Extension and Outreach/Department of Economics 2013 Markets, Farm Bills, and Insurance Ottumwa, Iowa Jan. 10, 2013 Chad Hart Associate Professor/Grain Markets Specialist

Extension and Outreach/Department of Economics U.S. Corn Supply and Use Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)12,09213,09212,44712,35810,725 Beg. Stocks(mil. bu.)1,6241,6731,7081, Imports(mil. bu.) 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, Season-Average Price($/bu.) Source: USDA-WAOB

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

Extension and Outreach/Department of Economics Prices

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 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 Soy Export Shifts Source: USDA-FAS

Extension and Outreach/Department of Economics Corn Grind for Ethanol

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.

Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 1/9/

Extension and Outreach/Department of Economics Current Soybean Futures Source: CME Group, 1/9/

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

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

Extension and Outreach/Department of Economics

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

Extension and Outreach/Department of Economics Why Crops Fail

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

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

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

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

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

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

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

Extension and Outreach/Department of Economics

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

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

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

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

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

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

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

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

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

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

Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: