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Ag Cycles, Current Crop Markets and the Farm Bill

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 chart@iastate.edu 515-294-9911. Corn Prices vs. Costs.

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Ag Cycles, Current Crop Markets and the Farm Bill

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  1. 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 chart@iastate.edu 515-294-9911

  2. 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

  3. 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

  4. Corn Prices and Recessions

  5. Crop Prices for the Next Decade Source: USDA-ERS

  6. Crops Livestock

  7. Net Farm Income

  8. Iowa Land Values Source: Mike Duffy, ISU

  9. Iowa Land Values – Log Scale Source: Mike Duffy, ISU

  10. Land Values and Income Source: Mike Duffy, ISU

  11. Land Values and Income Source: Mike Duffy, ISU

  12. U.S. Corn Supply and Use Source: USDA-WAOB for 2010-13

  13. U.S. Soybean Supply and Use Source: USDA-WAOB for 2010-13

  14. Corn Yields Top: 2013 Yield Bottom: Change from 2012 Units: Bushels/acre Source: USDA-NASS

  15. Soybean Yields Top: 2013 Yield Bottom: Change from 2012 Units: Bushels/acre Source: USDA-NASS

  16. World Corn Production Source: USDA-WAOB

  17. World Soybean Production Source: USDA-WAOB

  18. 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: ISU Extension

  19. Cattle Crush Margin 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 Source: ISU Extension

  20. U.S. Meat Production & Prices Source: USDA-WAOB

  21. Corn Export Shifts Source: USDA-FAS

  22. Corn Export Sales Source: USDA-FAS

  23. Soybean Export Sales Source: USDA-FAS

  24. Soy Export Shifts Source: USDA-FAS

  25. Corn Grind for Ethanol

  26. Source: DOE-EIA, Annual Energy Outlook

  27. Current Corn Futures 4.64 4.62 4.57 Source: CME Group, 3/5/2014

  28. Current Soybean Futures 13.04 11.47 10.91 Source: CME Group, 3/5/2014

  29. 2013/14 Crop Prices

  30. 2014/15 Crop Margins

  31. Source: droughtmonitor.unl.edu

  32. 3-Month Temperature Outlook Source: NOAA-CPC

  33. 3-Month Precipitation Outlook Source: NOAA-CPC

  34. Thoughts for 2014 and Beyond • Supply/demand concerns • Demand rebounding? Yes, so far, so good • Acreage allocation for 2014: Where do the extra corn acres go? • Markets favoring soybeans in the short term and corn longer term

  35. World Corn Markets Source: USDA

  36. Arable Land

  37. 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

  38. Two Waves First wave: Choice on base acreage and yield updating Probably occurs June-July timeframe Second wave: Choice on farm bill programs Probably Sept-Oct Harvest the crop and farm bill at the same time

  39. Producer Choice Have one-time choice between: PLC or ARC (can pick by commodity) If ARC is chosen, pick between county and individual coverage If individual coverage is chosen, must be taken for all covered commodities on the farm 2014-2018 crop years

  40. PLC vs. CCP and DP

  41. Revenue Programs • Think of ARC-County as crop-by-crop • Think of ARC-Individual as whole farm

  42. 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

  43. 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/

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