1. Assistant Professor/Grain Markets Specialist
Crop Market Outlook
Pro Ag Outlook
Greenfield, Iowa
January 21, 2009
Chad Hart
Assistant Professor/Grain Markets Specialist 1

2. U.S. Corn Supply and Use $4.00 $3.90 Source: USDA-WAOB, Jan. 2009 +81
-50
-100
-50
+316
$4.00
-0.10
$3.90
Source: USDA-WAOB, Jan. 2009 2 2

3. U.S. Soybean Supply and Use
+38
-30
+50
$9.00 NC
$9.00
Source: USDA-WAOB, Jan. 2009

4. World Corn Production
Source: USDA-WAOB, Jan. 2009

5. World Soybean Production
Source: USDA-WAOB, Jan. 2009

6. Dryness in South America
Source: USDA-WAOB, Dec. 2008

7. Chinese Corn Production
Source: USDA-WAOB, Jan. 2009

8. Soybeans in China
Source: USDA-PSD, Jan. 2009

9. Crop Basis Patterns Sources: CARD, Iowa State; IA Dept. of Ag.
While basis patterns are closing in on more historically normal levels, energy prices will likely maintain somewhat weaker basis than usual.
Sources: CARD, Iowa State; IA Dept. of Ag.

10. Livestock Adjustments
Sows farrowing:
Sept-Nov million, down 6% from last year
Dec-Feb million, down 3% from last year
Mar-May million, down 2% from last year
Broiler-type eggs set: 203 million, down 7% from last year
Broiler chicks placed: 166 million, down 6% from last year
Feedlot placements: 2.02 million, down 5% from last year
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.
Sources: Various USDA-NASS reports

11. Ethanol Margins
Source: ISU, CARD

12. Biodiesel Margins
Source: ISU, CARD

13. Renewable Fuels Standard (RFS)
Calendar Year
Billion Bushels
2009
3.75
2010
4.29
2011
4.50
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. 13 13

14. U.S. Blended Motor Gasoline Consumption
One of the biggest factors influencing the biofuel industry is the overall usage of fuel. This graph shows the dramatic decline in projected gasoline consumption for this year and next. The higher energy prices earlier this year had a definite impact.
Source: Energy Information Administration

15. 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.

16. Outside Influences (Sept. 2008 = 1)

17. Corn & Soybean Area Growth rate of 1.55 million acres per year
While total land devoted to crop production has been fairly steady over the past few years, the amount of land planted to corn and soybeans has been on the rise. Minor feed grains and cotton have been giving up ground.

18. CRP Expiring Contracts
Some CRP land has also come back into production. This graph shows the acreage with expiring CRP contracts. The contracts expire at the end of September in each year. So the land that can come out of CRP in 2008 can not enter production until 2009 at the earliest. Currently CRP has 34.7 million acres. But the 2008 farm bill has set 32 million acres as the top for CRP, starting in So an additional 2.7 million must come out over the next two years.
Source: USDA-FSA

19. Input Costs Source: USDA, Agricultural Prices, Dec. 2008
Input costs have risen dramatically, especially over the past year.
Source: USDA, Agricultural Prices, Dec. 2008

20. The Rise and Fall of Fertilizer Prices
Source:
TheMarket.pdf

21. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/
TheMarket.pdf

22. 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,

23. Iowa Soybean Prices vs. Costs
Average return over the period, 31 cents per bushel. Current Iowa prices still slightly above estimated costs.
Source: USDA-NASS and Duffy and Smith,

24. 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 = $ (1/16/09)
November 2009 Soy Futures = $9.72 (1/16/09)
Source: Duffy and Smith,

25. Crop Exports
Source: USDA, PSD

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

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

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

29. 2008 Corn Exports
Source: USDA, FAS

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

31. 2008 Soybean Exports
Source: USDA, FAS

32. U.S. Stocks-to-Use Ratios

33. World Stocks-to-Use Ratios
But the world has higher than usual soybean stocks. Corn stocks have been tight worldwide for several years.

34. Thoughts for 2008 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 Dow Jones Index
Current futures are indicating 2008 season-average prices of $ for corn and $ for soybeans

35. 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
Given current factors, the 2009 outlook is for crop prices around $4.00 for corn and $9.00 for soybeans
Key factor: Economic growth returns by late 2009/early 2010

36. Thank you for your time. Any questions. My web site: http://www. econ
Thank you for your time! Any questions? My web site: Ag Decision Maker: