joe l. outlaw professor & extension economist co-director, afpc 2015 crop outlook &...
TRANSCRIPT
Joe L. OutlawProfessor & Extension Economist
Co-Director, AFPC
2015 Crop Outlook & International Durum Forum
Minot, ND
November 9, 2015
The Challenge of Economic Viability in Uncertain Times
Presentation Outline
• My Background• Economic Viability• Why Do I Say Uncertain Times?• Conclusions
Economic Viability
My Background
• South Texas• Agricultural and Food Policy
Center–Dwight Aakre–ND feedgrain farms in Barnes
County
• Do Work Behind the Scenes for the Agricultural Committees
• Not Your Typical Economist
Budget Pressure
Agriculture’s Share of the U.S. Budget
Agriculture’s Share
(Non-Nutrition)
Economic Viability
• Very Simply – Can you make a living?
• Most Producers are Diversified Which Has Tended to Help
• Our Data Says Its Going to Be Harder Before It Gets Easier
U.S. corn supply and useAugust 2015 FAPRI-MU baseline update
2015/16 2016/17 2017/18 2018/19
Area planted (mil. a.) 88.9 90.5 89.2 90.1
Area harvested (mil. a.) 81.1 82.6 81.3 82.1
Yield (bu./a.) 168.8 166.8 168.6 170.1
Supply & use (mil. bu.)
Production 13,686 13,772 13,710 13,964
Feed & residual use 5,269 5,319 5,270 5,276
Ethanol & coproducts 5,253 5,240 5,283 5,321
Other domestic use 1,361 1,357 1,362 1,372
Exports 1,886 1,872 1,947 2,063
Ending stocks 1,720 1,734 1,612 1,574
Price per bushel $3.68 $3.71 $3.96 $4.09
U.S. wheat supply and useAugust 2015 FAPRI-MU baseline update
2015/16 2016/17 2017/18 2018/19
Area planted (mil. a.) 56.1 53.9 54.2 54.0
Area harvested (mil. a.) 48.5 45.5 45.7 45.5
Yield (bu./a.) 44.1 45.9 46.3 46.6
Supply & use (mil. bu.)
Production 2,136 2,088 2,113 2,120
Feed use 213 220 223 211
Food use 969 975 982 988
Exports 923 938 970 1,000
Ending stocks 837 844 835 811
Price per bushel $5.10 $5.05 $5.24 $5.55
AFPC Representative Crop Farm Locations
Rice
Wheat
Rice
Wheat
Cotton Cotton
Feed Grain
Cotton
RiceRice
Wheat
Wheat
Feed Grain
Feed Grain
Feed GrainFeed Grain
Feed GrainCotton
Cotton
CottonRice
Cotton
Rice
FeedGrain
Feed Grain
Cotton
Cotton
Feed Grain
Feed Grain
CottonFeed Grain
Wheat
Wheat
Wheat
CottonFeed GrainCotton
Feed Grain
Feed Grain
Rice
Feed Grain
Cotton
U.S. Net Farm Income
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
20
40
60
80
100
120
140
60
124
58
Billi
on d
olla
rs
Source: USDA Economic Research Service, August 2015
The Problem…
• Unless producers are kidding themselves… right now there are very few crops nation where expected prices appear to provide a profit this year --- and some get worse in the next few years
• So… we have been advising producers to spend money wisely and fine tune crop insurance as much as they can
Current Corn Coverage Levels
Current Wheat Coverage Levels
Coverage Level
Basic & Optional Subsidy %
Enterprise Unit Subsidy
%
SCO Subsidy
STAX Subsidy
%
50% 67% 80% 65% 80%
55% 64% 80% 65% 80%
60% 64% 80% 65% 80%
65% 59% 80% 65% 80%
70% 59% 80% 65% 80%
75% 55% 77% 65% 80%
80% 48% 68% 65% 80%
85% 38% 53% 65% 80%
Crop Insurance Choices
Why Do I Say Uncertain Times?
• Prices for All Major Commodities are Off– Some more than others
• Major Exporters Increased Production Along With Higher Prices – Just Like Us
• Strong Dollar – Hurts Exports … For How Long?
• While the Congress Did What They Could:– The Safety Net Programs are not enough
• Crop Insurance Clearly a Target of … Almost Everybody
Percent of All U.S. Base Acres Choosing PLC, ARC CO and ARC IC By
Covered Commodity
Barley
Canola
Corn
Crambe
Dry Pea
s
Flaxse
ed
Grain So
rghum
Lentils
Large
Chickpea
s
Long G
rain Rice
Medium Grai
n Rice (S
outhern)
Mustard
Oats
Peanuts
Rapese
ed
Safflower
Sesam
e
Small
Chickpea
s
Soyb
eans
Sunflowers
Tempera
te Jap
onica Rice
Whea
t0%
10%20%30%40%50%60%70%80%90%
100%
ARC ICARC COPLC
PLC 23% 55 milARC CO 76% 185 milARC IC 1% 2 mil
% of Total Base Acres
Corn 39.9%Wheat 26.3%Soybeans 22.4%Generic 7.3%Grain Sorghum 3.7%Barley 2.1%L.G. Rice 1.7%Oats 0.9%Peanuts 0.8%Japonica 0.2%
A Few Things to Think About
• China• Smaller CRP• Trade Issues– TPP, TTIP, COOL, Cuba,
• Section 179• WOTUS• SNAP Oversight• Haven’t passed Appropriations• I think there is a Presidential election
coming up sometime
Conclusions
• For most crop producers in the U.S. the next few years will be a rollercoaster ride– I just hope most are around when
prices rebound – not a given–Corn/Soybean prices aren’t at levels
to pull more acres away from wheat – especially durum
