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Crop Production Economic Risk Management

Crop Production Economic Risk Management. WinField Regional Conference Ames, Iowa Feb. 24, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911. U.S. Corn Supply and Use. Source: USDA-WAOB. U.S. Soybean Supply and Use. Source: USDA-WAOB. Corn Yields.

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Crop Production Economic Risk Management

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  1. Crop Production Economic Risk Management WinField Regional Conference Ames, Iowa Feb. 24, 2015 Chad Hart Associate Professor/Crop 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 Yields Top: 2014 Yield Bottom: Change from last year Units: Bu/acre Source: USDA-NASS

  5. Soybean Yields Top: 2014 Yield Bottom: Change from last month Units: Bu/acre Source: USDA-NASS

  6. World Corn Production Source: USDA-WAOB

  7. World Soybean Production Source: USDA-WAOB

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

  9. Corn Export Shifts Source: USDA-FAS

  10. Soybean Export Shifts Source: USDA-FAS

  11. Crude Oil Prices Sources: EIA and CME

  12. Strength of the U.S. Dollar Source: Federal Reserve

  13. Corn Grind for Ethanol

  14. Current Corn Futures 3.98 3.72 Source: CME Group, 2/20/2015

  15. Current Soybean Futures 10.04 9.47 Source: CME Group, 2/20/2015

  16. 2014/15 Crop Margins

  17. 2015/16 Crop Margins

  18. Thoughts for 2015 and Beyond • Supply/demand concerns • Record corn and soybean crops, but also record demand • Markets are in a holding pattern, waiting for news • Watching South American crop progress • Projected negative margins for 2014 and 2015 crops

  19. 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

  20. 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

  21. 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

  22. PLC: Corn Payment Potential Reference Price = $3.70 per bushel Payment Yield = 150 bushels per acre Notes: PLC payments are made on 85% of base acres.

  23. ARC-CO: 2014 Corn Revenue Guarantee Benchmark Revenue = $964.37 per acre ARC Revenue Guarantee = $829.36 per acre Notes: Revenue Guarantee equals 86% of Benchmark.

  24. ARC-CO: 2014 Potential Corn Payment ARC Revenue Guarantee = $829.36 per acre ARC Max Payment Rate = $96.44 per acre But ARC-CO is paid on 85% of base acres and 85% of $96.44 is $81.97

  25. PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not

  26. Iowa Corn Acres Insured in 2014 93% of all Iowa corn acres are insured

  27. Iowa Soy Acres Insured in 2014 94% of all Iowa soybean acres are insured

  28. Coverage Levels for RP

  29. Federal Crop Insurance

  30. Supplemental Coverage Option (SCO) SCO RP RPHPE YP

  31. 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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