The Outlook for 2010: Big Crops, Big Demands

Department of Economics

The Outlook for 2010: Big Crops, Big Demands

CFNB Crop Insurance MeetingStorm Lake, Iowa

Feb. 25, 2010

Chad HartAssistant Professor/Grain Markets Specialist

[email protected]


U.S. Corn Supply and Use

Source: USDA

2007 2008 2009 2010

Area Planted (mil. acres) 93.5 86.0 86.5 89.0

Yield (bu./acre) 150.7 153.9 165.2 160.9

Production (mil. bu.) 13,038 12,092 13,151 13,160

Beg. Stocks (mil. bu.) 1,304 1,624 1,673 1,719

Imports (mil. bu.) 20 14 10 15

Total Supply (mil. bu.) 14,362 13,729 14,834 14,894

Feed & Residual (mil. bu.) 5,913 5,246 5,550 5,350

Ethanol (mil. bu.) 3,049 3,677 4,300 4,500

Food, Seed, & Other (mil. bu.) 1,338 1,276 1,265 1,290

Exports (mil. bu.) 2,437 1,858 2,000 2,100

Total Use (mil. bu.) 12,737 12,056 13,115 13,240

Ending Stocks (mil. bu.) 1,624 1,673 1,719 1,654

Season-Average Price ($/bu.) 4.20 4.06 3.70 3.60

Department of EconomicsSource: USDA


U.S. Corn Harvest Progress

Source: USDA

0

20

40

60

80

100

% H

arv

est

ed

5-Year Average 2009 1992


U.S. Soybean Supply and Use

Source: USDA

2007 2008 2009 2010

Area Planted (mil. acres) 64.7 75.7 77.5 77.0

Yield (bu./acre) 41.7 39.7 44.0 42.9

Production (mil. bu.) 2,677 2,967 3,361 3,260

Beg. Stocks (mil. bu.) 574 205 138 210

Imports (mil. bu.) 10 13 8 8

Total Supply (mil. bu.) 3,261 3,185 3,507 3,478

Crush (mil. bu.) 1,803 1,662 1,720 1,655

Seed & Residual (mil. bu.) 93 101 177 168

Exports (mil. bu.) 1,159 1,283 1,400 1,325

Total Use (mil. bu.) 3,056 3,047 3,297 3,147

Ending Stocks (mil. bu.) 205 138 210 330

Season-Average Price ($/bu.) 10.10 9.97 9.45 8.80

Department of EconomicsSource: USDA


U.S. Soybean Harvest Progress

Source: USDA

0

20

40

60

80

100

% H

arv

est

ed

5-Year Average 2009 1985


Storage Issues

Source: Hurburgh and Elmore,ICM News, 10/15/09


World Corn Production

Source: USDA


Corn – Argentina & Brazil

Source: USDA

35

38

41

44

47

50

Mill

ion a

cre

s

1800

2100

2400

2700

3000

3300

Mill

ion b

ush

els

Area Harvested Production


World Soybean Production

Source: USDA


Soybeans – Argentina & Brazil

Source: USDA

65

75

85

95

105

Mill

ion a

cre

s

2700

3150

3600

4050

4500

Mill

ion b

ush

els

Area Harvested Production


Hog Returns vs. Corn Prices

Sources: ISU Extension, Farrow-to-Finish;USDA-NASS

-50

-40

-30

-20

-10

0

10

20

30

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

$ p

er

head

2

3

4

5

6

$ p

er

bush

el


Cattle Returns vs. Corn Prices

Sources: ISU Extension, Yearling Steers;USDA-NASS

-300

-250

-200

-150

-100

-50

0

50

100

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

$ p

er

head

2

3

4

5

6

$ p

er

bush

el


Hog Crush Margin

Source: Dr. John Lawrence, 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


Cattle Crush Margin

Source: Dr. John Lawrence, 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


0.4

0.6

0.8

1.0

1.2

1.4

1.6

Canada Mexico Brazil EU China South KoreaJapan Australia

Exchange Rates (Jan. 2003 = 1)

Source: USDA, ERS


Corn Export Sales

Source: USDA, FAS

0

500

1,000

1,500

2,000

2,500

Week

Mill

ion b

ush

els

2007 2008 2009


2009 U.S. Corn Exports

Source: USDA, FAS

Other25%

Taiwan6%

South Korea15%

Egypt4%

Mexico17%

Japan33%


Soybean Export Sales

Source: USDA, FAS

0

200

400

600

800

1,000

1,200

1,400

Week

Mill

ion b

ush

els

2007 2008 2009


2009 U.S. Soybean Exports

Source: USDA, FAS

Mexico5%

Japan4%

Other19%

EU8%

China64%


Renewable Fuels Standard (RFS)

0

2

4

6

8

10

12

14

16

2009 2010 2011

Bill

ion g

allo

ns

Additional Advanced Biofuels Biodiesel

Cellulosic Biofuels Conventional Biofuels

CropYear

Billion Bushels

2008 3.57

2009 4.11

2010 4.43

2011 4.64


Ethanol Margins

Source: ISU, CARD


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

/20

07

4/3

/20

07

7/3

/20

07

10/3

/20

07

1/3

/20

08

4/3

/20

08

7/3

/20

08

10/3

/20

08

1/3

/20

09

4/3

/20

09

7/3

/20

09

10/3

/20

09

1/3

/20

10

Ce

nts

pe

r ga

llon


0

20

40

60

80

100

120

140

Jan-8

6

Jan-8

8

Jan-9

0

Jan-9

2

Jan-9

4

Jan-9

6

Jan-9

8

Jan-0

0

Jan-0

2

Jan-0

4

Jan-0

6

Jan-0

8

Jan-1

0

Jan-1

2

Jan-1

4

Jan-1

6

Jan-1

8

$ p

er

barr

el

Crude Oil Prices

Sources: EIA, NYMEX


Outside Influences (Jan. 2007 = 1)

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.31/3

/2007

3/3

/2007

5/3

/2007

7/3

/2007

9/3

/2007

11/3

/2007

1/3

/2008

3/3

/2008

5/3

/2008

7/3

/2008

9/3

/2008

11/3

/2008

1/3

/2009

3/3

/2009

5/3

/2009

7/3

/2009

9/3

/2009

11/3

/2009

1/3

/2010

Corn Soybeans Ethanol Gasoline


1.5

2

2.5

3

3.5

0% 5% 10% 15% 20% 25% 30%

Stocks-to-use ratio

Pric

e ($

per

bus

hel)

Corn1990 - 2006


2007/082008/09May

June

July

AugSept Oct

JanNov Dec

Feb

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0% 5% 10% 15% 20% 25% 30%

Stocks-to-use ratio

Pric

e ($

per

bus

hel)

Corn


Soybeans2007/082008/09 June

JulySept Oct

NovMayAug DecJanFeb

4

5

6

7

8

9

10

11

0% 5% 10% 15% 20%

Stocks-to-use Ratio

Pric

e ($

per

bus

hel)


Corn Futures Trade

Source: CFTC

0

2

4

6

81/3

/2006

4/3

/2006

7/3

/2006

10/3

/2006

1/3

/2007

4/3

/2007

7/3

/2007

10/3

/2007

1/3

/2008

4/3

/2008

7/3

/2008

10/3

/2008

1/3

/2009

4/3

/2009

7/3

/2009

10/3

/2009

1/3

/2010

Bill

ion b

ush

els

0

2

4

6

8

$ p

er

bush

el

Total Trade Non Comm Net Price


Soybean Futures Trade

Source: CFTC

-1

0

1

2

3

41

/3/2

00

6

4/3

/20

06

7/3

/20

06

10/3

/20

06

1/3

/20

07

4/3

/20

07

7/3

/20

07

10/3

/20

07

1/3

/20

08

4/3

/20

08

7/3

/20

08

10/3

/20

08

1/3

/20

09

4/3

/20

09

7/3

/20

09

10/3

/20

09

1/3

/20

10

Bill

ion

bush

els

0

4

8

12

16

20

$ p

er

bush

el

Total Trade Non Comm Net Price


Iowa Crop Basis

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

Cen

ts p

er b

ushe

l

Average 2000-05 - Corn Average 2000-05 - Soy 2009 - Corn2009 - Soy 2010 - Corn 2010 - Soy


Projected 2009 Season-Average Corn Price

2.50

3.00

3.50

4.00

4.50

5.00

5/1

/2009

6/1

/2009

7/1

/2009

8/1

/2009

9/1

/2009

10/1

/2009

11/1

/2009

12/1

/2009

1/1

/2010

2/1

/2010

$ p

er

bush

el

Futures USDA


Projected 2009 Season-Average Soy Price

8.00

8.50

9.00

9.50

10.00

10.50

5/1

/2009

6/1

/2009

7/1

/2009

8/1

/2009

9/1

/2009

10/1

/2009

11/1

/2009

12/1

/2009

1/1

/2010

2/1

/2010

$ p

er

bush

el

Futures USDA


Corn Futures

Source: CBOT, 2/23/10

3.50

3.60

3.70

3.80

3.90

4.00

4.10

Mar-

10

Ap

r-1

0

May-

10

Jun-1

0

Jul-1

0

Au

g-1

0

Se

p-1

0

Oct

-10

No

v-10

De

c-10

$ p

er

bu

sh

el

0.11

0.22

0.29


Soybean Futures

Source: CBOT, 2/23/10

9.20

9.30

9.40

9.50

9.60

9.70

Mar-

10

Ap

r-1

0

May-

10

Jun-1

0

Jul-1

0

Au

g-1

0

Se

p-1

0

Oct

-10

No

v-10

$ p

er

bu

sh

el

0.07

0.13

0.09

-0.10


Feb. Prices on Dec. Corn

3.85

3.90

3.95

4.00

4.05

4.10

$ p

er

bu

sh

el

’10 Ave. $3.96, so far

’09 Ave. $4.04


8.80

8.90

9.00

9.10

9.20

9.30

9.40

9.50

$ p

er

bu

sh

el

Feb. Prices on Nov. Corn

’10 Ave. $9.21, so far

’09 Ave. $8.80


Ratio: Nov. 2010 Soy/Dec. 2010 Corn

Source: CBOT

2

2.1

2.2

2.3

2.4

2.5

2.6

2.71/2

/200

9

2/2

/200

9

3/2

/200

9

4/2

/200

9

5/2

/200

9

6/2

/200

9

7/2

/200

9

8/2

/200

9

9/2

/200

9

10/2

/20

09

11/2

/20

09

12/2

/20

09

1/2

/201

0

2/2

/201

0


Input Costs

Source: USDA, Agricultural Prices, Jan. 29, 2010


Iowa Corn Prices vs. Costs

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

$ pe

r B

ushe

l

Season-average Price Cost per Bushel


Iowa Soybean Prices vs. Costs

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

$ pe

r B

ushe

l

Season-average Price Cost per Bushel


Thoughts for 2009/10 and BeyondGeneral economic conditions

Projected economic recovery is a major key for crop pricesWeakness in the dollar helps exports, but dollar may fight backNearby crude oil prices floating in mid to upper $70’s

Supply/demand concernsLivestock numbers continue to declineSouth America: Record soybean crop and large corn crop

2009/10: USDA: Corn $3.70, Soy $9.45Futures: Corn $3.52, Soy $9.32

2010/11: USDA: Corn $3.60, Soy $8.80Futures: Corn $3.87, Soy $8.94


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/

Documents

The Outlook for 2010: Big Crops, Big Demands