Ag Decision Maker July 2016 Updates

Ag Decision Maker

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

July Newsletter (pdf)

New and Updated Files

 


Iowa Farm Outlook

Outlook Information for Crops and Livestock

July Newsletter

Livestock — Be Prepared for Lower Hog Prices
Crops — Plenty of Acres Planted

 


AgMRC Renewable Energy & Climate Change Report

National Center for Value-Added Agriculture

Choices

A publication of Agricultural & Applied Economics Association AAEA

 Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Supply and Demand Move Higher (7/12/16)

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

Hart_Chad-thumbThe July updates from USDA pushed both crop supplies and demands higher. But in the longer run, stock levels are projected to be higher, with steady to lower prices. On the supply side, the revised acreage and stock numbers from last month were fully incorporated into the projections. Corn production was increased by 110 million bushels, while soybean production rose by 80 million.

On the demand side, there were several offsetting moves. For corn in both old and new crop settings, feed and ethanol usage were lowered, while food and export usage rose. For soybeans, export demand was increased for both old and new crop. Crush demand was lifted slightly for the new crop, but seed and other uses were lowered for the old crop. Putting all of the shifts together results in slightly lower old crop ending stocks, but higher new crop (2016/17) stocks.

Season-average prices were held steady for soybeans, at $9.05 for the 2015/16 crop and $9.50 for the 2016/17 crop. Corn season-average prices were reduced by 5 cents on the 2015/16 crop to $3.65 per bushel and by 10 cents on the 2016/17 crop to $3.40 per bushel.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Ag Decision Maker June 2016 Updates

Ag Decision Maker

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

June Newsletter (pdf)

New and Updated Files


Iowa Farm Outlook

Outlook Information for Crops and Livestock

June Newsletter

Livestock — Ample Early Forage Supplies
Crops — Price Strength from Demand


AgMRC Renewable Energy & Climate Change Report

National Center for Value-Added Agriculture

Choices

A publication of Agricultural & Applied Economics Association AAEA

 Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Positive Demand News from USDA (6/10/16)

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

Hart_Chad-thumbUSDA’s June updates contained good news on the demand front for corn and soybeans. International demand continues to strengthen, while domestic usage holds steady. With no major changes on the supply side, this implies lower ending stocks and projections of higher prices. Starting with corn, the losses and delays in the South American harvest have opened up some off-season selling opportunities for the U.S. Old crop (2015/16) exports were raised 100 million bushels as a result. Although corn imports were increased slightly, the overall impact for old crop corn is a 95 million drop in ending stocks and a 10 cent increase in the season-average price to $3.70 per bushel. That drop in ending stocks, combined with another increase in new crop (2016/17) exports of 50 million bushels, lowered new crop ending stocks by 145 million bushels. The changes added 15 cents to the new crop corn season-average price estimate, raising it to $3.50 per bushel.

For soybeans, both old crop domestic and international demand were on the upswing. Crush added 10 million bushels, while exports grew by 20 million bushels. With the 30 million bushel drop in old crop ending stocks, USDA raised its 2015/16 season-average price by 20 cents to $9.05 per bushel. As with corn, the export demand increase extended into the new crop as well, adding another 15 million bushels. That pushed new crop ending stocks below 300 million bushels and lifted the 2016/17 season-average price estimate by 40 cents, to $9.50 per bushel.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

How accurate and useful is the ISU Cash Rent Survey?

Alejandro Plastina, extension economist, explores results of a follow-up survey on the accuracy and usefulness of the ISU Cash Rental Rate Survey.

plastina_alejandro_photoCash rents, land values, and rates for custom work in Iowa are topics that usually attract lots of attention from a number of stakeholders in the agricultural sector. Even more so when the economic outlook for the sector is particularly promising or particularly discouraging. So it comes as no surprise that the Cash Rental Rates for Iowa Survey is received with different degrees of acceptance by different groups depending on the economic outlook. This year we requested feedback from the online respondents to the Cash Rent Survey about the accuracy and usefulness of the survey results.

Who responded?

The Cash Rental Rates for Iowa 2016 Survey had 1,585 responses, of which 320 responses were submitted through the online questionnaire (the rest were mailed using USPS). All online respondents were invited to participate in a short follow up survey about their perceptions of the Cash Rent Survey. One hundred and forty-five respondents completed the follow up survey. All of them reported being familiar with the survey (figure 1).

Comparing the participation of different categories of participants in this opinion poll versus the corresponding participation of the same categories in the Cash Rent Survey (figure 2), farm operators accounted for the same share (47%); but agricultural lenders, professional farm managers and Realtors had a greater share (21% vs. 14%, and 16% vs. 12%, respectively); while landowners had a smaller share (15% vs. 25%).

Figure 1. How familiar are you with the ISU Cash Rental Rates for Iowa Survey?Figure 2. How would you classify yourself?

How accurate are survey results?

Ninety-one percent of the respondents indicated that the Cash Rent Survey reflects typical cash rents by county moderately, very, or extremely accurately (figure 3). Forty-seven percent of the respondents indicated that the Cash Rent Survey reflects typical cash rents by county very or extremely accurately.

The most prevalent response among farm operators, landowners, and agricultural lenders was that the Cash Rent Survey reflects typical cash rents by county very accurately, followed closely by moderately accurately (figure 4). The most prevalent response among professional farm managers and Realtors was that the Cash Rent Survey reflects typical cash rents by county moderately accurately.

Figure 3. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect typical cash rents by county?Figure 4. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect typical cash rents by county, by type of respondent?

The accuracy of the Cash Rent Survey in reflecting annual changes in typical cash rents by county was perceived to be better than the accuracy in reflecting their levels. Ninety-six percent of the respondent indicated that the Cash Rent Survey reflects year-over-year changes in typical cash rents by county moderately, very, or extremely accurately (figure 5). Fifty-seven percent indicated that the Cash Rent Survey reflects year-over-year changes in typical cash rents by county very or extremely accurately.

The most prevalent response among farm operators, landowners, and agricultural lenders was that the Cash Rent Survey reflects typical cash rents by county very accurately, followed by moderately accurately (figure 6). The most prevalent response among professional farm managers and Realtors was that the Cash Rent Survey reflects typical cash rents by county moderately accurately, followed by very accurately as a close second.

Figure 5. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect year-over-year changes in typical cash rents by county?Figure 6. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect year-over-year changes in typical cash rents by county, by type of respondent?

How useful are survey results?

Ninety-seven percent of the respondents indicated that the Cash Rent Survey was at least moderately useful to them (figure 7). Seventy-six percent of the respondents indicated that the Cash Rent Survey was very or extremely useful to them.

The most frequent answer among farm operators and agricultural lenders was that the Cash Rent Survey was extremely useful, followed by very useful and in a distant third place moderately useful (figure 8).

The most frequent answer among landowners was that the Cash Rent Survey was very useful, followed by extremely and moderately useful.

Professional managers and Realtors indicated most frequently that the Cash Rent Survey was moderately useful, followed by very and extremely useful.

Figure 7. How useful is the ISU Cash Rental Rates for Iowa Survey to you? Figure 8. How useful is the ISU Cash Rental Rates for Iowa Survey to you, by type of respondent?

Summary  

Although this opinion poll about the usefulness and accuracy of the Cash Rental Rates for Iowa Survey was not designed to be representative of all stakeholders in Iowa, it shows that most farmers, landowners, agricultural lenders, professional farm managers and Realtors, and other agricultural professionals that participate in the survey find it useful and accurate.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Ag Decision Maker May 2016 Updates

Ag Decision Maker

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

May Newsletter (pdf)

New and Updated Files


Iowa Farm Outlook

Outlook Information for Crops and Livestock

May Newsletter (pdf)

LivestockCull Cow Price Rally Not Likely
CropsThe April Crop Rally


AgMRC Renewable Energy & Climate Change Report

National Center for Value-Added Agriculture

 Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Ag Decision Maker April 2016 Updates

Ag Decision Maker

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

April Newsletter (pdf)

New and Updated Files


Iowa Farm Outlook

Outlook Information for Crops and Livestock

April Newsletter (pdf)

LivestockRecent Developments in Hogs Markets
CropsPlans for a Whole Lot of Corn


AgMRC Renewable Energy & Climate Change Report

National Center for Value-Added Agriculture

Choices – The Magazine of Food, Farm, and Resource Issues

A Publication of AAEA, Agricultural & Applied Economics Association

 Ag Decision Maker (AgDM) 

An agricultural economics and business website.

April Demand Update (4/12/16)

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

Hart_Chad-thumbThe World Ag Supply and Demand Estimates update for April contained some modest changes for the crop balance sheets. For U.S. soybeans, the only changes were a 15 million bushel bump in export demand and a slight decline in seed demand, based on last month’s Prospective Plantings report. Projected soybean ending stocks were lowered to 445 million bushels, but the midpoint of the 2015/16 season-average price range remains steady at $8.75 per bushel. For U.S. corn, the adjustments were mixed. Feed demand was reduced 50 million bushels, based on the quarterly disappearance pattern from the Grain Stocks report. Corn usage for ethanol was increased 25 million bushels as ethanol production has held near record levels over the 1st three months of the calendar year. Thus, corn ending stocks were raised 25 million bushels and the midpoint of the 2015/16 season-average price range fell 5 cents to $3.55 per bushel.

World corn production for 2015/16 was increased by 3 million metric tons, with 1 million of that going to increased imports for Mexico and Southeast Asia and 2 million projected to be held in stock. China’s feed usage of corn is projected to rise by 2 million metric tons, but that increase is expected to be met by drawing down existing internal stocks. World soybean production for 2015/16 was lowered slightly as declines in Chinese and Indian production offset an increase from Argentina. Global soybean trade was raised, based on stronger exports to China, Japan, and Mexico.

Ag Decision Maker (AgDM) 

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Plans for a Whole Lot of Corn (3/31/16)

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

Hart_Chad-thumbThe end of March is an active time for the crop markets and USDA. It’s when we get our first look at the 2016 crop year from the producers’ perspective with the release of USDA’s Prospective Plantings report. We also receive an update on demand via USDA’s Grain Stocks report. And as we typically see, these reports contained a few surprises to mull over as planting approaches, mainly for new crop prospects. Starting with the stocks/demand picture, the trade estimates going into the stocks report were fairly close to the USDA numbers. As of March 1, 7.81 billion bushels of corn were being held in storage. That’s 1% higher than last year at this time. Quarterly corn disappearance for the December-February time frame was 3.43 billion bushels, slightly lower than last year. Overall corn demand and usage has been relatively stable. Soybean stocks came in at 1.5 billion bushels, up 15% from last year. That is the highest soybean stock number for March since the 2006/07 crop. Quarterly soybean disappearance for the December-February time frame was 1.18 billion bushels, 1% lower than last year.  So the build-up of soybean stocks has more to do with supply than demand. In total, old crop usage turned up to be in-line with expectations.

That’s not the case with plantings and the potential for new crop production. The biggest discrepancies between trade expectations and the planting report were for corn and wheat. Projected corn plantings came in at 93.6 million acres. The trade expectation was roughly 90 million. So prospective corn plantings are 3.6 million above expectations and 5.6 million above last year. Meanwhile, projected wheat area dropped to 49.6 million acres, roughly 2 million below expectations and 5 million below last year. Soybean planted area was also down to 82.2 million acres, which was 800,000 less than expectations and 450,000 below last year. Looking at specific state projections, the boost in corn area is coming mostly from the Great Plains and Corn Belt. The largest moves are in Kansas and North Dakota, adding 650,000 acres each, as traditional wheat area heads to corn production. Illinois and Iowa are adding 400,000 corn acres each this year. Out of the 48 states listed in the corn table, only 7 are projected to have fewer corn acres than last year, with the largest reduction being 20,000 acres. The soybean planting story hinges mainly on Missouri. Missouri farmers indicated they would plant nearly one million more acres of soybeans this year, following the planting issues they had last year. Illinois and North Dakota are projected to gain significant soybean area as well.  However, many states (including Iowa) are projected to lower soybean plantings. Iowa and 9 other states are set to reduce soybean plantings by at least 100,000 acres each. Hence, despite the strong surge in area from Missouri, the national soybean planting area is projected to decline.

Given trend yields of 168 bushels per acre for corn and 46.7 bushels per acre for soybeans, the projected acreage points to another round of massive crops. Corn production would reach 14.38 billion bushels, which would be another record corn crop. Soybean production would approach 3.8 billion bushels, which would be the 3rd largest soybean crop in history. And for markets already dealing with large supplies, these prospective plantings do not help. So the markets will be looking for Mother Nature to slow the supply train down.

Ag Decision Maker (AgDM) 

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Why it is not OK to use NASS yields to calculate ARC-CO payments

plastina_alejandro_2014Alejandro Plastina, ISU Extension Economist, provides explanation of the yield data used in calculating ARC-CO payments in Iowa.

On February 22 2016, the USDA National Agricultural Statistical Service (NASS) released the final county crop production estimates for 2015: 73 Iowa counties had higher corn yields in 2015 than in 2014, 22 had lower yields, and 2015 corn yields were not reported for Mills, Monroe, Taylor, and Union County; 86 counties had higher soybean yields, 11 had lower yields, and 2015 soybean yields were not reported for Taylor and Mills County.

Knowing that higher county yields reduce the likelihood and the potential amount of ARC-CO payments, the NASS release spurred the interest of producers to recalculate their own projected ARC-CO payments for the 2015/16 crop marketing year. However, two important details often overlooked when calculating projected ARC-CO payments are (1) that county yields are determined on a per planted acre basis, as opposed to a per harvested acre basis; and (2) that the official county yields used in the final calculation of ARC-CO payments are published by USDA Farm Service Agency (FSA), as opposed to NASS.

NASS yields are calculated as production (in bushels) divided by harvested acres. Since they are not determined on a per planted acre basis, they cannot be used to calculate ARC-CO payments.

FSA yields are only available after the end of the crop year and are calculated on a per planted acre basis. Therefore, most of the difference between FSA and NASS yields is explained by failed acres. The average difference between FSA and NASS county corn yields in Iowa for 2014/15 (the only year for which both yields are publicly available), amounts to 4.75 bushels per acre.

arcco3232016In an effort to reflect the impact of failed acres on the yield used to project ARC-CO payments, the ISU Projected ARC-CO Payment Calculator uses “corrected” yields in the calculation of the 2015/16 actual county crop revenue. The “corrected” yields are based on NASS production data and obtained by dividing production (in bushels) by planted acres. For 63 Iowa counties the “corrected” yields in 2014/15 were closer to the official FSA yields than NASS yields were. For example, the corn yield used by FSA to calculate ARC-CO payments for Lyon County in 2014/15 is 149 bushels, while the NASS yield is 172.9 bushels, and the “corrected” yield is 155 bushels. The average difference between FSA and “corrected” corn yields amounted to 0.42 bushels per acre.

Judging by the release date of 2014 county yields by FSA on October 23, 2015, it can be expected that FSA will release final 2015 county yields in October 2016, at about the same time as the 2015 ARC-CO payments. Until then, the ISU ARC-CO Payment Calculator will use a “calculated” yield and projected marketing year price until the price for the marketing year is finalized the end of September.

All ISU Extension and Outreach Farm Bill decision tools are available online at: http://www.extension.iastate.edu/agdm/info/farmbill.html

Ag Decision Maker (AgDM) 

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