February 04, 2017

New Fertility Products for the Hog Industry

Martin Gleason poses with sow and litter (circa 1944).

Farmers raising pigs around the planet are always looking for ways to improve the productivity of their breeding herds.

University of Illinois Extension Swine Specialist Rob Knox explains PCAI, post cervical artificial insemination.


February 02, 2017

Corn Consumption Update

A University of Illinois agricultural economist has been thinking about the supply and demand for corn in the United States and elsewhere.

U.S. farmers harvested more than fifteen billion bushels of corn last fall. That’s a very, very big crop. It is expected there will be more than the usual amount leftover from it by the time the next crop comes in. Todd Hubbs has been thinking a lot about that and how the corn crop is used. He says exports have been strong. Factually 69% of what USDA thinks will be shipped out, has either been shipped or booked, already. And, we’re not even half-way into the marketing year.

Todd Hubbs - So, meeting that 2.25 billion bushels USDA projected for exports looks feasible right now, but we do have the South American crop coming on to compete. So far exports look strong. I am a little concerned about some of the policy issues surrounding our export market, but at this point it is a wait-and-see scenario in my mind.

Exports are the smallest primary component of corn consumption at a projected two-and-a-quarter billion bushels. Next up is ethanol at five-billion-three-hundred-twenty-five million. Those numbers suggest this sector is booming.

Ethanol production has hit record levels of over a million barrels per day for the last two months. However, over the last couple of weeks ethanol stocks have started to build. This means the ethanol margins are starting to deteriorate. Hubbs says production could slow, but maintains the consumption pace for ethanol will be pretty strong in the near-term.

The last and largest segment of corn consumption to explore is feed usage. USDA in January estimated five-point-six billion bushels of corn would be fed to livestock. It is a really hard number to calculate says U of I’s Todd Hubbs.

Hubbs - You never know how much corn is being consumed as we move through the marketing year. Still, livestock numbers are up almost across the board. The hog herd is up. Broiler placements and egg settings are up one to two percent a week. So, when we look at the livestock sector there is a lot of livestock production going on. Having said that, the initial number USDA projected at the beginning of the marketing year has been reduced by 50 million bushels.

Some of that is because of competition to use the corn in the ethanol industry and some because of substitution. There is more available sorghum to feed and it can be cheaper than corn. In the near term Todd Hubbs says the consumption pattern should keep the price of corn in Chicago mostly in its current trading range. That’s somewhere between $3.40 and $3.70 per bushel.


February 01, 2017

Assessing Argentine Soybean Yield Risks



by Todd Hubbs, Scott Irwin, and Darrel Good
original source article

We recently began a series of articles to evaluate the history of corn and soybean yields and deviations from trend yield in Brazil and Argentina. The objective of the yield analysis is to provide a basis for forming expectations about the likely yields of the 2017 crops. The first six articles focused on the alternative sources of historical yield estimates, the selection of the appropriate series to use in the analysis for both corn and soybeans, the selection of the best-fitting trend model for each commodity and country, trend yield deviations in each country for corn, and trend yield deviations in Brazil for soybeans (farmdoc daily, November 2, 2016; November 9, 2016; November 16, 2016; December 14, 2016; December 15, 2016; and January 12, 2016). Today’s article examines soybean yield trend estimates and trend deviations for the Argentinian soybean crop. Since Argentina is the world’s third largest producer of soybeans and is the largest exporter of soybean meal and oil, yield and production prospects have important price implications.

Background

We begin by providing some perspective on regional soybean production in Argentina. The production map of Argentina from the USDA/FAS gives a visual sense of the concentration. The top three soybean production provinces consist of Buenos Aires, Cordoba, and Santa Fe. Table 1 presents soybean production by country from 1971 through 2016 and gives an indication of overall growth in soybean production in the world, and Argentina in particular. Soybean production in Argentina grew rapidly in the early 2000’s with a significant jump in 2001. Figure 1 presents the soybean acreage for Brazil and Argentina provided by USDA/FAS estimates from 1978–2016. Both nations exhibited large growth in soybean acreage over the sample period with Argentinian acreage leveling off at the end of the period. Current estimates place Argentina soybean acreage at 48.1 million acres this year.





Figure 2 presents the annual soybean yields in Argentina for the period 1978 through 2016. As previously discussed in the farmdoc daily article of November 16, 2016, we chose a linear trend to fit the soybean yield data for Argentina. Note that these yield estimates are provided by the USDA’s Foreign Agricultural Service (FAS) and are based on past trends, expert opinion, industry intelligence, and AgMin, the Argentinian Ministry of Agriculture, estimates. Yields have obviously trended higher over time. The linear trend indicates annual average yield increases 0.37 bushels for Argentina. A linear trend explains about 49 percent of the annual variation in actual yields in Argentina. The historical soybean yields in Argentina show large variation around the trend with an extended period of above trend yields from 1998–2003. The linear trend since 1978 explains a much smaller percentage of yield variation than is the case for the U.S. (81 percent) and Brazil (79 percent).



Historical Deviations

Historical deviations for Argentine soybean yields for the period 1978 - 2016 are shown in Figure 3. Over the 39-year period, the average soybean yield in Argentina was above trend in 22 years and below trend in 17 years. The largest deviation below trend was 9.79 bushels per acre in 2009. The largest positive deviation from trend was 5.80 bushels per acre in 1998. The average positive deviation was 2.66 bushels while the average negative deviation was –3.44 bushels. The deviation from trend is asymmetric with more years of positive trend deviation and larger magnitudes associated with negative trend deviations. This differs substantially from soybean trend deviations for Brazil. Since 2012, Argentinian soybean yields demonstrate a wide variation around trend with significant yield loss in 2012 and a large positive deviation in 2015. Based on the historical trend deviations, the unconditional probability of a negative deviation is 43.6 percent. If a negative deviation occurs, the unconditional probability of a negative deviation of greater than two bushels is 65 percent, and there is a 29 percent probability of a greater than four-bushel deviation. The probability of a negative yield deviation greater than two (four) bushels, then, is 28 (13) percent. Based on the historical trend deviations, the unconditional probability of a positive deviation of greater than two bushels is 59 percent, and there is a 23 percent probability of a greater than four-bushel deviation. The probability of a positive yield deviation greater than two (four) bushels, then, is 33 (13) percent.



Implications

An examination of the national average soybean yields in Argentina for the period 1978 through 2016 reveals an upward yield trend with substantial annual variation. The estimated linear yield trend points to a 2017 average soybean yield of 42.2 bushels per acre, 1.10 bushels below the 2016 average. Based on the projections of harvested acreage in the USDA’s January 12, 2017 World Agricultural Production report, yield at trend value for Argentina points to a 2017 crop of 2.03 billion bushels, 57 million bushels (2.73 percent) smaller than the 2016 crop. Using estimates of the historical yield trend deviations, we estimate there is an unconditional probability of 62 percent of a two bushel trend deviation. A trend yield deviation of two bushels per acre would add or subtract approximately 96 million bushels to our projection of Argentina’s 2017 production.

The USDA projects the 2017 Argentinian yield at 43.57 bushels per acre (1.37 bushels above the trend value) and production at 2.094 billion bushels, 7 million bushels larger than the 2016 crop. The USDA estimated production level for Argentine soybeans is 64 million bushels larger than implied by a trend yield. Recent reports in Argentina indicate severe flooding in many growing regions with the potential to reduce production by 100–150 million bushels. If the production reduction materializes in Argentina, 2017 will produce yields well below trend estimates. In the next article, we will examine the impact of La Nina events on Brazilian and Argentinian soybean and corn production.


January 27, 2017

Iowa Court Decision on Field Tiles

The Iowa Supreme Court has ruled drainage districts in the state cannot be sued for the cleanup of nitrates in drinking water. Justice Thomas Waterman authored the majority opinion, writing that policy deciding who pays for nitrate removal is the jurisdiction of Iowa lawmakers. This was a win for the drainage districts says University of Illinois Agricultural Policy Specialist Jonathan Coppess. However, he says the Clean Water Act implications of the suit, about whether or not field tiles are point sources that can be regulated, remains to be addressed.

“So the big question under the Clean Water Act, as I understand it, is the Des Moines Water Works is claiming that the agricultural stormwater exemption under the Clean Water Act does not apply to drainage districts. In this case, because once it comes through the pipes it becomes a point source.” – Jonathan Coppess

Again, the decision in the Iowa courts is that only lawmakers in the state can determine who pays for the cleanup of nitrates from drainage districts. It did not address issues related to whether or not field tiles should be subject to regulation under the Clean Water Act.


January 23, 2017

Withdrawl from TPP and Farmer Reaction

President Trump has made good on a campaign promise to ditch the Trans-Pacific-Partnership. He has signed a memorandum to start the process of withdrawing from the 12 nation trade deal. White House Chief of Staff Reinse Priebus made sure those gathered understood which orders the President was signing.

Politco reports withdrawing from the deal will be welcome news to progressive Democrats and labor groups, some of whom Trump is scheduled to meet with at the White House today. It is likely to anger the other 11 nations involved as well as more mainstream Republicans and economists, some of whom hoped Trump would simply leave the deal alone for a few years - leaving the door open for him or another president to pick it up later.

Brian Duncan is a grain and livestock farmer from Polo, Illinois and is very concerned with the President’s actions and how it will impact agricultural trade.

Duncan says the way to increase agricultural prices is to improve market access. He made his comments on Illinois Public Media’s morning talk show the 21st. Here you’ll find links to the show highlighting trade, agriculture, and the Trump administration.


January 20, 2017

American Agriculture on Display at Inaugural

American agriculture displayed its colors for President Donald Trump and Vice President Mike Pence Friday evening. Farm leaders and members of the National Association of Farm Broadcasting rolled by the reviewing stand around 6pm eastern time. Earlier in the day, Todd Gleason spoke with two members of the delegation. You may listen to his conversation with Chad Colby from the Central Illinois Ag Case IH dealership in Atlanta, Illinois and Knox County Illinois farmer and president of the American Soybean Association Ron Moore.


January 11, 2017

New FarmDoc Tool Assesses Performance of Crop Insurance



by Gary Schnitkey
original source FarmDocDaily

A new “Product Performance” section has been added to the 2017 Crop Insurance Decision Tool. By using this section, users can examine per acre premiums and payments from alternative crop insurance products from 1995 to 2015, thereby allowing users to gain a feel for the historical performance of crop insurance products. For corn, users will notice that the 2012 drought had large impacts on crop insurance performance.

User Selections

From the 2017 Crop Insurance Decision Tool, users will select “product performance” from the menu and make the following selections (see Figure 1):

  1. State. Any state in the nation can be selected.
  2. County. Any county can be selected.
  3. Crop. Information is available for corn, soybeans, and wheat.
  4. Product. Data are available for Revenue Protection (RP), Yield Protection (YP), RP with the harvest price exclusion (RPwHPE), Area Revenue Protection (ARP), Area Yield Protection (AYP), and ARP with harvest price exclusion (ARPwHPE).
  5. Coverage level. Choices are each available coverage level (50 to 85% for RP) and an “all” selection.

Figure 1 shows a Logan County, Illinois example where corn is selected. RP performance will be given for all coverage levels, meaning that data over the 50% to 85% coverage levels are averaged and reported.




Product Performance Output

Figure 2 shows output from selections in Figure 1. All data comes from Summary of Business, which is maintained by the Risk Management Agency (RMA). The 2017 Crop Insurance Decision Tool provides results from 1995 to 2015. Yearly performance rows will be blank if no use of the chosen product occurred during the year.




RP along with YP and RPwHPE came into existence in 2011. As a result, RP performance is reported from 2011 onward. Before 2011, Crop Revenue Coverage (CRC) and Revenue Assurance (RA) plans where in use. RP, CRC, and RA all are revenue insurances that allow guarantees to increase if harvest price is higher than projected price (RA had an option that excluded the guarantee increase, but this option was used rarely). Therefore, CRC and RA performance are reported for years prior to 2011.

The “product performance” section first reports acres insured using the selected combination. RP type products were first introduced in 1997 and 7,916 acres were insured in Logan County (see Figure 2). Use grew to 125,359 acres in 2014, decreasing slightly to 121,619 acres in 2015. RP is now the most used crop insurance product, having over 90% use in many counties (see farmdoc daily, January 4, 2017).

Next, the section reports premiums in three columns: total, subsidy, and farmer-paid premium. The subsidy represents the premium paid by the Federal government as specified by subsidy schedules written into statute. As its name implies, “farmer-paid premium” is paid by the farmer. Farmer-paid premium plus subsidy equals total premium. In Logan County, total premium was $40.56 per acre in 2015 (see Figure 2). Of the total premium, $19.79 per acre was subsidy and $20.77 per acre was farmer-paid premium.

Also given are per acre insurance payments. These are payments to farmers resulting from claims to crop insurance products. In 2015, insurance payments on RP products averaged $32.95 per acre.
The final two columns provide an evaluation of the crop insurance products. Insurance payments minus farmer-paid premium show insurance payments received from the products relative to farmer-paid premium. Positive values mean that insurance payments were larger than farmer-paid premium.

In high payment years, payments minus farmer-paid premium will be positive. For example, insurance payments were high in the 2012 drought year, resulting in payments minus farmer-paid premium of $302.26. In low loss years, payments minus farmer-paid premium will be negative. From 1997 to 2015, negative values occurred 13 out of 19 years. From 1995 to 2015, farmers received an average of $10.38 more in premium than in payments (see Figure 2). From 2006 to 2015, farmers received $22.55 per acre more in payments than they paid in premium (see Figure 2).

The loss ratio equals insurance payments divided by total premiums. In 2015, the loss ratio was .81. Loss ratios less than 1.0 mean that insurance payments were less than total premium. Conversely, loss ratios higher than 1.0 indicate that payments were greater than premium. Over time, RMA’s goal is to maintain a loss ratio near but below 1.0.

Interpretation

Past performance will not be entirely reflective of how the products will perform in the future. RMA makes adjustments to premiums over time. For example, continuing high payments on products will result in increasing premiums and vice versa. Moreover, RMA continually conducts studies of its rating procedures, which can cause premium changes. As a result, current premiums will vary from historical premiums even given identical conditions. As a result, future performance will not match historical performance.

Moreover, values are averages across many farms in a county. In 2015, average RP premium in Logan County were $20.77 per acre. Some farmers paid higher premiums depending on crop insurance choices and historical yields, and vice versa. The average RP payment in 2015 was $32.95 per acre. Again, payments vary across farms in the county. Some farmers did not receive payments in 2015 while other farms received payments much larger than $32.95 per acre.

Importance of 2012 in Illinois

The drought year of 2012 has a large impact on crop insurance performance. In 2012, the loss ratio for RP in Logan County was 5.84, much higher than the .89 average from 2006–2015 (see Figure 2). If 2012, had not occurred, the .89 average loss ratio for the 2006–2015 would have decreased to .46.

Payments minus farmer-paid premium averaged $22.55 per acre from 2006 to 2015. Without 2012 included, payments minus premium averaged -$8.53 per acre.

The drought has similar impacts on many Illinois counties. To illustrate, Panel A of Figure 3 shows average RP loss ratios for corn in each Illinois county for 2006 to 2015. The 2012 drought particularly impacted farms in southern and eastern Illinois, causing many counties to have loss ratios above 1.0. Panel B shows loss ratios for 2006–2015 with 2012 excluded. Without 2012, most counties had loss ratios well below 1.0.




These comparisons point out the importance of “extreme” years on overall crop insurance performance. Severe droughts like 2012 occur in the Midwest occasionally, with much debate concerning their frequency of droughts. The last drought of comparable magnitude to 2012 happened in 1988, 25 years previous to 2012, suggesting infrequent droughts. However, two additional, large yield shortfalls occurred in the 1980s: 1980 and 1983. Three severe events in a decade give a very different perspective on the frequency of droughts than the more recent history of the passing of 25 years. Which represents the future the best is an open question, with a blend of the 1980s experience and the recent more moderate losses likely to be the most appropriate answer.

Summary

The Product Performance section allows users to examine historical performance of crop insurance plans, thereby providing intuitions on the frequency of payments, the size of payments, and the net costs of the plans. While evaluating past performance is useful, future performance will not necessarily match historical performance as RMA is adjusting premiums over time. Moreover, the frequency of large-scale droughts has a large impact on insurance performance. Whether there are 0, 1, or 2 drought years in the next ten will dramatically influence crop insurance performance.


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