1

Steven D. JohnsonFarm & Ag Business Management Specialist

(515) 957-5790sdjohns@iastate.edu

www.extension.iastate.edu/polk/farm-management

March 21, 2016

Learning Objectives• Discuss 2015 Yields & ARC-CO Payments this fall

• Highlight the latest USDA WASDE Balance Sheets

& 2016-17 Crop Projections

• Discuss the Role of Crop Insurance Revenue

Protection with Pre-Harvest Marketing Strategies

• Discuss 2016 Planted Acreage Forecasts & Crop

Weather Outlook

• Highlight 2016 Crop Costs & Margin Estimates

• Discuss Finalizing Old Crop Marketing Strategies:

Eliminate Storage Related Risks on Spring Rallies

• Provide 5 Crop Risk Management Web Sites

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56189

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175

53

Final 2015 NASS Crop Yields by Crop Reporting District (CRD)

Source: www.extension.iastate.edu/agdm File A1-12 & A13, Feb. 18, 2016

Average: Corn 192 bu/A & Soybeans 56½ bu/A

U.S. Corn Ending Stocks & Average Cash Price

Source: USDA WASDE, Jan. 2012 – March 9, 2016

3

Forecast for 2015 ARC-CO Corn Payments (issued by FSA in October 2016)

$68Y 185.3; OAY 170.8

$51Y 194.1; OAY 168.6

$63Y 186.5; OAY 167.8

$49Y 188.4 ; OAY 164.3

$38Y 192.8; OAY 163.8

$56Y 187.9; OAY 167.2

$37Y 174.2; OAY 150.6

$5Y 162.9; OAY 117.0

$20Y 173.2; OAY 134.5

Projections based on:

1)2015/16 USDA Price

Projection:

Corn $3.60

2) Guaranteed Price:

Corn $5.29

3) Projected 2015 County

Yields = 2014 County

Yields × 2015 CRD Yield /

2014 CRD Yield

State Average:

$43 per base

acre

Source: Plastina, ISU Extension Economics, March 2016

U.S. Soybean Ending Stocks & Average Cash Price

Source: USDA WASDE, Jan. 2012 – March 9, 2016

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Forecast for 2015 ARC-CO Soybean Payments (issued by FSA in October 2016)

State Average:

$22 per base

acre

$9Y 60.4; OAY 50.5

Projections based on:

1)2015/16 USDA Price

Projection:

Soybeans $8.80 per bu.

2) Guaranteed Price:

Soybeans $12.27 per bu.

3) Projected 2015 County

Yields = 2014 County

Yields × 2015 CRD Yield /

2014 CRD Yield

$1Y 58.6; OAY 47.0

$8Y 60.1; OAY 50.9

$37Y 52.8; OAY 48.7

$27Y 56.1; OAY 50.0

$28Y 58.4; OAY 52.1

$34Y 48.9; OAY 46.4

$19Y 47.1; OAY 41.3

$12Y 54.5; OAY 45.8

Source: Plastina, ISU Extension Economics, March 2016

Deductible?

Revenue Protection – RP

(65%-85% Levels)

Unit

Coverage?

(Basic, Optional

or Enterprise)

Trend-Adjusted (TA)

APH Yield

Endorsement ?

2016 Crop Insurance Decisions

Source: Johnson, ISU Extension, March 2016

Supplementals:

Hail, Wind & Green

Snap or Buy-up of

Projected Price?

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Corn Insurance Prices vs. Seasonal Futures Highs

Source: USDA RMA & CME Group, October 2015

December Corn Futures Seasonal Trends (1990-2015 Indexed)

Source: www.cffm.umn.edu, October 2015

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Delivery of Corn Bushels with Revenue Protection (RP)

Marketing Strategy

• Pre-Harvest Sell for

Delivery up to 153

Bu/A

• Price Guarantee is

Higher of the

Projected Price vs.

Harvest Price

• Slight Basis Risk

• Must Plant the Crop

(Prevented Planting = 60%)

180 Bu/A

Actual

Production

History

(APH)

RP @ 85% Level

of Coverage

153 Bu/A

Guarantee X

$3.90/bu

Projected Price

Deductible

15% = 27 Bu/A

= $597/A Revenue

Guarantee

Source: Johnson, ISU Extension, March 2016

December ‘16 Corn Futures Chart

Source: www.jimwyckoff.com, March 7, 2016

Projected Price = $3.86/bu

Scale-up Incremental

Sales: $3.95, $4.00,

$4.05, $4.10, $4.15, $4.20

If above $4.20, then Hedge

or Buy Put Options

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2016 U.S. Planted Acreage Forecast

Source: USDA NASS & Agricultural Outlook Forum, February 2016

* Projected **Forecast

90.0 M

82.5 M

51.0 M

23.7 M

2.5 M ?

Elwynn Taylor’s 2016 Risk Wheel

Neutral Summer = 53% risk of

above trendline corn yield

La Niña Summer = 70% risk of

below trendline corn yield

El Niño Summer = 70% risk of

above trendline corn yield

Source: Taylor, ISU Extension Climatologist, January 2016

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El Niño Southern Oscillation (ENSO)

Source: www.esrl.noaa.gov/psd/enso/mei

2016 Forecast from NOAA’s Dr. Klaus Wolter, 3/6/16: This season gives us three 'analogues' already identified four months ago:

1972-73, 1982-83, and 1997-98, plus 1957-58 and 1991-92 from last month,

and 2009-10 as a new entry. Three of these six analogues evolved into

La Niña one year later ('73-74, '98-99, and '10-11), one of them ended up

neutral ('83-84), and two hung onto weak El Niño conditions ('58-59 and '92-

93). Meanwhile, strong El Niño conditions (top 10% ranking) are quite

likely through March-April (four of the top six cases remained in that

category), while general El Niño rankings (top 30%) are still more likely

than not (four out of six) through May-June.

Slow El Niño Fade: La Nina possible Late Summer/Fall

Source: International Research Institute, www.iri.columbia.edu, March 10, 2016

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Expect Planting Delays: Eastern Corn Belt & Southeast

IRI

April/May Rain

Forecast Possible:Southeast 10”- 12”

and Midwest 4”- 6”

Source: Bryce Anderson, DTN Sr. Ag Meteorologist, March 2016

Bryce Anderson’s 2016 Crop Forecast

El Niño until early summer

La Niña development not likely

Field work delays-slow planting

Warmer summer temps possible

Trendline yields may be peak

Current USDA National Projections:

168 bu/A for corn

46.7 bu/A for soybeans

Source: Bryce Anderson, DTN Sr. Ag Meteorologist, March 2016

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April ‘16 U.S. Crude Oil Futures Chart

Source: www.jimwyckoff.com, March 7, 2016

April ‘16 U.S. Dollar Index Futures Chart

Source: www.jimwyckoff.com, March 10, 2016

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2016 Crop Cost Estimates

Source: Plastina, ISU Extension Economics, January 2016

Total Cost Expected Yield bu/A Cost Per Bushel

Soybeans after Corn

Corn after Soybeans

Corn after Corn

$537

$724

$769

50

180

165

$10.74

$4.02

$4.66

2016 Soybeans following Corn Margin Estimates

Labor $29

Inputs $163

Machinery

$75

50 bu/A X

$8.50/bu

= $425/A

$445

$178

$267

ARC-CO $20

Source: Johnson, ISU Extension, February 2016

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2016 Corn following Soybeans Margin Estimates

Machinery

$127

Inputs $292

180 bu/A X

$3.60/bu

= 648/A

$456

$668

$212

Labor $37

ARC-CO $20

Source: Johnson, ISU Extension, February 2016

2016 Corn following Corn Margin Estimates

Machinery

$130

Inputs $331

165 bu/A X

$3.60/bu

= $594/A

$498

$614

$116

Labor $37

ARC-CO $20

Source: Johnson, ISU Extension, February 2016

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Source: USDA WASDE, Ag Outlook Conference & ISU Wisner, February 2016

U.S. Corn Supply/Demand & Price Projection

Area Planted (million acres) 88.0

Area Harvested (million acres) 80.7

Yield per Harvested Acre (bu.) 168.4

Production 13,601

Beginning Stocks (million bu.) 1,731

Imports 50

Supply, Total 15,382

Feed & Residual 5,300

Food, Seed & Industrial 1,370

Ethanol & by-products 5,225

Domestic, Total 11,895

Exports 1,650

Use, Total 13,545

Ending Stocks 1,837

Avg. Farm Price ($/bu) $3.60

WASDE 2015-16

Mktg Year

Area Planted (million acres) 88.0 90.0

Area Harvested (million acres) 80.7 82.3

Yield per Harvested Acre (bu.) 168.4 168.0

Production 13,601 13,825

Beginning Stocks (million bu.) 1,731 1,837

Imports 50 40

Supply, Total 15,382 15,702

Feed & Residual 5,300 5,425

Food, Seed & Industrial 1,370 1,375

Ethanol & by-products 5,225 5,225

Domestic, Total 11,895 12,025

Exports 1,650 1,700

Use, Total 13,545 13,725

Ending Stocks 1,837 1,977

Avg. Farm Price ($/bu) $3.60 $3.45

USDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 88.0 90.0

Area Harvested (million acres) 80.7 82.3

Yield per Harvested Acre (bu.) 168.4 168.0

Production 13,601 13,825

Beginning Stocks (million bu.) 1,731 1,837

Imports 50 40

Supply, Total 15,382 15,702

Feed & Residual 5,300 5,425

Food, Seed & Industrial 1,370 1,375

Ethanol & by-products 5,225 5,225

Domestic, Total 11,895 12,025

Exports 1,650 1,700

Use, Total 13,545 13,725

Ending Stocks 1,837 1,977

Avg. Farm Price ($/bu) $3.60 $3.45

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 88.0 90.0 89.5

Area Harvested (million acres) 80.7 82.3 82.0

Yield per Harvested Acre (bu.) 168.4 168.0 145.0

Production 13,601 13,825 11,890

Beginning Stocks (million bu.) 1,731 1,837 1,851

Imports 50 40 74

Supply, Total 15,382 15,702 13,815

Feed & Residual 5,300 5,425 5,200

Food, Seed & Industrial 1,370 1,375 1,375

Ethanol & by-products 5,225 5,225 5,100

Domestic, Total 11,895 12,025 11,675

Exports 1,650 1,700 1,100

Use, Total 13,545 13,725 12,775

Ending Stocks 1,837 1,977 1,040

Avg. Farm Price ($/bu) $3.60 $3.45 $4.40

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 88.0 90.0 89.5 89.5

Area Harvested (million acres) 80.7 82.3 82.0 82.0

Yield per Harvested Acre (bu.) 168.4 168.0 145.0 168.0

Production 13,601 13,825 11,890 13,776

Beginning Stocks (million bu.) 1,731 1,837 1,851 1,851

Imports 50 40 74 35

Supply, Total 15,382 15,702 13,815 15,662

Feed & Residual 5,300 5,425 5,200 5,400

Food, Seed & Industrial 1,370 1,375 1,375 1,375

Ethanol & by-products 5,225 5,225 5,100 5,275

Domestic, Total 11,895 12,025 11,675 12,050

Exports 1,650 1,700 1,100 1,750

Use, Total 13,545 13,725 12,775 13,800

Ending Stocks 1,837 1,977 1,040 1,862

Avg. Farm Price ($/bu) $3.60 $3.45 $4.40 $3.40

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 88.0 90.0 89.5 89.5 89.5

Area Harvested (million acres) 80.7 82.3 82.0 82.0 82.0

Yield per Harvested Acre (bu.) 168.4 168.0 145.0 168.0 173.0

Production 13,601 13,825 11,890 13,776 14,186

Beginning Stocks (million bu.) 1,731 1,837 1,851 1,851 1,851

Imports 50 40 74 35 35

Supply, Total 15,382 15,702 13,815 15,662 16,072

Feed & Residual 5,300 5,425 5,200 5,400 5,450

Food, Seed & Industrial 1,370 1,375 1,375 1,375 1,375

Ethanol & by-products 5,225 5,225 5,100 5,275 5,300

Domestic, Total 11,895 12,025 11,675 12,050 12,125

Exports 1,650 1,700 1,100 1,750 1,775

Use, Total 13,545 13,725 12,775 13,800 13,900

Ending Stocks 1,837 1,977 1,040 1,862 2,172

Avg. Farm Price ($/bu) $3.60 $3.45 $4.40 $3.40 $3.25

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year

$4.40/bu

15%

$3.40/bu

64%

$3.25/bu

21%

Corn Cash Price & Probability Forecast’16-’17 Marketing Year

Source: Wisner, ISU Biofuels Economist, Feb. 10, 2016

Assumption: 89.5 M Acres Planted

168 bu/A Nat’l Yield

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Soybean Insurance Prices vs. Seasonal Futures Highs

Source: USDA RMA & CME Group, October 2015

November Soybean Futures Seasonal Trends(1990-2015 Indexed)

Source: www.cffm.umn.edu, October 2015

15

November ‘16 Soybean Futures Chart

Source: www.jimwyckoff.com, March 7, 2016

Projected Price

= $8.85/bu

Scale-up Incremental Sales:

$9.00, 9.10,

$9.20, $9.30, etc.

If above $9.30, then Hedge

or Buy Put Options

U.S. Soybean Supply/Demand & Price Projection

Area Planted (million acres) 82.7

Area Harvested (million acres) 81.8

Yield per Harvested Acre (bu.) 48.0

Production 3,929

Beginning Stocks (million bu.) 191

Imports 30

Supply, Total 4,150

Crush 1,870

Seed & Residual 130

Domestic, Total 2,000

Exports 1,690

Use, Total 3,690

Ending Stocks 460

Avg. Farm Price ($/bu) $8.75

WASDE 2015-16

Mktg Year

Area Planted (million acres) 82.7 82.5

Area Harvested (million acres) 81.8 81.6

Yield per Harvested Acre (bu.) 48.0 46.7

Production 3,929 3,810

Beginning Stocks (million bu.) 191 450

Imports 30 30

Supply, Total 4,150 4,289

Crush 1,870 1,900

Seed & Residual 130 125

Domestic, Total 2,000 2,025

Exports 1,690 1,825

Use, Total 3,690 3,850

Ending Stocks 460 440

Avg. Farm Price ($/bu) $8.75 $8.50

USDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 82.7 82.5

Area Harvested (million acres) 81.8 81.6

Yield per Harvested Acre (bu.) 48.0 46.7

Production 3,929 3,810

Beginning Stocks (million bu.) 191 450

Imports 30 30

Supply, Total 4,150 4,289

Crush 1,870 1,900

Seed & Residual 130 125

Domestic, Total 2,000 2,025

Exports 1,690 1,825

Use, Total 3,690 3,850

Ending Stocks 460 440

Avg. Farm Price ($/bu) $8.75 $8.50

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 82.7 82.5 83.5

Area Harvested (million acres) 81.8 81.6 82.8

Yield per Harvested Acre (bu.) 48.0 46.7 40.0

Production 3,929 3,810 3,312

Beginning Stocks (million bu.) 191 450 465

Imports 30 30 54

Supply, Total 4,150 4,289 3,831

Crush 1,870 1,900 1,845

Seed & Residual 130 125 131

Domestic, Total 2,000 2,025 1,976

Exports 1,690 1,825 1,680

Use, Total 3,690 3,850 3,656

Ending Stocks 460 440 175

Avg. Farm Price ($/bu) $8.75 $8.50 $9.25

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 82.7 82.5 83.5 83.5

Area Harvested (million acres) 81.8 81.6 82.8 82.8

Yield per Harvested Acre (bu.) 48.0 46.7 40.0 46.7

Production 3,929 3,810 3,312 3,867

Beginning Stocks (million bu.) 191 450 465 465

Imports 30 30 54 33

Supply, Total 4,150 4,289 3,831 4,365

Crush 1,870 1,900 1,845 1,925

Seed & Residual 130 125 131 130

Domestic, Total 2,000 2,025 1,976 2,055

Exports 1,690 1,825 1,680 1,725

Use, Total 3,690 3,850 3,656 3,780

Ending Stocks 460 440 175 585

Avg. Farm Price ($/bu) $8.75 $8.50 $9.25 $8.15

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year Low Medium High

Area Planted (million acres) 82.7 82.5 83.5 83.5 83.5

Area Harvested (million acres) 81.8 81.6 82.8 82.8 82.8

Yield per Harvested Acre (bu.) 48.0 46.7 40.0 46.7 48.0

Production 3,929 3,810 3,312 3,867 3,974

Beginning Stocks (million bu.) 191 450 465 465 465

Imports 30 30 54 33 30

Supply, Total 4,150 4,289 3,831 4,365 4,470

Crush 1,870 1,900 1,845 1,925 1,950

Seed & Residual 130 125 131 130 130

Domestic, Total 2,000 2,025 1,976 2,055 2,080

Exports 1,690 1,825 1,680 1,725 1,750

Use, Total 3,690 3,850 3,656 3,780 3,830

Ending Stocks 460 440 175 585 640

Avg. Farm Price ($/bu) $8.75 $8.50 $9.25 $8.15 $7.90

Wisner 2016-17 ProjectionUSDA

2016-17

Projection

WASDE 2015-16

Mktg Year

Source: USDA WASDE, Ag Outlook Conference & ISU Wisner, February 2016

16

$9.25/bu

18%

$8.15/bu

62%

$7.90/bu

20%

Soybean Cash Price & Probability Forecast’16-’17 Marketing Year

Source: Wisner, ISU Biofuels Economist, Feb. 10, 2016

Assumption: 83.5 M Acres Planted46.7 bu/A Nat’l Yield

Futu

res

Pri

ceFu

ture

s P

rice

Basis Basis

1. Store & wait2. Delayed price contract3. Minimum price contract

1. Basis contract2. Sell Cash Bushels and

Buy Futures or Call Option

3. Minimum price contract

1. Hedge2. Non-roll hedge to arrive3. Buy put option

1. Spot cash sale now 2. Forward Contract

Crop Marketing Matrix

Source: Iowa Commodity Challenge & Johnson, ISU Ext., March 2016

Old Crop Corn: Cash

Flow, Commercially Stored

Sold Old Crop Soybeans: Eliminated Storage, Basis

and Futures Price Risk

Old Crop Corn: On Farm

New Crop Corn/Soybeans:Price Futures in the Spring &

Early Summer Months

17

July Soybean Futures Chart

Source: www.jimwyckoff.com, March 7, 2016

$8.96 or $9.10 Price Objective

on a Spring Rally

July Corn Futures Chart

Source: www.jimwyckoff.com, March 7, 2016

$3.83, $3.93 or $4.03

Price Objective

on a Spring Rally

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Large Net Equity Losses: Identify 2016 Losses Early (December 1 Repayments),

Find Non-Farm Income, Determine Your 2017

Financing Commitments

Client Cash Flow Problems:

Need for Expense Reduction Plans, Sell Non-Earning Assets

Poor Marketing: Limit Storing Old Crop beyond early July, Make 2016

Pre-Harvest Sales, Learn to Use More than “Spot

Cash Sale Now”

Plan Ahead for 2016 & 2017 Financing NeedsLimit Unnecessary Spending without Prior Approval,

Termination of 2017 Farm Leases before Sept. 1

Solutions for Lenders to Ride the Storm Out

Reduce Crop Costs: Monitor Expense

Reduction of both Fixed & Variable Costs, Limit New Capital Purchases

Source: Johnson, ISU Extension, March 2016

Crop Risk Management Web Sites• Ag Decision Maker – ISU Extension

(Iowa Commodity Challenge Curriculum, 2014 Farm Bill Information, Monthly e-Newsletter, Decision Tools, Newsletters, Publications, Voiced Media with 22 different Crop Marketing Videos)

www.extension.iastate.edu/agdm

• ISU’s Ag Economics' Chad Hart

www.econ.iastate.edu/faculty/hart

• Crop Risk Management - ISU Polk County(Crop Marketing & Farmland Owners Updates, Government Farm Programs,

Crop Economics and Farmland Leasing Information)

www.extension.iastate.edu/polk/farm-management

• Farm Doc – U of IL Extension Economics(Daily e-Newsletter, FAST Tools, Newsletters, Publications)

www.farmdoc.illinois.edu

• Ag Manager – Kansas State University

www.agmanager.info

Source: Johnson, ISU Extension, March 2016