Ag Decision Maker website updates for June 2015

June 18th, 2015

Ag Decision Maker

Business Solutions for Farms and Agribusiness from Iowa State University Extension and Outreach

June Newsletter (pdf)

Iowa Farm Outlook

Outlook Information for Crops and Livestock

June Newsletter (pdf)

LivestockRegional Hay-Pasture Situation and Outlook
CropsSearching for a Reason to Rally


AgMRC Renewable Fuels Monthly Report

An Overview of U.S. Progress in Renewable Energy
The Future of Electric Powered Vehicles
Prices, Profitability and Supply/Demand


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An agricultural economics and business website.

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Relatively Quiet Report for Corn and Soybeans (6/10/15)

June 10th, 2015

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbThere are only a few changes in the U.S. corn and soybean outlooks from USDA. For corn, the only change is a 25 million drop in corn usage for ethanol from the 2014 crop. All other supply and demand numbers remain the same. And the season-average price midpoints hold at $3.65 per bushel for the 2014 crop and $3.50 per bushel for the 2015 crop. For soybeans, demand is ratcheted up a little bit. On the 2014 crop, both domestic crush and export demand are raised 10 million bushels. On the 2015 crop, crush is raised another 5 million bushels. Combined, this lowered 2015/16 soybean ending stocks to 475 million bushels. But the price outlook holds steady at $10.05 per bushel for the 2014 crop and $9.00 per bushel for the 2015 crop.

Ag Decision Maker (AgDM) 

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Crop Outlook, Crops

Survey Shows Farmland Rental Rates Down

May 14th, 2015

A second year of declining rates for renting land in Iowa

Alejandro PlastinaRental rates for Iowa farmland decreased by 5 percent in 2015, according to results from the Cash Rental Rates for Iowa – 2015 Survey conducted by Iowa State University Extension and Outreach. This is the second consecutive year of declining rates after a 15-year streak of increasing rental rates, accumulating a 9 percent loss since 2013.

“Average rents were lower in all nine crop reporting districts,” according to Alejandro Plastina, assistant professor and extension economist with Iowa State University. “The average estimated cash rent for corn and soybean land in the state for 2015 was $246 per acre, a decrease of $14 per acre or nearly 5 percent from last year. Low crop prices for the 2014 crop and small- to negative-profit margin forecasts for this year’s crop put downward pressure on rental rates,” Plastina said.

The largest decreases in land rental occurred in central and west central Iowa, at $24 and $23 per acre, respectively. Those districts had the highest rents among all crop reporting districts in 2014. Northeast Iowa reported the highest average in 2015 at $273, and the lowest district value was $187 in south central Iowa. Grundy County had the highest average rent in the state, at $316 per acre.

“It isn’t a trend yet, but it certainly is a reversal of the 15-year trend we’ve seen of land rental rate increases,” said Plastina. “Land rates and other input costs take time to adjust to lower levels of crop revenue; so if corn and soybean prices don’t improve soon, we can expect land rental rates to continue to decline.”

Plastina indicated the typical rental rates per bushel of corn yield, soybean yield and the average Corn Suitability Rating 2 points were computed for each county. In addition, typical charges for land growing oats and hay, for grazing pasture and corn stalks, and renting for hunting rights were reported.

Rental values were estimated by asking people familiar with land rental markets what they thought were typical rates in their county. Of the 1,437 total responses received, 49 percent came from farmers, 27 percent from landowners, 12 percent from agricultural lenders, 10 percent from professional farm managers and 2 percent from other professionals.

The Cash Rental Rates for Iowa – 2015 Survey is available online as a downloadable document from the ISU Extension and Outreach Store and Ag Decision Maker website.

Other resources available for estimating a fair cash rental rate include the Ag Decision Maker information files Computing a Cropland Cash Rental Rate (C2-20), Computing a Pasture Rental Rate (C2-23), and Flexible Farm Lease Agreements (C2-21). All documents include decision file electronic worksheets to help analyze leasing questions.

Ag Decision Maker (AgDM) 

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Ag Decision Maker website updates for May 2015

May 13th, 2015

Ag Decision Maker

Business Solutions for Farms and Agribusiness from Iowa State University Extension and Outreach

May Newsletter (pdf)

Iowa Farm Outlook

Outlook Information for Crops and Livestock

May Newsletter (pdf)

LivestockSeveral Factors Supporting, Pressuring Fed Cattle Prices
CropsPlanting and Prices Are Moving in Opposite Directions


AgMRC Renewable Fuels Monthly Report

Current Indicators Point to Ample Low-priced Feedstocks for U.S. Biofuels but Continued Weak Processing Margins
The Coming Electricity Storage Revolution
Prices, Profitability and Supply/Demand


Ag Decision Maker (AgDM) 

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Old vs. New Crop (5/12/15)

May 12th, 2015

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbWith the May monthly reports, USDA provides an update on old crop data and a forecast on new crop information. For soybeans, the old crop news was mixed. Domestic crush and export demand were both raised by 10 million bushels. That lowered projected 2014/15 ending stocks by 20 million bushels, but that still leaves 350 million bushels in storage as we enter the next marketing year, more than triple what we had to begin this marketing year. But despite the increase in old crop demand, the season-average soybean price for 2014/15 was reduced by 5 cents to $10.05 per bushel. For the 2015/16 soybean crop, the acreage and yield remained steady with earlier USDA estimates. So the market is staring at 84.6 million acres of soybeans with an expected yield of 46 bushels per acre. The combination would produce 3.85 billion bushels of soybeans, the 2nd largest soybean crop on record. And while overall soybean demand is projected to be steady, domestic demand is seen increasing, while international demand is expected to fall slightly. Ending stocks are expected to build to 500 million bushels and the first official estimate of the 2015/16 season-average price is $9 per bushel.

The story for corn is a little different. Old crop demand is shrinking slightly, mainly in the food, seed, and industrial sector. Export demand is up 25 million bushels, but the nearly 50 million bushel drop in food, seed, and industrial use more than offset the international boost. 2014/15 ending stocks now top 1.85 billion bushels and the season-average price was lowered 5 cents to $3.65 per bushel. On the new crop, like with soybeans, the production numbers were unchanged from earlier estimates, 89.2 million acres planted with a yield of 166.8 bushels per harvested acre. So production is estimated at 13.63 billion bushels, projected to be the 3rd largest corn crop. New crop demand is expected to rise, with a 50 million bushel rise in feed demand, a 13 million bushel increase in food, seed, and industrial use, and a 75 million bushel growth in export demand. With the growth in demand, 2015/16 ending stocks are forecast to be roughly 1.75 billion bushels and the first official estimate of the 2015/16 season-average price is $3.50 per bushel.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Crop Outlook

Ready to Plant

March 31st, 2015

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbFarmers provided their first outlook on the 2015 crop year with the release of USDA’s Prospective Plantings report. And the general shift is along the lines that the market expected. Corn planting intentions came in at 89.2 million acres. That’s 200,000 acres more than USDA’s early estimate and a half of million acres more than the average trade guess, but it’s still 1.4 million acres less than was planted last year. Illinois, Indiana, and Iowa all reduced corn intentions slightly, but there are offsetting increases on the fringes of the Corn Belt. The largest moves are in Minnesota, up 300,000 acres, and South Dakota, down 600,000 acres. Soybean planting intentions are at a record 84.6 million acres. That is well above USDA’s early estimate of 83.5 million acres, but below the average trade guess at 85.9 million acres. The I-states all increased soybean intentions, with Iowa topping 10 million acres. The big movers are Nebraska, down 300,000 acres, and Ohio, up 250,000 acres. Given USDA’s trend yields, the acreage numbers imply expected crops of 13.625 billion bushels for corn and 3.85 billion bushels of soybeans.

These projected large crops are coming on top of last year’s record crops. The Grain Stocks report was also released today and it showed more crop still sitting in storage. Soybean stocks came in at 1.33 billion bushels, up 34 percent from last year, even though disappearance was slightly higher. Corn stocks stand 7.74 billion bushels, up 11 percent from last year, as disappearance was basically flat. The main punchline from today’s reports is that supplies continue to build and while demand is growing, it will take a while to work through the expected production. Prices have lowered to reflect this and these reports don’t change that dynamic.

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Ag Decision Maker website updates for March 2015

March 17th, 2015

Finding a Little More Demand for Corn (3/10/15)

March 11th, 2015

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA report.

Hart_Chad-thumbWith the mid-March USDA supply and demand report, the corn picture is a little brighter today. Feed demand was increased to 5.3 billion bushels as the expansion in the livestock sector continues. Corn demand via ethanol was lowered 50 million bushels, but still stands at 5.2 billion bushels.  Processing efficiency at ethanol plants has improved and USDA incorporated that efficiency change in this update. So the feed and ethanol changes offset each other. But with corn exports also shifted up 50 million bushels, the overall demand structure for corn continues to grow. With total use now estimated at just under 13.7 billion bushels, corn demand is at record levels. And while ending stocks are projected to increase from last year, the growth in stocks is not as large as once feared. Given the improving demand, USDA increased the midpoint of its season-average price range 5 cents, to $3.70 per bushel.

For soybeans, this was a very quiet report on the domestic front. There were no changes to the U.S. soybean balance sheet. Domestic crush demand is projected at 1.795 billion bushels. Soybean exports are set at 1.79 billion bushels. Ending stocks are estimated at 385 million bushels, up from 92 million the year before. And the midpoint of the season-average price range is set at $10.20 per bushel. Globally, soybean production is at record levels as well. But global soybean trade is growing to work through the large supplies.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Crop Outlook

Ag Decision Maker website updates for February 2015

February 17th, 2015

Ag Decision Maker

Business Solutions for Farms and Agribusiness from Iowa State University Extension and Outreach

February Newsletter (pdf)

New and Updated Files


Iowa Farm Outlook

Outlook Information for Crops and Livestock

February Newsletter (pdf)

LivestockTakeaways from the January Cattle Inventory Report
Crops Pressure from Outside Markets


AgMRC Renewable Fuels Monthly Report

Big Changes in Ethanol Revenue, Costs and Profitability
Intermediate Term Issues for U.S. Biofuels, Part I
PDF of the January 2015 Monthly Report


 

 

 Ag Decision Maker (AgDM) 

An agricultural economics and business website.

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Tax Planning for 2014

February 4th, 2015

Contributed by Charles BrownFarm Management Specialist, Iowa State University Extension and Outreach, crbrown@iastate.edu641-673-5841

charlesBrown2014 has ended, but that doesn’t mean that some things can’t be done to increase or decrease taxable farm income. Again, late in the year Congress passed legislation that affected 2014 taxable income. Section 179 Expense Election and bonus depreciation were extended for 2014, but 2014 only. In 2015, the Section 179 Expense Election is back to $25,000 with phase-out starting at $200,000 of qualifying assets and bonus depreciation is gone.

For 2014, the Section 179 Expense Election is $500,000 with the phase-out starting at $2,000,000 of qualifying new or used asset purchases. Section 179 can generally be used on 15-year property or less, which would include farm drainage tile, single purpose ag buildings (confinement buildings), grain bins, machinery, breeding livestock and many farm pickups. You can choose any amount from $0 to $500,000 to be used as a fast write-off in the year of purchase of a single asset or multiple assets, but the aggregate total can’t exceed $500,000. Section 179 can be used on the cash difference paid for the asset. Section 179 must be reduced dollar for dollar for every $1 spent on qualifying assets exceeding $2,000,000. Section 179 reduces both Federal and Iowa taxable income and can reduce business and wage income to $0, but not below $0.

Bonus depreciation can only be used on new, not previously used, asset purchases. Fifty percent of the cash purchase price plus the basis left on any trade-ins can be used in the first year of purchase to reduce Federal taxable income. Iowa does not allow bonus depreciation, so you may reduce your Federal income tax to $0, but could still get hit with a sizeable Iowa income tax. Unlike Section 179, bonus depreciation can create a net operating loss. Also there is no phase-out for the bonus depreciation.

You can use both Section 179 and bonus depreciation on the same asset, but must first use Section 179 and then use bonus on the remainder. For example; confinement building costing $1,000,000, the first year depreciation could be Section 179 of $500,000, bonus depreciation of $250,000 (50 percent of $1,000,000 – $500,000) plus $18,750 (7.5 percent x remaining $250,000) of MACRS depreciation. On the Federal income tax return the total depreciation would be $768,750.

What if you had purchased assets in 2014, but not knowing if and when Section 179 and bonus depreciation would be extended you had deferred some of your grain income to 2015 to keep your taxable income down for 2014? If you are a cash basis taxpayer and have deferred payment contracts, you can pull some or all of those contracts back into 2014 and declare the income for 2014 instead of 2015. It has to be a full contract, you can’t pull back part of the income on a contract.

At this time, we don’t know if Section 179 and/or bonus depreciation will be extended again for 2015, so if you have the capital purchases in 2014 to use the Section 179 and/or bonus, you may want to raise your income in 2014 to take advantage of the accelerated methods of depreciation.

Another option that can be applied after the end of the year is whether or not to expense fertilizer and lime costs or amortize them over a period of years. Expensing them at the time of purchase would decrease taxable income and amortizing them over a period of years would increase taxable income for 2014.

As always, visit with you tax preparer to see what your options are, even though 2014 has ended there are certain tax planning strategies that can still be applied.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

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