Crop Markets and the Farm Bill Strawberry Point
Crop Markets and the Farm Bill Strawberry Point, Iowa Feb. 25, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate. edu 515 -294 -9911 Extension and Outreach/Department of Economics
U. S. Corn Supply and Use 2010 2011 2012 2013 2014 88. 2 91. 9 97. 3 95. 4 90. 6 Area Planted (mil. acres) Yield (bu. /acre) 152. 8 147. 2 123. 1 158. 1 171. 0 Production (mil. bu. ) 12, 447 12, 360 10, 755 13, 829 14, 216 Beg. Stocks (mil. bu. ) 1, 708 1, 128 989 821 1, 232 Imports (mil. bu. ) 28 29 160 36 25 Total Supply (mil. bu. ) 14, 182 13, 517 11, 904 14, 686 15, 472 Feed & Residual (mil. bu. ) 4, 795 4, 557 4, 315 5, 036 5, 250 Ethanol (mil. bu. ) 5, 019 5, 000 4, 641 5, 134 5, 250 Food, Seed, & Other (mil. bu. ) 1, 407 1, 428 1, 397 1, 367 1, 395 Exports (mil. bu. ) 1, 834 1, 543 730 1, 917 1, 750 Total Use (mil. bu. ) 13, 055 12, 528 11, 083 13, 454 13, 645 Ending Stocks (mil. bu. ) 1, 128 989 821 1, 232 1, 827 5. 18 6. 22 6. 89 4. 46 3. 65 Season-Average Price ($/bu. ) Source: USDA-WAOB Extension and Outreach/Department of Economics
U. S. Soybean Supply and Use 2010 2011 2012 2013 2014 Area Planted (mil. acres) 77. 4 75. 0 77. 2 76. 8 83. 7 Yield (bu. /acre) 43. 5 41. 9 40. 0 44. 0 47. 8 Production (mil. bu. ) 3, 329 3, 094 3, 042 3, 358 3, 969 Beg. Stocks (mil. bu. ) 151 215 169 141 92 Imports (mil. bu. ) 14 16 41 72 25 Total Supply (mil. bu. ) 3, 495 3, 325 3, 252 3, 570 4, 086 Crush (mil. bu. ) 1, 648 1, 703 1, 689 1, 734 1, 795 Seed & Residual (mil. bu. ) 130 88 105 97 116 Exports (mil. bu. ) 1, 501 1, 365 1, 317 1, 647 1, 790 Total Use (mil. bu. ) 3, 280 3, 155 3, 111 3, 478 3, 701 Ending Stocks (mil. bu. ) 215 169 141 92 385 11. 30 12. 50 14. 40 13. 00 10. 20 Season-Average Price ($/bu. ) Source: USDA-WAOB Extension and Outreach/Department of Economics
Corn Yields Top: 2014 Yield Bottom: Change from last year Units: Bu/acre Source: USDA-NASS Extension and Outreach/Department of Economics
Soybean Yields Top: 2014 Yield Bottom: Change from last month Units: Bu/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
U. S. Meat Production & Prices Source: USDA-WAOB Extension and Outreach/Department of Economics
Corn Export Shifts Source: USDA-FAS Extension and Outreach/Department of Economics
Corn Export Sales Source: USDA-FAS Extension and Outreach/Department of Economics
Soybean Export Shifts Source: USDA-FAS Extension and Outreach/Department of Economics
Soybean Export Shifts Source: USDA-FAS Extension and Outreach/Department of Economics
Crude Oil Prices Sources: EIA and CME 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 3. 91 3. 68 Source: CME Group, 2/24/2015 Extension and Outreach/Department of Economics
Current Soybean Futures 10. 11 9. 59 Source: CME Group, 2/24/2015 Extension and Outreach/Department of Economics
2014/15 Crop Margins Extension and Outreach/Department of Economics
2015/16 Crop Margins Extension and Outreach/Department of Economics
Thoughts for 2015 and Beyond ØSupply/demand concerns ØRecord corn and soybean crops, but also record demand ØMarkets are in a holding pattern, waiting for news ØWatching South American crop progress ØProjected negative margins for 2014 and 2015 crops 2013/14 2014/15 USDA Corn Soybeans $4. 46 $13. 00 $3. 65 $10. 20 Extension and Outreach/Department of Economics 2014/15 Futures (2/24/15) $3. 68 $10. 11 2015/16 Futures (2/24/15) $3. 91 $9. 59
Corn Prices vs. Costs Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre Sources: USDA-NASS for Prices, Duffy for Costs Extension and Outreach/Department of Economics
Soybean Prices vs. Costs Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre Sources: USDA-NASS for Prices, Duffy for Costs Extension and Outreach/Department of Economics
Farm Bill: Old vs. New Ø Direct Payments (DP) Ø Countercyclical Payments (CCP) Ø Marketing Loans (LDP) Ø Revenue Countercyclical Payments (ACRE) Ø Countercyclical Payments (PLC) Ø Marketing Loans (LDP) Ø Revenue Countercyclical Payments (ARC) New programs, but they have strong similarities to previous programs Extension and Outreach/Department of Economics
PLC: Corn Payment Potential Reference Price = $3. 70 per bushel Payment Yield = 150 bushels per acre Marketing Year Price ($/bu) $3. 10 $3. 20 $3. 30 $3. 40 $3. 50 $3. 60 $3. 70 PLC Payment Rate ($/bu) $0. 60 $0. 50 $0. 40 $0. 30 $0. 20 $0. 10 $0. 00 PLC Payment ($/base acre) $76. 50 $63. 75 $51. 00 $38. 25 $25. 50 $12. 75 $0. 00 Notes: PLC payments are made on 85% of base acres. Extension and Outreach/Department of Economics
ARC-CO: 2014 Corn Revenue Guarantee Year 2009 2010 2011 Yield 157. 0 186. 0 187. 0 MYA Price $3. 55 $5. 18 $6. 22 ARC Price $3. 70 $5. 18 $6. 22 2013 163. 0 156. 0 $6. 89 $4. 46 Oly. Ave. 168. 7 $5. 29 Benchmark Revenue = $892. 42 per acre ARC Revenue Guarantee = $767. 48 per acre Notes: Revenue Guarantee equals 86% of Benchmark. Extension and Outreach/Department of Economics
ARC-CO: 2014 Potential Corn Payment ARC Revenue Guarantee = $767. 48 per acre ARC Max Payment Rate = $89. 24 per acre But ARC-CO is paid on 85% of base acres and 85% of $89. 24 is $75. 85 Yield: 100 125 150 175 200 Price: $3. 50 $75. 85 $57. 36 $4. 00 $75. 85 $57. 36 $0. 00 Extension and Outreach/Department of Economics $4. 50 $75. 85 $0. 00 $5. 00 $75. 85 $14. 86 $0. 00
ARC-IC: 2014 Corn & Soybean Combined Revenue Guarantee Year Corn Yield ARC Price Revenue Soy Yield ARC Price Revenue 2009 157. 0 $3. 70 $580. 90 43. 0 $9. 59 $412. 37 2010 186. 0 $5. 18 $963. 48 55. 0 $11. 30 $621. 50 2011 187. 0 $6. 22 $1163. 14 56. 0 $12. 50 $700. 00 2012 163. 0 $6. 89 $1123. 07 50. 0 $14. 40 $720. 00 2013 156. 0 $4. 46 $695. 76 46. 0 $13. 00 $598. 00 Oly. Ave. $927. 44 $639. 83 In 2014, if the farm is planted 60% to corn and 40% to soybeans, then Benchmark Revenue = $812. 40 per acre Revenue Guarantee = $698. 66 per acre Extension and Outreach/Department of Economics
ARC-IC : 2014 Potential Corn & Soybean Combined Payment Actual 2014 farm yields: Corn 180 bushels per acre Soy 50 bushels per acre Marketing year prices: Corn $4. 00 per bushel Soy $10. 50 per bushel Calculated revenues: Corn $720. 00 per acre Soy $525. 00 per acre ARC Revenue: 60%*$720. 00 + 40%*$525. 00 = $642. 00 ARC-IC is paid on 65% of base acres ARC-IC Payment = $36. 83 per acre (65% of $698. 66 -$642. 00) Extension and Outreach/Department of Economics
Supplemental Coverage Option (SCO) ØAn additional policy to cover “shallow losses” ØShallow loss = part of the deductible on the producer’s underlying crop insurance policy ØSCO has a county-level payment trigger ØIndemnities are paid when the county experiences losses greater than 14% ØPremium subsidy: 65% ØStarts in 2015 ØCan’t have ARC and SCO together Extension and Outreach/Department of Economics
Supplemental Coverage Option (SCO) SCO RP RPHPE YP Extension and Outreach/Department of Economics
Three Choices Ø PLC + SCO ØPrice protection with top-up county-level insurance protection Ø ARC-County ØCounty-level revenue protection based on historical averages Ø ARC-Individual ØFarm-level revenue protection based on historical averages Ø Choice holds for 2014 -2018 crop years Extension and Outreach/Department of Economics
PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not Extension and Outreach/Department of Economics
Corn Marketing Year Average Price Projections Extension and Outreach/Department of Economics
Soybean Marketing Year Average Price Projections Extension and Outreach/Department of Economics
Thank you for your time! Any questions? My web site: http: //www. econ. iastate. edu/~chart/ Iowa Farm Outlook: http: //www. econ. iastate. edu/ifo/ Ag Decision Maker: http: //www. extension. iastate. edu/agdm/ Extension and Outreach/Department of Economics
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