Ag Outlook

Extension and Outreach/Department of Economics

Ag Outlook

C US Bank Ag Education SeminarOsage, IowaFeb. 27, 2014

Chad HartAssociate Professor/Crop Markets Specialist

[email protected]


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


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


Soy Export Shifts

Source: USDA-FAS


Corn Grind for Ethanol


Crop 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

(2/26/14)

2014/15

Futures

(2/26/14)

Corn $4.50 $3.90 $4.54 $4.48

Soybeans $12.70 $9.65 $13.05 $11.35


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


U.S. Beef Supply and Use2010 2011 2012 2013 2014

Beg. Stocks (mil. lb.) 565 585 600 608 582

Production (mil. lb.) 26,414 26,292 25,996 25,800 24,433

Imports (mil. lb.) 2,297 2,057 2,220 2,250 2,285

Exports (mil. lb.) 2,299 2,785 2,453 2,583 2,335

Domestic Use (mil. lb.) 26,392 25,548 25,755 25,493 24,440

Ending Stocks (mil. lb.) 585 600 608 582 525

Price, Steers ($/cwt.) 95.38 114.73 122.86 125.89 136.00

Price, All Fresh Beef ($/lb.) 4.02 4.44 4.69 4.94

Source: USDA-WAOB


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


U.S. Pork Supply and Use2010 2011 2012 2013 2014

Beg. Stocks (mil. lb.) 525 541 542 625 620

Production (mil. lb.) 22,456 22,775 23,270 23,215 23,437

Imports (mil. lb.) 859 803 802 879 880

Exports (mil. lb.) 4,224 5,189 5,381 4,992 5,140

Domestic Use (mil. lb.) 19,075 18.388 18,608 19,107 19,177

Ending Stocks (mil. lb.) 541 542 625 620 620

Price, Barrows & Gilts ($/cwt.) 55.06 66.11 60.88 64.05 63.00

Retail Value ($/lb.) 3.11 3.43 3.47 3.64

Source: USDA-WAOB


LivestockCrops

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


Corn Costs

57%

81%

98%


Net Farm Income


Iowa Land Values

Source: Mike Duffy, ISU


Land Values and Income

Source: Mike Duffy, ISU


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


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


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


PLC vs. CCP and DP


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


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


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/

Ag Outlook

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