/3
/20
08
7/3
/20
08
10/3
/20
08
1/3
/20
09
4/3
/20
09
7/3
/20
09
10/3
/20
09
1/3
/20
10
Ce
nts
pe
r ga
llon
Department of Economics
0
20
40
60
80
100
120
140
Jan-8
6
Jan-8
8
Jan-9
0
Jan-9
2
Jan-9
4
Jan-9
6
Jan-9
8
Jan-0
0
Jan-0
2
Jan-0
4
Jan-0
6
Jan-0
8
Jan-1
0
Jan-1
2
Jan-1
4
Jan-1
6
Jan-1
8
$ p
er
barr
el
Crude Oil Prices
Sources: EIA, NYMEX
Department of Economics
Outside Influences (Jan. 2007 = 1)
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.31/3
/2007
3/3
/2007
5/3
/2007
7/3
/2007
9/3
/2007
11/3
/2007
1/3
/2008
3/3
/2008
5/3
/2008
7/3
/2008
9/3
/2008
11/3
/2008
1/3
/2009
3/3
/2009
5/3
/2009
7/3
/2009
9/3
/2009
11/3
/2009
1/3
/2010
Corn Soybeans Ethanol Gasoline
Department of Economics
1.5
2
2.5
3
3.5
0% 5% 10% 15% 20% 25% 30%
Stocks-to-use ratio
Pric
e ($
per
bus
hel)
Corn1990 - 2006
Department of Economics
2007/082008/09May
June
July
AugSept Oct
JanNov Dec
Feb
1.50
2.00
2.50
3.00
3.50
4.00
4.50
0% 5% 10% 15% 20% 25% 30%
Stocks-to-use ratio
Pric
e ($
per
bus
hel)
Corn
Department of Economics
Soybeans2007/082008/09 June
JulySept Oct
NovMayAug DecJanFeb
4
5
6
7
8
9
10
11
0% 5% 10% 15% 20%
Stocks-to-use Ratio
Pric
e ($
per
bus
hel)
Department of Economics
Corn Futures Trade
Source: CFTC
0
2
4
6
81/3
/2006
4/3
/2006
7/3
/2006
10/3
/2006
1/3
/2007
4/3
/2007
7/3
/2007
10/3
/2007
1/3
/2008
4/3
/2008
7/3
/2008
10/3
/2008
1/3
/2009
4/3
/2009
7/3
/2009
10/3
/2009
1/3
/2010
Bill
ion b
ush
els
0
2
4
6
8
$ p
er
bush
el
Total Trade Non Comm Net Price
Department of Economics
Soybean Futures Trade
Source: CFTC
-1
0
1
2
3
41
/3/2
00
6
4/3
/20
06
7/3
/20
06
10/3
/20
06
1/3
/20
07
4/3
/20
07
7/3
/20
07
10/3
/20
07
1/3
/20
08
4/3
/20
08
7/3
/20
08
10/3
/20
08
1/3
/20
09
4/3
/20
09
7/3
/20
09
10/3
/20
09
1/3
/20
10
Bill
ion
bush
els
0
4
8
12
16
20
$ p
er
bush
el
Total Trade Non Comm Net Price
Department of Economics
Iowa Crop Basis
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
Cen
ts p
er b
ushe
l
Average 2000-05 - Corn Average 2000-05 - Soy 2009 - Corn2009 - Soy 2010 - Corn 2010 - Soy
Department of Economics
Projected 2009 Season-Average Corn Price
2.50
3.00
3.50
4.00
4.50
5.00
5/1
/2009
6/1
/2009
7/1
/2009
8/1
/2009
9/1
/2009
10/1
/2009
11/1
/2009
12/1
/2009
1/1
/2010
2/1
/2010
$ p
er
bush
el
Futures USDA
Department of Economics
Projected 2009 Season-Average Soy Price
8.00
8.50
9.00
9.50
10.00
10.50
5/1
/2009
6/1
/2009
7/1
/2009
8/1
/2009
9/1
/2009
10/1
/2009
11/1
/2009
12/1
/2009
1/1
/2010
2/1
/2010
$ p
er
bush
el
Futures USDA
Department of Economics
Corn Futures
Source: CBOT, 2/23/10
3.50
3.60
3.70
3.80
3.90
4.00
4.10
Mar-
10
Ap
r-1
0
May-
10
Jun-1
0
Jul-1
0
Au
g-1
0
Se
p-1
0
Oct
-10
No
v-10
De
c-10
$ p
er
bu
sh
el
0.11
0.22
0.29
Department of Economics
Soybean Futures
Source: CBOT, 2/23/10
9.20
9.30
9.40
9.50
9.60
9.70
Mar-
10
Ap
r-1
0
May-
10
Jun-1
0
Jul-1
0
Au
g-1
0
Se
p-1
0
Oct
-10
No
v-10
$ p
er
bu
sh
el
0.07
0.13
0.09
-0.10
Department of Economics
Feb. Prices on Dec. Corn
3.85
3.90
3.95
4.00
4.05
4.10
$ p
er
bu
sh
el
’10 Ave. $3.96, so far
’09 Ave. $4.04
Department of Economics
8.80
8.90
9.00
9.10
9.20
9.30
9.40
9.50
$ p
er
bu
sh
el
Feb. Prices on Nov. Corn
’10 Ave. $9.21, so far
’09 Ave. $8.80
Department of Economics
Ratio: Nov. 2010 Soy/Dec. 2010 Corn
Source: CBOT
2
2.1
2.2
2.3
2.4
2.5
2.6
2.71/2
/200
9
2/2
/200
9
3/2
/200
9
4/2
/200
9
5/2
/200
9
6/2
/200
9
7/2
/200
9
8/2
/200
9
9/2
/200
9
10/2
/20
09
11/2
/20
09
12/2
/20
09
1/2
/201
0
2/2
/201
0
Department of Economics
Input Costs
Source: USDA, Agricultural Prices, Jan. 29, 2010
Department of Economics
Iowa Corn Prices vs. Costs
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
$ pe
r B
ushe
l
Season-average Price Cost per Bushel
Department of Economics
Iowa Soybean Prices vs. Costs
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
$ pe
r B
ushe
l
Season-average Price Cost per Bushel
Department of Economics
Thoughts for 2009/10 and BeyondGeneral economic conditions
Projected economic recovery is a major key for crop pricesWeakness in the dollar helps exports, but dollar may fight backNearby crude oil prices floating in mid to upper $70’s
Supply/demand concernsLivestock numbers continue to declineSouth America: Record soybean crop and large corn crop
2009/10: USDA: Corn $3.70, Soy $9.45Futures: Corn $3.52, Soy $9.32
2010/11: USDA: Corn $3.60, Soy $8.80Futures: Corn $3.87, Soy $8.94
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/