Returns for Ohio Corn at Risk Management Association Projected Prices

by: Ben Brown, Department of Agricultural, Environmental, and Development Economics, The Ohio State University, March 17, 2019

Click here to access complete article complete with Figures

The month of February represents the price discovery period for Projected Prices of corn, soybeans, and spring wheat. Barley and winter wheat in Ohio have price discovery periods August 15 through September 14. The Projected Prices represent the Risk Management Associations (RMA) baseline for establishing federally sponsored corn and soybean insurance products for 2019. The Projected Price for corn is the average of the February settlement prices for the December futures contract (ZCX2019). The subsequent Harvest Price is the average of the October settlement prices for the same December futures contract. The Projected Price and the Harvest Price are used to identify the guaranteed revenue for revenue based crop insurance products. However, neither price takes into account local cash basis.

The February settlement prices for the December futures contract are represented in figure 1. The projected price established by RMA for 2019 corn revenue is $4.00/bushel. This is up $0.04/bushel from the 2018 and 2017 projected prices of $3.96/bushel representing the increase in corn prices during the last few months of 2018 after a drop during the summer months. The December futures price maintained during the month of February before falling Returns for Ohio Corn at Risk Management Assocation Projected Prices 3.17.2019-20bhk4lduring the beginning of March. Price volatility is considered when setting premium levels for insurance products. A higher volatility increases the premium paid by the producer all else equal. Volatility rates are set by averaging the volatility of the most recent five trading days. Corn volatility has continued decreasing and since 2011 is at its lowest point of 0.15.

In October, RMA will calculate the 2019 Harvest Price to set guaranteed revenue for the year. Historical Projected and Harvest corn prices are represented in figure 2. The Projected Price for corn has been higher than the Harvest Price the last six years after two years of increases in 2011 and 2012. For the entire series 2011-2018, the Projected Price was above the Harvest Price by $0.21/bushel. Looking at only the last six years of high production values across the country, the Projected Price exceeded the Harvest Price by $0.64/bushel. In 2013, both prices finished at $12.87/ bushel. The December Futures contract ZCX2019 is averaging below the Projected Price halfway through March. Several factors will determine the final Harvest Price for the December Futures contract between now and the discovery period in October.

Returns for Ohio Corn Producers based on 2019 Projected Prices

Through the Farm Office at The Ohio State University Extension, enterprise budgets can be found for 2019 corn and soybeans along with enterprise budgets from the previous years. These enterprise budgets break out all costs for production on low, medium and high yielding scenarios. These budgets can be found at farmoffice.osu.edu.

To calculate a cost of production for each crop reporting district in Ohio, the OSU enterprise budgets were used along with inputs from credible sources. Yield estimates for each crop reporting district came from the most current 5 years of National Agricultural Statistic Service (NASS) data.

Insurance policies are based on an Actual Production History (APH), which represents a maximum of 10 previous years of yield records for a particular field or enterprise. Since the 2012 crop year, these yields have been adjusted to account for improved crop genetics and current practices. The Federal Crop Insurance Corporation Board approves a trend adjustment factor for corn and soybeans in each county. This factor is equal to the annual increase in yield, and is based on county average yields determined by NASS each year. For the calculations below, a corn trend adjustment factor of 1.6 bushels is multiplied to the difference in the current year to the base year and then added to the yield of the base year. As an example, consider a county that has a yield in 2013 of 164 bushels per acre. Using 2017 as the current year the adjustment would be (((2017-2013)*1.6) + 164) for an adjusted yield of 170 bushels per acre. Seeding rates for cost estimates were taken from the 2018 eField Report published by The Ohio State University. The most profitable seeding rate based on a $3.50/1000 seeds was used in these cost calculations. Cash rent estimates for each crop reporting district were reported by NASS in 2017.

Ohio producers have the option to select coverage levels from 50% of APH to 85% of APH. Using the Summary of Business operations from the RMA website, the most popular coverage level for Ohio corn producers is 80%. For this article, it is assumed that an 80% APH coverage level is selected for revenue insurance products. An 80% coverage level means that the projected price is only covered on 80% of bushels not the total number of bushels.

When considering all acres within the unit, the uninsured acres have no direct revenue insurance coverage. In this case, it would equal the remaining 20% based on the 80% coverage level. The 2018 Farm Bill signed into law on December 20, 2018 raised the marketing loan rates for covered commodities. These loan rates are often considered a price floor under commodity markets. In the case of corn, the marketing loan rate is $2.20 per bushel. If the marketing loan rate is used as the price floor for the remain 20% bushels that are left uncovered then an adjustment can be made to cover all acres within a unit. The $3.64 per bushel represents the complete coverage of all acres.

(0.80 x $4.00/ bu.) + ($2.20 x 0.20) = $3.64 per bushel.

Figures 3 and 4 illustrate the coverage of the RMA projected price at a coverage level of 80% and at a complete coverage level for all corn bushels compared to cost of production for Ohio corn producers in each crop reporting district. The $4.00 Projected Price covers cost of production for almost all of Ohio’s crop reporting districts. Four exceptions include Central, North Central, Northwest and West Central Ohio, where the majority of Ohio’s corn is produced. Higher comparative cash rents and high seeding rate costs bring cost of production above the projected price in all regions. Southwest Ohio was able to compensate a portion its costs with higher yields than all the other districts. Their APH is likely the highest and therefore has the highest absolute value of covered bushels under a revenue policy.

Taking into account all bushels, using the marketing loan rate as a price floor, every district except the Southeast District has costs of production above the guaranteed price established with the RMA Projected Price. In the Southwest, cost of production remains below the Projected Price of all acres due to relatively low cash rented in relation to yields compared to the districts with costs of production above the Projected Price for all acres. The OSU eFields Report only reports corn seeding rates for a couple of districts so estimates based on soil type and yield were used to determine the rest. Southeast Ohio had the lowest cost of production, but also represented the smallest amount of covered acres according to the RMA Summary of Business. (Figure 5)

Summary

The Projected Price used in guarantees for revenue insurance and for premium costs for RMA federally subsidized insurance policies was finalized at the end of February. The $4.00/ bushel Projected Price is $0.04 above the Projected Prices of 2018 and 2019. Harvest Price will be discovered in the month of October and has historically been lower than the Projected Price of the corresponding year. The RMA Projected Price is used by Ohio corn producers to manage price risk, but it is not the only tool. The marketing loan rate set in the 2018 Farm Bill provides a price floor that is used to calculate insurance revenue guarantees. Four of Ohio’s 9 crop reporting districts showed higher costs of production compared to the $4.00 Projected Price. However, 8 of the 9 districts showed higher costs of production than the “Complete” Coverage when adjusting for 80% revenue coverage. Southeast Ohio was the only crop reporting district to show gains compared to the Projected Price set by RMA for both covered bushels only and all bushels using the marketing loan rate of $2.20 as a price floor. The districts of Central, North Central and Northwest are at best meeting their cost of production, while West Central has cost of production above the revenue guarantee. These districts represent the majority of corn revenue policies and corn production for the state as shown in Figure 5. Many producers reported higher than normal yields in 2018. If higher than historical average yields appear again in 2019, cost of production per bushel will be reduced below these calculations. In 2019, these programs are protecting the downside risk for producers as proponents argue they were designed to do. Districts having net returns above cost of production have low production and low insurance coverage. Thus, these insurance programs are providing a risk management tool for Ohio producers.

References

CFAES 2018 eFields Report: Ohio State Digital Ag Program. The Ohio State University. Jan. 2019.

O’Brien, Daniel, and Greg Ibendahl. “2019 Kansas Soybean Returns at RMA Projected Soybean Prices.” Ag Manager, Kansas State University Research and Extension, 8 Mar. 2019.

Ohio Cash Rent Estimates 2017.” United States Department of Agriculture-National Agricultural Statistics Service, 8 Sept. 2019.

“OSU Corn Enterprise Budgets.” Farm Budgets, Ohio State University Extension Farm Office, 5 Oct. 2018.

Plastin, Alejandro. “Trend-Adjusted Actual Production History (APH).” Ag Decision Maker, Iowa State University, Sept. 2014

Quick Stats, United State Department of Agriculture- National Agricultural Statistics Service, 17 Mar. 2019.

Summary of Business, USDA-Risk Management Agency Federal Crop Insurance Corporation, 18 Mar. 2019.

 

 

Returns for Ohio Soybeans at Risk Management Association Projected Prices

by: Ben Brown, Department of Agricultural, Environmental, and Development Economics, The Ohio State University, March 17, 2019

Click here to access complete article–includes Figures.

The month of February represents the price discovery period for Projected Prices of corn, soybeans, and spring wheat. Barley and winter wheat in Ohio have price discovery periods August 15 through September 14. The Projected Prices represent the Risk Management Associations (RMA) baseline for establishing federally sponsored corn and soybean insurance products for 2019. The Projected Price for soybeans is the average of the February settlement prices for the November futures contract (ZSX2019). The subsequent Harvest Price is the average of the October settlement prices for the same November futures contract. The Projected Price and the Harvest Price are used to identify the guaranteed revenue for revenue based crop insurance products. However, neither price takes into account local cash basis.

The February settlement prices for the November futures contract are represented in figure 1. The projected price established by RMA for 2019 soybean revenue is $9.54/bushel. This is down $0.62/bushel from the 2018 projected price of $10.16/bushel representing the drop in soybean prices from 2018 to 2019. Price volatility is considered when setting premium levels for insurance products. A higher volatility increases the premium paid by the producer all else equal. Volatility rates are set by averaging the volatility of the most recent five trading days. Soybean volatility has continued decreasing after an increase in 2017 from 2016.

In October, RMA will calculate the 2019 Harvest Price to set guaranteed revenue for the year. Historical Projected and Harvest soybean prices are represented in figure 2. The Projected Price for soybeans has been higher than the Harvest Price in all but three years since 2011. Yield shortfalls in 2012 and 2016 increased soybean prices through harvest increasing the Harvest Price above the Projected Price. In 2013, both prices finished at $12.87/ bushel. Last year, the Harvest price was $1.56/ bushel below the 2018 Projected Price of $10.16/ bushel explained by a record soybean crop in the United States and trade disturbances between the United States and China.

Returns for Ohio Soybean Producers based on 2019 Projected Prices

Through the Farm Office at The Ohio State University Extension, enterprise budgets can be found for 2019 corn and soybeans along with enterprise budgets from the previous years. These enterprise budgets break out all costs for production on low, medium and high yielding scenarios. These budgets can be found at farmoffice.osu.edu.

To calculate a cost of production for each crop reporting district in Ohio, the OSU enterprise budgets were used with inputs from credible sources. Yield estimates for each crop reporting district came from the most current 5 years of National Agricultural Statistic Service (NASS) data.

Insurance policies are based on an Actual Production History (APH), which represents a maximum of 10 previous years of yield records for a particular field or enterprise. Since the 2012 crop year, these yields have been adjusted to account for improved crop genetics and current practices. The Federal Crop Insurance Corporation Board approves a trend adjustment factor for corn and soybeans in each county. This factor is equal to the annual increase in yield, and is based on county average yields determined by NASS each year. For the calculations below, a soybean trend adjustment factor of 0.5 bushels is multiplied to the difference in the current year to the base year and then added to the yield of the base year. As an example, consider a county that has a yield in 2013 of 53 bushels per acre. Using 2017 as the current year the adjustment would be (((2017-2013)*0.5) + 53) for an adjusted yield of 55 bushels per acre. Seeding rates for cost estimates were taken from the 2018 eField Report published by The Ohio State University. The most profitable seeding rate based on a $0.428/1000 seeds was used in these cost calculations. Cash rent estimates for each crop reporting district were reported by NASS in 2017.

Ohio producers have the option to select coverage levels from 50% of APH to 85% of APH. Using the Summary of Business operations from the RMA website, the most popular coverage level for Ohio soybean producers is 80%. For this article, it is assumed that an 80% APH coverage level is selected for revenue insurance products. An 80% coverage level means that the projected price is only covered on 80% of yield not the total number of bushels.

When considering all acres within the unit, the uninsured acres have no direct revenue insurance coverage. In this case, it would equal the remaining 20% based on the 80% coverage level. The 2018 Farm Bill signed into law on December 20, 2018 raised the marketing loan rates for covered commodities. These loan rates are often considered a price floor under commodity markets. In the case of soybeans, the marketing loan rate is $6.20 per bushel. If the marketing loan rate is used as the price floor for the remain 20% bushels that are left uncovered then an adjustment can be made to cover all acres within a unit. The $8.87 per bushel represents the complete coverage of all acres.

(0.80 x 9.54/ bu.) + ($6.20 x 0.20) = $8.87 per bushel.

Figures 3 and 4 illustrate the coverage of the RMA projected price at a coverage level of 80% and at a complete coverage level for all soybean bushels compared to cost of production for Ohio soybean producers in each crop reporting district. The $9.54 Projected Price covers cost of production for almost all of Ohio’s crop reporting districts. Two exceptions include Northwest and West Central Ohio, where the majority of Ohio’s soybeans are produced. High cash rents and high seeding rate costs bring cost of production above the projected price in both regions. West Central Ohio compensates a portion of these higher costs with higher yields than all the other districts. Their APH is likely the highest and therefore has the highest absolute value of covered bushels under a revenue policy.

Taking into account all bushels, using the marketing loan rate as a price floor, Central, North Central, Northwest, and West Central Ohio all have costs of production above the guaranteed price established with the RMA Projected Price. In districts where the cost of production remains below the Projected Price of all acres cash rented in relation to yields, are lower than those districts that have costs of production above the Projected Price for all acres. According to the OSU eFields Report, these districts also have lower seeding rates with a lower seed costs. Southeast Ohio had the lowest cost of production, but also represented the smallest amount of covered acres according to the RMA Summary of Business. (Figure 5)

 

Summary

The Projected Price used in guarantees for revenue insurance and for premium costs for RMA federally subsidized insurance policies was finalized at the end of February. The $9.54/ bushel Projected Price is $0.62 below the Projected Price of 2018, and the lowest of the prices reported on the RMA webpage going back to 2011. The Harvest Price will be discovered in the month of October and has historically been lower than the Projected Price of the corresponding year. The RMA Projected Price is used by Ohio soybean producers to manage price risk, but it is not the only tool. The marketing loan rate set in the 2018 Farm Bill provides a price floor that is used to calculate insurance revenue guarantees. While several crop reporting districts showed gains over cost of production for soybeans, the crop reporting districts of Northwest, North Central, West Central, and Central are at best meeting costs for all acres given a coverage level of 80% of APH. These districts represent the majority of soybean revenue policies and soybean production for the state. In 2019, these programs are protecting the downside risk for producers as proponents argue they were designed to do. Districts having net returns above cost of production have low production and low insurance coverage. Thus, these insurance programs are providing a risk management tool for Ohio producers.

References

CFAES 2018 eFields Report: Ohio State Digital Ag Program. The Ohio State University. Jan. 2019.

O’Brien, Daniel, and Greg Ibendahl. “2019 Kansas Soybean Returns at RMA Projected Soybean Prices.” Ag Manager, Kansas State University Research and Extension, 8 Mar. 2019.

Ohio Cash Rent Estimates 2017.” United States Department of Agriculture-National Agricultural Statistics Service, 8 Sept. 2019.

“OSU Soybean Enterprise Budgets.” Farm Budgets, Ohio State University Extension Farm Office, 5 Oct. 2018.

Plastin, Alejandro. “Trend-Adjusted Actual Production History (APH).” Ag Decision Maker, Iowa State University, Sept. 2014

Quick Stats, United State Department of Agriculture- National Agricultural Statistics Service, 17 Mar. 2019.

Summary of Business, USDA-Risk Management Agency Federal Crop Insurance Corporation, 18 Mar. 2019.

 

 

Agriculture Improvement Act of 2018: Summary

by: Carl Zulauf, Emeritus Professor, and Ben Brown, Program Manager – Farm Management Ohio State University, Department of Agricultural, Environmental, and Development Economics,  February 2019

click here to access a PDF version this summary paper.

Title I – Commodities ($31.4 billion; +$0.101 billion)

Agriculture Risk Coverage (ARC)-County, ARC-individual, and Price Loss Coverage (PLC) are reauthorized. New program election by crop and Farm Service Agency (FSA) farm will be made for 2019 and 2020 crop years; then, starting with 2021 crop, program election can be changed each year. Failure of all producers of a FSA farm to make a unanimous election for the 2019 crop means no program payments to farm for the 2019 crop, and all the farm’s producers are defaulted for the 2020-2023 crops to the same coverage as in 2015-2018 for the covered commodity.

Owners of base acres will have a 1-time opportunity to update PLC payment yields using the following formula: [(90% times average 2013-2017 yield of a covered commodity on a FSA farm) times the ratio of (average US 2008-2012 yield of a covered commodity divided by its average US 2013-2017 yield, but not less than 90% nor greater than 100% of the US yield ratio)]. Yields are per planted acre. Updated PLC yields are first used for the 2020 crop. If a farm’s yield is less than 75% of average county yield for a covered commodity in any year, then 75% of the 2013-2017 average county yield will be the farm’s yield for that year. Average payment yield for seed cotton per planted acre equals (2.4 times average yield for upland cotton per planted acre). Oilseeds designated after enactment of the farm bill will have payment yields equal to 90% of average yield per planted acre over the most recent 5 years.

ARC county yields will be adjusted for trends. The trend adjustment cannot exceed crop insurance adjustment per year. Yield floor (plug yield) is raised to 80% from 70% of the county transitional yield. Insurance yield data is the first priority source of data for ARC yields. A separate irrigated and non-irrigated yield will be calculated in each county.

For ARC, up to 25 counties may be divided into 2 administrative units. Eligible counties are larger than 1,400 square miles with more than 190,000 base acres. Preference is given to counties with greater variation in climate, soils, and expected productivity between the 2 administrative units.

The reference price has an escalator option that results in an effective reference price used to calculate ARC and PLC payment rates. The effective reference price equals the higher of (a) the reference price stated in the farm bill (statutory reference price) for the covered commodity or (b) the escalator option of 85% of the Olympic average price of the covered commodity for 5 most recent crop years (excludes high and low price), but (c) cannot exceed 115% of the statutory reference price. The effective reference price will be used in ARC revenue guarantee calculations beginning with the 2019 crop year. Reference price for temperate japonica rice equals (1) effective reference price established for long grain rice, multiplied by the ratio of average market year price of medium grain rice to average market year price of all rice, both averages for the 2012-2016 years.

No ARC or PLC payments can be received for the 2019-2023 crop years if all base acres on a farm for 2009-2017 were entirely planted to grass and pasture, including idle or fallow land. All base acres and payment yields on the farm are preserved.

Nonrecourse marketing assistance loans are extended through 2023. Loan rates are increased for corn and grain sorghum ($2.20/bu.), soybeans ($6.20), wheat ($3.38/bu.), barley (2.50/bu.), oats ($2.00/bu.), extra-long staple cotton ($0.95/lb.), long and medium grain rice ($7.00/cwt.), dry peas ($6.15/cwt.), lentils ($13/cwt.), small chickpeas ($10/cwt.), large chickpeas ($14/cwt.), and raw cane sugar (19.75 cents/lb.). [ASIDE: started as a provision in the House farm bill to increase the loan rate only for extra-long staple cotton.] Secretary is given authority to adjust the marketing loan program to minimize forfeitures. Loan rate for base quality upland cotton is the simple average of adjusted prevailing world price for 2 immediately preceding market years, except its loan rate cannot decline more than 2%/year nor be lower than $0.45/lb. nor higher than $0.52/lb.

Renames dairy Margin Protection Program (MPP), Dairy Margin Coverage (DMC) Program. DMC provides eligible dairy producers milk-feed cost margin coverage between $4/cwt. and $9.50/cwt. for the first 5,000,000 pounds of participating production (i.e., tier 1 production). Premiums are reduced for margins that currently exist, including a premium of $0 for the $4 margin, and are specified for the new margins of $8.50, $9.00, and $9.50. For production over 5,000,000 pounds (i.e., tier 2 production), producers can elect coverage between $4 and $8. Operations can cover between 5% and 95% of production history. Production history is the highest production in 2011, 2012, or 2013. Premiums are increased for tier 2 production, especially for higher coverage levels. Any operation that signs up in 2019 and commits to maintaining their coverage decisions through 2023 will receive a 25% discount on their premium each year. The Secretary is required to repay each dairy that participated in MPP-dairy during calendar years 2014-2017 part of the difference between total MPP-dairy premiums and payments. Repayment is (1) 75% of the difference if taken as a credit toward DMC premiums or (2) 50% of the difference if taken as cash. Dairy operations are permitted to participate in both DMC and Livestock Gross Margin for Dairy insurance (LGM) on the same milk production. All restrictions between DMC and any Federal Crop Insurance product are removed. Dairies that were locked out of the revised 2018 MPP-dairy program due to LGM participation are allowed to retroactively participate in MPP-dairy for the months during 2018 they were excluded. A study of feed costs is required; the difference in feed value of corn silage vs. corn is specifically mentioned. Monthly price reports are to be revised to include prices for high-quality alfalfa hay in the top 5 milk producing states. A Milk Donation Program is established to encourage dairy organizations to donate milk through food banks and similar organizations. Class I skim milk price formula is adjusted.

Livestock Indemnity Program (LIP) is amended to cover (1) death or sale loss as a result of diseases caused or transmitted by a vector that cannot be controlled by vaccination or other acceptable management practices, and (2) death of unweaned livestock due to adverse weather.

Sets Noninsured Crop Assistance Program (NAP) payment limits at $125,000 for catastrophic coverage and $300,000 for additional coverage. Service fee for NAP is increased to smaller of (1) $325 per crop per county or (2) $825 per producer per county, but cannot exceed $1,950 per producer. Authority for additional NAP coverage (also called, NAP buy-up) is made permanent.

Current “actively engaged” requirements to qualify as a farm program payment entity is retained. Amends definition of family member to include first cousins, nieces, and nephews. Retains adjusted gross income (AGI) eligibility limit of $900,000. Retains $125,000 limit on PLC plus ARC payment per payment entity summed across all crops except peanuts (has its own $125,000 limit). Removes marketing loan gains and loan deficiency payments from the $125,000 payment limit.

Suspension of permanent price support authorities is extended through 2023.

TITLE II – CONSERVATION ($28.715 billion; +$0.555 billion)

Increases Conservation Reserve Program (CRP) cap from 24 to 27 million acres by FY 2023, including 8.6 million acres for continuous practices and 2 million for grasslands. Contract length is 10 to 15 years, after which the land is eligible for reenrollment, with some exceptions. A proportional, historic acreage allocation by State is included for a portion of acres eligible for enrollment. Not less than 40% of continuous CRP acres are be devoted to CLEAR (Clean Lakes, Estuaries, and Rivers Initiative). Flexibility for haying and grazing is increased. Limits cost-share payments to actual cost of practice installation and may not exceed 50% of seed cost. Soil rental rates for general and continuous enrollment are respectively limited to 85% and 90% of the county average; but the Secretary is required to account for potential impact on the local farmland rental market. Authorizes incentive payments for continuous practices and forest management. Amends rental rate calculations to allow for state and Conservation Reserve Enhancement Program (CREP) partner input and to maintain incentives for specific practices or areas like wellhead protection zones.

Creates a pilot program for CLEAR practices that use 30-year contracts in order to measure demand for longer-term CRP contracts. Also creates a pilot Soil Health and Income Protection Program. Uses 3, 4, or 5 year agreements.

Combines the Conservation Stewardship Program (CSP) and Environmental Quality Incentives Program (EQIP) under the same chapter, but the programs’ authorization remain separate with distinct purposes.

Requires Secretary to manage CSP to enhance soil health to the maximum extent feasible. Removes current acre-based funding method and $18/acre national average payment rate. Conservation activities supported by CSP now include advanced grazing management and comprehensive conservation planning. Secretary can allocate State funding for organic and transition to organic production. Establishes a new Grassland Conservation Initiative within CSP for cropland for which base acres have been maintained by Secretary under section 1112(d)(3) of Agricultural Act of 2014 (7 U.S.C. 9012(d)(3)). Producers are provided a 1-time election to enroll such land beginning with FY 2019. Statute specifies an annual payment rate of $18/acre. Limits enrollment in the Grassland Conservation Initiative to 1 time for a length of 5 years. Early contract termination under the Initiative is allowed at any time without penalty, and all land enrolled during a crop year is considered planted to an agricultural commodity during that crop year.

Maintains EQIP’s role of helping agriculture producers meet Federal, state and local regulatory requirements. Allows Secretary to provide water conservation and system efficiency payments to certain entities eligible for implementing water conservation or irrigation practices under a watershed-wide project, such as states and irrigation districts. Reduces EQIP’s livestock allocation to 50% from 60%, clarifies that livestock activities include grazing practices, and increases EQIP’s wildlife allocation to 10% from 5%.

For the Agricultural Conservation Easement Program (ACEP), narrows existing limitation on nonagricultural uses to those that negatively affect agricultural and conservation values. Expands cost-share and program eligibility. Prioritizes water quality improvement on wetland reserve easements (WRE). Land enrolled in Agricultural Land Easement (ALE) may simultaneously be enrolled in CRP.

Increases mandatory funding for Regional Conservation Partnership Program (RCPP) to $300 million/year (from $100 million/year) for FY 2019-2023 while eliminating the contribution of 7% of covered program funding. Covered programs now include EQIP, CSP, ACEP, CRP, Healthy Forest Reserve Program, and Watershed Act. Highlights water quality and quantity issues.

Provides $50 million in mandatory funding to the Voluntary Public Access-Habitat Incentives Program to encourage farmers and ranchers to open their land to public recreation.

Provides $50 million in annual mandatory funds for the Watershed Protection and Flood Prevention Program.

Codifies Working Lands for Wildlife model of conservation partnership between the Departments of Agriculture and Interior to provide regulatory predictability under the Endangered Species Act of 1973 for the purpose of carrying out working landscape conservation activities involving species conservation.

Provides $75 million of mandatory funds for a feral swine eradication and control pilot program for FY 2019-23.

Maintains current conservation compliance requirements for highly erodible land and wetlands.

 

Title III – Trade ($1.809 billion; +$0.235 billion)

Consolidates Market Access Program, Foreign Market Development Cooperator Program, Emerging Markets Program, and Technical Assistance for Specialty Crops under one Agricultural Trade Promotion and Facilitation section. However, intent is to maintain the unique functions of each program. Provides mandatory CCC funds of $255 million annually for export programs through FY 2023, with at least $200 million for the Market Access Program.

Establishes an International Agricultural Education Fellowship Program to assist eligible countries in developing school-based agriculture and youth extension programs.

Increases limit on US funds for Global Crop Diversity Trust (preserves genetic resources for food crops) from 25% to 33% of total funds contributed from all sources, capped at $5.5 million/year.

 

Title IV – Nutrition ($325.922 billion; +$0.098 billion)

Although work requirements for eligibility for Supplemental Nutrition Assistance Program (SNAP) benefits were little changed, a large number of provisions focus on employment and training activities and opportunities for those receiving SNAP benefits.

Directs USDA to continue improving the SNAP electronic benefits transaction (EBT) system to be more compatible with online transactions, mobile payments, and farmer markets.

Requires the Secretary to establish a longitudinal database accessible for research to enhance SNAP’s performance and design.

A number of provisions address incentives for SNAP participants to buy fruits and vegetables and encourage the sharing of information on which incentives and programs work best.

Authorizes pilot projects to incentivize fluid milk purchases for SNAP participants to test and evaluate methods that improve diet quality.

Eliminates performance bonus to states for low SNAP error rates.

A number of provisions address programs to direct current food wastes into programs that reduce food insecurity and hunger.

Authorizes a review of the thrifty food plan every 5 years.

 

Title V – Credit (-$2.205 billion; +$0.000 billion)

Increases the limit on direct ownership loans from $300,000 to $600,000, on guaranteed ownership loans from $700,000 to $1,750,000, on direct operating loans from $300,000 to $400,000, and on guaranteed operating loans from $700,000 to $1,750,000.

Increases overall loan authorization levels per Fiscal Year for ownership and operating Farm Loan Program loans to $10 billion from $4.226 billion.

Reduces current 3-year experience requirement under certain conditions to qualify for loans for young beginning farmers and military veterans.

Increases acreage limit exception for Farmer Mac from 1,000 to 2,000 acres.

Authorizes a study to analyze current capital standards of Farm Credit System institutions.

Expands list of persons eligible for State mediation programs.

 

Title VI – Rural Development ($0.98 billion; -$0.530 billion)

Issues addressed by multiple provisions are (1) broadband service; (2) healthcare, including substance abuse; (3) water quality, and (4) reducing cost of subsidies for government-provided loans and loan guarantees. The budget savings scored for this title come from reducing cost of interest credited to the Rural Utility Service Borrowers’ Cushion of Credit accounts.

Two provisions address the determination of a “rural” area. One excludes prison populations incarcerated on a long-term or regional basis. The second excludes the first 1,500 individuals who reside in housing located on a military base.

 

Title VII – Research ($0.329 billion;+$0.365 billion)

Provides for a transfer of $185 million in Commodity Credit Corporation (CCC) funds to the Foundation for Food and Agriculture Research once it submits to Congress a detailed strategic plan for becoming self-sustaining.

Provides mandatory CCC funding for the Organic Agriculture Research and Extension Initiative, increasing to $50 million for FY 2023 and thereafter.

Provides $4 million/year in mandatory CCC funds along with authorization of appropriations of $10 million/year for competitive research and extension grants for an Urban, Indoor, and Other Emerging Agriculture Production Research, Education, and Extension Initiative.

Authorizes $10 million/year through FY 2023 for a Farm and Stress Assistance Network to provide grants for training programs and workshops for advocates and others who assist farmers in crisis.

Provides mandatory funding from CCC for scholarships for students at 1890 institutions who intend to pursue a career in food and agricultural sciences.

Increases the limit on indirect costs for agricultural research, education, and extension from 22% to 30% of total federal funds received, unless otherwise provided in law.

Adds the following priority research areas to the Competitive, Special, and Facilities Research Grant Act: (1) soil health; (2) tools that accelerate research in use of automation or mechanization for labor-intensive tasks in crop production and distribution; and (3) barriers to entry for young, beginning, socially disadvantaged, veteran, and immigrant farmers and ranchers.

Makes industrial hemp eligible for certain funding under existing research authorities.

The Secretary is directed to implement a strategy to accelerate development and use of automation and mechanization in producing or processing of specialty crops.

 

Title VIII – Forestry ($0.005 billion; +$0.000 billion)

Focus is forest landscape restoration. Provisions include authorization of (1) $20 million/year for a competitive grant program for financial and technical assistance to restore priority forest landscapes and (2) $80 million/year ($40 million increase) for the Collaborative Forest Landscape Restoration Program.

 

Title IX– Energy ($0.362 billion; +$0.109 Billion)

Reauthorizes a majority of the 2014 farm bill energy programs in the Energy title. Moves Biomass Research and Development Initiative to Title VII and Community Wood Energy Program to Title VIII. Repeals Repowering Assistance Program and Rural Energy Self-Sufficiency Initiative.

Several definitions used to determine eligibility for programs are expanded. “Biobased product” is amended to include “renewable chemicals.” “Biorefinery” is amended to include facilities that convert renewable biomass into renewable chemicals, or an intermediate ingredient or feedstock of renewable biomass into any one or more, or a combination of biofuels, renewable chemicals, or biobased products. “Renewable Energy System” is amended to include systems that produce usable energy from a renewable energy source including distribution components necessary to move energy to initial point of sale, and other ancillary infrastructure such as storage systems.

Adds algae as an eligible material for the Biomass Crop Assistance Program.

Provides mandatory funding to Biobased Markets Program ($3 million/year over 5 years); Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program ($50 million in FY 2019 and $25 million in FY 2020); and Bioenergy Program for Advanced Biofuels ($7 million/year over 5 years).

Authorizes grants to educate rural business, communities, and utilities serving rural communities about biogas production.

 

Title X – Horticulture ($0.772 billion; +$0.250 billion)

Provides $50/year in mandatory CCC funds beginning in FY 2019 and each year thereafter for the Local Agriculture Market Program (LAMP). LAMP is composed of the Farmers’ Market and Local Food Promotion Program and value-added agricultural product market development grants. Highlights a new focus on regional partnerships to encourage multi-stakeholder approach to local food system development.

A number of provisions address organic production, including $24 million in mandatory CCC funding for FY 2019 through FY 2023 for the National Organic Certification Cost-Share Program.

Adds asexual reproduced plant material to the Plant Variety Protection Act.

Provides $500,000 of CCC funding for a multiple crop and pesticide use survey.

Authorizes a report on regulation of plant biostimulants to facilitate a regulatory framework.

Allows States to regulate hemp production based on a state or tribal plan. Stipulates several conditions, including the testing for THC concentration.

 

Title XI – Crop Insurance ($38.057 billion; -$0.047 billion)

Clarifies conditions for voluntary conservation practices, notably cover crops, to be considered good farming practices for crop insurance coverage. Defines cover crop termination as a practice that historically and under reasonable circumstances result in terminating growth of a cover crop.

Allows producers to establish a single enterprise unit by combining (a) enterprise units across counties or (b) enterprise units with basic units and optional units in one or more counties.

Continues to expand crop insurance in a variety of ways. (1) Directs research and development to improve existing policies or develop new policies for Whole Farm Revenue Protection, tropical storm or hurricane insurance, quality loss, citrus, hops, subsurface irrigation practices, grain sorghum, limited irrigation practices, rice irrigation practices, greenhouse, local foods, and batture land in the Lower Mississippi River Valley. (2) Requires data collected through the Noninsured Crop Disaster Assistance Program be provided for improving crop insurance coverage (3) Permits separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season (separate policies independently indemnified for different causes of loss). (4) Creates a Specialty Crop Liaison in each regional office to focus efforts on developing contracts for specialty crops. (5) Allows hemp to be added to the list of insurable crops.

Codifies RMA practice of allowing producers to limit decrease in actual production history (APH) to not more than 10% of the prior crop year’s APH, provided production decline is due to drought, flood, natural disaster, or other insurable loss. Actuarially sound premiums must be established.

Native sod acreage that has been tilled for the production of an insurable crop after the date of enactment of the 2018 farm bill is subject to a reduction in insurance benefits for not more than 4 cumulative years during the first 10 years after initial tillage.

Authorizes use of NASS and other data sources to reduce insurance waste, fraud, and abuse.

To facilitate use of Federal Crop Insurance Corporation (FCIC) data in administering FSA commodity programs, approved Insurance Providers (AIPs) must submit to FCIC APH yields used to establish insurable yields not later than 30 days after the applicable reporting date.

Requires FCIC to establish requirements for continuing education for loss adjusters and agents of AIPs, with conservation and agronomic practices specifically mentioned.

 

Title XII – Miscellaneous ($1.259 billion; +$0.685 billion)

Establishes the National Animal Disease Preparedness and Response Program and National Animal Vaccine and Veterinary Countermeasures Bank. Foot and Mouth Disease is a priority. Provides mandatory CC funding of $120 million for FY 2019 through 2022 and $30 million/year for FY 2023 and thereafter.

Directs the Secretary to conduct a feasibility study of the viability of a Livestock Dealer Trust for livestock dealer payment default.

Expands assistance and programs for socially disadvantaged farmers and ranchers, veteran farmers and ranchers, and beginning farmers and rancher, including mandatory CCC funds that increases to $50 million/year for FY 2023 and thereafter.

Directs the Secretary to establish an Office for Urban Agriculture and Innovative Production, including production that occurs indoors and on rooftops.

Directs the Secretary to establish the Under Secretary of Agriculture for Rural Development.

Three provisions address issues that in part relate to animals as pets. (1) Penalties are established for knowingly slaughtering a dog or cat for human consumption for interstate or foreign commerce. (2) A report to Congress is required on the volume of live dogs imported to the US. (3) The Secretary is authorized to enter into a memorandum of understanding with the head of other Departments to facilitate a grant program to assist victims of domestic violence and their pets. Expands federal domestic violence and stalking protections to include crimes targeting pets, horses, service animals and emotional support animals.

Authorizes $5 million/year for activities to improve the accuracy of the US Drought Monitor.

Directs the Secretary to conduct a study of food waste. Establishes a liaison position for food loss and waste reduction.

Authorizes a National Agriculture Imagery Program to annually acquire aerial imagery during the continental US agricultural growing seasons.

 

Sources:

US Congress. December 10, 2018. Agriculture Improvement Act of 2018. Conference Report to Accompany H. R. 2. https://www.agriculture.senate.gov/2018-farm-bill

US Congress, Congressional Budget Office. April 2018. CBO’s April 2018 Baseline for Farm Programs. https://www.cbo.gov/sites/default/files/recurringdata/51317-2018-04-usda.pdf

US Congress, Congressional Budget Office. Letter to Honorable K. Michael Conway, “Direct Spending and Revenue Effects of the Conference Agreement for H.R. 2, the Agriculture Improvement Act of 2018.” December 11, 2018. . https://www.cbo.gov/system/files?file=2018-12/hr2conf_0.pdf

US Senate Agriculture Committee. Summary: Agricultural Improvement Act of 2018. January 2019. https://www.agriculture.senate.gov/imo/media/doc/Conference%20Report%20Summaries.pdf

 

 

 

 

Agronomy and Farm Management Podcast

by: Amanda Douridas and Elizabeth Hawkins

Stay on top of what is happening in the field and the farm office as Amanda Douridas and Elizabeth Hawkins interview experts in agronomy and farm management. Hosted by Ohio State University Extension, this podcast takes a bi-monthly dive into specific issues that impact agriculture, such as: weather, land value, policies, commodity outlooks, and more.

This podcast began in May 2018 and has a great library of podcasts to choose from. This winter, we will feature some of the Ask the Expert interviews that occurred during Farm Science Review on Farm Management topics. Catch up on the ones you missed during the show.

Subscribe through iTunes at http://go.osu.edu/iTunesAFM or Stitcher at http://go.osu.edu/StitcherAFM to have the newest episodes added to your playlist. Stay up to date with us on Facebook @AFMPodcast and Twitter @AFM_Podcast.

 

2019 Outlook Meetings to be held Across Ohio

by Amanda Douridas, Extension Educator

Ohio State University Extension is pleased to announce the 2019 Agricultural Outlook Meetings! In 2019 there will be seven locations in Ohio. Each location will have a presentation on Commodity Prices- Today’s YoYo. Additional topics vary by location and include U.S. Trade Policy: Where is it Headed, Examining the 2019 Ohio Farm Economy, Weather Outlook, Dairy Production Economics Update, Beef and Dairy Outlook, Consumer Trends, and Farm Tax Update.

Join the faculty from Ohio State University Extension and Ohio State Department of Agricultural, Environmental, and Developmental Economics as they discuss the issues and trends affecting agriculture in Ohio. Each meeting is being hosted by a county OSU Extension Educator to provide a local personal contact for this meeting. A meal is provided with each meeting and included in the registration price. Questions can be directed to the local host contact.

The outlook meeting are scheduled for the following dates and locations:

Date: January 14, 2019 Time: 7:30 am – 10:30 am Speakers: Ben Brown, Barry Ward, Ian Sheldon, Zoe Plakias, Aaron Wilson Location: Emmett Chapel, 318 Tarlton Rd, Circleville, OH 43113 Cost: $10.00 RSVP: Call OSU Extension Pickaway County 740-474-7534 By: January 12th More information can be found at: http://pickaway.osu.edu

Date: January 17, 2019 Time: 8:00 am – noon Speakers: Barry Ward, Ben Brown, Ian Sheldon, Aaron Wilson Location: Der Dutchman, Plain City, 445 S Jefferson Ave. Cost: $15.00 RSVP: Call OSU Extension, Union County 937-644-8117 By: January 10th More information can be found at: http://union.osu.edu

Date: January 24, 2019 Time: 9:00 am – 12:00 noon Speakers: Barry Ward, Ben Brown, David Marrison Location: St Mary’s Hall 46 East Main St. Wakeman, OH 44889 Cost: No Charge; $20.00 if past deadline RSVP: Call OSU Extension, Huron County 419-668-8219 By: January 22nd More information can be found at: http://huron.osu.edu

Date: January 28, 2019 Time: 6:00 pm – 9:00 pm Speakers: Ian Sheldon, Ben Brown, Aaron Wilson Location: Jewell Community Center Cost: $10.00 (after deadline $20.00) RSVP: OSU Extension, Defiance County 419-782-4771 By: January 22nd More information can be found at: http://defiance.osu.edu

Date: January 30, 2019 Time: 9:30 am – 3:30 pm Speakers: Ian Sheldon, Ben Brown, Barry Ward, Dianne Shoemaker, David Marrison, Kenneth Burdine Location: Fisher Auditorium Cost: $15.00 RSVP: Call OSU Extension, Wayne County 330-264-8722 By: January 24th More information can be found at: http://wayne.osu.edu

Date: February 13, 2019 Time: 5:30 pm – 9:00 pm Speakers: Barry Ward, Ben Brown, Ian Sheldon Location: Wayside Chapel, 2341 Kerstetter Rd.,  Bucyrus OH 44820 Cost: $15.00 RSVP: Call OSU Extension, Crawford County 419-562-8731 or email hartschuh.11@osu.edu By: February 5th More information can be found at: http://crawford.osu.edu

Date: March 22, 2019 Time: 11:00 am – 4:00 pm Speakers: Barry Ward, Ben Brown, David Marrison, Ian Sheldon Location: Chamber Ag Day / Ag Outlook meeting, Darke County Romers 118 E Main St., Greenville Registration Flyer: http://go.osu.edu/2019darkeagoutlook Cost: $20 RSVP: Darke County Extension office at 937-548-5215 By: March 16th More information can be found at: http://darke.osu.edu

 

Ag Lender Seminars feature Federal Reserve Bank of Kansas City Economist

By Wm. Bruce Clevenger, Amanda Douridas & Rory Lewandowski, Extension Educators

The 2018 OSU Extension Agricultural Lender Seminars will feature keynote speaker, Courtney Cowley, Economist at the Federal Reserve Bank of Kansas City, Omaha, Nebraska.  Cowley will speak to each of the three regionally offered Ag Lender seminars scheduled in October 2018.  She will share her research and the role of the Federal Reserve Bank with her topic “Outlook for the U.S. Economy with Implications for the Ag Sector.”  Cortney Cowley is an economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City. Her current research focuses on agricultural finance, commodity markets, farm management, and natural resource economics and policy. Cowley’s responsibilities also include writing for the Tenth District Survey of Agricultural Credit Conditions and the Federal Reserve System’s Agricultural Finance Databook.    Cowley joined the Bank in 2015 after completing her Ph.D. in Agricultural Economics at Oklahoma State University. She also holds a B.S. degree in Biosystems Engineering from Oklahoma State and a M.S. degree in Civil Engineering from Colorado State University.

Additional speakers at each location include: Farm Policy & Commodity Outlook – Ben Brown, OSU CFAES, Farm Mgmt. Program Mgr.; Ohio Farm Economy & Production Economics – Barry Ward, OSU Extension, CFAES, Production Business Management; Dairy Production Economics – Dianne Shoemaker, OSU Extension, CFAES, Field Specialist; Hops, Barley & Ohio’s Specialty Crops – Brad Bergefurd, OSU Extension, CFAES, Extension Educator & Horticulture Specialist.

The three Ag Lender Seminars will be as follows:

Tuesday, October 16

Champaign Co. Community Center Auditorium

1512 South US Highway 68

Urbana, OH  43078

 

Wednesday, October 17

Putnam Co. Educational Service Center

Assembly Hall

124 Putnam Parkway

Ottawa, OH 45875

 

Thursday, October 18

Buckeye Agricultural Museum

877 West Old Lincoln Way

Wooster, OH 4469

Seminar programs begin promptly at 9:15 a.m. and conclude by 3:15 pm.  Registration information is available at: https://u.osu.edu/aglenderseminars/  or by contacting Bruce Clevenger, OSU Extension Educator, Defiance County at 419-782-4771 or clevenger.10@osu.edu.

OSU Extension conducts the seminars from input from Ag Lenders, County Extension Educators and Extension Specialists.  The seminars are designed to provide information that Ag Lenders will use directly with their customers, indirectly within the lending industry, and as professional development for current issues and trends in production agriculture.  OSU Extension has been offering Ag Lenders seminars for nearly 30 years.

 

 

Estimates for Agricultural Risk Coverage and Price Loss Coverage Payments for Program Year 2017

by Ben Brown, Department of Agricultural, Environmental, and Development Economics- The Ohio State University

Click here for complete report with figures & tables

The Agricultural Adjustment Act of 2014 ushered in two programs to the safety net for producers in Ohio and across the country: Agricultural Risk Coverage (ARC0-CO) and Price Loss Coverage (PLC). Both programs serve as shallow loss programs protecting against large variations in revenue and price respectively. The two programs opperate differently and should not be compared as substitute programs. However, producers were allowed a one time choice at the beginning of the farm bill to enroll each commodity in either ARC-CO or PLC. Participation rates in Ohio largely followed the national participation rates for corn and soybeans but differed for wheat. The national participation rate for wheat favored PLC, whereas in Ohio, producers favored heavily toward ARC-CO. Nonetheless there are producers in Ohio that are enrolled in ARC-CO and PLC for corn, soybeans, and wheat. This report looks toward the end of the marketing year to estimate county level payments for ARC-CO and PLC in Ohio. As a reminder, payments finalized in October 2018 will be for program year 2017. This information will be important for producers and lenders wishing to estimate their autumn cash flow.

In October of 2017, the majority of producers in Ohio received some form of commodity program payment for the program year 2016. In fact, every county across Ohio triggered a corn ARC-CO payment except Ashtabula county. Soybean ARC-CO payments for Ohio in program year 2016 were smaller and sparce compared to corn. The majority of Ohio counties triggered a wheat ARC-CO payment, but smaller base acres of wheat exist. In program year 2017, it is estimated six counties triggered corn payments while nearly half triggered soybean payments and two thirds triggered wheat payments.

 

Data Source and Calucation:

ARC-CO payments are based on a formula seperated into two parts: historical revenue benchmark and actual year revenue. The historical revenue benchmark is the Olympic average of yields and prices for the five previous cropping years at 86% of the total. The actual year revenue is the current year yields multiplied by the Marketing Year Average (MYA) price for each commodity. In the case where the curent year revenue falls below the historical revenue benchmark, a payment is triggered up to a 10% cap. If the current year revenue is higher than historical revenue then no payment is triggered.

As a reminder both ARC-CO and PLC payments are calculated from a formula using Farm Service Agency (FSA) yields and marketing year average prices. The estimations for this report use National Agricultural Statistic Service (NASS) yields for 2017. It should be noted that FSA yields are historically lower than NASS yeilds and should be treated as a lower bound for possibile payments. NASS does not provide county yields for all counties, particially due to a low survey respone rate. Counties with a NASS yield are included.

The corn and soybean marketing year is September 1st to August 31st meaning that final prices won’t be known for several more months. Using World Agricultural Supply and Demand Estimates (WASDE) average prices from May, MYA prices of $3.40 for corn, $9.35 for soybeans, and $4.70 for wheat are applied. As the marketing year progresses, it is likely that these estimates will flucuate with price. Higher price results in a smaller payment, similarily, a lower price results a larger payment.

MYA prices used in the historical calculation are as followed:

 

MYA 2012/13 MYA 2013/14 MYA 2014/15 MYA 2015/16 MYA 2016/17
Corn $6.89 $4.46 $3.70 $3.70 $3.70
Soybeans $14.40 $13.00 $10.10 $8.95 $9.50
Wheat $7.77 $6.87 $5.99 $5.50 $5.50

 

Years where the MYA price finished below the fixed reference price are replaced with the respective value and represented in bold above. Payments would be lower if the actual MYA price was used in the calculation. Soybeans have never finished below the reference price. Crossed out prices represent the highest and lowest values; these are thrown out in the Olympic average.

Established in the program payment calculations is a limit for payments on 85% of base acres. For simplicity purposes, these figures are adjusted to rates that represent the payment on 100% of enrolled acres. Because of the Budget Control Act of 2011, a 6.8% government sequester has been applied similar to payments made in program years 2014, 2015 and 2016. There is uncertainty as to how the Tax Cuts and Jobs Act of 2017 will impact the sequestration level.

Corn Estimates

Expectations for program year 2017 corn ARC-CO payments will be smaller and rare across much of Ohio. This is largely because of the formula benchmark lowering each year as a result of lower prices. In previous years the historical five year revenue included high prices from MYA 2011/12 and 2012/13. Those have been worked out of the formula and the probability of triggering a payment has lowered. The 5 year olympic average price in 2016 was $4.79 compared to a price of $3.95 in 2017. Payment variations across counties happen due to variations in yields. Highland County tiggers the largest estimated payment at $24 per acre as a result of a 2017 yield of 167 bu/acre compared to a 2016 yield of 176. The average payment in 2016 was $57 whereas in 2017 it is estimated at $8. Fewer counties are expected to receive a payment with a smaller average payment in comparison from 2016.

Soybean Estimates

In a complete reverse of 2016, the majority of counties in Ohio are expected to trigger a soybean ARC-CO payment due to smaller county soybean yields and a lower historical revenue benchmark. County yields across Ohio were closer to historical trend than previous years and the five year MYA prce was $10.86 in 2017 compared to $11.86 in 2016. Payments are projected larger in the northern part of the state where soybean acres are more prevelant. In 2016, 29 Ohio counties triggered an ARC-CO payment whereas in 2017, 38 counties are expected to trigger a payment. The average payment in 2016 was $18, whereas in 2017 the average payment is projected at $23. In difference to corn more counties are expected to trigger a payment this year than last.

Wheat Estimates

Corn and soybeans represent the majority of commodity base acres in Ohio with over 4 million base acres of corn and over 3 million base acres of soybeans. Wheat has just over 800 thousand base acres enrolled in ARC-CO or PLC. However, 82% of wheat base acres have ARC-CO enrollment. In 2016, all but four Ohio counties triggered an ARC-CO payment with an average payment rate of $32. In 2017, the estimated average payment rate is $24 in roughly two-thirds of Ohio’s counties. The lower rate is a product of a higher expected MYA price for the current year of 2017/18. The largest payments are located along the Indiana/Ohio boarder.

PLC Payments

PLC county payments estimates can be made at this time, but with less certainty. Largely because the PLC program has a higher focus on the current MYA price, which is being replaced with the WASDE estimated average price. In Ohio, 3% of soybean base acres, 7% of corn acres and 18% of wheat acres are enrolled in the PLC program. PLC calculation includes taking the positive difference of the fixed reference price minus the current MYA price. Fixed reference prices are as followed: corn- $3.70, soybeans- $8.40, and wheat- $5.50. Given current WASDE projections for a high, low and average MYA price, a PLC payment is triggered at all three levels for corn and wheat with differing levels of size while soybeans do not trigger a payment at any level. PLC payments are expected to be larger for corn than last year while smaller for wheat. Soybeans have never triggered a PLC payment since the creation of the farm bill.

Summary

Payments for ARC-CO and PLC won’t be made until later in the calendar year, but for cash flow planning an estimate can be seen as important. Estimates for program year 2017 include fewer counties in Ohio triggering a corn ARC-CO payment in 2017 compared to 2016 with a smaller average payment of $8. This is due to a lower historical benchmark after high prices were removed from the five year Olympic average. In relation to 2016, more Ohio counties are expected to trigger a soybean ARC-CO payment with a higher per acre average payment rate. Yields closer to a historical trend line have created a higher probability of a soybean payment for half of Ohio’s 88 counties. Like corn, a similar story exists for wheat where fewer counties are expected to receive a payment with a lower average per acre payment rate compared to 2016. A higher expected current year marketing year average brings the current year revenue above the historical benchmark for a third of Ohio’s counties. PLC payment rates are expected to be higher for corn and lower for wheat in 2017 than 2016, but applies to a small percentage of Ohio base acres. Soybeans are not expected to trigger a PLC payment. Estimates for ARC-CO and PLC for each county are included in the appendix.

These are estimates of what payment rates could look like in the majority of Ohio’s 88 counties. Yields and prices will be finalized by the Farm Service Agency later in the calendar year.

Data Sources:

United State Department of Agriculture- Farm Service Agency. ARC/PLC Program. Washington, D.C.: United States Department of Agriculture, 2018.

United States Department of Agriculture- National Agricultural Statistics Service. County Yields. Washington, D.C.: United States Department of Agriculture, 2018

United States Department of Agriculture- World Agricultural Outlook Board. World Agricultural Supply and Demand Estimates, WASDE-574, February 8, 2018.

Ben Brown Program Manager: Ohio Farm Management Program College of Food, Agricultural, and Environmental Sciences Department of Agricultural, Environmental, and Development Economics 235 Agricultural Administration, 2120 Fyffe Rd., Columbus, OH 43210-1067 614-688-8686 Office

World Supply and Demand Estimates for September 12, 2018

by Ben Brown, Program Manager- Farm Management Program College of Food, Agricultural, & Environmental Sciences  Department of Agricultural, Environmental, and Development Economics 2120 Fyffe Road, Columbus, OH 43210

614-688-8686 Office

brown.6888@osu.edu

USDA released their monthly supply and demand estimates today and similar to years past the September WASDE was an important one given its proximity to the end of harvest in the United States. This year’s September WASDE could have more influence on final yields compared to years past taking into consideration how quickly the crops are progressing. The crop progress report that came out earlier this week reported that corn completion is 2% further along than our five-year average- an adjustment from 3% to 5%. However, considering the majority of the corn production is located in the Midwest and Upper Plains, the percent of corn entering dent stage is important. USDA reports that 86% of the U.S. corn crop is in the dent stage compared to the 5-year average of 75%. For soybeans the percent of the U.S. crop dropping leaves is at 31% compared to the five-year average of 19%. Historically the October report has been the best indicator of final crop yields, but since 1964 when a crop is this far along there is significant correlation with the September yield forecasts.

As far as commodity prices received to producers, this was another WASDE to burn. However, producers will have to shake it off because while complaining about prices might make one feel better, it historically hasn’t changed the result. The yield forecast confirmed early reports by the Pro-Farmer Tour and Ohio Ag Net that this had the potential to be a record crop. The Pro-Farmer Tour had results of 177bu./acre for corn and 53bu./acre for soybeans for a national average. Ohio yields were 184 bu./ acre for corn and 60 bu./acre for soybeans. Both would be new yield records for Ohio beating previous records of 177 bu./acre for corn in 2017 and 54.5 bu./acre for soybeans in 2016. The Crop Production Report released today had an Ohio corn yield of 188 bu./acre and a Ohio soybean yield of 58 bu./acre. Multiplied by expected harvested acreage, this would be Ohio’s second largest corn crop and largest soybean crop in terms of production. Total U.S. yields were 181.3 bu./acre for corn and 52.8 bu./acre for soybeans.

Preventive plant numbers and failed acreage reports filed through USDA have to this point been lower than the 5-year average. It is likely that the harvested acreage estimates won’t move much through the remainder of the growing season, which leaves yield as the determining factor for total production. Total corn production is estimated at 14,827 billion bushels. Total soybean production is estimated at 4,693 billion bushels. That’s a lot of grain to store and sell. Some farmers or cooperatives will have a blank space and they will probably use it to pile corn, given the large size of both crops and significant carry over from 2017.

Moving to the demand side, export numbers for soybeans would suggest the there is some bad blood in the water between the United States and China and develops the question “will the U.S. and China ever get back together”. Trade theory would suggest that the U.S. price will either be bid lower on excess supply and weakened demand or the rest of the world price (mainly large exporters like Brazil) will be bid higher on stronger demand for their product until the U.S. price plus the tariff is equal to the Brazilian price. With an additional 25% Chinese tariff on U.S. soybeans, that would mean that the U.S. soybean price will would need to be 80% of the rest of the world price (i.e. Brazil) for the two prices to be substitutable to Chinese buyers. That wedge as of today sits at 83%, meaning that the Brazil price is still not high enough or the U.S. price has not hit it’s floor yet. Sorry for the bad news.

Due to the higher world price, Chinese, Brazilian and European producers are getting the signal to produce more product. Similarly, Chinese consumers are getting the signal to consume less. This creates a decrease in the amount of soybean imports for China, holding everything else constant.

Looking at the May WASDE, which in this case represents the before tariff estimates and the September WADE, which represents post tariff estimates we can draw conclusions about use. Chinese soybean production in the September WASDE is increased from the May WASDE by 6%, and their imports of soybeans are decreased by 9 million metric tons or 8.7%. This follows the logic in the paragraph above.

Time for some good news. As expected, a lower commodity price will spur domestic use. Corn ethanol production is up 50 million metric tons compared to a year ago and finally we are seeing increases in the feed and residual use value- up 125 million bushels from 2017. This value was also increased 50 million bushels from the August report. Exports for the 2018 crop are still down from 2017, but raised from the August report on strong growth in sales to Egypt, Columbia, and Mexico.

Soybean use, shows a 15 million bushel increase in crush- driven by profit margin of soybean oil. Bio-diesel is increased 800 million pounds on the resulting increase in soybean oil. It’s like a peanut butter sandwich- to get a sandwich, one need equal parts of peanut butter and jelly. For soybeans, increased crushing to get more soybean oil also produces more soybean meal. The increase in soybean meal pushes down meal prices and a decrease of $20/ short ton is represented in the WASDE report. Soybean export continue to be stronger than normal right now to countries not named China. This increase in exports is not expected to continue through the remainder of the marketing year. Soybean export estimates have been reduced 70 million bushels compared to a year ago, even with the record crop.

Total soybean use is reduced to 24,200 million bushels and ending stocks are increased to 845 million bushels. For corn, total use is increased to 15,105 million bushels, but not enough to counter the large production, as ending stocks are also increased to 1,774 million bushels.

The markets were expecting corn production around 14.5 billion bushels. The larger than expected corn crop pushed futures prices lower today. December corn futures reached their lowest levels of their existence settling at $3.52/bu. November soybean futures traded sideways as the increase in production was close to expectation. The season marketing average for corn is now projected at $3.50/bu. and for soybeans at $8.60/bu. As a reminder the season marketing period for both corn and soybeans is September 1, 2018- August 31, 2019.

Grain marketing this winter and early spring will be tough for producers, because the low prices are expected to continue. Any talk of a resolution to the trade situation has been a positive sign to markets and one could expect that if resolved could send corn and soybean prices significantly above current futures prices. However, a large South American crop this winter followed by another above trend U.S. crop would possibly send U.S. prices to their lowest levels since the early 2000s. It’s completely their choice, but personally- I’d rather be safe than sorry.

 

Margin Protection Program Update

By: Dianne Shoemaker, Field Specialist, Dairy Production Economics

The Dairy Margin Protection Program (DMPP) underwent a substantial change earlier this year resulting from language included in the 2018 Bipartisan Budget Act. Program enrollment was re-opened from April 9 through June 8, 2018. Significant changes benefiting dairy farmers included a one million pound increase in a farm’s production history eligible for new Tier 1 premium rates. This change meant that the first 5 million pounds of a farm’s annual production history was eligible for substantially reduced premiums. Tier 2 premiums applicable to any production history above 5 million pounds remained unchanged. Other changes included monthly margin calculations and payments of any indemnities, and the 2018 sign-up being retroactive to 1/1/18.
As a result of these changes and 2018’s challenging milk prices, 888 Ohio dairy farms enrolled in the updated MPP program according to the Ohio Farm Service Agency. By July 26, 876 of those farms had been approved. USDA Farm Service Agency announced that through July 11, $7,071,360 in program payments were processed for Ohio dairy farmers, averaging $8,072 before premium costs for the 876 approved farms. Individual farm payments vary depending on each farm’s production history and margin coverage selections.

On June 25, 2018, the Ohio Department of Agriculture’s Dairy Division reported 2,206 dairy farms in Ohio. This is a substantial decline from the 2,312 dairies recorded in October 2017. Since the Margin Protection Program was initiated in September 2014, 1,091 Ohio dairy farms have established their production history with the USDA Farm Service Agency. The current sign-up is 81.39% of farms that have established base with the FSA, or 40% of all Ohio dairy farms. It is unlikely that Ohio would experience a near-100% enrollment as the large population of Ohio’s Anabaptist farmers are not likely to participate in this type of program.

Find more details about the new MPP program and resources at this link

As Chinese Trade Tensions Build, Do Ohio Producers Need to Worry?

By Ben Brown and Ian Sheldon

The attached link is a report summarizing the impact of Chinese tariffs on U.S. soybeans, corn and pork.

https://bit.ly/2GoD0DW

A short summary follows:

Chinese tariffs on U.S. soybeans have not been implemented yet, but concern throughout the U.S. agricultural industry and Ohio exists because of uncertainty in export markets and commodity prices. Ohio exports $50 billion of products worldwide and $3.9 billion of agricultural commodities. The three largest markets for Ohio agricultural exports are Canada, China and Mexico with especially strong growth in the Chinese market since 2010. The U.S. is the second largest supplier, behind Brazil, of soybeans to China at 39%, and a tariff on U.S. soybeans would likely strengthen Brazil’s position in the market. Roughly, 31% of U.S. soybeans are exported to China, which would fall to 22%, a loss to Ohio of an estimated $241 million. Ohio exports to China of raw commodities are strongest for soybeans with large corn processing and domestic use limiting raw corn exports. Through calculations made based on a representative west central Ohio farm, and assuming an average degree of Chinese substitution between U.S. and Brazilian soybean import, it is estimated that average net income per year (2018-2024) would drop from $63,577 to $26,107 under the proposed tariff, which translates to a 59% decrease in net farm income. Import tariffs by the U.S. of Chinese steel will likely increase machinery costs and the cost to produce agricultural inputs that heavily rely on steel infrastructure by raising the domestic price. Weakening financial health through debt coverage and lower land values will continue to erode the financial health of Ohio farm families. The net worth of the representative farm decreased 6% from the baseline in projection year 2024 under the proposed tariffs. Larger farm incomes in the beginning of the decade would have showed a lower percentage decrease than the current farm margins.

These data should not be seen as a concrete prediction, as an analysis of external factors such as weather and shifts in demand could alter the outcomes. Reducing trade barriers with countries that depend on U.S. agricultural commodities strengthen the U.S. ability to sell in a world economy. The U.S. is currently renegotiating several of its free trade agreements while also encouraging bilateral deals with several of the world’s largest agricultural consuming countries. The North American Free Trade Agreement already allows most commodities to flow across the border at a 0% tariff, meaning that a new negotiated agreement between the countries will not increase exports to Canada and Mexico for corn and soybeans. The large agricultural disagreement in the NAFTA negotiations is around Canada’s dairy supply management program. The Korean- U.S. trade agreement named KORUS is also being reviewed, but talks have slowed after initial excitement over a completed agreement.