Ohio Farm Management Program Overview
2017 Agricultural Policy Outlook SeriesNovember 9th, 2017
Ben BrownProgram Manager
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Who am I? - Missouri
Appleton City: Bates County, Missouri
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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)
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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/
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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 [email protected] [email protected]
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
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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
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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 [email protected] Phone [email protected]