arm policy in the downturn and eyond/media/others/events/... · increased acres 0 20,000,000...

FARM POLICY IN THE DOWNTURN AND BEYOND

Jonathan Coppess

University of Illinois [email protected]

mailto:[email protected]

www.farmdoc.illinois.edu

SUMMARY OF THE DOWNTURN

Part 1.


INCREASED ACRES

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Acres Planted (NASS)

Corn Soybeans Wheat Cotton


INCREASED PRODUCTION

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

480-lb B

ale

s Cott

on

Bush

els

Total Production (NASS)



INCREASED YIELDS

0

100

200

300

400

500

600

700

800

900

1000

0

20

40

60

80

100

120

140

160

180

200

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Pounds

Cott

on/A

cre

Bush

els

/Acr

e

National Average Yields (NASS)



DECREASED PRICES

$0.0000

$0.1000

$0.2000

$0.3000

$0.4000

$0.5000

$0.6000

$0.7000

$0.8000

$0.9000

$1.0000

$0.0000

$2.0000

$4.0000

$6.0000

$8.0000

$10.0000

$12.0000

$14.0000

$16.0000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017p 2018p

$/P

OU

ND

CO

TT

ON

$/B

US

HE

L

Marketing Year Average Prices (NASS; CBO)



DECREASED REVENUES

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

$1,000.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f

National Average Revenue (Estimated-NASS and CBO)


NOTE: Revenues estimated using national average yields and MYA prices


CORN SUPPLY & DISAPPEARANCE

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016

Corn Supply and Use-ERS (Millions of bushels)

Total Supply Food-Alcohol-Ind. Seed Feed Exports


FARM POLICY’S ROLE.

Part 2.


TRADITIONAL FARM COALITION


PRICES & FARM POLICY HISTORY.

$0.0000

$0.1000

$0.2000

$0.3000

$0.4000

$0.5000

$0.6000

$0.7000

$0.8000

$0.9000

$1.0000

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

1933

1935

1937

1939

1941

1943

1945

1947

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

$/P

OU

ND

CO

TT

ON

$/B

US

HE

L

Corn Wheat Cotton

1973 A&CPA

Parity Era

Target Price Era

Decoupled Era

USDA-NASS; average prices received by farmers in the marketing year

1933 AAA

1996 FAIR Act


2014 FARM POLICY DISPUTE: PLC

• 2014 Farm Bill eliminated direct payments;

• Opened regional dispute over farm programs;

• Price-based vs. Revenue-based. $3.00

$3.20

$3.40

$3.60

$3.80

$4.00

$4.20

$4.40

2013 2014 2015 216 2017 2018

Deficiency Payment Market Price Reference Price


2014 FARM POLICY DISPUTE: ARC & REVENUE

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f

Corn Example-Revenue Policy

Co. Yield Benchmark Yld MYA Prices Ref. Price Benchmark MYA

Note: forecasted yields are estimated trend; prices CBO 2016 baseline


FARM PROGRAM DECISION

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

LONG GRAIN RICE

PEANUTS

CANOLA

MEDIUM GRAIN RICE (SOUTHERN)

SESAME

BARLEY

GRAIN SORGHUM

SAFFLOWER

CRAMBE

TEMPERATE JAPONICA RICE

FLAXSEED

MUSTARD

LENTILS

SUNFLOWERS

DRY PEAS

RAPESEED

WHEAT

LARGE CHICKPEAS

OATS

SMALL CHICKPEAS

CORN

SOYBEANS

Percent of Base Acres

Figure 1. Percent of Base Acres Enrolled in ARC and PLC.

ARC-CO ARC-IC PLC

Source: Farm Service Agency

Locked through 2014 Farm Bill expiration in 2018; unless Congress Acts.

Vast majority of base acres are in corn and soybeans; revenue program.

Farmer elections represent the regional dispute over farm policy.

FarmdocDaily, June 16, 2015


Revenue: ARC-CO

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

2013 2014 2015 2016f 2017f 2018f 2019f

Corn Example

Guarantee Actual Rev. Benchmark Rev.

Note: forecasted yields are estimated trend; prices CBO 2016 baseline


PRICE POLICY: PLC

$0.0000

$0.1000

$0.2000

$0.3000

$0.4000

$0.5000

$0.6000

$0.7000

$0.8000

$0.9000

$1.0000

$0.0000

$2.0000

$4.0000

$6.0000

$8.0000

$10.0000

$12.0000

$14.0000

$16.0000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017p 2018p

Marketing Year Average Prices (NASS; CBO)

Corn Soybeans Wheat Corn Fixed (eff.)

Soybeans Fixed (eff.) Wheat Fixed (eff.) Cotton Cotton Fixed (eff.)


OVERVIEW OF CROP INSURANCE

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Crop Insurance ($Millions)

Premium Subsidy Total Premium Indemnity Farmer Paid


OVERVIEW OF CROP INSURANCE

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

2001 2004 2007 2010 2013

Crop Insurance

Total Liability Farmer Benefit

Note: Farmer benefit calculated as total indemnities minus farmer paid premium (RMA).


WATER QUALITY CONCERNS.

Gulf of Mexico Hypoxia

Des Moines Waterworks Lawsuit

Toledo & Western Lake Erie

Chesapeake Bay TMDL

Others (non-ag): Flint, etc.

www.policymatters.illinois.edu


CONSERVATION PROGRAMS.—BASELINE.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2015A 2016 2017 2018 2109 2020 2021 2022 2023 2024 2025 2026

CBO (Millions)

CRP CSP EQIP ACEP RCPP


LOOKING AHEAD: 2018 FARM BILL

Part 3.


LOOKING AT THE 2016 PRESIDENTIAL ELECTION


LEGISLATING A FARM BILL.

2012 Presidential Election

The Traditional Farm Coalition & the 2016 Election results


2018 FARM BILL: SPENDING & PRIORITIES

• With budget pressure: partisan and difficult; competition for resources

• A question of priorities within the farm policy budget baseline. $3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

2015a 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

CBO March 2016 Baseline (Billions)

CCC Commodities Crop Insurance Conservation

Baseline for Next Farm Bill?


MANDATORY SPENDING IN THE FARM BILL.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

CBO March 2016 Baseline (Millions)

ARC/PLC Participants SNAP Participants

$3.00

$13.00

$23.00

$33.00

$43.00

$53.00

$63.00

$73.00

$83.00

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

CBO March 2016 Baseline (Billions)

Commodities Crop Insurance Conservation SNAP


ELECTION TAKEAWAYS: HISTORICAL PERSPECTIVE

First unified Republican government to write farm bill since 1954.

1981: President Reagan & budget as weapon; Democratic House

1995-1996: Republican control of Congress; budget reconciliation; Democratic President.

2011-2014: Republican House uses debt ceiling and budget to force spending cuts; Democratic Senate and President


ELECTION TAKEAWAYS: UPSIDE POTENTIAL

Rural America & voters in the spotlight.

Infrastructure spending: locks & dams; jobs; etc.

Reduced regulatory pressures (WOTUS).

Tax reforms.

2016 Presidential Election results cartogram (rescaled based on population) Source: http://www-personal.umich.edu/~mejn/election/2016/


ELECTION TAKEAWAYS: DOWNSIDE RISKS

Misreading the rural voter.

Impact of shift in trade policies.

Anti-EPA & regulations impact on RFS

Push to cut Federal spending impact on farm policy (farm programs to crop insurance to conservation)


THANK YOU!.

Jonathan Coppess

[email protected]

arm policy in the downturn and eyond/media/others/events/... · increased acres 0 20,000,000...

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