1. Ag Cycles, Current Crop Markets and the Farm Bill
NACM Heartland Meeting
Des Moines, Iowa
Mar. 6, 2014
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. 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

3. 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

4. Corn Prices and Recessions

5. Crop Prices for the Next Decade
Source: USDA-ERS

6. Crops
Livestock 6 6

7. Net Farm Income

8. Iowa Land Values
Source: Mike Duffy, ISU

9. Iowa Land Values – Log Scale
Source: Mike Duffy, ISU

10. Land Values and Income
Source: Mike Duffy, ISU

11. Land Values and Income
Source: Mike Duffy, ISU

12. U.S. Corn Supply and Use 2010 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
1,708
1,128
989
821
1,481
Imports 28 29
162 35 25
Total Supply
14,182
13,517
11,932
14,781
15,491
Feed & Residual
4,795
4,557
4,335
5,300
5,400
Ethanol
5,019
5,000
4,648
Food, Seed, & Other
1,407
1,428
1,396
1,400
1,430
Exports
1,834
1,543
731
1,600
1,550
Total Use
13,055
12,528
11,111
13,300
13,380
Ending Stocks
2,111
Season-Average Price
($/bu.)
5.18
6.22
6.89
4.50
3.90
Source: USDA-WAOB for 12 12

13. U.S. Soybean Supply and Use
2010
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
151
215
169
141
150
Imports 14 16 36 30 15
Total Supply
3,495
3,325
3,239
3,459
3,715
Crush
1,648
1,703
1,689
1,700
1,725
Seed & Residual
130 88 90 99
105
Exports
1,501
1,365
1,320
1,510
1,600
Total Use
3,280
3,155
3,099
3,309
3,430
Ending Stocks
285
Season-Average Price
($/bu.)
11.30
12.50
14.40
12.70
9.65
Source: USDA-WAOB for 13 13

14. Corn Yields Top: 2013 Yield Bottom: Change from 2012
Units: Bushels/acre
Source: USDA-NASS

15. Soybean Yields Top: 2013 Yield Bottom: Change from 2012
Units: Bushels/acre
Source: USDA-NASS

16. World Corn Production
Source: USDA-WAOB 16 16

17. World Soybean Production
Source: USDA-WAOB 17 17

18. Hog Crush Margin
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 futures
Corn: 10 bushels per pig Soybean meal: 150 pounds per pig
Source: ISU Extension

19. Cattle Crush Margin
The Crush Margin is the return after the feeder steer and corn costs.
Live weight: pounds Feeder weight: 750 pounds
Corn: 50 bushels per head
Source: ISU Extension

20. U.S. Meat Production & Prices
Source: USDA-WAOB 20 20

21. Corn Export Shifts
Source: USDA-FAS

22. Corn Export Sales
Source: USDA-FAS

23. Soybean Export Sales
Source: USDA-FAS

24. Soy Export Shifts
Source: USDA-FAS

25. Corn Grind for Ethanol

26. Source: DOE-EIA, Annual Energy Outlook

27. Current Corn Futures
4.64
4.62
4.57
Source: CME Group, 3/5/2014

28. Current Soybean Futures
13.04
11.47
10.91
Source: CME Group, 3/5/2014

29. 2013/14 Crop Prices

30. 2014/15 Crop Margins

31. Source: droughtmonitor.unl.edu

32. 3-Month Temperature Outlook
Source: NOAA-CPC

33. 3-Month Precipitation Outlook
Source: NOAA-CPC

34. Thoughts for 2014 and Beyond
Supply/demand concerns
Demand rebounding? Yes, so far, so good
Acreage 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
Unofficial
Futures
(3/5/14)
Corn
$4.50
$3.90
$4.64
$4.62
Soybeans
$12.70
$9.65
$13.04
$11.47

35. World Corn Markets
Source: USDA 35 35

36. Arable Land

37. 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

38. Two Waves First wave: Choice on base acreage and yield updating
Probably occurs June-July timeframe
Second wave: Choice on farm bill programs
Probably Sept-Oct
Harvest the crop and farm bill at the same time

39. Producer Choice Have one-time choice between:
PLC or ARC (can pick by commodity)
If ARC is chosen, pick between county and individual coverage
If individual coverage is chosen, must be taken for all covered commodities on the farm
crop years

40. PLC vs. CCP and DP

41. Revenue Programs Think of ARC-County as crop-by-crop
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
Think of ARC-County as crop-by-crop
Think of ARC-Individual as whole farm

42. 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

43. Thank you for your time. Any questions. My web site: http://www. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: