May 15, 2012
Update on U.S. Senate Ag Committee version of New Farm Bill
This update reflects additional information regarding the farm safety net in the 2012 Farm Bill voted out by the U.S. Senate Committee on Agriculture, Nutrition, and Forestry (Agriculture Reform, Food, and Jobs Act of 2012). This update mostly reflects additional information about the Supplemental Coverage Option (SCO) for crop insurance. In a few cases, corrections are made to my misinterpretations of the Bill’s provisions or to clarify provisions so as to reduce the potential for misinterpretation by readers.Posted by Site Administrator at 1:24 PM |
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Simple versus Olympic Averages in Prices used in Farm Commodity Programs
When historical averages are needed, an Olympic average often is used rather than a simple average in calculating benchmarks in Farm Bill commodity programs. For example, the Agricultural Risk Coverage (ARC) program that was passed by the Senate Agriculture Committee uses Olympic averages of prices and yields in calculating benchmark revenue. In this post, Olympic averages are compared to simple averages for corn and soybean prices. Generally, Olympic and simple averages will track one over time. The relationship of Olympic to simple averages depends on the nature of distributions across time.Posted by Site Administrator at 9:39 AM |
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May 14, 2012
Corn Market Direction Unfolding, Magnitude Still Uncertain
Listen to MP3 podcastThe USDA’s projections of U.S. and world corn and feed grain supply and demand conditions presented in the May WASDE report set the benchmark by which the corn market will judge unfolding events. Those events are continually unfolding, with some of the more important ones to be revealed this summer.
Posted by Site Administrator at 11:37 AM |
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May 11, 2012
How Many Futures Contracts Can One Market Support?
On April 12, the InterContinental Exchange (ICE) announced that it will be offering futures and options contracts for corn, wheat, soybeans, soybean meal and soybean oil beginning Monday, May 14. All five contracts will be settled daily to the corresponding Chicago Board of Trade (CBOT) prices, and final settlement will rely on cash settlement rather than physical delivery. Trading hours will be from 8 PM Sunday to 6 PM Friday, which is substantially longer than the CBOT’s current 6:00 PM to 7:15 AM and 9:30 AM to 1:15 PM trading day.Posted by Site Administrator at 7:56 AM |
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May 10, 2012
As Usual, USDA Reports Contain Some Surprises
Today, the USDA released the May WASDE report and the May Crop Production report. The WASDE report, which included the first forecasts for the 2012-13 marketing year, contained some very bearish projections for corn, but the soybean and wheat forecasts have mixed implications. Following is a brief summary of the new forecasts.Posted by Site Administrator at 9:41 AM |
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May 9, 2012
ARC and Multi-Year Price Declines
Listen to MP3 podcastThe Senate Agriculture Committee recently passed a version of the Farm Bill that now moves for debate in the entire Senate. This Bill replaces direct, counter-cyclical, and SURE payments with Agricultural Risk Coverage (ARC), a revenue-based program that is further described in yesterday’s post by Carl Zulauf (see here). In today’s post, ARC payments are computed for cases in which prices are low for several years. This emphasis is taken as ARC is specifically designed to provide protection in cases of multi-year revenue losses, cases in in which crop insurance often provides limited protection. ARC payments are computed for corn in Champaign County, Illinois, as further described in the the article.
Posted by Site Administrator at 12:19 PM |
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May 8, 2012
U.S. Senate Ag Committee version of New Farm Bill
On April 26, 2012; the U.S. Senate Committee on Agriculture, Nutrition, and Forestry reported the Agriculture Reform, Food, and Jobs Act of 2012 (2012 Farm Bill) to the full Senate for its consideration. This article summarizes provisions that concern the safety net for U.S. crops: The provisions are in Title I, Commodity Programs; Title XI, Crop Insurance; and Title XII, Miscellaneous.Posted by Site Administrator at 11:21 AM |
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May 7, 2012
Corn Prices in Three Parts
Listen to MP3 podcastCorn prices have recently moved in three distinct patterns. These include the patterns for new crop futures, old crop futures, and old crop cash prices.
Posted by Site Administrator at 11:35 AM |
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May 4, 2012
Estimates of Regional Shifts in Commodity Program Support: IL Corn and Soybeans
The Farm Bill recently passed by the Senate outlines some major changes to programs included in the Commodity Title. As expected, the direct, counter-cyclical, and ACRE programs were replaced by a revenue program referred to as Ag Risk Coverage (ARC). This shift towards a risk-based program has implications for the relative impact on crop producers across the country. In general, while the expected overall levels of support for producers will decline due to budget cuts, moving from a program which provides fixed payments to farmers which are proportional to productivity levels (direct payments) to a program which provides support when revenue declines from an historical average benchmark (ARC) will tend to favor producers in areas of higher crop yield risk. Today’s post estimates this effect for Illinois corn and soybean producers by comparing support levels under the direct payment program to the expected payments from the Senate’s county-level ARC program.Posted by Site Administrator at 1:01 PM |
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May 3, 2012
Tax Credit Available for Hiring Veterans
Farmers who plan to add additional help this year may want to consider hiring veterans. There is a substantial increase in the job pool as these individuals come back into the civilian workforce. As a further incentive, you may be eligible for a generous tax credit for hiring unemployed veterans. The credit can apply to seasonal employees if they work at least 120 hours.Posted by Site Administrator at 8:37 AM |
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May 2, 2012
Definitional Debates and Uncertainty for Would-be Biofuel Producers
Words have power, and when the semantic conveyance of those words is ambiguous, inconsistency, instability and risk ensue. For over 100 years, ecologists have debated the definitions of “native” and “nonnative.” In the process, the debate has unintentionally spilled over to other terms. For instance, definitional boundaries between “nonnative” and “invasive” have become virtually indiscernible, causing many to use the words interchangeably. In some circumstances this blending ambiguity has crossed over to noxious weeds. As a result, many state statutes will associate invasive plants and noxious weeds. It should be remembered, however, that a noxious weed—which is most often a government regulated plant species that impacts cultivated lands for agricultural producers—is not necessarily an invasive species. In an unmanaged system, the “noxious weed” could be a “native plant” species.Posted by Site Administrator at 9:29 AM |
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May 1, 2012
Impacts of Limits on Crop Insurance Risk Subsidies
Listen to mp3 podcastDiscussion has centered on limiting crop insurance risk subsidies. In a March 2012 report, for example, the General Accounting Office (GAO) used a $40,000 limit on risk subsidies to calculate the number of farms impacted by the limit (see here). In this post, the acres required to reach a $40,000 limit is examined for Illinois farms. Because risk subsidies vary by year, acres required to reach the limit also will vary. Between 2006 and 2012, acres required to reach the limit for average farms in Illinois are between 1,600 and 2,700 acres, not particularly large grain farms. More detail on risk subsidies and acre limits are provided in the following sections.
Posted by Site Administrator at 11:00 AM |
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