University Extension/Department of Economics

Grains Outlook for 2011

Insuring Iowa’s AgricultureAmes, IowaNov. 9, 2010

Chad HartAssistant Professor/Grain Markets Specialist

chart@iastate.edu515-294-9911

University Extension/Department of Economics

U.S. Corn Supply and Use

Source: USDA

2007 2008 2009 2010

Area Planted (mil. acres) 93.5 86.0 86.5 88.2

Yield (bu./acre) 150.7 153.9 164.7 154.3

Production (mil. bu.) 13,038 12,092 13,110 12,540

Beg. Stocks (mil. bu.) 1,304 1,624 1,673 1,708

Imports (mil. bu.) 20 14 8 10

Total Supply (mil. bu.) 14,362 13,729 14,792 14,257

Feed & Residual (mil. bu.) 5,913 5,182 5,159 5,300

Ethanol (mil. bu.) 3,049 3,709 4,568 4,800

Food, Seed, & Other (mil. bu.) 1,338 1,316 1,370 1,380

Exports (mil. bu.) 2,437 1,849 1,987 1,950

Total Use (mil. bu.) 12,737 12,056 13,084 13,430

Ending Stocks (mil. bu.) 1,624 1,673 1,708 827

Season-Average Price ($/bu.) 4.20 4.06 3.55 5.20

University Extension/Department of EconomicsSource: USDA-NASS

University Extension/Department of Economics

Translates to a yield in the 170-175 bu. range

Translates to a yield around 160 bu.

Source: USDA-NASS

University Extension/Department of Economics

U.S. Soybean Supply and Use2007 2008 2009 2010

Area Planted (mil. acres) 64.7 75.7 77.5 77.7

Yield (bu./acre) 41.7 39.7 44.0 43.9

Production (mil. bu.) 2,677 2,967 3,359 3,375

Beg. Stocks (mil. bu.) 574 205 138 151

Imports (mil. bu.) 10 13 15 10

Total Supply (mil. bu.) 3,261 3,185 3,512 3,536

Crush (mil. bu.) 1,803 1,662 1,752 1,665

Seed & Residual (mil. bu.) 93 106 108 117

Exports (mil. bu.) 1,159 1,279 1,501 1,570

Total Use (mil. bu.) 3,056 3,047 3,361 3,351

Ending Stocks (mil. bu.) 205 138 151 185

Season-Average Price ($/bu.) 10.10 9.97 9.59 11.45

Source: USDA

University Extension/Department of EconomicsSource: USDA-NASS

University Extension/Department of EconomicsSource: USDA-NASS

Within a bushel of each other

University Extension/Department of Economics

World Corn Production

Source: USDA

University Extension/Department of Economics

World Soybean Production

Source: USDA

University Extension/Department of Economics

La Niña Winter

Source: NOAA

University Extension/Department of Economics

Clearing Old Stocks

Source: USDA

1.5

2

2.5

3

3.5

4

4.5

Bill

ion

bush

els

The current stocks set-up is reminiscent of the transition between the 2006 and 2007 crops.

University Extension/Department of Economics

Hog Crush Margin

Source: Shane Ellis, ISU Extension

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 futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig

University Extension/Department of Economics

Cattle Crush Margin

Source: Shane Ellis, ISU Extension

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

University Extension/Department of Economics

0

200

400

600

800

1,000

1,200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ion

bush

els

Corn Soybeans

Historical Export Levels

Source: USDA, FAS

Week 9 of marketing year

University Extension/Department of Economics

Corn Export Shifts

Source: USDA, FAS

Japan

Mexico

South Korea

Taiwan

Egypt

Unknown

Other

Total

China

-60

-40

-20

0

20

40

60

80

100

Mill

ion

bush

els

30.7%

-2.0%

-36.9%

-24.3%

114.2%

81.7%

-12.2%

13.1%

University Extension/Department of Economics

Soy Export Shifts

Source: USDA, FAS

China

EU JapanMexico

Taiwan

Indonesia Other

Total

Unknown

-50

0

50

100

150

200

250

Mill

ion

bush

els

24.3%

47.7% 0.1% 30.5%

-13.9%

24.2%

23.6%

24.0%

140.3%

University Extension/Department of Economics

0

2

4

6

8

10

12

14

16

2010 2011 2012

Bill

ion

gallo

ns

Conventional Biofuels Cellulosic BiofuelsBiodiesel Additional Advanced Biofuels

Renewable Fuels Standard (RFS)

CropYear

Billion Bushels

2009 4.112010 4.432011 4.642012 4.86

University Extension/Department of Economics

Ethanol Blending Advantage

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

1/3/

2007

4/3/

2007

7/3/

2007

10/3

/200

7

1/3/

2008

4/3/

2008

7/3/

2008

10/3

/200

8

1/3/

2009

4/3/

2009

7/3/

2009

10/3

/200

9

1/3/

2010

4/3/

2010

7/3/

2010

10/3

/201

0

$ pe

r gal

lon

University Extension/Department of Economics

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50$

per B

ushe

l

Season-average Price Cost per Bushel

Iowa Corn Prices vs. CostsRight now, futures are in $5.40 range for 2010 and 2011 cornEven with higher fertilizer costs, corn’s profitable

University Extension/Department of Economics

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

$ pe

r Bus

hel

Season-average Price Cost per Bushel

Iowa Soybean Prices vs. CostsFutures are nearly $12 for 2010 and 2011 beans

University Extension/Department of Economics

3.40

3.90

4.40

4.90

5.40

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

$ pe

r bus

hel

9.20

9.80

10.40

11.00

11.60

$ pe

r bus

hel

Corn Soy

This YearSoy $12.10Corn $5.43

University Extension/Department of Economics

Thoughts for 2011 and BeyondGeneral economic conditions

Continued economic recovery is a major key for crop pricesLong-term oil price remain in the $90 range

Supply/demand concernsStocks: 2009 vs. 2010 cropSouth America: La Niña impactsBiofuels: E10, E12, or E15; Do the tax credits get extended/renewed?Will supply be able to keep pace with demand?

2010/11: USDA: Corn $5.20, Soy $11.45Futures (as of 11/8/2010): Corn $5.46, Soy $11.802011/12:Futures (as of 11/8/2010): Corn $5.34, Soy $11.71

University Extension/Department of Economics

Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/