Extension and Outreach/Department of Economics

2012 Market Price Outlook

ISU Northern Research Farm MeetingDuncan, IowaMar. 8, 2012

Chad HartAssistant 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 94.0

Yield (bu./acre) 153.9 164.7 152.8 147.2 164.0

Production (mil. bu.) 12,092 13,092 12,447 12,358 14,270

Beg. Stocks (mil. bu.) 1,624 1,673 1,708 1,128 801

Imports (mil. bu.) 14 8 28 20 15

Total Supply (mil. bu.) 13,729 14,774 14,182 13,506 15,086

Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,600 5,200

Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 4,950

Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,405 1,420

Exports (mil. bu.) 1,849 1,980 1,835 1,700 1,900

Total Use (mil. bu.) 12,056 13,066 13,055 12,705 13,470

Ending Stocks (mil. bu.) 1,673 1,708 1,128 801 1,616

Season-Average Price ($/bu.) 4.06 3.55 5.18 6.20 5.00

Source: USDA-WAOB, 2012 Unofficial Projections

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 75.0

Yield (bu./acre) 39.7 44.0 43.5 41.5 43.9

Production (mil. bu.) 2,967 3,359 3,329 3,056 3,250

Beg. Stocks (mil. bu.) 205 138 151 215 275

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

Total Supply (mil. bu.) 3,185 3,512 3,495 3,286 3,540

Crush (mil. bu.) 1,662 1,752 1,648 1,615 1,660

Seed & Residual (mil. bu.) 106 110 130 120 126

Exports (mil. bu.) 1,279 1,499 1,501 1,275 1,550

Total Use (mil. bu.) 3,047 3,361 3,280 3,011 3,335

Ending Stocks (mil. bu.) 138 151 215 275 205

Season-Average Price ($/bu.) 9.97 9.59 11.30 11.70 11.50

Source: USDA-WAOB, 2012 Unofficial Projections

Extension and Outreach/Department of Economics

2011 Corn Yields

Source: USDA-NASS

Extension and Outreach/Department of Economics

2011 Soybean Yields

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

Corn vs. Wheat

Source: CME Group, 3/7/2012

5.40

5.60

5.80

6.00

6.20

6.40

6.60

6.80

7.00

7.20$ p

er

bush

el

Corn Wheat

Extension and Outreach/Department of Economics

Hog Crush Margin

Source: Shane Ellis, 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: Shane Ellis, 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

Corn Export Shifts

Source: USDA-FAS

Japan

Mexico

Taiwan

EgyptUnknown

Other

South Korea

Total

China

-150

-100

-50

0

50

100

150

Mill

ion b

ush

els

-17.5%

33.6%

-13.0% -27.0%

-69.2%-48.2%

-39.5% -9.1%

1105.2%

Extension and Outreach/Department of Economics

Soy Export Shifts

Source: USDA-FAS

China

EU

JapanMexico

Taiwan

Total

UnknownIndonesia

Other

-400

-350

-300

-250

-200

-150

-100

-50

0

Mill

ion b

ush

els

-19.9%

-70.1%

-27.0% -8.9% -42.3% -36.1%

-31.8%

-25.0%

-2.0%

Extension and Outreach/Department of Economics

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

9/1 9/15 9/29 10/1310/2711/1011/24 12/8 12/22 1/5 1/19 2/2 2/16 3/2

Corn Soy

Change of Export Pace

Extension and Outreach/Department of Economics

5

7

9

11

13

15

17

2011 2012 2013

Bill

ion g

allo

ns

Conventional Biofuels Cellulosic Biofuels

Biodiesel Additional Advanced Biofuels

Renewable Fuels Standard (RFS)

CropYear

Billion Bushels

2011 4.64

2012 4.86

2013 5.07

2014 5.29

Extension and Outreach/Department of Economics

Corn Grind for Ethanol

Source: DOE-EIA

86

88

90

92

94

96

98

100

102

104

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mill

ion b

ush

els

Extension and Outreach/Department of Economics

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

1/3

/2007

7/3

/2007

1/3

/2008

7/3

/2008

1/3

/2009

7/3

/2009

1/3

/2010

7/3

/2010

1/3

/2011

7/3

/2011

1/3

/2012

7/3

/2012

1/3

/2013

7/3

/2013

1/3

/2014

7/3

/2014

1/3

/2015

$ p

er

gallo

nEthanol Blending Advantage

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 2011 Season-Average Corn Price

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

12/1

4/2

009

2/1

4/2

010

4/1

4/2

010

6/1

4/2

010

8/1

4/2

010

10/1

4/2

010

12/1

4/2

010

2/1

4/2

011

4/1

4/2

011

6/1

4/2

011

8/1

4/2

011

10/1

4/2

011

12/1

4/2

011

2/1

4/2

012

$ p

er

bush

el

Futures USDA

Cost

Extension and Outreach/Department of Economics

Projected 2011 Season-Average Soy Price

8.509.009.50

10.0010.5011.0011.5012.0012.5013.0013.5014.0014.50

12/1

4/2

009

2/1

4/2

010

4/1

4/2

010

6/1

4/2

010

8/1

4/2

010

10/1

4/2

010

12/1

4/2

010

2/1

4/2

011

4/1

4/2

011

6/1

4/2

011

8/1

4/2

011

10/1

4/2

011

12/1

4/2

011

2/1

4/2

012

$ p

er

bush

el

Futures USDA

Cost

Extension and Outreach/Department of Economics

Projected 2012 Season-Average Corn Price

4.50

5.00

5.50

6.00

6.50

7.00

$ p

er

bush

el

Futures USDA

Cost

Extension and Outreach/Department of Economics

Projected 2012 Season-Average Soy Price

10.50

11.00

11.50

12.00

12.50

13.00

13.50

14.00

12

/14/2

01

0

1/1

4/2

011

2/1

4/2

011

3/1

4/2

011

4/1

4/2

011

5/1

4/2

011

6/1

4/2

011

7/1

4/2

011

8/1

4/2

011

9/1

4/2

011

10

/14/2

01

1

11

/14/2

01

1

12

/14/2

01

1

1/1

4/2

012

2/1

4/2

012

$ p

er

bu

she

l

Futures USDA

Cost

Extension and Outreach/Department of Economics

Iowa Corn Prices vs. Costs

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00$ p

er

bush

el

Season-average Price Cost per Bushel

Extension and Outreach/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

12.00

13.00

14.00$ p

er

bu

she

l

Season-average Price Cost per Bushel

Extension and Outreach/Department of Economics

315

317

319

321

323

325

327

329

331

333

335

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Mill

ion a

cres

Principal Crop Area

Source: USDA-NASS

Extension and Outreach/Department of Economics

States with Room to Grow

Number is the difference in planted acres between 2008 and 2011

Extension and Outreach/Department of Economics

Iowa Crop Margins

-50

0

50

100

150

200

250

300

350

400

450

$ p

er

acr

e

Corn Soy

Extension and Outreach/Department of Economics

2012 Crop Prices

5.00

5.20

5.40

5.60

5.80

6.00

6.20

6.40

6.60

6.80

7.00

9/1

/20

11

9/1

5/2

011

9/2

9/2

011

10

/13/2

01

1

10

/27/2

01

1

11

/10/2

01

1

11

/24/2

01

1

12

/8/2

011

12

/22/2

01

1

1/5

/20

12

1/1

9/2

012

2/2

/20

12

2/1

6/2

012

3/1

/20

12

$ p

er

bush

el

10.00

10.40

10.80

11.20

11.60

12.00

12.40

12.80

13.20

13.60

14.00

$ p

er

bush

el

Corn Soy

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

6.30

6.40

6.50

Mar

-12

Jun-

12

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, 3/7/2012

5.96

5.425.31

5.22

Extension and Outreach/Department of Economics

11.7011.8011.9012.0012.1012.2012.3012.4012.5012.6012.7012.8012.9013.0013.1013.2013.3013.40

Mar

-12

Jun-

12

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, 3/7/2012

12.10

12.41

11.75

11.53

Extension and Outreach/Department of Economics

Thoughts for 2012 and BeyondGeneral economic conditions

Continued worldwide economic recovery is a major key for crop pricesUS job recovery, European financial concerns

Supply/demand concernsWorries about dry conditions in South America and in U.S.Biofuel growth and energy demandCorn has the upper hand in the acreage competitionWill supply be able to keep pace with demand?

2011/12: USDA: Corn $6.20; Soy $11.70Futures (as of 3/7/12): Corn $5.96; Soy $12.10

2012/13:Futures (as of 3/7/12): Corn $5.42; Soy $12.41

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/