Pat Westhoff FAPRI-MU director University of Missouri

Transcription

1 Farm Bill Decision Aid Training Memphis, Tennessee September 25, 214 Pat Westhoff FAPRI-MU director University of Missouri

2 FAPRI-MU crop market outlook Price projections Farm commodity supply and use that generate those prices Uncertainty around the projections Why prices matter in making program choices

3 213/14 214/15 215/16 216/17 217/18 218/19 Corn ($/bu.) Soybeans ($/bu.) Wheat ($/bu.) Durum Other spring Winter Upland cotton (cents/lb.) Sorghum ($/bu.) Rice ($/cwt) Long grain Medium/short (exc. Japonica) Japonica Barley ($/bu.) Oats ($/bu.) Peanuts (cents/lb.) Sunflower seed ($/cwt) Canola ($/cwt)

4 213/14 214/15 215/16 216/17 217/18 218/19 Flaxseed ($/bu.) Lentils ($/cwt) Safflower ($/cwt) Mustard seed ($/cwt) Dry peas ($/cwt) Rapeseed ($/cwt) Large chickpeas ($/cwt) Small chickpeas ($/cwt) Crambe ($/cwt) Sesame seed ($/cwt)

5 FAPRI-MU has been making market projections for 3 years Complex models of U.S. and world markets + analyst expertise DC review of models and projections each December Annual baseline released in early March Updates August update each year For this project, monthly updates September is first official Reflect new information on crop production, demand, etc. We know actual prices will differ We solve for 5 different futures given different assumptions

6 9 8 Corn price, dollars per bushel Corn yield, bushels per acre

7 Corn price, dollars per bushel Avg. of March estimates: bu./a. and $4.17/bu Corn yield, bushels per acre

8 Corn price, dollars per bushel Avg. of March estimates: bu./a. and $4.17/bu. September USDA estimates: bu./a. and $3.5/bu Corn yield, bushels per acre

9 Economic growth, exchange rates, etc. Policy (generally keep current policies) Technology (generally trend growth in crop yields, etc.) Economic choices by producers and consumers Weather and other factors that make markets volatile

10 Percent World U.S. Source: IHS Global Insight, July 214

11 2 15 Percent China Mexico EU Source: IHS Global Insight, July

12 Percent Unemployment Federal funds rate CPI inflation Source: IHS Global Insight, July

13 China Brazil Yuan per dollar Reals per dollar

14 12 1 West Texas Intermediate oil Henry Hub natural gas Dollars per barrel Dollars per million BTU

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16 212/13 213/14 214/15 Planted area (mil. a.) Harvested area (mil. a.) Yield (bu./a.) Production (mil. bu.) 1,78 13,925 14,395 Feed & residual (mil. bu.) 4,339 5,175 5,325 Ethanol & coproducts (mil. bu.) 4,641 5,125 5,125 Other domestic use (mil. bu.) 1,398 1,375 1,45 Exports (mil. bu.) 73 1,925 1,75 Ending stocks (mil. bu.) 821 1,181 2,2 Farm price per bushel $6.89 $4.45 $3.2-$3.8

17 213/14 214/15 215/16 216/17 217/18 218/19 million acres Area harvested bushels per acre Yield million bushels Production 13,925 14,395 13,239 13,755 13,891 14,61 Imports Beginning stocks 821 1,181 1,962 1,566 1,59 1,484 Total supply 14,781 15,67 15,23 15,352 15,429 15,575 Feed use 5,175 5,285 5,173 5,289 5,32 5,283 Other domestic use 6,5 6,551 6,63 6,6 6,584 6,662 Exports 1,925 1,81 1,888 1,954 2,6 2,173 Total use 13,6 13,645 13,664 13,843 13,946 14,118 Ending stocks 1,181 1,962 1,566 1,59 1,484 1,457 dollars per bushel Price, U.S. farm

18 12 1 Million metric tons Production Use End. Stocks 2 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: Unpublished FAPRI-MU projections, Sep. 214

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20 212/13 213/14 214/15 Planted area (mil. a.) Harvested area (mil. a.) Yield (bu./a.) Production (mil. bu.) 3,34 3,289 3,913 Crush (mil. bu.) 1,689 1,73 1,77 Seed and residual (mil. bu.) Exports (mil. bu.) 1,317 1,645 1,7 Ending stocks (mil. bu.) Farm price per bushel $14.4 $13. $9.-$11.

21 213/14 214/15 215/16 216/17 217/18 218/19 million acres Area harvested bushels per acre Yield million bushels Production 3,289 3,913 3,657 3,573 3,649 3,688 Imports Beginning stocks Total supply 3,59 4,58 4,15 4,22 4,45 4,77 Crush 1,73 1,89 1,848 1,84 1,851 1,864 Other domestic use Exports 1,645 1,712 1,72 1,698 1,717 1,741 Total use 3,379 3,626 3,67 3,641 3,671 3,78 Ending stocks dollars per bushel Price, U.S. farm ratio Soybean/corn price ratio

22 35 3 Million metric tons Production Use End. Stocks 5 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: Unpublished FAPRI-MU projections, Sep. 214

23 213/14 214/15 215/16 216/17 217/18 218/19 million acres Area harvested bushels per acre Yield million bushels Production 2,13 2,3 2,155 2,126 2,145 2,156 Imports Beginning stocks Total supply 3,16 2,789 2,987 3,11 3,24 3,26 Feed use Other domestic use 1,28 1,39 1,45 1,52 1,58 1,65 Exports 1, ,34 1,55 1,72 1,72 Total use 2,426 2,122 2,267 2,297 2,318 2,328 Ending stocks dollars per bushel Price, U.S. farm

24 213/14 214/15 215/16 216/17 217/18 218/19 million acres Area harvested pounds per acre Yield million bales Production Imports Beginning stocks Total supply Domestic use and residual Exports Total use Ending stocks cents per pound Price, U.S. farm

25 213/14 214/15 215/16 216/17 217/18 218/19 million acres Area harvested pounds per acre Yield 7,692 7,499 7,57 7,578 7,644 7,699 million hundredweight, rough equivalent Production Imports Beginning stocks Total supply Domestic use and residual Exports Total use Ending stocks dollars per hundredweight Price, U.S. farm

26 Both ARC and PLC depend on U.S. seasonaverage prices Lower prices increase payments under both programs, all else equal But actual payments under the two programs can differ sometimes by a lot

27 Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Dollars per bushel Corn prices FAPRI farm USDA farm Reference Paid on 85% of base acres (tied to historical plantings) 1 Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214

28 Dollars per bushel Actual/average 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

29 8 Dollars per bushel yield in #5 is 14 bushels per acre (avg: 174) Actual/average # /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

30 Dollars per bushel Actual/average #5 #25 #495 Reference 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

31 Dollars per bushel Actual/average 9th percentile 1th percentile 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

32 Dollars per bushel Actual/average 9th percentile 1th percentile Reference 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

33 Dollars per bushel /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 FAPRI-Mar FAPRI-Sep Dec. futures Reference Source: FAPRI-MU baselines, March and Sep. 214; CME December futures contracts, Sep. 23, 214

34 /15 215/16 216/17 217/18 218/19 1th %tile 5th %tile Mean 9th %tile Source: FAPRI-MU March 214 stochastic baseline

35 Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Paid on 85% of base acres (tied to historical plantings) Dollars per bushel Soybean prices FAPRI farm USDA farm Reference Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214

36 Dollars per bushel Actual/average 9th percentile 1th percentile Reference 2 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

37 Dollars per bushel /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 FAPRI-Mar. FAPRI-Sep. Nov. futures Reference Source: FAPRI-MU baselines, March and Sep. 214; CME Nov. futures contracts, Sep. 23, 214

38 /15 215/16 216/17 217/18 218/19 1th %tile 5th %tile Mean 9th %tile Source: FAPRI-MU March 214 stochastic baseline

39 Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Paid on 85% of base acres (tied to historical plantings) Dollars per bushel Wheat prices FAPRI farm USDA farm Reference Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214

40 Dollars per bushel Actual/average 9th percentile 1th percentile Reference 2 1 5/6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Source: FAPRI-MU stochastic baseline, March 214

41 Dollars per bushel /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 FAPRI-Mar FAPRI-Sep. July futures Reference Source: FAPRI-MU baselines, March and Sep. 214; CME July futures contracts, Sep. 23, 214

42 /15 215/16 216/17 217/18 218/19 1th %tile 5th %tile Mean 9th %tile Source: FAPRI-MU March 214 stochastic baseline

43 Price Loss Coverage Payment if annual average farm price is less than reference price Wheat: $5.5/bu. Corn: $3.7/bu. Soybeans: $8.4/bu. Sorghum: $3.95/bu. Long-grain rice: $14./cwt. Paid on 85% of base acres (tied to historical plantings) Dollars per cwt Long-grain rice prices FAPRI farm USDA farm Reference Sources: Agricultural Act of 214, FAPRI-MU March 214 baseline; USDA baseline, Feb. 214

44 Dollars per cwt /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Mar. FAPRI Nov. futures Reference Sep. FAPRI Source: FAPRI-MU baselines, March and September 214; November 214 rough rice futures contract, Sep. 24, 214

45 Cents per pound /6 7/8 9/1 11/12 13/14 15/16 17/18 19/2 Mar. FAPRI Sep. FAPRI Dec. futures Source: FAPRI-MU baselines, March and September 214; CME Dec. futures, Sep. 24, 214

46 Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) Dollars per acre Corn revenues per acre Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Sep. 214 baseline

47 Max of (national avg. farm price, reference price) County yield 29/1 $3.7/bu bu./a. 21/11 $ /12 $ /13 $ * 213/14 $ Olympic average $ Revenue 214/15 benchmark revenue $62 86% of benchmark $533 1 st option triggering payments $3.9 <137 <$533 2 nd option triggering payments <$ <$533 *Note: this yield would be replaced by a plug yield, but regardless, it is dropped as the lowest of the five years.

48 /15 215/16 216/17 217/18 218/19 1th %tile 5th %tile Mean 9th %tile Source: FAPRI-MU March 214 stochastic baseline

49 /15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline

50 Given Sep. baseline prices, 214 expected payments would be considerably higher under both programs /15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline

51 Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) Dollars per acre Soy revenues per acre Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Sep. 214 baseline

52 /15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline

53 Agriculture Risk Coverage (ARC) Payment if per-acre revenues fall below trigger For this example, using national yields, but actual program uses county- or farm-level yields Paid on share of base acreage 85% if choose county option 65% if choose farm option (all crops on farm) Dollars per acre Wheat revenues per acre Actual/ FAPRI 86% of benchmark Sources: Agricultural Act of 214, FAPRI-MU Sep. 214 baseline

54 /15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline

55 Given Sep. baseline prices, 214 expected payments would be lower under PLC /15 215/16 216/17 217/18 218/ ARC PLC Source: FAPRI-MU March 214 stochastic baseline

56 /15 215/16 216/17 217/18 218/19 ARC PLC Source: FAPRI-MU March 214 stochastic baseline

57 214/15 national seasonaverage corn price PLC payment per base acre (program yield= 1 bu./a.) ARC payment per base acre if county yield is 11 bu./a. ARC payment per base acre if county yield is 13 bu./a. ARC payment per base acre if county yield is 15 bu./a. 3. $59.5 $52.66 $52.66 $ $42.5 $52.66 $52.66 $ $25.5 $52.66 $52.66 $ $8.5 $52.66 $52.66 $. 3.8 $. $52.66 $33. $. 4. $. $52.66 $1.9 $. 4.2 $. $52.66 $. $. 4.4 $. $41.5 $. $. 4.6 $. $22.8 $. $.

58 CCC net oulays could vary greatly from averages Billion dollars Fiscal year 9th percentile Average of 5 outcomes 1th percentile Source: U.S. Baseline Briefing Book, March 214, page 49

59 FAPRI-MU website: To contact Pat Westhoff: FAPRI-MU team: Julian Binfield Sera Chiuchiarelli Deepayan Debnath Scott Gerlt Lauren Jackson Willi Meyers Wyatt Thompson Jarrett Whistance Peter Zimmel