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Agriculture Outlook Meeting Highlights Dec. 6, 2016

Summarizing the key points from the agriculture outlook meeting in Iowa Falls on Dec. 6, 2016, including corn and soybean supply and use, yield estimates, crop margins, livestock market updates, and more.

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Agriculture Outlook Meeting Highlights Dec. 6, 2016

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  1. Ag Outlook GNB Bank Meeting Iowa Falls, IA Dec. 6, 2016 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

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

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

  4. Corn Yield Estimates Top: 2016 Yield Bottom: Change from last month Units: Bushels/acre Source: USDA-NASS

  5. Soy Yield Estimates Top: 2016 Yield Bottom: Change from last month Units: Bushels/acre Source: USDA-NASS

  6. World Corn Production Source: USDA-WAOB

  7. World Soybean Production Source: USDA-WAOB

  8. Drought Monitor Source: National Drought Mitigation Center

  9. 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

  10. 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

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

  12. Corn Export Sales Source: USDA-FAS

  13. Change in Corn Export Sales Source: USDA-FAS

  14. Soybean Export Sales Source: USDA-FAS

  15. Change in Soybean Export Sales Source: USDA-FAS

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

  17. Corn Grind for Ethanol

  18. Crude Oil Prices Sources: EIA and CME

  19. Current Corn Futures 3.67 3.35 Source: CME Group, 12/5/2016

  20. Current Soybean Futures 9.84 9.73 Source: CME Group, 12/5/2016

  21. 2016/17 Crop Margins @ Trend Yields

  22. 2016/17 Crop Margins @ Actual Yields

  23. 2017/18 Crop Margins

  24. Iowa Corn Prices vs. Costs

  25. Iowa Soybean Prices vs. Costs

  26. Beef: + 2015.Q4 Pork: + 2015.Q1 Total Poultry: +2012.Q4 Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center

  27. 2017 2016 2015 Data Source: USDA/ERS

  28. 2016 Beef Cattle Situation • Transition to larger beef supplies in 2016 has been challenging • Cow-calf: Converging toward long-term levels • Herd expansion slowed, stalled, or stopped? • Stocker: Varies widely across situations • Opportunities vs. risk of owning cattle and managing risk • Feedlot: Worst behind us (I think), still red ink • Structural concerns—excess capacity, price discovery, etc.

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

  30. Data Source: USDA/AMS

  31. Data Source: USDA/AMS

  32. Beef Cow Culling Rates 2005 = 7.7% (6.6%) 2006 - 2007 = 9.4% (8.0%) 2008 - 2012 = 11.2% (9.6%) 2013 = 10.5% (9.1%) 2014 = 8.8% (7.7%) 2015 = 7.6% (6.5%) 2016 = 7.1% (7.1%) 2016 Slaughter +13.0% (vs. 2015) -23.2% (vs. 2010-14) Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

  33. 36.8% is average between 1996‐2016 HEIFER REPLACEMENTS 2016: +3.5% 2015: +9.6% 1993: +8.0% 1982: +7.7% Data Source: USDA/NASS

  34. Data Source: USDA/AMS

  35. Cattle on Feed―11/18 report • (1,000+ head capacity feedlots; & < 1,000 in Iowa) • Oct 1 On Feed: -1.3% yr/yr • Vs. -1.1% pre-report est. -2.3%, -0.5%) • IA: -6.3% vs last year [1,000+ Head] • IA: 0.0% vs last year [<1,000 Head] • Sep Placements: -5.0% • Vs. -4.9% pre-report est. (-10.1%, -3.4%) • IA: -17.3% vs last year [1,000+ Head] • IA: +11.0% vs last year [<1,000 Head] • Sep Marketings: +4.6% • Vs. +4.4% pre-report est. (+3.1%, +6.5%) • IA: -15.0% vs last year [1,000+ Head] • IA: -36.5% vs last year [<1,000 Head] -3.5% -7.6% -24.2% Data Source: USDA/NASS

  36. Steer Live Weights This week: 1,447 Last week: 1,464 Last year: 1,453 Heifer Live Weights This week: 1,322 Last week: 1,320 Last year: 1,294 Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center

  37. Data Source: USDA-AMS Livestock Marketing Information Center

  38. 2013 = -$59.43 [-$155 to +$77] 2014 = +$197.24 [+$41 to +$ 269] 2015 = -$225.12 [-$530 to +$43] 2016f = -$113.29 [-$359 to +$113] 2017f = -$26.44 [-$108 to +$114]

  39. U.S. Beef Exports, Jan-Sep 2016 (Volume excluding by-products & variety meats) WASDE U.S.: 2015: 2,265 mil lbs 2016: 2,459 (+9%) 2017: 2,630 (+7%) Source: USDA/ERS

  40. U.S. Beef Imports, Jan-Sep 2016 (Volume excluding by-products & variety meats) WASDE U.S.: 2015: 3,371 mil lbs 2016: 3,011 (-11%) 2017: 2,680 (-11%) Source: USDA/ERS

  41. Relative Changes in Beef & Cattle Prices Source: USDA/ERS, USDA/AMS

  42. 2016 Pork Situation • Processing capacity squeeze. 1998 Déjà vu??? • Demand is always an important driver. But we first need to understand supply dynamics. • Lower hog and pig prices have likely raised the red flag on further expansion, at least for now. • Longer-term additional expansion is quite possible • Low feed grain prices, packer competition • Revisions to H&P report complicate analysis

  43. Data source: CME Group, compiled by BarChart.com.

  44. Data Source: USDA-ERS & USDA-FAS Livestock Marketing Information Center

  45. 2013 = +$6.21 [-$25.60 to +$24.57] 2014 = +$61.85 [+$13.15 to +$107.25] 2015 = +$7.93 [-$18.40 to +$26.25] 2016f = -$1.46 [-$30.11 to +$32.92] 2017f = -$4.40 [-$23.31 to +$17.97]

  46. Data Source: USDA/NASS. Urner Barry pre-report estimates

  47. Source: USDA/AMS. * Steve Meyer, EMI.

  48. Source: USDA/AMS

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