WILLAg Notes

February 05, 2015

Beef Expansion Is Underway

The nation's cattle producers are expanding the herd and they're doing it at a somewhat faster rate than had been anticipated.


February 03, 2015

Using the APAS Sample Farm

Farmers and landowners wanting to learn more about the new farm programs and the sign up process can visit the Farm Bill Toolbox online. It was developed by the ag economists at the University of Illinois and Ohio State. Just search Google for Farm Bill Toolbox and you'll find a seven step decision making process. There is also a link from the Farm Bill Toolbox to USDA's APAS website.


February 01, 2015

Signing Up for the Farm Programs

The time to sign up for the farm programs has arrived. Decisions will need to be made in February and January. Read on for a quick lesson in the process, and then please visit the Farm Bill Toolbox website created by the ag economists at the University of Illinois. Landowners and farmers should find the seven decision process items in the toolbox very valuable as an aid to making the new farm program choices.
 


The deadline for making two of the three farm program choices is the end of February. University of Illinois Ag Economists Gary Schnitkey, Jonathan Coppess, & Nick Paulson along with The Ohio State’s Carl Zulauf penned an article this past week about the acreage allocation and yield update decisions. It follows;

Base Acre and Yield Updating Decisions: Push to the Finish
The deadline for completing base acre and yield updating decisions is February 27th (see steps 2 and 3 of “7 Steps” on Farm Bill Toolbox). Choosing between alternatives for each of these decisions is relatively straight forward:

1) For yield updating, select the highest yield for each program crop.
2) For base acre reallocation, choose the allocation that maximizes acres in program crops with the highest payments, given that the desire is to maximize program payments.

While the decisions usually are straightforward, collecting the information and completing the process will take some time. For this reason, beginning the process now seems prudent.

Landowners Officially Make the Decisions
Decisions will be made for each Farm Service Agency (FSA) farm. For each farm, there will be a landowner who owns the farm. Under rental arrangement, there also will be a producer who farms the land.

Landowners are responsible for making the base acre reallocation and yield updating decisions. While the landowner officially makes the decisions, in many rental situations producers have the proper power of attorneys to complete paperwork for these decisions. FSA has a record of whether proper power of attorneys exists for each farm. If an appropriate power of attorney does not exist and the landowner wishes the producer to complete the process, a power of attorney will need to be signed for farmers or farm managers to complete the decisions. If a power of attorney does not exist, the landowner will need to complete the process for base acre and yield updating decisions.

Collect Yield Data
If program yields are to be updated, yields are required for each year the crop was planted from 2008 through 2012. Documentation is not required at signup. However, documentation will be required if the FSA farm is audited during the life of the Farm Bill. The method of documentation will need to be indicated at signup. In many cases, crop insurance records will be used to provide documentation. These records are the actual yearly yields used to calculate Actual Production History (APH) yields. An explanation of using crop insurance records for documentation is available here (farmdocdaily December 23, 2014).

It will not be uncommon that documentation for a yield will not exist for a year. For example, a producer may have only farmed the land in 2010 through 2012 and cannot obtain documentation for 2008 and 2009.

If a yield is provided without documentation under an audit, farm program payments may have to be repaid and a fine could result. When yield documentation does not exist, a plug yield will need to be used. The plug yield equals 75% of the county average. When documentation cannot be provided, the plug yield should be used for 2008 and 2009

Plug yields for each county and crop are publicly available. FSA has this information. They can be obtained from the Payment Yield Update tool on the APAS website. The plug yields also are contained in the Base Acre and Yield Updating tool, a Microsoft FAST spreadsheet available for download at the FAST website.

Yields can be reported to FSA using CCC–859. This form is available here.

Make an Appointment with FSA
An appointment should be made immediately with FSA. If possible, yields for updating should be completed before this meeting. Bringing completed CCC–859 forms will facility the signup process.

Yield Updating Decision
Two alternatives for the program yield will exist for each program crop (see farmdocdaily April 3, 2014 for more detail):

  • The current program yield. These yields were reported for each FSA farm in a letter received from FSA in August 2014.
  • The updated yield equal to 90% of the average of yields from 2008 through 2012. If a year’s actual yield is below the plug yield, the plug yield will be used instead of the actual yield. If an actual yield does not exist for a year in which the crop was planted, the plug yield will be used in the update yield calculation.

Choose the highest yield. The decision can differ by crop for an FSA farm.

Base Acre Reallocation Decision
There are total base acres on each FSA farm. Landowner will be given two alternatives for dividing those total base acres into acres for each program crop (see farmdocdaily March 6, 2014 for more detail):

  • Current allocation of base acres on the farm. These acres were sent to landowners and producers in a letter received in August 2014.
  • Reallocated base acres. Total base acres are reallocated based on plantings from 2009 through 2012. Actual plantings were described in a letter received in August 2014. Total base acres under reallocation will equal base acres if current base acres are retained.

This decision is important as Price Loss Coverage (PLC) and Agricultural Risk Coverage at the county level (ARC-CO) will make payments in 2014 through 2018 on base acres. Planted acres in those years will not influence payments.

Many individuals will wish to make the allocation that maximizes commodity program payments, suggesting that the allocation be selected that places most acres in the crops with the highest expected payments. Estimating expected payments by crop requires forecast of prices and yields in 2014 through 2018. Obviously, forecasts can be wrong and crop rankings can vary from forecast rankings. With the knowledge of potential differences, estimated expected payments per program crop by county are available in the sample farms section of APAS. These same estimates also are available in the Base Acre and Yield Updating tool (available at the FAST website).

Users can see expected payment per program crop under different price forecasts for individual counties. In most counties, however, the following ranking exists:

  • Corn will have higher expected payment
  • Wheat will have lower expected payments than corn
  • Soybean will have lower expected payments than corn and wheat.

Corn and soybeans are only program crop: Given the above program crop ranking, choosing the acre alternative with the most corn acres likely will maximize program payments.

As an example take a farm whose current allocation is 60 acres of corn and 40 acres of soybeans. The reallocation alternative based on 2009 through 2012 plantings is 75 acres of corn and 25 acres of soybeans. Note that both alternatives total 100 total base acres. The above ranking suggests that the reallocated alternative (75 acres of corn and 25 acres of soybeans) will have the highest expected payments.

Corn, soybeans, and wheat are the program crops: When these three program crops exist, the reallocation with the lowest acres in soybeans while maximizing corn acres usually will result in the highest expected payments. Use of the Base Acre and Yield Updating Tool is advisable in these cases.

Summary
In many cases, making choices for base acre reallocation and yield updating will be relatively straightforward. Collecting yields, getting the proper power of attorneys, and signing proper election forms will take time. Beginning the process now is important. The process needs to be completed by February 27, 2015


January 30, 2015

Reviewing the Pace of Corn & Soybean Exports

Following the January 12 USDA Crop Production and Grain Stocks reports it has becoming increasingly clear that the story in the corn and soybean markets for the foreseeable future will be the ongoing pace of consumption.


Consumption of corn produced in the United States can be tallied as corn for used for ethanol, fed to livestock, or exported. The soybean consumption numbers are derived from an item called the crush… that’s when a soybean facility crushes the bean to extract the oil and meal from it. There is also the feed and residual number, and again exports. University of Illinois Ag Economist John Newton has explored the export numbers.

He says, holding all else constant, a lower rate of corn and soybean exports relative to current USDA projections would increase carryover stocks, and could produce downward pressure on prices. USDA, as of the January reports, expects corn exports will be 1.75 billion or 1750 million bushels for the current marketing year. Newton also says right now the actual numbers suggest corn exports will need to pick up to make it to seventeen-fifty.

With nearly 40 percent of the marketing year in the books, corn exports need to accelerate in order to reach the 1,750 million bushel WASDE projection. Based on the implied GATS estimate of 602 million bushels, 1,148 million bushels need to be exported during the remainder of the marketing year to reach the WASDE projection. On a weekly basis this total represents approximately 37 million bushels per week, and would require an increase of 57 percent over the current 10-week average export volume.

Again, in order to meet the USDA projected yearly exports total of 1.750 billion bushels the pace of corn exports needs to average 37 million bushels per week from mid-January forward. Using a similar set of calculations John Newton reports cumulative soybean exports for the 2014/15 marketing year total 1.312 billion bushels, up 18 percent from last year.

Based on the FGIS totals, then, to reach the 1,770 million bushel WASDE projection it’s implied that 458 million bushels of soybeans need to be exported during the remainder of the marketing year. On a weekly basis this total represents approximately 15 million bushels per week.

While corn exports are accelerating, the pace of soybean exports from U.S. ports is slowing down. Combining the outstanding sales with the remaining balance needed, Newton expects sales could come up 42 million bushels short of the WASDE projection. He thinks soybean exports will struggle to meet the lofty 1.77 billion bushel USDA estimate, but that it is entirely possible.


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