Department of Economics Crop Market Outlook B.E.S.T. Peer Group West Des Moines, Iowa October 23,...

Department of Economics

Crop Market Outlook

B.E.S.T. Peer GroupWest Des Moines, Iowa

October 23, 2008

Chad HartAssistant Professor/Grain Markets Specialist

[email protected]


U.S. Corn Supply and Use

Source: USDA-WAOB, Oct. 2008

+1.7

+128

+150

+136

-0.80$5.50 $4.70

-100

Department of EconomicsSource: USDA-NASS, Oct. 2008


U.S. Soybean Supply and Use


-0.5

+65+49

-25+50

-2.00$12.35 $10.35

+2.2

Department of EconomicsSource: USDA-NASS, Oct. 2008


World Corn Production



World Soybean Production


Department of EconomicsSources: CARD, Iowa State; IA Dept. of Ag.

Crop Basis Patterns

-140

-120

-100

-80

-60

-40

-20

0

Cen

ts p

er b

ushe

l

Average 2000-05 - Corn Average 2000-05 - Soy 2008 - Corn 2008 - Soy

Department of EconomicsSource: ISU, Dr. John Lawrence

Livestock Returns

-50

-25

0

25

50

Jan-0

1

Jul-0

1

Jan-0

2

Jul-0

2

Jan-0

3

Jul-0

3

Jan-0

4

Jul-0

4

Jan-0

5

Jul-0

5

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Jan-0

8

Jul-0

8

Ne

t re

turn

($

/he

ad

)

-400

-200

0

200

400

Ne

t re

turn

($

/he

ad

)

Farrow to Finish Steer Calves

Department of EconomicsSources: Various USDA-NASS reports

Livestock Adjustments

Sows farrowing: Sept-Nov 2008 3.01 million, down 5% from last yearDec-Feb 2009 2.98 million, down 3% from last year

Broiler-type eggs set: 195 million, down 8% from last yearBroiler chicks placed: 168 million, down 4% from last year

Feedlot placements: 2.06 million, down 3% from last year(2nd lowest since 1996)


Ethanol Margins

Source: ISU, CARD


Biodiesel Margins

Source: ISU, CARD


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

Calendar Year

Billion Bushels

2009 3.75

2010 4.29

2011 4.50

CropYear

Billion Bushels

2008 3.57

2009 4.11

2010 4.43


U.S. Blended Motor Gasoline Consumption

Source: Energy Information Administration


Outside Influences (Jan. 2007 = 1)

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.51/3

/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

Dow Oil Corn Soybeans


Outside Influences (Sept. 2008 = 1)

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

Dow Oil Corn Soybeans


130

135

140

145

150

155

160

165

170

Mill

ion

acr

es

Corn & Soybean AreaGrowth rate of 1.55 million acres per year


CRP Expiring Contracts

Source: USDA-FSA

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013

Mill

ion

acr

es


CRP Expiring Acres by State

Source: USDA-FSA

2008 1000 acres

2009 1000 acres

2010 1000 acres

2011 1000 acres

ND 137 TX 778 TX 669 TX 684

IA 136 CO 718 KS 615 KS 531

SD 123 KS 429 CO 452 MT 498

MN 98 ND 237 MT 383 ND 389

TX 88 SD 236 ND 258 CO 345

MT 76 MT 187 OK 210 MO 198

WI 64 OK 161 NE 180 OK 191

MO 48 NE 154 WA 172 NM 164

NE 45 IA 114 ID 155 NE 152

IL 42 WA 106 SD 148 MN 128


Input Costs

Source: USDA, Agricultural Prices, Sept. 2008


The Rise and Fall of Fertilizer Prices

Source: http://www.fertilizerworks.com/html/market/TheMarket.pdf


Urea Prices



DAP Prices



Ammonia Prices


A quote from “The Market: Fertilizer News and Analysis” October 16, 2008


Historical Iowa Corn Production Costs

Source: Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

0

100

200

300

400

500

600

$ pe

r ac

re

Machinery Seed, Chemicals, and Fertilizer Labor Land


Historical Iowa Soybean Production Costs

Source: Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

0

50

100

150

200

250

300

350

400

450

$ pe

r ac

re

Machinery Seed, Chemicals, and Fertilizer Labor Land


Iowa Corn Prices vs. Costs

Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

$ pe

r B

ushe

l

Season-average Price Cost


Iowa Soybean Prices vs. Costs

Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

$ pe

r B

ushe

l

Season-average Price Cost


Crop Costs for Central Illinois

Source: Schnitkey, July 2008

Corn Soybeans

2008 2009%

Change2008 2009

% Change

($/acre) ($/acre)

Fertilizer 118 215 82% Fertilizer 45 98 118%

Fuel and Oil 19 26 37% Crop Ins. 8 12 50%

Crop Ins. 20 27 35% Utilities 3 4 33%

Seed 62 78 26% Seed 42 53 26%

Utilities 4 5 25% Fuel and Oil

18 22 22%

Total Non-land Costs

388 529 36% Total Non-land Costs

239 321 34%


Rough Estimates for 2009 Iowa Corn

Non-land

Cost

Land Cost

Total Cost

Expected Yield

Cost per Bushel

($/acre) (bu/acre) ($/bu)

513.05 190.00 703.05 165 4.26

513.05 225.00 738.05 165 4.47

December 2009 Corn Futures = $4.65 (10/21/08)


Rough Estimates for 2009 Iowa Soybeans

Non-land

Cost

Land Cost

Total Cost

Expected Yield

Cost per Bushel

($/acre) (bu/acre) ($/bu)

268.10 190.00 458.10 49 9.35

268.10 225.00 493.10 49 10.06

November 2009 Soybean Futures = $9.47 (10/21/08)


Crop Exports

Source: USDA, PSD

0.0

0.5

1.0

1.5

2.0

2.5

Bill

ion

bush

els

Corn Soybeans


Population2008 2020 2050

(billion) (billion) (billion)World 6.678 World 7.601 World 9.393

China 1.330

China 1.431

India 1.808

India 1.148

India 1.362

China 1.424

U.S. 0.304 U.S. 0.336 U.S. 0.420Indonesia 0.238

Indonesia 0.268

Nigeria 0.357

Brazil 0.192

Brazil 0.212

Indonesia 0.313

Pakistan 0.168

Pakistan 0.204

Bangladesh 0.280

Bangladesh 0.154

Bangladesh 0.190

Pakistan 0.278

Russia 0.141

Nigeria 0.184

Brazil 0.228

Nigeria 0.138

Russia 0.132 Congo 0.189

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


Real GDP

0

1

2

3

4

5

6

7

8

9

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Perc

en

t C

han

ge

World Developed Market Economies Developing Market Economies

Sources: International Financial Statistics, Global Insight


Per Capita Meat Consumption

90

110

130

150

170

190

210

230

250

270

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Po

un

ds

China EU Mexico Russia South Africa South Korea U.S.

Source: FAPRI


Exchange Rate Ratios (Jan. 2007 = 1)

Source: OANDA.com

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.51

/1/2

00

7

3/1

/20

07

5/1

/20

07

7/1

/20

07

9/1

/20

07

11/1

/20

07

1/1

/20

08

3/1

/20

08

5/1

/20

08

7/1

/20

08

9/1

/20

08

EU Brazil Japan South Korea


U.S. Stocks-to-Use Ratios

0%

5%

10%

15%

20%

25%

30%

Corn Soybeans Corn - Avg. 1990-2006 Soy - Avg. 1990-2006


World Stocks-to-Use Ratios

0%

5%

10%

15%

20%

25%

Corn Soybeans Corn - Avg. 1990-2006 Soy - Avg. 1990-2006


Thoughts for 2008General economic conditions

A lot of recent market trade has been tied to reaction to the financial crisis and the world’s responseEconomic slowdown raises concern about export and energy demand

Energy demandHigher energy prices did constrain demandWill it recover?

Most important ag. statistic: Crude oil price or Dow Jones Index

Current futures are indicating 2008 season-average prices of $3.80-4.20 for corn and $8.50-9.00 for soybeans


Thoughts for 2009 and BeyondMany of the storylines from the past few years will continue

Tight stocks for both corn and soybeansThe competition for acreageEthanol’s buildout & livestock’s adjustmentEnergy price & general economy concerns

Market volatility will remain highLink to the energy marketsMore market players with different trading objectives

Given current factors, the 2009 outlook is for crop prices around $4.50 for corn and $9.25 for soybeans


Thank you for your time!

Any questions?

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