agricultural economy in september 2007 steve elmore pioneer – a dupont business sept 17, 2007 –...
TRANSCRIPT
Agricultural Economy inSeptember 2007
Steve ElmorePioneer – A DuPont Business
Sept 17, 2007 – ASFMRA – Washington DC
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FUNDAMENTALS
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0
1
2
3
4
5
6
7
8
9
10
1950 1970 1990 2010 2030 2050
Billions
Less Developed Regions
More Developed Regions
Source: United Nations, World Population Prospects: The 2004 Revision (medium scenario), 2005www.prb.org.
Growth in More, Less Developed Countries
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Real GDP [Annual % Change)
2005 2006 2007 2008
World 3.5 4.0 3.4 3.5
N America 3.2 3.3 2.2 2.9
W. Europe 1.7 2.8 2.5 2.1
C. & E. Europe 6.2 6.8 6.1 5.7
Asia 4.6 4.9 4.7 4.5
China 10.4 10.7 10.0 9.0
Japan 1.9 2.2 2.2 1.9
ex Japan 7.3 7.5 7.0 6.8
S. America 5.2 5.7 4.9 4.8
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Population & Income Drives the Demand forCorn & Soybean in the Last Decade
+13%+13%The growth in world
populationpopulation over the last 10 years
+35%+35%The growth in global
income income over the last 10 years
+32%+32%The growth in meat meat
consumption (Beef +15%, Pork
+37%, Chicken +39%) over the last decade
+29%+29%The growth in world
corn corn consumption over the last decade
+59%+59%The growth in world
soybean soybean consumption over the last decade
+2%+2%The growth in world crop crop areaarea harvested over the
last decade
AREA in 2008
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World Wheat Stocks & Stocks:Use Ratio
0
40
80
120
160
200
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
15%
20%
25%
30%
35%
40%
Stocks (Mil MT) Stocks:Use
Stocks:UseLowest Level
GlobalEnding Stocks
Lowest Since 1981
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U.S. Wheat Farm Price
4.654.80
5.105.40
5.80
2.30
2.80
3.30
3.80
4.30
4.80
5.30
5.80
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
Ma
y
Jun
e
July
Au
g
Se
pt
$/Bu
Month ofUSDA Estimate
Made for the2007 Crop Year
FOOD USE
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New record levels in red.
US Wheat
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Drawdown in Soybean Stocks-to-Use (& Carryover in terms of Days*)
0%
5%
10%
15%
20%
25%
30%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
20
40
60
80
100
120
* Days of additional carryover at constant usage rates.
Stocks-to-Use Days*
United States
Global
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New record levels in red.
US Soybeans
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Drawdown in Corn Stocks-to-Use (& Carryover in terms of Days*)
0%
5%
10%
15%
20%
25%
30%
35%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
18
37
55
73
91
110
128
* Days of additional carryover at constant usage rates.
Stocks-to-Use Days*
United States
Global
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2006/07 Crop: Difference Between WASDESept. 2006 Estimate to August 2007 Final
Source: Pioneer Market Economics USDA/NASS
-600 -500 -400 -300 -200 -100 0
Beginning Stocks
Production
Imports
Supply, total
Feed and residual
Food, seed & industrial
Ethanol for fuel
Domestic, total
Exports
Use, total
Ending Stocks
Sep-06 Aug-07
Mil Bu 06/07 est 06/07 FinalChange to
FinalBeginning Stocks 2,062 1,967 (95) Production 10,976 10,535 (441) Imports 10 10 - Supply, total 13,047 12,512 (535) Feed and residual 6,125 5,750 (375) Food, seed & industrial 3,540 3,525 (15) Ethanol for fuel 2,150 2,150 - Domestic, total 9,665 9,275 (390) Exports 2,150 2,100 (50) Use, total 11,815 11,375 (440) Ending Stocks 1,232 1,137 (95)
WASDE REPORT
Change from 06/07 Est. to 06/07 FinalMil Bu
Price:+$0.65
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New record levels in red.
US Corn
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Drawdown in Soybean Stocks-to-Use (& Carryover in terms of Days*)
0%
5%
10%
15%
20%
25%
30%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
20
40
60
80
100
120
* Days of additional carryover at constant usage rates.
Stocks-to-Use Days*
United States
Global
BIOFUELS
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Economic Growth Drives Oil Consumption
FUEL USE
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 07q1
United States Other OECDChina Former USSROther Non-OECD
Million Barrels Per Day
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
2002 2003 2004 2005 2006 07q1
United States Other OECDChina Former USSROther Non-OECD World Demand
Growth Index (2002=1)
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Oil & Natural Gas Prices
10
20
30
40
50
60
70
80
90
0
2
4
6
8
10
12
14
16
West Texas Henry Hub
Oil ($/bbl) Natural Gas ($/mmbtu)
2002200120001999 2003 2004 2005 2006 2007
FUEL USE
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Ethanol Capacity
1.92 2.35 2.71 3.10 3.64 4.345.39
0.060.39 0.48
0.600.75
1.78
6.34
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2001 2003 2005 2007 2009 2011
Jan. 1 capacity Under construction RFS Mandate
Calendar Year
Billion Gallons
As of July 20: • 6.1 bil. gal./yr. of ethanol
capacity (119 Plants)
• Additional 6.4 billion gallons under construction (78 plants) & expansion (8 plants).
As of July 20: • 6.1 bil. gal./yr. of ethanol
capacity (119 Plants)
• Additional 6.4 billion gallons under construction (78 plants) & expansion (8 plants).
Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics
FUEL USE
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U.S. Ethanol from corn policies:
Continued support from national and state public policies with a political environment trumpeting independence.• Federal $0.51 / gal tax benefit
• $0.54 / gal tariff on imported ethanol
• MTBE effectively eliminated .. no substitute emerges
• Increased bio-fuel use mandate (15 billion gallons?)
• Other state and federal incentives (from E-10 to E-20)
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Ethanol: Dry Mill Net Operating Returns
0.20
0.60 0.56
0.85
0.41
1.56
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
02/0
3
03/0
4
04/0
5
05/0
6
06/0
7
07/0
8
$/Gallon
FUEL USE
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Dry Mill Net Return U.S. Industry Average: 2007/08
0.41
1.86
0.30
0.32
0.29
1.14
0.00
0.50
1.00
1.50
2.00
2.50
Ethanol DDG Corn Nat.Gas
OthCost
NetReturn
$/per Gallon
FUEL USE
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Dry Mill Ethanol Plant Net Returns over Operating Costs, 2007/08
Corn Price (Dollars per Bushel)
2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00
Ethanol Price (Dollars per Gallon)1.25 0.07 0.01 -0.06 -0.12 -0.19 -0.25 -0.31 -0.38 -0.44 -0.51 -0.57 -0.64 -0.701.30 0.12 0.06 -0.01 -0.07 -0.14 -0.20 -0.26 -0.33 -0.39 -0.46 -0.52 -0.59 -0.651.35 0.17 0.11 0.04 -0.02 -0.09 -0.15 -0.21 -0.28 -0.34 -0.41 -0.47 -0.54 -0.601.40 0.22 0.16 0.09 0.03 -0.04 -0.10 -0.16 -0.23 -0.29 -0.36 -0.42 -0.49 -0.551.45 0.27 0.21 0.14 0.08 0.01 -0.05 -0.11 -0.18 -0.24 -0.31 -0.37 -0.44 -0.501.50 0.32 0.26 0.19 0.13 0.06 0.00 -0.06 -0.13 -0.19 -0.26 -0.32 -0.39 -0.451.55 0.37 0.31 0.24 0.18 0.11 0.05 -0.01 -0.08 -0.14 -0.21 -0.27 -0.34 -0.401.60 0.42 0.36 0.29 0.23 0.16 0.10 0.04 -0.03 -0.09 -0.16 -0.22 -0.29 -0.351.65 0.47 0.41 0.34 0.28 0.21 0.15 0.09 0.02 -0.04 -0.11 -0.17 -0.24 -0.301.70 0.52 0.46 0.39 0.33 0.26 0.20 0.14 0.07 0.01 -0.06 -0.12 -0.19 -0.251.75 0.57 0.51 0.44 0.38 0.31 0.25 0.19 0.12 0.06 -0.01 -0.07 -0.14 -0.201.80 0.62 0.56 0.49 0.43 0.36 0.30 0.24 0.17 0.11 0.04 -0.02 -0.09 -0.151.85 0.67 0.61 0.54 0.48 0.41 0.35 0.29 0.22 0.16 0.09 0.03 -0.04 -0.101.90 0.72 0.66 0.59 0.53 0.46 0.40 0.34 0.27 0.21 0.14 0.08 0.01 -0.051.95 0.77 0.71 0.64 0.58 0.51 0.45 0.39 0.32 0.26 0.19 0.13 0.06 0.002.00 0.82 0.76 0.69 0.63 0.56 0.50 0.44 0.37 0.31 0.24 0.18 0.11 0.052.05 0.87 0.81 0.74 0.68 0.61 0.55 0.49 0.42 0.36 0.29 0.23 0.16 0.102.10 0.92 0.86 0.79 0.73 0.66 0.60 0.54 0.47 0.41 0.34 0.28 0.21 0.152.15 0.97 0.91 0.84 0.78 0.71 0.65 0.59 0.52 0.46 0.39 0.33 0.26 0.202.20 1.02 0.96 0.89 0.83 0.76 0.70 0.64 0.57 0.51 0.44 0.38 0.31 0.252.25 1.07 1.01 0.94 0.88 0.81 0.75 0.69 0.62 0.56 0.49 0.43 0.36 0.302.30 1.12 1.06 0.99 0.93 0.86 0.80 0.74 0.67 0.61 0.54 0.48 0.41 0.352.35 1.17 1.11 1.04 0.98 0.91 0.85 0.79 0.72 0.66 0.59 0.53 0.46 0.402.40 1.22 1.16 1.09 1.03 0.96 0.90 0.84 0.77 0.71 0.64 0.58 0.51 0.452.45 1.27 1.21 1.14 1.08 1.01 0.95 0.89 0.82 0.76 0.69 0.63 0.56 0.502.50 1.32 1.26 1.19 1.13 1.06 1.00 0.94 0.87 0.81 0.74 0.68 0.61 0.55
Notes: The matrix shows net returns over variable operating costs for various combinations of ethanol and corn prices. To calculate plant profits, capital and other fixed costs would also need to be subtracted from these figures.
In the yellow zone, net returns over operating costs are less than $0.20 per gallon, which may be less than required to cover fixed costs. The matrix assumes DDG prices change with corn prices. For example, a $3.25/bu. corn price is associated with a $98/ton DDG price. Other operating costs (fuel, electricity, labor, etc.) are assumed to average $0.62 per gallon. The matrix assumes one bushel of corn yields 2.746 gallons of ethanol and 17 pounds of DDGs.
FAPRI average of 500 outcomes for 2007/08 December 2007 futures, Mar. 23, 2007
Corn price $3.23 per bushel Corn price $3.90 per bushel ($4.10 minus $0.20 assumed basis)Ethanol price $1.78 per gallon Ethanol price $1.89 per gallonDry mill net return $0.28 per gallon Dry mill net return $0.22 per gallon
Distribution of Dry Mill Ethanol Plant Net Returns over Operating Costs
Crop Year 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
Proportion of Stochastic Outcomes (Percent)Negative Net Returns 0.0 0.0 0.0 1.4 2.0 1.4 1.2 2.6 3.0 1.8 1.2$0.00-$0.20 per Gallon 0.0 30.6 54.4 60.6 60.4 60.8 62.0 62.4 62.0 62.2 61.4Over $0.20 per Gallon 100.0 69.4 45.6 38.0 37.6 37.8 36.8 35.0 35.0 36.0 37.4
U.S. Dry Mill Net Returns over Variable Costs
FUEL USE
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Biodiesel Growth Economically Biodiesel Growth Economically LimitedLimitedwith the High Soybean Oil Priceswith the High Soybean Oil Prices
10
15
20
25
30
35
40
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
USDA FAPRI CBOT Futures
Cents/Pound
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Biodiesel Plant Net ReturnsBiodiesel Plant Net Returnsover Variable Costsover Variable CostsBiodiesel Plant Net Returns over Operating Costs, 2007/08
Soybean Oil Price (Dollars per Pound)
0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44
Biodiesel Price (Dollars per Gallon)2.50 0.47 0.32 0.16 0.01 -0.15 -0.30 -0.45 -0.61 -0.76 -0.92 -1.07 -1.22 -1.382.55 0.52 0.37 0.21 0.06 -0.10 -0.25 -0.40 -0.56 -0.71 -0.87 -1.02 -1.17 -1.332.60 0.57 0.42 0.26 0.11 -0.05 -0.20 -0.35 -0.51 -0.66 -0.82 -0.97 -1.12 -1.282.65 0.62 0.47 0.31 0.16 0.00 -0.15 -0.30 -0.46 -0.61 -0.77 -0.92 -1.07 -1.232.70 0.67 0.52 0.36 0.21 0.05 -0.10 -0.25 -0.41 -0.56 -0.72 -0.87 -1.02 -1.182.75 0.72 0.57 0.41 0.26 0.10 -0.05 -0.20 -0.36 -0.51 -0.67 -0.82 -0.97 -1.132.80 0.77 0.62 0.46 0.31 0.15 0.00 -0.15 -0.31 -0.46 -0.62 -0.77 -0.92 -1.082.85 0.82 0.67 0.51 0.36 0.20 0.05 -0.10 -0.26 -0.41 -0.57 -0.72 -0.87 -1.032.90 0.87 0.72 0.56 0.41 0.25 0.10 -0.05 -0.21 -0.36 -0.52 -0.67 -0.82 -0.982.95 0.92 0.77 0.61 0.46 0.30 0.15 0.00 -0.16 -0.31 -0.47 -0.62 -0.77 -0.933.00 0.97 0.82 0.66 0.51 0.35 0.20 0.05 -0.11 -0.26 -0.42 -0.57 -0.72 -0.883.05 1.02 0.87 0.71 0.56 0.40 0.25 0.10 -0.06 -0.21 -0.37 -0.52 -0.67 -0.833.10 1.07 0.92 0.76 0.61 0.45 0.30 0.15 -0.01 -0.16 -0.32 -0.47 -0.62 -0.783.15 1.12 0.97 0.81 0.66 0.50 0.35 0.20 0.04 -0.11 -0.27 -0.42 -0.57 -0.733.20 1.17 1.02 0.86 0.71 0.55 0.40 0.25 0.09 -0.06 -0.22 -0.37 -0.52 -0.683.25 1.22 1.07 0.91 0.76 0.60 0.45 0.30 0.14 -0.01 -0.17 -0.32 -0.47 -0.633.30 1.27 1.12 0.96 0.81 0.65 0.50 0.35 0.19 0.04 -0.12 -0.27 -0.42 -0.583.35 1.32 1.17 1.01 0.86 0.70 0.55 0.40 0.24 0.09 -0.07 -0.22 -0.37 -0.533.40 1.37 1.22 1.06 0.91 0.75 0.60 0.45 0.29 0.14 -0.02 -0.17 -0.32 -0.483.45 1.42 1.27 1.11 0.96 0.80 0.65 0.50 0.34 0.19 0.03 -0.12 -0.27 -0.433.50 1.47 1.32 1.16 1.01 0.85 0.70 0.55 0.39 0.24 0.08 -0.07 -0.22 -0.383.55 1.52 1.37 1.21 1.06 0.90 0.75 0.60 0.44 0.29 0.13 -0.02 -0.17 -0.333.60 1.57 1.42 1.26 1.11 0.95 0.80 0.65 0.49 0.34 0.18 0.03 -0.12 -0.283.65 1.62 1.47 1.31 1.16 1.00 0.85 0.70 0.54 0.39 0.23 0.08 -0.07 -0.233.70 1.67 1.52 1.36 1.21 1.05 0.90 0.75 0.59 0.44 0.28 0.13 -0.02 -0.183.75 1.72 1.57 1.41 1.26 1.10 0.95 0.80 0.64 0.49 0.33 0.18 0.03 -0.13
Notes: The matrix shows net returns over variable operating costs for various combinations of biodiesel and soybean oil prices. To calculate plant profits, capital and other fixed costs would also need to be subtracted from these figures.
In the yellow zone, net returns over operating costs are less than $0.20 per gallon, which may be less than required to cover fixed costs. The matrix assumes glycerin is valued at $0.05 per gallon of biodiesel. Other operating costs (fuel, electricity, labor, etc.) are assumed to average $0.54 per gallon. The matrix assumes 7.7 pounds of crude soybean oil are required to produce one gallon of biodiesel.
FAPRI average of 500 outcomes for 2007/08
Soybean oil price $0.307 per poundBiodiesel price $3.17 per gallonPlant net return $0.32 per gallon
Distribution of Biodiesel Plant Net Returns over Operating Costs
Crop Year 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
Proportion of Stochastic Outcomes (Percent)Negative Net Returns 0.0 0.4 19.2 47.6 57.2 61.2 65.0 71.0 76.6 79.8 81.4$0.00-$0.20 per Gallon 0.0 12.8 69.2 51.0 40.4 36.2 33.4 27.0 22.4 18.0 17.0Over $0.20 per Gallon 100.0 86.8 11.6 1.4 2.4 2.6 1.6 2.0 1.0 2.2 1.6
Source: FAPRI – University of Missouri.
LIVESTOCK
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U.S. LivestockU.S. LivestockU.S. LivestockU.S. Livestock
New record levels in red.
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Feed & Fuel: Aggregate values for the U.S. Livestock Sector (Beef,
Pork & Chicken)
19.4 24.4 83.8 160.6 169.889.20
20
40
60
80
100
120
140
160
180
20
06
20
07
20
06
20
07
20
06
20
07
Billion Dollars
Feed Costs Retail Revenue
Livestock Cash Receipts
up $5.0 billion, +25.5%
up $5.4 billion, +6.4%
up $9.2 billion, +5.7%
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U.S. All Milk Prices & Variable U.S. All Milk Prices & Variable Production Costs Production Costs
1.92
1.78
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2002 2003 2004 2005 2006 2007
11.68
12.68
13.68
14.68
15.68
16.68
17.68
18.68
19.68
Feed Non-feed Variable Costs All Milk Price
Change in Costs vs. 2002 ($/Cwt) Milk Costs & Price ($/Cwt)
2007 or 0? U.S. Farm Bill
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What would happen if a 2007 farm bill is not enacted by September 30, 2007? If Congress takes no action on commodity support before the beginning of the 2008 harvest, then the non-expiring provisions of primarily the Agriculture Adjustment Act of 1938 and the Agriculture Act of 1949 take effect.
We will have a FARM BILL (or extension) because major distortions would occur if lawmakers do not get their work completed and major budget issues.
Permanent law does not authorize counter-cyclical payments or decoupled direct payments. Rice and Soybeans would not be mandatory. Non-recourse loans would be based off of Parity -- a formula that gives a unit of the
commodity the same purchasing power it had in the 1910-1914 time period.
Unit Average Farm Price
(July 2007)
Calculated
Parity Price(July 2007)
Parity Support %
Loan Rate
Based on Parity
Cotton $/Lb 0.468 2.06 65% 1.34
Peanuts $/Lb 0.183 0.653 75% to 90% 0.49 to 0.59
Wheat $/Bu 5.37 10.90 50% 5.45
Corn $/Bu 3.23 8.09 50% 4.05
Milk $/Cwt 21.70 40.50 75% to 90% 30.38 to 36.45
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Cash Receipts are Very Strong
$80
$90
$100
$110
$120
$130
$140
$150
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Crops Livestock
Billion Dollars
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Portion of U.S. Crop Receipts
22%
7%
16%7%
48%
24%
7%
15%
6%
48%
29%
8%
15% 5%
43%
20052005
20062006
20072007
Non-Row CropNon-Row Crop
CottonCotton& Sugar& Sugar
FeedFeedGrainsGrains
FoodFoodGrainsGrains
OilseedsOilseeds
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Market Returns Lead 2007 Income Rebound
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Direct Govt pymts Emergency pymtsNet cash farm income Net cash income less govt pymts
Billion Dollars
Net Farm Cash Income
Net Cash Income lessGov’t Payments
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U.S. Average Farm Real Estate Value
5% 6% 7% 5% 5% 7% 21% 15% 14%
$1,020 $1,080 $1,150 $1,210 $1,270$1,360
$1,650
$1,900
$2,160
$0
$500
$1,000
$1,500
$2,000
$2,50019
99
2000
2001
2002
2003
2004
2005
2006
2007
0%
5%
10%
15%
20%
25%
% Change Farm Value
Dollars/Acre Percent Change
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CRP: Global Carryover in terms of Days*
40
50
60
70
80
90
100
110
120
130
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Corn Soybeans Wheat
* Days of additional carryover at constant usage rates.
Days*
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Observations
• Economic fundamentals will continue to put pressure on the agricultural sector to produce.
• 2007 volatility is the new norm? 2008 battle for area will be intense as the days of carry are at historic low levels on corn & wheat.
• Ethanol needs policies to remain and strong oil prices that develop the infrastructure. Margins, however, are decreasing at the plant level.
• Economics are a great way to analyze the sector’s health. But in Washington DC, the politics, the budget, and ELECTIONS will determine what the final bill looks like!
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U.S. Budget Will Shape the Debate
-500
-400
-300
-200
-100
0
100
200
300
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2103 2015
Billion dollars
2002 Farm Bill+$73 billion
(for 10 years)
2002 Farm Bill+$73 billion
(for 10 years)
2007 Farm Bill-/+ ???
2007 Farm Bill-/+ ???
1996 Farm Bill-$12.8 billion
(for 10 years)
1996 Farm Bill-$12.8 billion
(for 10 years)
1990 Farm Bill-$13.6 billion
(for 10 years)
1990 Farm Bill-$13.6 billion
(for 10 years)
Current LawBudget Surplus
Budget Deficit
THANKTHANKYOU!YOU!
APPENDIX –APPENDIX –The House and Senate IssuesThe House and Senate Issues
in 2007 in 2007
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Political compromise that protect the status quoLowered payment limits
• AGI of less than $1 million per year
• 2/3 income from agriculture for AGI of $0.5-1.0 millionIncreased programs for fruits and vegetables
Extra $6.5 billion in funding• $4.0 billion in new taxes on investors
• $2.5 billion in taxes from oil companies
Safety net similar to 2002 farm bill• Revenue Counter-cyclical Program (RCCP) option
House Farm Bill 2007
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House – Payment Targets
Crop Target PricesDirect
PaymentLoan Rates
Counter-cyclical Trigger
Old NewNo
ChangeOld New
Corn 2.63 2.63 0.28 1.95 1.95 2.35
Sorghum 2.57 2.57 0.35 1.95 1.95 2.22
Soybeans 5.80 6.10 0.44 5.00 5.00 5.66
Wheat 3.92 4.15 0.52 2.75 2.94 3.63
Cotton 0.724 0.70 0.067 0.52 0.52 0.633
Rice 10.50 10.50 2.35 6.50 6.50 8.15
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USDA Estimates of Dollars per AcreAverage Total Cost of Production Crop 2002
2008 Forecast
$ Increase % Increase
Corn 330 462 132 40
Sorghum 203 321 118 58
Soybeans 232 302 70 30
Wheat 176 232 56 32
Cotton 529 611 82 16
Rice 586 797 211 36
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House – RCCP Revenue Targets and USDA Operating Cost Estimates for 2008
Crop Revenue Target Operating Costs
Corn 344 225
Sorghum 131 138
Soybeans 232 104
Wheat 150 91
Cotton 497 391
Rice 548 427
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1. Direct attribution to a single ID number for commodity and conservation payments
2. The three-entity rule eliminated
3. Payments limits under bill:
A. Counter-cyclical payments: retain current limit of $65,000
B. Direct payments: limit increases to $60,000 from current $40,000
C. Generic Certificates: eliminated, but no cap on MLGs or LDPs
D. Conservation programs: cap of $60,000 for participation in one
program; $125,000 if a producer in more than one program
4. Husbands and wives have separate limits if both are farming
House – Payment Limits
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CRP reauthorized with 39.2 million acres. New enrollments in 2009
WRP maximum enrollment decreased from 3,775,000 to 3,605,000 acres. Wetlands maintenance funds could be provided on up to 1.5 million acres.
CSP payments increased slightly for contracts after Oct. 1, 2012. Three tiered system is replaced with an annual stewardship enhancement payment.
EQIP increased by $2 billion through 2012. Conservation Innovation Grants are to increase to $75 million per year by fiscal year 2012 for air quality improvement. Livestock production continues allocation of 60% of EQIP funds.
Regional Water Enhancement Program (RWEP) funded at $60 million per year.
Farm and Ranchland Protection Program (FRPP) funding increased by $300 million by 2012.
The Small Watershed Rehabilitation Program (SWRP) extended through 2012 and provides $200 million in baseline funding.
The Wildlife Habitat Incentives Program (WHIP) extended and costs shares increased from 15 percent to 25 percent for long-term agreements and activities that assist producers in meeting a regulatory requirements.
The Grasslands Reserve Program (GRP) is extended and requires an additional 1,000,000 acres enrollment during fiscal years 2008-2012.
House – Conservation
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1. Up to $2 billion in loan guarantees for biorefineries (Half going to loans less than $100 million, Other half for loans up to $250 million)
2. Biodiesel Fuel Education Program - $10 million to continue 3. Rural Energy for America Program - $500 million, including
feasibility studies4. The Bioenergy Program - $1.5 billion5. Biomass Energy Reserve Program - encourage production
of cellulosic feedstocks and provide 5 year contracts to grow dedicated energy crops and provide incentives to harvest, store, and transport biomass
6. Forest Bioenergy Research Program - $75 million for the use of woody biomass for bioenergy production, including feedstock issues such as yield and new varieties.
7. The Biomass Research and Development Program (Section 9008) - funded for $500 million through fiscal year 2012.
8. $1 million to study the potential for an ethanol pipeline
House – Renewable Fuels
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1. Agriculture Committee schedule for October2. Chairman Harkin more focused on conservation (CSP)
and renewable energy3. Harkin, Grassley and upper plains tougher on
payment limits4. Durbin & Brown amendment on revenue-based safety
net5. Tax increases probably won’t fly
Political process pulling the Senate?
Senate – Process
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1. Senate must agree to a bill.2. Conference – Where the bill will be written.3. Bush must sign it.
TIMING?
2002 for ’08 (& ’09)
Can We See the Finish?