Crop Production Economic Risk Management

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Crop Production Economic Risk Management

WinField Regional Conference Ames, Iowa Feb.
24, 2015 Chad Hart Associate Professor/Crop
Markets Specialist chart_at_iastate.edu 515-294-9911
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U.S. Corn Supply and Use
2010 2011 2012 2013 2014
Area Planted (mil. acres) 88.2 91.9 97.3 95.4 90.6
Yield (bu./acre) 152.8 147.2 123.1 158.1 171.0
Production (mil. bu.) 12,447 12,360 10,755 13,829 14,216
Beg. Stocks (mil. bu.) 1,708 1,128 989 821 1,232
Imports (mil. bu.) 28 29 160 36 25
Total Supply (mil. bu.) 14,182 13,517 11,904 14,686 15,472
Feed Residual (mil. bu.) 4,795 4,557 4,315 5,036 5,250
Ethanol (mil. bu.) 5,019 5,000 4,641 5,134 5,250
Food, Seed, Other (mil. bu.) 1,407 1,428 1,397 1,367 1,395
Exports (mil. bu.) 1,834 1,543 730 1,917 1,750
Total Use (mil. bu.) 13,055 12,528 11,083 13,454 13,645
Ending Stocks (mil. bu.) 1,128 989 821 1,232 1,827
Season-Average Price (/bu.) 5.18 6.22 6.89 4.46 3.65
Source USDA-WAOB
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U.S. Soybean Supply and Use
2010 2011 2012 2013 2014
Area Planted (mil. acres) 77.4 75.0 77.2 76.8 83.7
Yield (bu./acre) 43.5 41.9 40.0 44.0 47.8
Production (mil. bu.) 3,329 3,094 3,042 3,358 3,969
Beg. Stocks (mil. bu.) 151 215 169 141 92
Imports (mil. bu.) 14 16 41 72 25
Total Supply (mil. bu.) 3,495 3,325 3,252 3,570 4,086
Crush (mil. bu.) 1,648 1,703 1,689 1,734 1,795
Seed Residual (mil. bu.) 130 88 105 97 116
Exports (mil. bu.) 1,501 1,365 1,317 1,647 1,790
Total Use (mil. bu.) 3,280 3,155 3,111 3,478 3,701
Ending Stocks (mil. bu.) 215 169 141 92 385
Season-Average Price (/bu.) 11.30 12.50 14.40 13.00 10.20
Source USDA-WAOB
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Corn Yields
Top 2014 Yield Bottom Change from last
year Units Bu/acre
Source USDA-NASS
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Soybean Yields
Top 2014 Yield Bottom Change from last
month Units Bu/acre
Source USDA-NASS
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World Corn Production
Source USDA-WAOB
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World Soybean Production
Source USDA-WAOB
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U.S. Meat Production Prices
Source USDA-WAOB
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Corn Export Shifts
Source USDA-FAS
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Soybean Export Shifts
Source USDA-FAS
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Crude Oil Prices
Sources EIA and CME
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Strength of the U.S. Dollar
Source Federal Reserve
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Corn Grind for Ethanol
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Current Corn Futures
3.98
3.72
Source CME Group, 2/20/2015
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Current Soybean Futures
10.04
9.47
Source CME Group, 2/20/2015
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2014/15 Crop Margins
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2015/16 Crop Margins
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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

2013/14 USDA 2014/15 USDA 2014/15 Futures (2/20/15) 2015/16 Futures (2/20/15)
Corn 4.46 3.65 3.72 3.98
Soybeans 13.00 10.20 10.04 9.47
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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
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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
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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
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PLC Corn Payment Potential
Reference Price 3.70 per bushel Payment Yield
150 bushels per acre
Marketing Year Price (/bu) PLC Payment Rate (/bu) PLC Payment (/base acre)
3.10 0.60 76.50
3.20 0.50 63.75
3.30 0.40 51.00
3.40 0.30 38.25
3.50 0.20 25.50
3.60 0.10 12.75
3.70 0.00 0.00
Notes PLC payments are made on 85 of base
acres.
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ARC-CO 2014 Corn Revenue Guarantee
Year Yield MYA Price ARC Price
2009 202.0 3.55 3.70
2010 196.0 5.18 5.18
2011 177.0 6.22 6.22
2012 125.0 6.89 6.89
2013 174.0 4.46 4.46

Oly. Ave. 182.3 5.29
Benchmark Revenue 964.37 per acre ARC
Revenue Guarantee 829.36 per acre
Notes Revenue Guarantee equals 86 of Benchmark.
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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

Price 3.50 4.00 4.50 5.00
Yield 150 81.97 81.97 81.97 79.36
175 81.97 81.97 41.86 0.00
200 81.97 29.36 0.00 0.00
225 41.86 0.00 0.00 0.00
250 0.00 0.00 0.00 0.00
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PLC pays, ARC does not
Neither pay
Both pay
ARC pays, PLC does not
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Iowa Corn Acres Insured in 2014
93 of all Iowa corn acres are insured
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Iowa Soy Acres Insured in 2014
94 of all Iowa soybean acres are insured
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Coverage Levels for RP
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Federal Crop Insurance
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Supplemental Coverage Option (SCO)
SCO
RP RPHPE YP
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Thank you for your time!Any questions?My
web sitehttp//www.econ.iastate.edu/chart/Iow
a Farm Outlookhttp//www.econ.iastate.edu/ifo/
Ag Decision Makerhttp//www.extension.iastate.ed
u/agdm/