1. Associate Professor/Crop Markets Specialist
Crop Market Outlook
and the Farm Bill
Washington, Iowa
Jan. 12, 2015
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
97.3
95.4
90.6
Yield
(bu./acre)
152.8
147.2
123.1
158.1
171.0
Production
(mil. bu.)
12,447
12,360
10,755
13,829
14,216
Beg. Stocks
1,708
1,128
989
821
1,232
Imports 28 29
160 36 25
Total Supply
14,182
13,517
11,904
14,686
15,472
Feed & Residual
4,795
4,557
4,315
5,036
5,275
Ethanol
5,019
5,000
4,641
5,134
5,175
Food, Seed, & Other
1,407
1,428
1,397
1,367
1,395
Exports
1,834
1,543
730
1,917
1,750
Total Use
13,055
12,528
11,083
13,454
13,595
Ending Stocks
1,877
Season-Average Price
($/bu.)
5.18
6.22
6.89
4.46
3.65
Source: USDA-WAOB 2 2

3. U.S. Soybean Supply and Use
2010
2011
2012
2013
2014
Area Planted
(mil. acres)
77.4
75.0
77.2
76.8
83.7
Yield
(bu./acre)
43.5
41.9
40.0
44.0
47.8
Production
(mil. bu.)
3,329
3,094
3,042
3,358
3,969
Beg. Stocks
151
215
169
141 92
Imports 14 16 41 72 15
Total Supply
3,495
3,325
3,252
3,570
4,076
Crush
1,648
1,703
1,689
1,734
1,780
Seed & Residual
130 88
105 97
116
Exports
1,501
1,365
1,317
1,647
1,770
Total Use
3,280
3,155
3,111
3,478
3,666
Ending Stocks
410
Season-Average Price
($/bu.)
11.30
12.50
14.40
13.00
10.20
Source: USDA-WAOB 3 3

4. Corn Yields Top: 2014 Yield Bottom: Change from last year
Units: Bu/acre
Source: USDA-NASS

5. Soybean Yields Top: 2014 Yield Bottom: Change from last month
Units: Bu/acre
Source: USDA-NASS

6. World Corn Production
Source: USDA-WAOB 6 6

7. World Soybean Production
Source: USDA-WAOB 7 7

8. Hog Crush Margin
The Crush Margin is the return after the pig, corn and soybean meal costs.
Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures
Corn: 10 bushels per pig Soybean meal: 150 pounds per pig
Source: ISU Extension

9. Cattle Crush Margin
The Crush Margin is the return after the feeder steer and corn costs.
Live weight: pounds Feeder weight: 750 pounds
Corn: 50 bushels per head
Source: ISU Extension

10. U.S. Meat Production & Prices
Source: USDA-WAOB 10 10

11. Corn Export Shifts
Source: USDA-FAS

12. Corn Export Sales
Source: USDA-FAS

13. Soybean Export Shifts
Source: USDA-FAS

14. Soybean Export Shifts
Source: USDA-FAS

15. Corn Grind for Ethanol

16. Current Corn Futures
4.02
3.79
Source: CME Group, 1/9/2015

17. Current Soybean Futures
10.22
9.86
Source: CME Group, 1/9/2015

18. Corn Prices vs. Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Sources: USDA-NASS for Prices, Duffy for Costs

19. Soybean Prices vs. Costs
Per Bushel Cost calculated as Per Acre Cost from ISU Extension divided by Actual Yield per Acre
Sources: USDA-NASS for Prices, Duffy for Costs

20. 2014/15 Crop Margins

21. 2015/16 Crop Margins

22. Thoughts for 2015 and Beyond
Supply/demand concerns
Record corn and soybean crops, but also record demand
Markets are in a holding pattern, waiting for news
Watching South American crop progress
Projected negative margins for 2014 and 2015 crops
2013/14
USDA
2014/15
Futures
(1/9/15)
2015/16
Corn
$4.46
$3.65
$3.79
$4.02
Soybeans
$13.00
$10.20
$10.22
$9.86

23. 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

24. 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
Notes: PLC payments are made on 85% of base acres.

25. ARC-CO: 2014 Corn Revenue Guarantee
Year
Yield
MYA Price
ARC Price
2009
171.0
$3.55
$3.70
2010
131.0
$5.18
2011
155.0
$6.22
2012
$6.89
2013
156.0
$4.46
Oly. Ave.
147.3
$5.29
Benchmark Revenue = $ per acre
ARC Revenue Guarantee = $ per acre
Notes: Revenue Guarantee equals 86% of Benchmark.

26. ARC-CO: 2014 Potential Corn Payment
ARC Revenue Guarantee = $ per acre
ARC Max Payment Rate = $77.92 per acre
But ARC-CO is paid on 85% of base acres
and 85% of $77.92 is $66.23
Price: $3.50
$4.00
$4.50
$5.00
Yield: 125
$66.23
$38.36
150
$59.61
$0.00
175
$48.99
200
225

27. ARC-IC: 2014 Corn & Soybean Combined Revenue Guarantee
Year
Corn Yield
ARC Price
Revenue
Soy Yield
2009
157.0
$3.70
$580.90
43.0
$9.59
$412.37
2010
186.0
$5.18
$963.48
55.0
$11.30
$621.50
2011
187.0
$6.22 $
56.0
$12.50
$700.00
2012
163.0
$6.89 $
50.0
$14.40
$720.00
2013
156.0
$4.46
$695.76
46.0
$13.00
$598.00
Oly. Ave.
$927.44
$639.83
In 2014, if the farm is planted 60% to corn and 40% to soybeans, then
Benchmark Revenue = $ per acre
Revenue Guarantee = $ per acre

28. ARC-IC : 2014 Potential Corn & Soybean Combined Payment
Actual 2014 farm yields: Corn 180 bushels per acre
Soy 50 bushels per acre
Marketing year prices: Corn $4.00 per bushel
Soy $10.50 per bushel
Calculated revenues: Corn $ per acre
Soy $ per acre
ARC Revenue: 60%*$ %*$ = $642.00
ARC-IC is paid on 65% of base acres
ARC-IC Payment = $36.83 per acre (65% of $ $642.00)

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. Supplemental Coverage Option (SCO)RP
RPHPE YP

31. Three Choices PLC + SCO ARC-County ARC-Individual
Price protection with top-up county-level insurance protection
ARC-County
County-level revenue protection based on historical averages
ARC-Individual
Farm-level revenue protection based on historical averages
Choice holds for crop years

32. 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.

33. 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: