Cornhusker Economics Outlook

Transcription

1 Cornhusker Economics Outlook Crop Outlook Cory Walters, Nebraska Extension Crop Economist Livestock Outlook Kate Brooks, Nebraska Extension Livestock Economist York November 17 Bridgeport November 18 McCook November 19 Kearney November 19 Nebraska City November 23 Wayne November 24 Policy Outlook Brad Lubben, Nebraska Extension Policy Specialist Farm Finance Tina Barrett, Director, Nebraska Farm Business, Inc. Risk Management Jay Parsons, Nebraska Extension Biosystems Economist Presented by Nebraska Extension and the UNL Department of Agricultural Economics. Program support provided in part by Great Western Bank.

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3 Crop Market Outlook Cory Walters Department of Agricultural Economics 1

4 USDA SUPPLY/DEMAND BALANCE SHEET FOR CORN / / /14 E P % Millions of Acres Acres Planted % Acres Harvested % Bu./Harvested Acre % Millions of Bushels Beginning Stocks 821 1,232 1, % Production 13,829 14,216 13, % Total Supply 14,686 15,479 15, % Use: Feed and Residual 5,036 5,315 5, % Food, seed, & industrial 6,501 6,568 6, % Ethanol for fuel 5,134 5,209 5, % Exports 1,917 1,864 1, % Total Use (Demand) 13,454 13,748 13, % Ending Stocks 1,232 1,731 1, % Ending Stocks, % of Use % U.S. Season Avg. Farm Price, $/ Bu. $6.89 $4.46 $ % Source: USDA, WASDE 2

5 Crop Insurance Information If determined today, corn projected price = $3.95 Implied price floor (put option) across different coverage levels (assumes APH realized yield) 85% = $ % = $ % = $ % = $2.77 Crop insurance will reduce the probability of profit but protect against bad events 3

6 December 2016 Corn Price Distribution Average = $3.95/bu Number of Contracts 100, , , , , , , , , ,000 Index Traders Minus Non Commercial More Index Traders More Speculators 4

7 Corn Outlook Leaving the year with fewer stocks then entering. Lower prices incentivized fewer acres For higher prices one of two needs to happen Improve exports. DDG exports are an important component Lower production. Changes likely small. Final numbers come out in January Or what? Speculators are slightly net short futures contracts. What news event will move them as a group? Futures market shows a carry Incentivizing storage over harvest sale Common with a large crop Export competition growing Importers growing as well Soybeans 5

8 USDA SUPPLY/DEMAND BALANCE SHEET FOR SOYBEANS 2013/14 /15 E 2015/16 P % Millions of Acres Acres Planted % Acres Harvested % Bu./Harvested Acre % Millions of Bushels Beginning Stocks % Production 3,358 3,927 3, % Total Supply 3,570 4,052 4, % Use: Crushing 1,734 1,873 1, % Exports 1,647 1,843 1, % Seed & Residuals % Total Use 3,478 3,861 3, % Ending Stocks % Ending Stocks, % of Use % U.S. Season Average Farm Price, $/Bu $13.00 $10.10 $ % Source: USDA, WASDE 6

9 November 2016 Soybean Price Distribution Average = $8.74/bu Percent 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Soybean Market Participants 13% 52% 35% 1/3/06 7/25/06 2/13/07 9/4/07 3/25/08 10/14/08 5/5/09 11/24/09 6/29/10 1/18/11 8/9/11 5/1/12 1/8/13 9/17/13 5/20/14 12/9/14 6/30/15 Index Commercial Non Commercial 7

10 New Crop Soybeans Outlook Entered the year with average supplies, leaving with more than double. Expect ending stocks to decline as crop year progresses For prices to improve exports need to pick up and/or production needs to decline in US and/or other competing countries (Southern hemisphere) Wheat 8

11 USDA SUPPLY/DEMAND BALANCE SHEET FOR WHEAT 2013/14 /15 E 2015/16 P % Million Acres Acres Planted % Acres Harvested % Bu./Harvested Acre % Million Bushels Beginning Stocks % Production 2,135 2,026 2, % Imports % Total Supply 3,026 2,766 2, % Use: Food/Seed 1,032 1,039 1, % Feed & Residual % Exports 1,176 1, % Total Use 2,436 2,013 2, % Ending Stocks % Ending Stocks, % of Use % U.S. Season Aver. Farm Price, $/ Bu. $6.78 $5.99 $ % 9

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13 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,000 Number of Net Long Contracts 20,000 30,000 Hard Red Winter Wheat Interest by Speculators Non Commercial 12/23/ 7/15/ 12/31/2013 6/11/ /29/2012 6/12/ /18/2011 5/3/ /23/2010 6/15/2010 1/5/2010 7/14/2009 2/3/2009 8/26/2008 3/18/ /9/2007 5/1/ /21/2006 6/13/2006 1/3/2006 July 2016 KC Wheat Price Distribution Average = $5.34/bu Volatility =.25 (.18 last year) Wheat Outlook US winter wheat crop condition is 51% in good to excellent Global production projected to be just under 733 MMT a record. Global ending stocks projected to rise to 228 MMT a record. China ending stocks projected to end up at 89 MMT (39% of world) Quality? World consumption projected to rise to 716 MMT a record 11

14 Wheat glut erodes US exports as cheap Russian grain wins buyers The Big Picture Modern day war: North Korea attacks US (well, actually SONY not a military location) US responds with more sanctions Russia enters Ukraine Passenger jet shot down Russia annexes crimea We place sanctions on Russia Syria. We bomb ISIS, Russia bombs terrorists ( everyone except Assad s regime) Russian passenger jet blown up in Egypt China, Iraq, Iran, Afghanistan, etc.. Overall Outlook Wars, weather, perception and Ag Policy War = influencing exchange rates and thus export markets. Are we helping our ag competition? Weather = Will the very strong El Nino persist? Register by visiting go.unl.edu/marketingworkshops Or calling the number below for the desired location Perception = Producer investing into crop, more or less? Nov. 17th Holdrege Phelps County Extension Office nd St. Todd Whitney Nov. 30th Hartington Nissen Wine HWY 57 Jim Jansen Dec. 10th Syracuse Kimmel Ag Expo Center 198 Plum St. Monte Vandeveer Ag Policy = Producer risk exposure going to grow? Nov. 18th Hastings Adams County Fairgrounds 947 S. Baltimore Ave Ron Seymour Dec. 1st Columbus Pinnacle Bank 310 E. 23rd St. Allan Vyhnalek Dec. 15 Scottsbluff Panhandle Research & Extension CTR 4502 Ave I Jessica Groskopf Nov. 24th Davenport Little Blue Natural Resources District 106 N. Juniper Ave Jenny Rees Dec. 2nd Arlington Washington County Fairgrounds HWY 30 Steve Tonn Dec. 16th Sidney Cheyenne County Community CTR 627 Toledo St. Karen DeBoer

15 Livestock Markets Outline Beef Industry Pork Industry Production/Retail Prices Kate Brooks Department of Agricultural Economics Overview of Beef Industry Supplies Expansion underway Imports Role of competing meats Demand Important factor, less certain than supply Domestic & Export market Barchart.com 13

16 LMIC Quarterly Forecasts (10/14/15) % Chg. Average % Chg. Comm'l % Chg. Year Comm'l from Dressed from Beef from Quarter Slaughter Year Ago Weight Year Ago Production Year Ago (1,000 Head) (Lbs.) (Mil. Lbs.) 2015 I II III b IV c Year I II III IV Year I II III IV Year LMIC Quarterly Forecasts (10/14/15) Live Sltr. % Chg. Feeder Steer Price Year Steer Price from Southern Plains d Quarter 5-Mkt Avg Year Ago 7-800# 5-600# ($/Cwt.) ($/Cwt.) 2015 I II III IV Year I II III IV Year I II III IV Year Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center G-NP-30 10/26/15 14

17 G-NP-32 Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center 10/26/15 Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center G-NP-21 10/09/15 Data Source: USDA-AMS Data Source: USDA-AMS Livestock Marketing Information Center G-P-02 10/30/15 15

18 53% in 47% in Data Source: USDA-AMS, Compiled by LMIC, Analysis Kate Brooks Data Source: USDA-AMS, Compiled by LMIC, Analysis Kate Brooks Livestock Marketing Information Center Livestock Marketing Information Center Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center C-P-66 09/24/15 Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center 09/24/15 16

19 C-N-37 First three quarters: Heifers: -13% Steers: -2% 9.5% Data Source: USDA-NASS Livestock Marketing Information Center 07/28/15 Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center C-S-13 10/30/15 Cow-Calf Industry Weaned Calves? Expansion is underway Profitability potential Supply & Demand =how fast & how long Precondition programs/stocker calves VOG vs. COG Economic profit per head Risk level - ROI Moisture conditions Understand Costs/Returns in Future Cornhusker Economics Article: Annual & Seasonal Price Patterns for Cattle NebGuide G2248: Economic Considerations for Preconditioning Calves for Feedlots 17

20 Feedlot Sector 2015 struggle Capacity/structural issues still a concern Data Source: USDA-AMS Livestock Marketing Information Center 11/02/15 October Cattle on Feed Report Latest Data: October 2015 On Feed October 1: +2.3% Nebraska: +1.8% November Placements: - 4.1% Nebraska: - 3.8% November Marketings: - 2.4% Nebraska: 7.5% Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center C-P-22 11/02/15 18

21 C-S-08 Data Source: USDA-AMS & USDA-NASS Data Source: USDA-AMS & USDA-NASS C-S-18 Livestock Marketing Information Center 10/30/15 Livestock Marketing Information Center 10/30/15 Data Source: Bureau of Labor Statistics, USDA-ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC Livestock Marketing Information Center I-N-06 10/13/15 19

22 I-N-07 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC Livestock Marketing Information Center 10/13/15 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-12 10/13/15 Livestock Marketing Information Center Overall Hog Outlook Supply Side Rebuilding Tipping point of tight supply Demand Side Key factor Strengthening dollar??? Trade issues Competing meats 20

23 September 2015 Hog Inventory Report 2015 (1,000 head) 2015 as % of All Hogs & Pigs 68, Kept for Breeding 5, Kept for Marketing 62, Under 50 lbs. 20, lbs. 17, lbs. 13, lbs. and over 11, (thousand litters) June-Aug Farrowings 2, Sep-Nov Farrowing Intentions 2, Dec-Feb Farrowing Intentions 2, Data Source: USDA-NASS Livestock Marketing Information Center H-N-57 09/25/15 Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Year-to-date hog slaughter is up 8.8%; pork production is up 8.0% H-S-05 10/30/15 Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center H-S-24 10/30/15 21

24 H-P-22 Data Source: USDA-AMS Data Source: USDA-AMS, Compiled & Analysis by LMIC H-P-09 Livestock Marketing Information Center 11/02/15 Livestock Marketing Information Center 11/09/ = +$6.21 [-$25.60 to +$24.57] = +$61.85 [+$13.15 to +$107.25] 2015* = +$7.79 [-$17.77 to +$26.25] 2016* = -$1.07 [-$16.10 to +$20.43] 22

25 Historical and Projected Iowa Farrow to Finish Returns (as of 11/12/15) ( Farrow Closeout Total Cost Lean Hog Price Net Return Mo-Yr Mo-Yr $/carcass cwt $/carcass cwt $/carcass cwt Mar-15 Oct Apr-15 Nov May-15 Dec Jun-15 Jan Jul-15 Feb Aug-15 Mar Sep-15 Apr Oct-15 May Nov-15 Jun Dec-15 Jul Jan-16 Aug Feb-16 Sep Mar-16 Oct Apr-16 Nov May-16 Dec Jan-Oct Nov-Dec Jan-Apr = +$4.77 [-$14.80 to +$22.07] = +$39.48 [+$1.62 to +$84.64] 2015* = -$14.46 [-$35.56 to +$4.70] 2016* = -$8.42 [-$18.93 to +$10.18] Historical and Projected Iowa Wean to Finish Returns (as of 11/12/15) ( Lean Breakeven Breakeven Place Closeout Net Hog SEW Breakeven Lean Hog SEW Mo-Yr Mo-Yr Return* FCOG** Price Price* FCOG** Price Price* Apr-15 Oct May-15 Nov Jun-15 Dec Jul-15 Jan Aug-15 Feb Sep-15 Mar Oct-15 Apr Nov-15 May Dec-15 Jun Jan-16 Jul Feb-16 Aug Mar-16 Sep Apr-16 Oct May-16 Nov Jun-16 Dec Jan-Oct Nov-Dec Jan-Apr * Net return and SEW price is $/head and all other values are $/carcass cwt. ** FCOG = Feeding cost of gain. 23

26 Data Source: Bureau of Labor Statistics, USDA-ERS, Compiled & Analysis LMIC Quarterly Hog & Pork Forecasts (10/23/15) % Chg. Average % Chg. Comm'l % Chg. Year Comm'l from Carcass from Pork from Quarter Slaughter Year Ago Weight Year Ago Production Year Ago (1,000 Head) (Lbs.) (Mil. Lbs.) by LMIC Livestock Marketing Information Center 2015 I II III a IV b Year I II III IV Year I II III IV Year Production/Retail Prices 2015: : : : : : +2.6 Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center 24

27 P-S-03 September +31% September +19% September +24% September +13% Data Source: USDA/NASS Data Source: USDA-NASS, Compiled & Analysis by LMIC M-C-07 Livestock Marketing Information Center 10/22/15 Livestock Marketing Information Center 10/19/15 Data Source: Bureau of Labor Statistics & USDA-ERS M-P-05 Data Source: Bureau of Labor Statistics & USDA-ERS M-P-11 Livestock Marketing Information Center 10/15/15 Livestock Marketing Information Center 10/15/15 25

28 Cost efficiencies & sound management key for profitability Thank You! Website: farm.unl.edu Photo taken by Troy Waltz 26

29 Ag Policy Outlook Bradley D. Lubben, Ph.D. Extension Assistant Professor, Policy Specialist, and Director, North Central Extension Risk Management Education Center Department of Agricultural Economics University of Nebraska-Lincoln Web information agecon.unl.edu/agpolicy or farmbill.unl.edu North Central Extension Risk Management Education Center ncrme.org Agricultural Policy Outlook National Farm Income Safety Net Budget and Appropriations Trade Bioenergy Biotechnology Food Production/Labeling Environmental Regulations/WOTUS State Property Taxes and School Finance and 2015 Farm Bill Analysis Predominant enrollment in ARC-CO for Nebraska crops PLC payments Minimal for only peanuts, rice, and canola More significant for 2015 based on current price projections ARC payments Significant for but also significant variance by county, crop, and practice across state Significant for 2015 variance across state dependent on specific crop yield results Farm Program Sign-Up Results By Crop Base Acreage in Nebraska State PLC ARC-CO ARC-IC Barley 72% 28% 0% Corn Grain Sorghum Oats Soybeans Sunflowers Wheat Source: USDA-FSA 27

30 and 2015 Farm Bill Analysis Predominant enrollment in ARC-CO for Nebraska crops PLC payments Minimal for only peanuts, rice, and canola More significant for 2015 based on current price projections ARC payments Significant for but also significant variance by county, crop, and practice across state Significant for 2015 variance across state dependent on specific crop yield results Calculating Program Payments Price Loss Coverage Price Loss Coverage Payment Rate MAX of [( - MAX of { or }) or 0] = reference national marketing year loan rate PLC rate price average price Price Loss Coverage Payment x x x 85% = PLC rate payment yield base acres PLC payment PLC Analysis A Look Ahead to 2015 and 2015 PLC Payment Comparison Commodity Reference Price PLC Payment Price Rate Corn ($/bus) $ $0.00 Grain Sorghum ($/bus) Soybeans ($/bus) Wheat ($/bus) Barley ($/bus) Oats ($/bus) Canola ($/pound) Sunflower Seed ($/pound) Peanuts ($/pound) Long Grain Rice ($/Pound) Commodity Reference Price PLC Payment Price Rate 2015 PLC 2015 Payment Price Rate Corn ($/bus) $3.70 $3.70 $0.00 $3.65 $0.05 Grain Sorghum ($/bus) Soybeans ($/bus) Wheat ($/bus) Barley ($/bus) Oats ($/bus) Canola ($/pound) Sunflower Seed ($/pound) Peanuts ($/pound) Long Grain Rice ($/Pound) * Analysis based on USDA-FSA prices and program data. * Analysis based on USDA-WAOB/USDA-FSA prices and program data as of November 11,

31 and 2015 Farm Bill Analysis ARC-CO Analysis Payments Predominant enrollment in ARC-CO for Nebraska crops PLC payments Minimal for only peanuts, rice, and canola More significant for 2015 based on current price projections ARC payments Significant for but also significant variance by county, crop, and practice across state Significant for 2015 variance across state dependent on specific crop yield results * Analysis based on USDA-FSA price, yield, and program data as of November 10, Calculating Program Payments Agriculture Risk Coverage - County ARC-CO Benchmark Revenue ARC-CO Analysis Olympic Average Yields x = 5-year Olympic average 5-year Olympic average national ARC-CO county yield* marketing year average price ** benchmark revenue ARC-CO Guarantee x 86% = ARC-CO benchmark revenue ARC-CO guarantee ARC-CO Actual Revenue x MAX of [ or ] = county yield* national marketing year loan rate ARC-CO actual revenue average price * County yield per planted acre, minimum yield for each year at county T-yield x 70% ** National marketing year average price, minimum price for each year at reference price * Analysis based on USDA-FSA price, yield, and program data as of November 10,

32 ARC-CO Analysis Guarantees Calculating Program Payments Agriculture Risk Coverage - County ARC-CO Payment Rate MAX of [ 0 or MIN of ({ - } or { x 10% }) ] = ARC-CO ARC-CO ARC-CO ARC-CO guarantee actual benchmark payment revenue revenue rate ARC-CO Payment x x 85% = ARC-CO payment rate base acres ARC-CO payment * Analysis based on USDA-FSA price, yield, and program data as of November 10, ARC-CO Analysis Crop Revenue ARC-CO Analysis Payments * Analysis based on USDA-FSA price, yield, and program data as of November 10, * Analysis based on USDA-FSA price, yield, and program data as of November 10,

33 ARC-CO Analysis Gross Revenue with ARC-CO Payments as a Percent of Guarantees A Look Ahead to 2015 and 2015 ARC-CO Payment Comparison * Analysis based on USDA-FSA price, yield, and program data as of November 10, Commodity Olympic Average Yield Yield Yield/ Olympic Average 2010 Olympic Average Yield 2015 Yield 2015 Yield/ Olympic Average Corn All % % Corn Irrigated % % Corn Nonirrigated % % Grain Sorghum All % % Grain Sorghum Irrigated % % Grain Sorghum Nonirrigated % % Soybeans All % % Soybeans Irrigated % % Soybeans Nonirrigated % % Wheat All % % Wheat Irrigated % % Wheat Nonirrigated % % * Average county yield analysis based on USDA-NASS harvested yield estimates and USDA-FSA program data as of November 10, Yield projections for 2015 based on USDA-NASS harvested yield estimates for the state total as a percent of the 5-year Olympic average yield applied to 5-year Olympic average yields for all observations. A Look Ahead to 2015 and 2015 ARC-CO Payment Comparison A Look Ahead to 2015 and 2015 ARC-CO Payment Comparison Commodity Olympic Average Price Price Price/ Olympic Average 2010 Olympic Average Price 2015 Price 2015 Price/ Olympic Average Corn % % Grain Sorghum % % Soybeans % % Wheat % % * Analysis based on USDA-WAOB/USDA-FSA prices and program data as of November 10, Yield/ Price/ ARC-CO Yield/ Price/ ARC-CO Payment/ Olympic Olympic Payment/ Olympic Olympic Payment/ Commodity Average Average Base Acre Average Average Base Acre Payment Corn All 105% 70% % 69% % Corn Irrigated 108% 70% % 69% % Corn Nonirrigated 109% 70% % 69% % Grain Sorghum All 105% 79% % 71% % Grain Sorghum Irrigated 105% 79% % 71% % Grain Sorghum Nonirrigated 99% 79% % 71% % Soybeans All 107% 82% % 73% % Soybeans Irrigated 100% 82% % 73% % Soybeans Nonirrigated 107% 82% % 73% % Wheat All 103% 91% % 75% % Wheat Irrigated 96% 91% % 75% % Wheat Nonirrigated 91% 91% % 75% % * Analysis based on USDA-NASS harvested yield estimates and USDA-WAOB/USDA-FSA price, yield, and program data as of November 10, Yield projections for 2015 based on USDA-NASS harvested yield estimates for the state total as a percent of the 5-year Olympic average yield applied to 5-year Olympic average yields for all observations. 31

34 2015 ARC-CO Analysis Farm Bill Outlook Government Program Payments in Nebraska $ Millions $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $ F 2017F Fixed direct payments Crop programs Dairy programs Conservation Supplemental/disaster assistance Miscellaneous programs * Analysis based on USDA-NASS harvested yield estimates and USDA-WAOB/USDA-FSA price, yield, and program data as of November 10, Yield projections for 2015 based on USDA-NASS harvested yield estimates for the state total as a percent of the 5-year Olympic average yield applied to 5-year Olympic average yields for all observations. Agricultural Policy Outlook National Farm Income Safety Net Budget and Appropriations Trade Bioenergy Biotechnology Food Production/Labeling Environmental Regulations/WOTUS State Property Taxes and School Finance Area Original Baseline ($ billions) Farm Bill Budget Senate Proposal (S954) (change in $ billions) House Proposal (HR1947/ 3102) (change in $ billions) Agricultural Act of (HR2642)* (change in $ billions) ($ billions) Commodities $58.8 -$17.4 -$18.7 -$14.3 $44.5 Crop Insurance $84.1 +$5.0 +$8.9 +$5.7 $89.8 Conservation $61.6 -$3.5 -$4.8 -$4.0 $57.6 Nutrition (SNAP) $764 -$3.9 -$39.0 -$8.0 $756 Other Titles $4.0 +$ $4.1 $8.1 Total $973 -$17.9 -$51.9 -$16.5 $956 * HR 2642, the Agricultural Act of as reported out of Conference on January 27, passed the House on January 29, by a vote, passed the Senate on February 4, by a vote, and was signed by the President on February 7,. 32

35 WTO Doha Development Agenda Timeline Current U.S. Trade Negotiations Seattle no agreement 2001 Doha negotiating agenda 2003 Cancun no agreement 2004 Geneva framework agreement 2005 Hong Kong no agreement 2008 Geneva progress but no agreement 2013 Bali trade facilitation agreement 2015 continuing Doha Round negotiations? Trans-Pacific Partnership (TPP) United States Australia Brunei Canada Chile Japan Malaysia Mexico New Zealand Peru Singapore Vietnam Transatlantic Trade and Investment Partnership (TTIP) United States European Union Source: Wikipedia Source: Wikipedia Trans-Pacific Partnership (TPP) Agreement reached and published Available at ustr.gov/tpp Full text at ustr.gov/tradeagreements/free-tradeagreements/trans-pacificpartnership/tpp-full-text Congressional consideration for ratification and implementation Potential ag impacts Current U.S. Trade Negotiations Transatlantic Trade and Investment Partnership (TTIP) Hormones in meat production Biotechnology Geographical indicators Source: Wikipedia Billion Gallons U.S. Renewable Fuel Production and Policy Timeline Ethanol Production 2005 RFS RFS (less advanced) Advanced RFS (less cellulosic) Cellulosic RFS Corn Ethanol Math: 15 bil gal 4 gal/bus = 3.75 bil bus 150 bus/ac = 25 mil ac Cellulosic Ethanol Math: 16 bil gal 70 gal/ton = 229 mil ton 2-6 ton/ac = mil ac Sources: Renewable Fuels Association, Energy Policy Act of 2005, and Energy Independence and Security Act of 2007 Source: Wikipedia Data file: renewable energy standard and production.xlsx 33

36 The Policy Development Path for Selected Issues Nebraska Policy Issues Property Taxes and School Finance Clean Water Rule/WOTUS Legislative Clean Water Act WOTUS repeal Exec/Regulatory Waters of the U.S. definition Judicial Federal court/supreme Court rulings District court injunction delaying the rule Social/Market Corporate stewardship/sustainability Interest groups/ shareholders/customers GM Food Labeling Legislative House-passed voluntary GM labeling bill federal preemption Exec/Regulatory Labeling rules under any federal mandate Judicial Lawsuit over the Vermont mandatory GM labeling rule Social/Market Interest groups/ballot issues/corporate strategies Agriculture and property taxes Agriculture pays about 30% of the total property tax bill K-12 represents about 60% of the total property tax bill Property taxes pay about 50% of K-12 expenses Policy alternatives and issues Property tax reform State school funding formula School funding levels Other demands on state funding Ag Policy Outlook Bradley D. Lubben, Ph.D. Extension Assistant Professor, Policy Specialist, and Director, North Central Extension Risk Management Education Center Department of Agricultural Economics University of Nebraska-Lincoln Web information agecon.unl.edu/agpolicy or farmbill.unl.edu North Central Extension Risk Management Education Center ncrme.org 34

37 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Adams Wheat All Adams Oats All Adams Corn All Adams Grain Sorghum Irrigated Adams Grain Sorghum Nonirrigated Adams Soybeans All Antelope Wheat Irrigated Antelope Wheat Nonirrigated Antelope Oats Irrigated Antelope Oats Nonirrigated Antelope Corn All Antelope Grain Sorghum All Antelope Peanuts All 2, Antelope Soybeans All Antelope Barley All Arthur Wheat All Arthur Oats All Arthur Corn All Arthur Grain Sorghum All Arthur Soybeans All Banner Wheat All Banner Oats All Banner Corn Irrigated Banner Corn Nonirrigated Banner Grain Sorghum All Banner Dry Peas All Banner Soybeans All Banner Barley All Blaine Wheat All Blaine Oats All Blaine Corn All Blaine Grain Sorghum All Boone Wheat Irrigated Boone Wheat Nonirrigated Boone Oats Irrigated Boone Oats Nonirrigated Boone Corn Irrigated Boone Corn Nonirrigated Boone Grain Sorghum All Boone Soybeans Irrigated Boone Soybeans Nonirrigated Box Butte Wheat Irrigated Box Butte Wheat Nonirrigated Box Butte Oats Irrigated Box Butte Oats Nonirrigated Box Butte Corn All Box Butte Grain Sorghum Irrigated Box Butte Grain Sorghum Nonirrigated Box Butte Dry Peas All 1, Box Butte Soybeans All Box Butte Barley All Boyd Wheat All Boyd Oats All Boyd Corn All Boyd Grain Sorghum All Boyd Soybeans All Boyd Barley All Brown Wheat All Brown Oats Irrigated Brown Oats Nonirrigated Brown Corn All Brown Grain Sorghum All Brown Soybeans All Brown Barley All Buffalo Wheat Irrigated Buffalo Wheat Nonirrigated Buffalo Oats Irrigated Buffalo Oats Nonirrigated Buffalo Corn All Buffalo Grain Sorghum Irrigated Buffalo Grain Sorghum Nonirrigated Buffalo Soybeans All Buffalo Barley All Burt Wheat All

38 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Burt Oats All Burt Corn Irrigated Burt Corn Nonirrigated Burt Grain Sorghum All Burt Soybeans All Butler Wheat All Butler Oats All Butler Corn Irrigated Butler Corn Nonirrigated Butler Grain Sorghum All Butler Soybeans Irrigated Butler Soybeans Nonirrigated Cass Wheat All Cass Oats All Cass Corn All Cass Grain Sorghum All Cass Soybeans All Cedar Wheat All Cedar Oats All Cedar Corn Irrigated Cedar Corn Nonirrigated Cedar Grain Sorghum All Cedar Soybeans Irrigated Cedar Soybeans Nonirrigated Cedar Barley All Chase Wheat Irrigated Chase Wheat Nonirrigated Chase Oats Irrigated Chase Oats Nonirrigated Chase Corn All Chase Grain Sorghum All Chase Soybeans All Chase Barley All Cherry Wheat Irrigated Cherry Wheat Nonirrigated Cherry Oats Irrigated Cherry Oats Nonirrigated Cherry Corn All Cherry Grain Sorghum All Cherry Soybeans All Cherry Barley All Cheyenne Wheat All Cheyenne Oats Irrigated Cheyenne Oats Nonirrigated Cheyenne Corn Irrigated Cheyenne Corn Nonirrigated Cheyenne Grain Sorghum All Cheyenne Dry Peas All Cheyenne Soybeans All Cheyenne Barley Irrigated Cheyenne Barley Nonirrigated Clay Wheat All Clay Oats All Clay Corn All Clay Grain Sorghum All Clay Soybeans All Colfax Wheat Irrigated Colfax Wheat Nonirrigated Colfax Oats All Colfax Corn Irrigated Colfax Corn Nonirrigated Colfax Grain Sorghum All Colfax Soybeans Irrigated Colfax Soybeans Nonirrigated Colfax Barley All Cuming Wheat All Cuming Oats All Cuming Corn All Cuming Grain Sorghum All Cuming Soybeans All Cuming Barley All Custer Wheat All Custer Oats All Custer Corn Irrigated

39 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Custer Corn Nonirrigated Custer Grain Sorghum All Custer Soybeans All Custer Barley All Dakota Wheat All Dakota Oats All Dakota Corn All Dakota Soybeans All Dakota Barley All Dawes Wheat All Dawes Oats All Dawes Corn Irrigated Dawes Corn Nonirrigated Dawes Grain Sorghum All Dawes Soybeans All Dawes Barley All Dawson Wheat All Dawson Oats All Dawson Corn All Dawson Grain Sorghum All Dawson Soybeans All Dawson Barley All Deuel Wheat All Deuel Oats All Deuel Corn Irrigated Deuel Corn Nonirrigated Deuel Grain Sorghum All Deuel Dry Peas All Deuel Soybeans All Deuel Barley All Dixon Wheat All Dixon Oats All Dixon Corn All Dixon Grain Sorghum All Dixon Soybeans All Dixon Barley All Dodge Wheat All Dodge Oats All Dodge Corn Irrigated Dodge Corn Nonirrigated Dodge Grain Sorghum Irrigated Dodge Grain Sorghum Nonirrigated Dodge Soybeans Irrigated Dodge Soybeans Nonirrigated Douglas Wheat All Douglas Oats All Douglas Corn Irrigated Douglas Corn Nonirrigated Douglas Grain Sorghum All Douglas Soybeans All Dundy Wheat All Dundy Oats Irrigated Dundy Oats Nonirrigated Dundy Corn Irrigated Dundy Corn Nonirrigated Dundy Grain Sorghum All Dundy Soybeans All Dundy Barley All Fillmore Wheat All Fillmore Oats All Fillmore Corn All Fillmore Grain Sorghum All Fillmore Soybeans Irrigated Fillmore Soybeans Nonirrigated Franklin Wheat All Franklin Oats All Franklin Corn Irrigated Franklin Corn Nonirrigated Franklin Grain Sorghum All Franklin Soybeans Irrigated Franklin Soybeans Nonirrigated Frontier Wheat All Frontier Oats All Frontier Corn Irrigated

40 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Frontier Corn Nonirrigated Frontier Grain Sorghum All Frontier Soybeans Irrigated Frontier Soybeans Nonirrigated Frontier Barley All Furnas Wheat All Furnas Oats All Furnas Corn Irrigated Furnas Corn Nonirrigated Furnas Grain Sorghum All Furnas Soybeans Irrigated Furnas Soybeans Nonirrigated Furnas Barley All Gage Wheat All Gage Oats All Gage Corn All Gage Grain Sorghum All Gage Soybeans All Garden Wheat All Garden Oats Irrigated Garden Oats Nonirrigated Garden Corn Irrigated Garden Corn Nonirrigated Garden Grain Sorghum All Garden Dry Peas All Garden Soybeans All Garden Barley All Garfield Wheat All Garfield Oats All Garfield Corn All Garfield Grain Sorghum All Garfield Soybeans All Garfield Barley All Gosper Wheat All Gosper Oats All Gosper Corn Irrigated Gosper Corn Nonirrigated Gosper Grain Sorghum All Gosper Soybeans All Greeley Wheat Irrigated Greeley Wheat Nonirrigated Greeley Oats All Greeley Corn All Greeley Grain Sorghum All Greeley Soybeans All Greeley Barley All Hall Wheat Irrigated Hall Wheat Nonirrigated Hall Oats All Hall Corn All Hall Grain Sorghum Irrigated Hall Grain Sorghum Nonirrigated Hall Soybeans All Hamilton Wheat Irrigated Hamilton Wheat Nonirrigated Hamilton Oats All Hamilton Corn All Hamilton Grain Sorghum Irrigated Hamilton Grain Sorghum Nonirrigated Hamilton Soybeans All Hamilton Barley All Harlan Wheat All Harlan Oats All Harlan Corn Irrigated Harlan Corn Nonirrigated Harlan Grain Sorghum All Harlan Soybeans Irrigated Harlan Soybeans Nonirrigated Harlan Barley All Hayes Wheat All Hayes Oats Irrigated Hayes Oats Nonirrigated Hayes Corn Irrigated Hayes Corn Nonirrigated

41 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Hayes Grain Sorghum All Hayes Dry Peas All Hayes Soybeans All Hayes Barley All Hitchcock Wheat All Hitchcock Oats All Hitchcock Corn Irrigated Hitchcock Corn Nonirrigated Hitchcock Grain Sorghum All Hitchcock Soybeans All Holt Wheat Irrigated Holt Wheat Nonirrigated Holt Oats All Holt Corn All Holt Grain Sorghum All Holt Soybeans All Holt Barley All Howard Wheat Irrigated Howard Wheat Nonirrigated Howard Oats All Howard Corn All Howard Grain Sorghum Irrigated Howard Grain Sorghum Nonirrigated Howard Soybeans All Howard Barley All Jefferson Wheat All Jefferson Oats All Jefferson Corn Irrigated Jefferson Corn Nonirrigated Jefferson Grain Sorghum All Jefferson Soybeans Irrigated Jefferson Soybeans Nonirrigated Jefferson Barley All Johnson Wheat All Johnson Oats All Johnson Corn All Johnson Grain Sorghum All Johnson Soybeans All Kearney Wheat All Kearney Oats All Kearney Corn All Kearney Grain Sorghum Irrigated Kearney Grain Sorghum Nonirrigated Kearney Soybeans All Kearney Barley All Keith Wheat All Keith Oats Irrigated Keith Oats Nonirrigated Keith Corn Irrigated Keith Corn Nonirrigated Keith Grain Sorghum All Keith Dry Peas All Keith Soybeans All Keith Barley All Keya Paha Wheat All Keya Paha Oats All Keya Paha Corn All Keya Paha Grain Sorghum All Keya Paha Soybeans All Keya Paha Barley All Kimball Wheat All Kimball Oats Irrigated Kimball Oats Nonirrigated Kimball Corn Irrigated Kimball Corn Nonirrigated Kimball Grain Sorghum All Kimball Dry Peas All Kimball Soybeans All Kimball Barley All Knox Wheat All Knox Oats All Knox Corn Irrigated Knox Corn Nonirrigated Knox Grain Sorghum All

42 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Knox Soybeans Irrigated Knox Soybeans Nonirrigated Knox Barley All Lancaster Wheat All Lancaster Oats All Lancaster Corn All Lancaster Grain Sorghum All Lancaster Soybeans All Lincoln Wheat All Lincoln Oats Irrigated Lincoln Oats Nonirrigated Lincoln Corn All Lincoln Grain Sorghum All Lincoln Soybeans All Lincoln Barley All Logan Wheat Irrigated Logan Wheat Nonirrigated Logan Oats All Logan Corn Irrigated Logan Corn Nonirrigated Logan Grain Sorghum All Logan Soybeans All Logan Barley All Loup Wheat Irrigated Loup Wheat Nonirrigated Loup Oats Irrigated Loup Oats Nonirrigated Loup Corn All Loup Grain Sorghum All Loup Soybeans All Mcpherson Wheat All Mcpherson Oats All Mcpherson Corn All Mcpherson Soybeans All Mcpherson Barley All Madison Wheat All Madison Oats All Madison Corn Irrigated Madison Corn Nonirrigated Madison Grain Sorghum All Madison Soybeans Irrigated Madison Soybeans Nonirrigated Merrick Wheat Irrigated Merrick Wheat Nonirrigated Merrick Oats All Merrick Corn All Merrick Grain Sorghum Irrigated Merrick Grain Sorghum Nonirrigated Merrick Soybeans All Morrill Wheat Irrigated Morrill Wheat Nonirrigated Morrill Oats Irrigated Morrill Oats Nonirrigated Morrill Corn All Morrill Grain Sorghum Irrigated Morrill Grain Sorghum Nonirrigated Morrill Soybeans All Morrill Barley All Nance Wheat All Nance Oats All Nance Corn Irrigated Nance Corn Nonirrigated Nance Grain Sorghum All Nance Soybeans Irrigated Nance Soybeans Nonirrigated Nemaha Wheat All Nemaha Oats All Nemaha Corn All Nemaha Grain Sorghum All Nemaha Soybeans All Nemaha Barley All Nuckolls Wheat All Nuckolls Oats All Nuckolls Corn Irrigated

43 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Nuckolls Corn Nonirrigated Nuckolls Grain Sorghum All Nuckolls Soybeans Irrigated Nuckolls Soybeans Nonirrigated Otoe Wheat All Otoe Oats All Otoe Corn All Otoe Grain Sorghum All Otoe Soybeans All Pawnee Wheat All Pawnee Oats All Pawnee Corn All Pawnee Grain Sorghum All Pawnee Soybeans All Pawnee Barley All Perkins Wheat All Perkins Oats Irrigated Perkins Oats Nonirrigated Perkins Corn Irrigated Perkins Corn Nonirrigated Perkins Grain Sorghum Irrigated Perkins Grain Sorghum Nonirrigated Perkins Dry Peas All Perkins Soybeans All Perkins Barley All Phelps Wheat Irrigated Phelps Wheat Nonirrigated Phelps Oats All Phelps Corn All Phelps Grain Sorghum Irrigated Phelps Grain Sorghum Nonirrigated Phelps Soybeans All Pierce Wheat Irrigated Pierce Wheat Nonirrigated Pierce Oats All Pierce Corn Irrigated Pierce Corn Nonirrigated Pierce Grain Sorghum All Pierce Soybeans Irrigated Pierce Soybeans Nonirrigated Pierce Barley All Platte Wheat Irrigated Platte Wheat Nonirrigated Platte Oats All Platte Corn Irrigated Platte Corn Nonirrigated Platte Grain Sorghum All Platte Soybeans Irrigated Platte Soybeans Nonirrigated Platte Barley All Polk Wheat All Polk Oats All Polk Corn All Polk Grain Sorghum Irrigated Polk Grain Sorghum Nonirrigated Polk Soybeans Irrigated Polk Soybeans Nonirrigated Red Willow Wheat All Red Willow Oats Irrigated Red Willow Oats Nonirrigated Red Willow Corn Irrigated Red Willow Corn Nonirrigated Red Willow Grain Sorghum All Red Willow Dry Peas All Red Willow Soybeans All Red Willow Barley All Richardson Wheat All Richardson Oats All Richardson Corn All Richardson Grain Sorghum All Richardson Soybeans All Richardson Barley All Rock Wheat All Rock Oats All

44 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Rock Corn All Rock Grain Sorghum All Rock Soybeans All Rock Barley All Saline Wheat All Saline Oats All Saline Corn Irrigated Saline Corn Nonirrigated Saline Grain Sorghum All Saline Soybeans Irrigated Saline Soybeans Nonirrigated Saline Barley All Sarpy Wheat All Sarpy Oats All Sarpy Corn All Sarpy Grain Sorghum All Sarpy Soybeans All Saunders Wheat All Saunders Oats All Saunders Corn Irrigated Saunders Corn Nonirrigated Saunders Grain Sorghum All Saunders Soybeans Irrigated Saunders Soybeans Nonirrigated Scotts Bluff Wheat Irrigated Scotts Bluff Wheat Nonirrigated Scotts Bluff Oats Irrigated Scotts Bluff Oats Nonirrigated Scotts Bluff Corn All Scotts Bluff Grain Sorghum All Scotts Bluff Soybeans All Scotts Bluff Barley All Seward Wheat All Seward Oats All Seward Corn Irrigated Seward Corn Nonirrigated Seward Grain Sorghum All Seward Soybeans Irrigated Seward Soybeans Nonirrigated Sheridan Wheat All Sheridan Oats Irrigated Sheridan Oats Nonirrigated Sheridan Corn Irrigated Sheridan Corn Nonirrigated Sheridan Grain Sorghum All Sheridan Dry Peas All 1, Sheridan Soybeans All Sheridan Barley All Sherman Wheat All Sherman Oats All Sherman Corn Irrigated Sherman Corn Nonirrigated Sherman Grain Sorghum All Sherman Soybeans Irrigated Sherman Soybeans Nonirrigated Sherman Barley All Sioux Wheat Irrigated Sioux Wheat Nonirrigated Sioux Oats Irrigated Sioux Oats Nonirrigated Sioux Corn All Sioux Grain Sorghum All Sioux Barley All Stanton Wheat All Stanton Oats All Stanton Corn All Stanton Grain Sorghum All Stanton Soybeans All Stanton Barley All Thayer Wheat All Thayer Oats All Thayer Corn Irrigated Thayer Corn Nonirrigated Thayer Grain Sorghum All

45 Table 1. Yields, Prices, Revenue, and Payments for Crops in Nebraska County Name Combined Crop Type Oly Avg Yield Oly Avg Price Revenue Guarantee Yield/ Planted Acre Price Revenue Payment Rate per Paid Acre Payment per Base Acre Including 85% Paid Acre Factor Revenue per Base Acre Including ARC CO Payment Revenue per Base Acre Including ARC CO Payment as a % of Guarantee units/acre* $/unit* $/acre units/acre* $/unit* $/acre $/acre $/acre $/acre % Thayer Soybeans Irrigated Thayer Soybeans Nonirrigated Thomas Wheat All Thomas Oats All Thomas Corn All Thomas Grain Sorghum All Thurston Wheat All Thurston Oats All Thurston Corn All Thurston Grain Sorghum All Thurston Dry Peas All Thurston Soybeans All Thurston Barley All Valley Wheat All Valley Oats Irrigated Valley Oats Nonirrigated Valley Corn All Valley Grain Sorghum All Valley Soybeans All Valley Barley All Washington Wheat All Washington Oats All Washington Corn All Washington Grain Sorghum All Washington Soybeans All Wayne Wheat All Wayne Oats All Wayne Corn All Wayne Grain Sorghum All Wayne Soybeans All Wayne Barley All Webster Wheat All Webster Oats All Webster Corn Irrigated Webster Corn Nonirrigated Webster Grain Sorghum All Webster Dry Peas All Webster Soybeans Irrigated Webster Soybeans Nonirrigated Webster Barley All Wheeler Wheat All Wheeler Oats Irrigated Wheeler Oats Nonirrigated Wheeler Corn All Wheeler Grain Sorghum All Wheeler Soybeans All York Wheat Irrigated York Wheat Nonirrigated York Oats All York Corn All York Grain Sorghum Irrigated York Grain Sorghum Nonirrigated York Soybeans All * Units in bushels for barley, corn, flaxseed, grain sorghum, oats, soybeans, and wheat; units in pounds for chickpeas, canola, dry peas, mustard seed, safflower, and sunflower seed Note: Revenue and payments calculated using USDA FSA final prices and yields per planted acre available as of November 9, Dawes and Sioux County calculations reflect USDA FSA compilation of Dawes County and North Sioux County in one grouping (Dawes) and South Sioux County in another grouping (Sioux). Total payments are subject to announced 6.8% reduction for budget sequestration not factored into estimates. 9 43

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47 Nebraska Farm Business, Inc. The Nebraska Farm Business Association was started in 1976 as part of Cooperative Extension & The University of Nebraska Today we work closely with the University, with teaching, research & extension projects 2016 Farm Financial Outlook Nebraska Farm Business, Inc. In 2002, NFBA became NFBI and we officially became a private company. Nebraska Farm Business, Inc. About Nebraska Farm Business, Inc. Financial Analysis Personalized Service Consultants work one on one with clients Business Planning Tax Planning Customized Services Clients can choose and pay only for the services they want and need Cash Flow Planning Goal: To Help Educate Farmers & Ranchers with Record Keeping and Management Through Financial Analysis. Accounting Convenience Travel throughout Nebraska and meet in our Lincoln office several times a year to meet with clients Our Clients We serve large and small farms, farm partnerships, and corporations all over Nebraska Payroll Tax Mangmnt 45

48 Cash Income received during the year minus expenses paid during the year. Generally used for tax purposes Accrual Income earned in the year minus the expenses incurred during the year. Used for analysis purposes Cash vs. Accrual Accrual accounting is vital to knowing and understanding the financial health of a business. Cash basis records should be converted to an accrual basis annually (at a minimum) to measure the true growth of the farming business All of the Farm Financial Analysis participants information is combined to one database NFBI takes that information and generates the average books Whole State Regional Top Efficient Quickfacts Nebraska Averages These resources provide a great benchmarking tool, allowing the producer to see where they are on a scale of those operations that are similar to theirs Review saw extreme weather conditions Net Farm Income Review Mother s Day tornado near Beaver Crossing, NE May 11 th June 3 rd Hail Storm Pilger Tornado June 16 th Kenesaw Area Hail Storm July 9 th Crop Prices Fell Again Soybean Price Falls from $12.30 to $9.50 Livestock Prices Soared 1,000# calves raise from $151 to $202 46

49 Net Farm Income Trend Crop vs Livestock Farms $450,000 Net Farm Income $600,000 Net Farm Income by Enterprise $400,000 $350,000 $500,000 $300,000 $400,000 $250,000 $200,000 $300,000 $150,000 $200,000 $100,000 $50,000 $100,000 $ $ Net Farm Income Crop Crop & Beef Behind the Numbers Net Farm Income Range: $2.2 Million to $500,000 Gross Income Range: $14 Million to $50,000 Age of Operator Range: 24 to 81 Crop Acre Range: Zero to 4,700 So Where Are We Headed? $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Net Farm Income A New Normal?? *2015 Net Farm Income maybe equal to any ARC payments received

50 Or is it an Old Normal? Government Payments vs Net Farm Income $100,000 $80,000 $60,000 $40,000 $20,000 $0 $20,000 Net Farm Income Net Farm Income $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $ Government Payments Net Farm Income Current Ratio Debt Load Rising Total Debt but Falling Debt to Asset Ratio Current Ratio "Green Light" "Red Light" 48

51 Working Capital As A Percentage of Gross Income 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Behind the Numbers Working Capital to Gross Revenues 12% of farms have negative working capital. 23% overall are in the red 63% of farms are sitting in a good position. 20% of farms are sitting with more than 80% of working capital to gross revenues. 0.0% Working Capital As A Percentage of Gross Income < 0 0% 10% 10% 25% > 25% Debt to Asset Ratio Debt to Asset Ratio 45% 40% 40% 35% 39% 37% 30% 33% 32% 30% 25% 29% 25% 26% 26% 20% 22% 15% 10% 5% 0% Debt to Asset Ratio Comparison of % of Farms by Debt to Asset Ratio 2000 Debt To Asset Ratio Debt To Asset Ratio Less than 5% 5% 30% 31% 60% Less than 5% 5% 30% 31% 60% 60% 80% Above 80% 60% 80% Above 80% 49

52 Debt to Asset Ratio 100% 90% 80% 70% 60% 50% 40% 30% 20% Average Total Debt Trend Total Average Debt $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 10% $300,000 0% $200, Less than 5% 5% 30% 31% 60% 60% 80% Above 80% Average Total Debt Climb = Average Total Debt = $1,009,704 First time to reach over $1 Million What kind of debt is increasing? Debt by Term $1,200,000 $1,000,000 Debt by Type $800,000 $600,000 $400,000 $200,000 $ Current Intermediate Long Term Non Farm 50

53 Debt by Term Crop Acres vs Debt Increase Debt by Type $1,200,000 $1,200,000 1,200 $1,000,000 $1,000,000 1,000 $800,000 $800, $600,000 $600, $400,000 $400, $200,000 $200, $ $ Current Intermediate Long Term Non Farm Current Intermediate Long Term Non Farm Crop Acres Behind the Debt # s Range on total debt load $0 $10 Million Interest Paid $0 $309,000 Average $36,353 Impact of Rising Interest Rates?? Not as simple as taking $1 million x 2% Not all that is borrowed for a full 12 months Most Intermediate & Long Term Rate are fixed (for at least the short term 3 5 years) Total Debt 11% 9% 27% 37% 16% < $50,000 $50,000 $500,000 $500,000 $1,000,000 $1 Million $2 Million > $2 Million Comparison of today to the 1980 s 1980 s Large number of farms and ranches Largely leveraged by single lender Years out of the Great Depression 12,000 Banks and 1,000 Farm Credit $14 of debt to every $1 of net farm income Today 270,000 farms generate 80% of the agricultural revenue Third party/counter party risk Years out of the 80 s 7,000 Banks and 82 Farm Credit $6 If Net of debt Farm to Income every $1 = of $50,000 net farm in income 2015/2016 in 2013 and debt & holds steady, the number will be $20 Just of debt four years for every ago it would $1 of have net farm been $2 of debt to every $1 of NFI income. Info taken from Dr. David Kohl s article Comparing and Contrasting and : Deja Vu? 51

54 Non Farm Expense Summary Family Living The #1 Non Farm Cost to Watch Family Living $96,645 Income Taxes $48,885 Furnishing & Appliances $649 Non Farm Vehicle $2,266 Non Farm Real Estate $9,152 Other Non Farm Capital Purchases $3,321 Non Farm Savings & Investments $6,992 Total Cash Family Living, Investment & Non Farm Capital Purchases $167,852 Family Living Expense Family Living & Taxes Family Living Expense Range: $25,000 $450,000 Family Living Expense $180,000 Family Living & Taxes Trend Even Distribution $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 Less than $50,000 $50, ,000 $100, ,0000 Over $200,000 $ Family Living Taxes 52

55 Net Farm Income vs Family Living 1977 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $100,000 Net Farm Income Family Living Expense 1995 Difference Food & Meals $5,010 $9,927 $4,917 Medical Care/Health Ins. $4,580 $11,700 $7,120 Cash Donations $2,010 $5,401 $3,391 Household/Clothing $5,101 $10,283 $5,182 Personal Care/Recreation $5,694 $15,837 $10,143 Child/Dependent Care $131 $1,577 $1,446 Gifts $1,477 $4,138 $2,661 Education $788 $1,892 $1,104 Utilities $1,330 $3,129 $1,799 Non FarmVehicle Expense $1,449 $4,382 $2,933 Household RE Taxes $359 $1,489 $1,130 Non Farm Interest $405 $2,187 $1,782 Life/Disability/LTC Ins $1,926 $6,306 $4,380 Miscellaneous $1,068 $18,369 $17,301 Total $31,328 $96,617 $65,289 Who has a Family Living Problem? How can Non Farm costs Put YOU Out of Business? Family A Spends $250,000 per year Family Living & Taxes Accrual Income Trend = $400,000 $150,000 Left Over Family B Spends $75,000 per year Family Living & Taxes Accrual Income Trend = $50,000 Short $25,000 Year 1 Year 2 Year 3 Year 4 Net Farm Income $75,000 $75,000 $75,000 $75,000 Income Taxes $21,000 $21,000 $21,000 $21,000 Family Living $100,000 $100,000 $100,000 $100,000 Total Expense $121,000 $121,000 $121,000 $121,000 Net Shortage $ 46,000 $ 46,000 $ 46,000 $ 46,000 Extra Borrowing $46,000 $92,000 $138,000 $184,000 53

56 Average Net Worth Change Average Net Worth Change $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Net Worth Change Net Worth Change 9 Year Total Increase over $1.8 Million $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 ($100,000) ($200,000) ($300,000) Net Worth Change What IF we have consistent Net Worth losses? Average Net Worth Change $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 ($100,000) ($200,000) ($300,000) Would be the same Net Worth if we had averaged $95,023 for all 13 years. Cost of Production A look by the acre 54

57 Net Income Equation Yield Price Expenses Net Farm Income How Do You Increase Net Farm Income? Yield Price Expenses Grow More XSell It For More Produce It For Less Beware of Maximizing Yield at the expense of your bottom line. Example: Spending $30/ ac for fertilizer to increase your yield 5 Bushels Price needs to be at $6.00 to break even. Carrying Cost of the Fertilizer Risk of not increasing the yield (Crop Damage, etc) Irrigated Corn All Tenure Types $1,200 $1,000 $800 $600 $400 $200 Irrigated Corn Gross Income & Expenses $ * Gross Income includes Government payments and expenses include Labor & Management Charges. Gross Income Total Expenses 55

58 Average Cost Comparison Irr. Corn Irr Corn Machinery Costs Per Acre Seed $68.05 $89.49 $91.14 Fertilizer $ $ $ Chemicals $50.75 $56.16 $47.12 Crop Insurance $23.36 $40.36 $32.58 Operating Power/Machine Costs $74.52 $ $ Land Rent $ $ $ Other Direct Costs $84.14 $ $87.18 Overhead Expenses $71.84 $75.67 $87.27 Total Expenses $ $ $ Included in our Operating Power/Crop Machinery cost is Fuel & Oil, General Repairs & Supplies, Machinery Repairs, Custom Hire and Machinery Leases. $ $ $ $ $ $ $80.00 $60.00 $40.00 $20.00 $ Machinery Costs Per Ac Irrigated Corn Machinery Costs Per Acre Irrigated Corn Cash Rent per Acre 2009 Fuel & Oil $16.28 $27.51 General Repairs & Supplies $9.60 $12.76 Machinery Repairs $13.53 $22.90 Mach. Depr. & Intermediate Debt Interest $61.85 $49.20 Custom Hire $8.26 $31.50 Machinery Leases $16.17 $11.28 Total Machinery Costs $ $ $ $ $ $ $ $50.00 $ $ $ $ $ $ $ $ $ $ $

59 When Should You Stop Farming Ground? When Should You Stop Farming Ground? Income Expenses What happens when net income is negative? Should a negative net return per acre mean you shouldn t be farming that piece of ground? Income Expenses Three Categories of Expenses: Direct Expenses Those that go away with less acres (seed, fertilizer, chemicals, etc) Overhead Expenses Those that stay the same regardless of a change of acres (insurance, depreciation, building repairs, utilities, etc) Non Farm Family Living & Inc. Taxes Economics of running in the short run vs. the long run Ideally, Gross Income would be larger than ALL three types of expenses Needs to be to produce in the long term When Should You Stop Farming Ground? When Should You Stop Farming Ground? Income Gross Income Expenses Overhead Expenses Direct Expenses IF Gross Income > Direct Expenses & Overhead Expenses Look at: Or: Cutting non farm expenses Increasing non farm income Using prior year profits to subsidize (Reduced net worth) Income Gross Income Expenses Direct Expenses IF Gross Income > Direct Expenses Your income covers the expenses that would go away without farming it and contributes SOME to overhead expenses. You are better off continuing to farm that ground in the short run. The overhead expenses don t change if you don t farm that ground so anything you can add to them is beneficial. 57

60 When Should You Stop Farming Ground? When Should You Stop Farming Ground? Income Gross Income Expenses Direct Expenses IF Gross Income < Direct Expenses Your income DOESN T even cover the expenses that would go away without farming it. Economic law says you re better off to let that piece of ground go. Income Gross Income Expenses Direct Expenses Other things to think about: Opportunity to farm that ground again in the future? How much net worth can you stand to lose? How long can you withstand losses? Example of Cash Rent Question Irr. Beans Net Return Per Acre (with Labor & Mgmt) Yield 180 Breakeven Direct Costs $ $4.07 Overhead Costs $87.27 Total Farm Costs $ $4.56 Family Living & $ Taxes Total Costs $ $5.29 If you can price your corn above $4.07, you are better off to continue to farm this piece of ground. If not, you need to look at long term benefits. $ $ $ $50.00 $0.00 $50.00 $ $ Cash Rent Share Rent Cash Rent Average Return: $71.14 Share Rent Average Return: $

61 Irr. Beans Net Return Per Acre (with Labor and Mgmt) $ $ $ Irr. Corn Cost of Production Average Yield 180 $50.00 $0.00 $50.00 $ Direct Costs $ Cash Rent $ Overhead Costs $87.27 Total Costs $ $ Cash Rent Share Rent Cost of Production $4.56 per Bushel Cash Rent Average Return: $26.77 Share Rent Average Return: $27.98 Irr. Corn Cost of Production Yield 180 Direct Costs $ Cash Rent $ Overhead Costs $87.27 Total Farm Costs $ Family Living & Taxes $ Total Costs $ Cost of Production $5.29 per Bushel Family Living: $96,645 Income Taxes: $48,855 Total: $145,500 Average Acres: 1,100 Cost Per Acre: $ Cost Per Bu: $0.73 Irr. Corn Cost of Production Yield Direct Costs $ $ $ Cash Rent $ $ $ Overhead Costs $87.27 $87.27 $87.27 Total Farm Costs $ $ $ Family Living & Taxes $ $ $ Total Costs $ $ $ Cost of Production $6.35 per Bu. $5.29 per Bu. $4.33 per Bu. 59

62 Irr. Corn Cost of Production Low 1/3 Average High 1/3 Direct Costs $ $ $ Cash Rent $ $ $ Overhead Costs $75.32 $87.27 $92.79 Total Farm Costs $ $ $ Family Living & Taxes $ $ $ Total Costs $1, $ $ Cost of Production $5.95 per Bu. $5.29 per Bu. $4.70 per Bu. * Assuming same 180 bushel yield & same Family Living Cost Irr. Soybean Cost of Production Low 1/3 Average High 1/3 Direct Costs $ $ $ Cash Rent $ $ $ Overhead Costs $ $87.55 $61.39 Total Farm Costs $ $ $ Family Living & Taxes $ $ $ Total Costs $ $ $ Cost of Production $15.06 per Bu. $13.76 per Bu. $10.73 per Bu. * Assuming same 60 bushel yield & same Family Living Cost Comparison of Ave. vs Top 1/3 Average Top 1/3 Difference Fertilizer $60.68 $40.48 $20.20 Chemicals $46.67 $41.08 $5.59 Machinery Costs $ $97.93 $45.68 Cash Rent $ $ $83.90 Beef Cow/Calf Cost of Production Average Direct Costs $ Overhead Costs $ Total Farm Costs $ Family Living & Taxes $ Total Costs per Cow $ Cost of Production $ per CWT * Cost of Production based on 576 lbs calf per cow. 60

63 Watch Where You re Going? Watch Where You re Going? 2,000 Acres Speed = 55 MPH Distance = Time = 110,000 Miles 2,000 Hours Speed = 85 MPH Distance = Time = 170,000 Miles 2,000 Hours Loss Per Acre = $150 Net Worth Loss = $300,000 20,000 Acres Loss Per Acre = $150 Net Worth Loss = $3,000,000 Take Home Points Tighter Margins Ahead Need to manage all costs (Farm and Non Farm) as effectively as possible. Re evaluate production decisions to make sure they STILL make sense Tough decision may be needed Give up high cost cash rented ground? Cut family living? Take Home Points Figure YOUR Cost of Production Averages are just averages Facts do not cease to exist because they are ignored. Aldous Huxley, Complete Essays 2, Use YOUR Cost of Production to make Changes "Knowledge isn t power until it is applied." Dale Carnegie If you Don t Know Where your going, you may get there Faster Than You Want. 61

64 Questions? Tina Barrett Executive Director Nebraska Farm Business, Inc Touzalin Ave, Ste 105 Lincoln, NE (402)

65 What is Risk? Risk Management: Protecting and Creating Value 2015 Cornhusker Economics Outlook Meetings Department of Agricultural Economics University of Nebraska-Lincoln Jay Parsons, Associate Professor 103B Filley Hall, Department of Agricultural Economics Department of Agricultural Economics Origin of the Word RISK RISICARE Italian word TO DARE Risk Tradeoffs Upside: Greater risk taking usually leads to greater wealth Downside: Losses from risk taking can be devastating Managing risks are a matter of evaluating tradeoffs. How much risk and how much stress are you willing to endure to potentially achieve higher returns? Department of Agricultural Economics Department 4 of Agricultural Economics 63

66 Definition of Risk RISK is the effect of uncertainty on your objectives. 1 Risk is objective focused. What are you trying to accomplish? Risk management explicitly addresses uncertainty If you ignore the risks you don t understand, you are probably in trouble or soon going to be. Risk has both positive and negative effects. 1 ANSI/ASSE/ISO Risk Management Principles and Guidelines Department of Agricultural Economics Risk management creates value as well as protects it! It is about recognizing opportunity as well as preventing disasters. European View (YUK!) The goal of risk management is to be risk free and if something does go wrong, someone is to blame. The Glass is Half Full Risk management is fundamentally about increasing the probability of achieving your objectives. Tim Leech Risk Oversight, Inc. Department of Agricultural Economics Risk Management Culture Risk management should be viewed as a priority and a competitive advantage. Christopher Mandel Sedgwick, Inc. Sources of Risk in Agriculture 1. Marketing/Price Risk 2. Production Risk 3. Institutional/Legal Risk 4. Human Risk 5. Financial Risk Business Risk Department of Agricultural Economics Department of Agricultural Economics 64

67 Strategies for Managing Risk 1. Avoid it 2. Reduce it a) Reduce the probability it will happen b) Reduce the impact if it does happen 3. Transfer it outside the business a) Insurance b) Contracting 4. Build your internal capacity to bear a) Increase reserves b) Maintain flexibility 5. Accept it Department of Agricultural Economics Financial Risk Financial risk is the extra risk that results from financial obligations associated with financing. Contributing factors include Anything that would negatively affect cash flow and the ability to meet debt obligations or other financial responsibility Controls Maintaining a financial cushion Practicing leasing and contract strategies Maintaining up-to-date financial information Department of Agricultural Economics Market Risk Fluctuations in prices paid for inputs and received for outputs by the firm after committing to plan of action. Contributing factors include National and regional production Demand (including quality issues) Government programs Seasonal effects Controls Forward pricing or contracting Diversified market timing Diversified production Selecting low price risk enterprises Obtaining market information Marketing/value add agreements Crop Insurance Production Risk Fluctuations in yield (physical quantities of production) Contributing factors Controls Weather Selecting low production risk Timing of operations enterprises Pests Using low-risk production practices Disease Diversification Genetics Maintaining flexibility and extra capacity Wildlife Utilizing land over a wide spread area Crop insurance Department of Agricultural Economics Department of Agricultural Economics 65

68 Institutional Risk Anything that changes the rules of the game. Contributing factors include Changes in social attitudes Changing regulations about land use and environmental quality Changes in government programs The possibilities of lawsuits for accidents or misuse of chemicals Department of Agricultural Economics Institutional Risk Anything that changes the rules of the game. Controls Maintaining a liability insurance program Keeping informed of new regulations and interpretations of the law Department of Agricultural Economics Human Risk Any risk attributed to the humans involved in the operation. Contributing factors include The possibilities of losing a key employee Health issues/injury risk Morale or the mental state of the work force Skill set and training of employees Human Risk Any risk attributed to the humans involved in the operation. Controls A backup management plan A plan to deal with the possible loss of a key employee Maintaining a health and life insurance program Establishing and maintaining an estate plan A good employee benefit package Department of Agricultural Economics Department of Agricultural Economics 66

69 Characteristics of a Solid Risk Management Culture Risk management is an integral part of your organization. done as a regular part of making decisions viewed as a priority viewed as a competitive advantage pro-active (not just re-active). Department of Agricultural Economics Risk Management Process Communication & Consultation Establish the context Internal Context External Context Objective(s) Involved Risk assessment Risk identification Risk analysis Evaluation Treatment Implementation Department of Agricultural Economics Monitoring & Review Take Home Points Be aware of the sources of risk you face and potential impacts on your operation. Build awareness for what you can do to manage these risks. Be prepared with good monitoring and recordkeeping practices. Stay informed about available tools, new production practices and other info. Department of Agricultural Economics g{tç~ léâ4 Contact Info: Jay Parsons jparsons4@unl.edu 103B Filley Hall, Department of Agricultural Economics 67