1. Pat Westhoff (westhoffp@missouri.edu)westhoffp@missouri.edu Food and Agricultural Policy Research Institute University of Missouri www.fapri.missouri.edu Crop Insurance and the 2014 Farm Bill: Reports and Analyses from the Field AAEA Symposium, Louisville October 6, 2015

2. Source: USDA Economic Research Service, August 2015

3. Source: USDA NASS, August 2015

4. 2004-13 avg: $11.3 bil.2014-18 avg.: $11.2 bil. Source: FAPRI-MU report #2-15: http://www.fapri.missouri.edu/wp-content/uploads/2015/06/FAPRI_MU_Report_02-15.pdfhttp://www.fapri.missouri.edu/wp-content/uploads/2015/06/FAPRI_MU_Report_02-15.pdf

5.  Overview of FAPRI-MU crop market outlook  Producer net revenues  Projected market receipts and variable expenses  Payments under the new farm bill  Crop insurance net indemnities  Some stochastic results

6.  FAPRI-MU 10 year baseline, released in March 2015  Incorporates new farm bill provisions  500 stochastic solutions  FAPRI-MU baseline update, released in August 2015  More current  But no stochastic results

7. 2015/16 2016/172017/182018/19 Area planted (mil. a.)88.990.589.290.1 Area harvested (mil. a.)81.182.681.382.1 Yield (bu./a.)168.8166.8168.6170.1 Supply & use (mil. bu.) Production13,68613,77213,71013,964 Feed & residual use5,2695,3195,2705,276 Ethanol & coproducts5,2535,2405,2835,321 Other domestic use1,3611,3571,3621,372 Exports1,8861,8721,9472,063 Ending stocks1,7201,7341,6121,574 Price per bushel$3.68$3.71$3.96$4.09

8. Sources: FAPRI-MU baselines, Mar. and Aug. 2015; CME December futures contracts, Oct. 2, 2015

9. Source: FAPRI-MU stochastic baseline, March 2015

10. Source: FAPRI-MU baseline update, August 2015

11. 2015/16 2016/172017/182018/19 Market price ($/bu.)3.893.904.014.12 Market revenue ($/a.)635644669693 Variable expenses ($/a.)350347350357 Net market return ($/a.)285298319337 ARC payments ($/base a.) 39 29 14 10 PLC payments ($/base a.) 24 25 22 19 Crop insurance net indemnities ($/a.) 23 24 25 27

12. 2015/162016/172017/182018/19 Area planted (mil. a.)84.382.483.583.7 Area harvested (mil. a.)83.581.682.782.9 Yield (bu./a.)46.944.945.445.8 Supply & use (mil. bu.) Production3,9163,6653,7543,796 Crush1,867 1,868 Other domestic use145 143145 143 Exports1,7731,7851,7961,824 Ending stocks 401 301 280 273 Price per bushel$9.12$9.15$9.98$10.31

13. Sources: FAPRI-MU baseline update, Aug. 2015; CME November futures contracts, Oct. 2, 2015

14. Source: FAPRI-MU stochastic baseline, March 2015

15. Source: FAPRI-MU baseline update, August 2015

16. 2015/16 2016/172017/182018/19 Market price ($/bu.)9.299.449.7910.26 Market revenue ($/a.)409421441465 Variable expenses ($/a.)181182185189 Net market return ($/a.)228238255276 ARC payments ($/base a.) 27 23 16 10 PLC payments ($/base a.) 15 14 10 8 Crop insurance net indemnities ($/a.) 15 14 15 16

17. 2015/162016/172017/182018/19 Area planted (mil. a.)56.153.954.254.0 Area harvested (mil. a.)48.545.545.745.5 Yield (bu./a.)44.145.946.346.6 Supply & use (mil. bu.) Production2,1362,0882,1132,120 Feed use 213 220 223 211 Food use 969 975 982 988 Exports 923 938 9701,000 Ending stocks 837 844 835 811 Price per bushel$5.10$5.05$5.24$5.55

18. Sources: FAPRI-MU baseline update, Aug. 2015; CME July futures contracts, Oct. 2, 2015

19. Source: FAPRI-MU stochastic baseline, March 2015

20. Source: FAPRI-MU baseline update, August 2015

21. 2015/16 2016/172017/182018/19 Market price ($/bu.)5.175.285.485.66 Market revenue ($/a.)234241253263 Variable expenses ($/a.)125126128132 Net market return ($/a.)109115125131 ARC payments ($/base a.) 15 14 10 7 PLC payments ($/base a.) 19 20 15 14 Crop insurance net indemnities ($/a.) 18 11 12 13

22. Projection forUSDAFAPRI-MUFutures Next year12.5%15.0%19.0% 2 years ahead17.7%20.4%25.1% 3 years ahead22.9%22.3%23.6% 4 years ahead26.2%26.1%24.2% 5 years ahead29.7%28.9%26.9% Average of above21.8%22.5%23.8% Sources: USDA and Futures estimates by Scott Irwin and Darrell Good in a FarmDoc piece posted Feb. 4 (http://farmdocdaily.illinois.edu/2015/02/long-term-forecasts-and-farm-bill- program-choice.html).http://farmdocdaily.illinois.edu/2015/02/long-term-forecasts-and-farm-bill- program-choice.html FAPRI-MU estimates compiled by FAPRI-MU and reported in a FarmDoc piece by Pat Westhoff on Feb. 12 (http://farmdocdaily.illinois.edu/2015/02/price-projections-and-farm-bill-program- choices.html).http://farmdocdaily.illinois.edu/2015/02/price-projections-and-farm-bill-program- choices.html

23. Source: Table 1 from Choices article by Westhoff, Gerlt and Glauber, http://www.choices magazine.org/choic es- magazine/submitte d-articles/farm- program-elections- budget-costs-and- the-wto

24. Source: Figures 2 and 3 from Choices article by Westhoff, Gerlt and Glauber, http://www.choicesmagazine.org/choices-magazine/submitted-articles/farm-program-elections-budget-costs-and-the-wto

25.  Under normal conditions, expect crop prices and net returns to remain well below 2010-12 peak values  Mean projected ARC and PLC payments and crop insurance net indemnities are important, but are still a modest share of total receipts for major crops  Programs protect against different types of risk, with different future profiles  PLC—price risk only; mean value inversely related to projected prices  ARC—county revenue risk; mean value declines over time for major crops as projected moving average of prices declines  Crop insurance—farm level yield/revenue risk; subsidies positively correlated with projected mean prices

26.  FAPRI-MU website: www.fapri.missouri.edu www.fapri.missouri.edu  To contact Pat Westhoff:  573-882-4647  westhoffp@missouri.edu westhoffp@missouri.edu  FAPRI-MU team:  Julian Binfield  Sera Chiuchiarelli  Deepayan Debnath  Scott Gerlt  Hoa Hoang  Lauren Jackson  Willi Meyers  Kateryna Schroeder  Wyatt Thompson  Jarrett Whistance  Peter Zimmel This material is based upon work supported by the U.S. Department of Agriculture, Office of the Chief Economist, under Agreement No. 58‐0111‐14‐001 with the Curators of the University of Missouri. Any opinion, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the view of the U.S. Department of Agriculture nor the University of Missouri.