ag cycles, current crop markets and the farm bill
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Ag Cycles, Current Crop Markets and the Farm Bill. NACM Heartland Meeting Des Moines, Iowa Mar. 6, 2014 Chad Hart Associate Professor/Crop Markets Specialist [email protected] 515-294-9911. Corn Prices vs. Costs. - PowerPoint PPT PresentationTRANSCRIPT
Extension and Outreach/Department of Economics
Ag Cycles, Current Crop Markets and the Farm Bill
NACM Heartland MeetingDes Moines, Iowa
Mar. 6, 2014
Chad HartAssociate Professor/Crop Markets Specialist
Extension and Outreach/Department of Economics
Corn Prices vs. Costs
Sources: USDA-NASS for Prices, Duffy for Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Extension and Outreach/Department of Economics
Soybean Prices vs. Costs
Sources: USDA-NASS for Prices, Duffy for Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Extension and Outreach/Department of Economics
Corn Prices and Recessions
Extension and Outreach/Department of Economics
Crop Prices for the Next Decade
Source: USDA-ERS
Extension and Outreach/Department of Economics
LivestockCrops
Extension and Outreach/Department of Economics
Net Farm Income
Extension and Outreach/Department of Economics
Iowa Land Values
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Iowa Land Values – Log Scale
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Land Values and Income
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Land Values and Income
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
U.S. Corn Supply and Use2010 2011 2012 2013 2014
Area Planted (mil. acres) 88.2 91.9 97.2 95.4 92.0
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 1,481
Imports (mil. bu.) 28 29 162 35 25
Total Supply (mil. bu.) 14,182 13,517 11,932 14,781 15,491
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 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 1,600 1,550
Total Use (mil. bu.) 13,055 12,528 11,111 13,300 13,380
Ending Stocks (mil. bu.) 1,128 989 821 1,481 2,111
Season-Average Price ($/bu.) 5.18 6.22 6.89 4.50 3.90
Source: USDA-WAOB for 2010-13
Extension and Outreach/Department of Economics
U.S. Soybean Supply and Use2010 2011 2012 2013 2014
Area Planted (mil. acres) 77.4 75.0 77.2 76.5 79.5
Yield (bu./acre) 43.5 41.9 39.8 43.3 45.2
Production (mil. bu.) 3,329 3,094 3,034 3,289 3,550
Beg. Stocks (mil. bu.) 151 215 169 141 150
Imports (mil. bu.) 14 16 36 30 15
Total Supply (mil. bu.) 3,495 3,325 3,239 3,459 3,715
Crush (mil. bu.) 1,648 1,703 1,689 1,700 1,725
Seed & Residual (mil. bu.) 130 88 90 99 105
Exports (mil. bu.) 1,501 1,365 1,320 1,510 1,600
Total Use (mil. bu.) 3,280 3,155 3,099 3,309 3,430
Ending Stocks (mil. bu.) 215 169 141 150 285
Season-Average Price ($/bu.) 11.30 12.50 14.40 12.70 9.65
Source: USDA-WAOB for 2010-13
Extension and Outreach/Department of Economics
Corn Yields
Source: USDA-NASS
Top: 2013 YieldBottom: Change from 2012Units: Bushels/acre
Extension and Outreach/Department of Economics
Soybean Yields
Source: USDA-NASS
Top: 2013 YieldBottom: Change from 2012Units: Bushels/acre
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
Source: ISU Extension
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 futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig
Extension and Outreach/Department of Economics
Cattle Crush Margin
Source: ISU Extension
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
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 Sales
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 EconomicsSource: DOE-EIA, Annual Energy Outlook
Extension and Outreach/Department of Economics
Current Corn Futures
Source: CME Group, 3/5/2014
4.64 4.62 4.57
Extension and Outreach/Department of Economics
Current Soybean Futures
Source: CME Group, 3/5/2014
13.04
11.47
10.91
Extension and Outreach/Department of Economics
2013/14 Crop Prices
Extension and Outreach/Department of Economics
2014/15 Crop Margins
Extension and Outreach/Department of EconomicsSource: droughtmonitor.unl.edu
Extension and Outreach/Department of EconomicsSource: NOAA-CPC
3-Month Temperature Outlook
Extension and Outreach/Department of EconomicsSource: NOAA-CPC
3-Month Precipitation Outlook
Extension and Outreach/Department of Economics
Thoughts for 2014 and BeyondSupply/demand concerns
Demand rebounding? Yes, so far, so goodAcreage allocation for 2014: Where do the extra corn acres go?Markets favoring soybeans in the short term and corn longer term
2013/14
USDA
2014/15
USDA
Unofficial
2013/14
Futures
(3/5/14)
2014/15
Futures
(3/5/14)
Corn $4.50 $3.90 $4.64 $4.62
Soybeans $12.70 $9.65 $13.04 $11.47
Extension and Outreach/Department of Economics
World Corn Markets
Source: USDA
Extension and Outreach/Department of Economics
Arable Land
Extension and Outreach/Department of Economics
Farm Bill: Old vs. New Direct Payments (DP) Countercyclical
Payments (CCP) Marketing Loans (LDP) Revenue
Countercyclical Payments (ACRE)
Countercyclical Payments (PLC)
Marketing Loans (LDP) Revenue
Countercyclical Payments (ARC)
New programs, but they have strong similarities to previous programs
Extension and Outreach/Department of Economics
Two WavesFirst wave: Choice on base acreage and
yield updatingProbably occurs June-July timeframe
Second wave: Choice on farm bill programsProbably Sept-OctHarvest the crop and farm bill at the same time
Extension and Outreach/Department of Economics
Producer ChoiceHave one-time choice between:
PLC or ARC (can pick by commodity)If ARC is chosen, pick between county and
individual coverageIf individual coverage is chosen, must be taken for
all covered commodities on the farm
2014-2018 crop years
Extension and Outreach/Department of Economics
PLC vs. CCP and DP
Extension and Outreach/Department of Economics
Revenue ProgramsARC-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 loan rate)
Sum across crops of [Farm production * Max(MYA price or loan rate)] / Total planted acres of all covered crops
Revenue guarantee
86% of benchmark 86% of benchmark
Think of ARC-County as crop-by-cropThink of ARC-Individual as whole farm
Extension and Outreach/Department of Economics
Supplemental Coverage Option (SCO)An additional policy to cover “shallow losses”
Shallow loss = part of the deductible on the producer’s underlying crop insurance policy
SCO has a county-level payment trigger
Indemnities are paid when the county experiences losses greater than 14%
Premium subsidy: 65%
Starts in 2015
Can’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/