New and Small Farm College

Are you interested in learning how to make the most of a few acres?  If so, this eight-week course is just for you!  Filled with practical knowledge on a variety of topics – you won’t be disappointed!  Licking County will host this college starting January 22, 2020 and meeting for eight consecutive Wednesday evenings.  See the flyer for further details and registration information.

What Does a Trade Deal Promise for Soybean Exports?

Source: Hubbs, T. “What Does a Trade Deal Promise for Soybean Exports?.” farmdoc daily (9):207, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 4, 2019

The proposed Phase 1 trade deal with China continues to move toward a resolution.  An initial announcement of $40-50 billion a year of agricultural exports gradually morphed into a $20 billion arrangement. Subsequently, a scenario popped up from Chinese trade commentators framing increased U.S. agricultural imports as China market demands require.  Stronger soybean prices appear to have priced in much of the recent export activity and leave the question of what if any change in soybean exports may come from the new deal.

USDA projections for Chinese soybean imports in 2019-20 are at 3.12 billion bushels, up 73 million bushels over the previous marketing year estimate.  The ongoing issues with swine fever led to the Chinese hog herd estimates coming in around 40 percent below last year.  Despite the reduced herd, Chinese attempts at rapid herd expansion and alternative feed use for soybeans to meet protein demands keep soybean imports from falling.  China reported soybean imports of 301 million bushels in September, with the vast majority of those coming from Brazil.  In the run-up to this latest round of negotiations, China exempted 10 million metric tons (367.4 million bushels) of U.S. soybean imports from tariffs.  Through October 24, China’s total commitments for U.S. exports sit near 227 million bushels.  Space exists for more buying under the current tariff exemption.  The implementation of a trade deal in November appears set to change the nature of soybean exports over the next year.

 

While the prospect of expanded export totals to China appears promising, the overall increase in soybean export may not be at levels equivalent to Chinese buying.  During the 2018-19 marketing year, the U.S. shipped 489 million bushels of soybeans to China and 1.258 billion bushels to the rest of the world.  Soybean exports to the rest of the world increased 41 percent from the previous marketing year as the U.S. picked up the slack witnessed from large Chinese buying out of South America.  A reversion to higher South American exports to the rest of the world’s major importers seems assured under expanded Chinese buying of U.S. soybeans.  Projections for non-Chinese soybean imports for the world are expected to decrease around 10 million bushels to 2.318 billion bushels for the marketing year.  It seems unlikely China would walk away from the trade relationships built over the last year and a half during the trade war.  Particularly when substantial uncertainty remains about the prospects of a long-term deal.  Significant Chinese buying from non-U.S. sources should continue.

The projection for U.S. soybean exports during the marketing year is 1.775 billion bushels.  This forecast is 7 million bushels higher than last marketing year’s total exports.  Soybean accumulated exports through October 24 equaled 292 million bushels, 21 million bushels above last year’s pace.  As of October 24, 416 million bushels of soybean had been sold for export but not shipped.  The outstanding sales total sits close to 100 million bushels below last year at this time despite increased Chinese buying.  The current unshipped export sales to China totaled 167 million bushels.  In the five marketing years before the onset of the trade war, U.S. exports to China averaged 37.7 percent of China’s total imports.  If the trade deal saw a reversion to that historical average, soybean exports to China this marketing year come in at 1.18 billion bushels.  By factoring in export substitutions related to expanded South American shipments to non-Chinese nations, expansion of U.S. exports by 70 – 100 million bushels above the present 1.775 billion bushel projection seems realistic.  This scenario remains strongly dependent on production levels in the U.S. and South America and the final framework for the trade deal.

World soybean production is set for much lower totals in 2019 due to the reduction in U.S. acreage.  U.S. soybean production is projected at 3.55 billion bushels for the 2019 crop.  The present yield forecast of 46.9 bushels per acre may see a further decline with the November 8 crop production report.  The continued deterioration of the U.S. crop diminishes the potential for massive increases in soybean exports that do not impact soybean crush profitability.  Brazilian production is forecast to be 5.3 percent higher than last year as higher export demand drove an increase in acreage.  Projected harvested acreage in Brazil sits at 91.2 million acres, up from 88.7 million acres last year.  Brazil’s soybean yield in 2018-19 came in at 48.5 bushels per acre.  The yield projection for the current crop is 49.5 bushels per acre.  Dry conditions and a slow start to planting in many areas may decrease the potential for a larger yield.  Argentine soybean production is forecast at 1.947 billion bushels, down a little over four percent from last year’s estimate.  The evolving nature of Argentine politics injects considerable uncertainty into future profitability for farmers in the region.  When considering the potential for the Brazilian crop, the market share of exports remains crucial in determining soybean export potential this marketing year.

Expanded soybean exports under the proposed trade agreement look probable.  The magnitude of this expansion may not be at the levels many hoped for when accounting for changing trade flows associated with South American export potential.  A substantial production shortfall from any of the major producing nations holds the potential for major changes to trade flows over the next year.

Discussion and graphs associated with this article available here:

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Seed Corn Costs: How Do Discounts Work with Seed Company Financing?

Source: Farmdoc, Chad Fiechter and Jennifer Ifft, Cornell University

To manage input costs, many producers take advantage of early pay and other discounts offered by input suppliers. Seed and chemicals often have complex pricing, with a range of pre-pay discounts, volume discounts, rebates and other incentives. On top of that, financing options are almost always available, with their own schedule of discounts and fees. This series addresses the following aspects of seed corn costs: (1) early cash payment and volume discounts (2) discounts under seed company financing options, and (3) the cost of seed company financing relative to traditional financing. In our first article (farmdoc daily October 10, 2019), we created a hypothetical discount schedule based on published discount schedules to show that seed discounts can easily reduce costs by over 20 percent  of the base price with early cash payment and volume discounts. In this article, we use this information to consider how discounts work under seed company financing.

Most seed companies offer financing under a separate discount schedule, which we summarize in Table 1. As we discussed in our previous article, we do not account for base price, but consider only the potential range of prices across an individual company, holding base price constant. Locking in financing early and obtaining a volume discount can lead to discounts from the base price in the range of 15 percent, which offers meaningful cost savings.

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Which Program Paid More Under the 2014 Farm Bill: ARC-CO or PLC?

Source:  Gary Schnitkey, Krista Swanson, Nick Paulson, Jonathan Coppess, Univ. of Illinois; Carl Zulauf, OSU

 

The Farm Service Agency recently released 2018 payment rates for both Agricultural Risk Coverage at the County Level (ARC-CO) and Price Loss Coverage (PLC). With this release, yearly payments for 2014 to 2018 are available so that average payments from ARC-CO and PLC can be compared over the entire length of the 2014 Farm Bill. These comparisons are made in this article across counties for corn, soybeans, and wheat. For corn, ARC-CO paid more than PLC for many counties in the U.S., with notable exceptions in southern Iowa, Missouri, and central Illinois. By default, ARC-CO made higher payments for soybeans because PLC did not make payments. For wheat, most counties had higher PLC payments.

ARC-CO-Minus-PLC Payments

Under the 2014 Farm Bill, farmers and land owners had a one-time decision to choose between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) commodity title programs for the years from 2014 to 2018. While an individual coverage option was available under ARC, most choose ARC at the County level (ARC-CO).

In this article, we determine whether ARC-CO or PLC made the largest payments across corn, soybeans, and wheat for all U.S. counties with available data. We do this by first calculating average ARC-CO payments and average PLC payments for each county for which complete data exist. These are average payments for the five years from 2014 through 2018. Then, ARC-CO-Minus-PLC payments are calculated for each county. An ARC-CO-minus-PLC payment for a county/crop combination equals the average ARC-CO payment for that county minus average PLC payment for that county. A positive ARC-CO-minus-PLC payment indicates that ARC-CO made larger payments than PLC. A negative value indicates that PLC made a higher average payment.

Several notes about the above calculation:

  • ARC-CO is a county revenue program that makes payments when county revenue is below a guarantee. Every farm in a county receives the same ARC-CO payment per base acre.
  • PLC is a price program that makes payments when the Market Year Average (MYA) price is below the reference price. Each farm in a county has a PLC yield. When the MYA price was below the reference price, the farm’s PLC yield was multiplied by the difference between the MYA price and reference price when arriving at a payment. Farms with higher PLC yields will receive higher payments. Averages presented in this article use the PLC yield equal to the average county yield from 2008 through 2012 multiplied by 90%, a yield updating option under the 2014 Farm Bill.  This procedure results in PLC yields close to the county average.
  • All values are stated on a per base acre basis (payment acres = 85% of base acres). A 6.8% sequester is deducted from all payments.

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It’s that time of year … Don’t forget to calibrate your yield monitor!

Remember the old adage … Garbage in = Garbage out. Many of us use our yield data to make additional management decisions on our farms such as hybrid or variety selection, fertilizer applications, marketing, etc. Data from an uncalibrated yield monitor can haunt us for many years by leading us into improper decisions with lasting financial affects. In today’s Ag economy we can ill afford any decision with adverse financial implications.

The two biggest reasons I usually hear for not calibrating a yield monitor are 1) I just don’t have time to do it or 2) I can’t remember how to do it without getting my manual out.  While I know it’s easy to criticize from “the cheap seats”, I would argue that this could be some of the most important time you spend in your farming operation each year.  Like many other tasks on our farm, the more we do it, the easier it gets.  Yield monitor data has so much value!  This data provides a summary (in term of yield) of every single decision you made on your farm during the past year.

Below is a calibration checklist created by Dr. John Fulton and Dr. Elizabeth Hawkins.

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