1. Marketing and Risk
Farming for the Future: Emerging Opportunities in Livestock Production
Ames, Iowa
Jan. 16, 2014
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. U.S. Corn Supply and Use 2009 2010 2011 2012 2013 Area Planted
(mil. acres)
86.4
88.2
91.9
97.2
95.4
Yield
(bu./acre)
164.7
152.8
147.2
123.4
158.8
Production
(mil. bu.)
13,092
12,447
12,360
10,780
13,925
Beg. Stocks
1,673
1,708
1,128
989
821
Imports 8 28 29
162 35
Total Supply
14,774
14,182
13,517
11,932
14,781
Feed & Residual
5,125
4,795
4,557
4,335
5,300
Ethanol
4,591
5,019
5,000
4,648
Food, Seed, & Other
1,370
1,407
1,428
1,396
1,400
Exports
1,980
1,834
1,543
731
1,450
Total Use
13,066
13,055
12,528
11,111
13,150
Ending Stocks
1,631
Season-Average Price
($/bu.)
3.55
5.18
6.22
6.89
4.40
Source: USDA-WAOB 2 2

3. World Corn Production
Source: USDA-WAOB 3 3

4. Renewable Fuels Standard (RFS)4 4

5. Current Corn Futures
4.46
4.38
4.37
Source: CME Group, 1/14/2014

6. Corn Prices vs. Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Sources: USDA-NASS for Prices, Duffy for Costs

7. Export Share of US Production, 2012
Source: USDA ERS “Livestock, Dairy & Poultry Outlook”

8. Beef Consumption Growth
Source: USDA Foreign Agriculture Service PSD Online

9. Trends in US Protein Consumption
Source: USDA Economic Research Service “Food Availability”

10. 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

11. 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

12. Fear, Greed, and Ego Fear of making a bad decision
-- Watching prices slip away as you wait
Greed of expecting even higher prices
-- Not taking advantage of good price opportunities
Ego of wanting to claim you caught the market high
-- “Lake Wobegon” marketing

13. Ego
Greed
Fear

14. Marketing Plan
To avoid fear, greed, and ego dominating your marketing, have a plan and stick to it.
A marketing plan outlines your market strategy and your marketing objectives.
It should examine marketing opportunities before and after harvest.

15. Marketing Objectives Get the highest selling price Reduce price risk
Pretty tough to do
More realistic objective: Obtain better than average prices
Reduce price risk
Cover cash flow needs
Minimize tax liability
Look at short and long-term goals for your business

16. Building a Marketing Plan
5 basic steps:
Estimate number of bushels/animals to sell/buy
Calculate breakeven price
Project price and production scenarios
Compare pricing tools and analyze market opportunities
Develop a pricing plan

17. 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: