publication archive: December 2012
December 28, 2012
IFES 2012: The Impact of Biofuels Mandates on Grain and OilseedListen to MP3 podcast
Minimum volumes of biofuel usage were first mandated for the U.S. in the 2005 Energy Policy Act and then revised in the Energy Independence and Security Act of 2007. The current legislation sets annual minimum volumes through 2022 in four categories of biofuels: cellulosic, biomass-based diesel, undifferentiated advanced, and renewable. There is a hierarchy among these different categories based on their life-cycle contribution to reducing "green house" gas (GHG) emissions. Most people are surprised to learn that there is not an explicit mandate for corn-based ethanol. Instead, corn-based ethanol has been the cheapest alternative to date for fulfilling the renewable component of the mandates.
December 27, 2012
IFES 2012: Crop and Livestock Price Prospects for 2013Listen to MP3 podcast
The crop price environment will likely remain very volatile in 2013, reflecting production uncertainty and unsettled economic issues. However, a transition to lower prices is anticipated as production rebounds. The extent of the price decline will depend heavily on the outcome of the 2013 crops.
December 26, 2012
IFES 2012: 2013 Projected Crop Farm Incomes: A Drought ReprieveListen to MP3 podcast
Net farm incomes in 2012 on many grain farms will be above expectations, even given relatively low corn and soybean yields caused by the drought. This will occur because of two factors countering yield losses: 1) higher corn andsoybean prices and 2) crop insurance payments. Corn and soybean prices increased beginning in the summer and fall of 2012. Cash prices for corn were in the mid-$6.00 range per bushel in the spring, reaching the high-$7.00 per bushel range in the fall. Soybeans were in the $14 range in April and reached the $15 range in the fall of 2012. Price increases partially countered yield declines on farms that did not have a great deal of per-harvest hedging in the spring.
December 21, 2012
Your Farm's Financial Health (Debt-to-Asset Ratio)The end of another year approaches - time to close out your accounting records for the year and review financial statements to assess the financial health of your business.This post will focus on the debt-to-asset ratio and how it tells about the risk exposure of your business.
December 20, 2012
CFTC-SEC Merger Proposal May Have Hidden CostsThe Commodity Futures Trading Commission (CFTC) is the federal regulatory agency for the futures and options markets, and the Securities Exchange Commission (SEC) is the federal regulatory agency for the securities markets. The markets they regulate serve different economic purposes, and the agencies have different regulatory missions and philosophies, receive oversight from different Congressional committees, and in most other respects have very little in common. Nevertheless, periodically there is a proposal to merge these two agencies, usually as a way to achieve "synergies," "efficiencies" or various other promised benefits.
December 19, 2012
Do Recent Precipitation Deficits Tell Us Anything about Next Summer's Precipitation?Drought conditions that impacted corn and soybean production in many areas of the U.S. in 2012 generally began in June. By the end of the growing season, large precipitation deficits developed in some areas. Some of those areas remain very dry, while more normal levels of precipitation have been received in other areas since August. That diverse pattern is illustrated below, which shows cumulative precipitation deficits for four major corn producing states for the period June through November 2012. Average statewide precipitation for this six-month period in Illinois, Indiana, Iowa, and Nebraska is compared to the average precipitation for the same six-month period since 1895. All four states received less than the average amount of precipitation since June, but the deficits are smaller in Illinois and Indiana, larger in Iowa, and much larger in Nebraska.
December 18, 2012
Per Acre Non-land Costs of Grain Farms of Different SizesListen to MP3 podcast
Considerable interest exists in examining per acre costs for grain farms of different sizes. Herein data from grain farms enrolled in Illinois Farm Business Farm Management (FBFM) are examined to determine per acre costs of farms of different size, breaking down those costs into non-land and land components. Only financial costs are included in this study, opportunity costs for unpaid labor, management, and equity are not included. Average non-land costs do not vary across farms of different size. Land costs tend to increase with farm size.
December 17, 2012
Difficult to Anticipate December 1 Corn Stocks EstimateListen to MP3 podcast
The USDA's estimate of December 1, 2012 inventories of corn, to be released on January 11, 2013, will be one of the more important factors influencing the price of old crop corn in the first quarter of the new year. The estimate of soybean stocks may be somewhat less important because more is known about the level of consumption during the first quarter of the 2012-13 marketing year.
December 14, 2012
RIN Stock Update: Implications of the 2012 DroughtToday's post provides an update on U.S. ethanol production and imports through August, and projections for 2012 ending Renewable Identification Number (RIN) stocks. Prior analyses of the available stock of RINs accumulated over the past three years through the RFS2's banking provision are available on farmdoc daily. These previous estimates indicated an ending stock level for 2011 of approximately 2.64 billion gallon RINs which could be used for mandate compliance in 2012 as an alternative to physical blending, providing up to 960 million bushels of flexibility in revealed demand for corn-for-ethanol if ethanol blending margins declined. Ethanol production and exports through the first quarter of 2012, and the expectation for a slowing in ethanol production due to the drought's impact on corn prices, suggested the likely use of a portion of available RIN stocks for mandate compliance in 2012 and a lower carry in to 2013.
December 13, 2012
A Move Towards a More Fair Division: Envisioning a New Illinois Fence ActLargely unchanged since its initial passage in 1819, the Illinois Fence Act provides that adjoining landowners ". . . shall make and maintain a just proportion of the division fence between them[.]" When the legislature drafted the statute in the early 1800s, land use patterns in Illinois looked quite different than today. Specifically, more landowners had cattle and sheep roaming their land. Starting in 1950, the number of farms in Illinois with livestock grazing has declined, with dramatic reductions in the 1960s and 1970s. As shown below, this trend continues.
December 12, 2012
Range in 2013 Market Year Average Prices for Soybeans Suggested by HistoryCurrent Chicago Mercantile Exchange (CME) futures prices suggest that market year average (MYA) soybean prices for 2013 will be near $13.00 per bushel. Obviously, prices could vary from $13.00. In this post, historical price changes are used to evaluate possible 2013 MYA prices. Historical price changes suggest there is an 11% chance of the MYA price being below $10.00 and a 19% chance of MYA price being below $11.00 per bushel.
December 11, 2012
Will ACRE Pay in 2012?ACRE, or the Average Crop Revenue Election, is a revenue based program contained in 2008 Farm Bill. In Illinois, 2012 ACRE payments for corn are possible if the Market Year Average (MYA) price for corn averages below $7.00 per bushel. In Illinois, ACRE payments are unlikely for soybeans or wheat.
December 10, 2012
Will Corn and Soybean Prices Return to Pre-Drought Levels?Listen to MP3 podcast
March 2013 corn futures dropped below $5.50 in early May 2012 and were drifting lower when U.S. drought conditions turned prices higher starting in mid-June. The price of that contract peaked in early August, just short of the $8.50 mark. March 2013 soybean futures dropped below $11.50 in December 2011before South American drought conditions and then U.S. drought conditions sent that contract above $17.25 by mid-September 2012. conditions sent that contract above $17.25 by mid-September 2012.
December 7, 2012
What's Driving the Surge in Ethanol Imports?With ethanol production margins under pressure in recent months there has been an understandable search for explanations. One widely-discussed factor is the recent surge in "cheap" imports of ethanol to the U.S. from Brazil. As Figure 1 documents, the volume of ethanol imports to the U.S. definitely has risen notably in the in the last few months. Total imports during January-May 2012 totaled only 43 million gallons, but increased over five-fold to 235 million gallons over June-September. It is important to keep in mind that ethanol imports have actually been much larger in the past. The U.S. imported a total of 1.7 billion gallons of ethanol in 2006-2008, mainly due to an immediate need to replace MTBE as an oxygenate in our motor fuel gasoline supply.
December 6, 2012
2012 Farm Bill UpdateThe 2012 Farm Bill has become entwined with the debate over federal budget priorities at a time of large fiscal deficits, a debate commonly called the fiscal cliff. The 2012 farm bill process most closely resembles the 1991 farm bill process, which also became entwined in a debate over budget priorities and deficits. This article briefly examines the current status of the 2012 Farm Bill process and offers a peek at future farm safety net issues.
December 5, 2012
U.S. Fiscal Cliff and U.S. AgricultureThe U.S. fiscal cliff refers to the combination of 2 events that will occur in late 2012 and early 2013: (1) implementation of federal budget cuts resulting from the compromise to extend the U.S. federal debt ceiling and (2) expiration of many of the tax cuts enacted since 2000. The name, "fiscal cliff," stems from the widely-held concern that these 2 actions may cause an economic recession. However, the fiscal cliff is actually a symptom, not the problem.
December 4, 2012
Range in 2013 Market Year Average Prices for Corn Suggested by HistoryCurrent Chicago Mercantile Exchange (CME) futures prices suggest that market year average (MYA) corn prices for 2013 will be near $6.00 per bushel. Obviously, prices could vary from $6.00. In this post, historical price changes are used to evaluate possible 2013 MYA prices. Historical price changes suggest there is an 8% chance of the MYA price being below $4.50 and a 19% chance of MYA price being below $5.00 per bushel.
December 3, 2012
Continued Support for Corn PricesListen to MP3 podcast
Corn prices peaked in August, moved sharply lower in September, and have been in a sideways pattern over the past two months. Within that sideways pattern, prices have moved higher over the past two weeks, with March 2013 futures trading within $0.10 of the post-September high. The recent rally has been fueled by some supply concerns and more optimism about near-term demand.