Extension and Outreach/Department of Economics
Outlook, Farm Bill, and Crop Insurance
ISUEO Farm Management In-ServiceAmes, IowaMay 8, 2012
Chad HartAssistant Professor/Grain Markets Specialist
Extension and Outreach/Department of Economics
U.S. Corn Supply and Use2008 2009 2010 2011 2012
Area Planted (mil. acres) 86.0 86.4 88.2 91.9 95.9
Yield (bu./acre) 153.9 164.7 152.8 147.2 164.0
Production (mil. bu.) 12,092 13,092 12,447 12,358 14,558
Beg. Stocks (mil. bu.) 1,624 1,673 1,708 1,128 801
Imports (mil. bu.) 14 8 28 20 15
Total Supply (mil. bu.) 13,729 14,774 14,182 13,506 15,374
Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,600 5,200
Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 4,950
Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,405 1,420
Exports (mil. bu.) 1,849 1,980 1,835 1,700 1,900
Total Use (mil. bu.) 12,056 13,066 13,055 12,705 13,470
Ending Stocks (mil. bu.) 1,673 1,708 1,128 801 1,616
Season-Average Price ($/bu.) 4.06 3.55 5.18 6.20 5.00
Source: USDA-WAOB, 2012 Unofficial Projections
?
Extension and Outreach/Department of Economics
U.S. Soybean Supply and Use2008 2009 2010 2011 2012
Area Planted (mil. acres) 75.7 77.5 77.4 75.0 73.9
Yield (bu./acre) 39.7 44.0 43.5 41.5 43.9
Production (mil. bu.) 2,967 3,359 3,329 3,056 3,202
Beg. Stocks (mil. bu.) 205 138 151 215 250
Imports (mil. bu.) 13 15 14 15 15
Total Supply (mil. bu.) 3,185 3,512 3,495 3,286 3,467
Crush (mil. bu.) 1,662 1,752 1,648 1,630 1,660
Seed & Residual (mil. bu.) 106 110 130 116 126
Exports (mil. bu.) 1,279 1,499 1,501 1,290 1,550
Total Use (mil. bu.) 3,047 3,361 3,280 3,036 3,335
Ending Stocks (mil. bu.) 138 151 215 250 205
Season-Average Price ($/bu.) 9.97 9.59 11.30 12.25 11.50
Source: USDA-WAOB, 2012 Unofficial Projections
?
Extension and Outreach/Department of Economics
Budget Projections by TitleTitle 2013-2022 Budget Change ($ million)
Title I – Commodity -17,639
Title II – Conservation -6,374
Title III – Trade 0
Title IV – Nutrition -4,024
Title V – Credit 0
Title VI – Rural Development 0
Title VII – Research 645
Title VIII – Forestry 9
Title IX – Energy 0
Title X – Horticulture 359
Title XI – Crop Insurance 2,748
Title XII – Miscellaneous -466
Total -24,747
Extension and Outreach/Department of Economics
Budget Projections by CropCrop 2013-2022 Budget Change ($ million)
Corn -5,752
Soybean 1,459
Wheat -6,409
Cotton -6,077
Rice -2,842
Sorghum -505
Barley -615
Oats -11
Peanuts -314
Dairy -59
Extension and Outreach/Department of Economics
Commodity TitleChanges 2013-2022 Budget Change ($ million)
End Direct Payments -44,622
End Countercyclical Payments -1,008
End ACRE -4,615
Adding Popcorn 91
Ag. Risk Coverage 29,240
Marketing Loans 35
Sugar Program 0
Dairy Program -59
Disaster Assistance 3,297
AGI Limits -95
Implementation 100
Total -17,639
Extension and Outreach/Department of Economics
2012 Senate ProposalEliminates direct payments, countercyclical
payments, and the ACRE program
Keeps marketing loan program
Creates the Ag. Risk Coverage program
Extension and Outreach/Department of Economics
ARC instead of ACRERevenue-based support program
Farmer chooses county or farm-based guarantee
Choice determines the % of land covered by the program
Extension and Outreach/Department of Economics
ARC Guarantees Based on 5-year Olympic averages of price and yield
Exception: farm-based price is 10-year average
Price is national season-average price
Yield is farm yield for farm-based coverage and county yield for county-based coverage
Yield is per planted (and prevented planted) acre
Guarantee = 89% * Ave. Price * Ave. Yield
Extension and Outreach/Department of Economics
ARC Set-up for Corn in 2013Yield per Planted Acre
Year Farm(bu./acre)
County(bu./acre)
Season-Average Price($/bu.)
2003 2.42
2004 2.06
2005 2.00
2006 3.04
2007 4.20
2008 160 160 4.06
2009 175 175 3.55
2010 164 164 5.18
2011 163 163 6.20
2012 165 165 5.00
Olympic Average 164 164 4.75
10-year average3.77
Extension and Outreach/Department of Economics
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 equals89% * $779.00/acre = $693.31/acre for
county89% * $618.28/acre = $550.27/acre for farm
Payments are triggered when actual revenues fall below these levels
Extension and Outreach/Department of Economics
ARC Actual RevenuesPrice is set at the higher of the crop loan
rate or the mid-season price
Loan rate for corn is $1.95/bu.
Mid-season price is the average price over the 1st 5 months of the marketing year
Extension and Outreach/Department of Economics
ARC Actual RevenuesYield is the actual yield per planted acre
Farm-based option uses actual farm yield
County-based option uses actual county yield
Actual Revenue = Price * Yield
Extension and Outreach/Department of Economics
ARC Payment RatePayment Rate = Minimum of
10% of Benchmark Revenue or
ARC Actual Revenue – ARC Guarantee
The maximum payment rate is 10% of Benchmark RevenueIn my example, that’s $77.90/acre for the county-
lever and $61.83/acre for the farm-level
Extension and Outreach/Department of Economics
ARC AcreageProgram is based on planted and prevented
planted acres, but doesn’t pay on all of them
Acreage limit = average of 2009-12 plantings (and prevented plantings)
Treats planted and prevented planted acres differently
Extension and Outreach/Department of Economics
ARC AcreageFor farm-based option, you get paid on 65%
of your planted acres and 45% of your prevented planting acres
For county-based option, you get paid on 80% of your planted acres and 45% of your prevented planting acres
Extension and Outreach/Department of Economics
ARC Payout Graph
0
50
100
150
200
250
300
350
2 3 4 5 6 7 8
Price ($ per bu.)
Yie
ld (
bu
./a
cre
)
ARC pays out
No ARC payments
Extension and Outreach/Department of Economics
Factors to ConsiderFarm-based guarantee could be higher or
lower than county-based guarantee
Farm-based option is generally more likely to pay out, but you get payments on 15% less acres
County-based option might not trigger when farm has a loss
Extension and Outreach/Department of Economics
Crop Insurance TitleChanges 2013-2022 Budget Change ($ million)
Supplemental Coverage Option 682
CAT Rerating -437
Enterprise Units 506
APH Adjustment 855
Stacked IP for Cotton 3,224
Peanut Rev. Insurance 239
Implementation 85
Index-Based Weather Ins. 50
Beginning Farmer Provisions 192
Ag. Mng. Assistance 6
Crop Prod. on Native Sod -167
Participation Effects from ARC -2,487
Total 2,748
Extension and Outreach/Department of Economics
Crop InsuranceSupplemental Coverage Option
Can purchase area-based policy to cover deductible part of individual-based policy
Payments triggered when area suffers 10% lossIf you participate in ARC, you face a deductible
of 21% for this optionWhat is the deductible if you do not participate in
ARC?70% premium subsidy for actuarially fair
premium
Extension and Outreach/Department of Economics
Crop InsuranceEnterprise discounts are now permanentSeparate enterprise units for irrigated and
nonirrigated landChange t-yield percentage from 60% to 70%Any renegotiation of the Standard
Reinsurance Agreement shall be budget neutral
Extension and Outreach/Department of Economics
Crop InsuranceAllows private insurance company pilot of
index-based weather insuranceAllows 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
Extension and Outreach/Department of Economics
Conservation TitleChanges 2013-2022 Budget Change ($ million)
CRP -3,795
CSP -1,987
EQIP -964
Cons. Easements 809
Reg. Cons. Incentives Prog. -86
Other Cons. Programs 190
Funding 100
Repeal of WHIP -641
Total -6,374
Top Related