1. Market Outlook & Farm Bill
Iowa AFSMRA/RLI Meeting
Ames, Iowa
Mar. 27, 2014
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. U.S. Corn Supply and Use 2010 2011 2012 2013 2014 Area Planted
(mil. acres)
88.2
91.9
97.2
95.4
92.0
Yield
(bu./acre)
152.8
147.2
123.4
158.8
165.3
Production
(mil. bu.)
12,447
12,360
10,780
13,925
13,985
Beg. Stocks
1,708
1,128
989
821
1,456
Imports 28 29
162 35 25
Total Supply
14,182
13,517
11,932
14,781
15,466
Feed & Residual
4,795
4,557
4,335
5,300
5,400
Ethanol
5,019
5,000
4,648
Food, Seed, & Other
1,407
1,428
1,396
1,400
1,430
Exports
1,834
1,543
731
1,625
1,550
Total Use
13,055
12,528
11,111
13,300
13,380
Ending Stocks
2,086
Season-Average Price
($/bu.)
5.18
6.22
6.89
4.50
3.90
Source: USDA-WAOB for 2 2

3. U.S. Soybean Supply and Use
2010
2011
2012
2013
2014
Area Planted
(mil. acres)
77.4
75.0
77.2
76.5
79.5
Yield
(bu./acre)
43.5
41.9
39.8
43.3
45.2
Production
(mil. bu.)
3,329
3,094
3,034
3,289
3,550
Beg. Stocks
151
215
169
141
145
Imports 14 16 36 35 15
Total Supply
3,495
3,325
3,239
3,464
3,710
Crush
1,648
1,703
1,689
1,690
1,725
Seed & Residual
130 88 90 99
105
Exports
1,501
1,365
1,320
1,530
1,600
Total Use
3,280
3,155
3,099
3,319
3,430
Ending Stocks
280
Season-Average Price
($/bu.)
11.30
12.50
14.40
12.95
9.65
Source: USDA-WAOB for 3 3

4. World Corn Production
Source: USDA-WAOB 4 4

5. World Soybean Production
Source: USDA-WAOB 5 5

6. U.S. Meat Production & Prices
Source: USDA-WAOB 6 6

7. Corn Export Shifts
Source: USDA-FAS

8. Soy Export Shifts
Source: USDA-FAS

9. Corn Grind for Ethanol

10. Current Corn Futures
4.65
4.64
4.59
Source: CME Group, 3/26/2014

11. Current Soybean Futures
13.04
11.60
10.96
Source: CME Group, 3/26/2014

12. Source: droughtmonitor.unl.edu

13. 3-Month Temperature Outlook
Source: NOAA-CPC

14. 3-Month Precipitation Outlook
Source: NOAA-CPC

15. Thoughts for 2014 and Beyond
Supply/demand concerns
Demand rebounding? Yes, so far, so good
Acreage allocation for 2014: Where do the extra corn acres go?
Markets favoring soybeans in the short term and corn longer term
Dry soils to start, but El Niño watch for summer
2013/14
USDA
2014/15
Unofficial
Futures
(3/26/14)
Corn
$4.50
$3.90
$4.65
$4.64
Soybeans
$12.95
$9.65
$13.04
$11.60

16. 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

17. Two Waves First wave: Choice on base acreage and yield updating
Probably occurs June-July timeframe
Second wave: Choice on farm bill programs
Probably Sept-Oct
Harvest the crop and farm bill at the same time

18. Base Acres
Keep current base acres or do a one-time “reallocation” of base acres
Reallocation allowed to covered commodities planted between 2009 and 2012
Reallocation in proportion to the ratio of 4-yr average plantings/prevented plantings
Total number of base acres limited to total of existing base acres

19. Payment Yields
Keep current CCP payment yield or do a one-time “update” of payment yield on a commodity-by-commodity basis
Update: 90% of yield per planted acre on the farm
If the farm yield is below 75% of the average county yield, then the farm yield is replaced by 75% of the average county yield
County yield: planted or harvested?

20. Payment Acres For PLC and ARC at the county level, 85% of base acres
For ARC at the individual level, 65% of base acres

21. Producer Choice Have one-time choice between:
PLC or ARC (can pick by commodity)
If ARC is chosen, pick between county and individual coverage
If individual coverage is chosen, must be taken for all covered commodities on the farm
crop years

22. Reference Prices Old Target Prices Reference Prices Corn $2.63
Wheat $4.17
Soybean $6.00
Sorghum $2.63
Barley $2.63
Oats $1.79
Reference Prices
Corn $3.70
Wheat $5.50
Soybean $8.40
Sorghum $3.95
Barley $4.95
Oats $2.40

23. PLC instead of CCP Price-based support program
Reference prices establish targets
Works like CCP
Payment rate = Max(0, Reference price – Max(MYA price, Loan rate))
Payment = Payment rate * Payment yield * Payment acres

24. PLC vs. CCP and DP

25. ARC instead of ACRE Revenue-based support program
Revenues based on 5-year Olympic average yields and prices
Yields and prices have cups (County T-yields and reference prices)
Triggers at county or individual farm level, instead of state level

26. ARC Payment Rate Payment rate = Max(0, Min(10% of Benchmark revenue,
Actual crop revenue – ARC guarantee))
So the basic payment structure is the same as it was under ACRE

27. Revenue Programs Think of ARC-County as crop-by-crop
ARC-Individual
Benchmark revenue
5-yr OA county yield * 5-yr OA MYA price
Sum across crops of [5-yr OA (farm yield * MYA price) *crop acreage]
Actual crop revenue
County yield * Max(MYA price or loan rate)
Sum across crops of [Farm production * Max(MYA price or loan rate)] / Total planted acres of all covered crops
Revenue guarantee
86% of benchmark
Think of ARC-County as crop-by-crop
Think of ARC-Individual as whole farm

28. Conservation Conservation Reserve Program 27.5 million acres in 2014
24 million acres in 2017 and 2018
Grassland enrollment capped at 2 million acres

29. 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 has a county-level payment trigger
Indemnities are paid when the county experiences losses greater than 14%
Premium subsidy: 65%
Starts in 2015
Can’t have ARC and SCO together

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