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December 18, 2014

ARC-CO and PLC Payment Indicator for 2014 Crop Year: December 2014 WASDE U.S. Yield and Price

This article provides payment indicators for ARC-CO and PLC based on the December 10, 2014 WASDE U.S. yield and U.S. price projections for barley, corn, oats, long grain rice, medium (and short) grain rice, sorghum, soybeans, and wheat. Previous estimates were made using the August, September, and October WASDEs (World Agricultural Supply and Demand Estimates). Peanuts is added in this article. The term, payment indicator, is used because the estimates use U.S. yield not the county yield used by ARC-CO or farm payment yield used by PLC. Thus, the indicators are not estimates of payments an individual FSA farm will receive. Nevertheless, they should help frame perspectives and questions regarding crop program choices.

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Posted by Carl Zulauf and Gary Schnitkey   Permalink  

December 17, 2014

Electing ARC and Using SCO

The 2014 Farm Bill allows producers to make a farm program election decision on each of their Farm Service agency farm units (FSNs). There are three programs available - Price Loss Coverage (PLC), Agriculture Risk Coverage at the county level (ARC-CO), and Agriculture Risk Coverage at the individual level (ARC-IC). The Farm Bill also created a new crop insurance program, the Supplemental Coverage Option (SCO), which can be used by producers to cover a portion of the deductible range on their underlying individual plan of insurance. The producer's farm program election decision can impact their eligibility to use the SCO insurance program. Specifically, FSNs with a crop elected for ARC-CO and FSNs for which ARC-IC is elected are ineligible to purchase SCO on the crop and acreage associated with that FSN. There has been a number of questions related to how this SCO eligibility rule will be interpreted and implemented, and today's article addresses that issue. The issues discussed here are based on RMA's SCO handbook and SCO endorsement documents.

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

December 16, 2014

Choosing Between Base Acre Allocation Alternatives

The 2014 Farm Bill gives landowners a choice between two alternatives for determining the allocation of base acres across program crops. Land owners will either 1) retain current base acres or 2) reallocate base acres based on plantings to program crops from 2009 through 2012. For most Midwest situations, the allocation with the highest corn acres, thereby having fewer soybean acres, likely will be the alternative that maximizes expected program payments.

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

December 15, 2014

Corn Price Strength Continues

March 2015 corn futures traded to a high of $4.115 on December 15, the highest level since July 10 and $0.80 above the low reached on October 1. The average spot cash price at South-Central Illinois elevators was reported at $3.785 on December 12, $1.01 above the low on October 1.

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Posted by Darrel Good   Permalink  

December 12, 2014

3rd Quarter RIN Update

Today's article provides an update on Renewable Identification Numbers by looking at estimates for RIN carry-in and generation numbers for 2014 based on available data through October from EPA's EMTS. There still exists a significant amount of uncertainty regarding actual mandate levels for 2014 in light of the EPA's recent announcement that the finalization of rules for 2014 will be delayed into 2015. This article examines the range of 2015 RIN stock scenarios that could occur assuming the final mandate levels range somewhere between proposed and statutory levels for 2014.

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Posted by Nick Paulson   Permalink  

December 11, 2014

Prospects for Ethanol Production Profits Dim as Gasoline Prices Plummet

The magnitude of the decline in crude oil and gasoline prices has taken nearly everyone by surprise. NYMEX nearby crude oil futures this week touched $60 per barrel, almost $50 less than peak prices last summer. This is a major economic event with potentially far-reaching impacts for biofuels markets. We examined some of these impacts in two recent farmdoc daily articles. Our conclusion was that current high ethanol prices relative to gasoline prices might slow the growth in domestic ethanol consumption, but would not likely result in consumption that is less than the 10 percent blend wall. In contrast, the high price ratio may represent a threat to growth in ethanol exports and could result in some decline in ethanol export volumes from current relatively high levels. Softness in export demand, in turn, would be expected to pressure ethanol prices and bring the ethanol/gasoline price ratio back to more normal levels. In today's article, we investigate how much ethanol prices could decline from the combination of weaker export demand and continued low gasoline prices and the impact that lower prices would have on the profitability of ethanol production.

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Posted by Scott Irwin and Darrel Good   Permalink  

December 10, 2014

Position Limits and Potential Impacts on Hedgers

Last week the Commodity Futures Trading Commission (CFTC) announced the reopening of the public comment period for its latest proposal on position limits for agricultural commodities. This marks the eighth time since 2010 that the public has had an opportunity to comment on some aspect of position limits, and the fourth time for much of this particular proposal, so it is worthwhile to review the purpose of position limits, explain why this issue is important to farmdoc daily readers, and explore some of the reasons why this decision has been so difficult.

Posted by Paul Peterson   Permalink  

December 9, 2014

Base Acre and Yield Updating Tool: A Release of Spreadsheet to Aid in Making Farm Bill Decisions

The Base Acre and Yield Updating spreadsheet is available on the farmdoc website). This tool will aid in making the first two sets of Farm Bill decisions: 1) base acre allocation and 2) yield updating. It also makes comparisons of expected payments from Agricultural Risk Coverage - County Option (ARC-CO) and Price Loss Coverage (PLC) programs calculated by Agricultural Policy Analysis System. The Base Acre and Yield Updating spreadsheet also prints the Farm Service Agency (FSA) form for reporting updated yields.

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Posted by Gary Schnitkey   Permalink  

December 8, 2014

How Will the December 1 Corn Stocks Estimate Be Interpreted?

It is always a challenge to anticipate the USDA's quarterly estimate of corn stocks, but the estimate of the December 1 inventory, to be released on January 12, 2015, is a special challenge. Not only is there the usual uncertainty about the magnitude of feed and residual use of corn during the first quarter of the marketing year, there is uncertainty about the potential change in the corn production estimate that is released on the same day.

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Posted by Darrel Good   Permalink  

December 5, 2014

Setting Cash Rents and Variability in Returns

Returns to farmland likely will vary considerably over the next several years. This variability will make it difficult to set a cash rent that can remain the same for several years. Prices projected for 2015 are lower than likely long-run prices. As a result, cash rents based on 2015 returns may have to be raised in the future. Similarly, rents may need to be lowered if those cash rents were set based on returns in 2010 through 2013, particularly given that prices in 2010 through 2013 were above likely long-run average prices.

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Posted by Gary Schnitkey   Permalink