July 30, 2015
U. S. Crop Insurance Fiscal Costs and WTO Notifications under Current Rules
This article continues a three-part series on the implications of the 2014 farm bill for (1) U.S. commitments on farm subsidies under the current World Trade Organization (WTO) Agreement on Agriculture and (2) current attempts to revitalize the Doha Round negotiations for new WTO trade rules. This article specifically addresses the fiscal costs of the crop insurance program, U.S. notifications of crop insurance to the WTO since 1995, and the potential notification of 2014 farm bill support to the WTO. These considerations take on meaning given the way the 2014 farm bill was materially affected by WTO decisions. Specifically, U.S. cotton does not have access to the ARC and PLC multiple year support programs due to resolution of the Brazilian WTO suit against past U.S. cotton support.
July 29, 2015
Trading at Settlement for Agricultural Futures: Results from the First Month
TAS (trading at settlement) became available for the major agricultural futures contracts on June 15, 2015. Eligible commodities include corn, soybeans, Chicago wheat, Kansas City wheat, soybean oil, soybean meal, live cattle, feeder cattle, and lean hogs.
July 28, 2015
Choices Given Low Projected Grain Farm Net Income in 2015
Net incomes on Midwest grain farms are likely to be low in 2015, potentially lower than levels experienced from 1998 to 2002, the last time commodity prices fell after a period of higher prices. Currently, most farms have strong financial positions, built as a result of higher incomes between 2006 and 2013. This financial strength presents many farmers with options in dealing with low incomes. One danger, however, is that some farmers will use this financial strength to postpone making tough decisions about cutting 2016 production costs and cash rents, potentially leading to financial stress in future years.
July 27, 2015
Weekly Outlook: Corn Prices Fade as Supplies Expected to Remain in Surplus
Corn futures prices increased about $0.90 per bushel from mid-June to mid-July. The increase was driven by a combination of a smaller-than-expected USDA estimate of June 1 stocks and production concerns stemming from record June rainfall in much of the eastern Corn Belt.
July 24, 2015
Mid-Year Update on the Competitiveness of Ethanol in Gasoline Blends
The plunge in crude oil and gasoline prices since last summer raised the question of whether ethanol could remain competitive in gasoline blends. The issue was addressed in three farmdoc daily articles in late 2014 and early 2015. In the first article, we concluded that: "Recent market history also suggests the ethanol/CBOB price ratio is not likely to move above 1.0 for any length of time and that market adjustments to maintain the competitive position of ethanol are likely to be rapid. Higher ethanol production and lower ethanol prices have proven quite effective in the past at maintaining ethanol's place in gasoline blends and are likely to continue to do so in the future." Markets have now had a full six months to adjust to the drop in crude oil and gasoline prices, which should be long enough to roughly approximate full adjustment. The purpose of today's article is to examine the accuracy of the prediction made last fall that ethanol prices would rapidly adjust to maintaining its competitive position.