outlook, farm bill, and crop insurance
DESCRIPTION
Outlook, Farm Bill, and Crop Insurance. Ag Credit School Ames, Iowa June 7, 2012 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911. U.S. Corn Supply and Use. Source: USDA-WAOB. U.S. Soybean Supply and Use. Source: USDA-WAOB. Corn Planting. - PowerPoint PPT PresentationTRANSCRIPT
Extension and Outreach/Department of Economics
Outlook, Farm Bill, and Crop Insurance
Ag Credit SchoolAmes, Iowa
June 7, 2012
Chad HartAssistant Professor/Grain Markets Specialist
Extension and Outreach/Department of Economics
U.S. Corn Supply and Use2008 2009 2010 2011 2012
Area Planted (mil. acres) 86.0 86.4 88.2 91.9 95.9
Yield (bu./acre) 153.9 164.7 152.8 147.2 166.0
Production (mil. bu.) 12,092 13,092 12,447 12,358 14,790
Beg. Stocks (mil. bu.) 1,624 1,673 1,708 1,128 851
Imports (mil. bu.) 14 8 28 20 15
Total Supply (mil. bu.) 13,729 14,774 14,182 13,506 15,656
Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,550 5,450
Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 5,000
Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,405 1,425
Exports (mil. bu.) 1,849 1,980 1,835 1,700 1,900
Total Use (mil. bu.) 12,056 13,066 13,055 12,655 13,775
Ending Stocks (mil. bu.) 1,673 1,708 1,128 851 1,881
Season-Average Price ($/bu.) 4.06 3.55 5.18 6.10 4.60
Source: USDA-WAOB
Extension and Outreach/Department of Economics
U.S. Soybean Supply and Use2008 2009 2010 2011 2012
Area Planted (mil. acres) 75.7 77.5 77.4 75.0 73.9
Yield (bu./acre) 39.7 44.0 43.5 41.5 43.9
Production (mil. bu.) 2,967 3,359 3,329 3,056 3,205
Beg. Stocks (mil. bu.) 205 138 151 215 210
Imports (mil. bu.) 13 15 14 15 15
Total Supply (mil. bu.) 3,185 3,512 3,495 3,286 3,430
Crush (mil. bu.) 1,662 1,752 1,648 1,645 1,655
Seed & Residual (mil. bu.) 106 110 130 116 125
Exports (mil. bu.) 1,279 1,499 1,501 1,315 1,505
Total Use (mil. bu.) 3,047 3,361 3,280 3,076 3,285
Ending Stocks (mil. bu.) 138 151 215 210 145
Season-Average Price ($/bu.) 9.97 9.59 11.30 12.35 13.00
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Corn Planting
Source: USDA-NASS
0
20
40
60
80
100
4/1 4/8 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10
% P
lan
ted
Maximum since 1980 Minimum since 1980
2012 2011
5-yr Average (2007-11)
Extension and Outreach/Department of Economics
Soybean Planting
Source: USDA-NASS
0
20
40
60
80
100
4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10 6/17 6/24 7/1
% P
lan
ted
Maximum since 1980 Minimum since 1980
2012 2011
5-yr Average (2007-11)
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: Shane Ellis, 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
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
9/1 9/22 10/13 11/3 11/2412/15 1/5 1/26 2/16 3/9 3/30 4/20 5/11
Corn Soy
Change of Export Pace
Extension and Outreach/Department of Economics
Corn Grind for Ethanol
Source: DOE-EIA
86
88
90
92
94
96
98
100
102
104
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Mill
ion
bu
she
ls
Extension and Outreach/Department of Economics
4.50
5.00
5.50
6.00
6.50
7.00
$ p
er
bu
she
l
Futures USDA
Projected 2012 Season-Average Corn Price
Cost
Extension and Outreach/Department of Economics
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
$ p
er
bu
shel
Futures USDA
Projected 2012 Season-Average Soy Price
Cost
Extension and Outreach/Department of Economics
Budget Projections by TitleTitle 2013-2022 Budget Change ($ million)
Title I – Commodity -17,639
Title II – Conservation -6,374
Title III – Trade 0
Title IV – Nutrition -4,024
Title V – Credit 0
Title VI – Rural Development 0
Title VII – Research 645
Title VIII – Forestry 9
Title IX – Energy 0
Title X – Horticulture 359
Title XI – Crop Insurance 2,748
Title XII – Miscellaneous -466
Total -24,747
Extension and Outreach/Department of Economics
Budget Projections by CropCrop 2013-2022 Budget Change ($ million)
Corn -5,752
Soybean 1,459
Wheat -6,409
Cotton -6,077
Rice -2,842
Sorghum -505
Barley -615
Oats -11
Peanuts -314
Dairy -59
Extension and Outreach/Department of Economics
Commodity TitleChanges 2013-2022 Budget Change ($ million)
End Direct Payments -44,622
End Countercyclical Payments -1,008
End ACRE -4,615
Adding Popcorn 91
Ag. Risk Coverage 29,240
Marketing Loans 35
Sugar Program 0
Dairy Program -59
Disaster Assistance 3,297
AGI Limits -95
Implementation 100
Total -17,639
Extension and Outreach/Department of Economics
2012 Senate ProposalEliminates direct payments, countercyclical
payments, and the ACRE program
Keeps marketing loan program
Creates the Ag. Risk Coverage program
Extension and Outreach/Department of Economics
ARC instead of ACRERevenue-based support program
Farmer chooses county or farm-based guarantee
Choice determines the % of land covered by the program
Extension and Outreach/Department of Economics
ARC Set-up for Corn in 2013Yield per Planted Acre
Year Farm(bu./acre)
County(bu./acre)
Season-Average Price($/bu.)
2003 2.42
2004 2.06
2005 2.00
2006 3.04
2007 4.20
2008 160 160 4.06
2009 175 175 3.55
2010 164 164 5.18
2011 163 163 6.20
2012 165 165 5.00
Olympic Average 164 164 4.75
10-year average3.77
Extension and Outreach/Department of Economics
ARC Guarantees Benchmark Revenue =
$779.00/acre = 164 bu/acre * $4.75/bu. for county$618.28/acre = 164 bu/acre * $3.77/bu. for farm
In this case, the guarantee equals89% * $779.00/acre = $693.31/acre for
county89% * $618.28/acre = $550.27/acre for farm
Payments are triggered when actual revenues fall below these levels
Extension and Outreach/Department of Economics
ARC AcreageFor farm-based option, you get paid on 65%
of your planted acres and 45% of your prevented planting acres
For county-based option, you get paid on 80% of your planted acres and 45% of your prevented planting acres
Extension and Outreach/Department of Economics
ARC Payout Graph
0
50
100
150
200
250
300
350
2 3 4 5 6 7 8
Price ($ per bu.)
Yie
ld (
bu
./a
cre
)
ARC pays out
No ARC payments
Extension and Outreach/Department of Economics
Crop Insurance TitleChanges 2013-2022 Budget Change ($ million)
Supplemental Coverage Option 682
CAT Rerating -437
Enterprise Units 506
APH Adjustment 855
Stacked IP for Cotton 3,224
Peanut Rev. Insurance 239
Implementation 85
Index-Based Weather Ins. 50
Beginning Farmer Provisions 192
Ag. Mng. Assistance 6
Crop Prod. on Native Sod -167
Participation Effects from ARC -2,487
Total 2,748
Extension and Outreach/Department of Economics
Federal Crop Insurance
0
50
100
150
200
250
300
Mill
ion a
cres
0
2
4
6
8
10
12
$ B
illio
n
Insured Acres Total Premiums
Extension and Outreach/Department of Economics
Causes of Loss for Iowa Corn, 1948-2010
Drought40%
Excess Moisture
27%
Flood4%
Frost3%
Hail12%
Wind4%
Other6%Plant Disease
2%
Insects2%
Extension and Outreach/Department of Economics
Causes of Loss for Iowa Soy, 1955-2010
Drought28%
Excess Moisture
27%
Flood6%
Frost2%
Hail29%
Wind2%
Other5%
Plant Disease1%
Insects0%
Extension and Outreach/Department of Economics
Acres Insured in 2011 Corn and Soybeans--Iowa
RP88.0%
YP6.5%
RPHPE3.6%
GRIP1.4%
GRP0.5%
Extension and Outreach/Department of Economics
0
50
100
150
200
250
$3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00
Price ($ per bu.)
Yie
ld (
bu
. p
er
acr
e)
0
50
100
150
200
250
$3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00
Price ($ per bu.)
Yie
ld (
bu
. p
er
acr
e)
RPE Pays Neither Pay
Both Pay
YP Pays
RP Payout Graph
RP Pays
No Payment
Extension and Outreach/Department of Economics
$0
$1
$2
$3
$4
$5
$6
$7
2000 2002 2004 2006 2008 2010 2012
Pri
ce (
$ p
er
bu
.)
Planting Harvest
Corn Insurance Prices
Harvest prices have been higher 4 out of last 12 years
Extension and Outreach/Department of Economics
$0
$2
$4
$6
$8
$10
$12
$14
2000 2002 2004 2006 2008 2010 2012
Pri
ce (
$ p
er
bu
.)
Planting Harvest
Soy Insurance Prices
Harvest prices have been higher 6 out of last 12 years
Extension and Outreach/Department of Economics
Current Subsidy RatesCoverage
levelBasic Units
Optional Units
Enterprise Units
Whole Farm Units
60% 64% 80% not avail.
65% 59% 80% 80%
70% 59% 80% 80%
75% 55% 77% 80%
80% 48% 68% 71%
85% 38% 53% 56%
Extension and Outreach/Department of Economics
0%
5%
10%
15%
20%
25%
30%
35%
50% 55% 60% 65% 70% 75% 80% 85% 90%
Coverage Level
2008 2009 2010 2011
Coverage Level Choice
Extension and Outreach/Department of Economics
Crop InsuranceSupplemental Coverage Option
Can purchase area-based policy to cover deductible part of individual-based policy
Payments triggered when area suffers 10% lossIf you participate in ARC, you face a deductible
of 21% for this optionWhat is the deductible if you do not participate in
ARC?70% premium subsidy for actuarially fair
premium
Extension and Outreach/Department of Economics
Crop InsuranceEnterprise discounts are now permanentSeparate enterprise units for irrigated and
nonirrigated landChange t-yield percentage from 60% to 70%Any renegotiation of the Standard
Reinsurance Agreement shall be budget neutral
Extension and Outreach/Department of Economics
Crop InsuranceAllows private insurance company pilot of
index-based weather insuranceAllows premium subsidy of 60% or less
Waives CAT fee, adds 10% to premium subsidy rates, and sets yield bound at 80% of the t-yield for beginning farmers
Extension and Outreach/Department of Economics
Not the Last Word on the 2012 Farm Bill
Senate proposal is just the start of the process
There will likely be several changes/modificationsARC may or may not be in the final farm bill
But now we know the starting point for negotiations
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/