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Managing Crop Risks & Revenue January 2009

Managing Crop Risks & Revenue January 2009. Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/ farmmanagement.htm. Presentation Objectives. Review 2008 Crop Price Outlook

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Managing Crop Risks & Revenue January 2009

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  1. Managing Crop Risks & RevenueJanuary 2009 Steven D. JohnsonFarm & Ag Business Management Specialist (515) 957-5790sdjohns@iastate.edu www.extension.iastate.edu/polk/ farmmanagement.htm

  2. Presentation Objectives • Review 2008 Crop Price Outlook • Summarize Futures Market Carry, Basis and Cost of Storage • Highlight Seasonal Price Trends, 2009 Planted Acres and Price Outlook • Examine 2009 Cost of Production and Breakeven Price Forecasts • Provide 12 Strategies for Managing Crop Risks • Highlight the New SURE and ACRE Programs available in 2009 through 2012 2.

  3. 2008 Old Crop Corn Chart Source: jim.wyckoff.com, December 16th, 2008. 3.

  4. Corn Futures Carry Dec. 2009 $4.56 Jan. 2nd, 2009 Good carry through September: rewards storage, especially on-farm Source: www.cbot.com January 2009. 4.

  5. Iowa Corn Basis Trends Source: www.farmfutures.com, December 2008. 5.

  6. Storage Costs for Corn .85 .66 .47 .54 .28 .43 .31 .20 Assumption: Corn is Valued at $4/bu - Financed @ 7% APR Source: Johnson, ISU Ext. Economics, January 2009. 6.

  7. Corn Cash Price & Probability Forecast ’08-’09 Marketing Year $3.60/bu 65% $3.65/bu 18% $3.55/bu 17% Source: Wisner, ISU Biofuels Economist, December 2008. 7.

  8. New Crop Corn Seasonal Trend 79% Odds: Spring Price Exceeds Harvest Price Source: CBOT data compiled by the U of MN, CFFM, 2008. 8.

  9. 2009 New Crop Corn Chart Source: jim.wyckoff.com, December 16th, 2008. 9.

  10. U.S. Planted Acreage Trend ◊ - Estimated * - Forecast Source: USDA WAOB and Johnson, ISU Ext. Economics, December 2008. 10.

  11. Corn Cash Price & Probability Forecast ’09-’10 Marketing Year $3.85/bu 65% $4.70/bu 18% $3.70/bu 17% Source: Wisner, ISU Biofuels Economist, December 2008. 11.

  12. 2008 Old Crop Soybean Chart $9.93 high on Jan. 2nd Source: jim.wyckoff.com, December 16th, 2008. 12.

  13. Soybean Futures Carry Nov. 2009 $10.04 Jan. 2nd, 2009 Lack of carry, difficult to justify storage long-term Source: www.cbot.com January 2009. 13.

  14. Iowa Soybean Basis Trends Source: www.farmfutures.com, December 2008. 14.

  15. Storage Costs for Soybeans .93 .65 .66 .38 .47 .29 .10 Assumption: Soybeans are Valued at $9/bu - Financed @ 7% APR Source: Johnson, ISU Ext. Economics, January 2009. 15.

  16. Soybean Cash Price & Probability Forecast ’08-’09 Marketing Year $8.65/bu 65% $8.95/bu 18% $8.40/bu 17% Source: Wisner, ISU Biofuels Economist, December 2008. 16.

  17. New Crop Soybeans Seasonal Trend 68% Odds: Spring Price Exceeds Harvest Price Source: CBOT data compiled by the U of MN, CFFM, 2008. 17.

  18. Soybean Cash Price & Probability Forecast ’09-’10 Marketing Year $7.80/bu 65% $8.50/bu 18% $7.50/bu 17% Source: Wisner, ISU Biofuels Economist, December 2008. 18.

  19. 2009 New Crop Soybean Chart $10.77 is 38% retracement of high/low Source: jim.wyckoff.com, December 16th, 2008. 19.

  20. Crop Production Costs – (Non-Land)Historical vs. 2009 Forecast $535 $487 $414 $367 $317 $283 $286 $202 $169 2004-2007 2008 2009 Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 20.

  21. Total Production Costs (w/Land @ $205/A)2009 Forecasts Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 21.

  22. Corn Following Corn – 2009 Forecasts Low Yield Medium Yield High Yield $805 $740 $675 Average Yield $5.40/bu $5.10/bu $4.88/bu Cost per bushel Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 22.

  23. Corn Following Soybeans – 2009 Forecasts Low Yield Medium Yield High Yield $757 $692 $627 Average Yield $4.48/bu $4.32/bu $4.21/bu Cost per bushel Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 23.

  24. Soybeans Following Corn – 2009 Forecasts Low Yield Medium Yield High Yield $530 $491 $452 Average Yield $10.04/bu $9.81/bu $9.64/bu Cost per bushel Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 24.

  25. Break Even Costs by Crop Rotation and Yield Source: Duffy, ISU Ext. Economics, FM-1712, December 2008. 25.

  26. 12 Strategies for Managing Crop Risks 12. Explore the new ACRE Program 1. Good Crop Production Records 11. Work with your FSA Office on 2009 DCP Sign-up 2. Determine 2008 Costs of Production/Breakevens 10. Explore the use of Crop Revenue Insurance and SURE, Make Pre-Harvest Market Sales 9. Expect 2009 Input Costs and Breakevens to Increase 3. Consider the use of Flexible Cash Farm Leases 4. Consider locking in 2009 Fuel Needs 8. Understand Seasonal Price Trends (Spring Highs) 5. Negotiate Seed & Fertilizer Prices 7. Consider Locking Basis on Bushels for Winter Delivery 6. Understand Futures Market Carry, Basis and Cost of Storage Source: Johnson, ISU Ext. Economics, January 2009. 26.

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