Slide 1sdjohns@iastate.edu www.extension.iastate.edu/agdm
March 2021
Webinar Topics • Seasonal Futures Price Trends • Corn & Soybean Supply/Demand and ‘21 Cash
Price Projections • Finalizing ‘21 Crop ARC/PLC & Crop Insurance
Decisions • Revenue Protection & Pre-Harvest Marketing
Your Insurance Bushels for Delivery • Using Hedges & Put Options for Non-Delivery • 7 Reasons to Make Pre-Harvest Sales • Components of a Written Marketing Plan • Crop Risk Management Web Sites
December Corn Seasonal Trends (2000-2020 Futures Indexed)
Source: Usset, U of MN, November 2020
U.S. Corn Supply/Demand & Price Projection
Area Planted (million acres) Area Harvested (million acres) Yield per Harvested Acre (bu.) Beginning Stocks (million bu.) Production Imports
Total Supply Feed & Residual Food, Seed & Industrial
Projected Avg. Price ($/bu.)
Exports Total Use
2020-21 WASDE
90.8 82.5
172.0 1,919
14,183 25
November Soybean Seasonal Trends (2000-2020 Futures Indexed)
Omitting years <minimum in May (2001, 2002, 2019, 2020)
Source: Usset, U of MN, November 2020
U.S. Soybean Supply/Demand & Price Projection
Area Planted (million acres) Area Harvested (million acres) Yield per Harvested Acre (bu.) Beginning Stocks (million bu.) Production Imports
Total Supply Crush Exports
Projected Avg. Price ($/bu.)
2020-21 WASDE
‘21 U.S. Planted Acreage Forecast
* Estimated **Forecast
92 M +/-2 M ? 90 M
+/-2 M ?
Marketing Assistance Loans (MLA) and Loan Deficiency Payments (LDP) National Rates:
$6.20/bu Soybeans $2.20/bu Corn
$8.40/bu Soybeans
Crop Insurance & ARC/PLC Decisions (‘21 Crop Only)
Crop Insurance Premium Subsidies
Can purchase SCO Annually
or PLC
Update
Iowa Base Acres Enrolled (% for 2019 & 2020 by Crop)
Source: USDA Iowa FSA, October 2020
11
Price Estimates
Projections
Corn $3.70 $4.30 $4.20
Soybeans $8.40 $11.15 $11.25
• 22 Different Commodity Crops with Base Acres • FSA establishes the “Effective Reference Prices” • MYA = Marketing Year Average (ie. ‘21 Crop = ‘21-’22 Mkt. Yr) not known until late September ‘22
Effective Reference Prices versus Est. & Proj. Avg. Prices (‘20 & ‘21 Crops)
Source: USDA FSA, WASDE & Ag Outlook Forum, February 2021
Calculating a Potential ’21 Corn PLC Payment 12
2021 Crop: Example for Farm with 100 Acre Corn Base
PLC New Yield = 170 bu/Acre Effective Reference Price = $3.70/bu. Projected ‘21 MYA Price = $4.20/bu.
$3.70 - $4.20 = $.00/bu. Price Loss
100 base acre corn X 85% X $.00/bu. X 170 bu/A = $ .00
Source: USDA FSA & Ag Outlook, February 2021
‘21 Crop Insurance Decisions
SCO = Supplemental Coverage Option
Trend-Adjusted (TA) APH Yield
Rates
New Quality Loss Option (QLO)?
Supplementals: Hail, Wind/Green Snap,
Comparing SCO to ECO Endorsements
Source: USDA RMA, December 2020
Supplemental = SCO • County-based Revenue
Guarantee not to exceed 86% level of coverage
• Subsidized at the 65% level • Must elect PLC for that crop on
that farm before buying SCO
Enhanced = ECO • County-based Revenue
Guarantee not to exceed the 90% or 95% level of coverage
• Subsidized at the 51% or 44% level
• Can be purchased regardless of ARC/PLC election
Coverage Level
Optional Units (Fields in Section)
59%
59%
55%
48%
38%
80%
80%
77%
68%
53%
Pre-Harvest Marketing Corn Bushels with Revenue Protection (RP) Crop Insurance
Marketing Strategy • Pre-Harvest Sell for
Delivery up to 152 Bu/A
– Forward Cash, HTAs
• Non-Delivery Bushels
– Hedges & Options
• Price Guarantee is Higher of the Projected Price vs. Harvest Price
• Slight Basis Risk
190 Bu/A Actual
Production History (APH)
152 Bu/A Guarantee X
$4.58*/bu Projected Price
Deductible 20% = 38 Bu/A
*Final Spring Projected Price
1. 50% to 70% of APH Bushels are
Pre-Harvested Marketed for
(Non-Delivery)
3. Buys Put Options on 10% to 15% of APH
Bushels (Non-Delivery)
Fu tu
re s
Pr ic
e Fu
tu re
s Pr
ic e
Basis Basis
1. Store & Wait 2. Delayed Price Contract 3. Minimum Price Contract
1. Basis Contract 2. Sell Cash Bushels and
Buy Futures or Call Option
3. Minimum price contract
Non-roll 3. Buy Put Option
1. Spot Cash Sale now 2. Forward Cash Contract
Crop Marketing Matrix
Source: Johnson, Ag Consultant, March 2021
7 Reasons to Make Pre-Harvest Sales 1: Futures price seasonals that tend to peak in the spring months. 2: Cash prices you will receive are above the APH breakeven cash prices. 3: Meet your cash flow needs next fall and winter. 4: Use of revenue protection crop insurance and sales of bushels for delivery. 5: Likely return to more normal basis by harvest. 6: Futures carry doesn’t build until the late summer. 7: Avoid putting excessive unpriced bushels into commercial storage at harvest.
Source: Johnson, Ag Consultant, March 2021
$16.70 $14.31 $12.53 $11.13 $10.02 $9.11 $8.35 $7.71
$3.91 $3.79 $3.69 $3.59 $3.49 $3.41 $3.32 $3.24
Estimating 2021 APH Breakeven Costs
Cost/BuExpense/Acre $664
Cost/BuExpense/Acre $501
Soybeans
Corn
$3.16
Yield 170 175 180 185 190 195 200 205 210
$7.16
Sheet1
170
175
180
185
190
195
200
205
210
750
$4.41
$4.29
$4.17
$4.05
$3.95
$3.85
$3.75
$3.66
$3.57
30
35
40
45
50
55
60
65
70
501
$16.70
$14.31
$12.53
$11.13
$10.02
$9.11
$8.35
$7.71
$7.16
Sheet1
170
175
180
185
190
195
200
205
210
664
$3.91
$3.79
$3.69
$3.59
$3.49
$3.41
$3.32
$3.24
$3.16
Sheet1
170
175
180
185
190
195
200
205
210
664
$3.91
$3.79
$3.69
$3.59
$3.49
$3.41
$3.32
$3.24
$3.16
Sheet1
170
175
180
185
190
195
200
205
210
750
$4.41
$4.29
$4.17
$4.05
$3.95
$3.85
$3.75
$3.66
$3.57
30
35
40
45
50
55
60
65
70
501
$16.70
$14.31
$12.53
$11.13
$10.02
$9.11
$8.35
$7.71
$7.16
Scale in sales over price ranges and
time
of tools
Source: Iowa Commodity Challenge, Marketing Tools Workbook
Crop Risk Management Web Sites – ISU Extension - Ag Decision Maker (Monthly e-newsletter,
Webinars, Videos, Farm Outlook, Information Files, Decision Tools, Iowa Commodity Challenge, Farm Bill Information with Iowa ARC/PLC Payment Estimator) www.extension.iastate.edu/agdm
– U of Illinois Extension - Farm Doc Daily e-Newsletter, FAST Tools, Publications, Webinars, Podcasts, Crop Insurance Premium Comparison, 2018 Farm Bill & ARC/PLC Payment “What If” Tool www.farmdoc.illinois.edu
– K-State Extension – Ag Manager, Crop Insurance & MYA National Cash Price Estimates & Projections
www.agmanager.info/crop-insurance – USDA Farm Service Agency (ARC/PLC Program)
U.S. Corn Supply/Demand & Price Projection
November Soybean Seasonal Trends(2000-2020 Futures Indexed)
U.S. Soybean Supply/Demand & Price Projection
‘21 U.S. Planted Acreage Forecast
‘21 Commodity Crop Safety Nets
Slide Number 9
Slide Number 10
Effective Reference Prices versus Est. & Proj. Avg. Prices (‘20 & ‘21 Crops)
Calculating a Potential ’21 Corn PLC Payment
Slide Number 13
Slide Number 14
Slide Number 15
Slide Number 16
Slide Number 17
Slide Number 18
Estimating 2021 APH Breakeven Costs
Written Marketing Plan Components