University of Illinois: Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign
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October 30, 2014

2014: A Tough Year for Biodiesel Producers

Previous farmdoc daily articles document the feast or famine nature of biodiesel production profits. If conditions are right, as they were in 2011 and 2013, biodiesel production profits can spike to spectacular levels. However, outside of these exceptional years it has been difficult for the biodiesel industry to generate profits. The purpose of this article is to examine which type of year 2014 is shaping up to be for biodiesel producers and why.

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Posted by Scott Irwin   Permalink  

October 29, 2014

Farmer Returns for Cash Rent, Share Rent, and Owned Farmland

Returns farmers receive from rental arrangement vary across years. In some years, share rent arrangements have higher farmer returns than cash rental arrangements. In other years, cash rent arrangements have higher returns. Given that cash rents are near or above average, cash rent arrangements will have lower returns than share rent arrangements this year. As a result, farmers who control proportionally more of their farmland with cash rent arrangements will have lower net incomes. As have been indicated previous articles, farms that rent the vast majority of farmland at high rents are the most at risk when revenues decline. This is the year when this risk may be realized. Farmers who own farmland have a significant buffer against lower revenue.

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Posted by Gary Schnitkey   Permalink  

October 28, 2014

Soybeans Returns Projected Higher than Corn in 2014

Corn returns in 2014 likely will be negative on many farms, with losses near $100 per acre on cash rent farmland in northern Illinois. Projections indicate that soybeans will be more profitable than corn in 2014. Having a higher return for soybeans is unusual and may have implications for 2015 planting decisions.

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Posted by Gary Schnitkey   Permalink  

October 27, 2014

Record Cattle Prices, Again and Again

The words, "Another new record for cattle prices" has kind of lost its punch this year because there have been so many new records established. Finished cattle prices began the year at about $135 per hundredweight which were record highs. By March they reached $150, a new record high. In July prices ascended to $160, for the first time ever. Now, finished cattle have touched $170, for the first time ever-a new record high.

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Posted by Chris Hurt   Permalink  

October 24, 2014

Cash Deficits Projected for Corn in 2014 and 2015

In Tuesday's article, gross revenue from corn was projected to be much lower in 2014 and 2015 than in 2011 through 2013. Total costs are compared to gross revenues in this article. For cash rent farmland, total costs are projected higher than gross revenue in 2014 and 2015. Projected losses are over $100 per acre in 2014 and 2015.

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Posted by Gary Schnitkey   Permalink  

October 23, 2014

Ethanol Production Profits Hit the Wall

The ethanol production industry in the U.S. has been on an unusually long "winning streak" in recent years. A run of historically high profits began in March 2013, punctuated by a spectacular spike during February-April 2014. The high profits were largely the result of steady or rising ethanol prices and falling corn prices. At several points during the run we argued the equilibrium long-run level of ethanol production profitability was much lower and either ethanol prices had to fall or corn prices had to rise in order to restore equilibrium. It was further argued that ethanol prices would likely bear the brunt of the adjustment. To the dismay of ethanol producers, the predicted adjustment process was painfully accurate. The purpose of today's farmdoc daily article is to examine the decline in ethanol production profits and the price adjustments that have driven the decline.

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Posted by Scott Irwin   Permalink  

October 22, 2014

Pricing Issues in Agricultural Markets

A previous farmdoc daily article discussed the difference between price discovery and price determination, and the trend toward price determination in many agricultural markets. In short, price discovery is the process of finding the price through the interaction of buyers and sellers. It allows the forces of supply and demand to arrive at a transaction price, and typically involves some type of negotiation process between buyers and sellers, such as a central market, an auction, or a commodity exchange where multiple buyers and multiple sellers compete for each transaction.

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Posted by Paul Peterson   Permalink  

October 21, 2014

Projected Corn Gross Revenues Down in 2014 and 2015

Per acre gross revenue for corn in 2014 is projected to be $808 per acre in northern Illinois, $292 lower than the 2011 through 2013 average of $1,100 per acre. Given the current price outlook, average gross revenue in 2015 is projected lower than 2014 revenue. These lower revenues will require cash flow adjustments on farms. Government payments will result in 2014 and 2015. These 2014 and 2015 payments will be higher than from 2006 to 2013, but lower than the average for the 2000 through 2005 period. Government payments will not make totally offset crop revenue decreases.

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Posted by Gary Schnitkey   Permalink  

October 20, 2014

Crop Storage Issues May Be Less Severe Than Anticipated

The large size of fall harvested crops in the U.S. have raised very real concerns about the ability to readily store the record supply of crops available this year. Supplies that exceed permanent storage capacity require the use of temporary storage facilities or may require delayed harvest in some circumstances. However, weather related harvest delays to date and a rapid rate of consumption mean that overall storage issues may be less severe than feared this year.

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Posted by Darrel Good   Permalink  

October 17, 2014

With Tightening Margins, Keep in Mind Family Living

In 2013, the total noncapital living expenses of 1,307 farm families enrolled in the Illinois Farm Business Farm Management Association (FBFM) averaged $80,716--or $6,726 a month for each family. This average was 5.3 percent higher than in 2012. Another $8,414 was used to buy capital items such as the personal share of the family automobile, furniture, and household equipment. Thus, the grand total for living expenses averaged $89,130 for 2013 compared with $85,012 for 2012, or a $4,118 increase per family.

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Posted by Bradley L. Zwilling, Brandy Krapf and Dwight Raab   Permalink