1. Crop Outlook and Farm Bill
Delta, Iowa
March 10, 2009
Chad Hart
Assistant Professor/Grain Markets Specialist 1

2. U.S. Corn Supply and Use 2007 2008 2009 Area Planted (mil. acres) 93.5
86.0
Yield
(bu./acre)
150.7
153.9
156.9
Production
(mil. bu.)
13,038
12,101
12,365
Beg. Stocks
1,304
1,624
1,790
Imports 20 15
Total Supply
14,362
13,740
14,170
Feed & Residual
5,938
5,300
5,200
Ethanol
3,026
3,600
4,100
Food, Seed, & Other
1,337
1,300
Exports
2,436
1,750
1,850
Total Use
12,737
11,950
12,450
Ending Stocks
1,720
Season-Average Price
($/bu.)
4.20
3.90
3.60
Source: USDA 2 2

3. U.S. Soybean Supply and Use
2007
2008
2009
Area Planted
(mil. acres)
64.7
75.7
77.0
Yield
(bu./acre)
41.7
39.6
42.6
Production
(mil. bu.)
2,677
2,959
3,240
Beg. Stocks
574
205
210
Imports 10 9 3
Total Supply
3,261
3,173
3,453
Crush
1,801
1,650
1,675
Seed & Residual 93
163
172
Exports
1,161
1,150
1,225
Total Use
3,056
2,963
3,073
Ending Stocks
380
Season-Average Price
($/bu.)
10.10
9.25
8.00
Source: USDA

4. Argentine Drought Impacts (Early Reports)
2007 Production
Corn million tons
Soybeans 46.2 million tons
January 2009 USDA Estimates
Corn million tons -21%
Soybeans 49.5 million tons +7%
Current USDA Estimates
Corn million tons -35%
Soybeans 43.8 million tons -5%
January Estimates from Buenos Aires Cereal Exchange (BACE)
Corn to 13.7 million tons -35 to -41%
Soybeans 34.5 to 38.2 million tons -17 to -25%
Feb. Estimate from BACE Soy 40 million tons -13%
Livestock consolidation is underway and with it comes lower feed demand. The recent reduction in crop prices can help ease consolidation pressure, but the economic weakness is also taking its toll on meat demand.
Source: Dow Jones Newswires

5. Renewable Fuels Standard (RFS)
Crop
Year
Billion Bushels
2008
3.57
2009
4.11
2010
4.43
Corn-based ethanol goes in as conventional biofuel. The tables show the amounts of corn needed to meet the conventional biofuel portion of the RFS with corn-grain ethanol. The Renewable Fuels Association lists current ethanol production capacity at billion gallons, with another 2.8 billion gallons under construction. So ethanol capacity is large enough to meet the RFS for the next few years is the 1st year for the biodiesel portion of the RFS, with 500 million gallons of biodiesel needed to meet the mandate. In 2007, we produced roughly 450 million gallons. And the U.S. has enough biodiesel capacity on the ground today to produce over 2 billion gallons of biodiesel from a variety of sources. 5 5

6. Outside Influences (Jan. 2007 = 1)
Agriculture’s link to the energy markets has been a strong one. Corn and soybean prices have tracked with oil prices since late in 2006.

7. Outside Influences (Sept. 2008 = 1)

8. Harvest Futures Source: CBOT
Input costs have risen dramatically, especially over the past year.
Source: CBOT

9. Iowa Corn Prices vs. Costs
Average return over the time period, -7 cents per bushel. Current corn prices for Iowa are around estimated costs.
Source: USDA-NASS and Duffy and Smith,

10. Estimates for 2009 Iowa Costs
Non-land
Cost
Land Cost
Total Cost
Expected Yield
Cost per Bushel
($/acre)
(bu/acre)
($/bu)
Corn
486.61
205.00
691.61
160
4.32
Soybean
285.60
490.60 50
9.81
December 2009 Corn Futures = $ (3/10/09)
November 2009 Soy Futures = $8.355 (3/10/09)
Source: Duffy and Smith,

11. 2007 World Corn Exports Drought issues for 2008 crops
Source: USDA, FAS

12. Pace of Corn Export Sales
Source: USDA, FAS

13. 2008 U.S. Corn Exports
Source: USDA, FAS

14. Pace of Soybean Export Sales
Source: USDA, FAS

15. 2008 U.S. Soybean Exports
Source: USDA, FAS

16. Finishing Out the 2008 Crop Year
General economic conditions
A lot of recent market trade has been tied to reaction to the financial crisis and the world’s response
Economic slowdown raises concern about export and energy demand
Most important ag. statistic: Exchange rates or South American production
Current futures are indicating 2008 season-average prices in the neighborhood of $4.00 for corn and $9.20 for soybeans
Forward contracted grain helping hold up 2008 prices

17. Thoughts for 2009 and Beyond
Many of the storylines from 2008 will continue
Tight stocks for corn (worldwide) and soybeans (U.S.)
The competition for acreage
Ethanol’s buildout & livestock’s adjustment
Energy price & general economy concerns
Market volatility will remain high
Link to the energy markets
More market players with different trading objectives
USDA’s preview for 2009 is for crop prices around $3.60 for corn and $8.00 for soybeans
Key factor: When does economic growth return?
Current futures Corn $3.80, Soy $8.00

18. The 2008 Farm Bill
Continues many of the same programs we have currently
Direct payments
Price countercyclical payments (CCPs)
Marketing loans
CRP, EQIP, and other conservation programs
Gives producers a choice on programs
Average Crop Revenue Election (ACRE)
Sets up new permanent disaster program
Supplemental Revenue Assistance Payments Program (SURE)

19. Target Price Changes Crop Unit 2008-09 2010-12 Corn $/bu. 2.63
Soybeans
5.80
6.00
Barley
2.24
Wheat
3.92
4.17
Oats
1.44
1.79
Cotton
$/lb.
0.724
0.7125
Sorghum
2.57

20. Average Crop Revenue Election (ACRE)
ACRE is a revenue-based counter-cyclical payment program
Based on state and farm-level yields per planted acre and national prices
Producers choose between the current price-based counter-cyclical payment (CCP) program and ACRE
There are still some details to be worked out about ACRE (stay tuned)

21. ACRE Set-up for Iowa Corn
Year
Yield per Planted Acre
(bu./acre)
2004
176.7
2005
168.9
2006
162.7
2007
167.4
2008
164.6
Olympic Average
167.0
Year
Season-average Price ($/bu.)
2007
4.20
2008
3.90
Average
4.05
The 2008 yield and price are USDA’s February 2009 estimates.
So the expected state yield would be bushels per acre and the ACRE price guarantee would be $4.05 per bushel.

22. An Example for 2009
To start, we need the expected state and farm yields and the ACRE price guarantee
Expected state yield bu/acre
Expected farm yield bu/acre
Olympic average of yields per planted acre
ACRE price guarantee $4.05/bu
Average of 2007 and 2008 season-average prices
ACRE Revenue Guarantee $608.72
90% * $4.05/bu * 167 bu/acre
ACRE Farm Revenue Guarantee $749.00
$4.05 * 180 bu/acre + $20/acre

23. Example (continued)
For 2009, we need the actual state yield, the actual farm yield , and the season-average price
Actual state yield bu/acre
Actual farm yield bu/acre
Season-Average Price $3.50/bu
ACRE Actual Revenue $577.50
$3.50/bu * 165 bu/acre
ACRE Farm Actual Revenue $665.00
$3.50/bu * 190 bu/acre

24. Example (continued) State Trigger So we’ve met the state trigger
ACRE Revenue Guarantee $608.72
ACRE Actual Revenue $577.50
So we’ve met the state trigger
Farm Trigger
ACRE Farm Revenue Guarantee $749.00
ACRE Farm Actual Revenue $665.00
So we’ve met the farm trigger

25. Example (continued) ACRE Payment $28.03
Min(25%*$608.72, $ – $577.50)
* (180 bu/acre / 167 bu/acre)
* 83.3%

26. ACRE vs. CCP
CCP pays
No CCP payments
No ACRE payments
ACRE pays out

27. You Don’t Have to Decide Today
ACRE signup will not be for a while, probably starting in April
Once the ACRE rules are finalized, there will be a number of decision tools available to help producers
Preliminary ACRE information and tools are available at:

28. Payment Limitations Direct payments: $40,000 (w/o ACRE)
$32,000 (w/ ACRE)
Counter-cyclical payments: $65,000
ACRE: $73,000 ($65,000 + $8,000)
Marketing loans: No limits
Direct attribution of payments
Elimination of the 3-entity rule
Legal Brief - Payment Limit Rules.pdf

29. 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: