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2010 Grain Market Outlook

2010 Grain Market Outlook. 2010 Ag Economy & Grain Market Outlook Hills, Iowa Feb. 24, 2010 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911. U.S. Corn Supply and Use. Source: USDA. Source: USDA. U.S. Corn Harvest Progress. Source: USDA.

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2010 Grain Market Outlook

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  1. 2010 Grain Market Outlook 2010 Ag Economy & Grain Market Outlook Hills, Iowa Feb. 24, 2010 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. U.S. Corn Supply and Use Source: USDA

  3. Source: USDA

  4. U.S. Corn Harvest Progress Source: USDA

  5. U.S. Soybean Supply and Use Source: USDA

  6. Source: USDA

  7. U.S. Soybean Harvest Progress Source: USDA

  8. Storage Issues Source: Hurburgh and Elmore, ICM News, 10/15/09

  9. World Corn Production Source: USDA

  10. Corn – Argentina & Brazil Source: USDA

  11. World Soybean Production Source: USDA

  12. Soybeans – Argentina & Brazil Source: USDA

  13. Hog Returns vs. Corn Prices Sources: ISU Extension, Farrow-to-Finish; USDA-NASS

  14. Cattle Returns vs. Corn Prices Sources: ISU Extension, Yearling Steers; USDA-NASS

  15. Hog Crush Margin The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 pounds Pig price: 50%of 5 mth out lean hog futures Corn: 10 bushels per pig Soybean meal: 150 pounds per pig Source: Dr. John Lawrence, ISU Extension

  16. Cattle Crush Margin The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head Source: Dr. John Lawrence, ISU Extension

  17. Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

  18. Corn Export Sales Source: USDA, FAS

  19. 2009 U.S. Corn Exports Source: USDA, FAS

  20. Soybean Export Sales Source: USDA, FAS

  21. 2009 U.S. Soybean Exports Source: USDA, FAS

  22. Renewable Fuels Standard (RFS)

  23. Ethanol Margins Source: ISU, CARD

  24. Ethanol Blending Advantage

  25. Crude Oil Prices Sources: EIA, NYMEX

  26. Outside Influences (Jan. 2007 = 1)

  27. Corn 1990 - 2006

  28. Corn

  29. Soybeans

  30. Corn Futures Trade Source: CFTC

  31. Soybean Futures Trade Source: CFTC

  32. Iowa Crop Basis

  33. Projected 2009 Season-Average Corn Price

  34. Projected 2009 Season-Average Soy Price

  35. Corn Futures Source: CBOT, 2/23/10

  36. Soybean Futures Source: CBOT, 2/23/10

  37. Ratio: Nov. 2010 Soy/Dec. 2010 Corn Source: CBOT

  38. Input Costs Source: USDA, Agricultural Prices, Jan. 29, 2010

  39. Iowa Corn Prices vs. Costs

  40. Iowa Soybean Prices vs. Costs

  41. Thoughts for 2009/10 and Beyond • General economic conditions • Projected economic recovery is a major key for crop prices • Weakness in the dollar helps exports, but dollar may fight back • Nearby crude oil prices floating in mid to upper $70’s • Supply/demand concerns • Livestock numbers continue to decline • South America: Record soybean crop and large corn crop • 2009/10: USDA: Corn $3.70, Soy $9.45 Futures: Corn $3.52, Soy $9.32 • 2010/11: USDA: Corn $3.60, Soy $8.80 Futures: Corn $3.87, Soy $8.94

  42. Average Crop Revenue Election (ACRE) • ACRE is a revenue-based counter-cyclical payment program • Based on state and farm-level yields per planted acre and national prices • Producers choose between the current price-based counter-cyclical payment (CCP) program and ACRE • Program has state and farm trigger levels, both must be met before payments are made

  43. ACRE Settings ACRE is based on planted acres Total acres eligible for ACRE payments limited to total number of base acres on the farm Farmers may choose which planted acres are enrolled in ACRE when total base area is exceeded

  44. ACRE Payments • Payment rate = Min(ACRE revenue guarantee – ACRE actual revenue, 25% * ACRE revenue guarantee) • ACRE payment adjustment: Payment multiplied by ratio of Expected farm yield to Expected state yield • Payments made on 83.3% of planted acres in 2009-11, 85% in 2012 (up to total base acres)

  45. ACRE Payment Timing Payments can begin as soon as practicable possible after the end of the marketing year So 2009 ACRE payments could start to be paid out in October 2010 There are no provisions for advance payments

  46. ACRE Set-up for 2009 Iowa Corn So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $4.13 per bushel.

  47. Using Latest USDA Projections ACRE revenue guarantee = $635.61/acre 90% * $4.13/bu. * 171.0 bu./acre Proj. ACRE actual revenue = $673.40/acre $3.70/bu. * 182.0 bu./acre No payments under this scenario Would need yields to fall to 172 bu/acre or price to fall to $3.49 to trigger payments

  48. ACRE Payment Rate Matrix ($/acre) Price Yield USDA

  49. ACRE Set-up for 2010 Iowa Corn The 2009 yields and prices are USDA’s Jan. 2010 estimates. So the expected state yield would be 171.0 bushels per acre and the ACRE price guarantee would be $3.88 per bushel.

  50. 2010 Iowa Corn ACRE Guarantee By formula, the ACRE revenue guarantee would be $597.13/acre 90% * $3.88/bu. * 171.0 bu./acre But the ACRE revenue guarantee can not change by more than 10% 2009 guarantee = $637.15/acre Allowed range is $572.05 to $699.17 So 2010 proj. guarantee is $597.13/acre

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