ACRE Update & Crop Outlook

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Department of Economics ACRE Update & Crop Outlook ISU Extension Farm Management In-Service Ames, Iowa October 13, 2009 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911

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ACRE Update & Crop Outlook. ISU Extension Farm Management In-Service Ames, Iowa October 13, 2009 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911. ACRE Set-up for 2009 Iowa Corn. - PowerPoint PPT Presentation

Transcript of ACRE Update & Crop Outlook

Page 1: 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

[email protected]

Page 2: ACRE Update & Crop Outlook

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.

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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

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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

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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.

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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

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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.

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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

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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

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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.

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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

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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

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Department of EconomicsSource: USDA

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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

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Department of EconomicsSource: USDA

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Department of Economics

World Corn Production

Source: USDA

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Department of Economics

World Soybean Production

Source: USDA

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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

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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

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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

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Department of Economics

Ethanol Margins

Source: ISU, CARD

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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

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Department of Economics

Crude Oil Prices

Sources: EIA, NYMEX

0

20

40

60

80

100

120

140$ p

er

barr

el

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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

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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

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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

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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

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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

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Department of Economics

Input Costs

Source: USDA, Agricultural Prices, Sept. 29, 2009

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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

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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/