1. Extension and Outreach/Department of Economics Ag Outlook, Links to the General Economy, and the Farm Bill West Des Moines, Iowa Nov. 20, 2014 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

2. Extension and Outreach/Department of Economics U.S. Corn Supply and Use 20102011201220132014 Area Planted(mil. acres)88.291.997.395.490.9 Yield(bu./acre)152.8147.2123.1158.8173.4 Production(mil. bu.)12,44712,36010,75513,92514,407 Beg. Stocks(mil. bu.)1,7081,1289898211,236 Imports(mil. bu.)28291603625 Total Supply(mil. bu.)14,18213,51711,90414,78215,668 Feed & Residual(mil. bu.)4,7954,5574,3155,1325,375 Ethanol(mil. bu.)5,0195,0004,6415,1345,125 Food, Seed, & Other(mil. bu.)1,4071,4281,3971,3631,385 Exports(mil. bu.)1,8341,5437301,9171,750 Total Use(mil. bu.)13,05512,52811,08313,54613,660 Ending Stocks(mil. bu.)1,1289898211,2362,008 Season-Average Price($/bu.)5.186.226.894.463.50 Source: USDA-WAOB

3. Extension and Outreach/Department of Economics U.S. Soybean Supply and Use 20102011201220132014 Area Planted(mil. acres)77.475.077.276.884.2 Yield(bu./acre)43.541.940.044.047.5 Production(mil. bu.)3,3293,0943,0423,3583,958 Beg. Stocks(mil. bu.)15121516914192 Imports(mil. bu.)1416417215 Total Supply(mil. bu.)3,4953,3253,2523,5704,065 Crush(mil. bu.)1,6481,7031,6891,7341,780 Seed & Residual(mil. bu.)1308810598115 Exports(mil. bu.)1,5011,3651,3171,6471,720 Total Use(mil. bu.)3,2803,1553,1113,4783,615 Ending Stocks(mil. bu.)21516914192450 Season-Average Price($/bu.)11.3012.5014.4013.0010.00 Source: USDA-WAOB

4. Extension and Outreach/Department of Economics Projected Corn Yields Source: USDA-NASS Top: 2014 Yield Bottom: Change from last month Units: Bu/acre

5. Extension and Outreach/Department of Economics Projected Soybean Yields Source: USDA-NASS Top: 2014 Yield Bottom: Change from last month Units: Bu/acre

6. Extension and Outreach/Department of Economics World Corn Production Source: USDA-WAOB

7. Extension and Outreach/Department of Economics World Soybean Production Source: USDA-WAOB

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

9. Extension and Outreach/Department of Economics Cattle Crush Margin Source: ISU Extension The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 poundsFeeder weight: 750 pounds Corn: 50 bushels per head

10. Extension and Outreach/Department of Economics U.S. Meat Production & Prices Source: USDA-WAOB

11. Extension and Outreach/Department of Economics Corn Export Shifts Source: USDA-FAS

12. Extension and Outreach/Department of Economics Corn Export Sales Source: USDA-FAS

13. Extension and Outreach/Department of Economics Soybean Export Sales Source: USDA-FAS

14. Extension and Outreach/Department of Economics Soy Export Shifts Source: USDA-FAS

15. Extension and Outreach/Department of Economics Corn Grind for Ethanol

16. Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 11/14/2014 3.69 4.04

17. Extension and Outreach/Department of Economics Current Soybean Futures Source: CME Group, 11/14/2014 9.97 9.82

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

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

20. Extension and Outreach/Department of Economics 2014/15 Crop Margins

21. Extension and Outreach/Department of Economics 2015/16 Crop Margins

22. Extension and Outreach/Department of Economics 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

23. Extension and Outreach/Department of Economics PLC: Corn 2014 Payment Potential Notes: PLC payments are made on 85% of base acres. 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 Reference Price = $3.70 per bushel Payment Yield = 150 bushels per acre

24. Extension and Outreach/Department of Economics ARC-CO: 2014 Corn Revenue Guarantee Notes: Revenue Guarantee equals 86% of Benchmark. YearYieldMYA PriceARC Price 2009163.4$3.55$3.70 2010184.1$5.18 2011174.2$6.22 2012133.2$6.89 2013146.3$4.45$4.46 Oly. Ave.161.3$5.29 Benchmark Revenue = $853.28 per acre ARC Revenue Guarantee = $733.82 per acre

25. Extension and Outreach/Department of Economics ARC-CO: 2014 Potential Corn Payment Price: $3.50$4.00$4.50$5.00 Yield: 100$72.53 125$72.53 150$72.53 $50.00$0.00 175$72.53$28.75$0.00 200$28.75$0.00 ARC Revenue Guarantee = $733.82 per acre ARC Max Payment Rate = $85.33 per acre But ARC-CO is paid on 85% of base acres and 85% of $85.33 is $72.53

26. Extension and Outreach/Department of Economics ARC-IC: 2014 Corn & Soybean Combined Revenue Guarantee Source: Schulte, ISU Extension, June 2014 Year Corn Yield ARC PriceRevenue Soy Yield ARC PriceRevenue 2009163.4$3.70$604.5843.3$9.59$415.25 2010184.1$5.18$953.6454.5$11.30$615.85 2011174.2$6.22$1083.5251.1$12.50$638.75 2012133.2$6.89$917.7545.7$14.40$658.08 2013146.3$4.46$652.5040.1$13.00$521.30 Oly. Ave.$841.30$591.97 In 2014, if the farm is planted 60% to corn and 40% to soybeans, then Benchmark Revenue = $741.57 per acre Revenue Guarantee = $637.75 per acre

27. Extension and Outreach/Department of Economics ARC-IC : 2014 Potential Corn & Soybean Combined Payment Source: Schulte, ISU Extension, June 2014 Actual 2014 farm yields:Corn 150 bushels per acre Soy45 bushels per acre Marketing year prices:Corn$4.00 per bushel Soy$10.50 per bushel Calculated revenues:Corn$600.00 per acre Soy $472.50 per acre ARC Revenue: 60%*$600.00 + 40%*$472.50 = $549.00 ARC-IC is paid on 65% of base acres ARC-IC Payment = $57.69 per acre (65% of $637.75-$549.00)

28. Extension and Outreach/Department of Economics 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

29. Extension and Outreach/Department of Economics RP RPHPE YP SCO Supplemental Coverage Option (SCO)

30. Extension and Outreach/Department of Economics Three Choices  PLC + SCO  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 2014-2018 crop years

31. Extension and Outreach/Department of Economics Neither pay Both pay PLC pays, ARC does not ARC pays, PLC does not

32. Extension and Outreach/Department of Economics Corn Prices and Recessions

33. Extension and Outreach/Department of Economics Crop Prices for the Next Decade Source: USDA-ERS

34. Extension and Outreach/Department of Economics Net Farm Income

35. Extension and Outreach/Department of Economics Net Farm Income

36. Extension and Outreach/Department of Economics Iowa Land Values Source: Mike Duffy, ISU

37. Extension and Outreach/Department of Economics Iowa Land Values – Log Scale Source: Mike Duffy, ISU

38. Extension and Outreach/Department of Economics Land Values and Income Source: Mike Duffy, ISU

39. Extension and Outreach/Department of Economics Land Values and Income Source: Mike Duffy, ISU

40. Extension and Outreach/Department of Economics Crop Shifts Source: USDA-NASS

41. Extension and Outreach/Department of Economics GDP Growth Source: USDA-ERS

42. Extension and Outreach/Department of Economics GDP Growth Source: USDA-ERS

43. Extension and Outreach/Department of Economics Source: USDA-NASS Iowa Crop Shifts

44. Extension and Outreach/Department of Economics Renewable Fuels Standard (RFS)

45. Extension and Outreach/Department of Economics Renewable Fuels Standard (RFS)

46. Extension and Outreach/Department of Economics Source: DOE-EIA, Annual Energy Outlook

47. Extension and Outreach/Department of Economics Liquid Fuel Usage 200720152020202520302035 (Million Barrels Oil Equivalent per Day)(Percent of 2007 Value) United States20.698%100%102%104%107% Canada2.396% 100%104% Mexico2.1105%110%114%129%138% Europe15.392%88% 89%90% Japan5.084%86% 84%82% China7.6132%153%178%201%222% India2.8114%129%139%154%168% Africa3.1113%116%126%135%148% Central and South America6.0110%112%117%125%133% World86.1103%107%113%121%128% Source: DOE-EIA

48. Extension and Outreach/Department of Economics Population 2013 2020 2050 (billion) World7.095World7.628World9.383 China1.350China1.385India1.657 India1.221India1.326China1.304 U.S.0.317U.S.0.337U.S.0.423 Indonesia0.251Indonesia0.267Nigeria0.402 Brazil0.201Pakistan0.214Indonesia0.300 Pakistan0.193Brazil0.212Pakistan0.291 Nigeria0.175Nigeria0.208Bangladesh0.250 Bangladesh0.164Bangladesh0.183Brazil0.232 Russia0.143Russia0.142Ethiopia0.228 Japan0.127Japan0.126Philippines0.172 Source: U.S. Bureau of the Census

49. Extension and Outreach/Department of Economics World Corn Markets Source: USDA

50. Extension and Outreach/Department of Economics Arable Land

51. Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/