Farm Bill Sign Up Extended

USDA has extended the deadline to update base acres and yields under the new farm bill until March 31st. The original deadline for landowners to make initial decisions related to the new farm safety net was Friday February 27, 2015.

U.S. Secretary of Agriculture Tom Vilsack made the announcement saying it is an important decision for producers, because the programs provide financial protection against unexpected changes in the marketplace.

The Secretary says USDA is working to ensure landowners and farmers have the time, the information, and opportunity to review their data, and to visit the Farm Service Agency to make solid informed farm bill decisions.

If no changes are made to yield history or base acres by March 31, 2015, the farm’s current yield and base will be used. A program choice of ARC or PLC coverage also must be made by that same date or there will be no 2014 payments for the farm and the farm will default to PLC coverage through the 2018 crop year.

2015 USDA Agricultural Outlook Forum

Last week the United States Department of Agriculture presented its view of the commodity markets.



Thursday USDA Acting Chief Economist Robert Johansson made a presentation on the current agricultural landscape during the 2015 USDA Agricultural Outlook Forum. Interestingly, he set the tone by showing how commodity prices have been trending downward for more than 60 years.

Yield Exclusion and Crop Insurance

When farmers go to their federal crop insurance agents in March they may have a new decision to make. The new Yield Exclusion option may allow some producers to increase their covered yields.




U.S. Soybean Production Prospects for 2015

There are lot of soybeans in the world. Last fall U.S. farmers harvested a record crop, and their counterparts in South America are doing the same right now.




Farm Program Sign Up Deadlines & Decision Aids

Farm Program Sign Up Deadlines & Decision Aids
Jonathan Coppess, Ag Law & Policy Specialist - University of Illinois

Time is running out for landowners and farmers to decide what to do about the new farm programs. They have until the end of February to make the first two decisions, and must make a final choice by March 31st. Todd Gleason reports on the decision aids available on the University of Illinois Farm Doc Daily website.

FarmDocDaily is hosted by the ag economists…
2:51

FarmDocDaily is hosted by the ag economist at a the U of I, including Ag Policy Specialist Jonathan Coppess. The home page includes a link to something called the Farm Bill Toolbox. There you’ll find decision tools, and a brand new link under Resources named Farm Program Decision Guide.

Coppess :18 …it is all right there.

Quote Summary - It is just a PDF file available on the website. It is something to take home with you, to go to your landlord with, to sit down with your brothers and dad over family discussions with about what your are going to do (about the farm program). It is all right there.

Right there in an easy to download, print out, and use file. It in includes the deadlines - February 27th to make the first two decisions about payment yields and base acre allocation, and March 31st for the final program choice. All of which must be recorded at the local F-S-A office, the Farm Service Agency. The first two decisions, the ones due Feb 27th, should be pretty easy for row crop farmers. Take the highest yields and use the base acre allocation with the most corn acres.

Coppess :25 …if landowners aren’t getting in there soon.

Quote Summary - There is no reason to delay those decisions because the program choice follows on March 31st. It is the one where farmers will want to know a little more about the 2014 county yields. Still, the payment yields and base acre decisions should be made now, otherwise, there will be some long lines at the FSA office if landowners don’t get to the office soon.

The county yields, as released by USDA NASS this month, will help determine how much the ARC County payment will be for last fall’s crop. Once those are released, it will be easier to compare ARC County to the other two farm programs, ARC Individual and PLC.

Coppess :47 …in order to trigger a payment.

Quote Summary - The county yields will determine the ARC County payment. The final number won’t be calculated until the Market Year Average Price is released next fall. Still, it will be the indicator used to calculate and trigger the 2014 ARC County payments.

Knowing the approximate 2014 ARC County payment should help farmers make a final farm program choice. It is important to remember the choice is a five year decision not a one year commitment. The online Farm Bill ToolBox walks producers through seven steps in hopes they’ll make an informed choice.

Finer Ground Corn More Digestible

Finer Ground Corn More Digestible
Hans Stein, Swine Nutritionist - University of Illinois

An animal nutritionist at the University of Illinois has quantified the importance of particle size in ground feed for hogs.




Grinding corn to finer particle sizes can increase its feed efficiency by up to five percent says Hans Stein.
They don’t gain any more, but they eat less to gain the same. Pigs adjust their energy intake. It means there is more available energy in corn when it is ground finer. The pigs eat less, the feed conversion is improved, and it takes fewer pounds of feed to produce a market weight hog.
Stein is a swine nutritionist at the University of Illinois. He investigated the affect of different particle sizes of ground corn when fed to pigs. The corn was ground to 800, 600, 400, and 300 microns.
We discovered amino acid and phosphorous digestibility does not change with particle size. Pigs are very efficient in digesting those nutrients, but when it came to starch we found a linear increase in digestibility as we reduced the particle size of corn. The highest digestibility was with the lowest particle size of corn.
This is because more starch is digested in the pig’s small intestine, causing more glucose to be absorbed and therefore increasing the amount of available energy.
The energy in the corn grain increased as we reduced particle size. A pig will get more energy out of one pound of corn if it is ground to 300 microns instead of 800 microns.
This is were the savings come in to play. The feed conversion rate improves by about one-point-two percent for every 100 micron reduction in particle size, saving seven pounds of corn to finish a pig.
Or producers wanting to formulate diets to a prescribed amount of energy could reduce fat in the ration. Fat is usually used to add more energy, but corn ground to a smaller particle size could replace it. The pigs should perform the same using corn ground to a smaller particle size.
There are a couple of negatives to the smaller grind. The feed doesn’t flow nearly so well and there is an increased risk of stomach ulcers. The ILLINOIS nutritionist says hog producers should try smaller grinds over time, ratcheting down a hundred microns every couple of months. Rations with higher fiber contents will be most successful at the lower particle sizes.

Crude Oil Jumps Off the Lows

Crude Oil Jumps Off the Lows
Harry Cooney, Growmark Energies Specialist - Bloomington, Illinois

The price of crude oil has rallied off it’s lows. Todd Gleason has more on the reasons why.

The cost of a barrel of crude oil has dropped… 1:51

The cost of a barrel of crude oil has dropped dramatically since last June. Back then the price was more the $100 per barrel. It dropped to nearly $44 a barrel earlier this year and has now begun to make a sharp turn higher. There are series of reasons for the rally says Bloomington based energies specialist for Growmark Harry Cooney.

Quote Summary - There has been a steelworkers strike at some of the refineries. This has caused some concerned. The rig counts have also declined. This number indicates how many oil wells are operational and the trade, which focuses on future supply, thinks the supply may peak out and then start to decline.

However, it is important to remember says Harry Cooney crude oil started its price decline at around $107.00 a barrel. It is very unlikely the oil rig count contraction taking place now will greatly constrain supply. Still Cooney has been advising end users, like farmers that purchase gasoline and diesel in bulk, to lock in the price of their 2015 needs.

Quote Summary - The end users see these values, values they haven’t seen for four or five years, as an opportunity to lock in the price of fuel even though they’re above the recent lows. The price of fuel, unlike other inputs on the farm, has decreased more rapidly in percentage terms.

Nitrogen fertilizer, for instance, has yet to drop in price.

Beef Expansion Is Underway

Beef Expansion Is Underway
Chris Hurt, Extension Ag Economist - Purdue University

The nation’s cattle producers are expanding the herd and they’re doing it at a somewhat faster rate than had been anticipated.

USDA, in the semi-annual update of cattle numbers, calculates the total number of cattle and calves has increased by a bit more than one percent. It is the first increase in the cattle inventory since 2007. The industry suffered high feed prices and poor pasture conditions in the Southern Plains over the intervening years. 2014 provided a series of reasons to change course says Purdue University Extension Ag Economist Chris Hurt.

Quote Summary - There were multiple incentives to expand in 2014. These were led by record high cattle prices, with finished cattle averaging near $155 per live hundredweight and Oklahoma 500–550 pound steer calves averaging $250 per hundred. The other part of the incentive was more abundant feed due to a retreating drought in the Central and Southern Plains that restored range conditions and to favorable feed crop production in 2013 and 2014 which lowered corn and protein feed costs.

The most significant expansion is underway in the beef herd where beef cow numbers are up two percent from year-ago levels. The number of beef heifers being held back to enter the breeding herd is up four percent. Significantly, the number of those retained heifers that will calve this year is up seven percent. This means 61 percent of the beef heifers that have been retained to enter the breeding herd were already bred at the start of this year. The 2014 beef cow herd expansion, thinks Hurt, is likely the beginning of a multi-year increase.

Quote Summary - It is common for the beef herd to be in expansion for four to six years. With 2014 registering as the first year of expansion, expansion could continue through most of this decade. If so, peak beef production on this cycle would not be expected until early in the next decade.

Beef supplies, however for this year, will not change much. This might lead one to anticipate prices to be near the $155 finished cattle price of 2014. However, 2014 was an exceptional year, and meat prices in general this year may be lower explains Chris Hurt. Currently, futures markets are heavily discounting cash cattle prices, suggesting 2015 average finished cattle prices in the higher $140’s. However, he expects finished cattle prices to average $150 to $157 in 2015, with prices in early spring in upper $150s and the lower $160’s and then to fall to near $150 in summer and then to end the year in the mid-$150s.

Using the APAS Sample Farm

Using the APAS Sample Farm
Jonathan Coppess, Ag Policy Specialist - University of Illinois

Farmers and landowners wanting to learn more about the new farm programs and the sign up process can visit the Farm Bill Toolbox online. It was developed by the ag economists at the University of Illinois and Ohio State. Just search Google for Farm Bill Toolbox and you’ll find a seven step decision making process. There is also a link from the Farm Bill Toolbox to USDA’s APAS (ay-pass) website.

APAS stands for Agricultural Policy Analysis System. Jonathan Coppess from the University of Illinois says the two systems are related to each other.

Quote Summary - The way we look at it is that the APAS site gives you the chance to calculate expected payments and the Farm Bill Toolbox is the education outreach and analysis. So, you may use the two in an interrelated way. In fact we often make presentations using both, jumping back and forth from the APAS Tools to the Decision Steps.

The seven Decision Steps in the Farm Bill Toolbox guide farmers and landowners through the sign up process. The APAS Tool allows them to put their own farm numbers into the programs to see how different scenarios would work over the project five year life of the new farm safety net. Those wanting a quick view can simply use a sample farm from their own county - no matter where they live in the nation.

Quote Summary - The sample farmers are very usually friendly way to get an idea what program payments might be expected in your county. You simply choose your state and county, and a projected price series - one from USDA, one from the Congressional Budget Office, or the or the FAPRI numbers - and APAS simulates a farm sized at about $500,000 in gross revenue. The models use historical values from the county and estimates payments for a farm of that size.

The APAS sample farm is a quick way to benchmark, says Coppess, the new farm programs and how they might perform in a given county under varying price scenarios and program choices. APAS estimates farm payments based on crop, price, and program choice.

Those wanting to use the APAS Tools and the Farm Bill Toolbox can find each online.

Signing Up for the Farm Programs

The time to sign up for the farm programs has arrived. Decisions will need to be made in February and January. Read on for a quick lesson in the process, and then please visit the Farm Bill Toolbox website created by the ag economists at the University of Illinois. Landowners and farmers should find the seven step decision process in the toolbox very valuable as an aid to making the new farm program choices.

The deadline for making two of the three farm program choices is the end of February. University of Illinois Ag Economists Gary Schnitkey, Jonathan Coppess, & Nick Paulson along with The Ohio State’s Carl Zulauf penned an article about the acreage allocation and yield update decisions. It follows;

Base Acre and Yield Updating Decisions: Push to the Finish
The deadline for completing base acre and yield updating decisions is February 27th (see steps 2 and 3 of “7 Steps” on Farm Bill Toolbox). Choosing between alternatives for each of these decisions is relatively straight forward:

1) For yield updating, select the highest yield for each program crop.

2) For base acre reallocation, choose the allocation that maximizes acres in program crops with the highest payments, given that the desire is to maximize program payments.

While the decisions usually are straightforward, collecting the information and completing the process will take some time. For this reason, beginning the process now seems prudent.

Landowners Officially Make the Decisions
Decisions will be made for each Farm Service Agency (FSA) farm. For each farm, there will be a landowner who owns the farm. Under rental arrangement, there also will be a producer who farms the land.

Landowners are responsible for making the base acre reallocation and yield updating decisions. While the landowner officially makes the decisions, in many rental situations producers have the proper power of attorneys to complete paperwork for these decisions. FSA has a record of whether proper power of attorneys exists for each farm. If an appropriate power of attorney does not exist and the landowner wishes the producer to complete the process, a power of attorney will need to be signed for farmers or farm managers to complete the decisions. If a power of attorney does not exist, the landowner will need to complete the process for base acre and yield updating decisions.

Collect Yield Data
If program yields are to be updated, yields are required for each year the crop was planted from 2008 through 2012. Documentation is not required at signup. However, documentation will be required if the FSA farm is audited during the life of the Farm Bill. The method of documentation will need to be indicated at signup. In many cases, crop insurance records will be used to provide documentation. These records are the actual yearly yields used to calculate Actual Production History (APH) yields. An explanation of using crop insurance records for documentation is available here (farmdocdaily December 23, 2014).

It will not be uncommon that documentation for a yield will not exist for a year. For example, a producer may have only farmed the land in 2010 through 2012 and cannot obtain documentation for 2008 and 2009.

If a yield is provided without documentation under an audit, farm program payments may have to be repaid and a fine could result. When yield documentation does not exist, a plug yield will need to be used. The plug yield equals 75% of the county average. When documentation cannot be provided, the plug yield should be used for 2008 and 2009

Plug yields for each county and crop are publicly available. FSA has this information. They can be obtained from the Payment Yield Update tool on the APAS website. The plug yields also are contained in the Base Acre and Yield Updating tool, a Microsoft FAST spreadsheet available for download at the FAST website.

Yields can be reported to FSA using CCC–859. This form is available here.

Make an Appointment with FSA
An appointment should be made immediately with FSA. If possible, yields for updating should be completed before this meeting. Bringing completed CCC–859 forms will facility the signup process.

Yield Updating Decision
Two alternatives for the program yield will exist for each program crop (see farmdocdaily April 3, 2014 for more detail):

  • The current program yield. These yields were reported for each FSA farm in a letter received from FSA in August 2014.
  • The updated yield equal to 90% of the average of yields from 2008 through 2012. If a year’s actual yield is below the plug yield, the plug yield will be used instead of the actual yield. If an actual yield does not exist for a year in which the crop was planted, the plug yield will be used in the update yield calculation.

Choose the highest yield. The decision can differ by crop for an FSA farm.

Base Acre Reallocation Decision
There are total base acres on each FSA farm. Landowner will be given two alternatives for dividing those total base acres into acres for each program crop (see farmdocdaily March 6, 2014 for more detail):

  • Current allocation of base acres on the farm. These acres were sent to landowners and producers in a letter received in August 2014.
  • Reallocated base acres. Total base acres are reallocated based on plantings from 2009 through 2012. Actual plantings were described in a letter received in August 2014. Total base acres under reallocation will equal base acres if current base acres are retained.

This decision is important as Price Loss Coverage (PLC) and Agricultural Risk Coverage at the county level (ARC-CO) will make payments in 2014 through 2018 on base acres. Planted acres in those years will not influence payments.

Many individuals will wish to make the allocation that maximizes commodity program payments, suggesting that the allocation be selected that places most acres in the crops with the highest expected payments. Estimating expected payments by crop requires forecast of prices and yields in 2014 through 2018. Obviously, forecasts can be wrong and crop rankings can vary from forecast rankings. With the knowledge of potential differences, estimated expected payments per program crop by county are available in the sample farms section of APAS. These same estimates also are available in the Base Acre and Yield Updating tool (available at the FAST website).

Users can see expected payment per program crop under different price forecasts for individual counties. In most counties, however, the following ranking exists:

  • Corn will have higher expected payment
  • Wheat will have lower expected payments than corn
  • Soybean will have lower expected payments than corn and wheat.

Corn and soybeans are only program crop: Given the above program crop ranking, choosing the acre alternative with the most corn acres likely will maximize program payments.

As an example take a farm whose current allocation is 60 acres of corn and 40 acres of soybeans. The reallocation alternative based on 2009 through 2012 plantings is 75 acres of corn and 25 acres of soybeans. Note that both alternatives total 100 total base acres. The above ranking suggests that the reallocated alternative (75 acres of corn and 25 acres of soybeans) will have the highest expected payments.

Corn, soybeans, and wheat are the program crops: When these three program crops exist, the reallocation with the lowest acres in soybeans while maximizing corn acres usually will result in the highest expected payments. Use of the Base Acre and Yield Updating Tool is advisable in these cases.

Summary
In many cases, making choices for base acre reallocation and yield updating will be relatively straightforward. Collecting yields, getting the proper power of attorneys, and signing proper election forms will take time. Beginning the process now is important. The process needs to be completed by February 27, 2015.

2015 ADAO Schedule

All-Day Ag Outlook Meeting Schedule
March 10, 2014 - Beef House
16501 Indiana 63
Covington, Indiana 47932

Registration
8:45am eastern / 7:45am central

Opening Remarks
9:25am eastern / 8:25am central

Cash Grain Panel
9:30am eastern / 8:30am central
Greg Johnson, The Andersons - Champaign, Illinois
Aaron Curtis, MIDCO - Bloomington, Illinois
Matt Bennett, Channel Seeds - Windsor, Illinois
Chuck Shelby, Risk Management Commodities - Lafayette, Indiana

Land Values 2015
10:15am eastern / 9:15am central
Murray Wise, CEO Murray Wise Associates - Champaign, Illinois

Break (20 min)

Livestock 2015
11:05am eastern / 10:05am central
Chris Hurt, Purdue University - West Lafayette, Indiana

Futures 2015
11:35am eastern / 10:35am central
Sue Martin, Ag and Investment Services - Webster City, Iowa

Lunch and Trade Show
12:20pm eastern / 11:20am central

Soybean Commodity Panel
1:30pm eastern / 12:30pm central
Curt Kimmel, Bates Commodities - Normal, Illinois
Wayne Nelson, L&M Commodities - New Market, Indiana
Mike Zuzolo, Global Commodity Analytics & Consulting - Atchison, Kansas
Bill Mayer, Strategic Farm Marketing - Champaign, Illinois

Corn Panel
2:15pm eastern / 1:15pm central
Dan Zwicker, CGB Enterprises - Mandeville, Louisiana
Pete Manhart, Bates Commodities - Normal, Illinois
Jacquie Voeks, Stewart Peterson Group - Champaign, Illinois
Bill Gentry, Risk Management Commodities - Lafayette, Indiana

Reviewing the Pace of Corn & Soybean Exports

Following the January 12 USDA Crop Production and Grain Stocks reports it has becoming increasingly clear that the story in the corn and soybean markets for the foreseeable future will be the ongoing pace of consumption.



Consumption of corn produced in the United States can be tallied as corn for used for ethanol, fed to livestock, or exported. The soybean consumption numbers are derived from an item called the crush… that’s when a soybean facility crushes the bean to extract the oil and meal from it. There is also the feed and residual number, and again exports. University of Illinois Ag Economist John Newton has explored the export numbers.

He says, holding all else constant, a lower rate of corn and soybean exports relative to current USDA projections would increase carryover stocks, and could produce downward pressure on prices. USDA, as of the January reports, expects corn exports will be 1.75 billion or 1750 million bushels for the current marketing year. Newton also says right now the actual numbers suggest corn exports will need to pick up to make it to seventeen-fifty.
With nearly 40 percent of the marketing year in the books, corn exports need to accelerate in order to reach the 1,750 million bushel WASDE projection. Based on the implied GATS estimate of 602 million bushels, 1,148 million bushels need to be exported during the remainder of the marketing year to reach the WASDE projection. On a weekly basis this total represents approximately 37 million bushels per week, and would require an increase of 57 percent over the current 10-week average export volume.
Again, in order to meet the USDA projected yearly exports total of 1.750 billion bushels the pace of corn exports needs to average 37 million bushels per week from mid-January forward. Using a similar set of calculations John Newton reports cumulative soybean exports for the 2014/15 marketing year total 1.312 billion bushels, up 18 percent from last year.
Based on the FGIS totals, then, to reach the 1,770 million bushel WASDE projection it’s implied that 458 million bushels of soybeans need to be exported during the remainder of the marketing year. On a weekly basis this total represents approximately 15 million bushels per week.
While corn exports are accelerating, the pace of soybean exports from U.S. ports is slowing down. Combining the outstanding sales with the remaining balance needed, Newton expects sales could come up 42 million bushels short of the WASDE projection. He thinks soybean exports will struggle to meet the lofty 1.77 billion bushel USDA estimate, but that it is entirely possible.