Crop Outlook and Grain Flow Shifts

Department of Economics

Crop Outlook and Grain Flow Shifts

Iowa Cooperative Managers’ AssociationJohnston, Iowa

February 10, 2009

Chad HartAssistant Professor/Grain Markets Specialist

[email protected]


U.S. Corn Supply and Use

Source: USDA-WAOB, Jan. 2009

-50

$3.90-0.10$4.00

-100

+316

-50

+81


U.S. Soybean Supply and Use


-30

$9.00 $9.00

+50

+38

NC


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


Producer Markets for Corn



0

10

20

30

40

50

60

70

Countryelevators

Corn processors River terminals Farm/feedingoperations

1999/2000 2006/07

Shifting Markets for Cornpercent



Producer Markets for Soybeans



0

10

20

30

40

50

60

70

80

Country elevators Soybean processors River terminals

1999/2000 2006/07

Shifting Markets for Soybeanspercent



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



Handler Markets for Corn



0

10

20

30

40

50

Feeders Corn processors River terminals Export markets

1999/2000 2006/07

Shifting Markets for Corn Handlerspercent



Handler Markets for Soybeans



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


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


Ethanol Margins

Source: ISU, CARD


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


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.


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


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


Crop Exports

Source: USDA, PSD

0.0

0.5

1.0

1.5

2.0

2.5

Bill

ion

bush

els

Corn Soybeans


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


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%


Chinese Corn Production



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


2007 World Corn Exports

Source: USDA, FAS

U.S.65%

Other12%

Argentina16%

Brazil7%

Drought issuesfor 2008 crops


2007 World Soybean Exports

Source: USDA, FAS

Other5%

U.S.40%

Paraguay6%

Brazil32%

Argentina17%

Drought issuesfor 2008 crops


0%

10%

20%

30%

40%

50%

60%

70%

80%

Week

2006 2007 2008

Pace of Corn Export Sales

Source: USDA, FAS


Japan40%

Other26%

Mexico19%

South Korea9%

Taiwan6%

2008 U.S. Corn Exports

Source: USDA, FAS


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Week

2006 2007 2008

Pace of Soybean Export Sales

Source: USDA, FAS


China60%

Other17%

EU10%

Mexico7%

Japan6%

2008 U.S. Soybean Exports

Source: USDA, FAS


U.S. Stocks-to-Use Ratios

0%

5%

10%

15%

20%

25%

30%

Corn Soybeans Corn - Avg. 1990-2006 Soy - Avg. 1990-2006


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


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


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


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

Crop Outlook and Grain Flow Shifts

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