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

| Region 1: Ron Hook | Region 2: Kelvin Leibold | Region 3: Robert Tigner | Region 4: Tom Olsen | Region 5: Steve Johnson | Region 6: Craig Chase | Region 7: Tim Eggers | Region 8: Bob Wells | Region 9: Jim Jensen |

Iowa State University Extension Budget, 2003-04 Gifts User Fees 2% Gifts 19% User Fees 12% Federal 30% State 20% Grants 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 Crop Insurance Products Crop Marketing Strategies

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 Source: Edwards, ISU Extension Economist

Structure of Program Payments for Corn Target Price Fixed Payment Loan Rate Counter-Cyclical Loan Deficiency Not Tied To Prod Req. $2.63 $0.28 $2.35 $1.95 Regardless Of Market Only If… $0.40 Maximum CCP

Corn Insurance Comparison Price Increase MPCI RA-HPO/CRC APH 150 bu/A Coverage 75% Base Price $2.20 $2.32 Guarantee 112 ½ bu/A $261/A Harvest Yield 100 bu/A Harvest Price ‘05 ------- $3.50/bu New Guarantee $393.75/A Indemnity $27.50/A $43.75/A Now let look at the price going to $7.30 in the fall – look familiar. With a higher fall price, you get an increased revenue guarantee. It’s the same math we used before to figure the base, 42 bu x 75% x $7.30 the new fall price give a new guarantee of $229.95. Then to calculate the indemnity you multiply 25 bushels time $7.30 and subtract from the new guarantee.

2005 Corn Strategy using Crop Revenue Revenue Assurance w/HPO Coverage or Revenue Assurance w/HPO 150 bu/A APH X 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 Outlook 2005 – 06 Marketing Year $2.55/bu 18% Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05

Probability of Cash Corn Price Outlook 2005 – 06 Marketing Year $2.05/bu 60% $2.55/bu 18% Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05

Cash Corn Price Outlook Probability ‘05 – ‘06 Marketing Year $2.05/bu 60% $2.55/bu $2.00/bu 18% 22% Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05

$ Pre-Harvest Crop Marketing Plan Crop Insurance Revenue 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 Ag Management e-School (AMES) Non-Credit Web Courses www.extension.iastate.edu/ames Advanced Grain Marketing Financial Decision Making Farmland Ownership Farm Leasing Arrangements Farm Machinery Economics Advanced Livestock Marketing AGM is the first in a series of courses. We are starting with courses that: build skills our clients say they need (demand side), and fit our core competencies (supply side). AGM was piloted in February 2001. It had a summer run from June-August 2001. We are promoting the course for the January-March 2002 run. Stress that the courses are internally reviewed prior to piloting. External review from other land grant ag economists and ag professionals is part of the pilot process. Courses are intended to be used by Midwest producers and landowners. Sponsorship through the offering of scholarships to clients enrolled in the course(s) is encouraged. AGM has a $100 registration fee.

Non-Discrimination & Information Disclosures AgDM Home Page What’s New Authors Topics Crops Cost & Return Markets Machinery Other Livestock Whole Farm Leasing Land Values Financial Legal & Taxes Transfer Value-Added Ag Iowa State University Extension $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ What is it What is it How to use it Search Help with a Business Problem Questions about AgDM Update Notification Non-Discrimination & Information Disclosures 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. Update government bases and yields Copyright  2002 Iowa State University Extension Don Hofstrand, dhof@iastate.edu, 641-423-0844 All rights reserved Web site design by Liisa Jarvinen This site is Bobby Approved and Disability Accessible. The site has passed P-1 accessibility standards.

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

150 bu/A Average Corn Yield (Marketing Plan) Copyright© 2004 with Permission

150 bu/A Average Corn Yield (No Marketing Plan) Copyright© 2004 with permission.

180 bu/A Average Corn Yield (Marketing Plan) Copyright© 2004 with permission.

180 bu/A Average Corn Yield (No Marketing Plan) Copyright© 2004 with permission.

131 bu/A Average Corn Yield (Marketing Plan) Copyright© 2004 with permission.

131 bu/A Average Corn Yield (No Marketing Plan) Copyright© 2004with permission.

“Train the Trainer”

Farm & Ag Business Management Thank You! Steven D. Johnson Farm & Ag Business Management Field Specialist ISU Polk County Extension 5201 NE 14th Street, Suite A Des Moines, IA 50313 (515) 261-4215 sdjohns@iastate.edu www.extension.iastate.edu/polk/ farmmanagement.htm