Agricultural Outlook

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Agricultural Outlook

Iowa Chapter of the ASFMRA Annual Meeting Ames,
Iowa February 5, 2009 Chad Hart Assistant
Professor/Grain Markets Specialist chart_at_iastate.e
du 515-294-9911
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U.S. Corn Supply and Use
81
-50
-100
-50
316
3.90
-0.10
4.00
Source USDA-WAOB, Jan. 2009
3
U.S. Soybean Supply and Use
38
-30
50
9.00
9.00
NC
Source USDA-WAOB, Jan. 2009
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Drought in South America
Source USDA-WAOB, Dec. 2008
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Argentine Drought Impacts (Early Reports)
2007 Production Corn 20.9 million
tons Soybeans 46.2 million tons Current USDA
Estimates Corn 16.5 million tons -21 Soybeans
49.5 million tons 7 Estimates from Buenos
Aires Cereal Exchange Corn 12.3 to 13.7 million
tons -35 to -41 Soybeans 34.5 to 38.2 million
tons -17 to -25
Source Dow Jones Newswires
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Chinese Corn Production
Source USDA-WAOB, Jan. 2009
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Soybeans in China
Source USDA-PSD, Jan. 2009
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Livestock Adjustments
Sows farrowing Sept-Nov 2008 2.99 million,
down 6 from last year Dec-Feb 2009 2.97
million, down 3 from last year Mar-May 2009
3.01 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
Sources Various USDA-NASS reports
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Ethanol Margins
Source ISU, CARD
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Biodiesel Margins
Source ISU, CARD
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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
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U.S. Blended Motor Gasoline Consumption
Source Energy Information Administration
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Outside Influences (Jan. 2007 1)
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Outside Influences (Sept. 2008 1)
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Corn Soybean Area
Growth rate of 1.55 million acres per year
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CRP Expiring Contracts
Source USDA-FSA
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Input Costs
Source USDA, Agricultural Prices, Dec. 2008
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The Rise and Fall of Fertilizer Prices
Source http//www.fertilizerworks.com/html/market
/ TheMarket.pdf
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Ammonia Prices
Source http//www.fertilizerworks.com/html/market
/ TheMarket.pdf
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Iowa Corn Prices vs. Costs
Source USDA-NASS and Duffy and Smith,
http//www.extension.iastate.edu/agdm/crops/pdf/a
1-21.pdf
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Iowa Soybean Prices vs. Costs
Source USDA-NASS and Duffy and Smith,
http//www.extension.iastate.edu/agdm/crops/pdf/a
1-21.pdf
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Estimates for 2009 Iowa Costs
Non-land Cost Land Cost Total Cost Expected Yield Cost per Bushel
(/acre) (/acre) (/acre) (bu/acre) (/bu)
Corn
486.61 205.00 691.61 160 4.32
Soybean
285.60 205.00 490.60 50 9.81
December 2009 Corn Futures 4.16
(2/2/09) November 2009 Soy Futures 9.25
(2/2/09)
Source Duffy and Smith, http//www.extension.ias
tate.edu/agdm/crops/pdf/a1-20.pdf
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Crop Exports
Source USDA, PSD
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Exchange Rates (Jan. 2003 1)
Source USDA, ERS
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Exchange Rates (Jan. 2003 1)
Source USDA, ERS
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2007 World Corn Exports
Drought issues for 2008 crops
Source USDA, FAS
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2007 World Soybean Exports
Drought issues for 2008 crops
Source USDA, FAS
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Pace of Corn Export Sales
Source USDA, FAS
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2008 U.S. Corn Exports
Source USDA, FAS
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Pace of Soybean Export Sales
Source USDA, FAS
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2008 U.S. Soybean Exports
Source USDA, FAS
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U.S. Stocks-to-Use Ratios
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World Stocks-to-Use Ratios
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Finishing Out the 2008 Crop Year

• General economic conditions
• A lot of recent market trade has been tied to
  reaction to the financial crisis and the worlds
  response
• Economic slowdown raises concern about export and
  energy demand
• Most important ag. statistic Exchange rates
  or South American production
• Current futures are indicating 2008
  season-average prices of 3.75-4.25 for corn and
  9.25-9.75 for soybeans
• Stress on South American crops has provided some
  support for prices

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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
• Ethanols buildout livestocks 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 8.50-8.75
  for soybeans
• Key factor Economic growth returns by early 2010

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Hog and Cattle Outlook 2009 and Beyond

• John D. Lawrence
• Extension Livestock Economist
• Iowa State University

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Overview

• Total production and competing meats
• Hog liquidation underway, but slowing?
• Tighter beef supplies and contracting
• MCOOL
• Feed costs and risks

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Year over year declines in chicken started in
September
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Hog Overview

• Supply side favorable
• Reduction underway
• Demand side a concern
• Smaller supplies of competing meats
• Exports below 2008 record levels
• Consumer income
• Breakeven year expected
• Liquidation slowing

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Livestock Marketing Information Center
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Dec Hogs and Pigs Report
Mil head change
All Hogs 66.7 -2.2
Breeding Herd 6.1 -2.4
Market Hogs 60.6 -2.1
Under 60 21.3 -5.5
60 - 119 15.1 -0.5
120 - 179 12.7 0.5
180 over 11.5 -0.4
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Dec Hogs and Pigs Report
Pig Crop Mil head change
Jun - Aug 29.3 0.5
Sep - Nov 28.4 -3.7
Farrowing Intentions
Dec - Feb 2.97 -3.3
Mar - May 3.01 -1.6
Pigs per Litter
Sep - Nov 9.5 2.4
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Sow Slaughter in US
Total US Sow Slaughter Canadian Sows Slaughtered in US US Sows Slaughtered
January-December 15 January-December 15 January-December 15
1000 head 3368.3 561.5 2806.8
Change 5.60 35.80 1.00
September-December 15 September-December 15 September-December 15
1000 head 989.1 182.8 806.4
Change -1.40 45.30 -8.10
November-December 15 November-December 15 November-December 15
1000 head 380.7 78.7 301.9
Change -6.80 49.80 -15.20
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Hog Summary

• Smaller supplies
• Exports below 2008, but second largest
• Domestic demand steady to weaker
• Watch feed costs
• Profitable summer, breakeven year
• Contraction slowing

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Cattle Overview

• Demand concern looms
• Herd reduction underway
• Lower supplies of competing meats
• Feed cost implications

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Demand Concerns

• Income!!!!
• Mortgages and stock market
• Unemployment growing
• Less spending at restaurants
• Value shopping for home consumption
• Stronger US slowing exports

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Chuck and round prices above 2007 and 5 year
average
Consumers eating out less often and spending less
per trip. They are trading down at the meat
counter so less total dollars to the system.
Livestock Marketing Information Center
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Livestock Marketing Information Center
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Beef Demand Summary

• Demand has weaken since Adkins
• Higher relative price and restaurant volume
• Greater impact from weaker economy
• Ground beef may benefit but not high value cuts
• Exports rebounding but stronger US will limit
  exports and favor imports

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COF -7.1 Steers -7.5 Heifers -6.4
Livestock Marketing Information Center Data
Source USDA/NASS
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Qtr LT700 GT700
1 7.6 -6.9
2 -8.7 -7.5
3 -14.8 7.4
4 -13.1 2.5
Feedlots placing heavier feeder cattle Delays
marketings and seasonal patterns Heavier
slaughter weights
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Beef Supply Summary

• Smaller beef supply
• Reduced fed cattle slaughter currently and
  through mid-year
• Continued high cow slaughter
• Trend to heavier placement weights
• Backgrounding opportunities?
• Continued heavy carcasses

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Feed Price Implications
Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200 Breakeven Purchase Price to Pay for 550 Steer Sold at 1200
Corn Fed Cattle Selling Price Fed Cattle Selling Price Fed Cattle Selling Price Fed Cattle Selling Price Fed Cattle Selling Price Fed Cattle Selling Price
Price 80 90 100 110 120 130
3.00 90 111 132 153 175 196
4.00 82 103 124 145 167 188
5.00 74 95 116 137 159 180
6.00 66 87 108 129 151 172
7.00 58 79 100 121 143 164
8.00 50 71 92 113 135 156
Cowherd Estimated Cost of Production Variable
Cost 120 Total Cost 150
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Production and Price Forecast, Jan 2009
Year Chg. Chg. Live Str Southern Plains Str Southern Plains Str
Qrtr Produce Consume 5-Mkt Avg 7-800 5-600
09 1 -3.3 -2.2 91-93 98-101 106-109
09 2 -4.1 -3.6 94-97 105-109 110-115
09 3 1.5 1.1 91-95 109-114 114-120
09 4 -0.3 -1.5 95-100 108-115 112-119
Year -1.5 -1.4 93-96 105-110 110-117
10 1 1.0 -2.4 95-101 106-113 111-119
10 2 -3.1 -4.0 100-107 110-118 117-127
10 3 -0.2 -0.7 94-102 111-120 117-128
10 4 -1.6 -1.9 99-108 110-120 115-124
Year -1.0 -2.3 98-104 110-117 115-124
Livestock Marketing Information Center
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Cattle Summary

• Weak economy and strong dollar bad for beef
  demand
• Near term smaller supplies of beef though mid 09
• Herd reduction continues leading to smaller
  supplies into 2012 or later
• Near term pressure on cattle prices
• Stronger prices in 2009 and beyond

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Thank you for your time!Any questions?My
web sitehttp//www.econ.iastate.edu/faculty/hart
/Iowa Farm Outlookhttp//www.econ.iastate.edu/
outreach/agriculture/periodicals/ifo/Ag
Decision Makerhttp//www.extension.iastate.edu/a
gdm/