University of Illinois: Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign
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July 31, 2014

Position Limits, Hedging, and Excessive Speculation

Position limits - the maximum number of futures contacts that can be owned or controlled by an individual or entity - are back in the spotlight. Readers may recall from a three-part farmdoc daily series that the Commodity Futures Trading Commission (CFTC) published new position limit rules on 28 "core referenced contracts" on physical commodities. These rules were scheduled to become effective on October 12, 2012, and would apply to futures contracts, options on those futures, and swaps that are economically equivalent to the exchange-traded contracts on these same underlying commodities. Of these 28 commodities, 19 are major agricultural commodities, so these new position limits would have a substantial impact on the agricultural sector.

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Posted by Paul Peterson   Permalink  

July 30, 2014

Highlights of the 2012 Census of Agriculture: A Closer Look at Farm Size

As discussed previously, Illinois was home to 75,087 farms in 2012, and the average farm size, as measured by acreage operated, increased by 3.2% from the 2007 Census of Agriculture. This article revisits the distribution of farm size, but highlights two important findings. One, the majority of Illinois' small farms are dedicated to livestock production, and, two, the largest farms, in terms of acreage operated, account for a significant majority of the State's value of agricultural production.

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Posted by Todd Kuethe   Permalink  

July 29, 2014

Will Crop Insurance Make Payments in 2014?

In Illinois, crop insurance payments on corn likely will be lower in 2014 than in 2012 and 2013. Crop insurance payments in 2014 likely will not be large for soybeans. For both corn and soybeans, harvest prices will be lower than projected prices. However, above average yields likely will counter price decreases, leading to low crop insurance payments. Somewhat ironically, crop insurance payments likely will be lower in 2014 than in 2012 and 2013. At the same time, revenue and returns will be much lower in 2014 than in 2012 and 2013.

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Posted by Gary Schnitkey   Permalink  

July 28, 2014

Storing the 2014 Corn Crop

The majority of annually produced crops such as corn obviously have to be stored. For corn producers, the question at harvest time will be who will store the portion of the crop which has not yet been sold?

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Posted by Darrel Good   Permalink  

July 24, 2014

2014 Farm Bill Decisions: Base Acre Reallocation Option

This article discusses the one-time option the owner of an Farm Service Agency (FSA) farm has to reallocate, but not increase, its base acres. The article concludes that this decision is important because of the emerging low prices, because Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) pay on base acres, and because the change in base acres can be substantive.

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Posted by Carl Zulauf, Nick Paulson, Jonathan Coppess, and Gary Schnitkey   Permalink  

July 23, 2014

The 2014 U.S. Average Soybean Yield: Headed for a New Record?

As we highlighted in an article two weeks ago, there has been much discussion this summer about the prospects for what can only be described as spectacularly high U.S. corn yields. We examined summer weather conditions in the six years from 1960 through 2013 that had the largest positive U.S. average corn yield deviation from trend. The objective was to determine if summer weather conditions are on track to produce another such high yield in 2014. Our conclusion was "... that very high U.S. corn yields have been associated with summer precipitation that was near to slightly above average and summer temperatures that were well-below average in Illinois, Indiana, and Iowa." With regard to 2014 we found that "...June weather conditions in Illinois, Indiana, and Iowa were not entirely consistent with those experienced in the previous six highest yielding years relative to trend. This was particularly true for Iowa, which received over twice its long-term average precipitation in June."

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Posted by Scott Irwin and Darrel Good   Permalink  

July 22, 2014

Renegotiating Cash Rents Down for 2015

Actual cropland returns in 2013 and projected returns in 2014 and 2015 are considerably below returns from 2010 through 2012. In many cases, projected 2015 returns will be lower than current cash rents, likely require renegotiating for lower cash rents. This article evaluates these situations by 1) identifying farms requiring adjustments in cash rents, 2) identifying how far cash rents must be lowered, and 3) providing comments for both land owners and farmers.

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Posted by Gary Schnitkey   Permalink  

July 21, 2014

Corn Price Premiums Continue to Fade

Corn was the primary focus of the agricultural commodity complex beginning in the 2006-07 marketing year and continuing through the 2012-13 marketing year. Corn prices during that period were supported by a rapidly growing domestic ethanol industry that required more acres of corn and by relatively poor U.S. corn yields in 2010, 2011, and especially in 2012 that kept corn supplies very tight.

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Posted by Darrel Good   Permalink  

July 18, 2014

Bigger Is Better?

The notion that larger farms have a different and lower cost structure is prevalent. The idea that larger farms can negotiate lower prices would seem logical. The idea that larger farms have more acres to spread fixed costs over seems logical on the surface as well. Both of those ideas would indicate that as farms increase in size that costs are lower. With that in mind, let's review some 2013 data from three groups of farms and make our own conclusions. We will look at selected per acre costs on increasing average farm size (in acres) for farms in northern Illinois, central Illinois, and southern Illinois.

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

July 17, 2014

Mapping the Size of Dairy Safety Net Programs: Comparing MILC and the Margin Protection Program

In today's article we will review the historical performance of the Milk Income Loss Contract (MILC) program using data provided by USDA Farm Service Agency (FSA). Then, we will demonstrate how the Margin Protection Program (MPP), by increasing production coverage to be more accommodating to all U.S. dairy producers, offers a larger safety net program and is capable of providing considerably more production coverage than the existing, and soon to be expired, MILC program.

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Posted by John Newton and Todd Kuethe   Permalink