Managing Crop Risks: A Model Public and Private Partnership Steven D. Johnson Farm & Ag Business...
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Transcript of Managing Crop Risks: A Model Public and Private Partnership Steven D. Johnson Farm & Ag Business...
Managing Crop Risks: A Model Public and Private Partnership
Steven D. JohnsonFarm & Ag Business Management
Field Specialist
| Region 1: Ron Hook | Region 2: Kelvin Leibold | Region 3: Robert Tigner | Region 4: Tom Olsen | Region 5: Steve Johnson | Region 6: Craig Chase | Region 7: Tim Eggers | Region 8: Bob Wells | Region 9: Jim Jensen |
30%
State
12%
Federal
Iowa State UniversityExtension Budget, 2003-04
19%
User Fees
20%
Grants
2%Gifts
17%
County
Presentation Objectives
• Review the history of “Managing Crop Risks” program
• Current program and agenda• Program topics• Creating “value” for clients• Show me the “money”• The “road ahead”
Educational Deliverables
• Conference• Seminars• Workshops• Discussion Groups• One on One• Web-site:
www.ManagingCropRisks.com• Emerging technologies: video
and MacroMedia Breeze
The Early Years• Daylong Conference in held one
location (November and January)– Sponsored by ISU Extension, Farm
Credit Services of America and Wallaces Farmer (Farm Progress Companies)
– Outside speakers on a variety of financial and market risk topics
– Registration fee of $50 with Farm Credit guaranteeing 50 participants at $30 each
The Later Years• Workshops scattered around Iowa
with county extension and FCS Market Place offices coordinating (December or January)– Sponsored by ISU Extension and Farm
Credit Services of America – Selected speakers on financial, market
and weather risk topics– Registration fee of $10 with Farm
Credit inviting customers and prospects
Current Program• Risk Management Workshop in January
– Sponsored by Farm Credit Services of America in cooperation with ISU Extension
– 2 ½ hour program with a complimentary meal
– Nineteen locations statewide– Phone register 48 hours in advance– Farm Credit invites customers, prospects
and Extension field staff to attend– All programs are listed on Extension
calendar
Program Agenda• “Risk Free Crop Farming” including
a video: – “Weather Outlook for 2005” with
Elwynn Taylor
• Utilizing Crop Insurance Tools• Outside speaker invited by Farm
Credit Services• Meal prior to program or afterwards• Registration and door prizes
Four Types of Government Farm Program Payments• Direct payment (DP)• Counter-cyclical payment
(CCP)• Loan deficiency payment
(LDP) or marketing loan gain (MLG)
• Subsidized crop insurance premiums – 38% to 59% paid by
Government
Government Payments for Corn
Total Expected Revenue-Corn
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Season Average Price
$/bu.
Direct Pmt
CC Pmt
LDP Pmt
Harv.Price
Source: Edwards, ISU Extension Economist
Structure of Program Payments
for CornTarget Price
Fixed Payment
Loan Rate
Counter-CyclicalPayment
Loan DeficiencyPayment
NotTiedTo
Prod
ProdReq.
$2.63
$0.28
$2.35
$1.95
RegardlessOf Market
Only If… $0.40
MaximumCCP
2004 Acres Insured in Iowa
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
ActualProduction
History
CropRevenueCoverage
Group RiskIncome
Protection
Group RiskPlan
IncomeProtection
RevenueAssurance
CORN
SOYBEANS
Insurance Coverage by Iowa Farmers in 2004
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
50 55 60 65 70 75 80 85 90
CORN
SOYBEANS
Corn Insurance Comparison
Price Increase MPCI RA-HPO/CRC
APH 150 bu/A 150 bu/A
Coverage 75% 75%
Base Price $2.20 $2.32
Guarantee 112 ½ bu/A $261/A
Harvest Yield 100 bu/A 100 bu/A
Harvest Price ‘05
------- $3.50/bu
New Guarantee ------- $393.75/A
Indemnity $27.50/A $43.75/A
2005 Corn Strategy using Crop Revenue Coverage or
Revenue Assurance w/HPO
150 bu/A APHX 75% level of coverage
112 ½ bu/A Guaranteed Yield
X $2.32/bu Dec. Corn Futures in Feb.
$ 261/A Guaranteed Revenue
Probability of Cash Corn Price Outlook2005 – 06 Marketing Year
Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05
$2.55/bu
18%
Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05
$2.55/bu
60%
$2.05/bu
18%
Probability of Cash Corn Price Outlook2005 – 06 Marketing Year
Source: Wisner, Iowa State Univ. Extension Economist, 4-1-05
$2.00/bu$2.55/bu
60%
$2.05/bu
22%18%
Cash Corn Price Outlook Probability‘05 – ‘06 Marketing Year
Show me the money• Revenue Generation at $36/hour
– Conceptualization and Development – 1 hour per site
– Travel – 3 hours per site– Set-up and presentation – 5 hours per site– Office staff time of 2 hours per site @
$25/hour– Campus support of $50 per site for video
and development
• Total of $400 per site for development and training
• Revenue Generation of $300 sent to ISU
Ag Management e-School (AMES) Non-Credit Web
Courses www.extension.iastate.edu/am
es• Advanced Grain Marketing• Financial Decision Making• Farmland Ownership• Farm Leasing Arrangements• Farm Machinery Economics• Advanced Livestock Marketing
$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
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Questions aboutAgDM
Dedication
Welcome to Ag Decision Maker (AgDM). The information and analysis provided at this web site will help you find solutions to many of the business, economic, and financial decisions facing farmers and agribusinesses.
Non-Discrimination & Information Disclosures
What is it
Update government bases and yields
Copyright 2002Iowa State University ExtensionDon Hofstrand, [email protected], 641-423-0844All rights reserved
Web site design by Liisa Jarvinen
This site is Bobby Approved and Disability Accessible. The sitehas passed P-1 accessibility standards.
Help with a BusinessProblem
How to use it
The Road Ahead• Iowa programs in January 2006• Nebraska and South Dakota
programs in December 2005 • Similar theme, agenda and use of
web site• Beyond 2006
– Driven by the Market Place– Must continue to “add value” to
clients– University role as objective 3rd party
Sample Farm• APH = 150/bu A Corn• Use Revenue Assurance w/HPO at 75% level of
coverage• Total Production Cost = $350/A• Marketing Plan
– Sell 50% of new crop corn in the spring– Average futures price of $2.50/bu– Average basis at harvest of $ .25/bu under
• No Marketing Plan– Average cash price of $2/bushel at harvest on all
bushels
• Compare APH Yields vs. High Yield vs. Low Yield
Thank You!
Steven D. JohnsonFarm & Ag Business Management
Field SpecialistISU Polk County Extension
5201 NE 14th Street, Suite ADes Moines, IA 50313
(515) [email protected]
www.extension.iastate.edu/polk/farmmanagement.htm