University of Illinois: Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign
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March 5, 2015

2014 Really Was an Amazing Year for Ethanol Production Profits

The changing fortunes of the ethanol industry in the face of crashing crude oil prices have attracted a lot of attention. For example, the topic has been the subject of three farmdoc daily articles in recent months. The focus on the changing profit outlook for ethanol producers can obscure the fact that the industry is also coming off the best year it has ever had in terms of profitability. The purpose of this article is to present estimates of ethanol production profitability in 2014 and compare the profits to those earned over 2007-2013.

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Posted by Scott Irwin   Permalink  

March 4, 2015

How Will Closing the Trading Pits Affect Market Performance?

CME Group's recent announcement regarding the scheduled July 2 closing of most futures trading pits has triggered a range of reactions from market participants. News stories have covered related issues such as displaced floor traders and the effect on membership or "seat" prices, but there has been little discussion about the impact of these closings on the performance of the agricultural futures markets used by farmdoc daily readers. This article examines three questions of interest to market participants.

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Posted by Paul Peterson   Permalink  

March 3, 2015

Crop Insurance Decisions for 2015

The Risk Management Agency (RMA) has now concluded its price discovery period used to determined final prices and volatility factors for federally sponsored corn and soybean crop insurance products for 2015. For the majority of the Cornbelt, the approved Projected Price (PP) for corn is $4.15 and the volatility factor is .20. For soybeans, the Projected Price is $9.73 with a volatility factor of .16. For comparison, the 2014 prices and (volatility factors) were $4.62 (.19) and $11.36 (.13) for corn and soybeans respectively. The Projected Prices are used to determine the guarantee revenue indexes based on futures prices, and do not reflect local basis. The Projected Price for corn is determined by averaging the closing December futures price during the trading days of February, and for soybeans by averaging the November Futures closing prices during February. The volatility factors are determined by an average of the most recent five trading days' implied volatility estimates, scaled for the interval of time from now until the middle of October -- the month during which average prices are used to determine Harvest Prices.

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Posted by Bruce Sherrick   Permalink  

March 2, 2015

Pork's Boom and Bust Price Pattern

Markets can take your breath away and the hog market over the past year has left many breathless. A year-ago in March, the new PED virus was the talk in the livestock media. Baby pig death losses of nearly 100 percent were the reality for some herds. The disease was not well understood and was spreading rapidly. There was trade talk that death losses were so high that 20 percent of pork production could be lost in 2014. Unfortunately, in the early stages the pork industry had no way of measuring the national baby pig death losses. Fear set in among some pork buyers-"What if bacon was not available to put on fast food hamburgers, What if tasty BLT sandwiches have to become only LT sandwiches?" Hog and pork prices exploded to record highs with the national live price reaching $100 per hundredweight.

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Posted by Chris Hurt   Permalink  

February 27, 2015

Understanding the Implied Volatility (IV) Factor in Crop Insurance

Each year, RMA resets the Projected Prices (PP) and Implied Volatility Factors (IV) that are used in the determination of crop insurance guarantee levels and premium costs. For much of the cornbelt, the Projected Prices are established based on the average of the settlement prices of the crop's associated harvest-period futures contract during the month of February. Other regions with different growing seasons and different sales closing dates use different time intervals, but the principle is to average a set of the market's estimates of future prices to establish an indemnification price that is intended to be highly correlated with expected revenue from the insured crop.

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Posted by Bruce Sherrick   Permalink  

February 26, 2015

Forming Expectations for the 2015 U.S. Average Corn Yield: What Does History Teach Us?

There continues to be a lot of discussion about the likely magnitude of planted acreage of corn in the U.S. in 2015. For the most part, current expectations are that lower corn prices and the high costs of producing corn relative to competing crops (primarily soybeans) will lead to fewer planted acres. Analysis prepared by the USDA's Wheat, Feed Grains, Rice, and Oilseeds Interagency Commodity Estimates Committees and presented at last week's USDA Outlook Forum, for example, projected plantings at 89 million acres. Planted area at that level would be the smallest since 2010, 1.6 million acres less than planted in 2014, and 8.3 million acres less than the record acreage of 2012. The USDA will release the results of its survey of 2015 planting intentions in the Prospective Plantings report to be released on March 31.

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Posted by Scott Irwin and Darrel Good   Permalink  

February 25, 2015

The Missing Link: Farmers' Class Action Against Syngenta May Answer Legal Questions Left After the StarLink and LibertyLink Litigation

Although the increasingly vocal debate over the labeling of food containing genetically modified (GM) organisms has captured most of the public and agricultural community's recent attention, two other controversies working their way through the court system may have an equally significant impact on farming and coexistence.

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Posted by Lisa Schlessinger and A. Bryan Endres   Permalink  

February 24, 2015

Estimated 2014 ARC-CO and PLC Payments

Release of 2014 county production data allows more precise estimates of 2014 Agricultural Risk coverage - county option (ARC-CO). In this article, maps show expected county payments for corn, soybeans, and wheat. Corn is projected to make payments over $40 per acre in many counties, except for a band of counties from eastern Kansas through southern Indiana. Soybeans are expected to pay in some counties. Wheat will make payments, particularly in Kansas and Oklahoma. These payments are compared to Price Loss Coverage (PLC) payments. In 2014, PLC may make modest per acre payments for corn but will not make payments for soybeans and wheat.

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Posted by Gary Schnitkey   Permalink  

February 23, 2015

Projected Soybean Plantings Are Surprisingly Low

On February 20, USDA released the Grain and Oilseeds Outlook as part of the 2015 Agricultural Outlook Forum. The report includes projections of the anticipated supply and consumption of corn and soybeans for the upcoming 2015-16 marketing year. Among the highlights of this report are projections of 2015 planting intentions for corn, soybeans, and wheat.

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Posted by John Newton   Permalink  

February 20, 2015

What's and When's of Capital Purchases

Over the last ten years, we have seen higher crop prices, higher costs, and greater expense election limits. What has this done to capital purchases? To determine this, we looked at capital purchases made by farms enrolled in Illinois Farm Business Farm Management (FBFM) from 2004 to 2013. This study contains all types of entities, but the purchases are based on the calendar year when they were acquired, not the entities fiscal year. For this study, we are defining capital purchases as items purchased to be used by the farm business and that fall into two categories, buildings or machinery.

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