Feb 08 | WILLAg Newsletter

February 8, 2020

The WILLAg.org All Day Ag Outlook is less than a month away. You may buy your tickets online today or by calling 800–898–1065 between 8:30 AM and 5 PM business days. The $30 ticket price includes Beef House rolls and coffee in the morning and your Beef House Lunch! The doors open at 8am central / 9am eastern Tuesday, March 3, 2020, at the Beef House in Covington, Indiana.

see you soon!
Todd Gleason, Farm Broadcaster
ILLINOIS Extension
tgleason@illinois.edu or 217–390–1858

Tuesday, March 3, 2020

Beef House
16501 Indiana 63
Covington, Indiana 47932

9:00am eastern / 8:00am central

Opening Remarks
* Todd E. Gleason, ILLINOIS Extension

The Future of Agriculture
* Steve Maulberger, Vice President Crop Risk Services, Inc.

Cash Grain Panel
* Matt Bennett, AgMarket.net
* Aaron Curtis, MID-CO Commodities
* Brian Stark, The Andersons * Chuck Shelby, Risk Management Commodities

Global Weather
* Eric Snodgrass, Nutrien Ag Solutions

Soybean Panel
* Dave Chatterton, Strategic Farm Marketing
* Merrill Crowley, Midwest Market Solutions
* Ellen Dearden, AgReview
* Chip Nellinger, Blue Reef AgriMarketing

ARC/PLC, MFP, & SCO & Crop Insurance
* Gary Schnitkey, ILLINOIS Extension

Corn Panel
* Curt Kimmel, Bates Commodities
* Wayne Nelson, L&M Commodities
* Mike Zuzolo, Global Commodity Analytics & Consulting
* Jacquie Voeks, Stewart Peterson
* Dan Zwicker, Zwicker Consulting

Let us know if you are interested in sponsoring the All Day Ag Outlook.
download sponsorship form

A Tale of Two Basis

The last two Commodity Week programs have been particularly focused. This week we honed in on the March corn futures basis contracts due to expire at the end of this month. Our panelists worked hard to put the forced choices into context.

Last week was all about how basis is used to move corn around the Midwest to fulfill local needs. The examples came primarily from Michigan and clearly defined how end users are dealing with both a lack of corn and the poor quality corn available within normal draw areas.

You may listen to the Basis Contracts Commodity Week and the Basis Moves Corn Commodity Week programs whenever you’d like. Just hit the links in this paragraph.

PhaseOne Included in February Reports

There is a lot of confusion related to how USDA will incorporate the Phase One China Trade deal into Tuesday’s World Agricultural Supply and Demand Estimates (WASDE) report.

The simple explanation is the same way USDA always deals with policy issues. Once the agreements are reached USDA incorporates them into the numbers. This month is a very good example.

PhaseOne was signed January 15. It will be in the February 11 WASDE release but was not in the January report. Trade estimates regarding the new agreement with Canada and Mexico, USMCA, will not be included. This is because Canada has not ratified it. However, if Canada manages to do that sometime between now and 11am central Tuesday the trade influence would (might) be included, depending on the economists in lock-up knowing about the change.

USDA uses current policy to make report estimates.

USDA OCE released a white paper on the impact of the Phase One China agreement. You may read it here. In an unusual statement, USDA Chief Ag Economist Rob Johannson said not to expect too much impact from the deal. USDA is not privy to any of the deal’s actual numbers.

ARC-Co, ARC-IC, Crop Insurance & SCO

Farmers and landowners have until March 15th to make Crop Insurance and Farm Safety Net program decisions. The farmdoc team ag economists on the third floor of Mumford Hall (I’m in the basement) have been working really hard for build decision making tools for use across the nation.

These include an online Gardner Program Payment Calculator that essentially gives you the odds on ARC vs PLC for corn, soybeans, and wheat. The thing runs on a supercomputer here at the University of Illinois. You may choose your state, your county, your crop, and the forecast (price) model you’d like to run. You’ll need your PLC program yield. It’s different than the APH and if you haven’t updated it with FSA, the first thing you need to do Monday is to get that straightened out. Start by making a call to your crop insurance agent.

The other tool, and these both work for every county in the nation, is a downloadable Excel spreadsheet. This program calculates Agricultural Risk Coverage for County Coverage (ARC-CO), Price Loss Coverage (PLC) payments, and ARC at the Individual Level (ARC-IC). County yields and market year average (MYA) prices are brought in for a user-specified state-county-crop combination. Users then can change 2018 through 2020 county yields and prices to see ARC-CO and PLC payments under those yields and prices.

Those with Prevented Planting acres from last year should use the spreadsheet. It will give them a better idea if ARC-IC is the best option. Early indications from ILLINOIS’ Gary Schnitkey points to this being the case if 100% of an FSA farm was prevent plant.

The ARC/PLC decision locks in those programs for last season and this season. You may watch a farmdocDaily video on making the ARC/PLC decision with info on ARC-IC. It was recorded in the office across the hall from my studio February 3rd with Gary Schnitkey, Jonathan Coppess, Nick Paulson, and Doug Yoder.

The Crop Insurance decision is also due March 15th. Those choosing PLC, for instance on corn, have an additional crop insurance option; SCO, or Supplemental Coverage Option. Here’s a portion of a December farmdocDaily article Gary Schnitkey wrote on SCO.
  • SCO provides protection in a band from 86% down to the coverage level of an underlying COMBO product. If, for example, a farmer selects a 75% Revenue Protection (RP) product, SCO could be purchased from 86% to the 75% RP coverage level (see farmdoc daily, December 17, 2014; April 24, 2014)
  • The SCO band of coverage is based on county revenue is given that the underlying COMBO product is RP. That is, county revenue must fall below 86% of expected revenue before SCO makes a payment. As a result, the RP-SCO combination provides mixed coverage: Farm-level coverage is provided from the RP coverage level downward while county-level coverage is provided between 86% to the coverage level of the RP product.
  • The primary advantage to SCO is that total farmer-paid crop insurance premium can be reduced using SCO (see farmdoc daily, February 12, 2019).
  • There are two disadvantages to SCO. First, choosing SCO and lowering the coverage level on the COMBO product will lower the potential to prevent plant payment. As a result, the economic advisability of taking prevent plant payments decreases with lower coverage levels. Second, the RP-SCO combination, where the county-level coverage does not match losses on a farm. Sometimes a farm may have a loss while SCO will not trigger a payment. Conversely, it is possible for the farm not have a loss while the county-based SCO product triggers a payment.
  • More information on SCO is available in a March 12, 2019 farmdoc daily article. This article includes YouTube visions describing aspects of the SCO policy.
  • The availability of SCO should not be the most important factor in the ARC/PLC decision for those farmers purchasing RP at 80% or 85% coverage levels. SCO will not greatly increase risk protection offered to these farmers. Farmers in this position likely should focus on the merits of ARC and PLC when making the commodity choice decisions.
  • On the other hand, SCO can increase risk protection to those farmers purchasing RP at 75% and lower coverage levels. Farmers in this position likely are on lower productivity farmland. If an SCO purchase would be considered, PLC should be given preference over ARC.

Listen to WILLAg on the Radio & Online.

Radio - Draw a north/south line from Champaign across the whole state of Illinois. If you live somewhere between 50 miles west of that line or a 100 miles east then you can likely hear the live broadcast. Those are (central time) at 8:55am, 10:58am, 12:58am, and 2:06pm daily. They include eighteen different commodity analysts weekly and six meteorologist specialized in agriculture.

Web - If you visit or webpage willag.org you’ll find much of that programming in full. The content is updated not long after it airs on the radio station and in the case of Commodity Week before it airs. You’ll find the daily Opening, Mid-Morning, Mid-Day, and Closing Marketing reports plus Commodity Week. If you look at the top of the page on your desktop (or in the hamburger tab on smartphones and tablets) you’ll find a way to listen to all of these live, too. Choose the WILL-AM Live live button.

Podcasts - Pick your favorite app and you will find the podcasts. Mostly just search for Closing Market Report (CMR) or Commodity Week (CW). Here are some direct links.

Apple Podcasts
CMR - https://podcasts.apple.com/us/podcast/closing-market-report/id1033017980
CW - https://podcasts.apple.com/us/podcast/commodity-week/id78616414

Google Podcasts
CMR - https://play.google.com/music/m/Ipwniphmbezak6hbc7j66txe42y?t=The_Closing_Market_Report
CW - https://play.google.com/music/m/Ilv6ww7upenw4g5lu4binszay4i?t=Commodity_Week

CMR - https://open.spotify.com/show/5gzoTEuKrOVezUYAGQPPNA
CW - https://open.spotify.com/show/4gqun3iXpg4ymF0S8D3mLP

CMR Playlist - https://soundcloud.com/narrowrow/sets/willag-futures-archive
CW Playlist - https://soundcloud.com/narrowrow/sets/commodity-week

Either set the app home station to Illinois Public Media or search for Commodity Week and the Closing Market Report.

You may copy these URLs into your favorite podcast applications in order to add our content.
CMR - https://will.illinois.edu/closingmarketreport/rss
CW - https://will.illinois.edu/commodityweek/rss

The farmdocDaily team operates a farmdocvideo YouTube channel. It includes videos I produce under the Illini Farm Report heading. More importantly you’ll find the farmdoc team’s videos.