University of Illinois College of Law
May 05, 2015

The Flash Crash and the Hound of Hounslow

The U.S. markets went into free fall in May of 2010 dropping 6 percent in minutes, and then bouncing mysteriously back. There was a sense that the machines were out of control during this "Flash Crash".  Five years later, US criminal authorities and financial regulators are pointing the finger at a lone trader. Verity Winship tells us more about the case against the “Hound of Hounslow”.


May 04, 2015

Can Herbicide of Choice Still be Used Post Planting

The fast pace of corn planting in the state of Illinois has farmers and chemical applicators racing one another across the fields. University of Illinois Extension Weed Scientist Aaron Hager has this advise for farmers wondering what to do if the corn was planted before their residual herbicides were applied.


You may read Aaron Hager's thoughts on weeds and herbicides on The Bulletin website.


April 29, 2015

2015 Gross Revenues for Corn Using RP85% + ARC Co

A University of Illinois Ag Economist has back figured how the new farm program would have performed over the last 40 growing seasons when coupled to crop insurance. The calculations can be used as a guidepost to 2015 farm incomes.



The exercise coupled RP crop insurance at the 85% level to the ARC County farm program to see how it would have supplemented farm income on a highly productive central Illinois farm located in Logan County. The numbers were run for crop years starting in 1975 all the way through 2014 says Gary Schnitkey. He’s an ag economist at the University of Illinois and explains, to begin with, how this combination would have handled the years farmer are most likely to remember; 1980, 83, 88, and 2012.

Quote Summary - So those are the drought years, and while in 1988 we didn’t have the crop insurance products we do now, we can figure what income would have looked like if a producer had purchased RP at the 85% level and took ARC County. Those years would not be bad from a gross revenue stand point. Crop revenues would be low, but crop insurance and ARC County payments would bring those back so that if, for instance 2015 looked like 1988 or 2012, the gross income would be at the top end of our distribution over the 40 year period.

Yields and prices in each of the 40 years are calculated using 2015 projections, but the actual year offsets. 2012, then. would show a lower actual price (because this years crop insurance price is lower than 2012’s) but a higher actual yield. Essentially you pick a year, adjust for 2015, and calculate the gross income.
 


The middle point (where the distribution is not quite evenly split above and below but close) is $828 per acre. The low revenue year forecasts correlate mostly with trend yields and lower corn prices. So, with a somewhat normal growing season that has below average prices. That could be caused by large residual supplies, big carryouts, or by poor demand.

Quote Summary - Poorer demand or something along that lines. Those types of years will be the ones that cause low revenues in 2015.

The ten middle years of the set project 2015 gross revenues from $825 to $831 per acre for corn. They were each characterized by harvest prices and yields relatively close to expected levels - the February crop insurance price and trend yield. Those years include 1984, 1990, 1991, 1996, 2002, and 2009.

Link to original FarmDocDaily article


April 24, 2015

Protect Backyard Chickens from Avian Flu

More people than you might think are keeping chickens in their backyards. These birds, just as those grown commercially, are at risk to the H5N2 Avian Influenza virus

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April 21, 2015

Will Soybean Consumption Reach USDA Projection

Last year U.S. farmers harvested a record sized soybean crop. The price of soybeans plummeted, but not yet as far as the most negative nellies expected. There is a glimmer in some of the USDA numbers that might explain why.


 


April 19, 2015

An Argument for $4.25 New Crop Corn

University of Illinois ag economists Darrel Good and Scott Irwin have posted an article to the FarmDocDaily website making the case for $4.25 new crop corn. We've posted the accompanying supply and demand table along with one paragraph (Implications) from there case. 

Follow this link to read the whole article.

 

...from the FarmDocDaily Post

Implications

Our current projected 2015-16 corn balance sheet points to an ending stocks-to use ratio of 10.5 percent. That compares to ratios ranging from 12.0 to 14.3 percent implied by other balance sheet or price projections. Some of the difference with other projections lies in different balance sheet projections. Our projected yield and crop size is smaller than projected by others and probably smaller than expected by the market. In addition, our projection of 2015-16 marketing year consumption is 50 million bushels larger than the latest USDA projection and 150 million bushels larger than the FAPRI projection. Finally, others may draw different price implications from the same projections of production, consumption, and ending stocks. The USDA, for example, appears to be expecting a much weaker demand structure than what we forecast. That weaker demand would be expressed as a leftward shift in the relationship between the price of corn and ending stocks-to-use. Our analysis suggests there is potential for new crop corn prices to move higher if: i) this year's growing season points to a U.S. average yield at or below trend value of 164 bushels; and/or ii) demand is not as weak as some appear to be assuming. We maintain expectations for a 2015-16 marketing year average price near $4.25.


April 15, 2015

2014 Loss Experience for Revenue Protection Products

by Gary Schnitkey

Most of the 2014 insurance payments on COMBO products have been entered into Risk Management Agency’s Summary of Business, allowing us to calculate loss performance for individual products accurately. This article describes loss performance for Revenue Protection (RP), a revenue insurance plan used to insure most acres in the United States.



Corn, soybeans, and wheat had loss ratios of 1.04, .54, and 1.12, respectively. Loss ratios were above 1.0 in many counties of Iowa and Minnesota for corn and soybeans. Counties in the southern Great Plains had loss ratios above 1.0 for wheat. In Illinois, RP loss ratios were .40 for corn and .24 for soybeans.

Corn

In 2014, RP was used to insure 69.9 million acres of corn in the United States, representing 88% of total acres insured with crop insurance. Total premium on RP products was $3,350 million and total crop insurance payments were $3,484 million, giving a loss ratio of 1.04 ($3,484 in losses divided by $3,350 in total premium). A loss ratio above 1.0 means that insurance payments exceeded premiums. Over time, average loss ratios should equal near 1.0. On a per insured acre, insurance payments equaled $49.86 per acre (see Table 1).
 

 

Loss experience varied tremendously across states. For the eleven states with the most insured acres, RP’s loss rate was the highest for Minnesota at 3.01 and the lowest for Missouri at .11 (see Table 1). Iowa had a loss ratio of 2.21 while Illinois had a .40 loss ratio.

For Midwest states, the 2014 projected price was $4.62 per bushel while the harvest price was $3.49 per bushel. The harvest price was 75% of the projected price, meaning that coverage levels of 80% and 85% would have crop insurance prices if the actual yield did not exceed the guarantee yield. While much of the country had above average corn yields, there were areas of the country where yields were at or below guarantee yields. These areas included northern and central Iowa, Minnesota, and Wisconsin. As a result, RP products had high loss ratios in these areas, as illustrated in Figure 1 which shows RP loss ratio by county (see Figure 1). In most other areas of the country, loss ratios were well below 1.0. As one would expect, loss ratios were higher in areas with lower relative yields.

 


Soybeans

In 2014, RP was used to insure 65.2 million acres of soybeans in the United States, representing 88% of total acres insured with crop insurance. Total premiums were $2,092 million and total payments were $1,126 million (see Table 2). Total payments were far less than total premiums resulting in a loss ratio of .54. Since 2008, loss ratios for soybeans across all policies have not exceeded 1.00. On a per insured acre basis, insurance payments equaled $17.27 per acre.

 


Loss experience for soybeans had less range than those for corn. For the eleven states with the most insured acres, RP’s loss ratio was the highest for Minnesota at 1.25 and the lowest for South Dakota at .18. Iowa had a loss ratio of 1.07 while Illinois has a .24 loss ratio.

For Midwest states, the 2014 projected price was $11.36 per bushel while the harvest price was $9.65 per bushel. The harvest price was 85% of the projected price. Even at an 85% coverage level, farmers had to have actual yields below guarantee yields before insurance payments were made.
Most counties across the United States had loss ratios well below 1 (see Figure 2). Areas with loss ratios above 1.00 included counties in northern and central Iowa, Minnesota, northern Wisconsin, and some counties in Michigan, and New York.

 


Wheat

In 2014, RP was used to insured 40.8 million acres of wheat, representing 85% of total acres insured with crop insurance. Total premiums were $1,330 million and total payments were $1,490. The loss ratio was 1.12 and payments averaged $36.60 per insured acre.

 


Figure 3 shows a map of county loss ratios for wheat RP polices. As can be seen, many counties in Texas, Oklahoma, and Kansas had loss ratios above 1.00. Many farms in this area had low yields. Other areas of payments occurred in Washington, Wisconsin, Illinois, and along the Mississippi Delta. Large areas with low loss ratios include Montana, North Dakota, South Dakota, Virginia, North Carolina, and South Carolina.

 


Summary

Lower prices for corn and soybeans resulted in RP payments for corn and soybeans. These payments were made in northern and central Iowa and Minnesota. Because of above average yields, loss ratios were low in most of Illinois, Indiana, and Ohio.

LINK to FarmDocDaily Article: 2014 Loss Experience for Revenue Protection on Corn, Soybeans, and Wheat


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