Crop Market Outlook Women Marketing Grain Meeting Algona

Crop Market Outlook Women Marketing Grain Meeting Algona, Iowa Mar. 7, 2017 Chad Hart Associate Professor/Crop Marketing Specialist chart@iastate. edu 515 -294 -9911 Extension and Outreach/Department of Economics

U. S. Corn Supply and Use 2013 2014 2015 2016 2017 95. 4 90. 6 88. 0 94. 0 90. 0 Area Planted (mil. acres) Yield (bu. /acre) 158. 1 171. 0 168. 4 174. 6 170. 7 Production (mil. bu. ) 13, 829 14, 216 13, 602 15, 148 14, 065 Beg. Stocks (mil. bu. ) 821 1, 232 1, 731 1, 737 2, 320 Imports (mil. bu. ) 36 32 67 55 50 Total Supply (mil. bu. ) 14, 686 15, 479 15, 401 16, 940 16, 435 Feed & Residual (mil. bu. ) 5, 040 5, 280 5, 131 5, 600 5, 450 Ethanol (mil. bu. ) 5, 124 5, 200 5, 206 5, 350 5, 400 Food, Seed, & Other (mil. bu. ) 1, 369 1, 401 1, 429 1, 445 1, 470 Exports (mil. bu. ) 1, 920 1, 867 1, 898 2, 225 1, 900 Total Use (mil. bu. ) 13, 454 13, 748 13, 664 14, 620 14, 220 Ending Stocks (mil. bu. ) 1, 232 1, 731 1, 737 2, 320 2, 215 4. 46 3. 70 3. 61 3. 40 3. 50 Season-Average Price ($/bu. ) Source: USDA-WAOB 2013 -16, USDA-OCE 2017 Extension and Outreach/Department of Economics

U. S. Soybean Supply and Use 2013 2014 2015 2016 2017 Area Planted (mil. acres) 76. 8 83. 3 82. 7 83. 4 88. 0 Yield (bu. /acre) 44. 0 47. 5 48. 0 52. 1 48. 0 Production (mil. bu. ) 3, 358 3, 927 3, 926 4, 307 4, 180 Beg. Stocks (mil. bu. ) 141 92 191 197 420 Imports (mil. bu. ) 72 33 24 25 25 Total Supply (mil. bu. ) 3, 570 4, 052 4, 140 4, 528 4, 625 Crush (mil. bu. ) 1, 734 1, 873 1, 886 1, 930 1, 945 Seed & Residual (mil. bu. ) 107 146 122 128 135 Exports (mil. bu. ) 1, 638 1, 842 1, 936 2, 050 2, 125 Total Use (mil. bu. ) 3, 478 3, 862 3, 944 4, 108 4, 205 Ending Stocks (mil. bu. ) 92 191 197 420 Season-Average Price ($/bu. ) 13. 00 10. 10 8. 95 9. 50 9. 60 Source: USDA-WAOB 2013 -16, USDA-OCE 2017 Extension and Outreach/Department of Economics

Corn Yields Top: 2016 Yield Bottom: Change from last year Units: Bushels/acre Source: USDA-NASS Extension and Outreach/Department of Economics

Soy Yields Top: 2016 Yield Bottom: Change from last year Units: Bushels/acre Source: USDA-NASS Extension and Outreach/Department of Economics

World Corn Production Source: USDA-WAOB Extension and Outreach/Department of Economics

World Soybean Production Source: USDA-WAOB Extension and Outreach/Department of Economics

Hog Crush Margin The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pig Soybean meal: 150 pounds per pig Source: ISU Extension and Outreach/Department of Economics

Cattle Crush Margin The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head Source: ISU Extension and Outreach/Department of Economics

U. S. Meat Trade Source: USDA-WAOB Extension and Outreach/Department of Economics

U. S. Meat Production & Prices Source: USDA-WAOB Extension and Outreach/Department of Economics

Corn Export Sales Source: USDA-FAS Extension and Outreach/Department of Economics

Change in Corn Export Sales Source: USDA-FAS Extension and Outreach/Department of Economics

Soybean Export Sales Source: USDA-FAS Extension and Outreach/Department of Economics

Change in Soybean Export Sales Source: USDA-FAS Extension and Outreach/Department of Economics

Strength of the U. S. Dollar Source: Federal Reserve Extension and Outreach/Department of Economics

Corn Grind for Ethanol Extension and Outreach/Department of Economics

Current Corn Futures 4. 06 3. 98 3. 57 Source: CME Group, 3/3/2017 Extension and Outreach/Department of Economics

Current Soybean Futures 10. 08 9. 72 9. 74 Source: CME Group, 3/3/2017 Extension and Outreach/Department of Economics

2016/17 Crop Margins @ Actual Yields Extension and Outreach/Department of Economics

2017/18 Crop Margins Extension and Outreach/Department of Economics

Iowa Corn Prices vs. Costs Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Federal Crop Insurance Extension and Outreach/Department of Economics

Federal Crop Insurance: Total Acres Insured Extension and Outreach/Department of Economics

Types of Crop Insurance Ø Individual Yield (YP) Ø Individual Revenue (RP and RPE) Ø Area Yield (AYP) Ø Area Revenue (ARP and ARPE) Extension and Outreach/Department of Economics

Example Farm A 100 acre corn farm in Story County, Iowa with a 5 -year average yield of 180 bu/acre Purchases insurance at the 80% coverage level Spring price: $3. 96/bu (average of Feb. prices for Dec. corn futures) Extension and Outreach/Department of Economics

Individual Yield Insurance (YP) Farmer chooses percentage of expected yield to insure – Expected yield measured by average yield Price at which the crop is valued is set up front and does not change If yields are 100 bushels per acre, the farmer receives $174. 24 per acre = $3. 96/bu * (80% * 180 bu/ac - 100 bu/ac) Extension and Outreach/Department of Economics

Yield Insurance Payout Graph No Payout Extension and Outreach/Department of Economics

Yield Insurance is like an Option Extension and Outreach/Department of Economics

Individual Revenue Insurance (RP or RPE) Farmer chooses percentage of expected revenue to insure – Expected revenue measured by average yield times initial crop price Price at which the crop is valued can move with price changes in the market Extension and Outreach/Department of Economics

Individual Revenue Insurance (RP or RPHPE) In our example, the farmer has insured $570. 24 of revenue per acre (80% * $3. 96/bu * 180 bu/ac) Final value of the crop determined by average futures prices over harvest period Extension and Outreach/Department of Economics

Individual Revenue Insurance (RP or RPHPE) If yields are 100 bushels per acre and harvest prices average $3. 50, the farmer receives $220. 24 per acre = 0. 80*$3. 96/bu. *180 bu. /acre - $3. 50/bu. *100 bu. /acre Extension and Outreach/Department of Economics

RPHPE Payout Graph No Payout Extension and Outreach/Department of Economics

Rev. Insurance is like an Option Extension and Outreach/Department of Economics

Individual Revenue Insurance (RP) This policy has a “harvest price option” If the harvest price is greater than the planting price, then the harvest price is used in all calculations In essence, the policy is giving you a put option with the strike price at the planting price Extension and Outreach/Department of Economics

Harvest Price Option Extension and Outreach/Department of Economics

Individual Revenue Insurance (RP) If yields are 100 bushels per acre and harvest prices average $5. 50, the farmer receives $242. 00 per acre 5. 50 = 0. 80*$3. 96/bu. *180 bu. /acre - $5. 50/bu. *100 bu. /acre Extension and Outreach/Department of Economics

RP Payout Graph No Payment Neither Pay RPHPE Pays YP Pays Both Pay RP Pays Extension and Outreach/Department of Economics

What Units to Choose? • Optional Units: Each farm is separate • Basic Units: Combine owned and cash rented acres in same county • Enterprise Units: Combine all acres of the same crop in same county • Whole Farm: Combine all crops in county Extension and Outreach/Department of Economics

Current Subsidy Rates Coverage level Basic Units Optional Units Enterprise Units Whole Farm Units 60% 64% 80% not avail. 65% 59% 80% 70% 59% 80% 75% 55% 77% 80% 48% 68% 71% 85% 38% 53% 56% Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Corn Acres Insured in 2016 87% of all corn acres are insured Extension and Outreach/Department of Economics

Soy Acres Insured in 2016 87% of all soybean acres are insured Extension and Outreach/Department of Economics

2016 Corn and Soy Coverage Levels Extension and Outreach/Department of Economics

Thank you for your time! Any questions? My web site: http: //www 2. econ. iastate. edu/faculty/hart/ Iowa Farm Outlook: http: //www 2. econ. iastate. edu/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ Extension and Outreach/Department of Economics