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Ag Outlook for 2012

Ag Outlook for 2012. Iowa Realtors Land Institute Meeting Clive, Iowa Dec. 5, 2011 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911. Source: USDA. Cattle and Hog Prices. Source: CME Group. Hog Crush Margin.

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Ag Outlook for 2012

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  1. Ag Outlook for 2012 Iowa Realtors Land Institute Meeting Clive, Iowa Dec. 5, 2011 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. Source: USDA

  3. Cattle and Hog Prices Source: CME Group

  4. 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: Shane Ellis, ISU Extension

  5. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  6. Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC

  7. 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: Shane Ellis, ISU Extension

  8. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  9. Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC

  10. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  11. Source: USDA

  12. Thoughts for 2012 and Beyond • Continued economic recovery is a major key for livestock prices • Meat demand is recovering • Meat supplies tightened up with smaller herds/flocks • Feed costs have kept margins tight • The combination implies livestock expansion will take awhile • Poultry is currently backing off, Hogs are expanding slightly, and Cattle will not start expanding for a few years

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

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

  15. World Corn Production Source: USDA-WAOB

  16. World Soybean Production Source: USDA-WAOB

  17. Corn vs. Wheat Source: CME Group, 12/2/2011

  18. Change of Export Pace

  19. Renewable Fuels Standard (RFS)

  20. Corn Grind for Ethanol Source: DOE-EIA

  21. Ethanol Blending Advantage

  22. Biodiesel Production Source: DOE-EIA

  23. Projected 2011 Season-Average Corn Price

  24. Projected 2011 Season-Average Soy Price

  25. Iowa Corn Prices vs. Costs

  26. Iowa Soybean Prices vs. Costs

  27. Principal Crop Area Source: USDA-NASS

  28. States with Room to Grow Number is the difference in planted acres between 2008 and 2011

  29. Iowa Crop Margins

  30. Thoughts for 2012 and Beyond • General economic conditions • Continued worldwide economic recovery is a major key for crop prices • US job recovery, European financial concerns, Chinese inflation • Supply/demand concerns • Smaller than anticipated U.S. crops, worries about dry conditions • Biofuel growth and energy demand • Corn has the upper hand in the acreage competition • Will supply be able to keep pace with demand? • 2011/12: USDA: Corn $6.70; Soy $12.60 • Futures (as of 12/2/11): Corn $5.73; Soy $11.24 • 2012/13: Futures (as of 12/2/11): Corn $5.35; Soy $11.04

  31. Crop Insurance • Two big changes for 2012 • Re-rating for corn and soybeans • Trend adjustment option for APH yields Both will impact Iowa producers

  32. Average Corn Premium Rate Changes Source: RMA

  33. Average Soybean Premium Rate Changes Source: RMA

  34. Trend Adjusted APH Yields Source: Dr. William Edwards, ISU

  35. Farm Bill • With the super committee’s failure, the farm bill returns to its normal timeline and method of deliberation • However, a few nuggets have leaked out about possible farm bill directions • None of these may make it into the final bill, but we know they have been proposed

  36. Farm Bill Proposals • Eliminate direct payments, counter-cyclical payments, ACRE, and SURE • Create Ag Risk Coverage (ARC) program to protect against low prices and/or yields • 87% of producer’s 5-year Olympic average revenue • Max. payment of 12% of revenue • Has price-only option • Payment limits of $105,000 for ARC and no payments for producers with a AGI over $950,000

  37. Farm Bill Proposals • Complete overhaul of dairy programs • Gradually reduce CRP to 25 million acres • Tighten requirements on some nutrition programs • Continue many bioenergy programs

  38. The following slides are land values and rents are from Dr. Mike Duffy His slides, my interpretation

  39. Land Summary Land values are at record levels Increases have been strong but will be affected as fundamentals change Land ownership will become more dispersed and land management will become more concentrated Odds of farmland experiencing a collapse similar to the 1980s or the urban real estate market are not high Farmland is a good long term investment and will likely remain that way for the foreseeable future Farmers are the majority of land purchasers; they buy land to own it, not to sell it

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

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