Illinois Grain and Feed Association

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Farm Policy News

February 13, 2018

Revised 2018 Corn and Soybean Budgets

Gary Schnitkey

Department of Agricultural and Consumer Economics
University of Illinois

farmdoc daily (8):24


Revised 2018 corn and soybean budgets are available in the management section of farmdoc (here). The major revision was to commodity prices. A $3.60 per bushel corn price and $9.60 per bushel price are now used in budgets, closely matching current fall delivery bids. Those prices are higher than in the July 2017 release. Still, the revised budgets suggest low returns and soybeans still are projected more profitable than corn.

Central Illinois High-Productivity Budgets

Table 1 shows budgets for high-productivity farmland in central Illinois. Three other sets of budgets are available in the “2018 Crop Budgets”: 1) Northern Illinois, 2) Central Illinois farmland with low productivity, and 3) Southern Illinois. In all cases, budgets are given for corn-after-soybeans, corn-after-corn, soybeans-after-corn, soybeans-after-soybeans, and wheat. Double-crop soybean budgets are provided for central and southern Illinois.

fdd13022018_tab1.jpg

For all regions, budgets are based on historical values from grain farms enrolled in Illinois Farm Business Farm Management (FBFM). Historical values for the regions are shown in “Revenues and Costs for Corn, Soybeans, Wheat, and Double-Crop Soybeans“, a publication available in the management section of farmdoc. Historical values in FBFM are updated to current conditions based on changes in commodity and input prices.

Budgets do not represent a specific production system. Rather they represent the average of all costs and revenues of farms enrolled in FBFM.

Yields Used in Budgets

Corn yield used in the corn-after-soybeans budget is 208 bushels per acre. This yield is a trend yield for high-productivity farmland in central Illinois. The trend yield represents an expectation of yield for the coming year. As always, actual yield will vary from the trend yield based on conditions experienced during the growing season. Note that the 208 bushel yield is well below yields in recent years. Corn yields on high-productivity farmland were 228 bushels per acre in 2016 and are projected to be 226 bushels per acre in 2017. Corn yield in 2015 was 200 bushels per acre, below the 208 bushel per acre yields in 2018 budgets.

Corn yields in the corn-after-corn budgets are ten bushels lower than corn-after-soybean budgets, representing a typical yield drag from corn following corn. The yield drag can vary from year-to-year, with a much larger yield drag often occurring in stressful years like drought years.

Soybean yield used in the soybean-after-corn budget is 63 bushels per acre. Similar to corn yield, the 63 bushel yield is a trend yield. Similar to corn, recent yields have been higher than the 63 bushel trend yield. Soybean yields were 66 bushels per acre in 2015, 69 bushels per acre in 2016, and 67 bushels per acre in 2017.

Soybean yield used in soybeans-after-soybeans is 60 bushels per acre, 3 bushels lower than the soybeans-after-corn yield. This lower yield represents a typical yield drag associated with soybeans following soybeans.

Commodity Prices

A $3.60 per bushel corn price and $9.60 per bushel soybean price are used in budgets. These represent current fall delivery bid prices for the two crops. Obviously, corn and soybean prices can vary from those shown in budgets.

The 2018 projected corn price is higher than those of recent years. Corn prices received by central Illinois farmers averages $3.47 in 2017 and are projected to average $3.50 for 2018. The 2017 soybean price is near the same in recent years. Central Illinois farmers received $9.50 per bushel in 2016 and are projected to average $9.50 in 2017. `

Non-land costs

Non-land costs shown in Table 1 are lower than those in recent years as continued costs reductions are projected. For example, the $534 per acre estimate of non-land costs for corn-after-soybeans is about $10 per acre less than non-land costs in 2017.

Operator and land returns

Operator and land return represents a return to the farmer and landowner. If farmland is cash rent, the cash rent would be subtracted from operator and land return. Take the operator and land return of $215 per acre for corn-after-soybeans and a cash rent of $260 per acre, close to the average for high-productivity farmland in central Illinois. In the case, the farmer’s return is -$45 per acre (-$45 = $215 operator and land return – $260 can rent).

Negative returns are projected for cash rented farmland at average cash rents, given that yields are at trend levels and prices are near fall delivery prices. For farms to be profitable on corn-after-soybeans, either yields or prices must be higher. Take a $300 operator and land return as an example. A $300 return would allow payment of a $260 cash rent and a modest return for the farmer. For corn-after-soybeans to generate a $300 return, yields would have to be 231 bushels per acre, given that all other prices and costs are as shown in the budget. That yield is close to the exceptional yields of 2016 and 2017. Alternatively, a $4.00 corn price would generate a $300 per acre return given a 208 bushel per acre yield and $534 of non-land costs shown in the budgets. As noted previously (farmdocDaily, January 30, 2018), either exceptional yields or above $4.00 corn prices are needed for reasonable returns in 2018.

Corn Versus Soybeans

Soybeans are projected to be more profitable than corn, similar to results for all years since 2013 (farmdoc daily, July 25, 2017). Soybeans-after-corn is projected to have a $270 per acre return compared to $215 per acre of corn-after-soybeans.

Soybeans-after-soybeans is projected to have $231 per acre of returns, a $16 higher return than corn-after-soybeans. The soybeans-after-soybeans has a 3 bushel per acre lower yield than does soybeans-after-corn and costs that are $10 higher on a per acre basis. While higher, the soybeans-after-soybeans return may not be large enough to warrant planting soybeans versus planting corn. Soybeans-after-soybeans represents a higher risk level than is represented by a corn-soybeans rotation. The soybeans-after-soybeans yield drag may be more significant in a year with an adverse growing season.

Corn-after-corn has a $164 operator and land return, significantly lower than $270 return for soybeans-after-corn. Corn-after-corn has a 10 bushels lower yield than corn-after-soybeans and $13 per ace higher costs. It seems difficult to economically justify planting corn-after-corn.

Summary

Budgets for 2018 depict a low to negative return environment for corn and soybean production in 2018. These projections do not differ greatly from projections made in 2016 and 2017. Similar to 2016 and 2017, high yields again could lead to higher returns. Alternatively, higher prices could occur. However, neither of those situations are foregone conclusions. A very poor income will result if prices do not increase and yields are close to historically expected levels.

Soybeans are projected to be more profitable than corn. Again, these projections do not differ from those in recent years. Illinois farmers have been shifting to more soybeans. In central Illinois, additional risks associated with soybeans-after-soybeans production may not outweigh the additional projected returns from soybeans-after-soybeans. Perhaps more important, corn-after-corn does not seem like an economical alternative in 2018.

References

Schnitkey, G. “2018 Crop Budgets: More of the Same.” farmdoc daily (7):134, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 25, 2017.

Schnitkey, G. “Crop Budgets, Illinois, 2018.” Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February, 2018.

Schnitkey, G. “Revenue and Costs for Corn, Soybeans, Wheat, and Double-Crop Soybeans, Actual for 2011 through 2016, Projected 2017 and 2018.” Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February, 2018.

Farm Policy News

Jacobs, K. “A Discussion of the Sec 199A Deduction and its Potential Impacts on Producers and Grain Marketing Firms.” farmdoc daily (8):13, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 26, 2018.

Permalink: http://farmdocdaily.illinois.edu/2018/01/a-discussion-of-the-sec-199a-deduction.html


The newly passed Tax Cuts and Jobs Act of 2017 introduced substantive changes to individual and entity-level tax rates and deductions, many of them welcomed by individuals and corporations. One section of the Internal Revenue Code (IRC) in particular–IRC § 199A Deduction for Qualified Business Income of Pass-Through Entities (Sec 199A hereafter)–is getting a lot of attention, raising questions and eyebrows for its potential impacts on grain marketing decisions. In essence, language in this section of code gives producers marketing grain a significant incentive to sell to a cooperative rather than a non-cooperative firm.

The purpose of this article is to highlight the primary features of the Sec 199A deduction causing concern and discuss potential implications for producers and grain marketing firms. Note that at one month into the new tax year, there are ongoing efforts directed at modifying the language in the code to correct the unintended effects on producers and grain marketing firms.

What Does Sec 199A Do?

Sec 199A is a deduction that applies to income earned from the business activities of pass-through entities, like S corporations, sole proprietorships, partnerships, and so forth. These are businesses whose income is not taxed at the entity level, but passed-through to its owners. The intent in crafting Sec 199A was two-pronged: 1) to ensure that these pass-through, non-corporate entities had a deduction similar to the reduction in the corporate tax rate, which dropped from a maximum of 35% to a flat rate of 21%, and 2) to retain, for cooperative organizations, a prior deduction that was removed: Domestic Productions Activity Deduction (DPAD), or Sec 199. This is not a typo: Sec 199A replaces Sec 199 of the 2001 Bush tax cuts. Note that the DPAD was a jobs-creation deduction and available to manufacturing firms across many sectors, including agricultural cooperatives marketing farmers’ domestic production of grain.

The Sec 199A deduction for pass-through entities is based on qualified business income (QBI). There are restrictions on what qualifies as a business activity for this deduction (many services, for example, do not), and both the definition of qualified business income and calculation of the actual deduction are complicated. But in simple terms, the deduction is 20% of the qualified business income, subset to a wage limitation. Though complicated, this portion of the code is not contentious.

Sec 199A has a second feature, and this is the part that leaves open a number of questions about unintended consequences. In addition to the deduction related to qualified business income, it provides a 20% deduction on ‘qualified cooperative dividends.’ Typically we think of qualified cooperative dividends as the annual allocation of profits from a cooperative to its members–these are better called qualified cooperative patronage allocations. In this new law, those are indeed included in the payments eligible for 20% deduction and also not hugely controversial. However, another payment by cooperatives to its members is also included in the definition of ‘qualified cooperative dividends’: per unit retains (more correctly called per unit retains paid in money, or PURPIM). Per unit retains, in the simplest terms, are the payments from cooperatives to members for their grain or other agricultural production. Note the deduction applies only to the marketing or pooling functions (grain and other agricultural products) and does not include purchases by members for agronomy, seed, fuel, etc.

Per unit retains were defined as ‘qualified cooperative dividends.’ As a result, a producer selling grain can receive a 20% deduction of gross grain sales (before farm expenses) from taxable income less capital gains if s/he is a member selling to a cooperative. If instead the sale is to a non-cooperative marketing firm or processor (e.g., ADM, Cargill, or any number of independent grain marketing firms), the deduction is 20% of the net income. At the surface, this creates a significant effective basis gap between otherwise equal basis bids for grain or other agricultural commodities. A simple example, abstracting from the complexities of QBI and marginal tax calculations shows the potential.

A farmer has $500k in gross grain sales (140,000 bushels) and $100,000 in net farm income, all from selling grain. If she markets through a cooperative, she anticipates a patronage allocation of $0.025 cents per bushel, or $3,500.

  • Choice A: She markets the crop to an independent grain firm or processor and, through Sec 199A, she deducts up to 20% of her QBI: 20% x $100,000 = $20,000 potential deduction.
  • Choice B: If she markets the crop to her cooperative, she deducts up to 20% of gross sales (20% x $500,000 = $100,000) because they qualify as per unit retains, plus 20% of any qualified patronage allocation (20% x $3,500 = $700). The potential deduction is $100,700.

At a 22% marginal tax rate based on selling to an independent marketing firm or processor (Choice A), the deduction difference between these two choices is $80,700, which equates to $0.12 per bushel in taxes. Estimates from tax professionals working with producers is that the tax effect may range from $0.05 – $0.20 per bushel.

It is clear to see why producers are eager for clarification on this law and why independent grain firms and processors want it changed. Facing equivalent cash bids in the market, the signal is pretty clear that it is advantageous to market to a cooperative.

What if it stays as written?

The above example is meant for illustration, and there are a number of factors that might mitigate the true differential created by the law, and these are producer-specific. Still, contemplating its preservation, a cascade of questions emerge regarding grain and agricultural product movements, local capacity, optimal organizational structures for farmers, and the fate of independents. Below are my thoughts summarized in the two broader questions I receive, vetted with trusted colleagues and grain marketing experts. The perspective I provide here applies to agricultural producers and grain marketing in the Midwest, but certainly there are related or larger impacts for other types of ag cooperatives throughout the country.

  1. Do cooperatives have the storage and transport capacity to handle agricultural products if all producers sell to a cooperative? What happens if not? What will be the local price impacts?

Generally speaking, it is unlikely that cooperatives have sufficient facilities currently to handle the harvest grain movements and other seasonal gluts that arise in the Midwest. But storage is a local phenomenon and each region will be different. In Iowa, for example, approximately 72% of the 1.4 billion bushels of licensed grain warehouse capacity (state and federally licensed) is held by a cooperative. If one considers on-farm storage, the argument could be made that this law wouldn’t create a significant grain-movement challenge in a number of parts of Iowa. In Kansas, approximately 70% of the grain storage is held by cooperatives or on-farm. Cooperatives in both states use ground piles to manage harvest gluts, and if this law sticks, that challenge may be exacerbated in the short term. But cooperatives and producers would respond to the economic incentives to invest in grain storage in that case. Condominium grain storage is another option for producers to mitigate storage constraints.

Grain storage facilities aside, a number of mitigating origination options are already used. In regions where processors and ethanol plants exist, producers use ‘direct-ship’ contracts to haul grain directly to a processor even though it is sold to the cooperative. Without recent data regarding the proportion of grain moving this way, it is hard to say whether we will see a significant change in those patterns, and even if so, grain movements and prices will find an equilibrium. Independent grain firms and processors likely will seek to establish marketing arrangements with cooperatives as a way to secure footing locally in the grain business.

Local price impacts are another unknown. On the one hand, some independents and corporations received a nearly 40% reduction in taxes (from 35% to 21%) via Sec 199A that cooperatives, which pass through member-based income to patron-members did not. The argument has been made that they can use those tax savings to be price competitive in the eyes of producers making the marketing decision. On the other hand, local capacity constraints at cooperatives may depress local basis, particularly during harvest, which partially mitigates the tax-differential created by Sec 199A. Cooperatives typically do not turn away grain from members, which is why we observe large grain piles on the ground during harvest. Producers individually will need to weigh the potential tax deduction benefit with other costs associated with marketing grain: hauling distance, local basis differential, differentials in wait times at grain dumps, and so on. If net farm income is expected to be low, the per-bushel estimated tax difference created by Sec 199A dissipates.

  1. 2. Will producers form their own cooperatives or independents reorganize as a cooperative?

In local areas without grain/oilseed marketing cooperatives, the potential exists to see producers forming closed cooperative organizations to capitalize on the Sec 199A deduction. More likely, however, is that existing cooperatives acquire or build assets in those areas, or as mentioned above, form marketing arrangements with existing firms. In much of the Midwest, existing cooperatives are of sufficient size and capitalization and have the spatial presence to respond much faster to the need for capacity and changing grain dynamics than a start-up could accomplish. Alongside the temptation to form a cooperative, the new tax code creates incentives for producers to reconsider their own operation’s structure, potentially reorganizing as a C corporation or S corporation or changing from one to the other. Those details aren’t discussed here, but are complicating factors in determining how the farm economy might change if Sec 199A holds as written.

Effects on grain cooperatives

Producers will be impacted not only by the farm-level deduction of Sec 199A but, as members of cooperatives, stand to notice positive changes related to their cooperative’s patronage allocations and equity redemption. The tax savings to cooperatives on non-member business and the supply-side of their business are just like those for other corporations, and the new tax rate is 21% instead of a maximum of 35%. However, if the Sec 199A deduction for producers marketing through a cooperative holds, all producers selling grain to a cooperative will choose membership, effectively eliminating any non-member marketing business. That aside, tax savings on cooperative profits related to input supply or other non-marketing functions could be used to accelerate the cooperative’s equity redemption which gets income into the members’ hands more quickly. Alternatively, the tax savings could be used to improve facilities and service offerings to benefit members.

For those wanting more details, the fact sheet “Impact of Tax Reform on Agricultural Cooperatives” (Briggeman and Kenkel, 2018) dives into the expected changes in cooperative patronage allocation and member-level returns from the law using simulation.

Conclusion

The questions that fall out of the reality of the Sec 199A code as written are important ones, as their answers weigh on the potential for significant changes in the structure of the agricultural supply chain for crops, in grain movements, and in farm-level incomes.

In a statement on January 12, 2018, the U.S. Department of Agriculture’s Under Secretary for Marketing and Regulatory Programs Greg Ibach wrote, “The aim of the Tax Cuts and Jobs Act was to spur economic growth across the entire American economy, including the agricultural sector. While the goal was to preserve benefits in Section 199A for cooperatives and their patrons, the unintended consequences of the current language disadvantage the independent operators in the same industry. The federal tax code should not pick winners and losers in the marketplace. We applaud Congress for acknowledging and moving to correct the disparity, and our expectation is that a solution is forthcoming. USDA stands ready to assist in any way necessary.”

The agricultural industry–cooperatives, too–anticipated that the existing DPAD deduction would not stand in the tax reform negotiations, but thought a similar provision would replace it. Few, if any, anticipated that a cooperative deduction would be expanded to the producer-level, or believe it will stand as written. Organizations such as the National Grain and Feed Association (NGFA) and the National Council of Farmer Cooperatives (NCFC) are working jointly on a revision with Congress. Tax professionals, agricultural businesses, and producers are waiting for clarification on whether the law will stay as-is or be changed, and will then await guidance from the IRS on interpretation.

References

Briggeman, B.C., P. Kenkel. “Impact of Tax Reform on Agricultural Cooperatives.” Special Edition ACCC Fact Sheet Series, Collaborative Research KSU / OSU, January 10, 2018. https://www.agmanager.info/agribusiness-management/papers/impact-tax-reform-agricultural-cooperatives-special-edition-accc

U.S. Department of Agriculture, Statement of Under Secretary Greg Ibach on Section 199A Tax Code Fix, Release No. 0010.18, January 12, 2018. https://www.usda.gov/media/press-releases/2018/01/12/statement-under-secretary-greg-ibach-section-199a-tax-code-fix

2018 Standard Mileage Rates

Notice 2018-03

SECTION 1. PURPOSE
This notice provides the optional 2018 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. This notice also provides the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan.

SECTION 2. BACKGROUND
Rev. Proc. 2010-51, 2010-51 I.R.B. 883, provides rules for computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes, and for substantiating, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses of local transportation or travel away from home. Taxpayers using the standard mileage rates must comply with Rev. Proc. 2010-51. However, a taxpayer is not required to use the substantiation methods described in Rev. Proc. 2010-51, but instead may substantiate using actual allowable expense amounts if the taxpayer maintains adequate records or other sufficient evidence.

An independent contractor conducts an annual study for the Internal Revenue Service of the fixed and variable costs of operating an automobile to determine the standard mileage rates for business, medical, and moving use reflected in this notice. The standard mileage rate for charitable use is set by § 170(i).

SECTION 3. STANDARD MILEAGE RATES
The standard mileage rate for transportation or travel expenses is 54.5 cents per mile for all miles of business use (business standard mileage rate). See section 4 of Rev. Proc. 2010-51.
The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization under § 170. See section 5 of   Rev. Proc. 2010-51.
The standard mileage rate is 18 cents per mile for use of an automobile (1) for medical care described in § 213, or (2) as part of a move for which the expenses are deductible under § 217. See section 5 of Rev. Proc. 2010-51.

SECTION 4. BASIS REDUCTION AMOUNT
For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 22 cents per mile for 2014, 24 cents per mile for 2015, 24 cents per mile for 2016, 25 cents per mile for 2017, and 25 cents per mile for 2018. See section 4.04 of Rev. Proc. 2010-51.

SECTION 5. MAXIMUM STANDARD AUTOMOBILE COST
For purposes of computing the allowance under a FAVR plan, the standard automobile cost may not exceed $27,300 for automobiles (excluding trucks and vans) or $31,000 for trucks and vans. See section 6.02(6) of Rev. Proc. 2010-51.

SECTION 6. EFFECTIVE DATE
This notice is effective for (1) deductible transportation expenses paid or incurred on or after January 1, 2018, and (2) mileage allowances or reimbursements paid to an employee or to a charitable volunteer (a) on or after January 1, 2018, and (b) for transportation expenses the employee or charitable volunteer pays or incurs on or after January 1, 2018.

SECTION 7. EFFECT ON OTHER DOCUMENTS
Notice 2016-79 is superseded.

DRAFTING INFORMATION
The principal author of this notice is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information on this notice contact Bernard P. Harvey on (202) 317-7005 (not a toll-free call).

Farm Policy News

Update

December 6, 2017

Latest News Summary

USDA Updates U.S. Ag Export Forecast Amid NAFTA Worries

December 05, 2017

In fiscal year 2017, U.S. agricultural exports totaled $140.5 billion, representing the third-highest level on record.  In its quarterly export forecast in August, USDA indicated that fiscal year 2018 agricultural exports were projected at $139.0 billion.  However, in its latest quarterly forecast, released late last month, USDA increased the fiscal year 2018 export projection by $1.0 billion.  Today’s update examines the latest export forecast in more detail, and looks briefly at recent NAFTA news items pertaining to agriculture, including a report from the Nebraska Farm Bureau.

Read This News Summary

Farm Policy News

November 27, 2017

Weekly Outlook: Acreage Prospects for 2018

Hubbs, T. “Weekly Outlook: Acreage Prospects for 2018.” farmdoc daily (7):217, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 27, 2017.

Permalink: http://farmdocdaily.illinois.edu/2017/11/acreage-prospects-2018.html


Corn and soybean prices have weathered the USDA’s November Crop Production report that contained larger forecasts of the size of the 2017 harvest, relative to market expectations, for both crops. Considerable speculation will occur over the next few months about the acreage decisions farmers will make in 2018. Current market conditions appear to support moderate soybean and corn acreage expansion in 2018.

Projecting the acreage allocations for 2018 U.S. crops will begin in earnest after the turn of the new calendar year. Prospects for 2018 crop acreage levels start with expectations about planted acreage for principal crops. Since planted acreage varies substantially from year to year, anticipating total planted acreage is quite difficult. In 2017, acreage planted in principal field crops declined to 318.2 million acres, the lowest level since 2011. The decrease in principal field crop acreage was particularly acute in the northern and southern plains. Texas and Kansas both decreased acreage by over 500,000 acres. North and South Dakota also decreased planted acreage by 143,000 and 279,000 acres respectively. Nebraska was the lone exception with an increase of 202,000 planted acres. While Illinois decreased planted acreage by 163,000 acres, most of the major Corn Belt states increase planted acreage in 2017. As we move into 2018, the prospect of large decreases in crop acreage in the Corn Belt appears low, while acreage changes in the plains may be in the form of crop adjustments instead of acreage losses.

In conjunction with the decrease in total principal crop planted acreage, prevented planting acreage was relatively low in 2017. The Farm Service Agency reports 2.4 million acres of prevented plantings in 2017, down from 3.7 million in 2016 and 6.7 million in 2016. Conservation Reserve Program acreage appears set to remain near 23.4 million acres. The current low price environment across most field crops point to steady or slightly lower total planted acreage in 2018 but holds the potential for more soybean and corn acres.

In 2017, the combination of corn and soybean acres increased to 179.9 million planted acres, expanding to 56.5 percent of principal crop acres. While corn and soybean acreage in total continued a three-year trend of increased planted acres, the change in soybean acreage stood out in 2017 with expansion to 90.2 million planted acres. Other than soybeans, the only major crops to see any planted acreage increases in 2017 were cotton, rye, peanuts, and canola. In the main corn producing states during 2017, only Kansas, Michigan, and North Dakota increased corn acreage over 2016 planting decisions. Increased planting of soybean acreage was common across all major producing states. North Dakota and Kansas lead the way in soybean acreage growth with 1.15 million and 700 thousand acres respectively. The increased soybean acreage, and in some instances corn acreage, came at the expense of other field crops with wheat acreage losing over 5.5 million acres from 2016 to 2017. The continuation of corn and soybean acreage expansion depends on demand prospects during the 2017-18 marketing year and the evolution of corn and soybean prices between now and planting.

Currently, demand prospects for corn remain mixed. Current demand is very strong for corn use in ethanol as production continues to exceed the pace of a year ago. The growth of livestock numbers and supportive prices in many livestock sectors provides support for increased feed demand. An indication of feed use for this marketing year will be available with the December 1 Grain Stocks report on January 12. Corn exports currently lag behind last year’s pace with export inspections through November 23 trailing last year’s total by 209 million bushels. When combined with the trade policy uncertainty associated with NAFTA, developments in the corn export market could inject volatility into corn prices in 2018. Additionally, the 7.2 million acres of corn to be planted in Brazil saw a large portion of the prospective acreage pushed back to the second crop which is more susceptible to the dry season. A reduction in Brazilian corn production may help corn exports in 2018.

For soybeans, the pace of the domestic crush is off to a strong start in the first two months of the marketing year. Soybean exports appear to be set for a strong marketing year but currently trail last year’s pace. Export inspections through November 23 lag last year’s pace by 120 million bushels. The current soybean crop being planted in South America will be a major factor in determining whether U.S. soybean exports hit record highs this marketing year.

The market will continue to form expectations about acreage devoted to corn and soybean acres. Preliminary surveys of farmer’s planting intentions for 2018 have varied on the direction and magnitude of soybean and wheat acreage. Thus far, all surveys have indicated an expansion of corn acreage. Current market prices imply, at a minimum, a repeat of the soybean acreage planted in 2017. The prospect of corn and soybean acres seeing moderate expansions is possible in 2018. Data availability on acreage prospects in 2018 begins with the USDA’s January 12 Winter Wheat Seedings report and will be followed by the March 30 Prospective Plantings report.

Farm Policy News

Update

November 17, 2017

Latest News Summary

 

Rural America: Perspective from USDA Report, and Federal Reserve Ag Credit Survey

November 16, 2017

On Thursday, the U.S. Department of Agriculture released its annual Rural America at a Glance report, which summarizes the status of conditions and trends in rural areas. In addition, the Federal Reserve Bank of Minneapolis recently provided details of its third quarter Agricultural Credit Conditions Survey, which follows on the heels of recent third quarter agricultural reports from four other federal reserve districts. Together, the USDA report and Minneapolis Fed update, provide some interesting perspective on the state of non-metro America.

 

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IFEEDER: Institute for Feed Education and Research

FOR IMMEDIATE RELEASE

Contact: Victoria Broehm

Director of Communications

(703) 558-3579; vbroehm@afia.org 

 

IFEEDER Focuses 2016-17 Research, Education Priorities on Improving Public, Policymaker Support of Feed Industry Issues

ARLINGTON, Va., Nov. 2, 2017 – The Institute for Feed Education and Research (IFEEDER) released its first-ever annual report to donors today, reinforcing its continued commitment to executing research and education projects and initiatives that support the animal food industry’s legislative and regulatory priorities, protect its license to operate, and preserve consumer choice.

“The past year for IFEEDER has been about one thing—focus,” said Rob Sheffer, the 2016-17 chairman of the IFEEDER Board of Trustees. “In 2016-17, we spent plenty of time refocusing what types of projects to fund in the future as well as how to better communicate with, or ‘pay particular attention to,’ you, our donors. … Even the logo has a ‘focus’ on research and education, while paying tribute to the importance of the historical green and black to signify the message of sustainability and growth.”

The annual report provides an overview of the institute’s financial revenue and expenses as well as a cumulative list of corporate and individual donors. It also highlighted some of IFEEDER’s recent accomplishments, including:

  • Developed a one-of-a-kind, generic hazard-analysis resource for facilities to use to create an animal food safety plan as required under the Food Safety Modernization Act (FSMA). This tool will help facilities save thousands of dollars and hundreds of hours of employees’ time and significantly reduce the number of new protocols that animal food companies must make to comply with the FSMA requirements.
  • Carried out an independent, in-depth survey on the Food and Drug Administration’s process for approving new feed ingredients. The staggering results showed that on average, feed producers are investing $600,000 per product on product approval costs, and the industry is losing an average $1.75 million annually. The American Feed Industry Association staff will share this data with the FDA in an effort to significantly improve the ingredient review approval process.
  • Carried out a three-year research project with the National Pork Board and other groups to identify knowledge gaps and opportunities for the feed industry to better prepare for a future outbreak of the porcine epidemic diarrhea virus (PEDv).
  • Developed a new tool that will provide the standard for all livestock and poultry organizations, universities and other organizations to use to assess the emissions generated by species over their total lifecycles. The methodology used to develop this tool concluded, based on scientific evidence, that the U.S. livestock and poultry sectors contribute less than 4.2 percent of total U.S. greenhouse gas emissions.
  • Overhauled the IFEEDER website by incorporating a new logo and optimizing the site for search engines and mobile devices.

IFEEDER also provided a look-ahead to upcoming research and education projects and initiatives it will be carrying out during the 2017-18 fiscal cycle, which ends April 30, 2018.

###

 

About IFEEDER

Founded in 2009 by the American Feed Industry Association (AFIA), the Institute for Feed Education and Research is a 501 (c)(3) public charity and is a critical link in the ever-evolving food supply chain. Serving as a champion for the animal food industry, IFEEDER supports critical education and research initiatives that ensure consumers have access to a safe, healthy and sustainable food supply. IFEEDER focuses its work in two primary areas: funding critical animal feed and pet food research to support AFIA’s legislative and regulatory positions, and developing appropriate messaging for policymakers, consumer influencers and stakeholders which highlights the industry’s positive contributions to the availability of safe, wholesome and affordable food, and preservation of our natural resources.

Farm Policy News October 12, 2017

NAFTA Renegotiation Continues- Pres. Trump, Sec. Perdue, Lawmakers Weigh In
View in Browser
Update

October 12, 2017

Latest News Summary

 

NAFTA Renegotiation Continues- Pres. Trump, Sec. Perdue, Lawmakers Weigh In

October 11, 2017

William Mauldin reported on Wednesday at The Wall Street Journal Online that, “President Donald Trump, speaking alongside Canadian Prime Minister Justin Trudeau, opened the door to separate trade deals with Canada and Mexico to replace the North American Free Trade Agreement and repeated his warnings that the U.S. could withdraw from the pact.”

 

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Farm Policy News

October 6, 2017

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Senate Hearings- Trade, and Conservation Reserve Program Examined

October 05, 2017

On Thursday, the Senate Finance Committee held a hearing to consider three nominees for key trade positions, while the Senate Ag Committee questioned two nominees for Undersecretary posts at the USDA.  Today’s update highlights some key points from the hearings, including issues related to agricultural trade and the Conservation Reserve Program.

 

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FarmDoc Daily October 4

 

 

Data and Outlook for Making 2018 Cash Rental Decisions

October 03, 2017

Gary Schnitkey

Much of the cash rent data for making 2018 cash rental decisions is now available. Data include 1) 2017 county and state cash rents as reported by the National Agricultural Statistical Service (NASS) and 2) actual 2017 and projected 2018 cash rents on professionally managed farmland as reported by the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA). These data are reported in this article. For 2018, cash rents likely will continue to decline as farmers are projected to have negative returns when cash rents are at average levels.

 

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