1. Assistant Professor/Grain Markets Specialist
2012 Crop Market Outlook
Grundy County Fair
Grundy Center, Iowa
July 26, 2012
Chad Hart
Assistant Professor/Grain Markets Specialist 1 1

2. U.S. Corn Supply and Use 2008 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
146.0
Production
(mil. bu.)
12,092
13,092
12,447
12,358
12,970
Beg. Stocks
1,624
1,673
1,708
1,128
903
Imports 14 8 28 22 30
Total Supply
13,729
14,774
14,182
13,508
13,903
Feed & Residual
5,182
5,125
4,793
4,550
4,800
Ethanol
3,709
4,591
5,021
5,050
4,900
Food, Seed, & Other
1,316
1,370
1,407
1,405
1,420
Exports
1,849
1,980
1,835
1,600
Total Use
12,056
13,066
13,055
12,605
12,720
Ending Stocks
1,183
Season-Average Price
($/bu.)
4.06
3.55
5.18
6.20
5.90
These are the latest numbers from USDA. Record production and demand is gone. The drought and resulting high prices put a end to the records, except for the potential for prices to reach records again. Feed and export demand took the biggest cuts, but ethanol is also down. Ending stocks are projected to be near 2010 levels.
Source: USDA-WAOB 2 2

3. U.S. Soybean Supply and Use
2008
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
40.5
Production
(mil. bu.)
2,967
3,359
3,329
3,056
3,050
Beg. Stocks
205
138
151
215
170
Imports 13 15 14
Total Supply
3,185
3,512
3,495
3,286
3,235
Crush
1,662
1,752
1,648
1,675
1,610
Seed & Residual
106
110
130
101
124
Exports
1,279
1,499
1,501
1,340
1,370
Total Use
3,047
3,361
3,280
3,116
3,105
Ending Stocks
Season-Average Price
($/bu.)
9.97
9.59
11.30
12.40
14.00
For soybeans, a tight market continues to get tighter. USDA ratcheted down demand for the new crop to hold 2012/13 ending stocks at 130 million bushels. Exports took the big cut.
Source: USDA-WAOB 3 3

4. Prices
Prices have risen with the temperatures.

5. Crop Conditions Source: USDA-NASS
But dry conditions have weakened the crops, as the crop conditions show. The USDA update reflects the scale of yield loss as they took 20 bushels from corn and 3.4 bushels from soybeans.
Source: USDA-NASS

6. Projection from Corn Conditions
Significant downgrading of crop over the last few weeks. My yield projection (138), based on current crop conditions, is 23 bushels below the 20-year trend (161).

7. Projection from Soy Conditions
As the soybean crop can still benefit from later season rains, the yield projection has not slid as much. 40 bushels per acre, as opposed to a 20-year trend of just over 43 bushels per acre.

8. The latest seasonal outlook shows continuing dry conditions across the Corn Belt. In fact, most of the country is under a drought.
Source: NOAA-CPC

9. World Corn Production Source: USDA-WAOB
World corn production is on the upswing as the high prices over the last year provided incentives for corn farmers worldwide to increase production. The biggest shifts are in Argentina, Mexico, Canada, South Africa, and China.
Source: USDA-WAOB 9 9

10. World Soybean Production
Soybean prices have also spurred on increased soybean plantings worldwide. South America will lead the charge.
Source: USDA-WAOB 10 10

11. Hog Crush Margin
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 futures
Corn: 10 bushels per pig Soybean meal: 150 pounds per pig
While hog margins are not strong right now, the outlook is breakeven at best.
Source: Shane Ellis, ISU Extension

12. Cattle Crush Margin
The Crush Margin is the return after the feeder steer and corn costs.
Live weight: pounds Feeder weight: 750 pounds
Corn: 50 bushels per head
Cattle returns also look better next year.
Source: Shane Ellis, ISU Extension

13. U.S. Meat Production & Prices
Higher feed costs have led to lower meat production projections.
Source: USDA-WAOB 13 13

14. Corn Export Shifts Source: USDA-FAS
Corn exports for the 2011 crop have been slow, with only Mexico and China buying more.
Source: USDA-FAS

15. Soy Export Shifts Source: USDA-FAS
2011 soybean exports are also lower, but have been improving for the last few months. The key market here is China and they have purchased a lot of soybeans recently.
Source: USDA-FAS

16. Corn Advance Export Sales
Advance sales have backed off as prices have risen.
Source: USDA-FAS

17. Soy Advance Export Sales
Soybean advance sales have held up better.
Source: USDA-FAS

18. Corn Grind for Ethanol Source: DOE-EIA
Negative margins at ethanol plants have finally dragged down production.
Source: DOE-EIA

19. Ethanol Stocks Source: DOE-EIA
But stocks have begun to decline as we are in the heart of the summer driving season.
Source: DOE-EIA

20. U.S. Blended Gasoline Consumption
7.6 bil. gal.
But the industry still faces blend wall issues as fuel consumption has dropped with the economy and the E-10 market is basically full.
7.4 bil. gal.
Source: DOE-EIA, via USDA-ERS

21. Projected 2011 Season-Average Corn Price
Cost
The 2011 corn crop looks to be the most profitable corn crop we have ever had with prices averaging $2 per bushel more than costs.

22. Projected 2011 Season-Average Soy Price
Cost
The 2011 soybean crop was also highly profitable.

23. Projected 2012 Season-Average Corn Price
The drought has brought in some very strong and profitable prices.
Cost

24. Projected 2012 Season-Average Soy Price
Cost
The same is true for soybeans.

25. Iowa Corn Prices vs. Costs
For those that have a crop, corn margins have exploded.

26. Iowa Soybean Prices vs. Costs
Soybean margins have also opened with the drought.

27. Prices
Prices have risen with the temperatures.

28. Iowa Crop Margins
At trend yields, the margins are tremendous. But trend yields are not what we’re experiencing. Given my yield projections, take $100 off of the corn figure and $30 off from soybeans. Those are still very good margins.

29. Current Corn Futures 7.28 6.30 5.84 5.21 Source: CME Group, 7/23/2012
Based on current futures prices, national season-average cash price estimates for corn are $6.30 for the 2011 crop, $7.28 for 2012, $5.84 for 2013, and $5.21 for So longer-term prices are settling in at the high $4 to $5 range.
5.21
Source: CME Group, 7/23/2012

30. Current Soybean Futures
14.66
12.52
For soybeans, the estimates are $12.52 for the 2011 crop, $14.66 for 2012, $12.05 for 2013, and $11.77 for 2014.
12.05
11.77
Source: CME Group, 7/23/2012

31. Thoughts for 2012 and Beyond
Supply/demand concerns
How about some rain?
Biofuel growth and energy demand
Will supply be able to keep pace with demand?
Drought is pulling supply down
But high prices are diminishing demand
General economic conditions
Continued worldwide economic recovery is a key for crop prices
US job recovery, European financial concerns, China?
2011/12: USDA: Corn $6.20; Soy $12.40
Futures (as of 7/23/12): Corn $6.30; Soy $12.52
2012/13: USDA: Corn $5.90; Soy $14.00
Futures (as of 7/23/12): Corn $7.28; Soy $14.66

32. Thank you for your time. Any questions. My web site: http://www. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: