1. Joe L. Outlaw Professor & Extension Economist Co-Director, AFPC 2015 Crop Outlook & International Durum Forum Minot, ND November 9, 2015 The Challenge of Economic Viability in Uncertain Times The Challenge of Economic Viability in Uncertain Times

2. Presentation Outline My Background Economic Viability Why Do I Say Uncertain Times? Conclusions Economic Viability

3. My Background South Texas Agricultural and Food Policy Center – Dwight Aakre – ND feedgrain farms in Barnes County Do Work Behind the Scenes for the Agricultural Committees Not Your Typical Economist

4. Budget Pressure Agriculture’s Share of the U.S. Budget Agriculture’s Share (Non-Nutrition)

7. Economic Viability Very Simply – Can you make a living? Most Producers are Diversified Which Has Tended to Help Our Data Says Its Going to Be Harder Before It Gets Easier

8. U.S. corn supply and use U.S. corn supply and use August 2015 FAPRI-MU baseline update 2015/16 2016/172017/182018/19 Area planted (mil. a.)88.990.589.290.1 Area harvested (mil. a.)81.182.681.382.1 Yield (bu./a.)168.8166.8168.6170.1 Supply & use (mil. bu.) Production13,68613,77213,71013,964 Feed & residual use5,2695,3195,2705,276 Ethanol & coproducts5,2535,2405,2835,321 Other domestic use1,3611,3571,3621,372 Exports1,8861,8721,9472,063 Ending stocks1,7201,7341,6121,574 Price per bushel$3.68$3.71$3.96$4.09

9. U.S. wheat supply and use U.S. wheat supply and use August 2015 FAPRI-MU baseline update 2015/162016/172017/182018/19 Area planted (mil. a.)56.153.954.254.0 Area harvested (mil. a.)48.545.545.745.5 Yield (bu./a.)44.145.946.346.6 Supply & use (mil. bu.) Production2,1362,0882,1132,120 Feed use 213 220 223 211 Food use 969 975 982 988 Exports 923 938 9701,000 Ending stocks 837 844 835 811 Price per bushel$5.10$5.05$5.24$5.55

10. AFPC Representative Crop Farm Locations

14. U.S. Net Farm Income Source: USDA Economic Research Service, August 2015

15. The Problem… Unless producers are kidding themselves… right now there are very few crops nation where expected prices appear to provide a profit this year --- and some get worse in the next few years So… we have been advising producers to spend money wisely and fine tune crop insurance as much as they can

16. Current Corn Coverage Levels

17. Current Wheat Coverage Levels

18. Coverage Level Basic & Optional Subsidy % Enterprise Unit Subsidy % SCO Subsidy STAX Subsidy % 50%67%80%65%80% 55%64%80%65%80% 60%64%80%65%80% 65%59%80%65%80% 70%59%80%65%80% 75%55%77%65%80% 48%68%65%80% 85%38%53%65%80% Crop Insurance Choices

19. Why Do I Say Uncertain Times? Prices for All Major Commodities are Off – Some more than others Major Exporters Increased Production Along With Higher Prices – Just Like Us Strong Dollar – Hurts Exports … For How Long? While the Congress Did What They Could: – The Safety Net Programs are not enough Crop Insurance Clearly a Target of … Almost Everybody

20. Percent of All U.S. Base Acres Choosing PLC, ARC CO and ARC IC By Covered Commodity PLC 23% 55 mil ARC CO 76%185 mil ARC IC 1% 2 mil % of Total Base Acres Corn39.9% Wheat26.3% Soybeans22.4% Generic 7.3% Grain Sorghum 3.7% Barley 2.1% L.G. Rice 1.7% Oats 0.9% Peanuts 0.8% Japonica 0.2%

21. A Few Things to Think About China Smaller CRP Trade Issues – TPP, TTIP, COOL, Cuba, Section 179 WOTUS SNAP Oversight Haven’t passed Appropriations I think there is a Presidential election coming up sometime

22. Conclusions For most crop producers in the U.S. the next few years will be a rollercoaster ride – I just hope most are around when prices rebound – not a given – Corn/Soybean prices aren’t at levels to pull more acres away from wheat – especially durum

23. Thanks!!! Joe Outlaw joutlaw@tamu.edu 888-890-5663 WWW.AFPC.TAMU.EDU @AFPCTAMU