May 1, 2015
Reviewing USDA's Revised Conservation Compliance Regulation
On Friday, April 24, 2015, the Farm Service Agency (FSA) published its regulation for attaching conservation compliance to the portion of premium covered by the Federal Crop Insurance Corporation (FCIC), known as premium subsidy. Section 2611 of the 2014 Farm Bill (Agricultural Act of 2014) made Highly Erodible Land (HEL) and Wetlands conservation compliance provisions a requirement for farmer eligibility for premium subsidy. Recently, FSA reminded farmers that they have until June 1, 2015, to file the certification form (AD-1026) required to remain eligible for crop insurance premium subsidy. This article reviews the regulation.
April 30, 2015
Understanding and Evaluating WAOB/USDA Corn Yield Forecasts
As the calendar turns to May, the market will begin focusing in earnest on the yield prospects for the 2015 U.S. corn crop . One of the key early assessments is the projection of the U.S. average corn yield by the USDA's World Agricultural Outlook Board (WAOB). Since 1993, those projections have been used in the May, June, and July WASDE reports to make supply, ending stocks, and price projections for the upcoming marketing year. The May 2015 WASDE report will be released on May 12. Previous research has shown that the release of these early projections--particularly in May--has a significant impact on prices in the corn futures market. While it is clear that the WAOB yield forecasts are perceived by market participants as containing important new information, these forecasts appear to be poorly understood by many and often confused with later forecasts released by the National Agricultural Statistics Service (NASS) of the USDA. The purpose of today's article is to describe the methodology for WAOB corn yield forecasts, demonstrate how the methodology has changed over time, and evaluate the historical accuracy of the forecasts. The analysis of forecast accuracy updates results published in an earlier research report on USDA forecasts and estimates. That evaluation was for the period 1993 through 2012. Here we extend the analysis for corn through the 2014 crop year.
April 29, 2015
2015 1st Quarter RIN Update
Today's article provides the first quarterly update on Renewable Identification Numbers (RINs) for 2015 by looking at RIN generation activity based on available data through March from EPA's EMTS. Uncertainty remains regarding final RFS compliance rules for 2014 and future years. This post examines two different 2014 compliance scenarios (proposed rule vs statutory mandate levels), and discusses the implications moving forward in terms of compliance in 2015.
April 28, 2015
2015 Gross Revenues for Corn: Likely Characteristics of Low, Middle and High Revenue Years
In 2015, gross revenues for corn on high-productivity farmland in Illinois are expected to be in the mid-$800 per acre range. At this point, both price and yields are uncertain, resulting in many possible levels of crop revenues, crop insurance payments, and commodity program payments. Therefore, actual gross revenues could vary from the mid-$800 projection. Historical price and yield changes suggest that gross revenues could fall within a $317 per acre range. From a historical perspective, low gross revenues of below $750 likely will be associated with harvest prices considerably below projected price and yields at or near trend levels. Mid-revenue cases likely will be associated with yields near or above trend levels and harvest prices near to slightly below the projected price. High gross revenues of over $900 per acre require either harvest prices well above projected prices or yields significantly above trend levels. A significant drought could result in a high revenue year. However, even the high gross revenue cases in 2015 likely will be lower than average revenues from the years between 2010 through 2013.
April 27, 2015
Weekly Outlook: Corn Market Expects Large Supply and Weak Demand
Corn prices have come under renewed pressure, with a decline of nearly $0.20 in futures prices over the past week. Those prices are now at the lowest level since October 2014. Old crop basis, however, continues to strengthen seasonally in most markets. The average cash price in central Illinois, for example, was $0.14 under July 2015 futures on April 23rd, compared to $0.70 under in late September and early October 2014.