August Indiana s Agricultural Outlook 2010? Quarterly Real GDP: Post WWII. Input Cost ABOVE Crop Prices

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1 Indiana s Agricultural Outlook 2010? Chris Hurt hurtc@purdue.edu Corinne Alexander cealexan@purdue.edu September 11, 2009 Input Cost ABOVE Crop Prices 16% 14% 12% 10% 8% 6% 4% 2% 0% Quarterly Real GDP: Post WWII August 9.7% -2% -4% -6% -8% -10% A lot of excess capacity: -People -Plants -Equipment $0 $40 $30 U.S. Household Assets (Trillion $) Financial Real Estate Durables rillion $ Tr $20 Utilizing only 68% of our capacity $10 $0 Household net worth FALLEN by near 20% since 2007 Q1 Q2 Q3 Q4 Q

2 6 Interest Rates on Treasuries Forecast for GDP (Real) -3.9% +1.9% - 2.3% Percent Year Treasury 10 Year Treasury 3 Year Treasury 3 Month Treasury JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJ CPI -1.9% +.% - 1.% Unemployment 3 Month Treasury 10 Year Treasury 97% 9.7% ().17% () 3.6% () 9.4% %.% -.9% 3.% 3.9% Fed Will Attempt to Prevent Inflation How big is the Deficit Danger? By carefully monitoring our balance sheet and developing tools to drain bank reserves as needed, we will ensure that policy accommodation can be reversed at the appropriate time to avoid risks of future inflation. (Feb. 2009) Ben Bernanke, Fed Chair Corn Yield Trend

3 Corn: USDA 9/11/09 USDA 06/07 07/08 08/09 09/10 Million Bushels Carryin 1,967 1,304 1,624 1,69 Production 10,3 13,074 12,101 12,94 Total Supply 12,1 14,398 13,740 14,660 Feed & Residual,600,974,20,30 FSI Non-Fuel 1,371 1,338 1,270 1,27 FSI Fuel (Ethanol) 2,11 3,026 3,67 4,200 Export 2,12 2,436 1,80 2,200 Total Use 11,211 12,774 12,04 13,02 Ending Stocks 1,304 1,624 1,69 1,63 US Farm Price $3.04 $4.20 $4.08 $3.0-$3.6 $3.30 BioFuels Production 3 30 Renewable Fuel Standard ( ) 2 Billion ns of Gallons Biomass-based Diesel Non-celulosic Advanced Celulosic Advanced Conventional Biofuels $1.0 Margin Per Bushel: Iowa Ethanol Plants $ $0.0 $ $ $

4 $3.60 Estimated Corn Storage Returns: September 8 $3.40 $3.20 $3.00 $2.80 $2.60 Estimated Cash On Farm Net Interest (6%) Commercial Net Int & Storage O N D J F M A M J J A S U.S. Trend Yields Soybeans: USDA 9/11/09 USDA 06/07 07/08 08/09 09/10 Million Bushels Carry in Soybean Carryover Stocks-to-Use World U.S. Production 3,188 2,676 2,99 3,24 Total Supply 3,647 3,260 3,179 3,366 Seed & Residual Crush 1,806 1,801 1,660 1,690 Exports 1,118 1,161 1,26 1,280 Percen nt of Use Total Use 3,074 3,0 3,069 3,14 Ending Stock Farm Price $6.43 $10.10 $10.00 $8.10- $10.10 $10.00 $ /91 91/92 92/93 93/94 94/9 9/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/0 0/06 06/07 07/08 08/09 09/10 4

5 $9.40 Soybean Price Returns: September 8 $9.20 $9.00 $8.80 $8.60 $8.40 $8.20 $8.00 Estimated Cash Px On farm Net Interest Commercial Net Int & Storage Fee O N D J F M A M J J A S Wheat: USDA 9/11/09 USDA 06/07 07/08 08/09 09/10 Million Bushels Carryin Production 1,812 2,067 2,00 2,184 Total Supply 2,0 2,63 2,932 2,961 Feed & Residual Other Domestic 1,01 1,03 1,004 1,033 Exports 909 1,264 1,01 90 Total Use 2,049 2,329 2,26 2,218 End Stocks Farm Price $4.26 $6.48 $6.78 $4.70-$.70 $.20 Variable Costs Per Acre Crops 2008 $/acre 2009 $/acre 2010 $/acre % 09 to 10 Continuous Corn % Rotation Corn % Rotation Soybeans % Wheat % Double Crop Soybeans % Total Costs Per Bushel Corn $3.94/bu. Beans $9.7/bu. $1,200 $1,100 $1,000 $900 $800 $700 $600 $00 $400 $300 $200 $100 $0 Illinois Retail Prices Paid: USDA Market News Anhydrous DAP Potash Fall Delivery

6 Farm Prices for Seed: 2010 Estimated Crop Budget: Central Indiana: September 8, 2009 Prices Corn Soybeans Wheat Harvest Futures $3.8 $9.10 $.02 Expected Basis Expected Cash Price $3.28 $8.70 $4.02 Triple-Stack Corn RR Soybean Wheat Seed Unit Size $/A 80,000 seeds 0 lb. bag or 130,000 seeds -- $182 $240 $240 $99 $30 $31.0 $40 $40 $2 0 lb. bag $11 $1 $18 $14 $34 Estimated Yield/Acre and Returns/Acre Above Variable Costs Corn $3.28 Soybeans $8.70 Wheat $4.02 Land Quality bu./acre $/acre bu./acre $/acre bu./acre $/acre Low $ $ $108 Average 19.0 $ $ $129 High $ $ $16 Budget: Purdue Id-166 (September 2009) 0.0% 1.0% 2.0% 3.0% 4.0%.0% 6.0% 7.0% 8.0% 9.0% Beef Pork Lamb & Mutton 2.6% Domestic Production by Species: % 4.0% Broilers 3.8% Turkeys 8.0% 2% 20% 1% 10% U.S. Net Pork Exports as a Percent of Monthly Commercial Production In 2 nd qtr. 2009, U.S. pork production was DOWN 2%, but pork available to domestic consumers was UP 7% 18.3% 22.8% 12.7% 2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% Domestic Per Capita Availability and Price 2009 Beef Pork Broilers Turkey 1.8% 1.4% 7.9% 4.0% 0.4% 6.6% 66% 7.4% % 0% % 14.00% 16.00% 18.00% Flexibilities Cattle = -1.% Hogs = -2.2% Chicken= -1.3% Turkey = -1.1% 1.3% Supply Price 6

7 2.0% 20.0% 1.0% 10.0%.0% 0.0%.0% Domestic Per Capita Availability and Price % 22.2% 1.4% Supply 4.4% Prices 1.9% Beef Pork Broilers 1.2% Turkey 0.9% 3.7% $/cwt $60 $ $0 $ $40 $3 $30 Estimated Hog Prices and Costs Per Live Hundredweight Hog Price Costs USDA: ERS Market prices vs08 10 vs 09 Indiana Net Farm Income: Actual $ 3,166 Choice steers, Neb. $/cwt $8.41 $91.82 $92.27 $8.00 $ % 6.% Feeder steers, Ok City, $/cwt $107.18$ $ $ $ % 1.0% U.S. All Milk Price $12.88 $19.13 $18.32 $12.20 $ % 4.1% Choice slaughter lambs $77.31 $84.93 $8.91 $90.0 $91.0.3% 1.1% Million $ 3,000 2,00 2,000 1,00 1,000 1, to 2007 Average=$1.3B 92 1,204 1,324 2,0 1,6 1,422 1, Barrows & gilts live/cwt. $47.26 $47.09 $47.84 $40.0 $ % 22.2% Broilers, 12 City, cents/lb $64.40 $76.40 $79.70 $80.00 $ % 4.4% Turkeys, Eastern, cents/lb $77.00 $82.10 $87.0 $81.00 $ % 1.9% Eggs, New York, cents/doz. $71.80$ $ $98.00 $ %.1% Source USDA: 2009 Purdue Estimates Caution: Estimates for 2009 are based on the crop report. The timing of sales from the 2009 crop can have a large impact on ultimate income for Consider 2009 to be a very rough estimates. Indiana Land Values and Cash Rents: Purdue $4,00 $4,261 $4,20 Land Value $4,000 Avg. Land Value 2009 Cash Rent $3,70 = $4,188 down1.7% $3,00 Cash rent = $3,20 $18/acre up $1 per ac $3,000 $2,70 $2,00 $2,100 $2,20 $2,000 $2,092 $1,70 $1,00 $1,20 $1,000 $70 $913 $ $180 $160 $140 $120 $100 $80 $60 7

8 Is this the beginning of a long downturn? Probably Not! -Biofuels will continue to expand crop demand -Developing economies have increased their economic growth rates -Energy probably will be in short supply and ag and energy markets are now linked -The world is in a global economic slowdown and that probably won t continue -We did have large crops this year 8