publication archive: January 2013
January 31, 2013
Expanding the Ethanol Blend Wall - a Role for E85?We began a discussion of the potential domestic blend wall for ethanol in a post in May of last year. The issue remains important for the biofuels industry, regulators, and policy makers. Domestic ethanol consumption is almost entirely in the form of low level blends with gasoline capped at 10 percent (E10), although small amounts have been consumed in "flex fuel" vehicles as an 85 percent blend (E85) and very small quantities are being consumed as a 15 percent blend (E15). With blending dominated by E10, the blend wall is reached when the ethanol inclusion rate reaches 10 percent of domestic motor gasoline consumption. The blend wall can be problematic since the federal Renewable Fuels Standards (RFS) require increasing quantities of renewable (ethanol) biofuels consumption for the next three years. Those requirements exceed the expected E10 blend wall.
January 30, 2013
Successful Legal Challenge to Renewable Fuel Standard Likely to Have Minimal Long-Term Impact on BiofuelsThe Energy Independence and Security Act of 2007, commonly referred to as EISA, amended the Federal Renewable Fuel Standard (RFS) by mandating specific quantities and types of renewable transportation fuels for each year--known as the yearly "applicable volume." The applicable volume for a particular fuel (conventional biofuel, advanced biofuel, cellulosic biofuel, biomass-based diesel) determines the quantity fuel refiners, importers and blenders much purchase each year. The below graph illustrates the statutory legal requirements for renewable transportation fuels under the RFS.
January 29, 2013
The 75 to 85% Coverage Level Choice for RP Crop InsuranceThe most popular crop insurance choice is Revenue Protection (RP), with coverage levels of 75%, 80%, and 85% being the most used. Often the choice of coverage level with RP is difficult. Comparisons of premiums and guarantees across coverage levels with production costs provide useful information in making coverage level choices. Those comparisons are made in this article for a Sangamon County farm example.
January 28, 2013
Update on Corn ConsumptionListen to MP3 podcast
March 2013 corn futures are currently trading about $0.25 above the closing price on January 10 and about $0.10 below the high reached on January 16. The spot market basis also remains very strong in most markets. The USDA's Grain Stocks report released on January 11 confirmed that feed and residual use of corn from June through November 2012 had been large, implying that consumption had not been sufficiently rationed following the small crop of 2012.
January 25, 2013
Landlord Characteristics in the USA and in IllinoisThe USDA collects a large amount of information directly from farmers and ranchers across the United States. Farmers and ranchers own the majority of the land dedicated to the production of agricultural products, yet a significant portion of our nation's farmland is rented or leased from non-operating landlords. In 2010, the USDA collected detailed information on land tenure, ownership patterns, and rental agreements through supplemental questions in the Agricultural Resource Management Survey. The goal was to provide more detailed information on land rental agreements and address important questions about landlord characteristics.
January 24, 2013
Rental Agreements in the USA and in IllinoisThe USDA collects a large amount of information directly from farmers and ranchers across the United States. Farmers and ranchers own the majority of the land dedicated to the production of agricultural products, yet a significant portion of our nation's farmland is rented or leased from non-operating landlords. In 2010, the USDA collected detailed information on land tenure, ownership patterns, and rental agreements through supplemental questions in the Agricultural Resource Management Survey. The goal was to provide more detailed information on land rental agreements and address important questions about landlord characteristics.
January 23, 2013
More Corn in 2013?Listen to MP3 podcast
In the next several months, planting decisions will be finalized, with one of the central question being how much corn will be planted. Herein, the corn versus soybean planting decision for 2013 is examined for high-productivity farmland. If more corn acres are to be planted in 2013, more corn likely needs to be planted on high-productivity farmland. In most cases, switching to more corn on high productivity farmland means a reduction in 2013 soybean acres. While planting corn is projected more profitable in 2013, a longer run perspective indicates that planting more corn in 2013 may reduce profits in future years.
January 22, 2013
Early Focus on the Prospective Size of the 2013 U.S. Corn CropListen to MP3 podcast
The drought reduced U.S. corn crop of 2012 suggested that corn prices might behave in a pattern generally described as "short crops have long tails." The phrase depicts the expectation of rapidly rising prices that peak near harvest time, decline in an unspecified pattern over the next several months, and return to pre-drought levels as early as the following marketing year. The decline in prices is expected as a result of a slowdown in consumption and a return to normal production.
January 18, 2013
Management Review of 2012...While Looking Forward to 2013Steven Covey is the author of the 'Seven Habits of Highly Effective People'. One of those seven habits is to 'begin with the end in mind'. So lets' begin 2013 by thinking about the end of 2013 and how your 2013 accrual income statement and balance sheet might turn out ...and lets' do that with a review of 2012. An introspective look the management of your operation for 2012 could provide good insight for bettering your management skills and abilities looking forward into 2013. The Good Lord gives us all different gifts in terms of the skills we have. The trick is to know ourselves well enough that we have the ability to seek outside assistance or education for the areas where our skills lack.
January 17, 2013
Farmland Tenure in the USA and in IllinoisThe USDA collects a large amount of information directly from farmers and ranchers across the United States. Farmers and ranchers own the majority of the land dedicated to the production of agricultural products, yet a significant portion of our nation's farmland is rented or leased from non-operating landlords. In 2010, the USDA collected detailed information on land tenure, ownership patterns, and rental agreements through supplemental questions in the Agricultural Resource Management Survey. The goal was to provide more detailed information on land rental agreements and address important questions about landlord characteristics.
January 16, 2013
Domestic Biodiesel versus Brazilian Ethanol RevisitedIn a post on January 10, 2013 we examined the relative profitability of meeting the RFS for advanced biofuels with domestically produced biodiesel and imported Brazilian ethanol. We concluded that even with the $1.00 per gallon tax credit for biodiesel, price relationships still favored Brazilian ethanol. We received a number of comments from readers in both the public and private sectors pointing out some omissions in the analysis as well as suggestions for alternative analysis. Here we incorporate those comments into an updated analysis of the relative economics of biodiesel and Brazilian ethanol based on prices as of January 10, 2013.
January 15, 2013
Crop Insurance Use in 2012 and 2013 ProjectionsIn 2012, most corn and soybean acres were insured with Revenue Protection (RP) crop insurance products using 75% and higher coverage levels. It is likely that 2013 crop insurance use will be similar to 2012 use.
January 14, 2013
USDA Reports Provide Some Price DirectionListen to MP3 podcast
On January 11, the USDA released a series of reports that provide important fundamental information for the crop markets. The information included the final estimate of the size of the 2012 U.S. corn and soybean crops, estimates of December 1 crop inventories, a winter wheat seedings estimate, and updated U.S. and world supply and consumption forecasts for the current marketing year.Listen
January 11, 2013
2013 Farm Bill UpdateThe farm bill debate remains unresolved at present. Congress chose not to pass a new farm bill but to extend most of the 2008 Farm Bill through September 30, 2013 as part of the agreement to avoid the so-called "fiscal cliff." This farmdoc post briefly discusses the extension, changes in the farm bill environment, and potential future policy paths. It ends with summary observations.
January 10, 2013
Does the Biodiesel Tax Credit Change the Advanced Biofuels Landscape?In an earlier post we highlighted the importance of the advanced biofuels Renewable Fuels Standard (RFS) for the current and future demand for biodiesel and biodiesel feed stocks. The RFS for 2013 is expected to require a minimum blending of 1.28 billion gallons of biodiesel and 2.75 billion gallons of all advanced biofuels. The difference between the minimum biodiesel requirement and the minimum total requirement is referred to as undifferentiated biofuel. That requirement can be met by Brazilian ethanol, biodiesel, or cellulosic ethanol. Since cellulosic ethanol is not available in any substantial quantities, the requirement will be met by either Brazilian ethanol or domestic biodiesel. In a separate post we illustrated that imported Brazilian ethanol was a cheaper alternative for meeting the undifferentiated advanced RFS than the domestic production of biodiesel. Those economic conditions implied that Brazilian ethanol imports would be maximized (estimated at 830 million gallons) in 2013 and would limit domestic biodiesel production to the minimum RFS requirement of 1.28 billion gallons. In addition, the impending ethanol blend wall near 13.3 billion gallons implies that Brazilian ethanol imports would limit the production of U.S ethanol to 13.17 billion gallons (assuming exports of 700 million gallons) in 2013.
January 9, 2013
Selling a Farm With Unharvested CropsSelling a farm with unharvested crops presents some unique tax issues. The tax rules today may provide the farmer with far greater advantages than the rules that existed back in 1953 when the Supreme Court first ruled on the tax treatment of the sale of farmland with standing crops, but care must be taken to assess the impact of the tax rules and structure the sale transaction to minimize the tax costs of the sale.
January 8, 2013
Crop Insurance Premiums and the 2013 Crop Insurance Decision ToolThe 2013 version of the Crop Insurance Decision Tool is now available for download from the FAST section of farmdoc. If projected prices and volatilities are the same as last year, most corn and soybean premiums in Illinois will be lower in 2013 as compared to 2012.
January 7, 2013
Pork Profits on the HorizonListen to MP3 podcast
Pork producers have begun the chant "four more months" as they can now see the light of profits as they are set to emerge from a tunnel of losses. That tunnel of darkness stretched from the spring of 2012 through the winter of 2013, with average estimated losses of $18 per head, primarily due to high feed prices.
January 4, 2013
IFES 2012: Overview and Impacts of Proposed Changes in the 2012 Farm BillListen to MP3 podcast
The main issue shaping the political debate around the 2012 Farm Bill is the desire to cut spending for deficit reduction. While farm programs do not represent the biggest piece of the Farm Bill pie, they are the main targets for program modifications and reductions in overall support as they become more difficult to justify with farm incomes reaching record levels.
January 3, 2013
IFES 2012: Crop Insurance - 2012 Performance and Updates for 2013Listen to MP3 podcast
Though final numbers will not be known until early 2013, crop insurance policies resulted in very large indemnity payments over a large region of the Corn Belt for both corn and soybeans for the 2012 crop. Policies that included the harvest price option benefitted significantly from the increased harvest prices (corn = $7.50 and soybeans = $15.39) relative to March projected prices (corn of $5.68 and soybeans of $12.55), and the resulting increased guarantees. Producers without claims benefitted from the higher market prices that accompanied the lower production due to drought. The Risk Management Agency has announced several important changes to available crop insurance programs for the 2013 crop year as well and these will be identified and discussed including substantial changes to group policies, extensions and expansions of the Trend Adjusted APH endorsement, impacts of rerating, and the likely impact of the payouts from this year's policies.
January 2, 2013
IFES 2012: Crop Insurance - Tax Reporting OptionsListen to MP3 podcast
Approximately 80% of Illinois farmers purchased various types of crop insurance on their 2012 crops. The total premiums for these policies were over $770 million. It is projected that the total claims will exceed twice the amount of the premiums.