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Ag. Outlook

Ag. Outlook

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Ag. Outlook

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  1. Ag. Outlook Chad Hart Center for Agricultural and Rural Development Iowa State University E-mail: chart@iastate.edu Northwest Iowa Agronomy Group Holstein, Iowa March 25, 2008

  2. Recession? Typically defined as two or more quarters of negative economic growth Looser definition: significant decline in economic activity over a few months Can be accompanied by deflation or inflation - stagflation is the combination of inflation and recession Takes several months to confirm if you’re in one “Economists have correctly predicted nine of the last five recessions.” -- Paul Samuelson

  3. GDP Growth

  4. Economy in General

  5. Recession? Ongoing debate whether we’re in one or not (slowdown vs. recession) Housing market and subprime mortgage crisis are significant contributors Projections range from slowdown to significant recession Bloomberg News surveyed several economists on economic outlook – Predicted GDP growth for 1st quarter 2008 = 0.1% Federal Reserve continues to lower interest rates, but is monitoring inflation

  6. Historical Crude Oil Prices

  7. Oil Futures As Of 3/20/2008

  8. Nearby Corn Futures

  9. Corn Futures As Of 3/20/2008

  10. Corn Market Factors • Domestic demand changes • Biofuels • Livestock feed • South American planting and production • Export competition • Competition for acreage • Corn vs. soybeans vs. wheat • Tighter stocks • More sensitivity to weather shocks

  11. U.S. Corn Supply and Demand Source: USDA

  12. Source: USDA

  13. Corn Utilization

  14. Exchange Rates

  15. Exchange Rate Futures

  16. World Corn Production Source: USDA

  17. South American Corn Area

  18. Corn Production Costs - National Source: USDA-ERS

  19. Basis in 2006

  20. Basis in 2007

  21. Basis in 2008

  22. Midwest Basis in 2008

  23. Nearby Soybean Futures

  24. Soybean Futures As Of 3/20/2008

  25. Soybean Market Factors • Domestic demand changes • Biofuels • Livestock feed • South American planting and production • Export competition • Competition for acreage • Corn vs. soybeans vs. wheat • Tighter stocks • More sensitivity to weather shocks

  26. U.S. Soybean Supply and Demand Source: USDA

  27. Source: USDA

  28. Exchange Rates

  29. Soybean Meal Futures as of 3/20/2008

  30. Soybean Oil Futures as of 3/20/2008

  31. World Soybean Production Source: USDA

  32. South American Soybean Area

  33. Corn-Soybean Price Ratio

  34. Soybean Production Costs - National Source: USDA-ERS

  35. Basis in 2007

  36. Basis in 2008

  37. Midwest Basis in 2008

  38. Source: USDA

  39. Price Summary Source: USDA

  40. U.S. Export Summary Source: USDA

  41. Biofuel Factors • Feedstock costs and competition • High corn prices • High soybean oil prices • Vegetable oil demand in Southeast Asia • Energy markets • High oil and gas prices • Continued government support • Passage of the 2007 Energy Act • Efforts to extend biofuel tax credits • Consumer demand for biofuels • Southeast U.S.

  42. Ethanol Expansion Source: Renewable Fuels Association

  43. U.S. Ethanol Industry • Current ethanol capacity: 141 plants, 8 billion gallons/year • Total capacity under construction and expansion: 5.4 billion gallons/year • 59 new ethanol plants and 7 expansion projects underway • 2.1 billion bushels of corn were used in producing fuel ethanol in 2006/2007 marketing year. • 3.2-3.5 billion bushels of corn are expected to be used in producing fuel ethanol for 2007/2008 marketing year.

  44. RFS by Fuel

  45. Oil Futures As Of 3/20/2008

  46. Historical Ethanol Margins

  47. Projected Ethanol Margins

  48. Comparing Futures Prices

  49. Ethanol Usage - 2004 (latest available)

  50. Biodiesel Growth Source: National Biodiesel Board