1. Farm Bill Outlook and the Potential Impact on Agriculture
Urban Ag Academy
Ames, Iowa
July 20, 2018
Chad Hart
Associate Professor/Crop Marketing Specialist 1 1

2. USDA’s Budget
Source: USDA, FY 2019 Budget Summary

3. Timing Federal ag leadership hopes to pass the Farm Bill this year
Current Farm Bill is set to sunset Sept. 30, 2018
Both chambers of Congress have passed their own separate versions of the Farm Bill
The next step is to appoint a conference committee to craft a compromise Farm Bill
The House has named conferees; the Senate has not.
Very tight timeline to pass Farm Bill for the President’s signature

4. Significant Differences
Differences in legislation and approach between the chambers
House Farm Bill passed on partisan lines
Senate Farm Bill passed with bi-partisan vote
Major differences on work requirements for nutrition programs
Senate put in tighter payment limitations than House for commodity support programs
House reduced spending for conservation programs (and eliminated some programs), while Senate maintained conservation spending

5. PLC: Corn Payment Potential
Reference Price = $3.70 per bushel
Payment Yield = 150 bushels per acre
Marketing Year Price ($/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
For PLC, the payment rate is the difference between the reference price and the maximum of either the marketing year average price or the loan rate (if the difference is negative, then the payment rate is zero). Take the payment rate times the payment (or base) yield times 85% to get the PLC payment per base acre.
Notes: PLC payments are made on 85% of base acres.

6. ARC-CO: 2015 Corn Revenue Guarantee
Year
Yield
MYA Price
ARC Price
2010
162
$5.18
2011
163
$6.22
2012
157
$6.89
2013
135
$4.46
2014
168
$3.70
Oly. Ave.
161
$5.29
Here’s the 5 years of price and yield data for Story County, Iowa corn. The red numbers are the high and low ones that are not used in the Olympic average (remember the Olympic average throws out the high and low). Also, the price used in the average can not be below the reference price specified in the farm bill (in this case, $3.70 for corn). So as the black circle above shows, the price in 2009 was replaced by the reference price. So the 5-year Olympic average yield is bushels per acre. The 5-year Olympic average price is $5.32 per bushel. Combine the two to get the benchmark revenue of $ per acre. The ARC revenue guarantee is 86% of the benchmark, so it’s $ per acre.
Benchmark Revenue = $ per acre
ARC Revenue Guarantee = $ per acre
Notes: Example is Story County, Iowa. Revenue Guarantee equals 86% of Benchmark.

7. PLC pays, ARC does not Neither pay Both pay ARC pays, PLC does not
The choice depends on where you expect prices and yields to be over the next 5 years. There are price/yield combinations where PLC pays and ARC does not. There are also price/yield combinations where ARC pays and PLC does not.

8. ARC-CO: 2017 Corn Revenue Guarantee
Year
Yield
MYA Price
ARC Price
2012
157
$6.89
2013
135
$4.46
2014
168
$3.70
2015
188
$3.61
2016
212
$3.36
Oly. Ave.
171
$3.95
Here’s the 5 years of price and yield data for Story County, Iowa corn. The red numbers are the high and low ones that are not used in the Olympic average (remember the Olympic average throws out the high and low). Also, the price used in the average can not be below the reference price specified in the farm bill (in this case, $3.70 for corn). So as the black circle above shows, the price in 2009 was replaced by the reference price. So the 5-year Olympic average yield is bushels per acre. The 5-year Olympic average price is $5.32 per bushel. Combine the two to get the benchmark revenue of $ per acre. The ARC revenue guarantee is 86% of the benchmark, so it’s $ per acre.
Benchmark Revenue = $ per acre
ARC Revenue Guarantee = $ per acre
Notes: Example is Story County, Iowa. Revenue Guarantee equals 86% of Benchmark.

9. Federal Crop Insurance

10. Ag Productivity and Usage
Using corn as an example
Source: USDA

11. Ag Prices
Using corn as an example
Source: USDA

12. Net Farm Income
Source: USDA

13. Farm Debt
Source: Federal Reserve

14. Ag Economic Summary
Agricultural production and consumption has grown rapidly over the past several years.
But when production exceeds consumption, prices fall.
Crop revenues peaked in , while livestock revenues crested in , leading to record farm incomes.
Since then net farm income has been cut in half.
While the percentage loss in substantial, net farm income remains above levels from the early 2000’s.
Farmers and ranchers have partially compensated for the loss in income by taking on higher debt loads.
Farm and ranch balance sheets are eroding and financial stress is building for some producers, but the financial issues are not as severe as during the 1980’s.
The recent trade issues have driven ag prices lower, putting additional pressure on farms already facing financial problems.

15. Iowa Corn Prices vs. Costs

16. Source: USDA-FAS

17. Source: USDA-FAS

18. Source: USDA-FAS

19. Source: USDA-FAS

20. Value of Ag Trade
Source: USDA-FAS

21. U.S. Ag Exports
Source: USDA-FAS

24. Pork Export Shifts
Source: USDA-FAS

25. Beef Export Shifts
Source: USDA-FAS

26. Corn Export Shifts
Source: USDA-FAS

27. Soybean Export Shifts
Source: USDA-FAS

28. Arable Land

29. Thank you for your time. Any questions. My web site: http://www2. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: