november 2010 steven d. johnson farm & ag business management specialist (515) 957-5790...
TRANSCRIPT
November 2010
Steven D. JohnsonFarm & Ag Business Management Specialist
(515) [email protected]
www.extension.iastate.edu/polk/farmmanagement.htm
Presentation Objectives• Summarize Iowa’s 2010 Corn & Soybean Yield
Estimates• Highlight 2010 Crop Insurance Coverage and
new Common Policy for 2011• Update Futures Market Carry, Basis & Cost of
Storage• Highlight Crop Margin Trends & Forecast 2011 Crop
Margins• Discuss 5 Strategies for Managing 2010 & 2011
Crop Margins• Provide 5 Crop Risk Management Strategies
& 5 Websites
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Iowa 2010 Crop Yield Estimates
Source: USDA NASS, Iowa Field Office, Nov. 9th, 2010
Acres Insured in 2010 Corn and Soybeans--Iowa
APH8%
RA10%
GRIP2%
GRP1%
CRC79%
Source: USDA Risk Management Agency, Oct. 2010
Corn Indemnity Prices(Revenue Coverage)
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00Feb. price
RA Nov. price
CRC Oct. price
Source: USDA Risk Management Agency, Oct. 2010
Feb. Avg. $3.99/bu
Oct. Avg. $5.46/bu
Soybean Indemnity Prices: (Revenue Coverage)
$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00
$10.00$11.00$12.00$13.00$14.00
Feb. price
RA Nov. price
CRC Oct. price
Source: USDA Risk Management Agency, Oct. 2010
Feb. Avg. $9.23/bu
Oct. Avg. $11.63/bu
2011 Policies Convert Automatically
Crop Revenue Coverage (CRC)Revenue Assurance with
Harvest Price Option (RA-HPO) Revenue Protection (RP)
Revenue Assurance (RA) withBase Price only (RA-BP)
Revenue Protection with harvest price exclusion
(RPE)
Source: USDA Risk Management Agency, Oct. 2010
2009/10 Estimated 2010/2011 Projected
Area Planted
Area Harvested
Yield
Beginning Stocks
Production
Imports
Supply, Total
Feed & Residual
Food, Seed & Industrial
Domestic Use, Total
Exports
Use, Total
Ending Stocks
Average Farm Price
U.S. Corn Supply/Demand & Price
86.5
$3.55
79.6164.71,67313,110
814,7925,1595,93811,0981,98713,0841,708
88.2
$4.80-$5.60
81.3154.31,70812,540
1014,2575,3006,18011,4801,95013,430
827
Midpoint $5.20/bu
Source: USDA WASDE Report, Nov. 9th, 2010
$5.80/bu 18%
$5.10/bu 65%
$5.00/bu 17%
Corn Cash Price & Probability Forecast
’10-’11 Marketing Year
Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010
Nearby Corn Chart
Source: www.jimwyckoff.com, Nov.12th, 2010
Nov. 9th: Key ReversalHigher High, Lower Low & Markete Closes Lower
Other support levels: $5.00 & $4.60
July$5.50
May$5.46
Mar$5.39
Dec.$5.26
Corn Futures Carry Dec. 2011
$4.99
Source: www.cmegroup.com
Nov. 17th , 2010
Decline in Carry since summer, but still rewards On-farm Storage if little to no interest accruing. Capture the carry with sales for the deferred contract months.
Corn Basis Trends
Source: www.farmfutures.com November 2010
Local Corn Basis History - Conrad
Source: www.cashgrainbids.com November 2010
Source: Johnson, ISU Extension, November 2010
Corn Storage Costs
Assumption: Corn is Valued at $5/bu. - Financed @ 5% APR
.20
.30
.32
.50
.44
.69
.56
.89Storing monthly beyond harvest costs 4¢ to 7¢ per bushel
2009/10 Estimated 2010/2011 Projected
Area Planted
Area Harvested
Yield
Beginning Stocks
Production
Imports
Supply, Total
Crush
Exports
Seed
Residual
Use, Total
Ending Stocks
Average Farm Price
U.S. Soybean Supply/Demand & Price
77.5
$9.59
76.444.0138
3,35915
3,5121,7521,501
9018
3,361151
77.7
$10.70 - $12.20
76.843.9151
3,37510
3,5361,6651,570
8829
3,351185
Source: USDA WASDE Report, Nov. 9th, 2010
Midpoint $11.45/bu
$12.30/bu 18%
$11.50/bu 65%
$11.25/bu 17%
Soybean Cash Price & Probability Forecast
’10-’11 Marketing Year
Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010
Nearby Soybean Chart
Source: www.jimwyckoff.com, Nov.12th, 2010
Nov. 9th & 12th: Key Reversal Up & Down in the same week
July$12.12
May $12.11
Mar $12.12
Jan.$12.05
Nov. 17th , 2010
Soybean Futures Carry
Lack of Carry, little incentive to hold soybeans beyond winter months without on-farm storage and little debt
Source: www.cmegroup.com
Nov. 2011
$11.27
Soybean Basis Trends
Source: www.farmfutures.com November 2010
Source: Johnson, ISU Extension, November 2010
Soybean Storage Costs
Assumption: Soybeans are Valued
at $11/bu. - Financed @ 5% APR
.10
.28
.38.46
.66
.64
.94Storing monthly beyond harvest costs 6¢ to 9¢ per bushel
5. Global Production Prospects
6. U.S. & Global Economic Recovery
7. Biofuel Tax Credits8. Random Shocks
1. Global Demand2. Hedge & Index Fund Positions
3. Technical Signals4. Outside Markets:
Dollar, Crude Oil
Factors that Impact Futures Price
Source: Wisner & Hart, ISU Economists, Nov. 2010
2011 U.S. Planted Acreage Forecast
* Forecast
Source: Wisner, ISU Biofuels Economist, Nov. 11th, 2010
Corn Margin Trends
Estimate Forecast
Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010
2011 Margin Estimates: Corn following Soybeans
Overhead $59
Power Costs $102
Direct Costs $327
Crop Value $900 = 180 bu/A X $5/bu
Direct Pmt. $23
Cash Rent $250
Cash Rent $200
$488
$923
$435
Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010
Soybean Margin Trends
Estimate Forecast
Source: U of IL Ext. Farm Econ., FEFO 10-18, Nov. 2010
2011 Margin Estimates: Soybeans following Corn
Overhead $50
Power Costs $90
Direct Costs $173
Crop Value $550 = 50 bu/A X $11/bu
Direct Pmt. $23
$313
$573
Cash Rent $250
Cash Rent $200
$260
Source: U of IL Ext. Farm Econ., FEFO 10-14, Updated Nov. 2010
5 Crop Risk Management Strategies
Source: Johnson, ISU Extension, Dec. 2010
Use Cash Flow Needs,
Basis & Storage Costs to Drive 2010
Sales Know Your
Cost of Production & Manage
Profit Margins
Lock-in 2011 Crop Costs, Make Pre-Harvest Sales
Use Revenue Protection (RP) and Consider
Additional Hail Coverage
Use a Variety of Marketing Tools: Cash, Forward Contracts, HTA, Futures & Options
Crop Risk Management Web Sites
• Crop Risk Management - ISU Polk CountyMonthly Crop Marketing Newsletter & Webcast, Updates on Crop Insurance,
Government Farm Program, Grain Contracts and Farmland Leasingwww.extension.iastate.edu/polk/farmmanagement
• Ag-Decision Maker – ISU Extension (Decision Tools, Newsletters, Publications and Voiced Media) www.extension.iastate.edu/agdm
• Farm Doc - U of Illinois Extension Economics www.farmdoc.illinois.edu
• Ag Manager – K-State Extension Economicswww.agmanager.info
• @g Online – Successful Farming Magazinewww.agriculture.com /farm-management
Source: Johnson, ISU Extension, Dec. 2010