Post on 20-Dec-2015
Higher Corn Prices Came at a Good Time
• Hogs: extended period of positive returns• Feedlots Near record weekly prices and new
record annual• Cowherds: profitable since 1999 and
contracting• Dairies: rough 2006, but record prices in 2007 • Eggs: prices higher in early 2007 following 3+
years of lower price• Turkeys: expanding after record prices in 2006
Omaha Corn and Decatur SBM
$0
$50
$100
$150
$200
$250
$300
$350
$4001
/4/2
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2
7/4
/20
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SBM Corn
Expanding U.S. Ethanol Industry vs. 2005-06 Corn Feeding
2005-06 U.S.Corn Feeding
Potential Cornfor Ethanol
Other underconstruction
07-08 Ethanol
Current Corn forEthanol
2005-06 U.S.Corn Feeding
Proj. Corn ethanol2011-12
'06-07 Corn for Ethanol
Proj. cornFor ethanol 07-08
Other under Constr’n.
Implication for Pork Producers
• Cost of production impact–1997-2006
• Omaha corn = $2.09• Decature 48% SBM $188• ISM barrows and gilts live weight $42.18• ISU farrow to finish cost estimate $39.92
–12 bu/head, 270# live weight• $1 higher corn = $4.44 = $44-45/cwt• $2 higher corn = $8.88 = $48-49/cwt
Impact on Feedlot Cattle Cost and Returns
• 1997-2006 Price BE Cost– Calf $101.96 $71.69– Yearling $90.35 $72.00
– Fed $74.18 • 60 Bushels and 1250# pay weight
– $1 higher corn = $4.80/cwt, $8.50 on 7cwt– $2 higher corn = $9.60/cwt, $17 on 7cwt
Cost of Corn as Percent of Total Retail, Hide, and Offal Value
0%
2%
4%
6%
8%
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20%J
an
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Beef Pork1991-2006 7.4% 7.1%
Jan-Jun 07 9.0% 9.6%
Example U.S. DGS demand by 2011-12
•COF @ 30% of corn 13.2 mil. T.•Dairy @ 25% of corn 8.3 mil. T.•Hogs @ 10% of corn 3.0 mil. T.•Poultry @ 7% of corn 1.4 mil. T. Total 25.9 mil.
T.Potential production at 5.5 bil. bu. for ethanol 46.8 Mil. T.
Midwest DGS Inclusion Rates Percent of Diet
• Enterprise Range Realistic Adoption• Swine 0-20 10 60• Poultry 0-10 5 40• Feedlot 0-40 30 85• Dairy 0-30 15 50Still need corn for beef and dairy cattleStill need corn and SBM for poultry and hogs• For each 1 bushel process to DDGS you
need 2 more bushels to feed
Chicago DDGS:Corn Price Ratio
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NW Iowa Price of Dry, Modified, and Wet Distillers Grains with Solubles Divided by the Price of Corn
05
10152025303540
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/06
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/06
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/06
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Wet Modified Dry
Converting Fiber to Ethanol
• 6/27/2007, POET produces cellulosic ethanol from corn cobs
• “… First, the fiber that comes from our fractionation process will provide 40 percent of our cellulosic feedstock from the corn kernels that we are already processing in our facility. “
Corn Basis to Chicago Cash for Cattle Feeding Regions
-$0.40
-$0.30
-$0.20
-$0.10
$0.00
$0.10
$0.20
$0.30
$0.40
IowaElevators
OMAHA SWNE Dodge City NECO TX N ofCanadian
TX Triangle
91-95 96-00 '01-05 '06-07
Monthly average of daily prices'06-'07 is Jan '06 - May '07
Corn Price Difference, Average Ethanol Bids Minus Elevator Bids, Northeast and Northwest Iowa
$(0.10)
$(0.05)
$-
$0.05
$0.10
$0.15
$0.20
$0.25
Oct06
Nov06
Dec06
Jan07
Feb07
Mar07
Apr07
May07
Jun07
Northeast Iowa Northwest Iowa
Risk Implications• Physical control• Enough for ‘08, what about ‘09
– Ethanol expansion continues– Other crops try to buy back acres
• Basis volatility– 20% more corn to harvest and store– Carry in the market– Location basis variability
Rural Communities Needs Both Ethanol and Livestock• 100 million gallon ethanol plant
– 37 million bushels of corn– 50-60 people directly employed
• 37 million bu corn Direct jobsFarrow-finish 800Or Wean-finish 242Or Beef feedlot 278
• Further processing employment??
Take-home points
• Much tighter feed energy supply than in past
• Increased supply of medium-protein DGS
• Soy meal: tighter supply & higher cost• Differential economic impacts by species of Differential economic impacts by species of
livestock & poultrylivestock & poultry• High risk to livestock industry in short-crop High risk to livestock industry in short-crop
yearsyears• Feed price volatility affected by govt. fuel
mandates• 2nd generation ethanol plants to tighten DGS,
forage supplies (8-10 years out?)
Warren
Boone
Audubon
Pottawattamie
Mills
Fremont Page
Montgomery
Cass
Harrison
Monona
Shelby
Crawford Carroll
Adams Union
RinggoldTaylor Decatur
Clarke
Greene
Adair
Guthrie
Madison
Dallas Polk
Dickinson
Cherokee
Woodbury
Plymouth
Ida Sac
BuenaVista
Sioux
Lyon
ClayO'Brien
Osceola
Humboldt
Calhoun
Pocahontas
HamiltonWebster
Wright
Kossuth
Palo Alto
Emmet
Hancock
Winnebago
Clinton
Keokuk
Wapello
Wayne
Lucas
DavisAppanoose
Monroe
Marion
Jasper
Mahaska
Poweshiek
Louisa
Van Buren
Jefferson
Lee
Henry
Des Moines
Johnson
Washington
IowaScott
Muscatine
Cedar
Howard
Black HawkHardin
StoryTama
Marshall
Grundy
Worth
Franklin
Cerro Gordo
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Mitchell
Floyd Chickasaw
BuchananDelaware
LinnBentonJackson
Jones
Dubuque
Fayette
Winneshiek
Clayton
Allamakee
Iowa Corn Processing Plants, 2002
Iowa corn processing & ethanol plants, current & planned, 10/26/06
63
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VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
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Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
HamiltonGrundy
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Delaware
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Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
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Humboldt
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Cedar
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Cass
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VanBuren
Mucatine
Dickenson
DesMoines
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HamiltonGrundy
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Delaware
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Jackson
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Guthrie Dallas
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Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
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Taylor Ringgold
Cherokee
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Decatur Wayne Davis
Henry
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Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
HamiltonGrundy
Buchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
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Audubon
Washington
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BlackHawk
Appanoose
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VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
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BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
HamiltonGrundy
Buchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
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66 Planned + current in Iowa
11 Just across the borders
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Figure 1.
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Iowa corn processing & ethanol plants, current & planned, 11/20/06
63
Capacity: 129% of 2006 cropCapacity: 142% of 2006 Crop
Iowa Corn Processing Plants, Current & Planned, 5/30/07
71 Potential Iowa Plants 11 Just across IA Borders
Take Home
The world in which you operate had fundamentally changed.
How have you changed
your business???