Farm Bill Meetings to be held across Ohio

Click here for complete article with locations of meetings

Ohio State University Extension and the USDA Farm Service Agency in Ohio are partnering to provide a series of educational Farm Bill meetings this winter to help producers make informed decisions related to enrollment in commodity programs.

The 2018 Farm Bill reauthorized the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) safety net programs that were in the 2014 Farm Bill. While the ARC and PLC programs under the new farm bill remain very similar to the previous farm bill, there are some changes that producers should be aware of.

Farm Bill meetings will review changes to the ARC/PLC programs as well as important dates and deadlines. Additionally, attendees will learn about decision tools and calculators available to help, which program best fits the needs of their farms under current market conditions and outlook.

Enrollment for 2019 is currently open with the deadline set as March 15, 2020. Enrollment for the 2020 crop year closes June 30, 2020. Producers can enroll for both 2019 and 2020 during the same visit to an FSA county office. Producers have the opportunity to elect to either ARC or PLC for the 2019 to 2023 crop years, with the option to change their program election in 2021, 2022, and 2023.

To find out about upcoming meetings, and get information about the Farm Bill, visit go.osu.edu/farmbill2019

The Case for Looking at the ARC-IC (ARC-Individual) Program Option

by: Carl Zulauf and Ben Brown, Ohio State University, and Gary Schnitkey, Krista Swanson, Jonathan Coppess, and Nick Paulson, University of Illinois at Urbana-Champaign, October 2019

Click here for the complete article as PDF

ARC-IC (Agriculture Risk Coverage – Individual) has received less attention than ARC-CO (ARC – County) and PLC (Price Loss Coverage).  ARC-IC is operationally more complex, thus harder to explain and understand.  It pays on only 65% of program base acres while ARC-CO and PLC pay on 85% of base acres.  Nevertheless, ARC-IC is worth considering if an FSA farm has one or more of the appropriate production attributes.  These attributes include (1) 100% prevent plant acres on a FSA farm, (2) high year-to-year production variability, (3) much higher farm than ARC-CO and PLC yields, and/or (4) acres planted to fruits and vegetables.  The prevent plant attribute is more relevant than normal in 2019.

ARC-IC Overview

►   ARC-IC is a whole farm program option based on the average experience of all covered program commodities planted on the ARC-IC farm.

►   ARC-IC applies to all base acres of all covered commodities on an ARC-IC farm.  It is not elected on a commodity-by-commodity basis.

►   An ARC-IC farm is the sum of a producer’s share in all FSA farms he/she enrolls in ARC-IC in a state.

►   All payment entities on an FSA farm must elect to enroll in ARC-IC.

►   ARC-IC makes a payment if average actual revenue/acre of all covered commodities planted on the ARC-IC farm is less than 86% of the ARC-IC farm’s average benchmark revenue/acre.

►   Revenue/acre for a covered commodity and year is (ARC-IC farm yield times US market year price).

►   ARC-IC farm benchmark revenue/acre equals the sum of the 5-year Olympic average revenue/acre for each covered commodity weighted by current year acres planted to a covered commodity.

►   ARC-IC actual revenue/acre equals the sum of actual revenue/acre for each covered commodity that was planted weighted by current year acres planted to a covered commodity.

►   Payment is made on 65% of total base acres on an ARC-IC farm times ARC-IC payment/acre.

►   Payment/acre is capped at 10% of the ARC-IC farm benchmark revenue/acre.

►   NOTE: Payment depends on program commodities that are planted.

►   NOTE: Prevent plant acres are included in ARC-IC revenue calculations ONLY IF 100% of an ARC-IC farm’s initially reported covered commodities are approved as prevent plant.

►   NOTE: Only initially planted covered commodity and approved double crop acres are included in the revenue calculations.  Any subsequently planted crops are not included in the calculations.

When ARC-IC should be considered:  A farm production attribute must compensate for ARC-IC’s fewer payment acres (65% vs. 85% of base acres for ARC-CO and PLC).  Such attributes include:

(1)  All of an ARC-IC farm’s initially planted covered commodities are approved as prevent plant.  Current year revenue is zero since production is zero, resulting in a payment/acre equal to the payment cap of 10% of ARC-IC benchmark revenue/acre.  In contrast, if any acre is planted to any covered commodity, payment is based on revenue/acre for the planted acre(s).  Given the prevalence of prevent plant acres in 2019, examples are provided below.  To underscore the key point, payment in this situation requires the ARC-IC farm has prevent plant for all covered program commodities on all base acres.

(2)  Production is highly variable from year to year on the ARC-IC farm.  High variability increases the likelihood of ARC-IC payment.  High variability is most likely when1 crop is grown and 1 FSA farm makes up the ARC-IC farm.  ARC-IC averages across crops and FSA farms.  Variability declines as more than 1 crop is grown and/or more than 1 FSA farm makes up the ARC-IC farm.

(3)  ARC-IC benchmark yield is (much) higher than ARC-CO benchmark yield and PLC farm payment yield.  Assuming 1 covered commodity and same percent payment rate for both ARC programs, ARC-IC benchmark yield needs to be more than 30% higher than the county benchmark yield for ARC-IC to pay more than ARC-CO.  Other situations result in different breakeven yields.

(4)  Fruits and vegetables (other than mung beans and pulse crops) or wild rice are planted on a FSA farm.  Payment base acres are 65% for ARC-IC vs. 85% for ARC-CO and PLC.  Non-payment acres are the remaining base acres:  35% for ARC-IC vs. 15% for ARC-CO and PLC.  Payment is reduced if fruits and vegetables (other than mung beans and pulse crops) or wild rice are planted on more than the non-payment acres.  ARC-IC has more acres that can be planted to fruits and vegetables (other than mung beans and pulse crops) or wild rice without losing program payments.  Note, base acres on the FSA farm are not altered in this situation.

ARC-IC Examples – role of prevent plant – Overview:  An ARC-IC farm with all yield information needed to calculate the ARC-IC benchmark revenue is assumed.  This information plus the US market year average price for crop years 2013-2017 and 2019 are in the top half of each table of values for each example.  The farm has 100 acres of cropland and program base, both composed of 60 acres of corn and 40 acres of soybeans.

Calculation of the ARC-IC benchmark revenue is a 3-step process.  In step 1, per acre revenue is calculated for each covered commodity (corn and soybeans in this case) for each of the 5 years in the benchmark calculation window.  In step 2, the Olympic average revenue per acre is calculated.  An Olympic average removes the high and low value before calculating the average of the remaining values.  For the example ARC-IC farm, the Olympic average revenue is $605 for corn and $475 for soybeans.  In step 3, the Olympic average revenues are weighted by the acres planted in the current year (2019 in this case) to covered commodities to determine an ARC-IC farm average revenue per acre.  This calculation for the example ARC-IC farm is:  (($605*60) + ($475*40)) / (60+40), or an ARC-IC benchmark revenue of $553 / acre.

ARC-IC Example 1 – no prevent plant acres:  Actual revenue / acre is $631 (166 bushels / acre times $3.80 / bushel) for corn and $423 (47 bushels / acre times $9.00 / bushel) for soybeans (see Table 1).  These individual crop values are weighted by acres planted to each covered commodity, resulting in an actual revenue / acre for the ARC-IC farm of $548 (($631*60) + ($423*40)) / (60+40).  Since actual revenue of $548 / acre exceeds the ARC-IC coverage revenue of $476 / acre (86% ARC-IC coverage level times benchmark revenue of $553 / acre), ARC-IC makes no payment.

ARC-IC Example 2 – some prevent plant acres: This example has 20 acres of corn prevent plant acres and lower 2019 yields (see Table 2).  Actual revenue / acre is $570 (150 bushels / acre times $3.80 / bushel) for corn and $378 (42 bushels / acre times $9.00 / bushel) for soybeans.  These individual crop values are weighted by acres planted to each program commodity, resulting in an actual revenue / acre for the ARC-IC farm of $522 (($570*60) + ($378*20)) / (60+20).  Only 80 acres is used in calculating actual ARC-IC revenue.  The 20 prevent plant acres are not included in calculating ARC-IC actual revenue.  Since actual revenue of $522 / acre exceeds ARC-IC coverage revenue of $493 / acre (86% ARC-IC coverage level times benchmark revenue of $573 / acre), ARC-IC makes no payment.  ARC-IC benchmark revenue and coverage revenue is higher in Example 2 than Example 1.  The reason is the combined impact on the weighted averages of (a) higher revenue per acre for corn than soybeans and (b) fewer acres planted to soybeans (20, not 40).

ARC-IC Example 3 – all prevent plant acres:  This example has no planted acres, with all initial planted covered commodity acres approved for prevent plant (see Table 3).  Actual revenue / acre is $0 since no initial covered commodity is planted.  Because no acres are planted to covered program commodities and all acres of initial planted covered commodities are approved as prevent plant, a benchmark revenue exists.  It equals the benchmark revenue in example 1 ($553 / acre).  ARC-IC makes a payment since actual revenue of $0 / acre is less than the ARC-IC coverage revenue of $476 / acre (86% ARC-IC coverage level times benchmark revenue of $553 / acre).  Payment is however capped at 10% of the benchmark revenue, or $55 per base acre ($553 times 10%).  Total ARC-IC payment is $5,500 ($55 per base acre times 100 base acres).

Summary Observations: 

►   Crop program choice rests on the production attributes of an FSA farm.

►   ARC-IC may be worth considering more often than commonly thought.

►   Farm production attributes which make ARC-IC potentially attractive include:

  • 100% of program base acres on a FSA farm are prevent plant acres,
  • high production variability from year to year on a FSA farm,
  • much higher farm than county or PLC yields on a FSA farm, and
  • fruits and vegetables are planted on a FSA farm.

►   If prevent plant is the production attribute of interest, all covered commodity acres on the ARC-IC farm must be prevent plant for ARC-IC to make a payment.

►   If high production variability is the production attribute of interest, ARC-IC is more attractive if only 1 FSA farm in a state with only 1 program commodity is elected into ARC-IC.  ARC-IC pays on the average experience across all program crops on all FSA farms in the ARC-IC farm.  Averaging across multiple crops and FSA farms usually reduces variability and thus payment probability.

►   Program sign up is for 2019 and 2020.  Expected payments in both years need to be considered for ARC-IC, ARC-CO, and PLC.  It is highly possible that the program with the highest expected payment will differ for 2019 and 2020, especially if ARC-IC has the highest expected payment for one year.

►   This article is not an argument for electing ARC-IC.  It is an argument for not dismissing ARC-IC without thinking about the individual FSA farm production attributes.

 

Table 1.  ARC-IC Example 1 – no prevent plant acres
  corn corn corn beans beans beans corn beans corn beans ARC-IC
yield MYA ARC-IC yield MYA ARC-IC plant plant prevent prevent farm
price revenue price revenue acres acres plant plant per
year / calculation acres acres acre
2013 155 $4.46 $691 43 $13.00 $559 60 40 0 0  
2014 169 $3.70 $625 47 $10.10 $475 60 40 0 0
2015 166 $3.61 $599 48 $8.95 $430 60 40 0 0
2016 172 $3.36 $578 52 $9.47 $492 60 40 0 0
2017 174 $3.40 $592 49 $9.33 $457 60 40 0 0
2019 166 $3.80 $631 47 $9.00 $423 60 40 0 0
Olympic average (’13-’17) $605 $475
benchmark revenue $553
revenue coverage (86%) $476
actual revenue $548
revenue loss $0
payment $0
total ARC-IC payment                     $0

 

 

 

 

 

Table 2.  ARC-IC Example 2 – some prevent plant acres
  corn corn corn beans beans beans corn beans corn beans ARC-IC
yield MYA ARC-IC yield MYA ARC-IC plant plant prevent prevent farm
price revenue price revenue acres acres plant plant per
year / calculation acres acres acre
2013 155 $4.46 $691 43 $13.00 $559          
2014 169 $3.70 $625 47 $10.10 $475
2015 166 $3.61 $599 48 $8.95 $430
2016 172 $3.36 $578 52 $9.47 $492
2017 174 $3.40 $592 49 $9.33 $457
2019 150 $3.80 $570 42 $9.00 $378 60 20 20 0
Olympic average (’13-’17) $605 $475
benchmark revenue $573
revenue coverage (86%) $493
actual revenue $522
revenue loss $0
payment $0
total ARC-IC payment                     $0

 

Table 3.  ARC-IC Example 3 – 100% prevent plant acres
  corn corn corn beans beans beans corn beans corn beans ARC-IC
yield MYA ARC-IC yield MYA ARC-IC plant plant prevent prevent farm
price revenue price revenue acres acres plant plant per
year / calculation acres acres acre
2013 155 $4.46 $691 43 $13.00 $559          
2014 169 $3.70 $625 47 $10.10 $475
2015 166 $3.61 $599 48 $8.95 $430
2016 172 $3.36 $578 52 $9.47 $492
2017 174 $3.40 $592 49 $9.33 $457
2019 0 $3.80 $0 0 $9.00 $0 0 0 60 40
Olympic average (’13-’17) $605 $475
benchmark revenue $553
revenue coverage (86%) $476
actual revenue $0
revenue loss $476
payment $55
total ARC-IC payment                     $5,500

 

“Ask the Expert” Area Seeks to Help Farmers at this year’s Farm Science Review

Each year, faculty and staff of The Ohio State University address some of the top farm management and veterinarian medicine challenges which Ohio farmers are facing during the “Ask the Expert” sessions held each day at the Farm Science Review at the Molly Caren Agricultural Center near London, Ohio.

The 20 minute “Ask the Expert” presentations at Farm Science Review are one segment of the College of Food, Agricultural, and Environmental Sciences (CFAES) and the College of Veterinary Medicine comprehensive extension education efforts during the three days of the Farm Science Review which will be held September 17-19 in London, Ohio.

Our experts will share science-based recommendations and solutions to the issues growers are facing regarding weather impacts, tariffs, veterinarian medicine, and low commodity prices. Producers are encouraged to attend one or more of the sessions throughout the day.

The sessions will take place in the Ohio State Area in the center of the main Farm Science Review exhibit area located at 426 Friday Avenue. This year’s featured sessions are:

Tuesday, September 17, 2019
“Tax Strategies Under the New Tax Law” presented by Barry Ward
10:00 – 10:20 a.m.

“Climate Smart- Weather, Climate & Extremes-Oh My!” presented by Aaron Wilson
10:20 – 10:40 a.m.

“Before the Pearly Gates- Getting Your Farm Affairs in Order” presented by David Marrison
10:40 – 11:00 a.m.

“Crop Inputs & Cash Rent Outlook for 2020” presented by Barry Ward
11:00 – 11:20 a.m.

“Farm Stress-We Got Your Back” presented by Dee Jepsen
11:20 – 11:40 a.m.

“The Legal Buzz on Hemp” presented by Peggy Hall
11:40 – 12:00 noon

“Current Status of African Swine Fever” presented by Scott Kenney
Noon to 12:20 p.m.

“Farm Income Forecasts: Are Farmers Experiencing Financial Stress?” presented by Ani Katchova
12:20 – 12:40 p.m.

“How Much Money Stayed on the Farm? 2018 Ohio Corn & Soybean Production Costs” presented by Dianne Shoemaker
12:40 – 1:00 p.m.

“Where Are We on U.S. Trade Policy” presented by Ian Sheldon
1:00 – 1:20 p.m.

“Farm Accounting: Quicken or Quickbooks” presented by Wm. Bruce Clevenger
1:20 – 1:40 p.m.

“Commodity Markets – Finding Silence in the Noise” by Ben Brown
1:40 – 2:00 p.m.

“GMOs, Food Animals, and Consumers” presented by Dr. Gustavo Schuenemann
2:00 – 2:20 p.m.

“Solar Leasing Options” presented by Peggy Hall & Eric Romich
2:20 – 2:40 p.m.

“Poultry Backyard Disease Management” presented by Dr. Geoffrey Lossie
2:40 – 3:00 p.m.

Wednesday, September 18, 2019
“Climate Smart- Weather, Climate & Extremes-Oh My!” presented by Aaron Wilson
10:00 – 10:20 a.m.

“The Legal Buzz on Hemp” presented by Peggy Hall
10:20 – 10:40 a.m.

“Zoonotic Diseases: Can I really get sick from my 4-H Project?” presented by Dr Jacqueline Nolting
10:40 – 11:00 a.m.

“Solar Leasing Options” presented by Peggy Hall & Eric Romich
11:00 – 11:20 a.m.

“Where Are We on U.S. Trade Policy” presented by Ben Brown
11:20 – 11:40 a.m.

“Impact of Peak Electrical Demand Charges in Agriculture” presented by Eric Romich
11:40 – 12:00 noon

“Crop Inputs & Cash Rent Outlook for 2020” presented by Barry Ward
12:00 – 12:20 p.m.

“Commodity Markets – Finding Silence in the Noise” by Ben Brown
12:20 – 12:40 p.m.

Public Perception Risk: Building Trust in Modern Agriculture by Eric Richer
12:40 – 1:00 p.m.

“Farm Stress-We Got Your Back” presented by Dee Jepsen
1:00 – 1:20 p.m.

“How Much Money Stayed on the Farm? 2018 Ohio Corn & Soybean Production Costs” presented by Dianne Shoemaker
1:20 – 1:40 p.m.

“Poultry Backyard Disease Management” presented by Dr. Geoffrey Lossie
1:40 – 2:00 p.m.

“Tax Strategies Under the New Tax Law” presented by Barry Ward
2:00 – 2:20 p.m.

“CRISPR gene editing: Are super animals within our reach?” presented by Dr. Scott Kenney
2:20 – 2:40 p.m.

“Using On-Farm Research to Make Agronomic and Return on Investment Decisions” presented by Sam Custer
2:40 – 3:00 p.m.

Thursday, September 19, 2019
“Horse Health Care and How to Feed a Horse” presented by Dr. Eric Schroeder
10:00 – 10:20 a.m.

“Farm Stress-We Got Your Back” presented by Dee Jepsen
10:20 – 10:40 a.m.

“Tax Strategies Under the New Tax Law” presented by Barry Ward
10:40 – 11:00 a.m.

“The Legal Buzz on Hemp” presented by Peggy Hall
11:00 – 11:20 a.m.

“Solar Leasing Options” presented by Peggy Hall & Eric Romich
11:20 – 11:40 a.m.

“Commodity Markets – Finding Silence in the Noise” by Ben Brown
11:40 – Noon

“Crop Inputs & Cash Rent Outlook for 2020” presented by Barry Ward
12:00 – 12:20 p.m.

“Antibiotic Use in Animals-Does it Impact for Human Health” presented by Dr. Greg Habing
12:20 to 12:40 p.m.

“Where Are We on U.S. Trade Policy” presented by Ben Brown
12:40 – 1:00 p.m.

“Swine Biosecurity” presented by Dr. Carlos Trincado
1:00 – 1:20 p.m.

“Nutritional Support for Ruminants in Winter” presented by Dr. Jeff Lakritz
1:20 – 1:40 p.m.

“How Much Money Stayed on the Farm? 2018 Ohio Corn & Soybean Production Costs” presented by Dianne Shoemaker
1:40 – 2:00 p.m.

The complete schedule for the Ask the Expert sessions and other events at the 2019 Farm Science Review can be found at: https://fsr.osu.edu/

Additional farm management information from OSU Extension can be found at ohioagmanager.osu.edu or farmoffice.osu.edu

Source:
David Marrison, OSU Extension
740-622-2265
Marrison.2@osu.edu

#leanonyourlandgrant

Mid to Late Prevented Planting Decisions

by: Ben Brown, Sarah Noggle, Barry Ward- The Ohio State University

Consistent rains across Ohio and the Corn Belt continue to delay planting progress as the June 17 USDA Planting Progress report showed that 68% of intended corn acres and 50% of intended soybean acres have been planted in Ohio. Nationwide, roughly 27 million acres of corn and soybeans will either be planted or filed under prevented planting insurance. Across Ohio, the Final Plant Date (FPD) for soybeans is June 20. Soybeans can be planted after the FPD, but a one percent reduction in the insurance guarantee occurs. This brief article outlines economic considerations for soybean prevented planting under three scenarios: planting soybeans on corn acres, planting soybeans late, and taking prevent plant soybeans. There are three sections to this article: a brief market update on corn and soybeans, a policy update on Market Facilitation Payments, and then finally the scenarios listed above. This article contains the best information available as of release, but conditions may change. Farmers should check with their crop insurance agents when making prevented planting decisions. OSU Extension is not an authorizing body of federal crop insurance policies.

Market Update

The World Agricultural Supply and Demand Estimates released on June 11, 2019, provided a mixed bag of news for corn prices, but the bullish factors outweighed the bearish factors and the December futures price increased 15 cents by market close. The Outlook Board lowered acreage 3 million acres reflective of relative returns from prevent plant and revenue over variable costs. However, the 10 bu. /acre drop in the national yield, reflective of the late planting across the Corn-Belt, provided possibly the biggest shock to the corn market. Most analysists had a decrease in final yield, but few expected a 10-bushel decrease down to 166 bushels per acre in the June WASDE- a month that rarely sees a decrease in yield given the length of season left. The market seems to have now figured in a yield decline and a reduction of 5-7 million acres. Further declines in yield during the growing season and increases in prevented planting acres favor price increases heading into fall. However, these are still largely unknown factors and market softness could happen as well.

The mixed bag continued with bearish signals in the corn balance sheet- corn exports continue to weaken on large to near record production quantities in Southern Hemisphere and currency exchange rates working against U.S. grain sellers. Strong yields in South America and the price differential may significantly reduce U.S. corn exports. Higher prices and lower production in the U.S. reduce the availability of corn for feed use. U.S. corn exports and corn for feed use estimates were collectively lowered 425 million bushels. The U.S. corn ending stocks to use ratio is lowered to 11.8%, the lowest ratio since the 9.2% experienced during the 2013/14 marketing year. Market increases in the fall of 2019 provide opportunities for producers to market multiple years’ worth of grain at profitable prices.

The soybean balance sheet continues to show market softness with no change in acreage or yield. The March Planting Intentions Report had already lowered soybean acres 4.6 million earlier in the year to 84.6 million acres and planting challenges for corn potentially have shifted some intended corn acres to soybeans. With a couple more weeks to go in the soybean-planting window, final soybean acreage is far from known. However, soybean ending stocks topped the 1 billion bushel mark- an emotional mark for soybean prices. U.S. soybean exports continue to struggle with lower world demand and competitive prices. The U.S. soybean beginning stocks for 2019/2020 were increased on softness in soybean export estimates for the end of 2018/2019. The reduced planting intentions earlier in the year and some switching from corn acreage could mean there is little price rally in a moderate reduction in soybean acreage or yield. An increase in soybean acreage would provide another bearish signal to an already soft market. While an increase in soybean acreage might sound crazy given current planting conditions, the current acreage count was already lowered in March.

Policy Update

A USDA issued press release on June 10th provided some details of the announced trade package.

  1. The 2019 Market Facilitation Program (MFP) payments will be made on a planted acre basis and the rates will be calculated for each county. The rates were not released. All eligible crops in a county will receive the same payment.
  1. If a cover crop is planted and that cover crop has the potential to be harvested, then that cover crop will be eligible for a minimum MFP payment- providing a way to get an MFP payment on prevented plant acres. The definition of a harvestable cover crop was not defined. This payment is not included in the examples below there is no way to know the size of this payment.
  1. The disaster assistance in the “Additional Supplemental Appropriations for Disaster Relief Act of 2019” will be eligible for Secretarial or Presidential declared disaster areas. On June 14, Governor DeWine sent a letter to Secretary Purdue requesting a disaster deceleration request for Ohio. The additional assistance could increase the prevented planting payment value, but the press release indicated a modest increase. The Disaster Bill passed by Congress and signed by President Trump also allows for the use of the higher of the projected price or the harvest price for the targeted areas. Because it is unknown which or if any areas will be included in the disaster aid bill, there is not the inclusion of changes in prevented payments in the examples below.

Acres intended to be planted to Corn

The corn FPD for full crop insurance purposes in Ohio was June 5. Producers could still plant corn in Ohio at a reduced crop insurance guarantee of 1% per day after the FPD or they could take a prevented planting indemnity on Revenue Insurance (RP), Yield Insurance (YP) or other Common Crop Insurance Policies (COMBO). Producers have 4 options available for intended corn acres:

  1. Plant corn
  2. Take a prevented planting payment
  3. Plant soybeans
  4. Take 35% of the corn prevented planting payment and plant soybeans after the late plating soybean period of June 20 in Ohio.

Given the calendar is starting the 3rd week of June, it is unlikely that there are many producers who are still planning to plant corn that have not done so. However, a relatively high 18% was planted last week in Ohio. Planting corn this late in the season is connected to the expectation that prices will increase through the year and be high enough to offset yield losses and added increases in drying costs. Two additional scenarios exist where producers will likely still see the benefits of planting a corn crop.

  1. He or she has applied nutrients and some input costs
  2. He or she needs feed for a livestock operation

Still, it is difficult to see corn reaching black layer before the first fall frost. For acres where no input costs have been applied, yield and insurance guarantee declines along with current futures prices of $4.62/ bushel and an increase to drying costs do not suggest producers should continue to plant corn. As mentioned in the market update section there is a possibility for higher prices, especially if the market is on the high end of acreage estimates and summer weather is not cooperative for moderate yield variations. For producers that have applied some input costs, the window is almost closed for expected returns to be larger than the prevented planting corn payment. This varies on the producer and the level of input costs.

The third option is to plant soybeans on those intended corn acres. As mentioned in a previous OSU Extension article- soybean returns above variable costs at current prices do not return a higher value than taking corn prevented planting payments. Higher soybean prices would tighten the decision, but the current balance sheet does not show the needed support to soybean prices. In the case that soybean planting continues to be delayed, the usual soybean prevented planting payment is considerably lower than the original corn prevented planting payment. Most producers will want to maximize the corn share of their prevented plant acres given the corn/soybean indemnity ratio.

The last option to take 35% of the corn prevented planting payment and plant soybeans become relevant for corn acres after the late planting period has concluded (June 25 in Ohio). Producers do not have this option available to them at this moment. A consideration of this option needs to be made that historical production history or APH yields will be negatively affected decreasing the insurance guarantee in future years. At this time, market signals do not suggest this option provides returns that are larger than straight prevented planting payments of corn. The inclusion of a MFP payment on the planted soybeans could make this option comparable. It is hard to know without the release of county payment rates.

Acres intended to be planted to Soybeans

The FPD for soybeans in Ohio is approaching quickly and with only half the crop planted, there is the potential that large amounts of Ohio soybean acreage will be planted in the late planting period or classified as prevented planting under insurance policies. Producers should continue to plant soybeans up to the FPD if possible. Once the FPD on June 20 is reached, producers have three options:

  1. Plant soybeans
  2. Take the prevented planting payment for soybeans
  3. Wait until the late planting period has finished and plant an alternative crop while taking 35% of the prevented planting payment on soybeans.

After the FPD for soybeans has been reached, the first option for soybean intended acres is to plant soybeans in the late planting period. Remember, like corn, the soybean insurance guarantee decreases a percent per day during this period. Yield declines in soybeans are harder to estimate given the variability in previous late planting years and final yields. The trend line does decrease with late planting but the variation in yields is larger as a percent than that experienced in corn. Economic considerations for planting soybeans versus taking the prevented planting soybean payment should first be calculated on the net return of the soybean crop above variable cost and the net return of soybean prevented planting payment. The calculations below are illustrated for an 80% coverage level on a RP insurance policy and a trend-adjusted actual production history of 50 bu. / acre. As mentioned in the policy section, the Federal Disaster Bill allows for the inclusion of the higher of the projected price or the harvest price. However, that is not guaranteed so the projected price of $9.54/bushel is used in these calculations.

Returns from Planting Soybeans

The insurance guarantee for soybeans in this scenario is

(80% x 50 bu. x $9.54/bu.)= $381.60

However, producers planting soybeans do not receive the projected Variable costs will need to be subtracted from this an addition of a reasonable MFP payment. Using the Farm Budget for soybeans on the OSU Farm Office webpage, a variable cost of $220/ acre on soybeans seems reasonable. Adding in a $45/ acre MFP payment (it is not sacred about this value other than if you weight MFP payments in 2018 for corn and soybean acres the average is close to $45/acre) you get your expected returns for planting soybeans.

Insurance Guarantee of $381.60 minus cost of $220 plus MFP payment of $45 = $206.60/acre

Remember that this insurance guarantee drops 1% per day after the FPD of June 20. Given that current November futures contracts are $9.34/bushel, there is the possibility of an insurance payment being made with a relatively large drop in yield. In this scenario of the price at $9.34/bu. a yield of 41 bushels/ acre would be needed to trigger insurance payments. A lower price would not require as large of a drop in yield similarly as a higher price would require a larger drop in yield.

Returns from Soybean Prevented Planting

Using the same scenario as above- the prevented planting payment would be 60% of the insurance guarantee. Some producers could have bought up to a higher coverage level, but most Ohio producers have a 60% prevented planting coverage level.

Insurance Guarantee of $381.60 x 60% = $228.96

There is no MFP added to this scenario and we are assuming that there is no additional cost to include. It is possible that soybean seed has already been purchased and will need to be factored into the equation. However, a maintenance charge of $25/acre is included to manage the bare acres. This brings the prevented planting return to $203.96/ acre.

In comparison, the net return for planting soybeans was roughly $3/acre higher for planting soybeans given an estimate for possible MFP payments at $45. Outside of planting a soybean crop in 2019 and having low yields that could affect future actual production history values, the minimum returns to planting soybeans is similar to those of taking prevented planting payments. There is some potential upside to net returns if prices strengthen most likely due to further decreases in soybean acreage or U.S. soybean exports increase at the end of 2018/19, the beginning of 2019/20 or both. A price later in the season that provides a cash price (futures minus basis) above $7.63/bu. and a yield that matches the historical production of 50 bu./acre would calculate to a higher net revenue than prevented planting payments. Similarly, a yield of 45 bu./acre would need a cash price above $8.48/bu. to trigger a higher return than the prevented planting payment. Because of yield and insurance guarantees of 1% per day after June 20, the downside risk of planting a soybean crop will grow.

Conclusion

The above analysis is based on a set of assumptions for soybean planting near the FPD of June 20 in Ohio. It is assumed that the MFP payment will be $45/acre (again this is not a final rule, and should be seen as illustration purposes only) and that costs are roughly $220 per acre. Some producers will have variable costs included on prevented planting soybean acres- especially purchases treated soybean seeds.

Decisions around prevented planting will continue to be difficult. However, corn prevented plant payments are estimated to have a higher net return than soybean prevented planting payments. Switching corn intended acres to soybeans and taking a prevented planting payment on soybeans does not seem like the best option. The producer should continue to plant soybeans up to the June 20 FPD, after that the decision is tight between planting a soybean crop and taking the prevented planting payment. There is some upside potential for planting soybeans although the current U.S. soybean balance sheet does not provide many positives. Moving later into the late planting period window decreases the insurance guarantee and soybean yields and improves the possibility of soybean prevented planting net returns being larger than late planted soybean net returns. For most Ohio producers this point comes roughly around June 25, the same day that the late planting period for corn ends. As a final reminder- producers should always consult with their crop insurance provider before making final decisions.

New Podcast Episodes

by: Amanda Douridas, OSU Extension Educator

The Agronomy and Farm Management Podcast has been releasing new episodes every other week since May 2018 and is set to release its 29th episode next Wednesday. To make it easier for listeners to find past episodes, the podcast has a new landing page at http://go.osu.edu/AFM.

Here you will find a listing of all past episodes, descriptions of what we talked about and links to additional resources. We cover a wide range of topics for corn, soybean and small grain farmers on agronomic and farm management topics. Episodes include legal topics such as leases, LEBOR, and hemp; timely seasonal topics like disease, insects and weather; and operational improving strategies related to nutrient management, precision agriculture and grain marketing.

Stay up to date on the latest episodes by following us on Twitter and Facebook (@AFMPodcast) and adding us to your favorites in Apple Podcasts or Stitcher. Give us a good rating and review if you like the podcast! If there is a listening platform you would like us to broadcast on or you have a topic suggestion, reach out on social media or by email at Douridas.9@osu.edu.

 

2019 Dairy Margin Coverage Program – Sign up coming soon

by: Dianne Shoemaker, Extension Field Specialist

Click here to read entire article (complete with graphs & figures)

Occasionally it is nice to catch a break…and breaks have been hard to find in the cow-milking business for a while now.  So, put on your mitt because it is nearly time to play ball.  The Farm Service Agency plans to open the sign-up period on June 17th for the newly renovated Dairy Margin Coverage (DMC) Program, re-named and re-configured in the 2018 Farm Bill.  The changes you will see in the DMC Program attempt to fix some of the problems that rendered the Dairy Margin Protection Program largely ineffective until initial adjustments were implemented early in 2018.

Two of the biggest changes that will positively impact farms of all sizes include 1) adding 3 new margins, $8.50, $9.00 and $9.50, at reasonable premiums, and 2) allowing farms with base production of more than 5 million pounds to make a second margin election for pounds over the first 5 million.

There are also opportunities to recover program participation net losses from 2014, 2015, 2016 or 2017.  Repayment can be received either as cash (50% of the net loss), or by applying it to premiums for participation in the new program (75% of the net loss).  What does this mean?  If a farm purchased $6.50 margin coverage in 2016, paid a premium of $3,500 and received a total indemnity payment of $500, they had a $3,000 net loss.  The farm can now choose to receive half the difference, or $1,500 as a cash payment.  The other option is to receive $2,250, or 75% of the amount, as a credit toward premiums for Dairy Margin Coverage Program participation.  If you participated in any or all of those years, you will receive notification from your Farm Services Agency office with your amounts and options.

So why should you step up to the plate?  Just like 2018, when sign-ups were re-opened for the updated program, sign-ups for 2019 will open well after January, but participation will be retroactive to January 1.  When the sign-up period opens on June 17th, we will know exactly what the margins will be for January ($7.99), February ($8.22), March ($8.85), and April.  Signups will end September 20th, so you could wait and know what the actual margins are through at least July.  As USDA announces new monthly margins, you can find them posted at https://www.fsa.usda.gov/programs-and-services/Dairy-MPP/index

No need to wait

For farms with up to 5 million pounds of base production, indemnity payments for January through March more than cover the premiums at the highest ($9.50) margin.

Example:

Base milk: 5,000,000 lbs (about 200 cows)

Farm elects to cover 95% of their base, 4,750,000 pounds, or 47,500 cwt.

Coverage level selected: $9.50 margin costing 15¢ per cwt

The program assumes that production is equal across months, or 47,500/12 = 3,958 cwt per month.

Because we know the January, February, and March margins, we can calculate the current indemnity payments.  These payments are made on the difference between the purchased margin coverage level ($9.50 in this example) and the announced margin, times the monthly cwts covered:

Jan       $1.51 x 3,958 cwt = $5,977

Feb      $1.28 x 3,958 cwt = $5,066

March $0.65 x 3,958 cwt = $2,573

Total payments                 = $13,616

Less

6.2% Sequestration     = $     844

Administration fee      = $     100

Premium                     = $  7,125

Difference                   = $  5,547 paid to the farm

Since the signup is retroactive to January 1, we know that not only will the known indemnity payments cover all program costs; we also know there will be net positive dollars to help pay a few bills.

How many total net dollars for 2019 is unclear and changing.  Two weeks ago, projections indicated that there would be announced margins less than $9.50 well into the summer.  If recent milk market rallies hold and show up in milk checks, then there could few or no further indemnity payments.  We all hope that that will be the case!

Second election for base pounds over 5 million

A major change that impacts farms with more than 200 cows, is the opportunity to make a margin selection for the first 5 million pounds of base milk, and a different margin selection for any base pounds over 5 million pounds.  The Tier 2 premiums for the > 5 million pounds are substantially higher than premiums for the first 5 million pounds (Table 1).  To be allowed to make a second selection, the farm must purchase coverage at $8.50, $9.00, or $9.50 for the first 5 million base pounds (Tier 1 milk and premiums).

Tier 2 premiums are the same as Tier 1 premiums for $4.00, $4.50, and $5.00 margins (Table 2).  The premium for the $5.50 Tier 2 margin costs more than three times as much as the corresponding Tier 1 premium, with premiums increasing exponentially until they reach $1.813 for the $8.00 margin.  The higher coverage levels quickly become cost prohibitive and are unlikely to make sense for most farms.

However, with the new 2-election option, farms with base production of more than five million pounds should seriously consider maximizing coverage in Tier 1 and electing the $4.00, $4.50, or $5.00 margin coverage on their Tier 2 base pounds for 2019.

Long-term commitment = 25% off premiums

Another option for farmers to consider as they sign up this year is the 25% premium discount option.  There is a large string attached to the 25% discount, as you have to commit to your election for 5 years.

 Decision Tool

How to make a decision? Particularly if you are considering the five-year commitment, use the decision tool developed by Mark Stephenson and crew at the University of Wisconsin.  The new DMC Decision Tool, which incorporates the changes legislated in the 2018 Farm Bill is now up and running at https://dairymarkets.org.  This is a very handy tool that allows farmers to enter their historic production (still starts with the highest of 2011, 2012, or 2013 production – verify your current production history with your FSA office) and explore the cost and potential returns of different coverage percentages and levels.  It will lay out your costs for 2019 participation, expected payment, and also lay out the premium with the 25% discount and total 5-year cost if you want to consider that option.

There is also a button to plug in your MPP Premium Repayment amount supplied to you by your FSA office.  It will tell you how much you could receive as a cash payment and how much of your current selection’s premium would be covered if you chose that option.  The decision tool’s milk and feed price data is updated nearly daily, so you may receive different “expected payment” results depending on what the markets are doing.

OSU Extension and FSA offices will be working together and offering educational programs before and early in the sign-up period to review the changes and options for farmers.  Look at the options for your farm.  Batter up.

 

 

USDA Announces Enhancements to Livestock and Dairy Insurance Programs

WASHINGTON, April 22, 2019 – USDA’s Risk Management Agency (RMA) announced today several enhancements to insurance programs that will provide a more efficient level of coverage for livestock and dairy producers. These program improvements to the Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and Livestock Risk Protection (LRP) programs take effect July 1, 2019.  “These changes to livestock and dairy programs strengthen risk management options and provide peace of mind in times of unpredictable market fluctuations,” said RMA Administrator Martin Barbre.

Livestock Gross Margin:
LGM provides protection against loss of gross margin or the market value of livestock minus feed costs. The Bipartisan Budget Act of 2018 removed the livestock capacity limitation, which allowed the LGM program to remove the individual capacity limitation under the cattle, dairy and swine program. Prior to the revised legislation, the Federal Crop Insurance Act limited the amount of funds available to support livestock plans of insurance offered by RMA to $20 million per fiscal year.

Livestock Risk Protection
LRP protects livestock producers from the impact of declining market prices. RMA offers LRP insurance plans for fed cattle, feeder cattle and swine.

Beef producers electing the LRP insurance plan for fed cattle may choose from a variety of coverage levels and insurance periods that correspond with the time the market-weight cattle would normally be sold. Likewise, the LRP plan for feeder cattle allows beef producers to choose from a variety of coverage levels and insurance periods that match the time feeder cattle would normally be marketed (ownership may be retained).

LRP insurance for swine gives pork producers the opportunity to choose from a variety of coverage levels and insurance periods that match the time hogs would normally be marketed.

LRP improvements include:

  • Expanded LRP coverage for swine, fed and feeder cattle to all states;
  •  Increased LRP subsidy from the current 13 percent for all coverage levels to a range from 20 percent to 35 percent based on the coverage level selected;
  • Updated the Chicago Mercantile Exchange trading requirements to allow for more insurance endorsement lengths to be offered for producers to purchase;
  •  Increased per head and annual head limits – fed cattle and feeder cattle: 3,000 head per endorsement and 6,000 head annually; swine: 20,000 per endorsement and 75,000 annually; and
  •  Modified the Price Adjustment Factor for Predominately Dairy cattle to 50 percent for both weight ranges, which allows dairy cattle to reflect market prices more accurately.

RMA has also enhanced risk management options for dairy producers.

Dairy Revenue Protection
DRP is designed to insure for unexpected declines in the quarterly revenue from milk sales compared with a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.

Improvements for the 2020 crop year:

  •  Modified the minimum declared butterfat from 3.50 to 3.25 pounds, making the range 3.25-5 pounds, and the minimum declared protein range is expanded from 3.00 to 2.75 to 2.75-4 pounds, affording greater coverage flexibilities for dairy producers;
  • Removed the declared butterfat test to declared protein test ratio to simplify the process for dairy producers; and
  •  Adjusted the coverage levels – removal of the 70 and 75 percent coverage levels.

Additionally, the Agriculture Improvement Act of 2018 allows producers to enroll in LGM-Dairy or DRP and simultaneously participate in Dairy Margin Coverage, a program administered by the Farm Service Agency.

For more information and answers to frequently asked questions on livestock and dairy risk management options, visit www.rma.usda.gov or contact an approved insurance provider.

Farm Bill Summit Video Available

 by Sam Custer, Extension Educator-Darke County

The 2018 Farm Bill, passed by Congress and signed by President Trump, now awaits implementation by United States Department of Agriculture (USDA), agencies like the Farm Service Agency, Natural Resources Conservation Services, Risk Management Agency and many others. The passage of the farm bill authorizes funding for many of the federal programs producers utilize throughout the growing season. This bill is considered to be mostly evolutionary not revolutionary, but there are still changes that will be important to producers and agribusinesses.

The Ohio State University, the Purdue Center for Commercial Agriculture, the University of Kentucky and Farm Credit Mid-America hosted a Farm Bill Summit on Thursday, April 11, 2019 at the Versailles High School in Versailles, Ohio. The program featured presentations by three of the nation’s top ag policy professionals: Keith Coble from Mississippi State; Jonathan Coppess from the University of Illinois; and Patrick Westhoff from the University of Missouri’s Food and Agricultural Policy Research Institute.

The three keynote speakers spoke on their areas of expertise and covered the three largest agricultural titles in terms of spending within the farm bill: commodities (Patrick Westhoff), conservation (Jonathan Coppess) and crop insurance (Keith Coble).

Could not make it to the Farm Bill Summit last week? Check out the recording here: http://go.osu.edu/farmbillvideo

More detailed meetings and explanation on how to use developing tools will becoming as the rules are released.

 

Should I Continue Farming?

by:  Chris Zoller, Extension Educator, ANR- Tuscarawas County

 It’s no secret that all of agriculture is suffering from years of low commodity prices and rising input costs. The economic struggles have affected you financially and physically. You’ve looked at the numbers, met with advisors, and talked to family.   The thought of selling part or your entire farm brings with it added worry and concern. What can you do?

Find someone you trust and with whom you feel comfortable discussing your situation. This person may not have many answers to your questions, but they can listen to your frustrations and worries. They may be able to help you sort through the confusion and develop a course of action. Think of your situation as a picture – a set of eyes looking at the picture from the outside may see things you can’t because you are caught up in the picture.

Understand that you are not alone. Nearly every farm and farm family is in a similar situation. Don’t live in the past or dwell on what could or should have been done. Take control of the situation and develop a plan for managing the things you are able to control.

Assessment

Evaluate your financial position by meeting with your lender to discuss options for restructuring debt. Can you extend the repayment terms to provide more cash flow? Contact your Extension Educator about completing a FINPACK analysis (https://farmprofitability.osu.edu/).

What are your Specific, Measurable, Attainable, Rewarding, and Timed (SMART) goals? How are your goals similar and different from those of family and/or business partners?

Develop a list of your education, experiences, and skills. How can you use these in another career? What career opportunities fit you best?

Evaluation

If you come to the decision that selling all or part of your farm is the best option, there are several items to address. Begin with a balance sheet and other financial information to understand your present financial situation. Doing so will help you decide how much money (and approximate number of assets) you must sell. You may want to meet with an appraiser, auctioneer, or real estate professional for help determining the expected value of assets.

Professionals

Your attorney can answer questions and advise you about legal considerations related to a sale. An accountant will help minimize your tax liability and give an estimate of what you may expect to pay in taxes.

Help is Available

There are people and agencies/organizations that can help with the transition and the emotions that come with the sale. Clergy, licensed counselors, and medical professionals can help you cope. Other sources of help include:

Ohio State University Extension (extension.osu.edu)

National Suicide Prevention (1-800-273-8255)

National Alliance for Mental Illness (1-800-950-6264)

Ohio Workforce Training (ohio.gov/working/training)

Ohio Job & Family Services, Office of Workforce Development (jfs.ohio.gov/owd)

Additional Information

Coming to the decision to sell all or a part of your farm is not an easy decision. Find someone with good listening skills. Talk to professionals, reach out for help, get answers, and make the best possible decisions. More information about this subject is available at https://ohioline.osu.edu/factsheet/anr-71.

 

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.