Ag Notes - July 08, 2020

July WASDE 11am Central Friday

Watch for the following tables to be updated just after 11am Friday July 10, 2020.

OLD CROP ENDING STOCKS


NEW CROP ENDING STOCKS

WASDE SUMMARY TABLE

 


 

The June 30 USDA Acreage and Grain Stocks reports are provided here for reference as the numbers are reflected in the July WASDE. 



 



Ag Notes - July 08, 2020

Prevented Plant Impacts on 2019 Illinois Grain Farms Incomes

link to farmdoc Daily article

In 2019, spring weather was very wet, and many farmers in Illinois had prevented plant (PP) acres. Compared to 2018 incomes, 2019 incomes declined more for those farms that had a larger proportion of their acres in PP. While some have suggested that PP payments may overcompensate farmers, the income results presented in a new paper from the University of Illinois do not support the contention. Todd Gleason has this discussion with ag economist Gary Schnitkey.



Farms Included in Study

Table 1 shows 2018 and 2019 incomes on Illinois grain farms enrolled in Illinois Farm Business Farm Management (FBFM). To be included in Table 1, a farm had to meet the following criteria:

1) Receive the majority of their incomes from grain operations,
2) Have over 500 acres, and
3) Have records that were certified useable by Illinois FBFM staff in both 2018 and 2019.

A total of 1,483 farms meet these criteria, with results for all farms given in Panel A.

For all farms, tillable acres averaged 1,525 per acre, with a range of 500 acres to over 13,000 acres. Net farm income averaged $184,460 in 2018, declining by 51% to $89,866 in 2019 (see Panel A of Table 1)



Income Declines as Percent Prevented Plant Acres Increases

In Panel A, the 1,483 farms are divided into five categories based on the proportion of PP acres. In 2019, 73% of the farms had no PP acres. Even given the wetness of 2019, most Illinois grain farms planted all acres in 2019. Still, of the farms in this sample, a sizable proportion (26%) has some PP. Of those farms that had PP, 15% had less than 10% of their acres in PP. Percentage of farms then declines as the proportion of PP acres increased: 8% had between 11 and 30% of acres in PP, 2% had between 31% to 50%, and 4% had over 50%.

Incomes declines became more negative as the proportion of acres of PP increased, as shown in the last column in Panel A of Table 1. With no PP, the average income change was –45% from 2018 to 2019. The income change was

* -53% when PP when less than 10%,
* -97% when 11% to 30% of acres were PP,
* -103% when 31% to 50% of acres were PP, and
* -112% when over 50% acres were PP.

On average, net incomes in 2019 were negative when over 31% of acres where PP: -$3,832 per farm when PP was between 31% to 50%, and -$12,638 when PP was over 50% of tillable acres.
Incomes in Table 1 include all sources of revenue, including that from additional government payments offered in 2019 to counter incomes lost due to trade difficulties. Market Facilitation Program (MFP) payments are included in revenue (farmdocDaily, July 30, 2019). Also included is the 10% increase in PP payments.

Income Declines by Region in Illinois

Northern Illinois had more delayed planting than other areas of Illinois. Only 43% of the farms located in northern Illinois got all their acres planted, compared to 81% for central Illinois and 60% for southern Illinois. Over 10% of northern Illinois farms had over 30% of their acreage in PP (6% in 315 To 50% and 4% in over 50% categories) Income declines were larger in northern Illinois than in other parts of Illinois. The average income change in northern Illinois was –76%, compared to –45% for central Illinois and 53% for southern Illinois.

Commentary

The above results do not present an analysis of whether taking PP or planting was the correct decision. To conduct that PP/plant comparison, one would have to link up farms with the same growing conditions who made different PP/plant decisions and then see corresponding results. In this article, we compare incomes with different levels of PP. Given the reluctance of Illinois farmers to take PP, we assumed that most farmers who took PP had no alternative but to take PP. 
There has been some thought that PP payments may provide more than adequate compensation (see Brasher, https://www.agri-pulse.com/articles/12390-coverage-changes-could-limit-prevent-plant-payout ). In 2019, for example, the Risk Management Agency lowered the standard PP payment factor on corn from 60% of the guarantee to 55% (see Risk Management Agency, https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/Prevented-Planting-Coverage-Factor-Changes-for–2019 ). As incomes decline with more PP, income results in this article do not support the contention that PP provides overcompensation. Of course, results could vary by across years.

Ag Notes - July 08, 2020

USDA Surprises Drive Corn Prices Higher

original farmdoc Daily article

by Todd Hubbs, ILLINOIS Extension

The Acreage and Grain Stocks reports, released on June 30, produced some surprises for the corn market. The drop in acreage spurred a rally in corn prices and injected some optimism into the corn outlook moving into the 2020 marketing year. The market turns to weather forecasts and the upcoming WASDE report for price formation over the short term.



Corn producers reported they planted or intended to plant 92.01 million acres of corn this year, 2.31 million more than planted in 2019. Corn planted acres came in 3.2 million acres lower than the average trade guess and 4.98 million acres smaller than March planting intentions. Compared to March planting intentions in major producing states, the June survey revealed lower corn acres in all states. In particular, the western Corn Belt saw substantial acreage reductions with North Dakota (800,000 acres), South Dakota (600,000), and Nebraska (700,000) leading the way. The eastern Corn Belt saw one million acres of corn dropped from March intentions with Illinois and Indiana at 400 thousand acres each. The five million acres drop in corn acres did not move into other principal crops and hints at expanded prevent plant acreage for corn this year.

Producer intentions to plant principal crop acreage show a 9.3 million acre increase from 2019. The USDA estimates that acreage planted to principal crops will total 311.9 million acres. The planned increase in total planted acreage from a year ago came from increases in feed grains and soybeans. Sorghum acreage came in 355,000 acres higher than a year ago at 5.62 million acres. Barley and oats increased by 76,000 and 324,000 acres, respectively. Soybean planting intentions indicated farmers plan to plant 83.8 million acres of soybeans, up 7.7 million acres from 2019. The soybean acreage came in at the low end of market expectations. An additional 2.24 million acres of corn remain unplanted at the time of the survey and brings into question whether those acres may end up in alternative crops or unplanted. The surprise in corn planted acreage led to a strong rally in corn prices. The market’s focus now turns to demand and weather.

While the Acreage report revealed a positive surprise for corn prices, the June 1 stocks report came in much higher than expected. June 1 corn stocks came in at 5.224 billion bushels, slightly higher than last year and about 273 million bushels larger than the average trade guess. The higher than expected stocks total revealed a lower level of feed use in the third quarter of the marketing year. Feed and residual use during the first three quarters of the marketing year sits at 4.729 billion bushels. To reach the projected 5.7 billion bushels of corn, the USDA projects for feed and residual during this marketing year, feed and residual use in the fourth quarter must equal 971 million bushels. Fourth quarter feed and residual use has not equaled that level since the 2005–06 marketing year. Based on current stocks estimate, it appears feed and residual use this year may not reach the projection of 5.7 billion bushels and may see the USDA lower the estimate in the next WASDE report on July 10.

A lower feed and residual amount points toward a larger carry out into the next marketing year. The potential for the current marketing year ending stocks eclipsing 2.2 billion bushels, while not sure, looks high. Ethanol production continues to recover from the weakness seen in April and May. Corn use for ethanol in the third quarter totaled 955 million bushels, down 387 million bushels from the third quarter of the last marketing year. For the week ending June 26, ethanol production came in at 900 thousand barrels a day, up almost 18 percent from a month ago. The recent uptick in Covid–19 cases and subsequent policies enacted around the country to fight the spread insert a considerable level of uncertainty into ethanol use projections. Corn use for ethanol may flatten out as the virus’s resurgence mitigates economic activity during the peak driving season and may carry over into the next marketing year. An expectation of USDA lowering corn use for ethanol by 50 million bushels in the next WASDE report seems reasonable.

Corn exports appear on track to hit the USDA estimate of 1.775 billion bushels for the current marketing year. Outstanding sales as of June 25 sit at 332 million bushels. Exports through June 25 for the marketing year total near 1.38 billion bushels. While the export pace sits slightly below the USDA estimate, some light Chinese buying and strong domestic prices in Brazil hold positives for corn exports. Higher corn prices and the potential for slow global growth may prevent an acceleration of exports as the calendar moves into the next marketing year.

A higher carry out, despite lower acreage, places an added emphasis on yield potential. Some dryness in major corn-producing areas looks feasible over the near term. The recent drought monitor showed areas in North Dakota, Illinois, and Indiana poised to come under stress if dryness continues. The overall impact on the crop is challenging to predict now. An extended dry period as the early-planted crop moves into pollination will push corn yields lower. The projection for harvested corn acres sits at 84 million acres, 2.7 million more than harvested in 2019. If USDA’s yield projection of 178.5 comes to fruition, corn production comes in near 15.0 billion bushels with the present acreage intentions, up around 1.37 billion bushels from 2019.

Corn prices already reflect lower acreage and weaker demand. Subsequent rallies in corn prices rely on the weather. The prospect of the market building a weather premium seems high over the next week given the current weather forecast.

Ag Notes - June 25, 2020

Expected Harvest Prices for Corn & Soybeans in 2020

farmdoc Daily Soybean article
farmdoc Daily Corn article

 

The farmdoc team at the University of Illinois has created a model projecting the average fall price for corn and soybean futures in October. University of Illinois Agricultural Economist Gary Schnitkey says, at USDA’s current projected yields, it puts December corn futures at $3.10 and November Soybean futures at $8.36.

 

Given current yield estimates, a statistical model suggests that the harvest price for crop insurance in Midwest states will be near $3.10 per bushel. Higher yields, above current estimates, would be expected to result in lower prices and vice versa. Thus, higher prices could happen if 2020 yields are lower than the trend. Conversely, an above trend yield would likely result in lower prices. A harvest price below $3.00 per bushel is a distinct possibility with above trend yields.

 

Given current yield estimates, a statistical model suggests that the harvest price for crop insurance in Midwest states will be near $8.36 per bushel. Higher yields, above current estimates, would be expected to result in lower prices and vice versa. Thus, higher prices could happen if 2020 yields are lower than the trend. Conversely, an above trend yield would likely result in lower prices. A harvest price below $8.00 per bushel is a distinct possibility with above trend yields.

Ag Notes - June 10, 2020

Discovering How Cover Crop Termination Impacts Insect Populations

Researchers at the University of Illinois were in the field this week counting insects in cereal rye used as a cover crop ahead of corn. It's all part of the work ILLINOIS Extension Entomologist Nick Seiter is doing with cover crops.

 
This University of Illinois cover crop research is funded in part by Illinois NREC. The Nutrient Research Education Council was created by state statute in 2012 and funded by a 75-cent per ton assessment on bulk fertilizer.

Ag Notes - June 01, 2020

Illinois Nutrient Loss Reduction Podcast

The Illinois Nutrient Loss Reduction podcast is produced by University of Illinois Extension. 

Jennifer Woodyard-Jones
Watershed Outreach Associate
University of Illinois Extension – Unit 21
1209 Wenthe Dr
Effingham, IL 62401
Phone: 217-347-7773

Haley Haverback-Gruber
Watershed Outreach Associate
University of Illinois Extension – Unit 7
358 Front St
Galva, IL 61434
Phone: 309-337-5816

Ag Notes - May 20, 2020

CFAP Calculations, Payment Schedule, & Explanation

 


University of Illinois ag policy specialist Jonathan Coppess and ILLINOIS Extension Farm Broadcaster Todd Gleason discuss the USDA CFAP coronavirus direct payment announcement.

CFAP payments for corn and soybeans max out at 1/2 of total production and are subject to other payment limitations. The calculation compares 1/2-of-total-production to 100% of total-unpriced-inventory on January 15th. The smaller of those two numbers is multiplied by the payment rate to attain the full CFAP payment. FSA will provide a spreadsheet for the calculation and other related paperwork starting May 26, 2020.

$0.33.5 for corn
$0.47.5 for soybeans

CFAP funds will be distributed in two checks. The first will be 80% of the full amount. The second will be up-to-the remaining 20% depending on available funding. It could be prorated to a smaller amount.


This payment rate schedule was developed by University of Illinois Ag Economist Gary Schnitkey. The payment schedule is not Illinois specific or an all-inclusive commodities list. See farmers.gov for USDA CFAP details.

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