1. Extension and Outreach/Department of Economics 2013 Markets, Farm Bills, and Insurance Ottumwa, Iowa Jan. 10, 2013 Chad Hart Associate Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. Extension and Outreach/Department of Economics U.S. Corn Supply and Use 20082009201020112012 Area Planted(mil. acres)86.086.488.291.996.9 Yield(bu./acre)153.9164.7152.8147.2122.3 Production(mil. bu.)12,09213,09212,44712,35810,725 Beg. Stocks(mil. bu.)1,6241,6731,7081,128988 Imports(mil. bu.)1482829100 Total Supply(mil. bu.)13,72914,77414,18213,51511,814 Feed & Residual(mil. bu.)5,1825,1254,7954,5474,150 Ethanol(mil. bu.)3,7094,5915,0195,0114,500 Food, Seed, & Other(mil. bu.)1,3161,3701,4071,4261,367 Exports(mil. bu.)1,8491,9801,8341,5431,150 Total Use(mil. bu.)12,05613,06613,05512,52711,167 Ending Stocks(mil. bu.)1,6731,7081,128988647 Season-Average Price($/bu.)4.063.555.186.227.40 Source: USDA-WAOB

3. Extension and Outreach/Department of Economics U.S. Soybean Supply and Use 20082009201020112012 Area Planted(mil. acres)75.777.577.475.077.2 Yield(bu./acre)39.744.043.541.939.3 Production(mil. bu.)2,9673,3593,3293,0942,971 Beg. Stocks(mil. bu.)205138151215169 Imports(mil. bu.)1315141620 Total Supply(mil. bu.)3,1853,5123,4953,3253,160 Crush(mil. bu.)1,6621,7521,6481,7031,570 Seed & Residual(mil. bu.)10611013090116 Exports(mil. bu.)1,2791,4991,5011,3621,345 Total Use(mil. bu.)3,0473,3613,2803,1553,031 Ending Stocks(mil. bu.)138151215169130 Season-Average Price($/bu.)9.979.5911.3012.5014.55 Source: USDA-WAOB

4. Extension and Outreach/Department of Economics Prices

5. Extension and Outreach/Department of Economics World Corn Production Source: USDA-WAOB

6. Extension and Outreach/Department of Economics World Soybean Production Source: USDA-WAOB

7. Extension and Outreach/Department of Economics U.S. Meat Production & Prices Source: USDA-WAOB

8. Extension and Outreach/Department of Economics Corn Export Shifts Source: USDA-FAS

9. Extension and Outreach/Department of Economics Soy Export Shifts Source: USDA-FAS

10. Extension and Outreach/Department of Economics Corn Grind for Ethanol

11. Extension and Outreach/Department of Economics U.S. Blended Gasoline Consumption Source: DOE-EIA, via USDA-ERS 7.6 bil. gal. 7.4 bil. gal.

12. Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 1/9/2013 6.58 5.47 5.24

13. Extension and Outreach/Department of Economics Current Soybean Futures Source: CME Group, 1/9/2013 13.66 12.28 12.06

14. Extension and Outreach/Department of Economics Total Acreage Shift Source: USDA-NASS

15. Extension and Outreach/Department of Economics Acreage Shift by State Source: USDA-NASS Top: Planted in 2012 Bottom: Change from 2011 Units: 1,000 acres

16. Extension and Outreach/Department of Economics

17. Thoughts for 2013 and Beyond  Supply/demand concerns  Soil moisture issues  Biofuel and export strength  Worldwide response to drought-induced pricing 2012/13 USDA 2012/13 Futures (1/9/13) 2013/14 Futures (1/9/13) Corn$7.40$6.58$5.47 Soybeans$14.55$13.66$12.28  Risk management  Crop insurance  Price protection

18. Extension and Outreach/Department of Economics Why Crops Fail

19. Extension and Outreach/Department of Economics Corn Insurance Prices Harvest prices have been higher 5 out of last 13 years

20. Extension and Outreach/Department of Economics Soy Insurance Prices Harvest prices have been higher 7 out of last 13 years

21. Extension and Outreach/Department of Economics Iowa Corn Acres Insured in 2012 91% of all Iowa corn acres are insured

22. Extension and Outreach/Department of Economics Iowa Soy Acres Insured in 2012 91% of all Iowa soybean acres are insured

23. Extension and Outreach/Department of Economics 2012 Corn and Soy Coverage Levels

24. Extension and Outreach/Department of Economics Farm Bill Progress?  Senate passed their version, S. 3240, on June 21  House Ag. Committee passed their version, H.R. 6083, on July 11  The full House never took up the farm bill  The 2008 farm bill expired Sept. 30, but remember crop insurance is permanently authorized  The fiscal cliff legislation extended the 2008 farm bill for another year

25. Extension and Outreach/Department of Economics Ideas on the Next Farm Bill  Let’s look at the common features  Both versions of the farm bill eliminate direct payments, countercyclical payments, ACRE, and SURE  The marketing loan program would continue  Livestock disaster programs would be reestablished  Some sort of revenue-based countercyclical program would be created

26. Extension and Outreach/Department of Economics

27. Crop Insurance Ideas  Whole farm coverage up to 85%  Standard Reinsurance Agreement savings to be reinvested in the crop insurance program  One new twist from the Senate  15% subsidy cut for producers with high AGIs, $750K

28. Extension and Outreach/Department of Economics But the Biggest Change Would Be…  The 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 is county-level yield or revenue policy  Indemnities are paid when the county experiences losses greater than 10% of the expected yield or revenue level, but payments are not more than the original deductible

29. Extension and Outreach/Department of Economics SCO Availability  SCO is to be made available for all crops if sufficient data are available  Under the House, SCO can not used if the producer has STAX or the revenue-based countercyclical program  Under the Senate, if the producer has the revenue- based countercyclical program, the loss trigger increases to 21% of expected yield or revenue

30. Extension and Outreach/Department of Economics SCO Subsidies, Timing, and Administration  SCO premiums are to receive a 70% subsidy  SCO would begin for the 2013 crop year  RMA would run SCO and set the premiums

31. Extension and Outreach/Department of Economics SCO Examples Source: Congressional Research Service

32. Extension and Outreach/Department of Economics Senate Proposal, 2013-2017 Source: FAPRI-MO $ per acre

33. Extension and Outreach/Department of Economics House Proposal, 2013-2017 Source: FAPRI-MO $ per acre

34. Extension and Outreach/Department of Economics Gov. Expenditures, 2013-2017 Source: FAPRI-MO $ million

35. Extension and Outreach/Department of Economics Change in Expenditures, 2013-2017 Source: FAPRI-MO

36. Extension and Outreach/Department of Economics Payments as a Share of Receipts Source: FAPRI-MO

37. 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/