Managing Crop Risks: A Model Public and Private Partnership Steven D. Johnson Farm & Ag Business...

Managing Crop Risks: A Model Public and Private Partnership

Steven D. JohnsonFarm & Ag Business Management

Field Specialist

30%

State

12%

Federal

Iowa State UniversityExtension Budget, 2003-04

19%

User Fees

20%

Grants

2%Gifts

17%

County

Presentation Objectives

• Review the history of “Managing Crop Risks” program

• Current program and agenda• Program topics• Creating “value” for clients• Show me the “money”• The “road ahead”

Educational Deliverables

• Conference• Seminars• Workshops• Discussion Groups• One on One• Web-site:

www.ManagingCropRisks.com• Emerging technologies: video

and MacroMedia Breeze

The Early Years• Daylong Conference in held one

location (November and January)– Sponsored by ISU Extension, Farm

Credit Services of America and Wallaces Farmer (Farm Progress Companies)

– Outside speakers on a variety of financial and market risk topics

– Registration fee of $50 with Farm Credit guaranteeing 50 participants at $30 each

The Later Years• Workshops scattered around Iowa

with county extension and FCS Market Place offices coordinating (December or January)– Sponsored by ISU Extension and Farm

Credit Services of America – Selected speakers on financial, market

and weather risk topics– Registration fee of $10 with Farm

Credit inviting customers and prospects

ISU Extension Corn Train:Managing Crop Risks

Current Program• Risk Management Workshop in January

– Sponsored by Farm Credit Services of America in cooperation with ISU Extension

– 2 ½ hour program with a complimentary meal

– Nineteen locations statewide– Phone register 48 hours in advance– Farm Credit invites customers, prospects

and Extension field staff to attend– All programs are listed on Extension

calendar

Locations for 2005 Managing Crop Risks

Program Agenda• “Risk Free Crop Farming” including

a video: – “Weather Outlook for 2005” with

Elwynn Taylor

• Utilizing Crop Insurance Tools• Outside speaker invited by Farm

Credit Services• Meal prior to program or afterwards• Registration and door prizes

$

Government Farm

Program

CropInsuranceProducts

Crop MarketingStrategies

Four Types of Government Farm Program Payments• Direct payment (DP)• Counter-cyclical payment

(CCP)• Loan deficiency payment

(LDP) or marketing loan gain (MLG)

• Subsidized crop insurance premiums – 38% to 59% paid by

Government

Government Payments for Corn

Total Expected Revenue-Corn

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Season Average Price

$/bu.

Direct Pmt

CC Pmt

LDP Pmt

Harv.Price

Source: Edwards, ISU Extension Economist

Structure of Program Payments

for CornTarget Price

Fixed Payment

Loan Rate

Counter-CyclicalPayment

Loan DeficiencyPayment

NotTiedTo

Prod

ProdReq.

$2.63

$0.28

$2.35

$1.95

RegardlessOf Market

Only If… $0.40

MaximumCCP

2004 Acres Insured in Iowa

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

ActualProduction

History

CropRevenueCoverage

Group RiskIncome

Protection

Group RiskPlan

IncomeProtection

RevenueAssurance

CORN

SOYBEANS

Insurance Coverage by Iowa Farmers in 2004

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

50 55 60 65 70 75 80 85 90

CORN

SOYBEANS

Corn Insurance Comparison

Price Increase MPCI RA-HPO/CRC

APH 150 bu/A 150 bu/A

Coverage 75% 75%

Base Price $2.20 $2.32

Guarantee 112 ½ bu/A $261/A

Harvest Yield 100 bu/A 100 bu/A

Harvest Price ‘05

------- $3.50/bu

New Guarantee ------- $393.75/A

Indemnity $27.50/A $43.75/A

2005 Corn Strategy using Crop Revenue Coverage or

Revenue Assurance w/HPO

150 bu/A APHX 75% level of coverage

112 ½ bu/A Guaranteed Yield

X $2.32/bu Dec. Corn Futures in Feb.

$ 261/A Guaranteed Revenue

Probability of Cash Corn Price Outlook2005 – 06 Marketing Year

Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05

$2.55/bu

18%


$2.55/bu

60%

$2.05/bu

18%

Probability of Cash Corn Price Outlook2005 – 06 Marketing Year


$2.00/bu$2.55/bu

60%

$2.05/bu

22%18%

Cash Corn Price Outlook Probability‘05 – ‘06 Marketing Year

$

Pre-HarvestCrop

MarketingPlan

CropInsuranceRevenue

Tools

Execution of Your Marketing

Plan

Show me the money• Revenue Generation at $36/hour

– Conceptualization and Development – 1 hour per site

– Travel – 3 hours per site– Set-up and presentation – 5 hours per site– Office staff time of 2 hours per site @

$25/hour– Campus support of $50 per site for video

and development

• Total of $400 per site for development and training

• Revenue Generation of $300 sent to ISU

Cross Promote other Extension Programs

Ag Management e-School (AMES) Non-Credit Web

Courses www.extension.iastate.edu/am

es• Advanced Grain Marketing• Financial Decision Making• Farmland Ownership• Farm Leasing Arrangements• Farm Machinery Economics• Advanced Livestock Marketing

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

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Dedication

Welcome to Ag Decision Maker (AgDM). The information and analysis provided at this web site will help you find solutions to many of the business, economic, and financial decisions facing farmers and agribusinesses.

Non-Discrimination & Information Disclosures

What is it

Update government bases and yields

Copyright 2002Iowa State University ExtensionDon Hofstrand, [email protected], 641-423-0844All rights reserved

Web site design by Liisa Jarvinen

This site is Bobby Approved and Disability Accessible. The sitehas passed P-1 accessibility standards.

Help with a BusinessProblem

How to use it

The Road Ahead• Iowa programs in January 2006• Nebraska and South Dakota

programs in December 2005 • Similar theme, agenda and use of

web site• Beyond 2006

– Driven by the Market Place– Must continue to “add value” to

clients– University role as objective 3rd party

Small Group Discussions

Group Interaction

Ask the “Expert”

Sample Farm• APH = 150/bu A Corn• Use Revenue Assurance w/HPO at 75% level of

coverage• Total Production Cost = $350/A• Marketing Plan

– Sell 50% of new crop corn in the spring– Average futures price of $2.50/bu– Average basis at harvest of $ .25/bu under

• No Marketing Plan– Average cash price of $2/bushel at harvest on all

bushels

• Compare APH Yields vs. High Yield vs. Low Yield

“Train the Trainer”

Thank You!

Steven D. JohnsonFarm & Ag Business Management

Field SpecialistISU Polk County Extension

5201 NE 14th Street, Suite ADes Moines, IA 50313

(515) [email protected]

www.extension.iastate.edu/polk/farmmanagement.htm

Managing Crop Risks: A Model Public and Private Partnership Steven D. Johnson Farm & Ag Business...

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