publication archive: March 2013
March 29, 2013
Illinois Farmland Assessments - Current Issues and ConsiderationsFor property tax purposes, Illinois assesses farmland on the basis of its "agricultural use" value rather than its "auction block" or market value. The agricultural use value is affected by the expected income from farming. The income potential in turn varies by soil productivity, productivity, and also changes as costs and prices evolve through time. To help dampen the impact of changes in farm incomes, the law "caps" the annual rate at which farmland assessments can change from year to year at 10% of its previous value. However, there is an emerging technical problem in the way the 10% cap functions, given the special historical context of farmland assessments in Illinois. A reasonable legislative solution would be to retain the "10% cap" but to provide a different answer to the question ... "10% of what?". The following paragraphs elaborate the purposes of the farmland assessment act, the calculation of agricultural use value, how the 10% cap currently works, the historical context that has created an unintended consequence of the 10% cap, and how the problem could be fixed by amending the farmland assessment law.
March 28, 2013
Geographical Acreage Changes between 2006 and 2012 in Corn, Soybeans, Wheat, and CottonUSDA's release of the 2013 Planting Intentions report again focuses attention on acreage shifts between crops. Herein, historical acre changes across counties are documented for corn, soybeans, wheat, and cotton; four crops with large acreages. Examining these changes documents geographical changes having occurred in the past, perhaps providing indications of any acreage changes that may occur in the near future.
March 27, 2013
High Gasoline and Ethanol RINs Prices: Is There a Connection?On March 8 we wrote about the sharp increase in the price of ethanol (D6) RINs since the first of the year. There, we indicated that the E10 blend wall would require RINs credits to be used to meet part of the RFS mandate in 2013 and beyond, increasing the value of those RINs credits. As indicated in Figure 1, the price of 2013 (current year) vintage D6 RINs remains high. The price was quoted at $0.685 per gallon on March 21, 2013, after peaking at nearly $0.90 two weeks ago.
March 26, 2013
Release of an Updated FAST Tool: Balance Sheet ProgramThe Balance Sheet program has been updated to include two new features: 1) saving multiple users and years to a database and 2) preforming trend analysis. The tool allows users to calculate beginning and ending balance sheets, income statement, statement of cash flows, and a report of the user's financial ratios, as well as deferred tax calculation. Users can generate financial statements for a one-year (simple balance sheet) or two-year period (beginning and ending year). The balance sheet program is a Microsoft Excel spreadsheet, part of our FAST series of tools.
March 25, 2013
2013 Corn and Soybean Acreage and Yield ProspectsCorn and soybean production prospects in the U.S. in 2013 will hinge mostly on the nature of the growing season and yield prospects. The magnitude of planted acreage, however, will provide the basis for anticipating total production. Likely acreage has been the topic of discussion all winter, with projections in a fairly wide range.
March 22, 2013
Comparing Current and 1970 Farm Prosperity: Crop PricesIt is common to hear references to the farm prosperity of the 1970s during the current period of farm prosperity. Therefore, this post is the first of a series that will examine various aspects of these two periods of U.S. farm prosperity. The series starts with U.S. crop prices since both periods are clearly associated with large increases in U.S. crop prices.
March 21, 2013
What's Next for the Cattle Market?Cattle feeders have witnessed record fed cattle prices over the past few years. But they also have experienced record prices for feed and feeder cattle, resulting in record feeding losses that at times exceeded $200 per head for Corn Belt cattle feeders. This has occurred despite the fact that cattle supplies have been declining for several years. The USDA cattle inventory in January reported the lowest beef cow numbers since 1962 and the smallest calf crop since 1949.
March 20, 2013
Current Estate LawThere have been questions raised regarding how to plan an estate with the new law enacted as a part of the American Taxpayer Relief Act of 2012 (ATRA). There has been a lot of coverage on the income tax aspects of the new law, but not much has been written on the estate tax aspects.
March 19, 2013
Drought and Crop Insurance Loss Experience in 2012Yield losses from the 2012 drought caused large crop insurance payments. In this post, 2012 loss ratios are shown for U.S. counties, thereby allowing areas of high loss experience to be identified. Higher loss ratios occurred in eastern Kansas, Missouri, central and southern Illinois, western Indiana, and western Kentucky. This area corresponds to the area where corn yield losses were most pronounced. The areas of high losses in 2012 bear little relationship to typical losses across the United States.
March 18, 2013
Mid-Year Soybean StocksListen to MP3 podcast
The 2012 U.S. soybean crop was 79 million bushels smaller than the 2011 crop. Because of smaller beginning stocks, the 2012-13 marketing year supply was 121 million bushels (3.6 percent smaller) than the previous year supply. Consumption of U.S. soybeans during the first quarter of the marketing year, however, was record large and the pace of consumption remained high during much of the second quarter. The rapid pace of consumption reflected continued strong export demand for soybeans and soybean products and the drought reduced South American harvest in 2012.
March 15, 2013
Control What You CanEven though the 2013 crop isn't planted many of the inputs were secured some time ago. Nitrogen for the 2013 crop was likely priced (and paid for) as early as March/April of 2012 before the 2012 crop was planted. Seed, fertilizer and pesticides are typically booked and paid for prior to the end of the preceding year. Securing inputs at the lowest cost is the driving force behind many of these decisions although end of year tax planning can drive inputs to be purchased prior to the end of the year.
March 14, 2013
TIAA-CREF and the University of Illinois Launch TIAA-CREF Center for Farmland ResearchTIAA-CREF, a leading financial services provider, today launched the TIAA-CREF Center for Farmland Research at the University of Illinois. The new center will enhance the university's research and educational initiatives for its students and the agricultural community, including investors, farmers, researchers and businesses.
March 13, 2013
Prices Paid for Farm Inputs vs. Prices Received for Crops: Implications for Managing Risk and Farm PolicyThe prices that U.S. farms receive for crops have increased far less than have the prices U.S. farms pay for inputs. This difference is often presented as an indication of the economic pressure U.S. farms confront and thus used to justify the need for a farm safety net in general and price supports in particular. This article examines in greater detail the differential trends in crop output and farm input prices, drawing implications for managing risk and farm policy.
March 12, 2013
Early Planting and Final Planting Dates for Crop InsuranceCOMBO crop insurance products - which include Yield Protection (YP), Revenue Protection with harvest price exclusion (RPwExcl), and Revenue Protection (RP) plans - have earliest planting dates and final planting dates. This year, the Risk Management Agency (RMA) revised earliest planting dates. This post details earliest and final planting dates for corn and soybeans in Illinois. It also provides a description of the impacts of these dates on insurance coverage.
March 11, 2013
Anticipating the USDA's March 1 Corn Stocks EstimateListen to MP3 podcast
On March 28, the USDA will release an estimate of U.S. corn stocks as of March 1, 2013. That estimate is based on a survey of all commercial storage facilities and a large sample of farmers. The estimate will be used to gauge the pace of domestic feed and residual use of corn during the second quarter of the 2012-13 marketing year. In addition the magnitude of stocks on March 1 will reveal the supply of corn available for consumption during the last half of the marketing year and will serve as the basis for judging the pace of consumption as it unfolds over the next several months.
March 8, 2013
Exploding Ethanol RINs Prices: What's the Story?The objective of this post is to provide a brief explanation of the underlying cause of the recent very sharp increase in the price of ethanol (D6) RIN credits and to identify the factors that might influence future price direction. As described in an earlier post by Nick Paulson, "RINs are the basis of the accounting system created by the Environmental Protection Agency (EPA) for use in enforcing the fuel mandates outlined under the RFS2."
March 7, 2013
Relationship between Crop Returns and Acreage DecisionsRelative corn and soybean prices over the past few crop years have encouraged expansion of corn acreage and the use of more corn intensive rotations throughout much of the Midwest. In general, and in central and northern Illinois in particular, increased corn acreage has come at the expense of fewer acres being planted to soybeans and, to a lesser extent, wheat.
March 6, 2013
Persistence of Low and High Prices for U.S. Row Crops: Implications for Managing Risk and Farm PolicyThis article examines the occurrence of multiple years of low prices and multiple years of high prices over the period from 1974 through 2006 for the farm program crops of barley, corn, rice, sorghum, soybeans, upland cotton, and wheat. Understanding the occurrence of persistent low prices and persistent high prices is important to managing risk as well as designing policy.
March 5, 2013
Crop Insurance Product RecommendationsThis blog post discusses a "basic" product which will be appropriate for most farm situations. This "basic" product uses Revenue Protection (RP) insurance. Also discussed are situations in which Group Risk Income Plan with the Harvest Revenue Option (GRIP-HR) and RP with the Harvest Price Exclusion (RP-HPE) are appropriate choices. The post summarizes an online webinar that is available for viewing when deciding between crop insurance products.
March 4, 2013
Spring Pork Price Recovery ThreatenedListen to MP3 podcast
Hog prices have dropped sharply in the past month, falling from about $67 per live hundredweight in early February to $58 recently. Futures prices have followed suit, with April lean hog futures dropping about $7.50 since the beginning of February. These declining prices raise concerns over the spring price recovery and whether that recovery will be strong enough to push hog prices up to breakeven levels as had been expected.