joe l. outlaw professor & extension economist co-director, afpc 2015 crop outlook &...

Joe L. OutlawProfessor & Extension Economist

Co-Director, AFPC

2015 Crop Outlook & International Durum Forum

Minot, ND

November 9, 2015

The Challenge of Economic Viability in Uncertain Times

Presentation Outline

• My Background• Economic Viability• Why Do I Say Uncertain Times?• Conclusions

Economic Viability

My Background

• South Texas• Agricultural and Food Policy

Center–Dwight Aakre–ND feedgrain farms in Barnes

County

• Do Work Behind the Scenes for the Agricultural Committees

• Not Your Typical Economist

Budget Pressure

Agriculture’s Share of the U.S. Budget

Agriculture’s Share

(Non-Nutrition)

Economic Viability

• Very Simply – Can you make a living?

• Most Producers are Diversified Which Has Tended to Help

• Our Data Says Its Going to Be Harder Before It Gets Easier

U.S. corn supply and useAugust 2015 FAPRI-MU baseline update

2015/16 2016/17 2017/18 2018/19

Area planted (mil. a.) 88.9 90.5 89.2 90.1

Area harvested (mil. a.) 81.1 82.6 81.3 82.1

Yield (bu./a.) 168.8 166.8 168.6 170.1

Supply & use (mil. bu.)

Production 13,686 13,772 13,710 13,964

Feed & residual use 5,269 5,319 5,270 5,276

Ethanol & coproducts 5,253 5,240 5,283 5,321

Other domestic use 1,361 1,357 1,362 1,372

Exports 1,886 1,872 1,947 2,063

Ending stocks 1,720 1,734 1,612 1,574

Price per bushel $3.68 $3.71 $3.96 $4.09

U.S. wheat supply and useAugust 2015 FAPRI-MU baseline update

2015/16 2016/17 2017/18 2018/19

Area planted (mil. a.) 56.1 53.9 54.2 54.0

Area harvested (mil. a.) 48.5 45.5 45.7 45.5

Yield (bu./a.) 44.1 45.9 46.3 46.6

Supply & use (mil. bu.)

Production 2,136 2,088 2,113 2,120

Feed use 213 220 223 211

Food use 969 975 982 988

Exports 923 938 970 1,000

Ending stocks 837 844 835 811

Price per bushel $5.10 $5.05 $5.24 $5.55

AFPC Representative Crop Farm Locations

Rice

Wheat

Rice

Wheat

Cotton Cotton

Feed Grain

Cotton

RiceRice

Wheat

Wheat

Feed Grain

Feed Grain

Feed GrainFeed Grain

Feed GrainCotton

Cotton

CottonRice

Cotton

Rice

FeedGrain

Feed Grain

Cotton

Cotton

Feed Grain

Feed Grain

CottonFeed Grain

Wheat

Wheat

Wheat

CottonFeed GrainCotton

Feed Grain

Feed Grain

Rice

Feed Grain

Cotton

U.S. Net Farm Income

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

20

40

60

80

100

120

140

60

124

58

Billi

on d

olla

rs

Source: USDA Economic Research Service, August 2015

The Problem…

• Unless producers are kidding themselves… right now there are very few crops nation where expected prices appear to provide a profit this year --- and some get worse in the next few years

• So… we have been advising producers to spend money wisely and fine tune crop insurance as much as they can

Current Corn Coverage Levels

Current Wheat Coverage Levels

Coverage Level

Basic & Optional Subsidy %

Enterprise Unit Subsidy

%

SCO Subsidy

STAX Subsidy

%

50% 67% 80% 65% 80%

55% 64% 80% 65% 80%

60% 64% 80% 65% 80%

65% 59% 80% 65% 80%

70% 59% 80% 65% 80%

75% 55% 77% 65% 80%

80% 48% 68% 65% 80%

85% 38% 53% 65% 80%

Crop Insurance Choices

Why Do I Say Uncertain Times?

• Prices for All Major Commodities are Off– Some more than others

• Major Exporters Increased Production Along With Higher Prices – Just Like Us

• Strong Dollar – Hurts Exports … For How Long?

• While the Congress Did What They Could:– The Safety Net Programs are not enough

• Crop Insurance Clearly a Target of … Almost Everybody

Percent of All U.S. Base Acres Choosing PLC, ARC CO and ARC IC By

Covered Commodity

Barley

Canola

Corn

Crambe

Dry Pea

s

Flaxse

ed

Grain So

rghum

Lentils

Large

Chickpea

s

Long G

rain Rice

Medium Grai

n Rice (S

outhern)

Mustard

Oats

Peanuts

Rapese

ed

Safflower

Sesam

e

Small

Chickpea

s

Soyb

eans

Sunflowers

Tempera

te Jap

onica Rice

Whea

t0%

10%20%30%40%50%60%70%80%90%

100%

ARC ICARC COPLC

PLC 23% 55 milARC CO 76% 185 milARC IC 1% 2 mil

% of Total Base Acres

Corn 39.9%Wheat 26.3%Soybeans 22.4%Generic 7.3%Grain Sorghum 3.7%Barley 2.1%L.G. Rice 1.7%Oats 0.9%Peanuts 0.8%Japonica 0.2%

A Few Things to Think About

• China• Smaller CRP• Trade Issues– TPP, TTIP, COOL, Cuba,

• Section 179• WOTUS• SNAP Oversight• Haven’t passed Appropriations• I think there is a Presidential election

coming up sometime

Conclusions

• For most crop producers in the U.S. the next few years will be a rollercoaster ride– I just hope most are around when

prices rebound – not a given–Corn/Soybean prices aren’t at levels

to pull more acres away from wheat – especially durum

Thanks!!!

Joe Outlawjoutlaw@tamu.edu

888-890-5663WWW.AFPC.TAMU.EDU

@AFPCTAMU