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Showing posts from July, 2018

Breeding Barley to Make Budweiser


You might think of Anheuser Busch as a beverage company producing great American beers like Budweiser. However, as Todd Gleason reports from Idaho Falls, Idaho, it is a highly integrated agricultural company.

Trade Tariff Farmer Compensation Package

The Trump Administration’s has a $12 billion dollar plan to compensate farmers for damages done so far by the trade dispute with China and other nations. Here’s what’s known, so far, about how the plan will work.

The largest part of that money will be paid out to soybean producers, though direct payments will also be made for other commodities including corn, wheat, sorghum, cotton, dairy, and pork. USDA Chief Economist Rob Johansson told reporters on the line the initial damage calculation has already been made, “We’ve calculated what the damage is to producers facing these illegal tariff actions. We are working out the specific details and will be working it out as a rule making action in a couple of weeks and that will have our estimated rates. As the Secretary mentioned, this will be playing out over time and we do look to allowing for the Administration to successfully negotiate a deal here with our trading partners. And so, the program will be flexible to allow that.”

Again, Johansson says the financial damage part has already been calculated, though he also says specific details have yet to be published and or worked out. Should the trade disputes be settled the program is meant to flexible.

This was not said, but it makes sense that a farmer who harvests and sells soybeans prior to the settlement would get a payment, one who sells after the settlement may not.

Assistant Deputy Administrator for Farm Programs, Brad Karmen says FSA, the Farm Service Agency, will be responsible for the sign up, “So we are going to allow producers, we are talking about a September sign-up, and it will probably go for many months. So, producers will have time to visit there FSA count y office. And in order to run this program we need producers to harvest their crop. So, producers that harvest their crop, like wheat for example which in on the list and many of those producers have harvested already. They may be able to get their payment earlier than somebody like corn or soybeans that doesn’t harvest until October. But we need producers to harvest so that we know their production in order to calculate a payment.”

Recapping then… the the bulk of the $12 billion dollars is intended to compensate soybean farmers for damages to their market. The initial calculation has, it appears, already been made but may be tweaked. Sign-up will be done at local FSA offices. Payments will begin once producers provide actual production figures to the FSA. And, the program may change or end prior to payments being made should the Administration settle trade disputes.

As of July 12th, U.S. farmers were expected to produce 4.3 billion bushels of soybeans this season.

A R C vs P L C | #farmbill18

The farmdocDaily team has written an article projecting future farm safety-net payments. Unless the conference committee members change ARC-Co (ark-county) dramatically, most corn farmers will choose P-L-C this time around.



excepts from the farmdocDaily article
by Gary Schnitkey, Jonathan Coppess, Nick Paulson, & Carl Zulauf

The House and Senate have respectively passed their versions of a 2018 Farm Bill. Now a conference committee will attempt to work out the differences. Both include the Agricultural Risk Coverage at the County Level (ARC-CO) and Price Loss Coverage (PLC) farm safety net programs first made available in the 2014 bill. The House version eliminates a third program— ARC at the individual farm level (ARC-IC) — while the Senate leaves it in.

ARC-CO pays when county revenue (county yield x marketing year average price) is below a revenue guarantee. The revenue guarantee equals .86 times a benchmark yield times a benchmark price. Benchmark yields and benchmark prices are Olympic averages of the five previous prices (eliminate the high and low equals). When county revenue is below the ARC guarantee, a shortfall is calculated that equals the guarantee minus harvest revenue. The shortfall cannot exceed 10% of the benchmark price times the benchmark yield. The ARC payment equals 85% times the shortfall. In each year since the 2014 Farm Bill has been implemented, payments have been reduced by a 6.8% sequester amount. Prices since 2014 have been below $4.00, and the benchmark price has declined. The benchmark price will be $3.70 in 2018, compared with a high of $5.29 in 2014. The benchmark price cannot go below $3.70 since the $3.70 reference price is a floor on the benchmark price.

Price Loss Coverage (PLC) is a price program. It makes payments when prices are below the reference price ($3.70 for corn). Each FSA farm has a PLC yield. The yield used in calculating payments is the average county yield, as reported by the Farm Service Agency. A per bushel shortfall is calculated when the MYA price is below the reference price equal to the reference price minus the higher of the MYA price or loan rate ($1.95 for corn). For example, the MYA price was $3.36 in 2016. Per bushel shortfall was $.34 ($3.70 reference price – $3.36 MYA Price), which is multiplied by the PLC yield and the payment acre factor of 0.85 and the sequester factor of (1 – 0.068).

The Senate ARC-CO version modifies the 2014 ARC-CO version in two ways; the benchmark yield will be trend adjusted; and an actual yield below 75% of the t-yield will be replaced by 75% of the t-yield. Both of these modifications have potential to raise benchmark yields, benchmark guarantees, and ARC payments.

The Senate PLC program is exactly the same as the 2014 PLC program.

The House PLC version uses an effective reference price in calculating per bushel shortfalls. The effective reference price equals .85 times the Olympic, five-year average of MYA prices as long as that average is between the current reference price ($3.70 for corn) up to 1.15 times the reference price ($4.26 for corn). If the average is below the $3.70 reference price, the $3.70 reference price is used. If the average is above $4.26, the $4.26 price is used. The House PLC program always has an effective price that is at least as great as the Senate PLC program.



The projection made in its April 2018 baseline allows calculation of CBO’s projections of per acre ARC-CO and PLC payments. On a national per base acre basis, ARC-CO is expected to make payments of $11 per acre for corn produced in the 2019 marketing year (see Table 2). For the 2019 marketing year, PLC is projected to pay $38 per corn base acre. In each year of the projected life of the 2018 Farm Bill, PLC is projected to pay more than ARC-CO. Over the 2019 to 2023 period, PLC is projected to pay an average of $29 per corn base acre compared to $9 per corn base acre for ARC-CO.

The Senate version of ARC-CO would result in higher payments for ARC-CO than those shown in Table 2 because the use of trend-adjusted yields and floors of 75% of t-yields will result in higher yield benchmarks and ARC guarantees. CBO’s estimate of program outlay changes for the Senate version suggests modest increases in spending of an average $20.5 million per year for marketing years from 2019 to 2023 (see Congressional Budget Office, Cost Estimates of S. 3042). The $20.5 million is applicable to all program crops. However, even if all the $20.5 million were applied to corn, expected payments would increase by $1.35 per corn base acre. This increase would leave expected payments for ARC-CO near $12 per base acre, still well below those for PLC. It is unlikely this increase would change any decisions by farmers as to which program to elect.

Turning to PLC, the House alternative will have at least as high of payments as shown in Table 2 for the Senate version because the House version has the potential escalator provision for reference prices. CBO estimates the impacts of the effective reference price mechanism to be minor for corn, with PLC payments for corn increasing $5 million for the ten fiscal years from 2019 to 2028 (CBO, https://www.cbo.gov/system/files/115th-congress–2017–2018/costestimate/hr2.pdf). This $5 million total increase would work out to be less than an increase of $1 per corn base acre. The reason for this low estimate is that MYA prices are not expected to get high enough to cause the effective reference price to exceed the reference price.

Given the choices in the House and Senate versions, most farmers and land owners would choose PLC over ARC-CO for use on corn base acre. This assumes that prices remain at levels currently forecast. It also assumes that farmers and land owners make choices based on highest expected payments from the program.

Jul 23 | USDA Weekly Crop Progress Reports

Around the nation, USDA reports 81% of the corn crop is silking. The rolling 5yr-avg is 62%. 18% of the crop has entered the dough stage, the 5yr-avg is 8%. The corn crop is in slightly better condition than last week as is the soybean crop. It now stands at 70% good or excellent with 44% of the crop setting pods. The 5yr-avg is about half that amount. Winter wheat harvest is 80% complete.

A Commodity Markets Interview with Todd Hubbs

The commodity markets seemed to have found a bottom for the moment. Todd Gleason has more on what may be next with University of Illinois Agricultural Economist Todd Hubbs.

July WASDE to Reflect Tariffs

This Thursday’s USDA’s monthly supply and demand estimates will include the impact of the Trump Administration’s tariffs. Gary Crawford talks with the chair of the World Agricultural Outlook Board Seth Meyer about the July WASDE. The report is scheduled for release at 11 a.m. central time Thursday, July 12, 2018.

When Farmers Should Spray for Japanese Beetles

Japanese beetles are showing up in corn and soybean fields. These can do enough damage to cause yield losses, but it is fairly unlikely. The University of Illinois has published thresholds for when farmers should spray crops to protect them from the Japanese beetle.

Nick Seiter says there needs to be a lot of beetles and a whole lot damage done before a producer should spend money on a rescue treatment, “Most of the reports that I am getting, as you would expect and as is typical, are below the treatment thresholds. These are 25 percent defoliation after bloom and 35 percent before bloom for soybean and the threshold for silk clipping in corn is consistent clipping to half-an-inch or less regularly throughout the field. I had a question yesterday about what to do when you have both Japanese beetles and corn rootworm clipping silks in the field. The answer is the same, the clipping has to be down to half-an-inch or less consistently through the field while pollination is still ongoing.”

ILLINOIS Extension Entomologist Nick Seiter says farmers have no need to apply a rescue treatment for Japanese beetles until defoliation reaches at least 25 percent after bloom for soybean and silk clipping during pollination is down to half-an-inch or less for corn.