Ohio Farm Management Program Overview

2017 Agricultural Policy Outlook SeriesNovember 9th, 2017

Ben BrownProgram Manager

2

Who am I? - Missouri

Appleton City: Bates County, Missouri

3

Who am I? – Kansas

• Majors: Agriculture Economics and Agronomy

• Student Assistant to Dr. Barry Flinchbaugh

• Legislative Assistant to University President- Extension and Agricultural Funding and Policy

• National Bio and Agro-defense Facility (NBAF)

4

Who am I? – Back to Mizzou• Major: Agriculture and Applied Economics

-Policy Analysis

• Graduate Student Researcher at the Food and Agricultural Policy Research Institute (FAPRI-MU)

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Farm Management ProgramLocated in the Department of

Agriculture, Environmental, and Development Economics

Mission:

Address critical farm management issues affecting Ohio agriculture, including marketing and price analysis, farm financial management, risk evaluation, agricultural processing, environmental issues, and farm entry among other

issues. Serve as a bridge between AEDE’s research, teaching and outreach to stakeholders.

OSU Farm Management- https://aede.osu.edu/research/osu-farm-management

OSU Ag Manager- https://u.osu.edu/ohioagmanager/

6

What Does Farm Business Analysis Do For You?

2017 Analysis: $100

• Whole Farm Analysis

• Personalized Reports

• Annual Summaries

• Benchmarks against Similar Sized Operations

• Enterprise Analysis

• Machinery Cost per Acre

• Cost of Production per Acre, Ton, CWT

Farm Business Analysis Program

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Benefits of farm business analysis for your farmers

• High quality financial statements• Multiple internal accuracy checks• Program review process

• Multiple uses• Document and review past performance• Cash flow planning and budgeting• Base plan for analyzing business changes

Farm Business Analysis Program

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Financial Standards Graphics

Farm Business Analysis Program

92013 Ohio Farm Business Analysis; ©The Ohio State University

Personalized Reports

Farm Business Analysis Program

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Expanding our Impact – 4 New FINPACK Technicians

Farm Business Analysis Program

FINPACKTechnician Host Counties

Defiance, Bruce ClevengerLicking, Dean KreagerMiami, Amanda BennettPickaway, Mike Estadt

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Farm Business Analysis Program

For More Information About Farm Business Analysis :

Visit: http://farmprofitability.osu.edu/

Dianne Shoemaker Haley ShoemakerField Specialist Program CoordinatorDairy Production Economics Farm Business Analysis330-533-5538 330-533-5538shoemaker.3@osu.edu drake.362@osu.edu

This project is supported by the Competitive Benchmarking Grant (GRT00035736), from theUSDA National Institute of Food and Agriculture.

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Things that Keep Me Awake at Night

• Taxes- I’m not sure what will shake out• Estate Tax• Step up in Basis• Agricultural Exemptions

• 2018 Farm Bill (Defer to Dr. Zulauf)• Reallocation of Commodity Program Dollars• Research Funding

• Trade with NAFTA (Defer to Dr. Sheldon)• Affect on World Commodity Prices• Market Power

• Federal Reserve • New Chair of the Board- ? • Interest Rate Increases- ?

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Demand- World Population

0

1

2

3

4

5

6

7

8

9

2000 2005 2010 2015 2020 2025 2030

Bill

ion

Population level

Asia Africa Rest of world

0

10

20

30

40

50

60

70

80

90

2000 2005 2010 2015 2020 2025 2030

Mill

ion

Annual population growth

Asia Africa Rest of world

Source: IHS Markit, December 2016

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Demand- GDP Growth

7.3

2.4 2.3

0.5 0.3

2.8

6.9

2.6 2.6

-3.8

1.1

2.7

6.7

1.62.3

-3.6

1

2.4

6.5

2.1 1.8

0.3

1.5

2.7

6.3

2.2 2.21.8

1

2.9

-4

-2

0

2

4

6

8

China U.S. Mexico Brazil Japan World

Perc

ent

Percentage of Real GDP Growth

2014 2015 2016 2017 F 2018 F

Data Source: The World Bank- 2017 Report

15

World Grain Production

1.6

1.9

2.2

2.5

2.8

3.1

3.4

90/91 95/96 00/01 05/06 10/11 15/16

Met

ric to

ns p

er h

ecta

re

Actual yield1980-2015 Trend

Global Grain and OilseedsMetric Tons/ hectare

Data Source: USDA PSD Online

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Where Ohio stands- Corn

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

0

20

40

60

80

100

120

140

160

180

200

$/B

u

Bu/

Acre

Corn-Bu/Acre

Ohio Average National Average $/Bu

Data Source: USDA- NASS

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Where Ohio stands- Corn

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Tota

l Bus

hels

Acre

s Pl

ante

dCorn Production

Corn- Acres Planted Production-Bushels

Ranked 10th with $1,888,920,000 in sales in 2016

Source: USDA-NASS

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Where Ohio stands- Soybeans

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

0

10

20

30

40

50

60

Dol

lars

Bu/

Acre

Soybeans- Bu/Acre

National Average Ohio Average MYA Price

Data Source: USDA- NASS

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Where Ohio stands- Soybeans

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

3,800,000

4,000,000

4,200,000

4,400,000

4,600,000

4,800,000

5,000,000

5,200,000

Bus

hels

Acre

s

Soybean Production

Soybean Acres Planted Production-Bushels

Ranked 5th with $2,447,744,000 in sales in 2012 Data Source: USDA- NASS

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Where Ohio stands- Wheat

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

$12

0

10

20

30

40

50

60

70

80

9020

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

17

Dol

lars

/Bu

Bu/

Acr

eWheat- Bu/Acre

National Average Ohio Average MYA Price

Data Source: USDA- NASS

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Where Ohio stands- Wheat

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000Wheat Production

Acres Planted Production-Bu.

Data Source: USDA- NASS

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World Price Projections

$2.50

$2.70

$2.90

$3.10

$3.30

$3.50

$3.70

$3.90

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$/Ac

re

Marketing Year

Corn Price Projections

Projection Period FAPRI USDA CME Futures

Sources:FAPRI August Baseline Update; USDA Agricultural Outlook- Office of Chief Economist; The CME Group- futures prices

$8.00

$8.50

$9.00

$9.50

$10.00

$10.50

$11.00

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Soybean Price Projections

Projection Period FAPRI USDA CME Futures

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$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

Dol

lars

Net Farm Income 2005-2026

Net Farm Income

Source: USDA-ERS and FAPRI-MU

New Farm Bill Landscape

24Source: USDA-NASS

National Land Prices

2017 Farm Real Estate Values$ / Acre and % Change from 2016

25

Signs of Optimism

05101520253035404550

00.10.20.30.40.50.60.70.80.9

1

Bill

ions

of D

olla

rs

Inde

x of

Ban

ker O

ptim

ism

Years/Economic Quarters

Nominal U.S. Farm Capital Expenditures

Bankers ERS

Data Sources: Authors calculations based on data from USDA-ERS and Federal Reserve Bank District 4

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Signs of Optimism

116

97

10798 96

85

10697

104112

95

101

92

116

132

153

134

124130

130

131139

132

132

60708090

100110120130140150160

Oct-15 Mar-16 Aug-16 Jan-17 Jun-17

Ag Economy Barometer

77

142

135

89

169

130

60

80

100

120

140

160

180

Oct-15 Mar-16 Aug-16 Jan-17 Jun-17

Components of the Barometer

Current Conditions Future Expectations

Source: Purdue University-Center for Commercial Agriculture and CME Group

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2014 Farm Bill: Commodity Programs

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Commodity Payments in Perspective?

$0

$50

$100

$150

$200

$250

$300

$350

$400

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Dolla

rs p

er A

cre

Years

Per Acre Returns for Corn with ARC

Market Revenue Marketing Loans ARC Payment Ins. Net Ind.

$0

$50

$100

$150

$200

$250

$300

$350

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Dolla

rs p

er A

cre

Years

Per Acre Returns for Soybeans with ARC

Market Revenue Marketing Loans ARC Payment Ins. Net Ind.

$0

$50

$100

$150

$200

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Dolla

rs p

er A

cre

Years

Per Acre Returns for Wheat with ARC

Market Revenue Marketing Loans ARC Payment Ins. Net Ind.

Source: FAPRI-MU 2017 baseline

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Payments Do Help- Corn

Source: USDA-FSA, 2016

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Ohio ARC-CO Payments: Corn 2016

* Payments adjusted for 85% of base acres and a 6.8% government sequester; rounded to nearest dollar

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Benchmark Declines Going Forward

Data Source: FAPRI-MU 2017 baseline

0

200

400

600

800

1000

9/10 11/12 13/14 15/16 17/18 19/20 21/22 23/24

$/ac

re

Marketing Year Average

Corn Payments Under ARC

Revenue/Acre 0.86 Benchmark

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$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$/ac

re

Years

Ashtabula County, OH Corn Revenue

Revenue 0.86 Guarantee

ARC-CO Example

Sources: Historical Revenue: USDA-FSA, Projections: FAPRI-MU

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ARC-CO Payment Triggers

2017 ARC-CO Example: Ashtabula Co., OH for Corn

Max of (MYA Price or reference Price)

$/Bu.

County Yield (Bushels)

Revenue

2012/2013 $6.89 135

2013/2014 $4.46 123

2014/2015 $3.70 144

2015/2016 $3.70 96

2016/2017 $3.70 171

Olympic Average $3.95 134

Expected Revenue Benchmark (Equation 1) $529.30

86% of Revenue Benchmark (Equation 2) $455.20

Scenario 1: Set Price *$3.20 <143 <$455.20

<$3.40 **134 <$455.20

*median WADE corn price October 2017 **Average of yield for all five previous years

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0

100

200

300

400

500

600

700

9/10 11/12 13/14 15/16 17/18 19/20 21/22 23/24

$/Ac

re

Marketing Year

Soybean Payments under ARC

Revenue/Acre 0.86 Benchmark

Benchmark Declines Going Forward

Data Source: FAPRI-MU 2017 baseline

35

Ohio ARC-CO Payments: Soybeans 2016

* Payments adjusted for 85% of base acres and a 6.8% government sequester; rounded to nearest dollar

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Ohio ARC-CO Payments: Wheat 2016

* Payments adjusted for 85% of base acres and a 6.8% government sequester; rounded to nearest dollar

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Conclusions

• Farm Business Analysis Program• In search of 4 part time technicians • Actively looking for Participants

• World Grain Supply and Demand• World Population is Increasing but at a Decreasing Rate• Four Years of above trend yields led to large stocks and lower prices

• Ohio Corn• Higher Production on Fewer Acres• Trend Yields would show a decrease in Production

• Ohio Soybean• Increased Planted Acres with Flat Production

• Farm Income• 40% Lower than when the 2014 Farm Bill was Created• Moderate changes moving forward; Unlike the last Farm Bill

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Conclusions

• Land Prices• Expected Decrease in Land Values in 2017 from 2016

• -0.9% Change in Ohio- USDA Estimate• Mostly Flat- OSU Extension Estimate

• ARC and PLC Commodity Payments Across Ohio• ARC Corn & Wheat Payments for Majority of the State in 2016• Benchmark Revenue can be Calculated for 2017

• Small Expectation of Corn or Soybean ARC Payments Going Forward

• Wheat Payments stronger under PLC: Reference Price $5.50• USDA MYA Price- $4.60• FAPRI MYA Price- $4.79

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Are there any questions? I’m all ears.

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Ben BrownProgram Manager: Ohio Farm Management Program

College of Food, Agriculture, and Environmental SciencesDepartment of Agriculture, Environmental, and Development Economics

Agriculture Administration Building, Room 2352120 Fyffe Road

Columbus, OH 43201-1067

660-492-7574- Mobile brown.6888@osu.edu614-688-8686- Phone aede@osu.edu