ACRE Update & Crop Outlook
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Transcript of ACRE Update & Crop Outlook
Department of Economics
ACRE Update & Crop Outlook
ISU Extension Farm Management In-ServiceAmes, Iowa
October 13, 2009
Chad HartAssistant Professor/Grain Markets Specialist
Department of Economics
ACRE Set-up for 2009 Iowa CornYear Yield per Planted Acre
(bu./acre)
2004 181.0
2005 173.0
2006 166.0
2007 171.0
2008 169.0
Olympic Average 171.0
Year Season-average Price ($/bu.)
2007 4.20
2008 4.06
Average 4.13
The 2008 price was released by USDA in the Sept. 29, 2009 Ag Prices report (see page 27 of the report for details).
So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $4.13 per bushel.
Department of Economics
Using Latest USDA ProjectionsACRE revenue guarantee = $635.61/acre
90% * $4.13/bu. * 171.0 bu./acre
Proj. ACRE actual revenue = $629.80/acre$3.35/bu. * 188.0 bu./acre
Proj. ACRE payment rate = $5.81/acre
Department of Economics
ACRE Payment Rate Matrix ($/acre)$2.55 $2.75 $2.95 $3.15 $3.35 $3.55 $3.75 $3.95 $4.15
180 158.90 140.61 104.61 68.61 32.61 0.00 0.00 0.00 0.00
182 158.90 135.11 98.71 62.31 25.91 0.00 0.00 0.00 0.00
184 158.90 129.61 92.81 56.01 19.21 0.00 0.00 0.00 0.00
186 158.90 124.11 86.91 49.71 12.51 0.00 0.00 0.00 0.00
188 156.21 118.61 81.01 43.41 5.81 0.00 0.00 0.00 0.00
190 151.11 113.11 75.11 37.11 0.00 0.00 0.00 0.00 0.00
192 146.01 107.61 69.21 30.81 0.00 0.00 0.00 0.00 0.00
194 140.91 102.11 63.31 24.51 0.00 0.00 0.00 0.00 0.00
196 135.81 96.61 57.41 18.21 0.00 0.00 0.00 0.00 0.00
PriceYield
USDA
Department of Economics
ACRE Set-up for 2010 Iowa CornYear Yield per Planted Acre
(bu./acre)
2005 173.0
2006 166.0
2007 171.0
2008 169.0
2009 188.0
Olympic Average 171.0
Year Season-average Price ($/bu.)
2008 4.06
2009 3.35
Average 3.71
The 2008 and 2009 yields and prices are USDA’s Oct. 2009 estimates.
So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $3.71 per bushel.
Department of Economics
2010 Iowa Corn ACRE GuaranteeBy formula, the ACRE revenue guarantee
would be $570.97/acre90% * $3.71/bu. * 171.0 bu./acre
But the ACRE revenue guarantee can not change by more than 10%2009 guarantee = $637.15/acreAllowed range is $572.05 to $699.17
So 2010 proj. guarantee is $572.05/acre
Department of Economics
ACRE Set-up for 2009 Iowa SoybeansYear Yield per Planted Acre
(bu./acre)
2004 49.0
2005 52.0
2006 50.5
2007 52.0
2008 46.5
Olympic Average 50.5
Year Season-average Price ($/bu.)
2007 10.10
2008 9.97
Average 10.04
The 2008 price was released by USDA in the Sept. 29, 2009 Ag Prices report (see page 30 of the report for details). Also note, USDA raised Iowa’s soybean yield in 2008 to 46.5 bushels per acre (see the recent Grain Stocks report, page 17, for details).
So the expected state yield would be 50.5 bushels per acre and the ACRE price guarantee would be $10.05 per bushel.
Department of Economics
Using Latest USDA ProjectionsACRE revenue guarantee = $456.32/acre
90% * $10.04/bu. * 50.5 bu./acre
Proj. ACRE actual revenue = $468.00/acre$9.00/bu. * 52 bu./acre
No payments under this scenario
Department of Economics
ACRE Payment Rate Matrix ($/acre)$8.20 $8.40 $8.60 $8.80 $9.00 $9.20 $9.40 $9.60 $9.80
50.0 46.32 36.32 26.32 16.32 6.32 0.00 0.00 0.00 0.00
50.5 42.22 32.12 22.02 11.92 1.82 0.00 0.00 0.00 0.00
51.0 38.12 27.92 17.72 7.52 0.00 0.00 0.00 0.00 0.00
51.5 34.02 23.72 13.42 3.12 0.00 0.00 0.00 0.00 0.00
52.0 29.92 19.52 9.12 0.00 0.00 0.00 0.00 0.00 0.00
52.5 25.82 15.32 4.82 0.00 0.00 0.00 0.00 0.00 0.00
53.0 21.72 11.12 0.52 0.00 0.00 0.00 0.00 0.00 0.00
53.5 17.62 6.92 0.00 0.00 0.00 0.00 0.00 0.00 0.00
54.0 13.52 2.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00
PriceYield
USDA
Department of Economics
ACRE Set-up for 2010 Iowa SoybeansYear Yield per Planted Acre
(bu./acre)
2005 52.0
2006 50.5
2007 52.0
2008 46.5
2009 52.0
Olympic Average 51.5
Year Season-average Price ($/bu.)
2008 9.97
2009 9.00
Average 9.49
The 2008 and 2009 yields and prices are USDA’s October 2009 estimates.
So the expected state yield would be 51.5 bushels per acre and the ACRE price guarantee would be $9.49 per bushel.
Department of Economics
2010 Iowa Soybean ACRE GuaranteeBy formula, the ACRE revenue guarantee
would be $439.86/acre90% * $9.49/bu. * 51.5 bu./acre
But the ACRE revenue guarantee can not change by more than 10%2009 guarantee = $456.32/acreAllowed range is $410.69 to $501.95
So 2010 proj. guarantee is $439.86/acre
Department of Economics
U.S. Corn Supply and Use
Source: USDA
2007 2008 2009
Area Planted (mil. acres) 93.5 86.0 86.4
Yield (bu./acre) 150.7 153.9 164.2
Production (mil. bu.) 13,038 12,101 13,018
Beg. Stocks (mil. bu.) 1,304 1,624 1,674
Imports (mil. bu.) 20 14 10
Total Supply (mil. bu.) 14,362 13,739 14,702
Feed & Residual (mil. bu.) 5,913 5,231 5,400
Ethanol (mil. bu.) 3,049 3,700 4,200
Food, Seed, & Other (mil. bu.) 1,338 1,276 1,280
Exports (mil. bu.) 2,437 1,858 2,150
Total Use (mil. bu.) 12,737 12,065 13,030
Ending Stocks (mil. bu.) 1,624 1,674 1,672
Season-Average Price ($/bu.) 4.20 4.06 3.35
Department of EconomicsSource: USDA
Department of Economics
U.S. Soybean Supply and Use
Source: USDA
2007 2008 2009
Area Planted (mil. acres) 64.7 75.7 77.5
Yield (bu./acre) 41.7 39.7 42.4
Production (mil. bu.) 2,677 2,967 3,250
Beg. Stocks (mil. bu.) 574 205 138
Imports (mil. bu.) 10 15 10
Total Supply (mil. bu.) 3,261 3,187 3,398
Crush (mil. bu.) 1,803 1,662 1,690
Seed & Residual (mil. bu.) 93 106 173
Exports (mil. bu.) 1,159 1,280 1,305
Total Use (mil. bu.) 3,056 3,049 3,169
Ending Stocks (mil. bu.) 205 138 230
Season-Average Price ($/bu.) 10.10 9.97 9.00
Department of EconomicsSource: USDA
Department of Economics
World Corn Production
Source: USDA
Department of Economics
World Soybean Production
Source: USDA
Department of Economics
0.4
0.6
0.8
1.0
1.2
1.4
Canada Mexico Brazil EU China South KoreaJapan Australia
Exchange Rates (Jan. 2003 = 1)
Source: USDA, ERS
Department of Economics
Exports & Advance Sales(1st 5 weeks of marketing year)
Source: USDA, FAS
0
100
200
300
400
500
600
700
800
900
1,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mill
ion b
ush
els
Corn Soybeans
Department of Economics
Renewable Fuels Standard (RFS)
0
2
4
6
8
10
12
14
16
2009 2010 2011
Bill
ion g
allo
ns
Additional Advanced Biofuels Biodiesel
Cellulosic Biofuels Conventional Biofuels
CropYear
Billion Bushels
2008 3.57
2009 4.11
2010 4.43
2011 4.64
Department of Economics
Ethanol Margins
Source: ISU, CARD
Department of Economics
Outside Influences (Jan. 2007 = 1)
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.31/3
/200
7
3/3
/200
7
5/3
/200
7
7/3
/200
7
9/3
/200
7
11/3
/20
07
1/3
/200
8
3/3
/200
8
5/3
/200
8
7/3
/200
8
9/3
/200
8
11/3
/20
08
1/3
/200
9
3/3
/200
9
5/3
/200
9
7/3
/200
9
9/3
/200
9
Corn Soybeans Ethanol Gasoline
Department of Economics
Crude Oil Prices
Sources: EIA, NYMEX
0
20
40
60
80
100
120
140$ p
er
barr
el
Department of Economics
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
Department of Economics
2007/082008/092009/10 May
2009/10 June
2009/10 July
2009/10 Aug.2009/10 Sept. 2009/10 Oct.
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
Department of Economics
2007/082008/09 2009/10 June
2009/10 July2009/10 Sept. 2009/10 Oct.
2009/10 May2009/10 Aug.
4
5
6
7
8
9
10
11
0% 5% 10% 15% 20%
Stocks-to-use Ratio
Pric
e ($
per
bus
hel)
Soybeans
Department of Economics
Iowa Crop Basis
-140
-120
-100
-80
-60
-40
-20
0
20
40
Cen
ts p
er b
ushe
l
Average 2000-05 - Corn Average 2000-05 - Soy 2008 - Corn2008 - Soy 2009 - Corn 2009 - Soy
Department of Economics
Ratio: Nov. 2010 Soy/Dec. 2010 Corn
Source: CBOT
2
2.1
2.2
2.3
2.4
2.5
2.6
2.71
/2/2
00
9
1/1
6/2
009
1/3
0/2
009
2/1
3/2
009
2/2
7/2
009
3/1
3/2
009
3/2
7/2
009
4/1
0/2
009
4/2
4/2
009
5/8
/200
9
5/2
2/2
009
6/5
/200
9
6/1
9/2
009
7/3
/200
9
7/1
7/2
009
7/3
1/2
009
8/1
4/2
009
8/2
8/2
009
9/1
1/2
009
9/2
5/2
009
10/9
/20
09
Department of Economics
Input Costs
Source: USDA, Agricultural Prices, Sept. 29, 2009
Department of Economics
Thoughts for 2009 and BeyondGeneral economic conditions
Recession concerns still hold significant power in the marketsProjected economic recovery is a major key for crop prices for the 2009 crop yearContinued weakness in the dollar helping exports
Most important ag. statistics: Crop production, $ value, feed demand
USDA is indicating 2009 season-average prices in the neighborhood of $3.35 for corn and $9.00 for soybeans
Current futures Yesterday: Corn $3.64, Soy $9.55
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/