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Showing posts from 2017

2017 Year End Tax Planning Ideas

link to farmdocDaily article

by Dwight Raab, Illinois FBFM

With the recent passage of the Tax Cuts and Jobs Act (Congress passed on 12/20; President signed on 12/22) there are significant changes to the deductible amount of state income, property tax and real estate tax used in calculating itemized deductions beginning in tax year 2018. Under the new law, beginning in 2018, there is a $10,000 maximum combined limit of state income, property and real estate tax that may be deducted when itemizing deductions on IRS Form 1040, Schedule A. For 2017, there is no limit on the amount of these expenses. Thus, there are two tax planning opportunities with the potential to allow taxpayers to maximize the amount of these deductions if they take action prior to December 31, 2017. These two planning opportunities are available only to those using Form 1040, Schedule A to itemize certain deductions on their individual income tax return.

The first planning opportunity involves the advance payment of property and real estate tax on the taxpayers' personal residence or other personal use property prior to December 31, 2017. This advances payment of these taxes that would normally be paid in 2018 into 2017 and then itemizing them on IRS Form 1040, Schedule A. Please check with your local county treasurer or collector to make certain that they will accept such an advance payment of real estate tax. To make a distinction between personal real estate tax and business real estate tax - this IRS Form 1040 Schedule A limit on the maximum amount of deduction does not apply to property or real estate tax paid in the operation of a business. Those taxes continue to be deducted on Schedule F or Schedule C and are not subject to the $10,000 limit for years after 2017.

The second planning opportunity involves paying any 2017 state income tax due by December 31, 2017 for personal income tax returns due in April 2018. For example, if a taxpayer is making quarterly estimated payments of State of Illinois income tax, the fourth quarter payment is due January 15, 2018. If that amount is paid by December 31, 2017 then that amount can be deducted on the 2017 tax return, since the liability is related to the 2017 return. This includes farmers making a 4th quarter state income tax payment - making that estimate payment prior to December 31 allows for a 2017 deduction and avoids the 2018 Schedule A limit. Care must be taken to not prepay any 2018 state income tax liabilities, as any prepayment of a 2018 state income tax is not allowed to be deducted on the 2017 return. That payment would be treated as being paid on January 1, 2018 and would then be subject to the $10,000 limit. Taxpayers should use the 2017 state estimate vouchers to make these payments.

This is a 'one-time' potential strategy to put in place prior to the $10,000 limit on state income, personal and real estate tax is put in place and don't forget that the standard deduction increases markedly beginning in 2018 which will make it more difficult to itemize deductions on Schedule A of IRS Form 1040.

Before utilizing either of these strategies taxpayers should consult their tax advisor. Not all taxpayers will benefit from advancing the payment of these taxes into 2017. This would especially apply to taxpayers subject to the alternative minimum tax as there may be no tax benefit on the 2017 return by making these payments in December.

Corn Use for Ethanol Update


University of Illinois Commodity Markets Specialist Todd Hubbs discusses prospects for the ethanol exports to Brazil and China with Extension Farm Broadcaster Todd Gleason.

by Todd Hubbs, University of Illinois
farmdocDaily article

The recent strength in ethanol production has led to speculation about changes to USDA’s estimate of corn used for ethanol in the pending WASDE report. Ethanol production for the week ending December 1 set a new ethanol production record with an average of 1.108 million barrels per day, continuing eight consecutive weeks of more than a million barrels a day of production. Currently, the WASDE forecast for corn consumption for ethanol production is 5.475 billion bushels, up 36 million bushels from 2016–17 marketing year estimates. The ability to surpass this projection is possible, but foreign demand for ethanol will be crucial as we move into 2018.

Domestic ethanol consumption is influenced by domestic gasoline consumption, due to the ethanol blending requirement, and the biofuels volume requirement associated with the Renewable Fuels Standard. The EPA final rulemaking for the Renewable Fuels Standard for 2018 was released on November 30. The renewable fuels volume requirement is set at 19.29 billion gallons for 2018, up slightly from the 19.28 billion gallons required in 2017. The conventional ethanol requirement is set at 15 billion gallons for 2018, the same as in 2017 and equal to the statutory requirement level. If the gasoline consumption forecast used by the EPA is correct, the E–10 blend wall will be near 14.3 billion gallons in 2018. The EPA believes an ethanol supply of 15 billion gallons is reasonably attainable in 2018 with a total domestic capacity of 16 billion gallons. Since the ethanol blending requirements did not change, the possibility for greater corn usage in 2018 due to blending is low unless gasoline consumption increases beyond current expectations.

According to the most recent Energy Information Agency (EIA) Short Term Energy Outlook, U.S. retail gasoline price is projected to average $2.45 per gallon in 2018, an increase of five cents from the current expected price in 2017. Despite the projection of higher gasoline prices, gasoline consumption is forecast at 143.27 billion gallons in 2018. The 2018 gasoline consumption projection is up from the 143.03 billion gallons projected for consumption in 2017. EIA’s forecast of ethanol production is set at 1.04 million barrels per day. If the EIA projection is correct, approximately 15.9 billion gallons of ethanol will be produced in 2018. To exceed the current USDA projections for corn use in ethanol, exports need to repeat the impressive performance of the 2016–17 marketing year.

Ethanol export numbers are available from U.S. Census trade data for 2017 through October. For the 2017 calendar year, U.S. exports of ethanol are at 1.09 billion gallons, up almost 16.6 percent from the similar period in 2016. A note of caution is warranted when considering ethanol exports in the current marketing year. During the first two months of this marketing year, ethanol exports are down 19 percent from previous marketing year levels. The large reduction is due to drastically lower export levels to Brazil and China. Chinese imports of U.S. ethanol are minimal thus far in the marketing year. Brazilian ethanol imports from the U.S. are down 49 percent from last year for the first two months. During the 2016–17 marketing year, U.S. ethanol exports totaled 1.37 billion gallons, with exports to Brazil comprising 36.5 percent of the total. The imposition of the 20 percent tariff rate quota on Brazilian ethanol imports on September 4 is curtailing Brazilian imports. The tariff becomes active at export levels greater than 150 million liters per quarter (39.6 million gallons) and restarted in December. U.S. ethanol exports will require increases in other markets to meet or exceed the export levels attained during the 2016–17 marketing year.

Corn consumption levels for ethanol production during this marketing year is provided in the USDA Grain Crushing and Co-Product Production report. Grain crushing for fuel alcohol is available through October. For the first two months of the marketing year, 915.6 million bushels of corn has been processed for ethanol. The grain crush is up 2.8 percent from 2016–17 marketing year processing numbers over the same period. Using EIA weekly ethanol production numbers, November ethanol production averaged over 1 million barrels per day. These production levels place corn use for ethanol production in a range of 555 to 565 million bushels for the month. With a conservative estimate of corn crush in November, total corn consumption for ethanol production through the first quarter of the marketing year would be well above the current WASDE projection. While this is an encouraging sign for corn use, ethanol stocks have risen for five consecutive weeks to reach 22.5 million barrels as of December 1, a level not attained since June. During the same period last year, ethanol stocks fell around 700,000 barrels under strong export demand.

The December WASDE report may increase the corn use in ethanol projection due to the strong production during the first quarter of the marketing year. Lower ethanol export totals and growing ethanol stocks may create a wait and see scenario. Another strong year of ethanol production is highly likely, but flat projections for gasoline consumption and lower ethanol export levels may limit growth over last marketing year’s performance.

Weekly Outlook | Soybean Export Prospects for 2017-18

Up Next… U.S. soybean exports need to continue to build on the strength seen in the 2016–17 marketing year. The ability to exceed the current USDA export projections in 2017–18 is a possibility, but it is heavily dependent on South American production and the continued growth in demand from importers. Todd Gleason has more from the University of Illinois…

Fun Turkey Facts

Ben Franklin, in a letter to his daughter, proposed the turkey as the official United States bird.

In 2012, the average American ate 16 pounds of turkey.

The heaviest turkey ever raised was 86 pounds, about the size of a large dog.

A 15 pound turkey usually has about 70 percent white meat and 30 percent dark meat.

The male turkey is called a tom.

The female turkey is called a hen.

The turkey was domesticated in Mexico and brought to Europe in the 16th century.

Wild turkeys can fly for short distances up to 55 miles per hour.

Wild turkeys can run 20 miles per hour.

Turkeys’ heads change colors when they become excited.

Most of the turkeys raised for commercial production are White Hollands.

It takes 75–80 pounds of feed to raise a 30 pound tom turkey.

A domesticated male turkey can reach a weight of 30 pounds within 18 weeks after hatching.

Forty-five million turkeys are eaten each Thanksgiving.

Twenty-two million turkeys are eaten each Christmas.

Nineteen million turkeys are eaten each Easter.

Male turkeys gobble. Hens do not. They make a clicking noise.

Turkeys have heart attacks. The United States Air Force was doing test runs and breaking the sound barrier. Nearby turkeys dropped dead with heart attacks.

The five most popular ways to serve leftover turkey is as a sandwich, stew, chili or soup, casseroles, or as a burger.

Nitrogen Fertilizer Prices and Costs Lower for 2018 | Interview

Nitrogen fertilizer prices are averaging lower now than in any time since September 2008. These lower prices could translate into roughly a $10 per acre saving in nitrogen fertilizer for the coming 2018 production year. Further savings may be possible for those farms who are applying above recommended nitrogen rates and are willing to cut fertilizer application rates. University recommendations suggest nitrogen application rates well below 200 pounds in northern and central Illinois.

Todd Gleason talked with University of Illinois agricultural economist Gary Schnitkey about his farmdocDaily article.

Average anhydrous ammonia prices in Illinois are reported approximately twice a month in the Illinois Production Cost Report, a publication of the Agricultural Marketing Service, an agency of the U.S. Department of Agriculture. In the November 10th report, the anhydrous ammonia price was reported at an average of $405 per ton, with an offer range from $343 per ton up to $440 per ton. Anhydrous ammonia prices have averaged $404 per ton during the months of September, October, and November of 2017.



The $404 per ton average in 2017 is considerably lower than fall prices in recent years. AMS has been reporting anhydrous ammonia prices since 2008 (see Figure 1). This year’s $404 per ton price is the lowest fall price since reporting began in 2008.



Farmers can leverage this lower price even more by using the MRTN to optimize yield. The online N-Rate Calculator is the work of seven corn state Land Grant universities. The calculator uses the prices of nitrogen and corn to optimize yield for the highest revenue. This is different than maximizing yield. It seeks to maximize dollars.

Through the lower cost of nitrogen and use of the N-Rate Calculator northern and central Illinois farmers may save approximately $10 per acre writes Gary Schnitkey on farmdocDaily.
Weather-related decision permits trucks hauling ag commodities to exceed gross vehicle weight limits, speed crop transportation
YORKVILLE (Nov. 5, 2017) — Gov. Bruce Rauner today declared a statewide harvest emergency to assist farmers and grain handlers who are grappling with the fallout of rain-related delays.

“Illinois is home to 72,000 farms on 26.7 million acres. We are among the top three corn producers in the nation,” Rauner said while visiting Stewart Farms in Yorkville Sunday afternoon. “Moving corn and other crops in a timely and efficient manner affects the bottom line of hard-working farmers. This declaration is an appropriate response to an urgent need.”

Under a new law Rauner signed Aug. 11, the declaration permits drivers of trucks carrying agricultural commodities over state highways to obtain a free permit to exceed gross vehicle weight limits by 10 percent. Further, local authorities may waive the permit requirement at their discretion. The emergency declaration is in effect for 45 days beginning today, Nov. 5.

The Illinois Department of Transportation already is mobilizing the permitting process and notifying law enforcement agencies throughout the state. More information is available at https://truckpermits.dot.illinois.gov/.

“I would like to thank the governor for making this declaration today,” said Richard Guebert Jr., president of the Illinois Farm Bureau. “This harvest season emergency declaration will improve the transportation of our crops.”

According to data from the U.S. Department of Agriculture, the Illinois corn harvest at the end of October was 17 percentage points behind the prior year and 11 percentage points behind the five-year average. The corn harvests in the Northwest, Northeast and East regions are especially hard hit. Harvesters of a variety of crops made up ground toward the end of October, but early delays still are causing backups in the transportation chain.

Jeff Adkisson, executive vice president of the Grain and Feed Association of Illinois, also praised the governor’s action, noting that a bumper crop combined with the harvest delays to compound the situation.

“In years when harvest is better than anticipated, crops like corn and soybeans may need to be stored in piles outside of the traditional concrete or steel bins or tanks,” he said. “This declaration will allow grain elevators to transport commodities out of their facilities quicker, thus making room for grain stored on the ground to be moved to more suitable storage structures.”

Illinois Department of Agriculture Director Raymond Poe said the action will encourage the farming community.

“Illinois farmers work tirelessly year-round, even more so around harvest,” he said. “The Department of Agriculture would like to thank Gov. Rauner for making this declaration and for his support of Illinois farmers.”

And state legislators also welcomed the harvest emergency declaration.
State Rep. Toni McCombie, R-Savanna, co-sponsored HB 2580, which amended the state vehicle code to allow for exceeding trucks’ gross weight limits when a governor declares a harvest emergency.

“Mother Nature has presented Illinois farmers with a rainy spring and fall, making this year’s harvest challenging,” she said. “The State of Illinois was proactive when we foresaw an emergency this year.”

“Farmers form the backbone of our state’s economy,” said state Sen. Neil Anderson, a Republican from Andalusia who sponsored the legislation in the Senate. “Declaring a harvest emergency will reduce red tape and allow those farmers who are still in the field to focus on getting their crops in before winter really takes hold.

“The sooner farmers can get their commodities to market, the more stable the market will be for the consumer.”

State Rep. Dan Swanson, R-Alpha, a member of the House Agriculture and Conservation Committee, said the rainy planting season caused corn and beans to mature later this fall.

“As a result, many farmers are behind in getting their crops harvested,” he said. “With this declaration of a harvest emergency, we will allow farmers the ability to get more grain to the storage sites quicker.”

More Money Raising Soybeans

For four years in a row farmers in Illinois, other parts of the nation too, have made more money on soybeans than corn.



The numbers are pretty clear and University of Illinois Agricultural Economist Gary Schnitkey lays them out in an online farmdocDaily article. He says, on average, soybeans have been more profitable than corn since 2013, “One of the things we’ve seen is that soybean prices, when compared to corn, have been relatively strong since 2013. The ration of soybean to corn prices has been 2.74 since 2013, and it was 2.42 before that. So, we’ve seen soybean prices increase relative to corn prices.”

Farmers have responded to the higher soybean price.

When you look at historic price ratio changes, it is relatively easy to see when demand has pushed one crop over the other. The corn-based ethanol build up, for instance, from 2006 to 2013 has a soybean-to-corn price ratio of 2.42… that means the price of soybeans is 2.42 times greater than the price of corn.



Ethanol plants were being built around the United States at this time, and there was a big need for more bushels of corn. Farmers responded and planted more corn. That need has now leveled off at the same time China has been continually increasing its need for soybeans. Today the soybean-to-corn ratio is 2.72.

This ratio continually changes says Schnitkey, “We’ve seen soybean and corn have roughly the same revenue. That happened in the late 1980’s. So, it has happened in the past, and I think we are going to see the soybeans to be at least as profitable as corn for the foreseeable future. This is driven by strong demand for soybean exports. We have this growing demand for exports of soybeans. As long as that demand is there, we will continue to try and pull acres into soybeans.”

Just as an FYI, the long-term soybean-to-corn ratio, 1972 to present, is 2.55.

How Many U.S. Soybean Acres Needed in 2018


Listen to Todd Gleason’s full interview with U of I’s Todd Hubbs

read farmdocDaily post

Farmers in the United States have been planting more and more acres to soybeans. There is a simple reason behind this increase. Soybeans have been more profitable than other crops over the last several years. The question now is how many acres will they plant next year. University of Illinois Commodity Markets Specialist Todd Hubbs has been thinking about that one and he decided to determine how many acres are needed if the stocks-to-use ratio was to stay at about 7%.

Hubbs says that number should provide a $9.50 season’s average cash price, “If we assume seven-percent stocks-to-use in 2018/2019 would give us $9.50, which would cover the cost of production in Illinois based on current projections, how many acres of soybeans national under those assumptions would we need given a trend yield? Based on a trend yield of about 46.8 bushels to the acre, and it may be higher than that in 2018, we would need about 88.4 million harvested acres to get $9.50 based on a seven-percent stocks-to-use.”

If you use USDA’s long-term trend line yield for next year, 48.4 bushels to the acre, then the harvested acreage number must drop to about 85.4 million in order to get to the $9.50 season’s average cash price. That’s 86.2 million acres planted to soybeans in the United States next spring.

Farmers Desires for Enterprise Units Use Across County Lines

In a survey conducted by the Illinois Corn Growers Association, farmers with land in different counties indicated a willingness to combine insurance units across counties. Todd Gleason has more on the results with University of Illinois Agricultural Economist Gary Schnitkey.

Soybean Acreage in 2018 | an interview with Todd Hubbs

The market is currently sending a signal of maintaining the record high soybean acreage of 2017, but the necessity for that level of soybean acreage in 2018 could deteriorate quickly under evolving market conditions. Todd Gleason has more with University of Illinois Commodity Markets Specialist Todd Hubbs.

Calculating N-Rates for Corn | with Emerson Nafziger

University of Illinois Agronomist Emerson Nafziger says deep prairie soils can provide up to one-hundred-pounds of N annually. This makes nitrogen fertilizer applications less limiting than once thought. Todd Gleason talks with Nafziger about how farmers should calculate anhydrous ammonia rates this fall.



Timing Fall Nitrogen
by Emerson Nafziger, Extension Agronomist - University of Illinois
original blog post

The substantial rain that fell over central and northern Illinois between October 5 and 15 mostly soaked into the soil that was dried out by crop water use, and harvest has moved back to full speed in most areas. With harvest, thoughts turn to application of fall ammonia in central and northern Illinois. Almost everyone is on board with waiting until soil temperatures are at or below 50 degrees before applying ammonia. Cool soil (along with use of nitrification inhibitor) lowers the rate of nitrification, so helps preserve N in the ammonium form. Nitrogen present in the soil as ammonium is safe from loss.

Once air and soil temperatures start to decline in October, it’s natural to anticipate that soil temperatures will reach 50 soon, so some are inclined to start to apply before soil temperatures reach 50 degrees. But if we apply when soil is at 60 degrees and soil temperatures fail to drop quickly, or if they rise again after application, nitrification will continue and will persist as long as soils stay warmer. In fact, nitrification does not stop dead at 50 degrees; as a biological process, its rate drops off as temperature falls, but temperatures need to near freezing for nitrification to stop completely.

So we need to wait to apply fall ammonia not only until soil temperatures are 50 or less, but until we have reasonable confidence that they’ll stay there. In Illinois, we normally consider November 1 to be the date at which we can be reasonably sure that soil temperatures won’t rise again until the next spring. That’s not a sure thing, however – in both of the past two years, soil temperatures have gone above 50 at least once between November and February. But most years it’s a reasonable starting date to balance keeping N safe with getting fall application done.

Minimum air temperatures have fallen into the 40s this past week, which has people wondering if it might be OK to go ahead and start applying now. Minimum soil temperatures 4 inches deep under bare soil (from the Illinois Water Survey http://www.isws.illinois.edu/warm/soil) have dropped to the upper 40s to low 50s over much of the state each day between October 16 and 18 this week. The problem with using only the minimum soil temperature is that it doesn’t represent the actual soil temperature in the ammonia application zone. As Figure 1 shows, minimum soil temperatures (on clear days) are typically five degrees or so less than average soil temperatures for the day. So even though we may need a jacket on cool mornings this week, ammonia applied now is not going to be in soils with temperatures less than 50 degrees for some days or weeks.

Figure 1. Soil temperature at 4 inches under bare soil at three Illinois Climate Network sites on October 17, 2017. Source: Illinois State Water Survey.
Figure 1. Soil temperature at 4 inches under bare soil at three Illinois Climate Network sites on October 17, 2017. Source: Illinois State Water Survey.

Air temperatures are forecast to stay in the 70s the rest of this week, to fall into the 50s (with lows in the mid to upper 30s) next week, then to rise again (with dry weather) for some period after that. We’re already past the average first frost date for central and northern Illinois, and even with more seasonal temperatures coming the last week of October, it doesn’t look like ammonia applied now will be as safe from nitrification and possible loss as will ammonia applied in November.

If the soil is in condition to apply ammonia, soil temperatures are in the upper 40s, and the 10-day forecast doesn’t show above-normal temperatures settling in, the last few days of October might offer an opportunity to start applying ammonia. But what if early November is warmer than normal, and soil temperatures remain above 50? Delaying application, of course, moves us closer to having safer soil temperatures.

Average Illinois fall temperatures have been trending slowly upward for some decades now, and as we have seen the last few years, waiting until November 1 does not assure low soil temperatures as consistently as it did in the past. So if a stretch of warm weather is still in the forecast at the end of October, it might make sense to wait a little longer. Otherwise, patience in waiting another 10 days will likely be rewarded, even if – as is often be the case when doing the right thing – the reward isn’t very visible.

Comparison of 2016 ARC-CO and PLC Payments


link to full farmdocDaily article

The United States Department of Agriculture will issue farm safety net payments this month. Todd Gleason has more on the payments for this year, and projections for next year with University of Illinois Agricultural Economist Gary Schnitkey. You may listen to that conversation.



Schnitkey, his University of Illinois colleagues Nick Paulson & Jonathan Coppess, and Ohio State’s Carl Zulauf also explored how the 2016 ARC County payments would compare to those from its counterpart USDA safety net program, PLC. This exploration is a head to head look at how each program performed.

Check the farmdocDaily website for full details at www.farmdocdaily.illinois.edu.

The four academics compared PLC and ARC-CO payment levels per base acre in 2016. They looked at corn and wheat and then did a simple calculation for each to illustrate which USDA farm safety net program made the largest payments for 2016. They calculated by county, for the whole of the United States, the average county-wide ARC payment and then subtracted from it the calculated average county-wide PLC payment. The differences where mapped.

2016 Corn Payments | ARC-CO minus PLC

For corn, it shows ARC-CO payments per base acre exceed those from PLC in most of the counties in the western, Great Plains, and southeastern regions of the US. In more than 60% of counties where the ARC and PLC programs are available for corn base, the ARC-CO payment is at least $10 per base acre larger than the average PLC payment. The ARC-CO payment per base acre is more than $20 larger than the average PLC payment per base acre in more than 50% of counties.

The exception to this is in the Midwest. Many counties in Illinois, Iowa, Missouri, Wisconsin, Minnesota, and North Dakota would receive larger payments from PLC for the 2016 corn crop. Despite low prices, high yields in this region had an offsetting effect on ARC-CO payments. Average PLC payments exceed ARC-CO payments for corn by more than $10 per base acre in 27% of counties across the United States, and by more than $20 per base acre in 17% of counties. Most of those counties are in the corn belt.

This is not an unexpected outcome as ARC was projected to make much larger payments in the first years of the program, and then to taper off with PLC expected to make larger payments in the closing years of the current farm bill. It did this more evenly across the United States for the 2016 wheat base.

The vast majority of counties trigger larger PLC payments per base acre for 2016 wheat. The average PLC payment is more than $10 larger than the ARC-CO payment in nearly 92% of counties with ARC and PLC programs for wheat base. The average PLC payment is more than $20 per base acre larger than the ARC-CO payment in more than 57% of the counties. This large payment difference of more than $20 per base acre captures the main wheat producing areas of the country.

2016 Wheat Payments | ARC-CO minus PLC

Again, while low wheat prices had the effect of triggering PLC and ARC-CO payments, most wheat producing areas experienced high yield levels, offsetting the price effect for ARC-CO payments. Less than 1% of counties triggered an ARC-CO payment per wheat base acre larger than the average PLC payment.

In summary, the farmdoc team finds low commodity price levels led to PLC payments being triggered for a number of program crops in 2016, including corn and wheat. Their models show the size of PLC payments per base acre vary regionally by the size of PLC program yields for those crops, with larger payments being triggered in areas with larger program yields. This includes the Midwest region for corn, and the Midwest, Great Plains, and Western regions for wheat.

President Trump's Pennsylvania Tax Reform Speech



Last night President Donald Trump made a speech about his administration’s tax reform plan. He addressed truckers in Pennsylvania. Mr. Trump told the truckers his tax reforms will create American jobs by lowering taxes in several ways.
So, to summarize, our plan goes from eight tax brackets down to four, expands the zero tax bracket greatly, expands the child tax credit, repeals the estate tax and special interest tax breaks, cuts the corporate tax rate from much more and equal to 35% tax and brings it all the way down to 20%, and cuts tax breaks for small businesses to the lowest level in more than eight years.
The President also says it will be possible for most Americans to do their taxes on a single sheet of paper.

The particulars of the reform would double the standard deduction so that $12,000 of income for individuals and $24,000 for married couples would be tax-free. It would consolidate the eight existing tax brackets for income to four brackets: zero, 12 percent, 25 percent, and 35 percent. The Child Tax Credit would expand to benefit more middle-income families and eliminate the marriage penalty, although how this will happen isn't outlined. Finally, the reform would create a new $500 tax credit for those caring for an adult dependent.

The President last night also mentioned something not in the official release. It’s unclear if this is related to the Bonus Depreciation tax break, but that’s rather how it sounds.
And that is part of our plan because, companies in order to compete, over the next five-year period in our framework, and within our framework, that you right off 100% of the cost of new equipment in the year you buy it. When have you heard that one? That’s going to be a big one. That’s going to be big.
Bonus Depreciation currently allows businesses of all sizes to depreciate 50 percent of the cost of new equipment acquired and put in service during 2017. It also allows the same deduction for some improvement to non-residential real-estate. It is scheduled to phase down to 40 percent in 2018 and 30 percent in 2019. This particular tax break is targeted to large businesses.

Farmers generally use the related Section 179 Deduction which also accounts for the purchase of used equipment and caps the dollar amount rather than using a percentage.

The President's proposal could seek to replace both by combining them into a single deduction which would sunset in five years.

Exploring Corn & Soybean Stocks

Last week’s Grain Stocks report should reduce the ending stocks for both corn and soybeans this month.

USDA’s quarterly grain stocks estimate suggests there are fewer bushels of corn and soybeans leftover from last year than have been reported so far. University of Illinois Commodity Grain Markets Specialist Todd Hubbs says corn is off by 56 million bushels and soybeans are down 44 million, “I’d say one thing out of the stocks report is the idea that corn and soybean consumption is starting to get stronger as we move through the year. This is especially the case in some areas we didn’t see before like feed. For the soybean ending stocks, USDA adjusted 2016 production. This isn’t a shocker, but it did change the balance sheet.”

I’d say one thing out of the stocks report is the idea that corn and soybean consumption is starting to get stronger as we move through the year. This is especially the case in some areas we didn’t see before like feed.

Having said that, Hubbs admits the 2016/17 projected carryouts for corn and soybeans remain very large. It’s possible to roll forward the September grain stocks report to forward figure the October USDA Supply & Demand table… or at least some of the adjustment. When you do that it shows corn carry out at 2.295 billion bushels and soybean ending stocks at 301 million. It is a matter then, says, Hubbs, of laying off the heavy supply-side against growing consumption - which for the moment is hampered by low river water levels that have been causing transportation problems to the Gulf of Mexico. Hubbs says, “The strong demand, the strong consumption, that we’ve been seeing is a good sign as we move through the next marketing year if we can keep it up. Right now we are suffering under these supply and transportation issues.”

It’s not to say a bullish market is around the corner, but that demand should provide a series of marketing opportunities over the coming months.

Friday’s USDA Grain Stocks Unlikely to Change Corn Market

Friday the United States Department of Agriculture will close out last fall’s harvest and marketing year with the release of the fourth quarter Grain Stocks report. Todd Gleason reports it is not expected to impact the price of corn.

Big Income Years Impact Medicare Premiums 2 years Out

Farmers, business owners, and others on Medicare might find a bigger bill in the mail than expected. Todd Gleason has more on how big income years produce big Medicare premiums two years later.

Margin Protection Insurance | an interview with Gary Schnitkey

Gary Schnitkey assesses the value of Margin Protection Insurance against ARP and RP plans.

Growmark Introduces Simulator to Train Drivers

We often hear about pilots using simulators to train before they actually fly. As of this year Growmark FS is using a simulator to train its sprayer operators.

This month the company invited reporters to its training center in Bloomington, Illinois and after a brief introduction invited them to take a spin in their brand new RoGator. Not a real one, but a simulator that seems pretty darned real even, says Growmark Equipment Manager Erik Wilcox, to those that drive the sprayer for a living.

Wilcox - I’ve had a lot of doubting Thomases come in and say, “this is just a video game and not anything worthwhile” and with each and every one of them I challenge them to just get on and give me the feedback. Every one of them, and I mean every one of them and that’s been about a dozen that have gotten on with me as an expert, have come off and said, “yeah, we are headed in the right direction.”

The simulator currently features road and field courses. It was created as a training module for FS System operators from Ontario to Cairo to practice, study, and enhance their ability, knowledge, and safety skills. That and to cut down on accidents.

Wilcox - We’d like to see the instance of insurance claims say running over crops, we’ll use that as an example, decrease over time as we use this. That is as we get into more row crop simulations. We’d also like to see a decrease in on the road accidents.

The most common of which by the way is for a car to run into the back of the sprayer when it goes to make a left hand turn.

Corn and Soybean Production Outlook in 2017-18

Given the price reaction, the market remains uncertain about the USDA’s September forecast of 2017 corn and soybean production. Todd Gleason has more with the commodity markets specialist from the University of Illinois.

USDA NASS Soybean Objective Yield Pod Weight

Tuesday’s USDA Crop Production report included a very heavy soybean pod weight. Todd Gleason talks with USDA NASS Chief of the Crops Branch about the weight, how it is calculated, and how it might change over time.







DICAMBA | U of Arkansas Takes a Stand



Statement from Dr. Mark Cochran, Vice President-Agriculture for the University of Arkansas System Division of Agriculture, on Monsanto’s petition to the Arkansas State Plant Board

First, and most importantly, we stand by the integrity of our scientists and their science, including Dr. Jason Norsworthy, our internationally recognized researcher and his work, and all our weed scientists, as well as other public weed scientists on record in other states.

We are confident in the science that we’ve used to advise the regulatory process in Arkansas.
Even Monsanto recognizes his reputation. Just 48 hours before the petition was filed, the company invited Dr. Norsworthy to present a summary of national drift and volatility research at an academic summit on dicamba that the company is hosting in St. Louis this month. He has declined this invitation.

We will examine every point in this petition and its appearing and disappearing group of supporting exhibits, and over time will respond factually to its major points.

There are several points in the petition we need to address immediately: First, Norsworthy’s findings are anything but an outlier. It is consistent with research work in other states, including that of Kevin Bradley in Missouri, Tom Mueller and Larry Steckel in Tennessee, and elsewhere.

Second, none of our researchers has ever endorsed any product, but sometimes companies use our public comments and statements without our permission.

Based on Monsanto’s allegations, we intend, under the terms of our agreements with Monsanto, to publish all data relevant to our dicamba work over the last few years.

This petition isn’t just about a single herbicide, but it’s an attack on a whole profession – scientists whose careful work is meant to be of benefit to all.

We have made our explanations available to the public, including at field days and through videos of the presentations that were and are still public on the Cooperative Extension Service site, www.uaex.edu. Our public land grant research results are scientifically vetted and valid, and we are pledged to being transparent in our results.

Link to Dicamba in Arkansas - Research and FAQs

Storing Corn and Soybeans in 2017

The current price structure of corn and soybean futures markets indicate positive carry in both markets and raises the question of whether producers should make decisions about grain sales. The decision by producers to store corn or soybeans should be determined by the returns to storage.

There will be a lot of corn around this fall. USDA projects about sixteen-and-half billion bushels when you add what’s leftover from last year to this year’s harvest. It is projecting about four-point-eight billion bushels of soybeans. That’s a lot of both crops, but University of Illinois agricultural economist Todd Hubbs isn’t worried about running out of space to store it. In fact, the market is urging farmers to go ahead and store both crops at the moment by pricing futures contracts for later in the year a bit higher than the nearby months. The difference is called the carry says Hubbs. Having said that, he says the carry probably doesn’t pay out for commercial storage like you would see for on-farm storage, but there is a nice carry in the market for both crops.

The carry probably doesn’t pay out for commercial storage like you would see for on-farm storage, but there is a nice carry in the market for both crops. - Todd Hubbs, University of Illinois

Harvest bids says Hubbs for corn and soybeans possess a weak basis. This means the difference between the futures price in Chicago and the local cash prices across the nation are generally wider than normal. In central Illinois, for example, that bid is about 7 cents wider than usual. It seems there could be some room for improvement.

When we look at the fundamentals of the corn and soybean markets they’ve been poor says Hubbs, “We are looking at higher yields than expected and large crops in South America. Still, on the corn side, it looks like demand through the 2017/18 marketing year should be really good. Ethanol grind will be really strong, exports should be there especially at these price points, and I believe feed usage should be up across the board. I think there is some strength in corn demand.”

Demand for soybeans may be a slightly different story. However, the domestic crush has been strengthening and exports to China remain super strong. The ag economist explains, “when we think about storing into next year and hedging the storage, basis is a real issue. This is particularly true in Illinois. This year we should see a typical basis pattern for corn because of the supply and demand factors. There may be a lot of basis risk in soybeans. There is really no discernible pattern for spring basis in soybeans. Some years we have a positive basis. This year we had a really weak basis for soybeans. So, I think there is a lot of basis risk when you think about storing and hedging soybeans and you should take that into consideration.”

The uncertainty surrounding corn and soybean yield projections for 2017 says Todd Hubbs may encourage a patient approach to pricing crops. By storing corn and soybeans unpriced, one holds an expectation of prices increasing by more than the cost of owning and storing them. Over the short term, significantly higher prices require a large reduction in the production forecasts by the USDA on September 12 or October 12. Over a longer horizon, higher prices may occur if demand is stronger than currently forecast. Southern hemisphere crop problems could also materialize to provide a price increase.

Sep 4 | WILLAg Newsletter



September 4, 2017

Evidence Favors the South & East Tempering Poorer Corn Belt Yields
  This map shows the August 2017 USDA Crop Production Report state by state corn yields. Rollover each state to reveal the yield. Darker green colors represent higher yields. The table gives more complete detail and breaks down the nation by region. Note the twelve corn belt states in the Midwest are expected to yield 8.4 bushels to the acre less this year than last. The southern states, while representing only about 1.5 billion bushels of the total expected 2017 production of 14.2 billion, show a year over year increase of nearly 14 bushels to the acre.

  USDA will update the Crop Production and WASDE figures Tuesday September 12, 2017. This will be followed at the end of the month by the 4th quarter Grain Stocks report Friday September 29th. Naturally, you can see these numbers shortly after their release on our website at willag.org or by following Todd's twitter account.

Marketing Panels this Week & Next
  Tuesday the 12th (next week) you are invited to review the September Crop Production and WASDE figures at the Champaign County Farm Bureau / University of Illinois Extension building. The Champaign County Marketing Club is hosting a free event starting at 7pm. Todd Gleason will moderate the panel discussion with Curt Kimmel, Chip Nellinger, and Bill Mayer. Check out the date and time in our calendar for full details. That's next week. This week, you'll note Todd and Company are off to Purdue for its Agronomy Day event. Thursday at the Beck Agricultural Center starting at 8am eastern time. During the final session of the day, starting just after lunch, Illinois Ag Economist Todd Hubbs, Purdue's Chris Hurt, and Chuck Shelby from Risk Management Commodities will take the stage for a WILLAg Marketing Panel discussion.

  Click on the links in the calendar below to reveal full details.



Notes from the Farm Progress Show
  A great big THANK YOU goes out to all those that dropped by the University of Illinois tent during last week's Farm Progress Show in Decatur, Illinois. If you missed the stage shows, or didn't hear the Closing Market Report each day, then you should take some time to come up to speed on the latest agricultural news. What follows are few of the stories collected during the week.

How Harvey Will Impact Fuel Supply Infrastructure
  Monday Todd Gleason spoke with Dave Chatterton at the Powerline Group about how Hurricane Harvey is impacting the nation’s fuel supply infrastructure.




Southern States Crop Tour Review
  The corn crop in the south is good. Very good in fact. Todd Gleason talks with Jeremy Wilson from Crop IMS.




Discussing Dicamba Damage with Robb Fraley
  Monsanto’s Robb Fraley dropped by the University of Illinois tent at the Farm Progress Show to talk about dicamba and soybeans. Todd Gleason has more…



Recruiting Higher Ed Ag Students to IL Universities
  Recruiters from Illinois State, Southern Illinois, Western Illinois, and the University of Illinois are planning to work together to keep more agricultural students in state. Todd Gleason discussed the reasons why with them during this year’s Farm Progress Show.




House Ag Committee Members on the Farm Bill
  Members of the U.S. House of Representatives Committee on Agriculture held a farm bill listening session at the 2017 Farm Progress Show. Todd Gleason spoke with them afterwards and asked about the compromises which might need to be made to accommodate additional crops and the food & feeding programs.



The New IBRL Building Good for Corn Growers
  The University of Illinois has built a biofuels processing facility on campus to pilot test new energy concepts. Todd Gleason has more with the Director of the Integrated Bioprocessing Research Laboratory.




Trump Admin USDA Nominee Ted McKinney
  Todd Gleason has a conversation with Director Ted McKinney of the Indiana State Department of Agriculture. McKinney has been nominated by President Donald Trump to the post of Under Secretary for Trade and Foreign Agricultural Affairs.




Trade & Farm Bill Issues with @ILCorn
  Illinois corn growers Ken Hartman from Waterloo and Roger Cy from Newman talk with Todd Gleason at the 2017 Farm Progress show about the next farm bill and trade issues.



What’s Next for @FieldView Software
  Big data tools like Climate Corp’s Field View are harnessing crop development and agronomic information from farmers and their equipment. Todd Gleason has more with Rick Myrup.



@NationalCorn Spurlock Discusses NAFA & Farm Bill
  NAFTA and the Farm Bill are the hot topics for NCGA. Todd Gleason has more with the Wesley Spurlock from Texas. He is the president of the National Corn Grower’s Association.



Thanks for Listening
  Finally, thank you for listening to our programs and following our content. You can hear the Closing Market Report on 6 Illinois stations including our home station WILL, WHOW, WTIM, WKEI, WSDR, and WLMD. Our programs are available to hear in full on our website at willag.org, in iTunes, the NPR One app, and Stitcher. You may also stay up to speed by following Todd on twitter.



State by State & Regional Corn Yields

This map shows the August 2017 USDA Crop Production Report state by state corn yields. Rollover each state to reveal the yield. Darker green colors represent higher yields. The table gives more complete detail and breaks down the nation by region. Note the twelve corn belt states in the Midwest are expected to yield 8.4 bushels to the acre less this year than last. The southern states, while representing only about 1.5 billion bushels of the total expected 2017 production of 14.2 billion show a year over year increase of nearly 14 bushels to the acre.

Interviews from the Farm Progress Show

How Harvey Will Impact Fuel Supply Infrastructure
Dave Chatterton, Powerline Group - Champaign, Illinois

Monday Todd Gleason spoke with Dave Chatterton at the Powerline Group about how Hurricane Harvey is impacting the nation’s fuel supply infrastructure.


Southern States Crop Tour Review
Jeremy Wilson, Crop IMS - Effingham, Illinois

The corn crop in the south is good. Very good in fact. Todd Gleason talks with Jeremy Wilson from Crop IMS.


Discussing Dicamba Damage with Robb Fraley
Robb Fraley, Monsanto Company - St. Louis, Missouri Doug Maxwell, Crops Researcher - University of Illinois

Monsanto’s Robb Fraley dropped by the University of Illinois tent at the Farm Progress Show to talk about dicamba and soybeans. Todd Gleason has more…


Recruiting Higher Ed Ag Students to Illinois Universities

Recruiters from Illinois State, Southern Illinois, Western Illinois, and the University of Illinois are planning to work together to keep more agricultural students in state. Todd Gleason discussed the reasons why with them during this year’s Farm Progress Show.


House Ag Committee Members on the Farm Bill
Mike Conaway - U.S. House of Representatives - State of Texas
Rodney Davis - U.S. House of Representatives - State of Illinois
G.T. Thompson - U.S. House of Representatives - State of Pennsylvania

Members of the U.S. House of Representatives Committee on Agriculture held a farm bill listening session at the 2017 Farm Progress Show. Todd Gleason spoke with them afterwards and asked about the compromises which might need to be made to accommodate additional crops and the food & feeding programs.


The New IBRL Building Good for Corn Growers
Vijay Singh, Director IBRL & Agricultural Engineer - University of Illinois

The University of Illinois has built a biofuels processing facility on campus to pilot test new energy concepts. Todd Gleason has more with the Director of the Integrated Bioprocessing Research Laboratory.


Trump Admin USDA Under Secretary Nominee Ted McKinney
Ted McKinney, Director Indiana State Department of Agriculture

Todd Gleason has a conversation with Director Ted McKinney of the Indiana State Department of Agriculture. McKinney has been nominated by President Donald Trump to the post of Under Secretary for Trade and Foreign Agricultural Affairs.


Trade & Farm Bill Issues with @ILCorn
Ken Hartman, Newly Elected NCGA Board Member
Roger Sy, Treasurer - Illinois Corn Marketing Board

Illinois corn growers Ken Hartman from Waterloo and Roger Cy from Newman talk with Todd Gleason at the 2017 Farm Progress show about the next farm bill and trade issues.

What’s Next for @FieldView Software
Rick Myrup, Field View - Climate Corp

Big data tools like Climate Corp’s Field View are harnessing crop development and agronomic information from farmers and their equipment. Todd Gleason has more with Rick Myrup.


@NationalCorn Spurlock Discusses NAFA & Farm Bill
Wesley Sprulock, President National Corn Growers Association

NAFTA and the Farm Bill are the hot topics for NCGA. Todd Gleason has more with the Wesley Spurlock from Texas. He is the president of the National Corn Grower’s Association.

Farm Journal Midwest Crop Tour

Owned & Share Cropped Land Making up Cash Rent Losses

The high price of cash rent for corn ground in Illinois has been a loser over the last three seasons. It looks like that may continue for two more years. Todd Gleason has more on how owned ground, and share cropped acres have been making up the difference.





ifr170825–213
Gary Schnitkey, Agricultural Economist - University of Illinois

Assessing the Prospects for 2017 Corn Production

The August Crop Production report surprised many market observers by forecasting 2017 corn production at 14.153 billion bushels. In particular, the corn yield forecast of 169.5 bushels per acre came under scrutiny due to higher than expected yield forecasts in major producing states. The question is whether the corn production forecast will change enough to result in higher prices than those currently reflected the market.



read blog post

CME Group Provides Scholarships for Agriculture

Agricultural companies are always on the hunt for good employees, but those with college educations can be hard to find. Todd Gleason reports from the Illinois State Fair that the world’s largest options and futures exchange is hoping to inspire a few more kids to further their education.

NAFTA Negotiations Start Wednesday

Trade negotiators from Mexico and Canada will gather in Washington, D.C. this week to update NAFTA, the North American Free Trade Agreement. Todd Gleason has more…

Google & 4-H Working Together on STEM

ifr170811–208
Google & 4-H Working Together on STEM
Rob Biederman, Head of External Affairs Midwest - Google
Jennifer Sirangelo, President & CEO National 4-H Council

Google made a big splash on the Illinois State Fairgrounds this past week when it and the National 4-H Council announced a computer science collaboration. Todd Gleason has more on the $1.5 million gift and how it will be used to create STEM programming for kids.

Google Makes $1.5 Million Gift to 4-H

Google, through its philanthropic arm, has made a $1.5 million gift to 4-H across the nation. The company is providing both funding support and virtual reality equipment to 4-H youth computer science programs. It made the announcement at the Illinois State Fair Friday, August 11, 2017.

Todd Hubbs Review August Crop Reports

Excerpt from August USDA Crop Production report.

Corn production is forecast at 14.2 billion bushels, down 7 percent from last year. Based on conditions as of August 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third highest yield and production on record for the United States. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016.

Soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Based on August 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. Area for harvest in the United States is forecast at a record high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Planted area for the Nation is estimated at a record high 89.5 million acres, also unchanged from June.

All wheat production, at 1.74 billion bushels, is down 1 percent from the July forecast and down 25 percent from 2016. Based on August 1 conditions, the United States yield is forecast at 45.6 bushels per acre, down 0.6 bushel from last month and down 7 bushels from last year.







...see USDA Reports page for more complete detail.

How USDA Collects Yield Data

How USDA NASS Gathers Crop Production Report Data

USDA NASS will release the first corn and soybean Crop Production Report of the season Thursday August 10th, 2017 at 11am central. Todd Gleason talks with USDA NASS State Statistician Mark Schleusener (shloy-seh-ner) about how the information is collected and calculated.



USDA Crop Production Reports | a primer with Scott Irwin

A year ago University of Illinois agricultural economist Scott Irwin and Darrel Good wrote an article about how USDA predicts corn yields for the farmdocDaily website. Todd reviews this article with Scott Irwin as a primer to the August Crop Production report.

read blog post



Opening Up the Black Box

We have written extensively about U.S. corn yield forecasts issued by the National Agricultural Statistics Service (NASS) of the USDA (Irwin and Good, 2006; Irwin and Good, 2011; Irwin, Sanders and Good, 2014; farmdoc daily, August 28, 2013; August 29, 2014; August 18, 2016). As indicated in these previous publications, NASS uses two surveys to provide indicators of corn yield prior to harvest. These include the Agricultural Yield Survey (or farmer-reported survey) and the Objective Yield Survey (or field-measurement survey) in major corn producing states. A formal Agricultural Statistics Board (ASB) of NASS statisticians is convened in each month of the forecasting cycle to review yield indicators and determine an official yield forecast. In our previous publications we focused on the survey procedures used by NASS and had relatively little to say about the methodology used by the ASB to combine the various yield indicators and determine an official yield forecast. This omission reflects the fact that NASS has historically provided very little information about this part of the forecasting methodology. Fortunately, several publications have appeared in the scientific literature during the last several years that provide important insights into the nature of the different survey yield indications and the other non-survey information used by the ASB to determine official published yield forecasts. The purpose of this article is to review the information in these scientific articles and provide a more informed understanding of the role of the ASB in generating these important market-moving forecasts.

NASS Corn Yield Survey Indicators

We begin with a brief review of the two surveys that form the backbone of the NASS corn yield forecasting methodology–the Agricultural Yield Survey (or the farmer-reported survey) and the Objective Yield Survey (or the field measurement survey). For the August 2016 forecast, the Agricultural Yield Survey (AYS) included 22,144 operations for all crops and was conducted in 32 states for corn. The sample of farm operations surveyed was drawn from those who responded to the survey of planted acreage in June. The same operations will be interviewed each month from September through November. In the August survey, respondents were asked to identify the number of acres of corn to be harvested and to provide a forecast of the final yield.

The Objective Yield Survey (OYS) is designed to generate yield forecasts based on actual plant counts and measurements. The sample of fields for the OYS survey is selected from farms that reported corn planted or to be planted in the June survey of acreage. Samples are selected in the 10 principal corn producing states. A random sample of fields is drawn with the probability of selection of any particular field being proportional to the size of the tract. For the August 2016 OYS, a total of 4,544 plots were sampled for corn, soybeans, cotton, and winter wheat.

Two counting areas, or plots, are randomly selected in each field. Objective measurements (such as counts of plants and ears) are made for each plot each month during the survey cycle. When mature, the plots are harvested and yield is calculated based on actual production minus an allowance for harvest loss. During the August survey, the operator is asked to verify, field-by-field, the acreage reported in June. For corn, each of the two independently located sample plots in a field consists of two parallel 15 foot sections of row. Each plot is selected by using a random number of rows along the edge of the field and a random number of paces into the field. Enumerators count all fruit and fruiting positions in corn and, if ears have formed, a sample of ears is measured for length and circumference. Just before the field is harvested, both plots are hand harvested and weighed by the enumerator.

At each visit, the enumerator establishes a corn maturity category for the plot, ranging from 1 (no ear shoots) to 7 (mature). Prior to the blister stage the number of ears is forecast based on the number of stalks, ear shoots, or ears and both the weight per ear and harvest loss are forecast based on the 5-year average. From the blister through the dough stage, the weight per ear is forecast based on kernel row length and harvest loss is forecast based on the past 5-year average. Ear weight is measured in the dent and/or mature stage. Harvest loss is measured following harvest.

Prior to maturity and harvest, the OYS corn yield is forecast based on the forecast of the number of ears, the forecast of the weight per ear, and the forecast of harvest loss. Forecasts are based on conditions as of the survey date and projected assuming normal weather conditions for the remainder of the growing season. The OYS forecast of gross corn yield then is based on the following formula:

Gross Yield= [number of ears X weight per ear at 15.5% moisture] ÷ 56

Number of ears and ear weight are either forecast or actual and 56 is a conversion from weight to bushels.

The ASB

The survey and forecasting procedures described above produce a number of indictors of the net yield of corn from the AYS and OYS. It is the job of the Agricultural Statistics Board (ASB) to combine the information from these indicators and determine the official published estimates. How does the ASB actually do this? The latest version of the official NASS publication on yield forecasting programs describes the ASB’s role this way:

“The sample surveys are designed to produce State level estimates of acreage, expected yields, final yields, and total production. The surveys are conducted by each State, and the first level of analysis is done by each State. Each Field Office does its independent appraisal of the relationships between the survey estimates and the final official statistics and forwards this information to Headquarters. While each Field Office is analyzing its survey data, statisticians in Headquarters are doing a parallel analysis of all survey data at the State, U.S., and regional levels. For the major field crops discussed in this paper, a formal Agricultural Statistics Board is convened to review regional indications and determine the official forecast or estimate. This Board is made up of 7 to 10 statisticians representing different divisions of NASS. Each Board member evaluates the regional survey indications and supporting data and determines their forecast or estimate. Each member brings their individual perspective to the review which can result in different conclusions being drawn. Through review and discussion, the Board must collectively reach a consensus and establish the National number. The Board process ensures all perspectives are examined and the national or regional forecast or estimate is the result of a thorough analysis. The summation of the individual State estimates as prepared by each State is compared to the Board number. The Headquarters statisticians will re-examine all national and State data relationships and either adjust State estimates so they sum to the U.S. or change the previously determined U.S. number.”

“The formal meeting of the ASB to establish the final numbers and prepare the report is conducted under ”lock up“ conditions. Lock up begins with a complete isolation of all facilities required by the Board. All doors are locked, windows and elevators are covered and sealed, phones are disconnected, and the computer network inside ”lock up“ is isolated from the full network. Transmitters are not permitted and the area is monitored for electronic signals. Highly speculative data are decrypted only after the area is secure. Only after all security is in place does the Board begin final deliberations. The area remains locked up until a prescribed release time (8:30 a. m. for Crop Production) at which time the report is disseminated in electronic and paper forms.” (pp. 96–97)

While this provides a helpful overview of the ASB in general times, it provides almost no detail on the nature of yield indications, the non-survey information, if any, used to supplement the survey indications, or how the ASB reaches a collective consensus.

In terms of statistical properties, NASS does acknowledge in its official yield forecasting publication that the AYS yield indications are biased:

“Note that AYS data are the respondents’ expected yield. The crop may not be mature and ready for harvest for another several weeks after the respondent has been contacted. Experience has shown these responses tend to be conservative (biased down). Under drought conditions, this bias gets much larger as respondents perceptions of a crop are influenced by current weather conditions. Therefore, the interpretation phase of the review must recognize this tendency and factor it into the final deliberations.” (p. 19)

Likewise, NASS acknowledges that OYS yield indications may also be biased:

“Forecasts of state or regional yields are inherently subject to differ from the final, administratively determined, yield. The difference is due to weather and crop conditions yet to be encountered at the time the forecast is made, the difference between weather and crop conditions in the current year and the historic weather and crop conditions utilized to predict current yields, and systematic non-sampling errors which contribute to forecast error. NASS makes every attempt to minimize the impact of these three sources of error by means of administratively determine final values. These final, sometimes referred to as official, values are used as dependent variables to estimate an ordinary least squares equation with the averages calculated from objective yield samples as the independent variable. For example, each state will have an administratively determined, official corn yield for all previous years. To forecast the official corn yield for the current year, NASS regresses the objectively determined State level average corn yields from previous years to the corresponding official corn yields. This process provides a historical context for weather, biases, and non-sampling errors.” (p. 38)

The fact that both yield indications are biased is interesting in and of itself, but the really important question is by how much and in what direction. We know the direction of bias for the AYS (downward) but neither the direction nor magnitude of bias for the OYS. If the biases are relatively small then this is largely a technical issue that has little practical import, but if the biases are large it becomes an important part of how the ASB generates published yield estimates.

A recent paper by Wang et al. (2011) is the first we know of to present data on actual AYS and OYS corn yield indications for an extended sample period. Figure 1 is taken directly from the Wang et al. article, and it presents: i) the OYS indications for the corn objective yield region and each report release month over 1993–2009; ii) the AYS yield indications for the same corn objective yield region and each report release month over 2001–2009; and iii) the December Agricultural Survey (DAS) corn yield indication for each year over 1996–2009. The objective region yield is simply the weighted-average yield for the objective yield states (10 since 2005) and the DAS is very close to the final yield estimates released in January. After viewing the chart, it is probably more understandable why NASS has been so cautious in disclosing this data previously. The magnitude of the bias in both yield indications is striking. The coarseness of the scales prevents precise measurements, but the upward bias in the OYS, regardless of the release month, varies from around 10 to 15 bushels per acre (using the DAS as the benchmark). The downward bias in the AYS in August ranges from about 10 to 20 bushels, and then generally declines in September and October and is usually, but not always, fairly small in November. The pattern of bias in the AYS yield indications make sense, in that farmer-reported yields should become more accurate as the growing season progresses and harvest eventually is completed.




What this means from a practical standpoint is that the ASB is confronted with substantial bias in its two most important yield indications. For example, based on Figure 1, the final DAS objective region yield for corn in 2009 was about 175 bushels and the August OYS yield indication was around 190 bushels and the AYS yield indication was around 155 bushels, a spread of 35 bushels. A more recent paper by Nandram, Berg, and Barboza (2014) provides precise measurements. They report that the average biases for the OYS objective region corn yield indications relative to the DAS over 1993–2010 were 13.96, 11.62, 13.13, 14.99 and 14.97 bushels for August, September, October, November and December, respectively (note that we assume the bias estimates were stated in bushels but the article does not explicitly state the units). The average differences between the AYS indications and the DAS indications were respectively –12.26, –13.42, –9.81, and –4.10 bushels for August, September, October, and November. These imply AYS/OYS yield indicator spreads that average 26.22, 25.04, 22.94, and 19.09 bushels. It is important to keep in mind that these spreads are not symmetric around zero, as the AYS bias diminishes substantially by November but the OYS bias does not. Assuming these bias estimates are similar to the estimates available to the ASB when making published estimates in recent years, we can use the averages to provide a rough estimate of the OYS and AYS corn yield indications for the objective region in August 2016. The published objective region corn yield this year was 182 bushels, which combined with the bias estimates suggest an OYS yield of about 196 bushels and an AYS yield of about 170 bushels.

From this discussion, it should be obvious that the corn yield indications have to be adjusted for bias by the ASB in order to make useful published estimates. The key is the consistency of the bias across time. Figure 1 suggests there is some variation in the bias for a given report month across years and this likely contributes to the errors in the published corn yield estimates. Nonetheless, there appears to be a strong degree of consistency in the bias from year-to-year and this can be used to efficiently “de-bias” the AYS and OYS yield indications applying standard statistical techniques. The larger question is why the biases exist in the first place. Nandram, Berg, and Barboza (2014) conjecture that:
One possible reason for the bias of the OYS indications is that the measurement process leads to a systematic overestimation of the plant density in a field. Two potential reasons for the biases in the AYS indications are pessimism on behalf of the farmers and exclusion of farms in the largest size stratum from the sampling frame. Large farms are conjectured to have higher average yields than moderately sized farms because of greater investment in advanced technology. (p. 510)

There is also a large literature (e.g., Poate, 1988) that formally evaluates the accuracy of so-called “crop cutting” yield estimates, and the evidence shows that such techniques have a tendency to over-estimate actual yields for a variety of reasons, including variability in population density. So, it is not surprising that the OYS yield indicator is biased upwards. NASS has also been aware of the bias in OYS indications for decades and has conducted extensive research to better understand the underlying reasons for the bias, apparently without great success (Warren, 1985). The underlying reasons for the downward bias in the AYS yield indicator are hard to pinpoint beyond a general conservatism among farmers about yield prospects before harvest. Given the dramatic shrinkage in the AYS bias through November and the fact that the same farms are surveyed each month for a given year, it is unlikely that under-sampling large farm operations is one of the main reasons for the AYS bias, as suggested by Nandram, Berg, and Barboza (2014).

In light of the level and variability of the bias in AYS and OYS yield indications, it is sensible for the ASB to seek out additional non-survey information when generating published yield estimates. The Wang et al. (2011) article provides helpful information in this regard:

Each month (August through December), estimates are produced by the ASB with the primary objective of providing the most accurate projection or end-of-season estimate given the survey indications and standard errors, in addition to other factors. When projecting corn yield, information on crop maturity, planting date, weather conditions, and other auxiliary factors is also taken into consideration by the ASB. (p. 85)

Since two of the co-authors of this paper at the time of its publication were NASS employees, we take this as authoritative evidence that the ASB uses “auxiliary” information when generating published estimates. While the details of exactly what type of auxiliary information the ASB uses when making corn estimates is not available, several recent articles by provide important clues. The stated purpose of the Wang et al. (2011), Adrian (2012), and Nandram, Berg, and Barboza (2014) articles is to basically formalize the decision-making process of the ASB in making corn yield forecasts. In order to do so, the models in the articles incorporate a variety of auxiliary information, including trend yields, planting progress, July temperature and precipitation, and crop condition ratings, which presumably reflect variables actually used by the ASB in the estimation process. Another type of auxiliary information used by the ASB in recent years is remote-sensing satellite data (Adrian, 2012; Johnson, 2014), such as the Normalized Difference Vegetative Index (NDVI), a measure of biomass density.

In sum, NASS has an active research program to try to formalize and improve the ASB methodology (e.g., Adrian, 2012; Wang et al., 2011; Nandram, Berg, and Barboza, 2014; Cruze, 2015). This provides important clues about the types of non-survey information used by the ASB, but we still don’t have any information about the weights placed on this information in ASB deliberations. There is obviously some concern within NASS about the subjective weights placed on the survey and non-survey information given discussions found in the articles cited above. For example, Adrian (2012) notes that the emphasis placed on different information, “will inevitably vary from person to person and depend upon the composition of the Board.” Our view is that an element of subjective expert judgement will likely always be a necessary component of a process as complex and difficult as forecasting crop yields. We concur with the late Bruce Gardner, who made this trenchant observation after sitting through ASB lock-up deliberations for an early 1990s Crop Production report:

“A NASS board in Washington then assesses all the indicators of yield, including the estimates of a month earlier. This is not done using a pre-specified formula–in which case a computer could replace the NASS board–but through a consensus of the Board members based on their experience and the full information before them.” (Gardner, 1992, p. 1068)

ASB Track Record

When viewing the details of the ASB forecasting methodology, especially the magnitude of the bias in the AYS and OYS yield indications, it is easy to lose sight of the big picture. That is, the ASB is tasked with combining the AYS and OYS yield indications with other relevant information in order to make the best possible published estimates of corn yield, and it is the accuracy of the final published estimates that ultimately matters. So, we updated our earlier evaluation (farmdoc daily, August 29, 2014) of the historic accuracy of USDA published August forecasts of the U.S. average corn yield relative to the “final” yield estimate released in January (we say “final” because January estimates are sometimes revised based on the Agricultural Census conducted every five years). The differences between the forecasts and the final estimates in percentages over 1990–2015 are presented in Figure 2. When interpreting the errors, note that a positive error implies an under-estimate on the part of USDA and a negative error implies an over-estimate. The errors associated with the USDA corn yield forecasts are occasionally very large, such as 1993 and 1995. These examples of large errors are not surprising due to the unusual weather events that occurred in those years. It is interesting to note that USDA corn yield forecast errors in 2012 were extremely small, with the August forecast exactly equal to the final estimate, and thus, having a zero forecast error. This is surprising given the magnitude of drought conditions that prevailed in 2012 and the difficulty of forecasting corn yields under these circumstances. Accuracy was also exceptional in 2015, when the forecast error was only –0.2 percent. The plot suggests a clear downward trend in USDA corn forecast errors over time.

Forecast performance after 2011 has been particularly impressive.



It is important to emphasize that the USDA track record of forecasts evaluated here is based on “real-time” forecasts. In other words, this is the record of actual forecasts produced and released to the public over time. As Tetlock and Gardner (2015) observe in their best-selling book Superforecasting:

The Art and Science of Prediction, measurement and evaluation of a large sample of real-time quantitative forecasts is the only scientifically-valid way of determining true forecasting skill.

Recently, there has been a considerable media coverage of several new “big data” firms that claim to produce superior corn yield forecasts to that of the USDA (e.g., Brokaw, 2016; Woyke, 2016). What is not emphasized is that the evidence for these claims is based on historical simulations of model performance, or “backcasting,” a much lower and less rigorous hurdle. These firms may actually be able to beat the USDA, but real-time track records will be required to convincingly prove the point. Until then, the available evidence indicates it is hard to beat the accuracy of USDA corn yield forecasts.

Implications

The Agricultural Statistical Board (ASB) of the National Agricultural Statistics Service (NASS), is responsible for determining the official published corn yield estimates of the USDA. While there is considerable information available about the survey methodology used by NASS to generate yield indications, until recently, very little information has been publically available about the nature of the corn yield indications, the non-survey information, if any, used by the ASB to supplement the survey indications, or how the ASB reaches a collective consensus. Several publications have appeared in the scientific literature during the last several years that help open up the ASB “black box.” These publications present for the first time historical data on the separate Agricultural Yield Survey (AYS) and the Objective Yield Survey (OYS) corn yield indications and the results are striking. The upward bias in the OYS corn yield indications, regardless of the release month, varies from around 10 to 15 bushels per acre, while the downward bias in the AYS in August ranges from about 10 to 20 bushels, and then generally declines in September and October and is usually, but not always, fairly small in November. Given the level and variability of the bias in AYS and OYS yield indications, it is sensible for the ASB to seek out additional non-survey information when generating published yield estimates. The recent publications indicate that the ASB incorporates a variety of auxiliary information, including trend yields, planting progress, July temperature and precipitation, crop condition ratings, and satellite imagery data. Unfortunately, we still don’t have any information about the weights placed on this information in ASB deliberations. While it is important to better understand all aspects of the NASS corn yield forecasting methodology, and ASB procedures in particular, in the end what matters is the accuracy of the final published estimates.
On that score, the evidence suggests USDA corn yield forecasts are still hard to beat.