Ag Economic Outlook Ohnward Bank & Trust Town Hall Meeting Monticello, Iowa Dec. 16, 2014 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911 1 1

U.S. Corn Supply and Use 2010 2011 2012 2013 2014 Area Planted (mil. acres) 88.2 91.9 97.3 95.4 90.9 Yield (bu./acre) 152.8 147.2 123.1 158.8 173.4 Production (mil. bu.) 12,447 12,360 10,755 13,925 14,407 Beg. Stocks 1,708 1,128 989 821 1,236 Imports 28 29 160 36 25 Total Supply 14,182 13,517 11,904 14,782 15,668 Feed & Residual 4,795 4,557 4,315 5,132 5,375 Ethanol 5,019 5,000 4,641 5,134 5,150 Food, Seed, & Other 1,407 1,428 1,397 1,363 1,395 Exports 1,834 1,543 730 1,917 1,750 Total Use 13,055 12,528 11,083 13,546 13,670 Ending Stocks 1,998 Season-Average Price ($/bu.) 5.18 6.22 6.89 4.46 3.50 Source: USDA-WAOB 2 2

U.S. Soybean Supply and Use 2010 2011 2012 2013 2014 Area Planted (mil. acres) 77.4 75.0 77.2 76.8 84.2 Yield (bu./acre) 43.5 41.9 40.0 44.0 47.5 Production (mil. bu.) 3,329 3,094 3,042 3,358 3,958 Beg. Stocks 151 215 169 141 92 Imports 14 16 41 72 15 Total Supply 3,495 3,325 3,252 3,570 4,065 Crush 1,648 1,703 1,689 1,734 1,780 Seed & Residual 130 88 105 98 115 Exports 1,501 1,365 1,317 1,647 1,760 Total Use 3,280 3,155 3,111 3,478 3,655 Ending Stocks 410 Season-Average Price ($/bu.) 11.30 12.50 14.40 13.00 10.00 Source: USDA-WAOB 3 3

Projected Corn Yields Top: 2014 Yield Bottom: Change from last month Units: Bu/acre Source: USDA-NASS

U.S. Meat Production & Prices Source: USDA-WAOB 5 5

Corn Export Shifts Source: USDA-FAS

Soy Export Shifts Source: USDA-FAS

Corn Grind for Ethanol

Current Corn Futures 4.13 3.82 Source: CME Group, 12/12/2014

Current Soybean Futures 10.21 9.88 Source: CME Group, 12/12/2014

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

2015/16 Crop Margins

Thoughts for 2015 and Beyond Supply/demand concerns Record corn and soybean crops, but also record demand Markets are in a holding pattern, waiting for news Watching South American crop progress Projected negative margins for 2014 and 2015 crops 2013/14 USDA 2014/15 Futures (12/12/14) 2015/16 Corn $4.46 $3.50 $3.82 $4.13 Soybeans $13.00 $10.00 $10.21 $9.88

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

Quarterly Hog & Pork Forecasts (LMIC:12/4/2014)   Change Average Commercial from Carcass Pork Year Slaughter Year Ago Weight Production Quarter (1,000 hd) (%) (lbs) (mil lbs) 2013 I 27,864 -0.9 208 -0.5 5,775 -1.4 II 26,765 0.4 206 5,516 -0.1 III 27,657 -1.1 204 1.2 5,622 -0.2 IV 29,792 -2.1 211 2.6 6,274 0.5 112,077 -1.0 207 0.7 23,187 -0.3 2014 27,134 -2.6 213 2.7 5,785 0.2 25,574 -4.4 215 4.4 5,504 25,554 -7.6 212 4.2 5,423 -3.5 28,922 -2.9 214 1.4 6,189 107,184 3.2 22,902 -1.2 2015 26,951 -0.7 0.9 5,799 26,341 3.0 -0.4 5,649 26,325 0.0 5,588 29,894 3.4 6,426 3.8 109,511 2.2 23,462 2.4 2016 28,263 4.9 216 6,096 5.1 27,037 5,810 2.9 27,049 2.8 0.3 5,758 30,462 1.9 6,558 2.1 112,811 24,222

Data Source: USDA/AMS

Data Source: USDA-AMS, Compiled & Analysis by LMIC Livestock Marketing Information Center

U.S. Pork Exports, Jan-Sep 2014 Sep-14/Aug-14 Sep-14/Sep-13 Year-to-Date Country Percent 1,000 lbs Japan -4.3% -21.1% -42,448 -4.2% Mexico 2.7% 15.7% 149,153 17.2% Canada 13.5% 3.2% -25,664 -5.9% China (Mainland) 38.1% -83.4% -90,934 -24.1% South Korea 36.1% 178.2% 73,014 36.6% Russia 85,443 497.1% Hong Kong -25.1% -10.3% -24,011 -21.8% Australia -20.8% -28.3% 5,833 4.8% China (Taiwan) -36.3% -10,600 -32.8% Philippines 29.9% -14.7% -6,734 -7.6% Honduras -16.3% -19.9% -9,840 Colombia -21.6% 9.6% 38,511 60.3% Other Countries 6.1% -34.5% -75,373 -25.8% Total -2.4% -13.2% 66,350 1.8% WASDE U.S. Pork Exports (mil lbs) 2013: 4,992 2014: 5,066 (+1.5%) 2015: 5,250 (+3.6%) Source: USDA/ERS

Cattle Crush Margin 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 Source: ISU Extension

Quarterly Cattle & Beef Forecasts (LMIC:12/4/2014)   Change Average Commercial from Dressed Beef Year Slaughter Year Ago Weight Production Quarter (1,000 hd) (%) (lbs) (mil lbs) 2013 I 7,781 -3.1 794 1.4 6,175 -1.7 II 8,325 0.2 782 0.4 6,513 0.6 III 8,321 -0.1 0.5 6,609 IV 8,035 -3.0 799 0.7 6,423 -2.3 32,462 -1.5 792 25,720 -0.7 2014 7,375 -5.2 796 0.3 5,868 -5.0 7,836 -5.9 789 0.9 6,183 -5.1 7,630 -8.3 810 1.9 6,178 -6.5 7,508 -6.6 820 2.6 6,157 -4.1 30,349 804 24,386 2015 7,135 -3.3 816 2.5 5,819 -0.8 7,602 803 1.7 6,103 -1.3 7,447 -2.4 818 1.0 6,088 7,407 823 6,097 -1.0 29,591 -2.5 815 24,107 -1.1 2016 7,145 0.1 821 5,865 0.8 7,325 -3.6 808 5,920 7,579 1.8 825 6,252 2.7 7,316 -1.2 828 6,059 -0.6 29,365 24,096 -0.05

Data Source: USDA/AMS

Data Source: USDA-AMS, Compiled and Analysis by LMIC Livestock Marketing Information Center

Data Source: USDA/AMS

Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

U.S. Beef Exports, Jan-Sep 2014 Sep-14/Aug-14 Sep-14/Sep-13 Year-to-Date Country Percent 1,000 lbs Mexico 23.6% 19.6% 52,523 18.6% Japan -7.4% 30.2% -16,031 -3.0% Canada -18.1% -30.1% -82,815 -22.8% South Korea -14.7% 0.6% 38,523 21.5% Hong Kong 7.2% -1.5% 57,458 24.8% China (Taiwan) -19.8% 5,309 7.3% Vietnam -25.4% 63.6% -3,983 -41.4% Russia -96 -78.7% Egypt -74.3% -97.2% -43,340 -93.6% Netherlands 20.4% 14.9% 335 1.2% Philippines 9.3% 14.2% 4,402 25.6% Other Countries -21.1% -9.2% 6,644 4.3% Total -4.3% 3.8% 18,928 1.0% WASDE U.S. Beef Exports (mil lbs) 2013: 2,590 2014: 2,599 (+0.3%) 2015: 2,525 (-2.8%) Source: USDA/ERS

Net Farm Income

Net Farm Income

Iowa Land Values Source: Mike Duffy, ISU

Iowa Land Values – Log Scale Source: Mike Duffy, ISU

Land Values and Income Source: Mike Duffy, ISU

Land Values and Income Source: Mike Duffy, ISU

Thank you for your time. Any questions. My web site: http://www. econ 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/