ACRE Update & Crop Outlook

1. ACRE Update & Crop Outlook ISU Extension Farm Management In-Service Ames, Iowa October 13, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. ACRE Set-up for 2009 Iowa Corn 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.

3. Using Latest USDA Projections ACRE 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

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

5. ACRE Set-up for 2010 Iowa Corn 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.

6. 2010 Iowa Corn ACRE Guarantee By formula, the ACRE revenue guarantee would be $570.97/acre 90% * $3.71/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 $572.05/acre

7. ACRE Set-up for 2009 Iowa Soybeans 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.

8. Using Latest USDA Projections ACRE 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

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

10. ACRE Set-up for 2010 Iowa Soybeans 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.

11. 2010 Iowa Soybean ACRE Guarantee By formula, the ACRE revenue guarantee would be $439.86/acre 90% * $9.49/bu. * 51.5 bu./acre But the ACRE revenue guarantee can not change by more than 10% 2009 guarantee = $456.32/acre Allowed range is $410.69 to $501.95 So 2010 proj. guarantee is $439.86/acre

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

13. Source: USDA

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

15. Source: USDA

16. World Corn Production Source: USDA

17. World Soybean Production Source: USDA

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

19. Exports & Advance Sales(1st 5 weeks of marketing year) Source: USDA, FAS

20. Renewable Fuels Standard (RFS)

21. Ethanol Margins Source: ISU, CARD

22. Outside Influences (Jan. 2007 = 1)

23. Crude Oil Prices Sources: EIA, NYMEX

24. Corn 1990 - 2006

25. Corn

26. Soybeans

27. Iowa Crop Basis

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

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

30. Thoughts for 2009 and Beyond • General economic conditions • Recession concerns still hold significant power in the markets • Projected economic recovery is a major key for crop prices for the 2009 crop year • Continued 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

31. 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/