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Crop Insurance Loss Performance in 2014


Last year federal crop insurance performed really well. This means it covered losses in the way it was designed to do the job. Over time crop insurance is meant to even out the ups and downs in annual income experienced by commodity farmers.


It does this by paying out one dollar for every dollar of premium a farmer pays in to the system to purchase the insurance. The farmer can expect there will be many years when a payment is not made, but when the income from crops drop, a crop insurance payment will help alleviate the gap. Here’s another explanation from University of Illinois Extension Ag Economist Gary Schnitkey.
Quote Summary - The crop insurance program was designed to have a loss ration of about one. The loss ratio equals payments-made divided by premium-paid. Over time the federal crop insurance program is supposed to pay out roughly the same amount it collects in premium. A loss ratio of one is about the target. A loss ratio of less than one means payments were less than the premium collected and if the payments made are more than the premium paid, then the loss ratio is greater than one.
Last year, for all covered crops harvested in 2014, the loss ratio was point-nine. This is slightly above the annual yearly average of the last decade. The long run average is point-eight-two.
Quote Summary - Overall you would say 2014 was an average year. The high happened in 2012. That year the loss ratio was one-point-six-two. The low year is point-five-three which happened in 2007.
The 2014 loss ratio for corn was one-point-zero-five. Wheat losses nearly topped that chart at one-point-one-three. Rice had a bad income year. Its loss ratio was one-point-four-nine. By contrast the soybean loss ratio was just point-five-four.


Last year Gary Schnitkey says the data shows most of the corn belt state payments were made in Iowa and Minnesota. Many of the counties in the northern two-thirds of Iowa and in Minnesota had loss ratios above two. Losses in those parts of the country were quite high.


The reason is because we had price declines on both corn and soybeans and those areas last year were not as good as the rest of the corn belt. The remainder of the corn belt had very low loss ratios. The loss ratios were below one in Illinois, Indiana, Ohio, Missouri, and the Dakota’s.

Link to Original Article

Pork Industry Continues to Adjust from PED

The price of hogs is on the rebound. It appears to be the economic remnants of a widespread disease outbreak in 2014.

The pork industry continues to adjust from the supply shock created by the PED virus last year. Live hog prices peaked in the summer of 2014 as Porcine Epidemic Virus losses mounted and then fell into the late winter of this season. Looking back it seems prices overshot on the high side due to PED, thinks Purdue University Ag Economist Chris Hurt, and then undershot early this year as market supplies were restored. He says the third phase of this cycle now seems to be the recent recovery in prices - up from the $45 low made in March.

Quote Summary - Now, they have recovered to the low $60s. The low prices in March were clearly related to 14 percent higher production for that month compared to year previous levels and market concerns that pork supplies were going to remain higher by ten percent or more into the spring.

The recent recovery in hog prices, apparently, is related to the fact supplies have not been that high. April pork production was up eight percent. May was about six percent higher. Both are in alignment with the last inventory count from USDA. If those inventory counts continue to hold, then second quarter pork production will be up by six percent, the third quarter up by seven percent, and the final quarter of the year up only four percent says Chris Hurt. He says not only are fewer hogs coming to market, but that they weigh less, too.

Quote Summary - I would guess we’ll average one percent lower weights for most of the rest of this year.

Fewer hogs at lower weights are causing a mid year bump in prices. Live hog prices in the first quarter of the year were $48.47 according to USDA. Prices are expected to average near $58 in the second and third quarters. Hurt thinks it will drop to about $51 in the last quarter of the year, and decline to the high$40 level for the first quarter of 2016. These numbers mean hog producers will make money this year, but lose money starting in 2016 unless the price of corn stays on the bottom of its trading range.

The next important benchmark for the pork industry is USDA’s June Hogs and Pigs report due the 26th. It will show how the industry has grown or contracted since March.

Quote Summary - Producers reported in the March update that they intended to reduce this summer’s farrowings by two percent. This was a surprise given the generally profitable industry since mid–2013. If farrowings should actually expand, this would increase pork production early next year and keep a bearish cast over the industry to start 2016.

If you’d like to learn more about the livestock sector, in particular the pork industry, from Chris Hurt, you may read his thoughts on the Farm Doc Daily website.

Reducing Illinois Cash Rents Imperative

An ag economist on the University of Illinois campus is continuing his calls for farmers and landowners to lower cash rents.

Monitoring Soybean Consumption & Production Prospects

The trade has turned its primary attention to the soybean crop being planted across the United States, but that doesn’t mean it has fully discounted last year’s harvest as market maker.



This year the United States Department of Agriculture expects about one-point-eight billion bushels of soybeans will be used within U.S. borders. This is more than last year and it appear USDA is on target with its projection. The pace of domestic crush has steadily picked up as the fiscal year has passed. University of Illinois Ag Economist Darrel Good says the pace needs to pick up a bit more to make the target.
Quote Summary - To reach the USDA projection, the crush during the last four months of the marketing year needs to exceed that of a year earlier by 7.7 percent.
The NOPA crush estimate for May is scheduled for release on June 15, and that’ll offer more insight into domestic usage. The other primary point of usage is the export market for soybeans.
Quote Summary - The USDA projects that U.S. soybean exports during the current marketing year will reach a record 1.8 billion bushels, 9.3 percent more than the previous record of last year. With about 14.6 weeks remaining in the marketing year, cumulative USDA export inspection estimates have reached 1.722 billion bushels. For the first seven months of the marketing year, export inspections tracked Census Bureau export estimates very closely. To reach 1.8 billion bushels for the year, exports during the final weeks need to total about 78 million bushels, or about 5.35 million bushels per week.
The last five weeks have seen exports above 10 million bushels each. It very likely, thinks Darrel Good, that USDA’s export projection for soybeans will be easily met. This brings him to the ending stocks figure, or the number of bushels to be leftover at the end of the fiscal year in September. That number will be calculated and it could result in an adjustment of the size of last year’s crop, and then there is this year’s crop.
Quote Summary - Until very recently, few concerns have been expressed about the 2015 soybean production season. Planting has proceeded at a pace that exceeds the previous 5-year average pace and expectations have been for acreage to exceed intentions reported in the USDA’s March Prospective Plantings report. The recent weather pattern, however, has generated a few issues. In particular, the area of extreme rainfall amounts in Texas and Oklahoma that extends into southern Kansas and parts of Arkansas have raised a few concerns about the timeliness of planting and the potential for some prevented planting. The focus is on Kansas due to the combination of the slow pace of planting (17 percent as of May 17) and the magnitude of soybean acreage (3.8 million) intended to be planted in that state.
For the U.S as a whole, there is some measurable yield loss as the percentage of the crop planted after May 30 increases. For the period from 1986 through 2014, the percentage of the crop planted after May 30 has ranged from nine percent (2012) to 66 percent (1995) and averaged 34 percent. With 45 percent of the crop reported planted as of May 17, the percentage of the crop planted after May 30 this year will not likely exceed the average of the previous 29 years due to the rapid pace of planting in northern growing areas. The impact, if any writes Darrel Good in his Weekly Outlook posted online to Farm Doc Daily, of the extreme wetness on the magnitude of planted acreage of soybeans should be revealed in the USDA’s June 30 Acreage report.