Grain, Oilseed, and Biofuel Outlook
Chad Hart
Center for Agricultural and Rural Development
Iowa State University
E-mail: chart@iastate.edu
January 18, 2008
Pro Ag Outlook
Harlan, Iowa
1/1/2008
11/1/2007
9/1/2007
7/1/2007
5/1/2007
3/1/2007
1/1/2007
11/1/2006
9/1/2006
$ per Bushel
Nearby Corn Futures
5.50
5.00
4.50
4.00
3.50
3.00
2.50
2.00
ar
.2
M 00
ay 8
2
Ju 00
ly 8
Se 200
pt 8
.2
D 00
ec 8
.2
M 00
ar 8
.2
M 00
ay 9
2
Ju 00
ly 9
D 200
ec 9
.2
M 00
ar 9
.2
Ju 01
ly 0
D 201
ec 0
.2
01
0
M
$ per Bushel
Corn Futures As Of 1/16/2008
5.40
5.20
5.00
4.80
Corn Market Factors
Domestic demand changes
•Livestock feed
•Biofuels
South American plantings
•Export competition
Competition for acreage
•Corn vs. soybeans vs. wheat
Tighter stocks
•More sensitivity to weather shocks
U.S. Corn Supply and Demand
2006/07
estimate
Planted area (million acres)
Harvested area (million acres)
Yield (bushels per acre)
Beginning stocks
Production
Total supply
Feed and residual
Food, seed, and industrial
Ethanol
Domestic use
Exports
Total use
Ending stocks
Stocks/use
Average market price
Source: USDA
2007/08
forecast
78.3
93.6
70.6
86.5
149.1
151.1
Million bushels
1,967
1,304
10,535
13,074
12,514
14,393
5,598
5,950
3,488
4,555
2,117
3,200
9,086
10,505
2,125
2,450
11,210
12,955
1,304
1,438
Percent
11.6
11.1
Dollars per bushel
3.04
3.70/4.30
Change from Change from
last month
last year
Percent
0.0
19.5
0.5
22.5
-1.2
1.3
0.0
-0.7
-0.6
5.3
-0.8
0.0
2.6
0.0
2.1
-20.0
10.4/8.9
-33.7
24.1
15.0
6.3
30.6
51.2
15.6
15.3
15.6
10.3
21.7/41.4
Corn for Grain Yields 2007
Bushels and Change From Previous Year
210#
NC
195#
15
180#
15
145
-1
165
-5
148
-9
185
15
116
5
129
NC
146
-15
121
24
160
8
142
-14
175
-10
140
25
145
40
148#
27
Source: USDA
171
5
135
-8
124
-23
127
-2
128
6
125
-4
97
-48
103
-39
150
175 155 -9
12 -2
111 85
-9 -35
142
129
4
-17
100
106
-32
-19
168#
100
22
-10
130
150# 79
18
U.S. 151.1
7
40
2.0
165#
25
95
# Record High
13
NC = No Change
U.S. Corn Stocks
Billion Bushels
16.0
14.0
12.0
10.3
10.0
8.0
6.0
4.0
2.0
0.0
98-99 99-00
00-0l
0l-02
02-03 03-04 04-05 05-06 06-07 07-08
Source: USDA
Beginning Supply
Dec
Mar
Jun
Sep
Corn Utilization
7,000
6,000
Million Bushels
5,000
4,000
3,000
2,000
1,000
0
96/97
Feed
98/99
00/01
Ethanol
02/03
Other
04/05
06/07
Exports
Exchange Rates
1.05
1.00
0.95
0.90
0.85
0.80
Jan-07
Canada
India
Mar-07
Mexico
China
May-07
Jul-07
Brazil
South Korea
Sep-07
Argentina
Japan
Nov-07
Russia
EU
Exchange Rate Futures
1.05
1.00
0.95
0.90
0.85
0.80
Jan-08
Canada
Mar-08
May-08
Mexico
Brazil
Jul-08
Russia
Sep-08
South Korea
Nov-08
Japan
EU
World Corn Production
Country or
Region
World
EU-27
FSU-12
South Africa
Argentina
Brazil
China
United States
Source: USDA
2007/08 2006/07 Change
Million tons
766.7
703.9
62.9
47.4
54.7
-7.3
13.5
12.8
0.7
10.0
7.3
2.7
22.5
22.5
0.0
50.0
51.0
-1.0
145.0
145.5
-0.5
332.1
267.6
64.5
Percent
Change
Percent
8.9
-13.3
5.3
37.0
0.0
-2.0
-0.3
24.1
South American Corn Area
40
35
Million Acres
30
25
20
15
10
5
0
1992/1993
1995/1996
1998/1999
Argentina
2001/2002
2004/2005
Brazil
2007/2008
Temperatures in Argentina
WMO data indicate that temperatures were not high enough to cause significant
widespread damage to corn advancing through the tasseling and silking stages.
Source: USDA
Corn Production Costs - National
Item
Operating costs:
Seed
Fertilizer
Chemicals
Custom operations
Fuel, lube, and electricity
Repairs
Other variable expenses
Interest on operating capital
Total, operating costs
40.47
69.35
22.84
9.97
26.50
14.00
0.12
3.12
186.37
43.55
80.17
23.62
10.58
28.73
14.45
0.12
4.76
205.98
Allocated overhead:
Hired labor
Unpaid labor
Capital recovery
Land
Taxes and insurance
General farm overhead
Total, allocated costs
2.08
22.02
64.02
93.27
6.51
12.61
200.51
Total costs listed
386.88
Source: USDA-ERS
2005
Corn
2006
2007F
2008F
2009F
48.93
93.96
24.67
10.93
30.98
14.86
0.12
5.16
229.61
50.02
99.95
25.64
11.27
32.98
15.22
0.13
4.94
240.15
51.21
102.34
26.40
11.59
34.56
15.60
0.13
5.81
247.64
2.19
23.56
66.71
90.84
7.01
13.45
203.76
2.22
23.86
69.99
95.44
7.39
13.83
212.73
2.27
24.45
73.12
97.78
7.51
14.17
219.30
2.33
25.02
75.56
100.67
7.63
14.52
225.73
409.74
442.34
459.45
473.37
Basis in 2006
Basis in 2007
Basis in 2008
1/1/2008
11/1/2007
9/1/2007
7/1/2007
5/1/2007
3/1/2007
1/1/2007
11/1/2006
9/1/2006
$ per Bushel
Nearby Soybean Futures
14
13
12
11
10
9
8
7
6
5
ar
.2
M 00
ay 8
2
Ju 00
ly 8
A 200
ug 8
.2
Se 00
pt 8
.
N 200
ov 8
.2
Ja 008
n.
M 200
ar 9
.2
M 00
ay 9
2
Ju 00
ly 9
N 200
ov 9
.2
N 00
ov 9
.2
01
0
M
$ per Bushel
Soybean Futures As Of 1/16/2008
13.50
13.00
12.50
12.00
11.50
Soybean Market Factors
Domestic demand changes
•Livestock feed
•Biofuels
South American plantings
•Export competition
Competition for acreage
•Corn vs. soybeans vs. wheat
Tighter stocks
•More sensitivity to weather shocks
U.S. Soybean Supply and Demand
2006/07
estimate
Planted area (million acres)
Harvested area (million acres)
Yield (bushels per acre)
Beginning stocks
Production
Imports
Total Supply
Crush
Seed and Residual
Domestic use
Exports
Total Use
Ending stocks
Stocks/use ratio
Average market price
Source: USDA
2007/08
forecast
75.5
63.6
74.6
62.8
42.7
41.2
Million bushels
449
574
3,188
2,585
9.0
6.0
3,647
3,165
1,806
1,830
148
165
1,955
1,995
1,118
995
3,073
2,990
574
175
Percent
18.7
5.9
Dollars per bushel
6.43
9.90/10.90
Change from Change from
last month
last year
Percent
-0.1
-15.7
0.0
-15.8
-0.4
-3.7
0.2
-0.3
0.0
-0.3
0.0
1.1
0.1
0.0
0.1
-5.4
7.0/6.3
27.7
-18.9
-33.6
-13.2
1.3
11.3
2.1
-11.0
-2.7
-69.5
54.0/69.5
Soybean Yields 2007
Bushels and Change From Previous Year
35
4
41
-3
39
-5
42#
8
43
-5
33
1
24
7
37#
13
39
-6
51.5
1
50.5
0.5
38
-8
45
-5
37
-1
47#
NC
33
-9
26
-18
40#
14
21
1
27
-4
19
-10
30
5
U.S. 41.2
-1.5
42#
7
24
-3
Source: USDA
31
-4
24
-7
27
-7
21
-11
18
-21
36
1
41
1
# Record High
NC = No Change
U.S. Soybean Stocks
Billion Bushels
4.0
3.5
3.0
2.5
2.33
2.0
1.5
1.0
0.5
0.0
98-99 99-00
00-0l
0l-02
02-03 03-04 04-05 05-06 06-07 07-08
Source: USDA
Beginning Supply
Dec
Mar
Jun
Sep
ar
.2
M 00
ay 8
Ju 200
ly 8
A 20
ug 08
Se . 20
pt 08
.2
O 00
ct 8
.
D 20
ec 08
.2
Ja 00
n. 8
M 20
ar 09
.
M 200
ay 9
Ju 200
ly 9
A 20
ug 09
.2
O 00
ct 9
.2
D 0
ec 09
.2
00
9
M
$ per Ton
Soybean Meal Futures as of 1/16/2008
360
350
340
330
320
ar
.2
M 00
ay 8
Ju 200
ly 8
A 200
ug 8
.2
Se 00
pt 8
.2
O 00
ct 8
.2
D 00
ec 8
.2
Ja 00
n. 8
M 200
ar 9
.2
M 00
ay 9
Ju 200
ly 9
O 200
ct 9
.2
D 00
ec 9
.2
00
9
M
Cents per Pound
Soybean Oil Futures as of 1/16/2008
56
55
54
53
52
Exchange Rates
1.05
1.00
0.95
0.90
0.85
0.80
Jan-07
Canada
India
Mar-07
Mexico
China
May-07
Jul-07
Brazil
South Korea
Sep-07
Argentina
Japan
Nov-07
Russia
EU
World Soybean Production
Country or
Region
World
U.S.
Argentina
Brazil
China
Foreign
Source: USDA
2007/08
2006/07 Change
Million tons
220.3
235.6
-15.2
70.4
86.8
-16.4
47.0
47.2
-0.2
60.5
59.0
1.5
14.3
16.0
-1.7
150.0
148.8
1.2
Percent
Change
Percent
-6.5
-18.9
-0.4
2.5
-10.6
0.8
South American Soybean Area
60
50
Million Acres
40
30
20
10
0
1992/1993
1995/1996
1998/1999
Argentina
2001/2002
2004/2005
Brazil
2007/2008
Precipitation in Brazil
Brazil
Favorable
Erratic
Showers
Normal
rains
Source: USDA
Crop Weather Summary
January 10, 2008
•
Significant late start to the rainy season in
most major soybean areas;
•
Seasonal showers still sporadic in
portions of the central interior (beans
flowering – pod-filling);
•
Near-normal precipitation in southern
growing areas.
1/1/2008
11/1/2007
9/1/2007
7/1/2007
5/1/2007
3/1/2007
1/1/2007
11/1/2006
9/1/2006
Corn-Soybean Price Ratio
3.0
2.5
2.0
1.5
Soybean Production Costs - National
2008F
2009F
Item
Operating costs:
Seed
Fertilizer
Chemicals
Custom operations
Fuel, lube, and electricity
Repairs
Other variable expenses
Interest on operating capital
Total, operating costs
32.62
10.06
14.32
6.67
13.62
11.29
0.13
1.50
90.21
34.06
11.08
14.97
7.02
15.75
11.60
0.15
2.23
96.86
38.27
13.94
14.79
7.25
16.98
11.93
0.15
2.37
105.68
39.12
14.82
15.37
7.48
18.08
12.22
0.16
2.24
109.49
40.05
15.18
15.83
7.69
18.95
12.52
0.16
2.64
113.02
Allocated overhead:
Hired labor
Unpaid labor
Capital recovery
Land
Taxes and insurance
General farm overhead
Total, allocated costs
2.03
16.77
50.17
86.68
6.06
12.47
174.18
2.12
16.81
51.47
88.25
6.57
12.54
177.76
2.15
17.02
54.00
92.72
6.93
12.90
185.72
2.20
17.44
56.41
94.99
7.04
13.21
191.29
2.25
17.85
58.30
97.80
7.15
13.54
196.89
Total costs listed
264.39
274.62
291.40
300.78
309.91
Source: USDA-ERS
2005
Soybeans
2006
2007F
2008 Winter Wheat Planted
Acres (000) and Change From Previous Year
1750
30
2700
460
780
30
900
150
11
-6
600
100
130&
-5
10
4
650
185
130
-10
70
5
1900
-200
1950
-100
2400
-100
480
-10
9900
-500
5700
-200
6000
-200
330#
40
50
15
780
220
1200 550
200 130
1200
150
125
25
1020
200
530
90
620
200
870
50
400
30
170
50
12
4
280
50
800#
170
170
10
480
120
U.S.
400
165
18
5
Source: USDA
34
3
80
23
250
30
180
10
46,610
1,623
# Record High
& Record Low
Price Summary
2006/07
estimate
2007/08
forecast
(midpoint)
Change from
last month
Crops and products
Wheat ($/bu)
Rice ($/cwt)
Corn ($/bu)
Soybeans ($/bu)
Soybean oil (¢/lb)
Soybean meal ($/s.t.)
Cotton (¢/lb)
Percent
4.26
9.74
3.04
6.43
31.02
205.44
46.50
6.65
11.15
4.00
10.40
47.50
320.00
51.50*
3.9
0.0
9.6
6.7
10.5
14.3
*Average price for August-November 2007. USDA is prohibited by law from publishing cotton price projections.
Source: USDA
Change from
last year
56.1
14.5
31.6
61.7
53.1
55.8
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.
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Billion Gallons
7
Ethanol Expansion
6
5
4
3
2
1
0
Source: Renewable Fuels Association
500
Biodiesel Growth
450
Million Gallons
400
350
300
250
200
150
100
50
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: National Biodiesel Board
20
22
20
20
20
18
20
16
20
14
20
12
20
10
20
08
20
06
Billion Gallons
40
Renewable Fuels Standard
35
30
25
20
15
10
5
0
10
5
0
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
Billion Gallons
40
35
30
25
20
15
RFS by Fuel
Corn-based Ethanol
Biodiesel
Cellulosic Biofuels
Additional Advanced Biofuels
U.S. Ethanol Industry
Current ethanol capacity:
137 plants, 7.63 billion
gallons/year
Total capacity under
construction and expansion:
5.74 billion gallons/year
63 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.
Oil Futures As Of 1/16/2008
92
91
90
$ per Barrel
89
88
87
86
85
84
83
82
Feb.
2008
Dec.
2008
Dec.
2009
Dec.
2010
Dec.
2011
Dec.
2012
Dec.
2013
Ethanol Gross Margin
Net Cost of Corn
Cost of Nat. Gas
11/21/2007
9/21/2007
7/21/2007
5/21/2007
3/21/2007
1/21/2007
11/21/2006
9/21/2006
7/21/2006
5/21/2006
3/21/2006
1/21/2006
11/21/2005
9/21/2005
7/21/2005
5/21/2005
3/21/2005
$ per Gallon
Historical Ethanol Margins
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Projected Ethanol Margins
2.50
$ per Gallon
2.00
1.50
1.00
0.50
0.00
Feb- Apr08
08
Jun- Aug- Oct- Dec- Feb- Apr08
08
08
08
09
09
Ethanol Gross Margin
Net Cost of Corn
Jun- Aug- Oct- Dec09
09
09
09
Cost of Nat. Gas
Plant Location
08
A
pr
-0
Ju 8
n08
A
ug
-0
O 8
ct
-0
D 8
ec
-0
Fe 8
b09
A
pr
-0
Ju 9
n0
A 9
ug
-0
O 9
ct
-0
D 9
ec
-0
9
b-
Fe
$ per Gallon
Comparing Futures Prices
2.50
2.40
2.30
2.20
2.10
2.00
Ethanol
Gasoline
A Quick Look at Ethanol Blending
January 2007
Unleaded
E-10
($/gallon)
Gasoline
1.490
Ethanol
1.341
November 2007
Unleaded
E-10
($/gallon)
2.520
0.226
2.268
0.208
Price before
Taxes
1.490
1.567
2.520
2.476
Fed. Gas Tax
0.184
0.184
0.184
0.184
Ethanol Tax
Credit
Price after
Fed. Taxes
-0.051
1.674
1.700
-0.051
2.704
2.609
Gasoline and ethanol prices are monthly average rack prices for Omaha
Ethanol Usage - 2004 (latest available)
Blending Percentage
0%
1 - 25%
25 - 50%
50 - 75%
75 - 100%
10
5
0
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
Billion Gallons
40
35
30
25
20
15
RFS by Fuel
Corn-based Ethanol
Biodiesel
Cellulosic Biofuels
Additional Advanced Biofuels
U.S. Biodiesel Industry
Current biodiesel capacity:
165 plants, 1.85 billion
gallons/year
Total capacity under
construction and expansion:
1.35 billion gallons/year
80 new plants underway
2.8 billion pounds of soybean oil was used in producing biodiesel in 2006/2007 marketing year.
3.8 billion pounds of soybean oil are expected to be used in producing biodiesel for 2007/2008
marketing year.
500
Biodiesel Growth
450
Million Gallons
400
350
300
250
200
150
100
50
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: National Biodiesel Board
Biodiesel Internationally
EU
Biofuel targets:
Argentina
Biodiesel mandate:
5.75% by 2010
10% by 2020
5% by 2010
Brazil
Biodiesel mandate:
2% in 2008
5% by 2010
Many U.S. producers have targeted the EU market
Soybean Oil
Biodiesel
07
3/
20
12
/1
07
3/
20
11
/1
07
3/
20
10
/1
07
/2
0
13
9/
07
/2
0
13
8/
07
/2
0
13
7/
07
/2
0
13
6/
07
/2
0
13
5/
07
/2
0
13
4/
Biodiesel Price Ratios
1.7
1.6
1.5
1.4
1.3
1.2
1.1
1.0
0.9
Thanks for your time!
Any questions?