President obama and our great leader, tom vilsack has an opportunity to share with us visions for were going in the second term. It seems like a sequester come to sequester come to sequester and that certainly does weigh heavily on our shoulders, but nevertheless come were applied rumor going to do some incredibly great things in the second turned and im sure hes very excited to share that with you. I also want to recognize that we have a lot of young people in the audience from the Outlook ForumStudent Diversity program, now in its seventh year. 20 undergraduates and for the first time, 10 graduate students are here to gain insights into food monoculture. So be sure to seek them out during the breaks. Congratulate them for being here, mentor them over the course of a couple of days. That would be great. I know how these people are because i have an alumnus of this program who works in my office and these are the people who are going to beat american agriculture in the future. Many thanks to our program partner, university of maryland Eastern Shore and the sponsors to make this program possible, chs, farm Credit Committee arrest and Agriculture Research service. Students, could i ask you to stand please . [applause] thank you. Congratulations. So without further ado, i am going to ask our chief economist to kick off this conference with the traditional presentation on his economic and Foreign Trade outlook. Show clogger has been our chief economist for 15 years and before he was deputy chief economist before becoming the current chief economist and i know he is someone you rely upon. His analysis who has the trust of the secretary. So let us know whats going on. [applause] is very much and thanks for enhancing that revenue enmity may be chief economist for 15 years. That was good. I too would like to welcome everyone and im just delighted to see such a large crowd. Weve had really great crowds the last two years has featured do to the Program Committee putting together such good programs. In my comments today, i am going to talk a little about the historic drought that affected the agriculture tastier. Despite the Drought Committee act economy is very strong. Our main come two weeks ago in near record highs in nominal terms for 2012 over 2013 projected net cash income close to record highs. Exports are a record as we are going to find out and i think the financial situation is quite solid. Low debt asset ratio and assets at record highs. However, the aggregate measures have sharp differences between sectors. Producers say think have fared pretty well, those with high prices to record Crop Insurance indemnities which have helped offset the losses we saw this year. If youre an uninsured farmer or underinsured farmer, very think the crop loss are probably hitting those producers a little more than certainly those that have insurance. And if your poultry producer, this is the third year since 2007, where recent record high prices with the effects that had some higher feet past, type martian and particularly on the catalyst five, some liquidation. The outlook for 2013 in a nutshell they were expecting a rebound in yields. We should see record production for corn and soybeans. That means lower prices and improve profitability in the long run towards the end of the year, certainly for livestock poultry producers. If that sounds familiar me think im taking outlooks feature reading it, it does read similar to what we said last year. We came in with those stocks last year were expecting record crops we know we know what happened. Just to say theres a lot of uncertainty. One of the reasons we want to focus on risk and without the conference. I would like to go through as they go through the charts i will focus on some of the aspects. First lets go for the export picture. Experts are forecasted a record of 142 billion for fiscal year 2013. Thats down a little bit from what we carried in november about 3 billion last that will be carried in november, but still record high. The first three months of this year, 43 billion in exports is a Staggering Amount if you consider this, thats over exported annually in the early 1990s. Search is tremendous growth since 2005, imports are forecast at 2112. 5 billion down a little bit from our november estimates. Given us a trade balance of almost 30 billion, 29. 5 billion. For the spectator in a a row, china is our major export destination. Remarkable growth they are since 2005 exports to china have been growing by 25 annually and they are now our top export market. If you look at what were sending to china, no surprise its dominated by and cotton. They have accounted in recent years as much as three quarters of total trade to china. But if you look at not minor, but still quite large exports for things like wars screens, corn for example, if you look at steve, distilled or dried grains other red meats, ec does are showing growth figures as well. In terms of overall exports, values are up for most of the commodity categories. Again, these are experts on night fiscal year basis. You can see for most of these categories with one exception being core and, but largely the fair price driven events. We do see volumes up for some categories, but for most individual commodity categories we see lower volumes. The drought obviously having some effect but for most of the commodities being offset by higher prices for values thereof. The big difference though is this horrid and its striking we are down 30 . On the fiscal year basis in terms of the volume explores and what that is meant as we are currently forecasting Court Experts at the lowest level the early 1970s. Just a dramatic decrease in Court Experts such that if you look where we are relative to the rest of the world, corn as many of you know for many years was the number one exporter of corn. You dont have to go back to many years ago remain 70 , 80 of the market. That is the kind particularly since 2007 sec and the recent corneas for ethanol production. But tastier 70s and because of the increased growth of production and Southern Hemisphere and brazil in particular, we are likely to be a number two exporter on a fiscal year basis. I expect this to be a temporary situation svc the crops rebound this year. But again because of unusual circumstances of a record crop in brazil, but also the crop here in the u. S. , well actually likely see brazil being the number one exporter for fiscal 2013. Lets turn to the commodity balance sheet. I promised all of my commodity analyst i would give other details all the details out so they could have sent a to talk about tomorrow. I will hit the highlights. Much like last year we are coming in with fairly those stocks globally for most commodities. Because of problems in the black sea region and southern europe, we production is down this year and because of that in very Strong Demand for wheat is past few years, weve seen stocks get drawn down again at her lowest level since 2008, 2009, not quite a slow since 2007, to fascinate and again hopefully with a good Strong Production this year globally return to more normal weather, we should see those. Very those stock bubble this project did for the current crop year. We are at the lowest ratio so you see these numbers hearken back to the early 70s. Just to say this has been an unusual year for corn as has been drawn down, but particularly because of the drought. Soybeans has been low stocks. We had a poor crop in south america last this time last year followed by problems with the soybean crop because of the u. S. Soybean crop because of the child. Currently concerned over the size of the argentina and brazil in crop this year. Brazil still looks good, but driving in argentina has analysts looking at those numbers. The one exception is caught in you can see caught in terms of stocks here as days of use has increased dramatically over the last couple years. But that is driven by his china. Because of policies to support producers, theyve been acquiring a lot of grain. You can see cotton has increased substantially in china and currently account for 50 of inventories. If you look on a commodity basis, it is some 120 . That is certainly caused analysts to look at that and how sustainable that is and china is a large importer of cotton for its textile mills. And so, sir limit the assertive stock level overhanging the market, disbelieve some uncertainty and in the Cotton Market is in the forward into this year. Lets turn to planning. Obviously with the high prices, are expecting a strong plan aims for grains and oil seeds. Sandy lands coming out crp jay shows the amount of acres that came out this past fall. Around a million acres, most of northern plains. You can see by the coloration of those charts, or that of the area is coming out for the area first went in in the mid1980s but this has been historically wheatland, but svc a lot of corn and soybeans creeping up in those areas. Turning to the acres, last year the combined acreage for corn, wheat and soybeans was some 240 million acres. Excuse me, 230 million acres. Thats the highest level for the crops combined since 1982. In 1882, wheat was much larger back to. Certainly weve seen some of the largest planning since the 30s we expect this year for corn to be strong again. Its partially because of the weather. We are sending more of a return to normal weather. The year started out great. They had a deal planning because of strong corn prices, a lot of people were able to get and corn. Perfect planning conditions and the world turned ugly in june as the rain stopped in a lot of key states. This year we expect plan aims to be strong again. If you look at the soybean and corn ratio these days, it favors more than a few months ago and certainly as we move towards march we put up playing members at the end of march, this would be something certainly to look at. The one crop that sticks out is cotton. Cotton prices have very, very strong grain prices. We should see some decline. That is no surprise and certainly the surveys weve seen would suggest that. What about yield . This of course is where most analysts are directing attention these days. If you look at the Drought Monitor and i daresay a few of you have looked at a child on the directv these markets closely. We still have significant drought in the central plains. The good news is if you were to look at this map six months ago, we wouldve seen significant drought and illinois, in vienna and western kentucky. That is actually improved a lot. The forecast put out suggests more improvement in iowa creeping into the western cornball, but the plane say things still look like they have a persistent dryness. That has immediate implications for the winter crop. The crop in kansas, oklahoma and nebraska, currently 50 of that area looking at the state crop conditions reporters. 50 is in poor or very poor conditions. Obviously, spring rains are critical to see how that crop improves. Otherwise we could be facing some serious abandonment issues for the hard red winter crafts. Wayne is obviously very critical. What about the other crops . What we are looking not at least in our analysis is the release to try and heals. Tomorrows commodity sessions will have a paper they are on our yield models and explaining how we incorporate weather in most models. But i think both of these would result because we are expecting record crops for corn and soybeans this year. Again, dramatic improvement for corn. Remember last year between our may projections and what we ended up at the end of the year we lost 4 billion bushels. We expect them to rebound on my, about that amount this year. So a very big improvement there. We each is the one area of various concerned we anticipate a higher being that for the winter area. Luckily because of that being in the eastern corn belt looks much better and hopefully we will see some rebound they are in terms of yields. But again, a critical question a lot of people are asking is why normal yields . Why are we expecting another year of poor year olds . The answer is threefold. One of the senate should we have seen improvement. We assume the eastern corn belt a lot better than what we saw four or five months ago as a percent of total production in drought or total area in drought. We have seen improvement, 5 to 10 improvement over the last couple of months. The other thing is if you look at the data, theres little correlation between rainfall and one year and rainfall in the next year. Most studies have shown that, so at least going into this year, theres a reason to think necessarily that we are going to be looking at a poor crop. Lastly, theres some issue on socalled yield, would have been because of moisture. Ig show you a real mawkish, economist thing here. All i did was take preseason by sharing iowa. I looked at that relative to what normally we see in iowa and then i looked at projected yields in iowa, tremulous relative to what we actually saw later that year. As you can see, theres little direct correlation here. Its hard to put a line through any of that to say there is a direct relationship between said soil moisture and resulted in yields. Some you see on the bottom part of the graph are certainly years in 1988, which was actually, but also years we have low subsoil love those far above trend is not to say the last thing i want the relationship between drought in yields because obviously there is a relationship between drought and kneeled. But she has to say will be following this very carefully, at least at this point in time, theres no reason to think we wont be looking at verbal yields and again, the proof will be obviously as we look into spring. As we all know for corn, the critical month or so i have said oasis in terms of precipitation and temperature. Lets turn to another issue and ill try to speed up a little bit. I talked about ethanol every year because at the mall has been such a large charter in the corn market in the decision so it affects others as well. From 2006 to 2010, we saw ethanol production increase by almost 700 million bushels annually. It topped 5 billion bushels in terms of corn used in 2010 at similar levels in 2011, 2012. Coming into this year with the drought oversaw high prices. We saw margins declined, ethanol production start to drop. But this chart shows are ethanol productions in the administration. An annualized sense you get a feel for what they look like if they were to for an entire year. And those lines represent the allowable caps under the renewable fuel standard, how much conventional ethanol can be applied towards me and the caps under the renewable fuel standard. You can see from this summer, this weekly numbers have been below the caps and we reduce our cornballcorn oil by 10 , we expect that will rebound a bit, we are still calling for calm as we look forward to 2013, 2014, still calling for about 4. 675 billion bushels of corn going into ethanol use. It aired back obviously the fact or not allowing now. Theres other reasons for that. Certainly the margins should be better. The problems are on the demand side and reducing gasoline consumption at the time to energy act was passed in 2007. Our forecast for ethanol excuse me, gasoline consumption was close to 150 billion bushels for 2014, 2015. Just looking at a 10 penetration rate, that gives you 15 million bushels. Instead however 15 billion gallons of ethanol. Weve seen because of high prices that the recession and fuel efficiencies, gasoline consumption has declined. If you look at the eaa chart, that remind us what was both bad and the Energy Administration was project team for gasoline use in 2008. You can see another projections are for far lower than in the out years because a lot of other assumptions with some decline. The board for being is the next three or four years. The sun decreases there. If you look at penetration rate, weve been at a little under 10 , says the adoption of higher blends, i think we are looking at some fairly low numbers on terms of implied ethanol use. This is a very important issue of the puzzle, at least the outlook puzzle weve seen. It is again particularly compared to 2007, to fascinate with yearoveryear increase, this is for the next few years flat and out for ethanol and will be an important factor in the market. Let me get to the price is and then move over to income and start rapping. We should see i think some significant prices at these record crops. This is not too unlike what i was saying last year, but with the service of things we should see corn prices, sees an average price is below 5. Again, a deep shop from where we are. Wheat prices come down a bit as well. Soybeans down. Some improvement for rice and cotton largely due to the domestic talent shes such a type of the day. Thats going to obviously improve feed margins for cattle producers. Feed ratios have been very low. You can see the longterm decline over the last seven, eight years. Understand there has been a lot of activity in the series, so they dont necessarily mean problems. Since 2007 with a three price hikes with the poultry sectors. As a lookout we should see some improvement there. We are certainly expecting prices to increase. Our current prices for cattle broilers are forecasting record highs. These are all very high prices for the meat and poultry and dairy markets. However, what i think will be the real benefit to the sector will be lower prices at the end of the year and hopefully the critical thing but the problems the cattle sector had, we lost 3. 4 million for the last two years in kansas, oklahoma and texas alone. The rest of the nations heard was pretty much constant. With losses and gains are offsetting. The drought in texas two years ago and this past year has really affected cattle there. We have the 60 some odd of the conditions over the summertime to send drought. A critical thing for bees and dairy will be better means early on in the spring so we see some improvement posture or we could unfortunately see further liquidation. All this means for food prices we will see transmission of higher prices into higher food prices. Ers is currently projecting food inflation to increase by 3 to 4 . They believe there is a session on that later today. But it is important to realize that current levels if you look at the most recent month, in fact the report came out today, which i dont have the numbers for, but our current levels vary though. 1. 3 yearoveryear, but we will expect that to increase. Nsa say come at ers is forecasting sent 3 to 4 for 2013. High, but not nearly high as oversaw 20,842,011. As a mentioned at the outset, ers food numbers on that farm income. Net cash income done a little bit busier at 123. 5 billion. That is found, which you can see still in nominal terms relative to recent years. We recorde