ACRE Update & Crop Outlook ISU Extension Farm Management In-Service Ames, Iowa October 13, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1

ACRE Set-up for 2009 Iowa Corn Year Yield per Planted Acre (bu./acre) 2004 181.0 2005 173.0 2006 166.0 2007 171.0 2008 169.0 Olympic Average Year Season-average Price ($/bu.) 2007 4.20 2008 4.06 Average 4.13 The 2008 price was released by USDA in the Sept. 29, 2009 Ag Prices report (see page 27 of the report for details). So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $4.13 per bushel.

Using Latest USDA Projections ACRE revenue guarantee = $635.61/acre 90% * $4.13/bu. * 171.0 bu./acre Proj. ACRE actual revenue = $629.80/acre $3.35/bu. * 188.0 bu./acre Proj. ACRE payment rate = $5.81/acre

ACRE Payment Rate Matrix ($/acre) Price Yield $2.55 $2.75 $2.95 $3.15 $3.35 $3.55 $3.75 $3.95 $4.15 180 158.90 140.61 104.61 68.61 32.61 0.00 182 135.11 98.71 62.31 25.91 184 129.61 92.81 56.01 19.21 186 124.11 86.91 49.71 12.51 188 156.21 118.61 81.01 43.41 5.81 190 151.11 113.11 75.11 37.11 192 146.01 107.61 69.21 30.81 194 140.91 102.11 63.31 24.51 196 135.81 96.61 57.41 18.21 USDA

ACRE Set-up for 2010 Iowa Corn Year Yield per Planted Acre (bu./acre) 2005 173.0 2006 166.0 2007 171.0 2008 169.0 2009 188.0 Olympic Average Year Season-average Price ($/bu.) 2008 4.06 2009 3.35 Average 3.71 The 2008 and 2009 yields and prices are USDA’s Oct. 2009 estimates. So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $3.71 per bushel.

2010 Iowa Corn ACRE Guarantee By formula, the ACRE revenue guarantee would be $570.97/acre 90% * $3.71/bu. * 171.0 bu./acre But the ACRE revenue guarantee can not change by more than 10% 2009 guarantee = $637.15/acre Allowed range is $572.05 to $699.17 So 2010 proj. guarantee is $572.05/acre

ACRE Set-up for 2009 Iowa Soybeans Year Yield per Planted Acre (bu./acre) 2004 49.0 2005 52.0 2006 50.5 2007 2008 46.5 Olympic Average Year Season-average Price ($/bu.) 2007 10.10 2008 9.97 Average 10.04 The 2008 price was released by USDA in the Sept. 29, 2009 Ag Prices report (see page 30 of the report for details). Also note, USDA raised Iowa’s soybean yield in 2008 to 46.5 bushels per acre (see the recent Grain Stocks report, page 17, for details). So the expected state yield would be 50.5 bushels per acre and the ACRE price guarantee would be $10.05 per bushel.

Using Latest USDA Projections ACRE revenue guarantee = $456.32/acre 90% * $10.04/bu. * 50.5 bu./acre Proj. ACRE actual revenue = $468.00/acre $9.00/bu. * 52 bu./acre No payments under this scenario

ACRE Payment Rate Matrix ($/acre) Price Yield $8.20 $8.40 $8.60 $8.80 $9.00 $9.20 $9.40 $9.60 $9.80 50.0 46.32 36.32 26.32 16.32 6.32 0.00 50.5 42.22 32.12 22.02 11.92 1.82 51.0 38.12 27.92 17.72 7.52 51.5 34.02 23.72 13.42 3.12 52.0 29.92 19.52 9.12 52.5 25.82 15.32 4.82 53.0 21.72 11.12 0.52 53.5 17.62 6.92 54.0 13.52 2.72 USDA

ACRE Set-up for 2010 Iowa Soybeans Year Yield per Planted Acre (bu./acre) 2005 52.0 2006 50.5 2007 2008 46.5 2009 Olympic Average 51.5 Year Season-average Price ($/bu.) 2008 9.97 2009 9.00 Average 9.49 The 2008 and 2009 yields and prices are USDA’s October 2009 estimates. So the expected state yield would be 51.5 bushels per acre and the ACRE price guarantee would be $9.49 per bushel.

2010 Iowa Soybean ACRE Guarantee By formula, the ACRE revenue guarantee would be $439.86/acre 90% * $9.49/bu. * 51.5 bu./acre But the ACRE revenue guarantee can not change by more than 10% 2009 guarantee = $456.32/acre Allowed range is $410.69 to $501.95 So 2010 proj. guarantee is $439.86/acre

U.S. Corn Supply and Use 2007 2008 2009 Area Planted (mil. acres) 93.5 86.0 86.4 Yield (bu./acre) 150.7 153.9 164.2 Production (mil. bu.) 13,038 12,101 13,018 Beg. Stocks 1,304 1,624 1,674 Imports 20 14 10 Total Supply 14,362 13,739 14,702 Feed & Residual 5,913 5,231 5,400 Ethanol 3,049 3,700 4,200 Food, Seed, & Other 1,338 1,276 1,280 Exports 2,437 1,858 2,150 Total Use 12,737 12,065 13,030 Ending Stocks 1,672 Season-Average Price ($/bu.) 4.20 4.06 3.35 Source: USDA 12 12

Source: USDA 13 13

U.S. Soybean Supply and Use 2007 2008 2009 Area Planted (mil. acres) 64.7 75.7 77.5 Yield (bu./acre) 41.7 39.7 42.4 Production (mil. bu.) 2,677 2,967 3,250 Beg. Stocks 574 205 138 Imports 10 15 Total Supply 3,261 3,187 3,398 Crush 1,803 1,662 1,690 Seed & Residual 93 106 173 Exports 1,159 1,280 1,305 Total Use 3,056 3,049 3,169 Ending Stocks 230 Season-Average Price ($/bu.) 10.10 9.97 9.00 Source: USDA 14 14

Source: USDA 15 15

World Corn Production Source: USDA 16 16

World Soybean Production Source: USDA 17 17

Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

Exports & Advance Sales (1st 5 weeks of marketing year) Source: USDA, FAS

Renewable Fuels Standard (RFS) Crop Year Billion Bushels 2008 3.57 2009 4.11 2010 4.43 2011 4.64 20 20

Ethanol Margins Source: ISU, CARD

Outside Influences (Jan. 2007 = 1)

Crude Oil Prices Sources: EIA, NYMEX

Corn 1990 - 2006

Corn

Soybeans

Iowa Crop Basis

Ratio: Nov. 2010 Soy/Dec. 2010 Corn Source: CBOT

Input Costs Source: USDA, Agricultural Prices, Sept. 29, 2009

Thoughts for 2009 and Beyond General economic conditions Recession concerns still hold significant power in the markets Projected economic recovery is a major key for crop prices for the 2009 crop year Continued weakness in the dollar helping exports Most important ag. statistics: Crop production, $ value, feed demand USDA is indicating 2009 season-average prices in the neighborhood of $3.35 for corn and $9.00 for soybeans Current futures Yesterday: Corn $3.64, Soy $9.55

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/faculty/hart/ Iowa Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/