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COPING WITH
LOWER PRICES
Robert Johansson
Chief Economist Int’l Grains Council
London, June 2016
http://www.startribune.
com//307422201/.
Photo: Bethany Hahn.
World GDP growth slows, compared to last year’s
projections, most notably in China
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2011 2013 2015 2017 2019 2021 2023 2025
% change
Actual
2016 projection
2015 projection
World
Source: USDA.
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2011 2013 2015 2017 2019 2021 2023 2025
% change China
40
60
80
100
120
140
160
40
60
80
100
120
140
160
2009 2010 2011 2012 2013 2014 2015 2016
DAP Steel Lumber Crude Oil
Price declines for primary inputs could be ending
2007=100 2007=100
Source: Eikon/Datastream, USDA-OCE.
U.S. GDP growth and real ag trade-weighted
exchange rate up through 2017
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
20
11
20
12
20
13
20
14
20
15
2016
2017
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
85.00
90.00
95.00
100.00
105.00
110.00
115.00
% change
Exchange rate
(right axis) US GDP
(left axis)
2010 = 100
Data: USDA-OCE.
Ag Trade Outlook
Decline in agricultural exports expected in
2016 --- China share falls in value
0
2
4
6
8
10
12
14
16
18
20
0
20
40
60
80
100
120
140
160
2000 2003 2006 2009 2012 2015
Billion dollars China Percent
Source: USDA. Data are fiscal year.
0
50
100
150
200
250
300
1980
1982
1984
1986
1988
1990
19
92
1994
1996
1998
2000
2002
2004
20
06
2008
2010
2012
2014
2016
2018
2020
20
22
2024
Global trade growth is expected to continue
Million metric tons
Soybeans and products
Wheat Coarse Grains
Source: USDA.
Monthly Chinese soybean imports
-
1
2
3
4
5
6
7
8
9
10 0
1/2
01
0
04
/20
10
07
/20
10
10/2
010
01
/20
11
04
/20
11
07
/20
11
10/2
011
01
/20
12
04
/20
12
07
/20
12
10/2
012
01
/20
13
04
/20
13
07
/20
13
10/2
013
01
/20
14
04
/20
14
07
/20
14
10/2
014
1/2
01
5
4/2
01
5
7/2
01
5
10/2
015
01
/20
16
04
/20
16
Millio
n M
etr
ic T
on
s
United States Argentina +Brazil ROWSource: Global Trade Information Services (GTIS)
Monthly Chinese corn/barley/sorghum imports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.01
0/2
01
0
01
/20
11
04/2
011
07
/20
11
10
/20
11
01
/20
12
04/2
012
07
/20
12
10
/20
12
01
/20
13
04
/20
13
07
/20
13
10
/20
13
01
/20
14
04
/20
14
07
/20
14
10
/20
14
1/2
01
5
4/2
01
5
7/2
01
5
10
/20
15
01/2
016
04
/20
16
Millio
n M
etr
ic T
on
s
US-CORN US-SORGHUM US-DDG
Ukraine-CORN Thailand/Burma/Laos-CORN Other-CORN
BARLEY Other-SORGHUM Other-DDG
Source: Global Trade Information Services (GTIS)
0
20
40
60
80
100
120
140
160
1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21 2025/26
Million metric tons
Source: USDA.
This year's
projection
Last year's
projection
China imports to rise, but more slowly than last
year: soybeans up, grains down, cotton down
Combined imports of
grains, soybeans,
and cotton.
0
20
40
60
80
100
120
1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21 2025/26
Million metric tons
This year's
projection
Last year's
projection
Projections for Brazil’s exports for corn and
soybeans both increase from last year
Exports of
soybeans and
corn
Fig 14
Source: USDA.
US Corn Export Sales
0
5
10
15
20
25
30
35
40
45
50
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Mil
lio
ns m
etr
ic t
on
s
Accumulated Exports 2014/15 Outstanding Sales 2014/15
Accumulated Exports 2015/16 Outstanding Sales 2015/16
USDA-FAS U.S. Export Sales Report June 9 2016
US Soybean Export Sales
0
10
20
30
40
50
60
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Mil
lio
ns m
etr
ic t
on
s
Accumulated Exports 2014/15 Outstanding Sales 2014/15
Accumulated Exports 2015/16 Outstanding Sales 2015/16
USDA-FAS U.S. Export Sales Report June 9 2016
Expanding U.S. ag exports through FTAs
U.S. Ag Trade
TPP* Ag Trade
Source: USDA Global Agricultural Trade Statistics, UN Commodity Trade Statistics,
CY2014/2015 trade data.
*TPP
partners
include
Australia,
Brunei,
Canada,
Chile,
Japan,
Malaysia,
Mexico,
New
Zealand,
Peru,
Singapore,
and
Vietnam.
Exports $133 billion
Imports $113.5 billion Total $246.5 billion
U.S exports to TPP-11
$57.2 billion
U.S. imports from TPP-11
$58.1 billion
Total TPP-11 trade
$403 billion
0
50
100
150
200
250
300
350
400
450
500
House Trade Votes
TPA 2015 –AG Congressional Districts
Top 200 Congressional Districts ranked by value of ag production ($300 million or greater)
Yes on TPA 2015
No on TPA 2015
Did not vote
Voted no,
then yes.
resigned, no vote
Outlook for Crops
Global production stays high,
consumption catches up for corn and soybeans
300
400
500
600
700
800
MMT Wheat
Source: World Agricultural Supply and Demand Estimates, June 10, 2016.
300
400
500
600
700
800
900
1,000
1,100
MMT Corn
0
50
100
150
200
250
300
350
MMT Soybean
Global ending stocks edge up
Source: World Agricultural Supply and Demand Estimates, June 10, 2016. Foreign
Agricultural Service, PS&D database.
100
150
200
250
300
350
400
40
60
80
100
120
140
160
1990 1993 1996 1999 2002 2005 2008 2011 2014
Wheat Corn
Rice Soybeans
Cotton (right axis)
Days of use Days of use
China policies build stocks
Source: USDA, PSD database, World Agricultural Supply and Demand Estimates, June 10, 2016.
0
10
20
30
40
50
60
70
2000 2002 2004 2006 2008 2010 2012 2014 2016
Wheat
Corn
Rice
Soybeans
Cotton
Percent of global stocks
Prices soften, but still above 2000-2003 average
Ave 2000-
03 2011 2012 2013 2014 2015F 2016F
Dollars per metric ton
Wheat 113.5 266.0 285.5 252.4 220.1 180.0 147.0
Corn 84.2 244.9 271.2 175.6 145.7 145.7 137.8
Soybeans 200.2 459.3 529.1 477.7 371.1 332.5 349.1
Cotton 1,024.6 1,946.7 1,598.3 1,717.4 1,351.4 1,278.7 1,256.6
All Rice 123.6 319.7 332.9 359.4 295.4 271.2 266.8
Source: USDA-NASS, World Agricultural Supply and Demand Estimates, June 10, 2016.
Red denotes record high.
Crop
US Ethanol Export Destinations
by month
020
40
60
80
100
120140
160
180
Jan
-20
10
Ap
r-2
01
0Ju
l-20
10
Oct
-20
10
Jan
-20
11
Ap
r-2
01
1Ju
l-2
01
1O
ct-2
01
1Ja
n-2
01
2A
pr-
20
12
Jul-
20
12
Oct
-20
12
Jan
-20
13
Ap
r-2
01
3Ju
l-20
13
Oct
-20
13
Jan
-20
14
Ap
r-2
01
4Ju
l-2
01
4O
ct-2
01
4Ja
n-2
01
5A
pr-
20
15
Jul-
20
15
Oct
-20
15
Jan
-20
16
Total Exports Canada EU China Brazil
million gallons
US Energy Information Administration
US Ethanol Destinations March 2016
Canada
Brazil
China
India EU
ROW
95.3 million gallons
March 2016
US Energy Information Administration
Outlook for
Livestock and Dairy
Livestock and poultry inventories building
* Dec 1, prior year
Source: National Agricultural Statistics Service.
Animal
products
2011 2012 2013 2014 2015 2016 %
change
Million Head/Birds, Jan 1
Total Cattle 92.9 91.2 90.1 88.5 89.1 92.0 3.3
Dairy Cows 9.2 9.2 9.2 9.2 9.3 9.3 0.1
Hogs* 64.7 66.3 66.2 64.8 67.8 68.4 0.9
Broiler Layers 55.5 50.4 51.4 52.5 53.7 54.6 1.8
Beef, pork, and poultry production higher in 2017
Source: World Agricultural Supply and Demand Estimates, June 10, 2016.
Data in red denote record levels.
Animal
products
2012 2013 2014 2015 2016F 2017F %
change
Million Metric Tons
Beef 11.7 11.7 11.0 10.8 11.2 11.7 4.5
Pork 10.6 10.5 10.3 11.1 11.3 11.6 2.6
Broilers 16.8 17.1 17.5 18.1 18.6 19.1 2.5
Total 42.2 42.3 41.8 42.9 44.2 45.5 3.1
Million Metric Tons
Milk 91.0 91.3 93.5 94.6 96.4 97.7 1.3
Cattle, hog, and broiler prices expected to
come down from 2016, but dairy perks up
Source: World Agricultural Supply and Demand Estimates, June 10, 2016.
Prices in red denote record levels.
Item 2012 2013 2014 2015 2016F 2017F
%
change
Dollars per metric ton
Steers 2,709 2,776 3,408 3,265 2,802 2,717 -3.0
Hogs 1,343 1,413 1,676 1,107 1,070 964 -9.9
Broilers 1,909 2,198 2,313 1,995 1,980 1,962 -0.9
Milk 408 443 529 377 334 347 4.0
Outlook for the Farm
Sector
http://www.hoosieragtoday.com/indiana-cash-rent-up-3-per-acre-in-2014/
Net farm income is down, but debt-to-asset
ratio remains low
Data: USDA-ERS.
0
5
10
15
20
25
0
20
40
60
80
100
120
140
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F
Billion dollars Percent
Debt-to-Asset ratio
(right axis)
Net farm income
(left axis)
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Land Costs $278 $278 $687 $687 Cash rent
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Costs
Revenue
Breakeven rental rate
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Costs
Land Costs $687 $687 $278 $278
Fertilizer prices
32
0
100
200
300
400
500
600
700Jan-1
1
Apr-
11
Ju
l-11
Oct-
11
Jan-1
2
Apr-
12
Ju
l-12
Oct-
12
Jan-1
3
Apr-
13
Ju
l-13
Oct-
13
Jan-1
4
Apr-
14
Jul-
14
Oct-
14
Jan-1
5
Apr-
15
Ju
l-15
Oct-
15
Jan-1
6
do
lla
rs p
er
me
tric
to
n
Phosphate Rock (Morocco) DAP (US Gulf)
Urea (Black Sea) Potash (Canada)
Source: World Bank
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Costs
Land Costs $687 $687 $278 $278
2004
20052006 2007
2008
2009
2010
2011
2012
2013
2014Aug-15
Sep-15Oct-15
Nov-15
0.260
0.270
0.280
0.290
0.300
0.310
0.320
0.330
0.340
0.350
0.360
25,000 25,500 26,000 26,500 27,000 27,500 28,000 28,500 29,000 29,500
Lbs/Ear
Ears Per Acre
Corn Objective Yield RegionEars Per Acre vs. Implied Ear Weight
Implied Ear Weight = (Published Yield * 56) / Ears
USDA-NASS
11-10-15
Corn Objective Yield (ears per acre vs. implied ear weight)
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
20142015
Jun-16
0.530
0.540
0.550
0.560
0.570
0.580
0.590
0.600
0.610
0.620
0.630
0.640
0.650
38 39 40 41 42 43 44 45 46 47 48 49
Grams/Head
Heads Per Square Foot
Wheat Objective Yield RegionHeads Per Square Foot vs. Implied Head Weight
Implied Head Weight= Published Yield / (Heads*1.6006)
USDA-
NASS 6-10-16
Wheat Objective Yield (heads per sq. foot vs. implied head weight)
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Costs
Land Costs $687 $687 $278 $278
US 4WD Tractor Sales
0
200
400
600
800
1000
1200
1400Jan-2
009
May-2
009
Sep-2
009
Jan-2
010
May-2
010
Sep-2
010
Jan-2
011
May-2
011
Sep-2
011
Jan-2
012
May-2
012
Sep-2
012
Jan-2
013
Ma
y-2
01
3
Sep-2
013
Jan-2
014
Ma
y-2
01
4
Sep-2
014
Jan-2
015
Ma
y-2
01
5
Sep-2
015
Jan-2
016
May-2
016
Sep-2
016
un
its s
old
prior 5 year range 4WD Farm Tractors
Source: American Equipment Manufacturers
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Costs
Land Costs $687 $687 $278 $278
Selected Energy Prices
Source: Thomson Reuters Datastream
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160
2000 2002 2004 2006 2008 2010 2012 2014 2016
Crude Oil (WTI) Cushing, Oklahoma
Natural Gas, Henry Hub, Louisiana (right axis)
$/Barrel $/Million BTU
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Costs
Land Costs $687 $687 $278 $278
Includes Interest
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2009:Q4 2010:Q4 2011:Q4 2012:Q4 2013:Q4 2014:Q4 2015:Q4
Farm debt continues to increase at
commercial banks
Source: Federal Reserve Bank of Kansas City, Agricultural Finance Databook.
Percent change from previous year
Delinquency rates on farm loans up slightly
Source: Kauffman and Clark (2016), Ag Finance Databook.
Data: Federal Reserve Board of Governors.
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Land Costs $687 $687 $278 $278
Revenue
Source: USDA-NASS, World Agricultural Supply and Demand Estimates, June 10,
2016.
U.S. Maize Yield Weather-Adjusted Trend Yield vs. Actual
5
6
7
8
9
10
11
12
1988 1992 1996 2000 2004 2008 2012 2016
MT/hectare
Actual Yield
Weather-AdjustedTrend
February 2016 Ag Outlook Forum: 10.54
2016 May WASDE: 10.54
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Land Costs $687 $687 $278 $278
Revenue
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Land Costs $278 $278 $687 $687
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Breakeven rental rate
Corn After
Soybeans
Soybeans
After Corn
Corn After
Soybeans
Soybeans After Corn
Fertilizers $309 $79 $125 $32 Seed $301 $188 $122 $76
Crop Insurance $59 $44 $24 $18 Other direct costs $217 $114 $88 $46
Machinery hire/lease, repair and depreciation $250 $230 $101 $93 Fuel and oil $42 $42 $17 $17
Other power costs $17 $17 $7 $7
Overhead costs $168 $153 $68 $62
Total non-land costs $1,364 $867 $552 $351
Yield (mt/ht) and (bu/ac) 12.62 3.90 201 58 Price (per mt) and (per bu) $159 $396 $4.03 $10.77
Crop Revenue $2,002 $1,544 $810 $625
ARC(PLC) $74 $74 $30 $30 Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $638 $676 $258 $274
Per Hectare Per Acre
Land Costs $278 $278 $687 $687 Cash rent
Central Illinois Production Budget 2016 (high productive land)
Source: Gary Schnitkey, University of Illinois, farmdoc http://www.farmdoc.illinois.edu/manage
Cash rental rates falling, but slowly
Illinois farmers scrutinize high cash rental rates
IFT photo by Phyllis Coulter January 07, 2016 5:03 am • By Phyllis Coulter, Illinois Farmer Today
CHAMPAIGN — Some of the rent Eastern Illinois farmer Keith Dalenberg pays is a little higher than he would like, but landowners aren’t willing to take less right now. Dalenberg, who grows corn and soybeans near Georgetown in Vermillion County, is carefully looking at rent and input costs as margins are tight. He attended the Eastern session of the 2015 Illinois Farm Economics Summit in Champaign in December where University of Illinois economists led the discussion about dealing with the current margin squeeze. “Everybody would like the rents they pay to be less,” he said. Dalenberg has different kinds of agreements with landowners, including some cash rent and some
flexible leases. Some of his landlords are retired farmers, some are widows and others have never farmed. He has been able to adjust some rental agreements to help him cope with the lower commodity prices, but not all.
Cash rental rates Whole State Average
0
100
200
300
400
500
600
700
$/hectare
IL IN IA KS GA
0%
50%
100%
150%
200%
250%
1998 = 100
GA IL IN IA KS
New Farm Bill
2014 Farm Bill elections and 2014 payments by
base commodity
Election ARC PLC ARC payments
to date (mill)
PLC payments
to date (mill)
Corn 93% 7% $3,711.511 $0
Soybeans 93% 7% $317.282 $0
Wheat 58% 42% $349.119 $0
Long-grain
rice
0% 100% $0.013 $399.491
Peanuts 0% 100% $0.096 $321.484
Source: USDA, Farm Service Agency. As of May 20, 2016
ARC-CO 2014 payment rates for corn minus 2008 Direct Payment rates reflect effects of yield variations on revenue
Source: USDA-FSA.
$dollars / acre (ARC-DP)
ARC-CO 2014 payment rates for soybeans minus 2008 Direct Payment rates reflect effects of yield variations on revenue
Source: USDA-FSA.
$dollars / acre (ARC-DP)
ARC-CO 2014 payment rates for wheat minus 2008 Direct Payment rates reflect effects of yield variations on revenue
Source: USDA-FSA.
$dollars / acre (ARC-DP)
Growth in the US crop insurance program
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
160
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
1997
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
Source: USDA Risk Management Agency Summary of Business.
Mill hectares Bill $
1988 drought
1994 Reform Act
ARPA 2000
8-Crop Planting and Lag Prices
240
245
250
255
260
265
70
95
120
145
170
195
220
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
P
Price Index , 2004 = 100 Million Acres Planted
8-crop planted acres
(right axis)
8-crop index of lagged
real area-weighted
prices (left axis)
Source: NASS
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Mar
-16
May
-16
Soybean/Corn Harvest-Time Futures
Price Ratio
Release of Planting Intentions Survey
CME November Soybeans and December Corn
0.56
0.58
0.60
0.62
0.64
0.66
0.68
0.70
0.72
0.74
No
v-1
4
Dec
-14
Jan
-15
Feb
-15
Mar
-15
Ap
r-1
5
May
-15
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
Oct
-15
No
v-1
5
Dec
-15
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Meal Share of Soybean Value
(December Futures)
Release of Planting Intentions Survey
May 10 WASDE
CME December Soybean meal and oil
Conclusions
• Low price environment expected to continue at least in near
term.
• US plantings will be driven by producers decisions on which crop
will produce the best returns (or lowest losses).
• Borrowing is expected to increase; cash rents are expected to
fall. This points to continued use of risk management tools and
safety-net programs.
• Globally, we expect trade growth to continue, along with trade
discussions, which will look to open new markets (e.g., TPP) and
enforce existing rules (WTO).
• The most recent WASDE from last week shows record carry-out
for wheat, but opportunities for corn and soybean marketing due
to lower production in SA.
Thanks!
www.usda.gov/oce
http://www.usda.gov/oce/commodity/wasde/Secretary_Briefing.pdf
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