Outlook and Market Update for 2012

Outlook and Market Update for 2012

Corn Short Course and Georgia Corn Growers Annual Meeting

January 17, 2012

Dr. Nathan B. SmithExtension Economist

What’s Happened to Markets?

What’s Happened to Markets?

• Drought and Excessive Heat in the South– Costly crops , Hurt quality

• Peanuts in short supply• Corn, cotton and soybean domestic

demand “destruction”• Wheat production hurt in southern Great

Plains, Soft Red Winter wheat supply up. • Europe in economic turmoil, US dollar up.

US Dollar Index

Georgia CornGeorgia Corn

• Acreage fluctuates year to year.• Corn is #3 Georgia row crop in value

($170 mil.) followed by soybeans ($70 mil.) and then wheat ($60 mil.).

• Nearly 70% of corn is irrigated in GA.• Corn deficit state, feed about 6 times

more than produce.

40

140

240

340

440

540

640

740

840

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Mill

ion

Acr

es

GA Corn Acreage

Planted Harvested

134 140 140145

158

0

20

40

60

80

100

120

140

160

180

Bu

sh

els

Pe

r A

cre

Georgia Corn Yields

GA & US Corn Crops, 2009 -2011GA & US Corn Crops, 2009 -2011

• U.S. planted acreage up 4.2% in 2011, GA up 17%

• Harvested up 3% for U.S., GA up 10%• U.S. production down 1%, GA up 24%

Planted Acres Harvested Acres Yield (bu/acre)

2009 2010 2011 2009 2010 2011 2009 2010 2011

GA(1,000)

420 295 345 379 245 270 140 145 158

US (million)

86.4 88.2 91.9 79.581.4

583.9

4164.

7152.

8147.

2

U.S. Corn Supply and Demand

U.S. Corn Supply and Demand

19.8%17.5%

11.6% 12.8% 13.9% 13.1%8.6% 6.8%

0%

10%

20%

30%

40%

50%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/102010/11 2011/12

Ending Stocks Production Domestic Use and Exports Stocks:Use

Mil bu

More Corn Used for Ethanol as Energy Act Mandates

More Corn Used for Ethanol as Energy Act Mandates

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

Feed and Residual Ethanol Exports Food Seed and Other Industrial

Million bushels

Source: USDA WASDE Report, 11/9/2011

Hit the 10% Blend Wall in the past year. Ethanol exports growing.

Ethanol FuturesEthanol Futures

Corn Futures – December 2012

Source: Barchart.com

Corn Futures – September 2012

Source: Barchart.com

Corn ConsiderationsCorn Considerations• Increased competition from South America. • Ethanol 10% blend wall appears to been

reached.• Blender’s credit expired in January ‘12• Soybean/Corn price ratio favors corn (MidWest).• Seasonal low? • Potential to plant 94-95 million acres in 2012.• Global economic turmoil, tight stocks, ethanol

uncertainties mean continued volatile prices.

2012 Budgeting Considerations2012 Budgeting Considerations

• Yield Expectation – raised budgets to 200 bu/ac• Fuel prices expected to increase. Gone up

more than expected to date. • Fertilizer prices for 2012

– More corn and wheat acres likely to lead to higher fertilizer prices.

• Cost of technology, – Seed prices up for newest technology.– Most chemical prices expected to increase 3%

– Price of Corn continue to be volatile.

2012 Corn Cost Analysis 2012 Corn Cost Analysis Practice Dryland Irrigated

Yield 85 bu 200 bu

Per Acre Per Bu Per Acre Per Bu

Variable Costs $328 $3.86 $664 $3.32

Fixed Costs $71 $0.84 $197 $0.99

Management $16 $0.19 $33 $0.17

Total Costs $415 $4.89 $894 $4.47 Price $5 $5.5 $6 $5 $5.5 $6Breakeven Yield bu/ac Variable Costs 66 60 55 133 121 111

Breakeven Yield bu/ac Total Costs 83 76 69 179 163 149

Corn Cost EstimatesCorn Cost EstimatesDryland Corn, Conventional

0 50 100 150 200 250 300 350

Fixed

Variable

Interest

Labor

Repairs

Fuel

Chemicals

Fertilizer

Seed

Inp

uts

$/Acre

2007 2008 2009 2010 2011 2012

Corn Cost EstimatesCorn Cost EstimatesIrrigated Corn, Conventional

0 100 200 300 400 500 600 700

Fixed

Variable

Interest

Labor

Irrigation

Repairs

Fuel

Chemicals

Fertilizer

Seed

Inp

ut

$/Acre

2007 2008 2009 2010 2011 2012

BudgetsBudgets

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