1. Associate Professor/Crop Marketing Specialist
Ag Outlook
Ireton, Iowa
Feb. 1, 2017
Chad Hart
Associate Professor/Crop Marketing Specialist 1 1

2. 2017
2016
2015
Data Source: USDA/ERS

3. 2017 Beef Cattle Situation
Transition to larger beef supplies in 2016 has been challenging
Cow-calf: Converging toward long-term levels
Herd expansion slowed, stalled, or stopped?
Stocker: Varies widely across situations
Opportunities vs. risk of owning cattle and managing risk
Feedlot: Worst behind us (I think), still red ink
Structural concerns—excess capacity, price discovery, etc.

4. 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
Source: ISU Extension

5. Top 10, 2015 to 2016 Head % TX +160,000 +3.9% OK +73,000 MO +61,000
+3.3% NE
+96,000
+5.5% SD
+79,000
+4.9% KS
+4.3% MT
-10,000
-0.7% KY
+24,000
+2.4% IA
+40,000
+4.4% FL
+9,000
+1.0%
Total
593,000
+3.5%
Data Source: USDA/NASS

6. Projections for 11/6/15 9/2/16 9/27/16 11/1/16 2016 $300 $78 $15 -$30
2017
$86
$22
-$29
Data Source: USDA & LMIC, Compiled by LMIC
Livestock Marketing Information Center

7. Data Source: USDA/AMS

8. 2013 = -$ [-$155 to +$77]
2014 = +$ [+$41 to +$269]
2015 = -$ [-$530 to +$43]
2016f = -$ [-$359 to +$113]
2017f = -$ [-$115 to +$111]

9. U.S. Beef Exports, Jan-Nov 2016
(Volume excluding by-products & variety meats)
Year-to-Date
Country
1,000 lbs
Percent
Japan
98,130
19%
South Korea
110,764
38%
Mexico
27,796 8%
Canada
-18,363
-6%
Hong Kong
-17,692
China (Taiwan)
23,042
23%
Netherlands
-4,269
-12%
Chile
1,871
Philippines
-6,846
-23%
Vietnam
4,920
45%
Dominican Republic
-4,239
-21%
United Arab Emirates
1,150
Italy
-3,000
-18%
Guatemala
3,010
33%
Other Countries
9,881 9%
Total
226,153
11%
WASDE U.S.: 2015: 2,265 mil lbs : 2,484 (+10%) : 2,630 (+6%)
Source: USDA/ERS

10. U.S. Beef Imports, Jan-Nov 2016
(Volume excluding by-products & variety meats)
Year-to-Date
Country
1,000 lbs
Percent
Australia
-477,829
-40%
Canada
85,879
15%
New Zealand
-42,970
-7%
Mexico
84,402
23%
Nicaragua
7,903 8%
Brazil
-6,823
-5%
Uruguay
-17,579
-14%
Costa Rica
-12 0%
Other Countries
-2,509
-21%
Total
-369,538
-12%
WASDE U.S.: 2015: 3,371 mil lbs : 3,021 (-10%) : 2,680 (-11%)
Source: USDA/ERS

11. 2017 Pork Situation
Record production. Processing capacity squeeze.
Demand is always an important driver. But we first need to understand supply dynamics.
Lower hog and pig prices have likely raised the red flag on further expansion, at least for now.
Longer-term additional expansion is quite possible
Low feed grain prices, packer competition
Revisions to H&P report complicate analysis

12. 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
Source: ISU Extension

13. Data Source: USDA-ERS & USDA-FAS
Livestock Marketing Information Center

14. 2013 = +$ [-$25.60 to +$24.57]
2014 = +$ [+$13.15 to +$107.25]
2015 = +$ [-$18.40 to +$26.25]
2016f = -$ [-$35.52 to +$32.92]
2017f = +$ [-$14.24 to +$22.50]

15. Source: USDA/AMS. * Steve Meyer, EMI.

16. U.S. Packing Capacity Under Construction
New (proposed) pork
Fall 2016
Fall 2017
Fall 2018
Fall 2018 – TSF Doubled
packing plants
Daily
Annual
Pleasant Hope, MO
2,500
625,000
Windom, MN
4,000
1,000,000
Sioux City, IA
12,000
3,000,000
20,000
5,000,000
Coldwater, MI
10,000
2,500,000
Wright County, IA
Total
6,500
1,625,000
28,500
7,125,000
38,500
9,625,000
46,500
11,625,000
Head per week
31,250
137,019
185,096
223,558
% of '15 avg = mil
1.4%
6.2%
8.4%
10.2 %
% of '15 max = mil
1.2%
5.5%
7.4%
8.9 %
July 19, 2016
Source: Steve Meyer. Published in National Hog Farmer Magazine.

17. Source: USDA/AMS

18. U.S. Pork Exports, Jan-Nov 2016
(Volume excluding by-products & variety meats)
Year-to-Date
Country
1,000 lbs
Percent
Mexico
16,874 1%
Japan
-55,946
-5%
Canada
5,774
China (Mainland)
234,167
100%
South Korea
-92,915
-21%
Australia
9,041 6%
Hong Kong
25,740
23%
Colombia 32 0%
Philippines
3,603 5%
Honduras
10,307
18%
Dominican Republic
7,538
13%
Chile
4,245
11%
Guatemala
2,252
Panama
2,728
Other Countries
-13,794
-8%
Total
159,646 3%
WASDE U.S.: 2015: 5,009 mil lbs : 5,179 (+3%) : 5,440 (+5%)
Source: USDA/ERS

19. U.S. Corn Supply and Use 2013 2014 2015 2016 2017 Area Planted
(mil. acres)
95.4
90.6
88.0
94.0
90.0
Yield
(bu./acre)
158.1
171.0
168.4
174.6
170.8
Production
(mil. bu.)
13,829
14,216
13,602
15,148
14,060
Beg. Stocks
821
1,232
1,731
1,737
2,355
Imports 36 32 67 55 50
Total Supply
14,686
15,479
15,401
16,940
16,465
Feed & Residual
5,040
5,280
5,131
5,600
5,500
Ethanol
5,124
5,200
5,206
5,325
Food, Seed, & Other
1,369
1,401
1,429
1,435
1,440
Exports
1,920
1,867
1,898
2,225
1,950
Total Use
13,454
13,748
13,664
14,585
14,215
Ending Stocks
2,250
Season-Average Price
($/bu.)
4.46
3.70
3.61
3.40
3.30
Source: USDA-WAOB , USDA-OCE 2017 19 19

20. U.S. Soybean Supply and Use
2013
2014
2015
2016
2017
Area Planted
(mil. acres)
76.8
83.3
82.7
83.4
85.5
Yield
(bu./acre)
44.0
47.5
48.0
52.1
47.9
Production
(mil. bu.)
3,358
3,927
3,926
4,307
4,050
Beg. Stocks
141 92
191
197
420
Imports 72 33 24 25 30
Total Supply
3,570
4,052
4,140
4,528
4,500
Crush
1,734
1,873
1,886
1,930
1,935
Seed & Residual
107
146
122
128
130
Exports
1,638
1,842
1,936
2,050
2,100
Total Use
3,478
3,862
3,944
4,108
4,165
Ending Stocks
336
Season-Average Price
($/bu.)
13.00
10.10
8.95
9.50
9.35
Source: USDA-WAOB , USDA-OCE 2017 20 20

21. Corn Yields Top: 2016 Yield Bottom: Change from last year
Units: Bushels/acre
Source: USDA-NASS

22. Soy Yields Top: 2016 Yield Bottom: Change from last year
Units: Bushels/acre
Source: USDA-NASS

23. Drought Monitor
Source: National Drought Mitigation Center 23 23

24. South American Weather
Source: NOAA, Climate Prediction Center 24 24

25. World Corn Production
Source: USDA-WAOB 25 25

26. World Soybean Production
Source: USDA-WAOB 26 26

27. U.S. Meat Production & Prices
Source: USDA-WAOB 27 27

28. Corn Export Sales
Source: USDA-FAS

29. Change in Corn Export Sales
Source: USDA-FAS

30. Soybean Export Sales
Source: USDA-FAS

31. Change in Soybean Export Sales
Source: USDA-FAS

32. Strength of the U.S. Dollar
Source: Federal Reserve

33. Corn Grind for Ethanol

34. Crude Oil Prices
Sources: EIA and CME

35. Current Corn Futures
3.97
3.86
3.52
Source: CME Group, 1/31/2017

36. Current Soybean Futures
9.85
9.80
9.48
Source: CME Group, 1/31/2017

37. 2016/17 Crop Margins @ Actual Yields

38. 2017/18 Crop Margins

39. Iowa Corn Prices vs. Costs

40. AVERAGE VALUES
all farmland 1941−2016
$7,183
As of
Nov 16
-5.9%

41. % Change in Nominal Iowa Farmland Values 1942-2016

42. Land Values by District and Land Quality, Nov 2016
Average
Value
% Change
High
Quality
Medium Quality
Low Quality
Northwest
$9,243
-4.6%
$10,650
-5.2%
$8,468
-4.1%
$6,019
-3.7%
North Central
$7,562
-5.0%
$8,442
-5.9%
$6,992
-4.9%
$5,164
-3.9%
Northeast
$7,313
-7.0%
$8,892
-7.1%
$6,994
-6.2%
$4,847
-7.5%
West Central
$7,358
-8.7%
$8,874
-8.4%
$6,870
-9.4%
$4,577
-9.9%
Central
$7,841
-7.8%
$9,299
$7,186
-7.4%
$5,158
-2.5%
East Central
$7,917
-6.9%
$9,502
-7.6%
$7,396
-6.8%
$5,153
-4.0%
Southwest
$6,060
$7,527
-6.3%
$5,683
$4,189
2.9%
South Central
$4,241
-3.6%
$5,980
-7.2%
$4,128
$2,892
5.2%
Southeast
$6,716
-2.6%
$9,265
-2.8%
$6,283
$3,783
-0.4%
Iowa Avg.
$7,183
$8,758
-6.5%
$6,705
$4,665
-3.5%

43. Land Values by County, 2016

44. Percent Changes in Land Values from Nov 2015

45. Iowa Farmland Sale Activity Relative to Last Year 1985-2016

46. Farmland supply tends to be tighter in down years

47. Iowa Farmland Purchases by Buyer Types 1989-2016

48. Source: Purdue Ag Barometer

49. A replay of 1920s or 1980s farm crisis?
Source: USDA-ERS, Ag DM C2-70,
Zhang and Beek (2016)
Farm Policy Journal

50. Thank you for your time. Any questions. My web site: http://www2. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: