Market Outlook Farm Bill Iowa AFSMRARLI Meeting Ames
Market Outlook & Farm Bill Iowa AFSMRA/RLI Meeting Ames, Iowa Mar. 27, 2014 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. 2 95. 4 92. 0 Area Planted (mil. acres) Yield (bu. /acre) 152. 8 147. 2 123. 4 158. 8 165. 3 Production (mil. bu. ) 12, 447 12, 360 10, 780 13, 925 13, 985 Beg. Stocks (mil. bu. ) 1, 708 1, 128 989 821 1, 456 Imports (mil. bu. ) 28 29 162 35 25 Total Supply (mil. bu. ) 14, 182 13, 517 11, 932 14, 781 15, 466 Feed & Residual (mil. bu. ) 4, 795 4, 557 4, 335 5, 300 5, 400 Ethanol (mil. bu. ) 5, 019 5, 000 4, 648 5, 000 Food, Seed, & Other (mil. bu. ) 1, 407 1, 428 1, 396 1, 400 1, 430 Exports (mil. bu. ) 1, 834 1, 543 731 1, 625 1, 550 Total Use (mil. bu. ) 13, 055 12, 528 11, 111 13, 300 13, 380 Ending Stocks (mil. bu. ) 1, 128 989 821 1, 456 2, 086 5. 18 6. 22 6. 89 4. 50 3. 90 Season-Average Price ($/bu. ) Source: USDA-WAOB for 2010 -13 Extension and Outreach/Department of Economics
U. S. Soybean Supply and Use 2010 2011 2012 2013 2014 Area Planted (mil. acres) 77. 4 75. 0 77. 2 76. 5 79. 5 Yield (bu. /acre) 43. 5 41. 9 39. 8 43. 3 45. 2 Production (mil. bu. ) 3, 329 3, 094 3, 034 3, 289 3, 550 Beg. Stocks (mil. bu. ) 151 215 169 141 145 Imports (mil. bu. ) 14 16 36 35 15 Total Supply (mil. bu. ) 3, 495 3, 325 3, 239 3, 464 3, 710 Crush (mil. bu. ) 1, 648 1, 703 1, 689 1, 690 1, 725 Seed & Residual (mil. bu. ) 130 88 90 99 105 Exports (mil. bu. ) 1, 501 1, 365 1, 320 1, 530 1, 600 Total Use (mil. bu. ) 3, 280 3, 155 3, 099 3, 319 3, 430 Ending Stocks (mil. bu. ) 215 169 141 145 280 11. 30 12. 50 14. 40 12. 95 9. 65 Season-Average Price ($/bu. ) Source: USDA-WAOB for 2010 -13 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
Soy Export Shifts Source: USDA-FAS Extension and Outreach/Department of Economics
Corn Grind for Ethanol Extension and Outreach/Department of Economics
Current Corn Futures 4. 65 4. 64 4. 59 Source: CME Group, 3/26/2014 Extension and Outreach/Department of Economics
Current Soybean Futures 13. 04 11. 60 10. 96 Source: CME Group, 3/26/2014 Extension and Outreach/Department of Economics
Source: droughtmonitor. unl. edu Extension and Outreach/Department of Economics
3 -Month Temperature Outlook Source: NOAA-CPC Extension and Outreach/Department of Economics
3 -Month Precipitation Outlook Source: NOAA-CPC Extension and Outreach/Department of Economics
Thoughts for 2014 and Beyond ØSupply/demand concerns ØDemand rebounding? Yes, so far, so good ØAcreage allocation for 2014: Where do the extra corn acres go? ØMarkets favoring soybeans in the short term and corn longer term ØDry soils to start, but El Niño watch for summer 2013/14 USDA Corn Soybeans $4. 50 $12. 95 2014/15 2013/14 2014/15 USDA Futures Unofficial (3/26/14) $3. 90 $4. 65 $4. 64 $9. 65 $13. 04 $11. 60 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
Two Waves Ø First wave: Choice on base acreage and yield updating ØProbably occurs June-July timeframe Ø Second wave: Choice on farm bill programs ØProbably Sept-Oct ØHarvest the crop and farm bill at the same time Extension and Outreach/Department of Economics
Base Acres Ø Keep current base acres or do a one-time “reallocation” of base acres Ø Reallocation allowed to covered commodities planted between 2009 and 2012 Ø Reallocation in proportion to the ratio of 4 -yr average plantings/prevented plantings Ø Total number of base acres limited to total of existing base acres Extension and Outreach/Department of Economics
Payment Yields Ø Keep current CCP payment yield or do a one-time “update” of payment yield on a commodity-by-commodity basis Ø Update: 90% of 2008 -2012 yield per planted acre on the farm Ø If the farm yield is below 75% of the 20082012 average county yield, then the farm yield is replaced by 75% of the 2008 -2012 average county yield ØCounty yield: planted or harvested? Extension and Outreach/Department of Economics
Payment Acres Ø For PLC and ARC at the county level, 85% of base acres Ø For ARC at the individual level, 65% of base acres Extension and Outreach/Department of Economics
Producer Choice Ø Have one-time choice between: ØPLC or ARC (can pick by commodity) ØIf ARC is chosen, pick between county and individual coverage ØIf individual coverage is chosen, must be taken for all covered commodities on the farm Ø 2014 -2018 crop years Extension and Outreach/Department of Economics
Reference Prices Ø Old Target Prices ØCorn ØWheat ØSoybean ØSorghum ØBarley ØOats $2. 63 $4. 17 $6. 00 $2. 63 $1. 79 Extension and Outreach/Department of Economics Ø Reference Prices ØCorn ØWheat ØSoybean ØSorghum ØBarley ØOats $3. 70 $5. 50 $8. 40 $3. 95 $4. 95 $2. 40
PLC instead of CCP Ø Price-based support program Ø Reference prices establish targets Ø Works like CCP Ø Payment rate = Max(0, Reference price – Max(MYA price, Loan rate)) Ø Payment = Payment rate * Payment yield * Payment acres Extension and Outreach/Department of Economics
PLC vs. CCP and DP Extension and Outreach/Department of Economics
ARC instead of ACRE Ø Revenue-based support program Ø Revenues based on 5 -year Olympic average yields and prices Ø Yields and prices have cups (County Tyields and reference prices) Ø Triggers at county or individual farm level, instead of state level Extension and Outreach/Department of Economics
ARC Payment Rate Ø Payment rate = Max(0, Min(10% of Benchmark revenue, Actual crop revenue – ARC guarantee)) So the basic payment structure is the same as it was under ACRE Extension and Outreach/Department of Economics
Revenue Programs ARC-County ARC-Individual Benchmark revenue 5 -yr OA county yield * 5 -yr OA MYA price Sum across crops of [5 -yr OA (farm yield * MYA price) *crop acreage] Actual crop revenue County yield * Max(MYA price or Sum across crops of [Farm loan rate) production * Max(MYA price or loan rate)] / Total planted acres of all covered crops Revenue guarantee 86% of benchmark Ø Think of ARC-County as crop-by-crop Ø Think of ARC-Individual as whole farm Extension and Outreach/Department of Economics
Conservation Ø Conservation Reserve Program Ø 27. 5 million acres in 2014 Ø 26 million acres in 2015 Ø 25 million acres in 2016 Ø 24 million acres in 2017 and 2018 Ø Grassland enrollment capped at 2 million acres 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
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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