May 28, 2015
Clues from the RINs Market about the EPA's RVO Proposals for 2014, 2015, and 2016
As required by a recent consent decree, the EPA will soon release its proposed RFS rules for 2014-2016. The proposal may be released yet this week and almost certainly no later than next week. This will be the latest turn in the tumultuous process that started with the release of the preliminary RFS rulemaking for 2014 on November 15, 2013. The most controversial aspect of the proposal was the write down of the renewable mandate for 2014 from 14.4 to 13 billion gallons. The substantial write down from the statutory mandates resulted in the EPA receiving over 15,000 comments and was met with the threat of legal challenges. A final rule for 2014 had been expected shortly after the November 2014 U.S. elections, but the EPA surprised virtually everyone by announcing on November 21, 2014 that the final 2014 rules would be delayed until sometime in 2015 and the 2015 and 2016 rules would be released at the same time.
May 27, 2015
Marketing Gains Impacts on 2014 and 2015 Net Incomes on Grain Farms
Many farms' net income statements are prepared using modified cost principles. Grain revenues typically includes crop sales and changes in grain inventory values between beginning and ending balance sheets. Much of the grain produced and unpriced in 2013 was valued on the end-of-year 2013 balance sheet at prices lower than that grain was sold in 2014. This resulted in sizable marketing gains, which could be significant contributors to 2014 net incomes on many farms. Marketing gains likely will not be large contributors to income in 2015. Marketing losses are likely for grain produced in 2014 and not priced until 2015.
May 26, 2015
Weekly Outlook: Monitoring Soybean Consumption and Production Prospects
The projected U.S. supply and consumption balance sheet for the 2014-15 soybean marketing year has changed considerably since last fall. The USDA's May 2015 balance sheet, for example, indicates that the supply of soybeans was 33 million bushels larger than projected in September 2014. Consumption is expected to exceed the September projection by 158 million bushels and year ending stocks are expected to be 125 million bushels less than projected in September. The marketing year average price received by producers, however, is currently expected to be very near the mid-point of the range of prices projected by the USDA in September.
May 22, 2015
The Influence of Direct Payments on US Cropland Values
Direct payments were a key fixture of US farm policy and America's farm financial safety net from 1996 to 2013. Unlike prior price support programs, direct payments were considered "decoupled" because they were not tied to current production practices or current market prices. Instead, direct payments were determined by historical cropping patterns (called base acres). The program was originally introduced to ensure World Trade Organization (WTO) compliance, but the nature of the payments drew political scrutiny. The program was phased out through the 2014 Farm Bill (Agricultural Act of 2014). The prominence of the direct payments program coincided with one of the largest increases in U.S. agricultural land values, and as a result, many questioned the role direct payments played in the recent farm real estate price boom. A recent study, reviewed in this article, suggests that an additional dollar of direct payments is associated with an $18 per acre increase in cropland values.
May 21, 2015
Some Key Trends in the World Corn Market
This article is a companion to the March 13, 2015 farmdoc daily article. As with the article on soybeans, objective of this article is to examine strategic consumption and production trends that underlie the current U.S. and world corn market.