Extension and Outreach/Department of Economics
Ag Outlook, Links to the General Economy, and the Farm Bill
West Des Moines, IowaNov. 20, 2014
Chad HartAssociate Professor/Crop Markets Specialist
Extension and Outreach/Department of Economics
U.S. Corn Supply and Use2010 2011 2012 2013 2014
Area Planted (mil. acres) 88.2 91.9 97.3 95.4 90.9
Yield (bu./acre) 152.8 147.2 123.1 158.8 173.4Production (mil. bu.) 12,447 12,360 10,755 13,925 14,407Beg. Stocks (mil. bu.) 1,708 1,128 989 821 1,236
Imports (mil. bu.) 28 29 160 36 25Total Supply (mil. bu.) 14,182 13,517 11,904 14,782 15,668Feed & Residual (mil. bu.) 4,795 4,557 4,315 5,132 5,375Ethanol (mil. bu.) 5,019 5,000 4,641 5,134 5,125
Food, Seed, & Other (mil. bu.) 1,407 1,428 1,397 1,363 1,385Exports (mil. bu.) 1,834 1,543 730 1,917 1,750Total Use (mil. bu.) 13,055 12,528 11,083 13,546 13,660Ending Stocks (mil. bu.) 1,128 989 821 1,236 2,008
Season-Average Price ($/bu.) 5.18 6.22 6.89 4.46 3.50
Source: USDA-WAOB
Extension and Outreach/Department of Economics
U.S. Soybean Supply and Use2010 2011 2012 2013 2014
Area Planted (mil. acres) 77.4 75.0 77.2 76.8 84.2Yield (bu./acre) 43.5 41.9 40.0 44.0 47.5Production (mil. bu.) 3,329 3,094 3,042 3,358 3,958
Beg. Stocks (mil. bu.) 151 215 169 141 92Imports (mil. bu.) 14 16 41 72 15Total Supply (mil. bu.) 3,495 3,325 3,252 3,570 4,065
Crush (mil. bu.) 1,648 1,703 1,689 1,734 1,780Seed & Residual (mil. bu.) 130 88 105 98 115Exports (mil. bu.) 1,501 1,365 1,317 1,647 1,720Total Use (mil. bu.) 3,280 3,155 3,111 3,478 3,615
Ending Stocks (mil. bu.) 215 169 141 92 450Season-Average Price ($/bu.) 11.30 12.50 14.40 13.00 10.00
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Projected Corn Yields
Source: USDA-NASS
Top: 2014 YieldBottom: Change from last monthUnits: Bu/acre
Extension and Outreach/Department of Economics
Projected Soybean Yields
Source: USDA-NASS
Top: 2014 YieldBottom: Change
from last monthUnits: Bu/acre
Extension and Outreach/Department of Economics
World Corn Production
Source: USDA-WAOB
Extension and Outreach/Department of Economics
World Soybean Production
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Hog Crush Margin
Source: ISU Extension
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 futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig
Extension and Outreach/Department of Economics
Cattle Crush Margin
Source: ISU Extension
The Crush Margin is the return after the feeder steer and corn costs.Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head
Extension and Outreach/Department of Economics
U.S. Meat Production & Prices
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Corn Export Shifts
Source: USDA-FAS
Extension and Outreach/Department of Economics
Corn Export Sales
Source: USDA-FAS
Extension and Outreach/Department of Economics
Soybean Export Sales
Source: USDA-FAS
Extension and Outreach/Department of Economics
Soy Export Shifts
Source: USDA-FAS
Extension and Outreach/Department of Economics
Corn Grind for Ethanol
Extension and Outreach/Department of Economics
Current Corn Futures
Source: CME Group, 11/14/2014
3.69
4.04
Extension and Outreach/Department of Economics
Current Soybean Futures
Source: CME Group, 11/14/2014
9.97
9.82
Extension and Outreach/Department of Economics
Corn Prices vs. Costs
Sources: USDA-NASS for Prices, Duffy for Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Extension and Outreach/Department of Economics
Soybean Prices vs. Costs
Sources: USDA-NASS for Prices, Duffy for Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Extension and Outreach/Department of Economics
2014/15 Crop Margins
Extension and Outreach/Department of Economics
2015/16 Crop Margins
Extension and Outreach/Department of Economics
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
Extension and Outreach/Department of Economics
PLC: Corn 2014 Payment Potential
Notes: PLC payments are made on 85% of base acres.
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
Reference Price = $3.70 per bushelPayment Yield = 150 bushels per acre
Extension and Outreach/Department of Economics
ARC-CO: 2014 Corn Revenue Guarantee
Notes: Revenue Guarantee equals 86% of Benchmark.
Year Yield MYA Price ARC Price2009 163.4 $3.55 $3.702010 184.1 $5.18 $5.182011 174.2 $6.22 $6.222012 133.2 $6.89 $6.892013 146.3 $4.45 $4.46
Oly. Ave. 161.3 $5.29Benchmark Revenue = $853.28 per acreARC Revenue Guarantee = $733.82 per acre
Extension and Outreach/Department of Economics
ARC-CO: 2014 Potential Corn Payment
Price: $3.50 $4.00 $4.50 $5.00
Yield: 100 $72.53 $72.53 $72.53 $72.53125 $72.53 $72.53 $72.53 $72.53150 $72.53 $72.53 $50.00 $0.00175 $72.53 $28.75 $0.00 $0.00200 $28.75 $0.00 $0.00 $0.00
ARC Revenue Guarantee = $733.82 per acreARC Max Payment Rate = $85.33 per acreBut ARC-CO is paid on 85% of base acres
and 85% of $85.33 is $72.53
Extension and Outreach/Department of Economics
ARC-IC: 2014 Corn & Soybean Combined Revenue Guarantee
Source: Schulte, ISU Extension, June 2014
YearCorn Yield
ARC Price Revenue
Soy Yield
ARC Price Revenue
2009 163.4 $3.70 $604.58 43.3 $9.59 $415.252010 184.1 $5.18 $953.64 54.5 $11.30 $615.852011 174.2 $6.22 $1083.52 51.1 $12.50 $638.752012 133.2 $6.89 $917.75 45.7 $14.40 $658.082013 146.3 $4.46 $652.50 40.1 $13.00 $521.30
Oly. Ave. $841.30 $591.97
In 2014, if the farm is planted 60% to corn and 40% to soybeans, thenBenchmark Revenue = $741.57 per acreRevenue Guarantee = $637.75 per acre
Extension and Outreach/Department of Economics
ARC-IC : 2014 Potential Corn & Soybean Combined Payment
Source: Schulte, ISU Extension, June 2014
Actual 2014 farm yields: Corn 150 bushels per acreSoy 45 bushels per acre
Marketing year prices: Corn $4.00 per bushelSoy $10.50 per bushel
Calculated revenues: Corn $600.00 per acreSoy $472.50 per acre
ARC Revenue: 60%*$600.00 + 40%*$472.50 = $549.00
ARC-IC is paid on 65% of base acres
ARC-IC Payment = $57.69 per acre (65% of $637.75-$549.00)
Extension and Outreach/Department of Economics
Supplemental Coverage Option (SCO)An additional policy to cover “shallow losses”Shallow loss = part of the deductible on the
producer’s underlying crop insurance policySCO has a county-level payment triggerIndemnities are paid when the county
experiences losses greater than 14%Premium subsidy: 65%Starts in 2015Can’t have ARC and SCO together
Extension and Outreach/Department of Economics
RPRPHPE
YP
SCO
Supplemental Coverage Option (SCO)
Extension and Outreach/Department of Economics
Three ChoicesPLC + SCO
Price protection with top-up county-level insurance protection
ARC-CountyCounty-level revenue protection based on historical
averagesARC-Individual
Farm-level revenue protection based on historical averages
Choice holds for 2014-2018 crop years
Extension and Outreach/Department of Economics
Neither pay
Both pay
PLC pays, ARC does not
ARC pays, PLC does not
Extension and Outreach/Department of Economics
Corn Prices and Recessions
Extension and Outreach/Department of Economics
Crop Prices for the Next Decade
Source: USDA-ERS
Extension and Outreach/Department of Economics
Net Farm Income
Extension and Outreach/Department of Economics
Net Farm Income
Extension and Outreach/Department of Economics
Iowa Land Values
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Iowa Land Values – Log Scale
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Land Values and Income
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
Land Values and Income
Source: Mike Duffy, ISU
Extension and Outreach/Department of Economics
30
40
50
60
70
80
90
100
Cro
p A
crea
ge (m
illio
n ac
res)
Corn Soybeans Wheat Hay Other
Crop Shifts
Source: USDA-NASS
Extension and Outreach/Department of Economics
GDP Growth
Source: USDA-ERS
Extension and Outreach/Department of Economics
GDP Growth
Source: USDA-ERS
Extension and Outreach/Department of EconomicsSource: USDA-NASS
Iowa Crop Shifts
Extension and Outreach/Department of Economics
Renewable Fuels Standard (RFS)
0
5
10
15
20
25
30
35
40
2009 2012 2015 2018 2021
Bill
ion
gallo
ns
Conventional Biofuels Cellulosic BiofuelsBiodiesel Additional Advanced Biofuels
Extension and Outreach/Department of Economics
Renewable Fuels Standard (RFS)
Extension and Outreach/Department of EconomicsSource: DOE-EIA, Annual Energy Outlook
Extension and Outreach/Department of Economics
Liquid Fuel Usage2007 2015 2020 2025 2030 2035
(Million Barrels Oil Equivalent per
Day) (Percent of 2007 Value)
United States 20.6 98% 100% 102% 104% 107%
Canada 2.3 96% 96% 96% 100% 104%
Mexico 2.1 105% 110% 114% 129% 138%
Europe 15.3 92% 88% 88% 89% 90%
Japan 5.0 84% 86% 86% 84% 82%
China 7.6 132% 153% 178% 201% 222%
India 2.8 114% 129% 139% 154% 168%
Africa 3.1 113% 116% 126% 135% 148%
Central and South America 6.0 110% 112% 117% 125% 133%
World 86.1 103% 107% 113% 121% 128%
Source: DOE-EIA
Extension and Outreach/Department of Economics
Population2013 2020 2050
(billion) (billion) (billion)World 7.095 World 7.628 World 9.383
China 1.350
China 1.385
India 1.657
India 1.221
India 1.326
China 1.304
U.S. 0.317 U.S. 0.337 U.S. 0.423Indonesia 0.251
Indonesia 0.267 Nigeria 0.402
Brazil 0.201
Pakistan 0.214 Indonesia 0.300
Pakistan 0.193
Brazil 0.212
Pakistan 0.291
Nigeria 0.175 Nigeria 0.208 Bangladesh 0.250
Bangladesh 0.164Bangladesh 0.183
Brazil 0.232
Russia 0.143Russia 0.142 Ethiopia 0.228
Japan 0.127
Japan 0.126 Philippines 0.172
Source: U.S. Bureau of the Census
Extension and Outreach/Department of Economics
World Corn Markets
Source: USDA
Extension and Outreach/Department of Economics
Arable Land
Extension and Outreach/Department of Economics
Thank you for your time!
Any questions?
My web site:http://www.econ.iastate.edu/~chart/
Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/
Ag Decision Maker:http://www.extension.iastate.edu/agdm/