April 2014 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/farm-management Presentation Objectives Review the latest Corn & Soybean Supply/Demand and 2014-15 Marketing Year Cash Price Outlook Highlight 2014 Weather Forecasts Discuss Pre-Harvest Marketing Strategies using Guaranteed Insurance Bushels Provide 5 Crop Risk Management Strategies Highlight the New Farm Program for Commodity Crops in 2014-18 Summarize with 5 Crop Risk Management Web Sites 1
U.S. Corn Supply/Demand & Price USDA Wisner USDA 2011-12 2012-13 2012-13 2013-14 2013-14 ISU's Wisner 2013-14 2014-15 Projection Estimate Projected Projection April Projection Low Medium High Area Planted (million acres) 91.9 97.2 97.2 95.4 96.5 95.4 97.5 91.7 96.9 91.7 91.7 Area Harvested (million acres) 84.0 87.4 87.4 87.7 88.8 87.7 88.0 83.8 90.6 84.5 84.5 Yield per Harvested Acre (bu.) 147.2 123.4 123.4 158.8 163.6 158.8 125.0 154.5 155.0 164.0 167.0 Beginning Stocks (million bu.) 1,128 989 989 821 632 821 1,240 595 1,240 595 1,240 Production 12,360 13.925 10,780 13,925 14,530 13,925 11,000 12,957 14,043 13,858 14,243 Imports 162 29 125 38 25 35 100 46 12 29 28 Supply, Total 13,516 11,932 11,894 14,785 15,187 14,781 11,695 14,233 14,650 15,127 15,379 Feed & Residual 4,545 4,333 4,400 5,400 5,400 5,300 4,075 5,250 4,750 5,400 5,425 Food, Seed & Industrial 6,439 6,046 5,937 1,410 6,110 1,400 1,350 1,455 1,410 1,455 1,455 Ethanol & by-products 5,011 4,648 4,550 5,010 4,675 5,000 4,750 5,020 5,150 5,050 5,050 Domestic, Total 10,985 10,739 10,337 11,820 11,510 11,700 10,175 11,725 11,310 11,900 11,930 Exports 1,543 731 1,725 800 1,500 1,750 1,680 950 1,500 1,680 1,775 Use, Total 12,527 11.111 11,137 13,545 13,010 13,450 11,125 13,405 12,810 13,650 13,705 Ending Stocks 821 989 1,240 757 2,177 1,331 570 828 1,840 1,477 1,674 Avg. Farm Price ($/bu) $6.89 $6.22 $6.65-7.15 $4.60 $4.80 $4.60 $8.50 $6.00 $5.30 $4.25 $4.00 Source: USDA WASDE April 10, 2014 & ISU Wisner, April 14, 2014 Corn Cash Price & Probability Forecast 14-15 Marketing Year Assumption: 91.7 M Acres Planted 164 bu/a Nat l Yield $4.25/bu 64% $6.00/bu 15% $4.00/bu 21% Source: Wisner, ISU Biofuels Economist, April 14, 2014 2
2014 U.S. Planted Acreage Forecast 91.7 M 81.5 M 55.8 M 27M * Forecast Source: USDA NASS & Prospective Plantings Report, March 31, 2014 U.S. Soybean Supply/Demand & Price USDA Wisner USDA 2011-12 2012-13 2013-14 2012-13 2013-14 ISU's Wisner 2013-14 2014-15 Projection Estimate Projected Projection April Projection Low Medium High Area Planted (million acres) 75.0 77.2 77.2 76.5 77.2 76.5 78.5 81.5 78.5 81.5 81.5 Area Harvested (million acres) 73.8 76.2 76.1 75.9 76.5 75.9 77.4 80.6 77.6 80.6 80.6 Yield per Harvested Acre (bu.) 41.9 39.8 39.6 43.3 44.5 43.3 38.0 39.5 42.0 43.5 45.0 Beginning Stocks (million bu.) 215 169 169 140 125 141 115 125 115 125 125 Production 3,094 3,034 3,015 3,239 3,405 3,289 2,941 3,184 3,259 3,515 3,636 Imports 16 36 66 20 15 65 20 54 12 35 25 Supply, Total 3,325 3,239 3,204 3,495 3,545 3,494 3,082 3,495 3,385 3,463 3,483 Crushings 1,703 1,689 1,635 1,690 1,660 1,685 1,582 1,670 1,705 1,725 1,735 Exports 1,362 1,320 1,350 1,585 1,500 1,580 1,270 1,430 1,400 1,475 1,495 Seed & Residual 90 95 135 95 115 110 115 108 108 Use, Total 3,155 3,099 3,080 3,370 3,295 3,360 2,967 3,370 3,220 3,463 3,483 Ending Stocks 169 141 125 250 135 115 125 165 212 303 Avg. Farm Price ($/bu) $12.50 $14.40 $13.80-14.80 $13.60 $10.50 $13.00 $14.90 $14.00 $12.50 $9.90 $9.60 Source: USDA WASDE April 10, 2014 & ISU Wisner, April 14, 2014 3
Soybean Cash Price & Probability Forecast 14-15 Marketing Year Assumption: 81.5 M Acres Planted 43.5 bu/a Nat l Yield $9.90/bu 64% $14.00/bu 17% $9.60/bu 19% Source: Wisner, ISU Biofuels Economist, April 14, 2014 Fig 11 USDA Forecast Decline from Record Highs 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15F Wheat 6.78 4.87 5.70 7.24 7.77 6.80 5.30 Corn 4.06 3.55 5.18 6.22 6.89 4.50 3.90 Soybeans 9.97 9.59 11.30 12.50 14.40 12.70 9.65 Cotton 47.80 62.90 81.50 88.30 72.50 76.00 68.00 Rice 16.80 14.40 12.70 14.50 14.90 16.00 15.90 Wheat, corn and soybeans in dollars per bushel; rice in dollars per hundredweight; cotton in cents per pound. Numbers in green denote record levels. Source: USDA NASS, WASDE and World Outlook Board, February 20, 2014 4
El Niño (ENSO) Neutral until Spring Spring/Summer Forecast: ENSO-neutral conditions are expected to continue through the spring of 2014, followed by a 50% chance of El Niño developing during the summer or fall. I am more 'bullish' on El Niño development in 2014, even more so than last month, states Dr. Klaus Wolter, NOAA, University of Colorado. April 8, 2014 Source: www.bom.gov.au/climate/enso/, April 14, 2014 Elwynn Taylor s 2014 Risk Wheel La Niña Summer = 70% risk of below trendline corn yield Neutral Summer = 53% risk of above trendline corn yield El Niño Summer = 70% risk of above trendline corn yield Source: Taylor, ISU Extension Climatologist, April 2014 5
Marketing Revenue Protection (RP) Guaranteed Insurance Bushels Source: Johnson, ISU Extension, February 2014 Delivery of Corn Bushels with Revenue Protection (RP) 180 Bu/A Actual Production History (APH) Deductible 15% = 27 Bu/A RP @ 85% Level of Coverage 153 Bu/A Guarantee X $4.62/bu Projected Price = $707/A Revenue Guarantee Marketing Strategy Pre-Harvest Sell for Delivery up to 153 Bu/A Price Guarantee is Higher of the Projected Price vs. Harvest Price Slight Basis Risk Must Plant the Crop (Prevented Planting = 60%) Source: Johnson, ISU Extension, March 2014 6
New Crop 14 Corn Futures Chart Corn Projected Price = $4.62/bu Source: www.futuresource.com, April 3, 2014 New Crop 14 Soybean Futures Chart Soybean Projected Price = $11.36/bu Source: www.futuresource.com, April 10, 2014 7
Crop Risk Management Strategies Enrollment in the New Commodity Crop Farm Program for 2014-18 (ARC or PLC) With Lower Crop Prices & Large Supplies; Storage Issues & Unpriced Grain come Fall With Improved 2014 Corn Belt Weather, Large Crop Potential Exists Expect Futures Price Volatility; Use Crop Revenue Protection (RP) Insurance Use Pre-Harvest Market Strategies; Forward Contracts, Hedges & Purchase Put Options Source: Johnson, ISU Extension, April 2014 Farm Bill Funding (FY 2014 to FY 2018) Total Outlays $489 Billion Source: USDA Economic Research Service, January 2014 8
New Farm Programs Implementation Timeline Forecast Commodity Crop Rules and Regulations Released Agricultural Act of 2014 Conservation Programs (EQIP & CSP) Livestock Disaster Assistance Program Commodity Crop Program Education Conservation Compliance SCO Product Spring-Seeded Crops Commodity Crop Program Sign-up 2014 2015 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR Spring Seeded Crops Crop Insurance Closing Date (March 15) Source: USDA and Other Ag Media Resources, April 2014 New 5-Year Farm Program (2014-2018) Marketing Loan National Rates: $1.95/bu Corn $5.00/bu Soybeans Source: The Agricultural Act of 2014, February 2014 9
Solving the ARC PLC Enrollment Puzzle ARC PLC Overview Base Acreage Reallocation Potential ARC PLC Payments Final Rules & Regulations Source: Johnson, ISU Extension, April 2014 Crop Risk Management Web Sites Crop Risk Management - ISU Polk County (Farmland Owners Newsletter, Webcasts and Videos, Updates on Crop Marketing Strategies, Government Farm Programs & Farmland Leasing) www.extension.iastate.edu/polk/farm-management Farm Doc U of IL Extension Economics (Daily e-newsletter, FAST Tools, Newsletters, Publications) www.farmdoc.illinois.edu Ag Manager Kansas State Extension Economics www.agmanager.info Ag Risk & Farm Management Library www.agrisk.umn.edu Ag Decision Maker ISU Extension (Iowa Commodity Challenge Curriculum, Monthly e-newsletter, Decision Tools, Newsletters, Publications, Voiced Media) www.extension.iastate.edu/agdm Source: Johnson, ISU Extension, April 2014 10