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November 2010

November 2010. Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/farmmanagement.htm. Presentation Objectives. Summarize Iowa’s 2010 Corn & Soybean Yield Estimates

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November 2010

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  1. November 2010 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790sdjohns@iastate.edu www.extension.iastate.edu/polk/farmmanagement.htm

  2. Presentation Objectives Summarize Iowa’s 2010 Corn & Soybean Yield Estimates Highlight 2010 Crop Insurance Coverage and new Common Policy for 2011 Update Futures Market Carry, Basis & Cost of Storage Highlight Crop Margin Trends & Forecast 2011 Crop Margins Discuss 5 Strategies for Managing 2010 & 2011 Crop Margins Provide 5 Crop Risk Management Strategies & 5 Websites

  3. 185 178 175 54 53 52 98 156 175 167 173 121 48 46 50 52 55 52 Iowa 2010 Crop Yield Estimates Source: USDA NASS, Iowa Field Office, Nov. 9th, 2010

  4. Acres Insured in 2010 Corn and Soybeans--Iowa Source: USDA Risk Management Agency, Oct. 2010

  5. Corn Indemnity Prices(Revenue Coverage) Oct. Avg. $5.46/bu Feb. Avg. $3.99/bu Source: USDA Risk Management Agency, Oct. 2010

  6. Soybean Indemnity Prices: (Revenue Coverage) Oct. Avg. $11.63/bu Feb. Avg. $9.23/bu Source: USDA Risk Management Agency, Oct. 2010

  7. 2011 Policies Convert Automatically Crop Revenue Coverage (CRC) Revenue Assurance with Harvest Price Option (RA-HPO) Revenue Protection (RP) Revenue Protection with harvest price exclusion (RPE) Revenue Assurance (RA) with Base Price only (RA-BP) Source: USDA Risk Management Agency, Oct. 2010

  8. U.S. Corn Supply/Demand & Price 2009/10 Estimated 2010/2011 Projected Area Planted Area Harvested Yield Beginning Stocks Production Imports Supply, Total Feed & Residual Food, Seed & Industrial Domestic Use, Total Exports Use, Total Ending Stocks Average Farm Price 86.5 88.2 79.6 81.3 164.7 154.3 1,673 1,708 13,110 12,540 8 10 14,792 14,257 5,159 5,300 5,938 6,180 11,098 11,480 1,987 1,950 13,084 13,430 1,708 827 $3.55 $4.80-$5.60 Midpoint $5.20/bu Source: USDA WASDE Report, Nov. 9th, 2010

  9. Corn Cash Price & Probability Forecast ’10-’11 Marketing Year $5.10/bu 65% $5.80/bu 18% $5.00/bu 17% Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010

  10. Nearby Corn Chart Nov. 9th: Key Reversal Higher High, Lower Low & Markete Closes Lower Other support levels: $5.00 & $4.60 Source: www.jimwyckoff.com, Nov.12th, 2010

  11. Corn Futures Carry Dec. 2011 $4.99 Nov. 17th, 2010 Decline in Carry since summer, but still rewards On-farm Storage if little to no interest accruing. Capture the carry with sales for the deferred contract months. Source: www.cmegroup.com

  12. Corn Basis Trends Source: www.farmfutures.com November 2010

  13. Local Corn Basis History - Conrad Source: www.cashgrainbids.com November 2010

  14. Corn Storage Costs Storing monthly beyond harvest costs 4¢ to 7¢ per bushel .89 .69 .50 .56 .30 .44 .32 .20 Assumption: Corn is Valued at $5/bu. - Financed @ 5% APR Source: Johnson, ISU Extension, November 2010

  15. U.S. Soybean Supply/Demand & Price 2009/10 Estimated 2010/2011 Projected Area Planted Area Harvested Yield Beginning Stocks Production Imports Supply, Total Crush Exports Seed Residual Use, Total Ending Stocks Average Farm Price 77.5 77.7 76.4 76.8 44.0 43.9 138 151 3,359 3,375 15 10 3,512 3,536 1,752 1,665 1,501 1,570 90 88 18 29 3,361 3,351 151 185 $9.59 $10.70 - $12.20 Midpoint $11.45/bu Source: USDA WASDE Report, Nov. 9th, 2010

  16. Soybean Cash Price & Probability Forecast ’10-’11 Marketing Year $11.50/bu 65% $12.30/bu 18% $11.25/bu 17% Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010

  17. Nearby Soybean Chart Nov. 9th & 12th: Key Reversal Up & Down in the same week Source: www.jimwyckoff.com, Nov.12th, 2010

  18. Soybean Futures Carry Nov. 2011 $11.27 Nov. 17th, 2010 Lack of Carry, little incentive to hold soybeans beyond winter months without on-farm storage and little debt Source: www.cmegroup.com

  19. Soybean Basis Trends Source: www.farmfutures.com November 2010

  20. Soybean Storage Costs Storing monthly beyond harvest costs 6¢ to 9¢ per bushel .94 .66 .64 .38 .46 .28 .10 Assumption: Soybeans are Valued at $11/bu. - Financed @ 5% APR Source: Johnson, ISU Extension, November 2010

  21. Factors that Impact Futures Price 5. Global Production Prospects 6. U.S. & Global Economic Recovery 7. Biofuel Tax Credits 8. Random Shocks 1. Global Demand 2. Hedge & Index Fund Positions 3. Technical Signals 4. Outside Markets: Dollar, Crude Oil Source: Wisner & Hart, ISU Economists, Nov. 2010

  22. 2011 U.S. Planted Acreage Forecast * Forecast Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010

  23. Corn Margin Trends Estimate Forecast Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010

  24. 2011 Margin Estimates: Corn following Soybeans $923 Crop Value $900 = 180 bu/A X $5/bu $488 $435 Overhead $59 Power Costs $102 Cash Rent $250 Direct Costs $327 Cash Rent $200 Direct Pmt. $23 Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010

  25. Soybean Margin Trends Estimate Forecast Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010

  26. 2011 Margin Estimates: Soybeans following Corn $573 Crop Value $550 = 50 bu/A X $11/bu $313 $260 Overhead $50 Cash Rent $250 Power Costs $90 Cash Rent $200 Direct Costs $173 Direct Pmt. $23 Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010

  27. 5 Crop Risk Management Strategies Use Cash Flow Needs, Basis & Storage Costs to Drive 2010 Sales Use a Variety of Marketing Tools: Cash, Forward Contracts, HTA, Futures & Options Use Revenue Protection (RP) and Consider Additional Hail Coverage Know Your Cost of Production & Manage Profit Margins Lock-in 2011 Crop Costs, Make Pre-Harvest Sales Source: Johnson, ISU Extension, Dec. 2010

  28. Crop Risk Management Web Sites Crop Risk Management - ISU Polk County Monthly Crop Marketing Newsletter & Webcast, Updates on Crop Insurance, Government Farm Program, Grain Contracts and Farmland Leasing www.extension.iastate.edu/polk/farmmanagement Ag-Decision Maker – ISU Extension (Decision Tools, Newsletters, Publications and Voiced Media) www.extension.iastate.edu/agdm Farm Doc - U of Illinois Extension Economics www.farmdoc.illinois.edu Ag Manager – K-State Extension Economics www.agmanager.info @g Online – Successful Farming Magazine www.agriculture.com /farm-management Source: Johnson, ISU Extension, Dec. 2010

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