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Ag Outlook

Ag Outlook. Federal Reserve of Kansas City Risk Council Meeting Kansas City, Missouri Oct. 30, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911. Key factors for 2015 and beyond. Crops/Feedstuffs – BULLISH for livestock sector

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Ag Outlook

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  1. Ag Outlook Federal Reserve of Kansas City Risk Council Meeting Kansas City, Missouri Oct. 30, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

  2. Key factors for 2015 and beyond • Crops/Feedstuffs – BULLISH for livestock sector • Hog supply – or lack of supply issues in U.S. hog herd • Beef herd rebuilding is under way and accelerating – limiting current supplies BUT currently the fed cattle market purge is on • HPAI in U.S. poultry – HUGE hit on layers/eggs, only meat impact was turkey, chicken was okay---but represents the largest risk • U.S. consumer demand has been GREAT – will it hold? • The U.S. dollar

  3. 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: ISU Extension

  4. Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center

  5. Data Source: USDA/NASS, tabulations by Lee Schulz

  6. Quarterly Cattle & Beef Forecasts (LMIC: 10/1/2015)

  7. Quarterly Cattle & Beef Forecasts (LMIC: 10/1/2015)

  8. Strength of the U.S. Dollar Source: Federal Reserve

  9. Crude Oil Prices Sources: EIA and CME

  10. 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: ISU Extension

  11. LMIC Pork Production and Price Quarterly Forecasts (9/21/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

  12. LMIC Pork Production and Price Quarterly Forecasts (9/21/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

  13. U.S. Corn Supply and Use Source: USDA-WAOB

  14. U.S. Soybean Supply and Use Source: USDA-WAOB

  15. Corn Yield Estimate Top: 2015 Estimated Yields Bottom: Change from last month Units: Bushels/acre Source: USDA-NASS

  16. World Corn Production Source: USDA-WAOB

  17. World Soybean Production Source: USDA-WAOB

  18. U.S. Meat Production & Prices Source: USDA-WAOB

  19. Corn Export Sales Source: USDA-FAS

  20. Soybean Export Sales Source: USDA-FAS

  21. Corn Grind for Ethanol

  22. 2015/16 Crop Margins

  23. 2016/17 Crop Margins

  24. Iowa Corn Prices vs. Costs

  25. Iowa Corn Costs Overall 75% increase 88% 26% 88% 46% Source: AgDM A1-21

  26. Iowa Corn Costs Source: AgDM A1-21

  27. Iowa Average Farmland Values all grades 1950−2014

  28. 2015 Cropland Value by State- Dollars per acre and percent change from 2014 http://usda.mannlib.cornell.edu/usda/current/AgriLandVa/AgriLandVa-08-05-2015.pdf

  29. Margin Maneuvers • Negotiate lower land rental rates • Explore variety choice (seed cost vs. seed benefits) • Soil test and apply required fertilizer • Examine and control other input costs (pesticides, herbicides, etc.) • Be more aggressive marketing on rallies • May look to limit losses, as opposed to capture profits • Singles & doubles vs. Home run strategy

  30. Margin Maneuvers • Fully utilize government programs • ARC-CO, PLC, crop insurance • Break price into futures and basis components to capture improvements in either • Put the pencil to paper and calculate storage benefits/costs • Will a traditional seasonal price swing cover storage costs? • What are futures prices telling you about storage opportunities now? • Remember, Rome wasn’t built in a day • It took us awhile to get into this situation and it will take awhile to get out.

  31. Crop Insurance No Payment Neither Pay RPE Pays YP Pays Both Pay RP Pays

  32. PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not

  33. Thank you for your time!Any questions?My web site:http://www2.econ.iastate.edu/faculty/hart/Iowa Farm Outlook:http://www2.econ.iastate.edu/ifo/Ag Decision Maker:http://www.extension.iastate.edu/agdm/

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