Outlook, Farm Bill, and Crop Insurance

1. Outlook, Farm Bill, and Crop Insurance Ag Credit School Ames, Iowa June 7, 2012 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. U.S. Corn Supply and Use Source: USDA-WAOB

3. U.S. Soybean Supply and Use Source: USDA-WAOB

4. Corn Planting Source: USDA-NASS

5. Soybean Planting Source: USDA-NASS

6. World Corn Production Source: USDA-WAOB

7. World Soybean Production Source: USDA-WAOB

8. 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: Shane Ellis, ISU Extension

9. Change of Export Pace

10. Corn Grind for Ethanol Source: DOE-EIA

11. Projected 2012 Season-Average Corn Price Cost

12. Projected 2012 Season-Average Soy Price Cost

13. Budget Projections by Title

14. Budget Projections by Crop

15. Commodity Title

16. 2012 Senate Proposal Eliminates direct payments, countercyclical payments, and the ACRE program Keeps marketing loan program Creates the Ag. Risk Coverage program

17. ARC instead of ACRE Revenue-based support program Farmer chooses county or farm-based guarantee Choice determines the % of land covered by the program

18. ARC Set-up for Corn in 2013 10-year average 3.77

19. 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 equals 89% * $779.00/acre = $693.31/acre for county 89% * $618.28/acre = $550.27/acre for farm Payments are triggered when actual revenues fall below these levels

20. ARC Acreage For 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

21. ARC Payout Graph No ARC payments ARC pays out

22. Crop Insurance Title

23. Federal Crop Insurance

24. Causes of Loss for Iowa Corn, 1948-2010

25. Causes of Loss for Iowa Soy, 1955-2010

26. Acres Insured in 2011 Corn and Soybeans--Iowa

27. RP Payout Graph No Payment Neither Pay RPE Pays YP Pays Both Pay RP Pays

28. CornInsurance Prices Harvest prices have been higher 4 out of last 12 years

29. Soy Insurance Prices Harvest prices have been higher 6 out of last 12 years

30. Current Subsidy Rates

31. Coverage Level Choice

32. Crop Insurance Supplemental Coverage Option Can purchase area-based policy to cover deductible part of individual-based policy Payments triggered when area suffers 10% loss If you participate in ARC, you face a deductible of 21% for this option What is the deductible if you do not participate in ARC? 70% premium subsidy for actuarially fair premium

33. Crop Insurance Enterprise discounts are now permanent Separate enterprise units for irrigated and nonirrigated land Change t-yield percentage from 60% to 70% Any renegotiation of the Standard Reinsurance Agreement shall be budget neutral

34. Crop Insurance Allows private insurance company pilot of index-based weather insurance Allows 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

35. Not the Last Word on the 2012 Farm Bill Senate proposal is just the start of the process There will likely be several changes/modifications ARC may or may not be in the final farm bill But now we know the starting point for negotiations

36. 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/