July 27, 2016

The Profitability of Biodiesel Production in 2016: Feasting on an Expiring Tax Credit?

The U.S. biodiesel production industry has a distinct "feast or famine" pattern in terms of profitability. The industry made very large profits in 2011 and 2013, but losses in most years previous to 2011 and losses again in 2014 and 2015. The feast or famine pattern has been closely tied to expiration of the $1 per gallon biodiesel tax credit in the face of binding RFS biodiesel mandates. The biodiesel tax credit is once again scheduled to expire at the end of 2016. The purpose of this article is to investigate whether a boom in biodiesel prices and profits is ongoing similar to the booms that occurred in previous years when the biodiesel tax credit expired.

July 26, 2016

Growth in Crop Costs and Cash Rents

Crop costs, which include seed, pesticide, and fertilizer costs, have grown more in recent years than have cash rents. Between 2014 and 2015, costs did decline, with most of the reductions coming from cash rents and fertilizer costs. Seed and pesticide costs have not decreased much. Continuing cost cuts are needed, particularly as Agricultural Risk Coverage (ARC) payments likely decrease for the 2017 year. It remains to be seen how much cost are reduced the 2017 growing year.

July 25, 2016

Weekly Outlook: Cattle Markets Can Recover

Lower cattle prices have been the story this spring and summer. Beef supply has been large due to heavy placements of heavy calves and the beginning of more females coming to market as herd expansion may be slowing. Retail beef prices have been slow to come down and this has limited consumer purchases of beef in relation to abundant pork and poultry supplies.

July 22, 2016

Impact of Corn and Soybean Meal Prices on Swine Finishing Feed Cost

The recent volatility in the corn and soybean markets has increased the uncertainty related to expected swine finishing feed cost. Since planting there have been wide swings in corn and soybean meal prices. For example, the December corn futures contract price ranged from $3.50 to $4.50 from early May to early July, and was approximately $3.70 in mid-July. Similarly, the December soybean meal futures contract ranged from $330 to $420 during the same time period, and was approximately $380 in mid-July. This article documents the impact of corn and soybean meal prices on feed cost indices for a swine finishing enterprise. It is important to note that the swine finishing enterprise assumes the finishing of an early-weaned pig. The ration for this enterprise consists of corn, soybean meal, dry distillers' grain, and supplements. Corn prices represent averages for Indiana as reported by USDA-NASS. Soybean meal and distillers' grain prices are obtained from Feed Outlook, published monthly by USDA-ERS. Information from Agricultural Prices, a monthly USDA-NASS publication, was used to compute supplement prices. Future prices for corn and soybean meal are used to project feed indices through 2017. Feed cost indices are reported on a closeout month rather than a placement month basis.

July 21, 2016

County-Farm Loss Basis: Evidence from Illinois and Kansas Farm Management Data

Area insurance, including county insurance, is championed, particularly by economists, for several reasons including lower administrative cost and a lower potential for cheating. However, payments by area insurance can cover more or less than a farm's loss. This so-called area-farm loss basis risk has emerged as a topic of interest. Basis risk is usually examined for a single or only a few years due to availability of data. This study takes a longer term perspective. A long term perspective is desirable because it allows over and under coverage for a given year to be averaged over time. In this study, each farm has reported complete data including yield for the same crop in all or all but one year from 1973 through 2012 to farm management programs in the important crop production states of Illinois and Kansas. Even over 35 years, the county-farm loss basis is found to vary widely across the farm observations. This study also finds that caution is in order when using the county-farm correlation to decide between county and individual farm insurance.

  • Authors: Carl Zulauf, Jinsoon Lim, Sang-Hyo Kim, Vecdi Demircan, Gary Schnitkey, Kevin Herbel, and Art Barnaby
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