crop outlook and grain flow shifts
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Department of Economics
Crop Outlook and Grain Flow Shifts
Iowa Cooperative Managers’ AssociationJohnston, Iowa
February 10, 2009
Chad HartAssistant Professor/Grain Markets Specialist
chart@iastate.edu515-294-9911
Department of Economics
U.S. Corn Supply and Use
Source: USDA-WAOB, Jan. 2009
-50
$3.90-0.10$4.00
-100
+316
-50
+81
Department of Economics
U.S. Soybean Supply and Use
Source: USDA-WAOB, Jan. 2009
-30
$9.00 $9.00
+50
+38
NC
Department of Economics
Grain Marketers Survey• 2.05 billion bushels of corn were produced
during the 2006/07 marketing year.– 82% sold, 11% utilized on the farm, 7%
remaining for future sales
• 510 million bushels of soybeans were produced– 92% sold, 1% used on the farm, 7% expected
to be marketed
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
Producer Markets for Corn
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
0
10
20
30
40
50
60
70
Countryelevators
Corn processors River terminals Farm/feedingoperations
1999/2000 2006/07
Shifting Markets for Cornpercent
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
Producer Markets for Soybeans
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
0
10
20
30
40
50
60
70
80
Country elevators Soybean processors River terminals
1999/2000 2006/07
Shifting Markets for Soybeanspercent
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
Grain Handlers Survey• About 1.09 billion bushels of corn and 311
million bushels of soybeans were processed or shipped.
• More than 2 million tons of ethanol co-products were handled during the 2006/07 marketing year.
• Corn shipments – 1999/2000:43% by truck, 57% by rail– 2006/07: 66% by truck, 30% by rail
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
Handler Markets for Corn
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
0
10
20
30
40
50
Feeders Corn processors River terminals Export markets
1999/2000 2006/07
Shifting Markets for Corn Handlerspercent
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
Handler Markets for Soybeans
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of Economics
0
10
20
30
40
50
60
70
80
90
Soybean processors River terminals Export markets
1999/2000 2006/07
Shifting Markets for Soy Handlerspercent
Source: Yu and Hart2006/07 Iowa Grain and Biofuel Flow Survey
Department of EconomicsSources: Various USDA-NASS reports
Livestock Adjustments
Sows farrowing: Sept-Nov 2008 2.99 million, down 6% from last yearDec-Feb 2009 2.97 million, down 3% from last yearMar-May 2009 3.01 million, down 2% from last year
Broiler-type eggs set: 203 million, down 7% from last yearBroiler chicks placed: 166 million, down 6% from last year
Feedlot placements: 2.02 million, down 5% from last year
Department of Economics
Ethanol Margins
Source: ISU, CARD
Department of Economics
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
Department of Economics
U.S. Blended Motor Gasoline Consumption
Source: Energy Information Administration
115
120
125
130
135
140
145
Bill
ion
Ga
llons
Actual Feb. Proj. July Proj. Dec. Proj.
Department of Economics
Outside Influences (Jan. 2007 = 1)
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2.51
/3/2
00
7
3/3
/200
7
5/3
/200
7
7/3
/200
7
9/3
/200
7
11/3
/20
07
1/3
/200
8
3/3
/200
8
5/3
/200
8
7/3
/200
8
9/3
/200
8
11/3
/20
08
1/3
/200
9
Dow Oil Corn Soybeans
Department of Economics
Outside Influences (Sept. 2008 = 1)
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.009/2
/2008
9/9
/2008
9/1
6/2
008
9/2
3/2
008
9/3
0/2
008
10/7
/2008
10/1
4/2
008
10/2
1/2
008
10/2
8/2
008
11/4
/2008
11/1
1/2
008
11/1
8/2
008
11/2
5/2
008
12/2
/2008
12/9
/2008
12/1
6/2
008
12/2
3/2
008
12/3
0/2
008
1/6
/2009
1/1
3/2
009
1/2
0/2
009
Dow Oil Corn Soybeans
Department of Economics
Crop Exports
Source: USDA, PSD
0.0
0.5
1.0
1.5
2.0
2.5
Bill
ion
bush
els
Corn Soybeans
Department of Economics
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
Jan-
03
Apr
-03
Jul-0
3
Oct
-03
Jan-
04
Apr
-04
Jul-0
4
Oct
-04
Jan-
05
Apr
-05
Jul-0
5
Oct
-05
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Canada Mexico Brazil EU
China South Korea Japan Australia
Exchange Rates (Jan. 2003 = 1)
Source: USDA, ERS
Department of Economics
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Canada Mexico Brazil EU
China South Korea Japan Australia
Exchange Rates (Jan. 2003 = 1)
Source: USDA, ERS
Department of EconomicsSource: Dow Jones Newswires
Argentine Drought Impacts (Early Reports)
2007 ProductionCorn 20.9 million tonsSoybeans 46.2 million tons
Current USDA EstimatesCorn 16.5 million tons -21%Soybeans 49.5 million tons +7%
Estimates from Buenos Aires Cereal ExchangeCorn 12.3 to 13.7 million tons -35 to -41%Soybeans 34.5 to 38.2 million tons -17 to -25%
Department of Economics
Chinese Corn Production
Source: USDA-WAOB, Jan. 2009
Department of Economics
Soybeans in China
Source: USDA-PSD, Jan. 2009
0
5
10
15
20
25
30
35
40
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mill
ion M
etr
ic T
on
s
Production Imports
Department of Economics
2007 World Corn Exports
Source: USDA, FAS
U.S.65%
Other12%
Argentina16%
Brazil7%
Drought issuesfor 2008 crops
Department of Economics
2007 World Soybean Exports
Source: USDA, FAS
Other5%
U.S.40%
Paraguay6%
Brazil32%
Argentina17%
Drought issuesfor 2008 crops
Department of Economics
0%
10%
20%
30%
40%
50%
60%
70%
80%
Week
2006 2007 2008
Pace of Corn Export Sales
Source: USDA, FAS
Department of Economics
Japan40%
Other26%
Mexico19%
South Korea9%
Taiwan6%
2008 U.S. Corn Exports
Source: USDA, FAS
Department of Economics
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Week
2006 2007 2008
Pace of Soybean Export Sales
Source: USDA, FAS
Department of Economics
China60%
Other17%
EU10%
Mexico7%
Japan6%
2008 U.S. Soybean Exports
Source: USDA, FAS
Department of Economics
U.S. Stocks-to-Use Ratios
0%
5%
10%
15%
20%
25%
30%
Corn Soybeans Corn - Avg. 1990-2006 Soy - Avg. 1990-2006
Department of Economics
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
285.60 205.00 490.60 50 9.81
December 2009 Corn Futures = $4.2175 (2/9/09)November 2009 Soy Futures = $9.43 (2/9/09)
Source: Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-20.pdf
Department of Economics
Finishing Out the 2008 Crop YearGeneral economic conditions
A lot of recent market trade has been tied to reaction to the financial crisis and the world’s responseEconomic 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
Department of Economics
Thoughts for 2009 and BeyondMany of the storylines from 2008 will continue
Tight stocks for corn (worldwide) and soybeans (U.S.)The competition for acreageEthanol’s buildout & livestock’s adjustmentEnergy price & general economy concerns
Market volatility will remain highLink to the energy marketsMore 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
Department of Economics
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/
Grain and Biofuel Flow Survey Report:http://www.card.iastate.edu/publications/DBS/PDFFiles/08sr102.pdf
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