# U.S. Baseline Briefing Book
Projections for Agricultural and Biofuel Markets



# March 2015

FAPRI

‐ MU Report #01

‐ 15

Prepared by the Integrated Policy Group, Division of Applied Social Sciences

www.fapri.missouri.edu amap.missouri.edu 

# Agricultural Markets and Polic y

## Published by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri (MU), 101 Park DeVille Drive, Suite E; Columbia, MO 65203. FAPRI–MU is part of the Division of Applied Social Sciences (DASS) in the College of Agriculture, Food and Natural Resources (CAFNR).

www.fapri.missouri.edu

This material is based upon work supported by the U.S. Department of Agriculture, under Agreement Nos. 58

‐ 0111

‐ 13

‐ 002 and 58

‐ 0111

‐ 14

‐ 001.

Any opinion, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the view of the U.S. Department of Agriculture nor the University of Missouri.

The crop, biofuel, government cost and farm income projections in this report were prepared by the
team at FAPRI

‐ MU, including Pat Westhoff ( westhoffp@missouri.edu ), Scott Gerlt ( gerlts@missouri.edu ), Jarrett Whistance ( whistancejl@missouri.edu ), Julian Binfield ( binfieldj@missouri.edu ), Wyatt Thompson ( thompsonw@missouri.edu ), Sera Chiuchiarelli ( chiuchiarellis@missouri.edu ) and Deepayan Debnath ( debnathd@missouri.edu ).

The livestock, poultry, dairy and consumer price projections were prepared by the MU Agricultural Markets and Policy (AMAP) team, including Scott Brown ( brownsc@missouri.edu ) and Daniel Madison ( madisondc@missouri.edu ).

FAPRI

‐ MU and AMAP are both part of the Integrated Policy Group in the MU Division of Applied Social Sciences.

U.S. crop trade figures reported here were prepared with the help of Mike Helmar ( mhelmar@cabnr.unr.edu ) at the University of Nevada, Reno, Eric Wailes ( ewailes@uark.edu ) and Eddie C. Chavez ( echavez@uark.edu ) at the University of Arkansas and Darren Hudson ( Darren.hudson@ttu.edu ) at Texas Tech University.

The Agricultural and Food Policy Center at Texas A&M University will prepare a companion set of estimates of the farm

‐ level impacts of these projections ( www.afpc.tamu.edu ).

The authors would like to thank participants in a workshop reviewing a preliminary version of these estimates in Washington in December 2014. Any remaining errors are those of the authors.

Permission is granted to reproduce this information with appropriate attribution to the authors and FAPRI–MU.

The University of Missouri does not discriminate on the basis of race, color, religion, national origin, sex, sexual orientation, gender identity, age, genetics information, disability or status as a protected veteran. For more information, call Human Resource Services at 573

‐ 882

‐ 4256 or the US Department of Education, Office of Civil Rights.

# Table of contents

Summary

............................................................................................................................... ....... 1 Crop production, prices and farm income .................................................................................... 3 New farm bill provisions and effects .......................................................................................... ... 4 Livestock and dairy outlook highlights ....................................................................................... .. 5 Other highlights: Biofuels, exports and food prices ...................................................................... 6 Policy assumptions under the new farm bill ................................................................................. 7 Crop program participation under the new farm bill ..................................................................... 9 Macroeconomic assumptions and farm prices paid .................................................................... 11
Corn ......................................................................................................................... .................. 13 Soybeans ..................................................................................................................... ............. 15
Wheat

............................................................................................................................... ......... 17 Upland cotton ................................................................................................................ ............. 19 Sorghum and barley ................................................................................................................... 21 Oats and hay

............................................................................................................................. 23 Rice and sugar ............................................................................................................... ............ 25
Peanuts and sunflower seed ................................................................................................... ... 27
Land use ..................................................................................................................... ............... 29 Soybean products ............................................................................................................. ......... 31 Corn products ................................................................................................................ ........... 33 Ethanol and biofuel policies ................................................................................................. ..... 35 Biomass-based diesel and biofuel plant returns ....................................................................... 37 Cattle and hogs .............................................................................................................. ........... 39
Meat ......................................................................................................................... ................. 41 Dairy

............................................................................................................................... ........... 43 Food prices and expenditures ................................................................................................. .. 45
Government costs ............................................................................................................. ........ 47 Payments and crop insurance .................................................................................................. 49 Farm receipts and expenses ................................................................................................... .. 51
Farm income .................................................................................................................. ........... 53 Ranges from the 500 alternative futures ................................................................................... 5 5

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 1 

# Summary

Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.

These baseline projections for agricultural and biofuel markets were prepared using market information available in January 2015. Macroeconomic assumptions are based on forecasts by IHS Global Insight which suggest moderate growth in the U.S. and global economies. After declining sharply in late 2014, forecasted oil prices increase steadily.

The baseline incorporates the Agricultural Act of 2014 (the new farm bill). The analysis requires important assumptions about how people will respond to new program options. As more information becomes available, these assumptions and estimates will need to be revisited.

The figures reported here represent the average of 500 alternative outcomes based on different assumptions about the weather, oil prices and other factors. In some of the 500 outcomes, prices, quantities and values are much higher or much lower than the reported averages.

Some key results:

• Record production of corn and soybeans in 2014 has pushed down prices of all major grains and oilseeds.

• In response to lower expected prices, U.S. producers are projected to reduce corn, wheat and cotton acreage in 2015, while slightly increasing soybean area. The total area devoted to major crops declines in 2015, but remains above the average that prevailed over the 2008-13 life of the previous farm bill.
• Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies.
• Between 2016/17 and 2024/25, corn prices average $4.06 per bushel and soybeans $10.09 per bushel, similar to projections made last year. Wheat prices average $5.57 per bushel, and cotton prices average 63 cents per pound.

• Milk, hog and poultry prices are all projected to decline in 2015 as producers respond to lower feed costs and the record output prices of 2014 by significantly increasing production. Cattle and beef supplies remain tight in 2015, but prices begin to fall in 2016 as beef production starts to expand again.

• Lower prices translate into reduced farm income, as both crop and livestock cash receipts decline in 2015. Lower feed and fuel costs result in a modest reduction in total farm production expenses. Net farm income falls to $79 billion, a 27 percent decline from 2014.
• Payments under 2014 farm bill programs increase when crop prices fall. A projected $3.9 billion in Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments for the 2014 crop will be made after fiscal year (FY) 2016 begins on October 1, 2015.
• Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion, but decline to $3.4 billion for the 2018 crop. Actual ARC and PLC spending in any given year is likely to differ greatly from these projected averages, given price and yield volatility.
• Crop insurance net outlays are projected to average more than $8 billion per year over the next ten years.

• Projected food price inflation drops to 1.6 percent in 2015, and averages 2 percent per year from 2016-2024.

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 2 

# Key results

2008/09

Ȭ 2013/14 2016/17

Ȭ 2024/25 Marketing year average 2014/15 2015/16 average

Crop pricesȱȱȱ Corn farm price, dollars per bushel 5.06 3.63 3.89 4.06ȱȱȱ S oybean farm price, dollars per bushel 11.79 10.02 9.29 10.09ȱȱȱ Wheat farm price, dollars per bushel 6.54 6.13 5.17 5.57ȱȱȱ Upland co tton farm price, cents per pound 71.8 61.8 60.0 63.1

Crop area planted, million acresȱȱȱ Corn 90.9 90.6 87.9 90.9ȱȱȱ S oybeans 76.6 83.7 84.2 83.4ȱȱȱ Wheat 56.8 56.8 55.1 54.8ȱȱȱ Upland co tton 11.0 10.8 9.5 9.5ȱȱȱ 12 major c rops* 256.6 262.7 258.3 260.0

2008

Ȭ 2013 2016

Ȭ 2024 Calendar year except as noted average 2014 2015 average

Livestock sector pricesȱȱȱ Fed steers, 5

Ȭ area direc t, dollars per cwt 105.81 154.56 156.07 129.23ȱȱȱ Barrows and gilts, 51

Ȭ 52% lean, dollars per cwt 55.86 76.03 62.11 56.07ȱȱȱ National wholesale broiler, cents per pound 84.32 104.87 94.53 95.55ȱȱȱ All milk, dollars per cwt 17.78 23.97 17.59 18.68

Biofuel production, billion gallonsȱȱȱ Ethanol 12.4 14.3 14.2 15.2ȱȱȱȱȱȱ Corn starch

Ȭ based ethanol 12.1 14.2 14.0 14.9ȱȱȱ Biomass

Ȭ based diesel 0.9 1.6 1.3 1.8

Government outlays, billion dollars, fiscal yearȱȱȱ Commodity Credit Corporation net outlays 9.4 12.2 7.7 8.0ȱȱȱȱȱȱ Major commodity programs 5.9 5.1 1.6 5.0ȱȱȱȱȱȱ CRP, disaster and all o ther CCC net outlays 3.5 7.1 6.0 3.0ȱȱȱ Crop insurance net outlays 7.0 8.3 7.0 8.6

Net farm income, billion dollars 92.7 108.0 79.3 71.9

Annual consumer food price inflation 2.6% 2.4% 1.6% 2.0%

*Includes corn, soybeans, wheat, upland co tton, sorghum, barley, oats, rice, peanuts, sunflowers, sugarc ane and sugar b eets.

No te: The estimates are based on market information available in January 2015 and incorporate provisions o f the Agricultural Act o f 2014, the new farm bill.ȱȱ Projec tions are averages ac ross 500 outcomes.

##  U.S. producers harvested record corn and soybean crops in 2014.

 Both crops saw record yields, and soybean area was also at an all-time high.

 World production of both crops also increased in 2014, breaking records set in 2013.

 These large crops are the primary reason grain and oilseed prices have declined sharply from records set during the 2012/13 marketing year.

 Corn prices declined from $6.89 per bushel in 2012/13 to about half that level at harvest time last fall.

 If yields return to more normal levels in 2015, corn prices may recover, but average projected prices remain below $4.00 per bushel until 2017/18.

 Soybean and wheat prices have also declined since 2012/13, and both could drop again in 2015/16 in the face of continued large global supplies.

 Nominal net farm income reached record highs in 2013. Net farm income declined in 2014 because of lower crop prices.

 In 2015, lower prices lead to a projected decline in both crop and livestock receipts.

 Even though lower feed and fuel costs reduce production expenses, the sharp drop in receipts results in a 27 percent decline in net farm income in 2015.

 Net farm income declines further from 2016-2018, to levels not seen since 2009. 

# Crop production, prices and farm income

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 3 

## 2014 corn and soybean crops set records

4.0 2.8 0.2 8.5 18.1 10.9 0 5 10 15 20 25

U.S. corn yield U.S. corn production World corn production U.S. soybean yield U.S. soybean production World soybean production Percent increase from previous record



## Large crops result in lower prices

0 2 4 6 8 10 12 14 16

06/07 08/09 10/11 12/13 14/15 16/17 18/19 Marketing yearDollars per bushel



### Soybeans Wheat Corn



## Net farm income declines from 2013 record

79 108 129

0 20 40 60 80 100 120 140

2006 2008 2010 2012 2014 2016 2018 Calendar yearBillion dollars

##  The baseline incorporates provisions of the Agricultural Act of 2014, the new farm bill.

 For crop producers, this includes the elimination of direct and countercyclical (DCP) payments and the average crop revenue election (ACRE) program.

 It also includes the creation of two new options, price loss coverage (PLC) and agriculture risk coverage (ARC), as well as new crop insurance policies and more.

 The new PLC and ARC programs cost little when crop prices and revenues are high, but could make large payments when prices or revenues are low.

 Given all of the assumptions of the baseline, average PLC and ARC payments for the 2014-2018 crops are just under $5 billion per year.

 ARC spending is greatest in 2015/16 but declines in later years as the moving averages that determine benchmark revenues adjust.

 Crop insurance net outlays peaked in FY 2013 because of 2012 drought losses. Projected crop insurance costs average $8 billion per year from FY 2015-FY 2020.

 Net Commodity Credit Corporation (CCC) outlays (covering commodity and disaster programs, the conservation reserve and more) reached $12 billion in FY 2014.

 Projected net CCC outlays exceed $10 billion again in FY 2017, when ARC and PLC payments associated with the 2015 crop will be made. 

# New farm bill provisions and effects

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 4 

## Baseline incorporates 2014 farm bill provisions

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

08/09 10/11 12/13 14/15 16/17 18/19 Marketing yearDollars per bushel



### Corn target/reference Corn loan Corn direct payment



## New crop payments replace DCP and ACRE

0 1 2 3 4 5 6 7

08/09 10/11 12/13 14/15 16/17 18/19 Marketing yearBillion dollars



### DCP and ACRE PLC ARC



## Crop insurance costs can exceed other programs

0 2 4 6 8 10 12 14 16

2008 2010 2012 2014 2016 2018 2020 Fiscal yearBillion dollars



### CCC net outlays Crop insurance net outlays

##  The combination of tight supply and strong domestic meat demand resulted in record prices for many livestock products in 2014.

 The record output prices coincided with sharply lower feed costs, allowing for record high profitability for many producers in 2014.

 Recent profitability levels follow what was a very difficult set of years financially for many producers for all or most of 2008- 2013.

 Record levels of profitability will result in more meat production in coming years.

 Pork and poultry production will increase in 2015 and 2016, as larger breeding herds and improved productivity combine for sharp increases in output.

 It will take longer for beef production to increase due to the time required to raise a new animal to market weight once a decision has been made to expand output.

 International dairy product prices decreased for most of 2014, as demand weakened and milk supplies recovered in many exporting nations.

 U.S. product prices remained well above international levels for much of 2014, allowing for a record high all milk price near $24 per hundredweight.

 U.S. prices have begun to decline in recent months, as markets catch up to the international supply and demand situation and domestic milk supplies increase. 

# Livestock and dairy outlook highlights

Weak international dairy markets affect milk price

6 8 10 12 14 16 18 20 22 24 26

2002 2004 2006 2008 2010 2012 2014 2016Dollars per hundredweight



### U.S. all milk International dairy products (avg.)



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 5 

## Record high prices for cattle and hogs in 2014

0 40 80 120 160 200 240 280

2002 2004 2006 2008 2010 2012 2014 2016Dollars per hundredweight



### Fed steer Feeder steer Barrow and gilt



## Meat production will grow, but at varying rates

-8 -6 -4 -2 0 2 4 6

2001-08 2009-13 2014 2015 2016 2017-24Percent change vs. prior year



### Beef Pork Chicken

##  Exports account for a much larger share of production for cotton, soybeans, wheat and rice than for corn, beef, pork or chicken.

 Continued growth is expected in the share of beef, pork and chicken which is exported.

 For corn and soybeans, the share exported would be larger if one considered exports of feeds, biofuels, vegetable oils, and other products derived from corn and soybeans.

 Meat price inflation was much greater in 2014 than inflation for other food items.

 CPIs for beef (up 12.1 percent), pork (9.1) and eggs (8.4) far outpaced price increases for fruits and vegetables (1.5), cereal and bakery items (0.2) and sugar and sweets (-0.8).

 Although beef prices increase more than other food prices in 2015, the difference is much smaller than in 2014. 

# Other highlights: Biofuels, exports and food prices

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 6 

## Share of production exported varies

0% 10% 20% 30% 40% 50% 60% 70% 80%

Co rn Soy b

e a ns W h eat Rice Co t ton Be ef Po rk ChickenExports/production



### 2003-2004 2013-2014 2023-2024 

##  Ethanol production dips slightly in 2015 due to tighter margins but resumes a path of modest growth in the years that follow.

 In the near term, lower oil prices result in an increase in motor fuel use, so more ethanol can be used in 10 percent blends.

 U.S. exports (right axis) are projected to grow steadily as U.S. ethanol prices remain competitive globally

.

 Results are sensitive to assumptions about implementation of the Renewable Fuel Standard (RFS). Ethanol production and use grow slowly

0 2 4 6 8 10 12 14 16 18

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons



### 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2.1 2.4 2.7Billion gallons



### Production Domestic use Exports (right axis)



## Meat prices outpace other inflation one more year

-4 -2 0 2 4 6 8

2001-08 2009-13 2014 2015 2016 2017-24 Calendar yearPercent change vs. prior year



### CPI for meat CPI for food General CPI

##  ARC is the other new option for grain and oilseed producers. Payments occur when county or farm-level revenues per acre fall below 86 percent of a benchmark.

 The benchmark depends on moving fiveyear Olympic averages of national prices and county or farm yields.

 To illustrate, consider a county where corn yields match the national average. At our average projected prices, the 2014- 2016 crops would earn ARC payments, but the 2017 and 2018 crops would not.

 The 2014 farm bill reauthorizes and consolidates conservation programs.

 The Conservation Reserve Program is operated by the Farm Service Agency and funded by the CCC.

 The Environmental Quality Incentives Program and the Conservation Stewardship Program are operated by the Natural Resources Conservation Service.

 Total projected spending on these programs is around $5 billion per year. 

# Policy assumptions under the new farm bill

Reference prices exceed old target prices

0 1 2 3 4 5 6 7 8 9

08/09 10/11 12/13 14/15 16/17 18/19 Marketing yearDollars per bushel



### Soybeans Wheat Corn 

##  The 2014 farm bill eliminates the DCP and ACRE programs and creates several new programs.

 PLC is one new option for grain and oilseed producers. Participating producersreceive a payment when national seasonaverage farm prices fall below fixed reference prices.

 The new reference prices are higher than the target prices that were used in calculating countercyclical payments under the previous farm bill.

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 7 

## ARC benchmarks depend on moving averages

400 500 600 700 800 900 1,000

08/09 10/11 12/13 14/15 16/17 18/19 Marketing yearDollars per acre



### Corn revenue 86% of benchmark



## Conservation programs total $5 billion per year

0 1 2 3 4 5 6

2008 2010 2012 2014 2016 2018 Fiscal yearBillion dollars



### NRCS programs Conservation reserve

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 8 

# Selected policy assumptions, 2014

Ȭ 2024

P olicy Description

Direc t, countercyclic al and No t available for 2014 and subsequent c rop yearsȱȱȱ ACRE payments

Price loss coverage Makes payments when marketing year average price falls below fixed reference prices:ȱȱȱ (PLC) Corn $3.70/bu. Soybeans $8.40/bu. Wheat $5.50/bu. Rice $14.00/cwt ($16.10/cwt for Japonic a) Sorghum $3.95/bu. Barley $4.95/bu. Oats $2.40/bu. Peanuts $535/ton Sunflowers 20.15 cents/lb. Co tton no t available Paid on 85% o f base ac reage and program yields

Agriculture Risk Coverage Makes payments when county or farm per

Ȭ ac re revenues fall below 86% o f a benchmarkȱȱȱ (ARC) County option benchmark: 5

Ȭ year Olympic average price multiplied by 5

Ȭ year Olympic average yield Farm option benchmark: 5

Ȭ year Olympic average o f weighted farm revenue per ac re Maximum payment is 10% o f benchmark value Paid on 85% (county option) or 65% (farm option) o f base ac reage Alternative to price loss coverage Available for program c rops (no t upland co tton)

Sequestration Assumed to apply to PLC and ARC payments and certain conservation payments Rate: 7.0% for 2015 c rop payments, declining to 5.8% for 2018

Ȭ 24 c rop payments

Marketing loan program Continues 2008 farm bill provisions for c rops o ther than upland co tton

Supplemental coverage option Available for program c rops no t enrolled in ARC beginning in 2015 Area c rop insurance available as a supplement to conventional insurance Covers range between 86% and individual coverage level 65% o f premium subsidize d

Upland co tton S tacked income pro tec tion program (STAX) Area c rop insurance availabe in addition to conventional insurance 80% o f premium subsidized Transition payment in 2014 (STAX no t available until 2015) Loan rate varies in range dependng on recent world co tton prices No co tton PLC or ARC programs Former co tton base (now ȱȈ generic base Ȉ ) eligible for PLC or ARC if planted to o ther c rops

Sugar Continues 2008 farm bill provisions Incorporates stylized version o f agreement with Mexico

Conservation reserve Caps conservation reserve ac reage at 24 million ac res by 2017

Dairy Margin insurance program establishe d MILC no longer available Dairy produc t price support program no t available for 2014 and subsequent years

##  For soybeans, expected average ARC payments exceed PLC payments for all five years of the 2014 farm bill.

 Producers would also need to consider possible SCO benefits, which are only available to PLC participants.

 Producers can enroll in the county-based ARC program, which pays on 85 percent of base area, or in the farm-based ARC, which considers all program crops on a farm and pays on 65 percent of base area.

 Price expectations, yield histories and risk attitudes will affect producer enrollment choices.

 Based in part on projected average payments, the baseline assumes most producers of wheat, sorghum, rice and peanuts will enroll in PLC.

 Most soybean and corn producers are assumed to elect ARC. Of those enrolled in ARC, 90 percent are assumed to choose the county-based option. 

# Crop program participation under the new farm bill

Paths differ for projected average corn payments

0 5 10 15 20 25 30 35 40 45

14/15 15/16 16/17 17/18 18/19 Marketing yearDollars per acre



### ARC PLC 

##  Under the new farm bill, producers must make a one-time choice to participate in ARC or PLC for the 2014-2018 crops.

 Projected national average ARC payments for corn producers exceed PLC payments for the first three years, but the opposite is true for the last two.

 Expected payments may be very different in different counties. For example, high 2014 yields may mean no 2014 crop ARC payments for corn in some counties.

Greater PLC enrollment assumed for most crops

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Soybeans Corn Wheat Sorghum Rice Peanuts

PLC County ARC Farm ARC



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 9 

## Expected ARC payments exceed PLC for soybeans

0 5 10 15 20 25 30

14/15 15/16 16/17 17/18 18/19 Marketing yearDollars per acre



### ARC PLC

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 10 ARC PLC County Farm

Corn 40.0% 54.0% 6.0% Soybeans 30.0% 63.0% 7.0%

Wheat 60.0% 36.0% 4.0% Upland co tton n.a. n.a. n.a. Sorghum 80.0% 18.0% 2.0% Barley 75.0% 22.5% 2.5%

Oats 50.0% 45.0% 5.0%

Rice 90.0% 9.0% 1.0%

Peanuts 95.0% 4.5% 0.5% 

# ARC and PLC participation (share of base acres)

ARC PLC
Corn $26.83 $19.92 S oybeans $16.91 $9.57
Wheat $11.16 $13.66 Upland co tton n.a. n.a. S orghum $11.00 $20.82 Barley $10.09 $21.70
Oats $1.96 $1.38
Rice $4.19 $66.02
Peanuts $44.91 $138.38 

# Payments per participating

acre, 2014

Ȭ 2018 average

##  Oil prices declined sharply in the final months of 2014.

 IHS Global Insight forecasts that oil prices will recover, exceeding $140 per barrel by 2024.

 Futures markets in early March 2015 suggested a much smaller increase.

 Our stochastic simulations (see the end of this report) examine a range of energy prices around the IHS Global Insight figures.

 Lower feed and fuel prices reduce farm production expenses in 2015.

 Fertilizer prices are also expected to decline in 2015, offsetting cost increases for some other inputs.

 Projected increases in fuel prices and general inflation in the economy contribute to an increase in overall farm input prices after 2017. 

# Macroeconomic assumptions and farm prices paid

Faster U.S. growth and low inflation expected in 2015

-4 -3 -2 -1 0 1 2 3 4 5 6

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024Percent



### Real GDP growth 3-mo. Treasury bill CPI inflation 

##  IHS Global Insight forecasted in January that U.S. real GDP growth would accelerate in 2015 to 3.1 percent.

 Growth averages 2.6 percent per year between 2016 and 2024.

 Lower oil prices reduce inflation in 2015.

 The unemployment rate continues to decline slowly.

 Short-term interest rates increase to near pre-recession levels by 2017.

Lower feed, fuel prices reduce 2015 production costs

50 60 70 80 90 100 110 120 130 140

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024Index, 2011 = 100



### All production items Feed Fuel



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 11 

## Oil prices recover after sharp decline

0 20 40 60 80 100 120 140 160

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024Dollars per barrel



### IHSGI W. Texas Intermediate June futures, 3/3/2015

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 12 

# Macroeconomic assumptions

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Real GDP growth (Percentage change from previous year)ȱȱȱ United S tates 2.4 3.1 2.7 2.7 2.4 2.8 2.8 2.6 2.4 2.4 2.4ȱȱȱ China 7.3 6.5 6.7 6.8 7.1 7.3 7.3 6.9 6.7 6.2 6.0ȱȱȱ World 2.7 3.0 3.4 3.5 3.6 3.7 3.8 3.7 3.6 3.5 3.4 Population growthȱȱȱ United S tates 0.7 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7ȱȱȱ World 1.1 1.1 1.1 1.1 1.0 1.0 1.0 1.0 0.9 0.9 0.9 U.S. CPI, all urban consumers 1.6 0.1 2.3 2.4 2.5 2.4 2.5 2.4 2.2 2.3 2.2
(Percent) U.S. unemployment rate 6.2 5.5 5.3 5.2 5.3 5.3 5.1 5.0 5.1 5.1 5.1 3

Ȭ

month Treasury bill rate 0.0 0.4 1.6 3.2 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Prime interest rate 3.3 3.5 4.6 6.3 6.8 6.8 6.8 6.8 6.8 6.8 6.8

Petroleum prices (Dollars per barrel)ȱȱ West Texas intermediate 93.01 58.24 71.07 80.64 89.90 98.69 109.47 119.86 126.36 133.40 141.39ȱȱ Refiners ȇȱ acquisition cost 91.54 55.71 68.16 77.25 86.18 94.93 105.58 115.63 121.69 128.46 136.16

Natural gas price (Dollars per million BTU)ȱȱ Henry Hub 4.37 3.73 3.85 4.25 4.54 4.60 4.83 4.70 4.56 4.75 4.83
Exchange rates (Currency per dollar)ȱȱȱ Euro 0.75 0.83 0.81 0.77 0.76 0.75 0.74 0.74 0.74 0.73 0.73ȱȱȱ Chinese yuan 6.16 6.23 6.27 6.25 6.20 6.12 6.05 6.02 6.03 6.05 6.08

Source: IHS Global Insight, Jan. 2015, except exchange rates and non

Ȭ U.S. economic and population growth are from IHS Global Insight, Dec. 2014.



# Indices of prices paid by farmers

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

P roduction items, interest, (2011=100) taxes and wages 112 109 109 110 112 114 117 120 122 124 127ȱȱ Produc tion items 113 110 109 109 111 113 116 119 121 122 124ȱȱȱȱ Feed 113 102 102 103 103 105 105 105 104 103 101ȱȱȱȱ Livestock & poultry 154 158 141 126 117 115 116 120 123 126 130ȱȱȱȱ Seeds 114 113 114 115 118 121 125 128 131 134 136ȱȱȱȱ Fertilizer 96 91 89 89 90 93 96 97 96 96 95 Mixed fertilizer 87 85 84 84 85 87 90 91 90 89 88 Nitrogen fertilizer 104 95 92 91 93 97 100 101 100 99 98 Po tash and phosph. 100 99 98 98 99 101 104 105 105 106 106ȱȱȱȱ Agricultural chemic als 110 109 110 113 117 121 126 130 133 136 139ȱȱȱȱ Fuels 98 76 81 87 94 101 110 118 123 129 135ȱȱȱȱ Supplies & repairs 106 108 109 111 113 115 118 120 122 123 125ȱȱȱȱ Autos & trucks 104 105 108 110 112 115 117 118 120 122 123ȱȱȱȱ Farm machinery 111 110 112 113 117 121 125 128 131 134 136ȱȱȱȱ Building material 107 107 110 113 115 117 119 120 121 123 124ȱȱȱȱ Farm services 109 110 113 116 120 124 128 132 136 140 144ȱȱ Interest* 101 103 107 114 117 119 122 125 127 130 133ȱȱ Taxes** 105 105 107 109 112 115 120 123 127 131 135ȱȱ Wage rates 108 110 113 117 121 125 129 134 138 143 147ȱȱ *Interest per ac re on farm real estate debt and interest rate on farm non

Ȭ real estate debt. **Farm real estate taxes payable per ac re.

##  2014 is the second year in a row of record U.S. corn production. Although area was the lowest it has been since 2010, yields were at an all-time high.

 Corn production topped 14.2 billion bushels in 2014. This is a 32% increase from two years ago.

 The larger corn crops in 2013 and 2014 after three years of drought are the primary cause of lower corn prices.

 High prices caused by the drought resulted in reduced use of corn during the 2012/13 marketing year.

 Increased production for the 2013/14 marketing year allowed use to recover, and use remains largely flat for the 2014/15 marketing year.

 Ending stocks in 2014/15 increase for the second year in a row, putting downward pressure on prices for the near-term.

 The main source of demand growth into the future comes from export markets.

 After several years of record returns, market revenues fell in 2013/14 and again in 2014/15. Lower prices more than offset the yield increases.

 Variable expenses (which exclude land costs) fall in the short term as fertilizer and fuel prices moderate.

 Projected farm program payments rise in the short term with the new farm bill and decreasing prices, but remain small relative to revenues. 

# Corn

Corn returns decline for a second straight year

0 200 400 600 800 1,000 1,200

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses 

## Corn production sets record again in 2014/15

10 11 12 13 14 15 16

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearBillion bushels



### Production Total use



## Corn stocks increase again, other use remains flat

0 1 2 3 4 5 6

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearBillion bushels



### Feed & residual Ethanol & coproducts Exports Ending stocks



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 13

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 14 

# Corn supply and use

September

Ȭ August year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 90.6 87.9 90.3 90.7 91.1 91.2 91.1 91.1 91.1 90.9 90.7ȱȱȱ Harvested area 83.1 80.2 82.3 82.7 83.0 83.1 83.1 83.1 83.0 82.9 82.7 (Bushels per harvested ac re) Yield 171.0 165.1 167.0 168.7 170.2 171.9 173.8 175.5 176.9 178.4 180.4 (Million bushels) Supply 15,472 15,152 15,466 15,706 15,885 16,027 16,173 16,337 16,491 16,638 16,840ȱȱȱ Beginning stocks 1,232 1,890 1,691 1,729 1,723 1,707 1,703 1,725 1,776 1,830 1,886ȱȱȱ Produc tion 14,216 13,237 13,751 13,952 14,137 14,295 14,444 14,587 14,690 14,783 14,928ȱȱȱ Imports 25 25 25 25 25 25 25 25 25 25 25

Domestic use 11,831 11,707 11,888 12,016 12,089 12,128 12,183 12,221 12,231 12,244 12,266ȱȱȱ Feed and residual 5,278 5,162 5,284 5,312 5,321 5,311 5,283 5,271 5,269 5,286 5,314ȱȱȱ Ethanol and coproduc ts 5,152 5,146 5,196 5,284 5,341 5,382 5,457 5,499 5,503 5,491 5,476ȱȱȱ HFCS 491 488 492 497 499 501 503 504 505 505 505ȱȱȱ Seed 22 23 23 23 23 23 23 23 23 23 23ȱȱȱ Food and o ther 888 887 894 900 904 910 917 924 932 939 947

Exports 1,751 1,755 1,849 1,967 2,089 2,196 2,265 2,341 2,429 2,507 2,592

Total use 13,582 13,462 13,737 13,983 14,178 14,324 14,447 14,561 14,660 14,752 14,858

Ending stocks 1,890 1,691 1,729 1,723 1,707 1,703 1,725 1,776 1,830 1,886 1,982ȱȱȱ CCC inventory 0 0 0 0 0 0 0 0 0 0 0ȱȱȱ Under loan 179 167 175 168 157 153 154 163 170 177 196ȱȱȱ Other stocks 1,711 1,524 1,554 1,555 1,550 1,551 1,572 1,612 1,661 1,709 1,786

P rices, program provisions (Dollars per bushel)ȱȱȱ Farm price 3.63 3.89 3.90 4.01 4.12 4.17 4.18 4.16 4.07 4.01 3.90ȱȱȱ Loan rate 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.95ȱȱȱ Reference price 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 (Million ac res)ȱȱȱ Base area + alloc ated generic 90.7 90.6 90.7 90.8 90.8 90.8 90.8 90.8 90.8 90.7 90.7 (Bushels per ac re)ȱȱȱ PLC program yield 125.0 125.1 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 (Percent)ȱȱȱ PLC participation rate 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0ȱȱȱ ARC participation rate 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0

Returns and payments (Dollars)ȱȱȱ Gross market revenue/a. 621.32 635.36 644.48 668.87 693.46 709.00 719.44 721.45 712.77 708.25 697.57ȱȱȱ Variable expenses/a. 363.63 350.34 346.64 349.70 356.79 367.47 380.24 390.50 395.49 399.53 403.15ȱȱȱ Market net return/a. 257.69 285.03 297.84 319.17 336.66 341.53 339.20 330.95 317.27 308.72 294.42ȱȱȱ Marketing loan benefits/a.* 0.00 0.22 0.12 0.12 0.15 0.05 0.04 0.08 0.01 0.04 0.18ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 9.96 23.82 24.91 22.13 18.80 16.50 17.18 20.24 20.58 21.82 28.00ȱȱȱȱȱȱ ARC/base a.* 42.64 38.83 29.39 13.60 9.69 8.50 10.29 12.44 13.92 15.71 17.90ȱȱȱ Insurance net indemnities/a.* 24.47 23.47 23.56 24.81 26.80 27.77 29.11 28.88 29.50 29.89 29.13

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.

##  The 2014 soybean crop exceeded the previous record by over 18%. This was achieved by both a record yield and area.

 Soybean area is expected to set a new record in 2015 and remain high given strong global demand.

 Even with increased use in 2014/15, the consumption of soybeans cannot match the record production.

 If yields decline to more normal levels in 2015, production and use of soybeans may be in closer balance.

 Increasing demand from China is the primary cause of increases in U.S. soybean exports.

 Domestic soybean crush also increases in response to rising demand for U.S. soybean meal and soybean oil.

 Ending stocks jump sharply in 2014/15 after a very low carry-out in 2013/14.

 Prices have fallen sharply in 2014/15, and a smaller decline is expected in 2015/16.

 In 2014/15, the decrease in the soybean price is more than enough to offset the increased yield. This results in lower market returns.

 Total and net returns decline again in 2015/16, as prices decline and yields are assumed to return to the long-term trend.

 Program payments with the new farm bill could increase in 2015/16, but continue to be small relative to soybean market returns. 

# Soybeans

Soybean ending stocks increase sharply

0.0 0.5 1.0 1.5 2.0 2.5

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearBillion bushels



### Crush Exports Ending stocks



## Soybean returns dip in 2014/15

0 100 200 300 400 500 600 700

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses 

## Soybean production sets record in 2014

2.0 2.5 3.0 3.5 4.0 4.5

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearBillion bushels



### Production Total use



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 15

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 16 

# Soybean supply and use

September

Ȭ August year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 83.7 84.2 82.6 82.8 83.1 83.5 83.7 83.7 83.8 83.7 83.7ȱȱȱ Harvested area 83.1 83.4 81.8 82.0 82.3 82.7 82.9 82.9 83.0 82.9 82.9 (Bushels per harvested ac re) Yield 47.8 44.5 45.0 45.4 45.8 46.2 46.6 47.0 47.4 47.7 48.1 (Million bushels) Supply 4,076 4,121 4,105 4,124 4,141 4,184 4,224 4,256 4,294 4,329 4,371ȱȱȱ Beginning stocks 92 398 411 387 360 349 345 347 350 359 365ȱȱȱ Produc tion 3,969 3,708 3,679 3,722 3,766 3,820 3,865 3,893 3,930 3,955 3,991ȱȱȱ Imports 15 15 15 15 15 15 15 15 15 15 15

Domestic use 1,905 1,949 1,955 1,962 1,963 1,969 1,993 2,005 2,023 2,052 2,077ȱȱȱ Crush 1,790 1,837 1,843 1,849 1,850 1,855 1,877 1,888 1,903 1,931 1,954ȱȱȱ Seed and residual 115 112 112 113 113 114 116 117 120 121 123

Exports 1,772 1,760 1,763 1,803 1,829 1,870 1,884 1,901 1,913 1,911 1,926

Total use 3,678 3,709 3,718 3,765 3,792 3,839 3,877 3,906 3,936 3,964 4,003

Ending stocks 398 411 387 360 349 345 347 350 359 365 368ȱȱȱ CCC inventory 0 0 0 0 0 0 0 0 0 0 0ȱȱȱ Under loan 14 24 24 22 20 20 21 22 24 26 28ȱȱȱ Other stocks 384 387 363 338 328 324 327 328 334 339 340

P rices, program provisions (Dollars per bushel)ȱȱȱ Farm price 10.02 9.29 9.44 9.79 10.26 10.45 10.36 10.45 10.18 9.99 9.87ȱȱȱ Illinois processor price 10.35 9.75 9.90 10.24 10.69 10.88 10.79 10.87 10.61 10.44 10.32ȱȱȱ Loan rate 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00ȱȱȱ Reference price 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 (Million ac res)ȱȱȱ Base area + alloc ated generic 62.0 62.2 62.2 62.2 62.2 62.2 62.2 62.3 62.3 62.3 62.3 (Bushels per ac re)ȱȱȱ PLC program yield 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 (Percent)ȱȱȱ PLC participation rate 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0ȱȱȱ ARC participation rate 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0

Returns and payments (Dollars)ȱȱȱ Gross market revenue/a. 478.92 409.19 420.69 440.66 465.17 477.75 479.51 485.90 477.43 472.52 470.64ȱȱȱ Variable expenses/a. 185.14 180.74 182.23 185.20 188.89 193.15 198.61 203.43 206.63 209.75 212.61ȱȱȱ Market net return/a. 293.77 228.46 238.46 255.47 276.28 284.61 280.90 282.47 270.81 262.77 258.03ȱȱȱ Marketing loan benefits/a.* 0.00 0.30 0.12 0.06 0.22 0.15 0.18 0.29 0.04 0.37 0.10ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 0.00 15.04 14.30 10.16 8.33 7.93 6.81 8.51 9.21 11.47 11.20ȱȱȱȱȱȱ ARC/base a.* 8.46 26.88 23.10 16.24 9.85 6.82 6.52 8.16 9.84 11.10 11.29ȱȱȱ Insurance net indemnities/a.* 4.03 15.39 14.05 15.00 16.03 17.09 17.41 17.81 18.07 17.97 18.05 (Dollars per bushel) Crush margin 1.99 1.82 1.76 1.75 1.70 1.66 1.78 1.72 1.71 1.80 1.77

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.

##  Unlike corn and soybeans, U.S. wheat yields were down in 2014, resulting in a second straight year of declining production.

 Even though projected planted wheat acreage is down in 2015, more typical weather might allow more of the crop to be harvested and yields to increase.

 Imports, primarily from Canada, explain the continuing difference between production and total use.

 The weakening of the corn price has led to less wheat being used for feed in 2013/14 and 2014/15.

 Exports declined sharply in 2014/15 because of strong competition from other exporters and cheaper U.S. corn.

 Exports slowly rebuild beginning in 2015/16, but competing exporters will continue to capture most of the world wheat market.

 Food use of wheat increases with population.

 Although U.S. wheat production was down in 2014/15, abundant domestic supplies of other crops and plentiful foreign production suppressed the price.

 Lower prices and yields result in reduced receipts in 2014/15. Projected prices and returns fall further in 2015/16.

 Net returns to U.S. wheat producers remain well above pre-2007 levels. 

# Wheat

Wheat non-food use declines in 2014/15

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 June-May marketing yearBillion bushels



### Exports Food use Feed & residual



## Wheat net returns drop for three straight years

0 50 100 150 200 250 300 350 400

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 June-May marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 17 

## Wheat production falls in 2014/15

1.6 1.8 2.0 2.2 2.4 2.6

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 June-May marketing yearBillion bushels



### Production Total use

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 18 

# Wheat supply and use

June

Ȭ May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 56.8 55.1 54.1 54.5 54.7 54.7 54.9 55.0 54.8 55.0 55.1ȱȱȱ Harvested area 46.4 46.6 45.8 46.1 46.2 46.2 46.4 46.4 46.3 46.4 46.5 (Bushels per harvested ac re) Yield 43.7 45.4 45.8 46.2 46.5 46.9 47.2 47.5 47.8 48.1 48.4 (Million bushels) Supply 2,796 2,971 2,998 3,034 3,041 3,050 3,070 3,083 3,096 3,121 3,154ȱȱȱ Beginning stocks 590 683 727 728 715 705 699 698 704 713 727ȱȱȱ Produc tion 2,026 2,118 2,100 2,133 2,152 2,169 2,195 2,209 2,217 2,234 2,254ȱȱȱ Imports 180 169 171 173 175 176 176 175 175 174 174

Domestic use 1,190 1,246 1,249 1,246 1,250 1,257 1,264 1,277 1,290 1,301 1,310ȱȱȱ Feed and residual 157 201 196 186 182 182 181 186 189 191 192ȱȱȱ Seed 73 72 73 74 74 74 74 75 75 75 75ȱȱȱ Food and o ther 960 972 980 986 994 1,001 1,008 1,017 1,026 1,034 1,043

Exports 923 998 1,021 1,073 1,087 1,094 1,107 1,101 1,094 1,093 1,104

Total use 2,113 2,243 2,270 2,319 2,336 2,351 2,371 2,378 2,384 2,394 2,414

Ending stocks 683 727 728 715 705 699 698 704 713 727 741ȱȱȱ CCC inventory 0 0 0 0 0 0 0 0 0 0 0ȱȱȱ Under loan 23 40 40 36 34 33 33 34 36 39 41ȱȱȱ Other stocks 660 687 688 679 671 666 666 670 676 688 699

P rices, program provisions (Dollars per bushel)ȱȱȱ Farm price 6.13 5.17 5.28 5.48 5.66 5.77 5.81 5.70 5.59 5.46 5.36ȱȱȱ Loan rate 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94 2.94ȱȱȱ Reference price 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 (Million ac res)ȱȱȱ Base area + alloc ated generic 73.8 73.8 73.7 73.7 73.7 73.7 73.7 73.8 73.8 73.8 73.8 (Bushels per ac re)ȱȱȱ PLC program yield 37.3 37.3 37.3 37.3 37.4 37.4 37.4 37.4 37.3 37.3 37.3 (Percent)ȱȱȱ PLC participation rate 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0ȱȱȱ ARC participation rate 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0

Returns and payments (Dollars)ȱȱȱ Gross market revenue/a. 267.76 233.97 241.26 252.97 262.89 269.94 273.74 270.54 267.05 262.51 259.14ȱȱȱ Variable expenses/a. 131.17 124.98 126.34 128.43 131.59 135.58 140.19 143.71 145.47 147.19 148.79ȱȱȱ Market net return/a. 136.59 108.99 114.92 124.54 131.30 134.36 133.55 126.84 121.57 115.32 110.35ȱȱȱ Marketing loan benefits/a.* 0.00 0.27 0.46 0.25 0.51 0.53 0.44 0.38 0.40 0.77 1.26ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 0.00 19.14 19.97 15.35 13.86 13.33 12.53 13.41 15.40 17.32 18.85ȱȱȱȱȱȱ ARC/base a.* 8.79 14.89 14.34 10.40 7.37 6.07 6.08 7.00 7.94 8.59 8.90ȱȱȱ Insurance net indemnities/a.* 21.02 18.04 11.36 12.02 12.65 13.10 13.34 13.44 13.33 13.07 13.27

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.

##  Upland cotton acreage is likely to fall sharply in 2015, given low cotton returns in absolute terms and relative to competing crops.

 Large international stocks limit export and price prospects. Domestic mill use is relatively flat and accounts for a small share of total use of U.S. cotton.

 U.S. cotton competes well on quality terms, supporting export sales.

 China continues to be the main source of uncertainty in world cotton markets.

 China’s end-of-year cotton stocks are now almost twice as large as the amount of cotton China produces or uses each year.

 Recent policy changes in China should end stock accumulation, but it is not clear when and how existing stocks will be reduced.

 Cotton revenues per acre harvested fall in 2014/15, as both prices and yields decline.

 Cotton returns stay below 2013/14 levels through the baseline.

 Cotton prices sometimes drop enough to trigger marketing loan benefits.

 Transition payments provide support in 2014, and a new crop insurance program, STAX, is available in 2015. 

# Upland cotton

Cotton acreage, production fall in 2015

0 5 10 15 20

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearMillion bales



### Production Use Ending stocks



## China's cotton stocks remain a source of uncertainty

0 10 20 30 40 50 60 70

08/09 10/11 12/13 14/15 August-July marketing yearMillion bales



### Production Domestic use Ending stocks Imports



## Cotton profit margins remain tight

0 200 400 600 800 1,000 1,200

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 19

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 20 

# Upland cotton supply and use

August

Ȭ July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 10.85 9.54 9.64 9.83 9.65 9.46 9.37 9.37 9.48 9.50 9.53ȱȱȱ Harvested area 9.52 7.92 7.97 8.14 7.98 7.84 7.76 7.75 7.84 7.88 7.90 (Pounds per harvested ac re) Yield 781 799 806 816 826 833 841 850 859 867 876 (Million bales) Supply 17.83 17.75 18.14 18.65 18.67 18.48 18.45 18.59 18.92 19.04 19.34ȱȱȱ Beginning stocks 2.33 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88ȱȱȱ Produc tion 15.50 13.21 13.42 13.88 13.76 13.65 13.64 13.77 14.07 14.28 14.46ȱȱȱ Imports 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Domestic mill use 3.76 3.88 3.95 3.98 3.97 3.93 3.89 3.85 3.80 3.76 3.71

Exports 9.54 9.16 9.42 9.77 9.87 9.74 9.74 9.90 10.36 10.41 10.73

Total use 13.30 13.04 13.37 13.76 13.84 13.67 13.63 13.75 14.16 14.16 14.44

Ending stocks 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88 4.90ȱȱȱ CCC inventory 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00ȱȱȱ Other stocks 4.53 4.71 4.77 4.90 4.83 4.81 4.82 4.84 4.76 4.88 4.90

P rices, program provisions (Cents per pound)ȱȱȱ Farm price 61.8 60.0 60.3 60.3 62.0 62.8 63.2 63.8 65.2 64.7 65.2ȱȱȱ Adjusted world price 48.7 50.6 51.1 51.3 53.9 54.4 54.8 55.5 58.0 57.2 58.1ȱȱȱ Loan rate 52.0 52.0 49.0 49.1 49.2 49.3 49.9 49.9 49.9 50.3 50.4 (Dollars per ton)ȱȱȱ Co ttonseed price 199.69 191.66 188.50 192.36 200.06 203.98 204.83 203.64 198.88 195.86 192.40 (Million ac res)ȱȱȱ Base area n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Returns and payments (Dollars)ȱȱȱ Gross market revenue/a. 594.30 586.57 592.84 603.32 630.06 644.27 655.52 665.07 681.78 681.43 690.35ȱȱȱ Variable expenses/a. 523.10 503.88 509.17 521.12 536.12 552.26 572.40 587.68 597.29 608.65 618.68ȱȱȱ Market net return/a. 71.20 82.69 83.67 82.20 93.94 92.01 83.12 77.39 84.49 72.78 71.67ȱȱȱ Marketing loan benefits/a.* 53.50 71.31 58.56 58.50 44.62 43.62 43.04 42.91 31.86 35.90 31.55ȱȱȱ Transition payments/base a.* 33.33 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.ȱȱȱ Insurance net indemnities/a. 40.53 44.29 49.49 49.53 50.40 52.22 53.55 54.35 55.65 56.22 56.91

*Marketing loan benefits, transition payments and insurance net indemnities are averaged ac ross all ac res. All projec tions are averages ac ross 500 stochastic outcomes.

##  U.S. sorghum production rebounded in 2013 and 2014. Stronger export demand helps sustain the higher production levels.

 China accounts for the big increase in sorghum exports. This has allowed sorghum to sell at a premium to corn in 2014/15.

 The baseline assumes China’s demand for sorghum imports will abate enough that sorghum prices will return to a more typical relationship to corn prices. There are no guarantees this will occur.

 As with several other crops, sorghum returns have been declining since 2012/13.

 Projected average sorghum prices are near or below the levels that trigger PLC payments.

 Higher PLC participation rates for sorghum allow more acres to be eligible for SCO, thereby increasing crop insurance net indemnities.

 Unlike other crops, barley returns have remained strong, dipping only slightly in 2014/15.

 Like sorghum, average barley projected prices are near or below levels that trigger PLC payments.

 High expected PLC payments discourage ARC participation and encourage SCO enrollment. 

# Sorghum and barley

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 21 

## Sorghum production and exports increase in 2013/14

0 100 200 300 400 500

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearMillion bushels



### Production Domestic use Exports



## Sorghum returns

0 100 200 300 400 500

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses



## Barley returns

0 100 200 300 400 500

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 June-May marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 22 

# Sorghum supply and use

September

Ȭ August year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 7.14 7.56 7.60 7.57 7.56 7.55 7.53 7.53 7.53 7.56 7.58ȱȱȱ Harvested area 6.40 6.16 6.18 6.16 6.16 6.14 6.13 6.14 6.14 6.15 6.17 (Bushels per harvested ac re) Yield 67.6 62.8 62.8 63.0 62.9 62.9 63.1 63.0 62.9 62.5 62.5
Supply and use (Million bushels)ȱȱȱ Produc tion 433 388 390 390 389 388 388 389 388 387 388ȱȱȱ Imports 0 0 0 0 0 0 0 0 0 0 0ȱȱȱ Domestic use 167 166 171 173 172 172 171 170 167 164 159ȱȱȱ Exports 269 225 218 218 217 215 217 217 220 222 227ȱȱȱ Ending stocks 31 27 28 27 27 27 28 29 30 31 33
P rices, returns and payments (Dollars)ȱȱȱ Farm price/bu. 3.80 3.62 3.67 3.76 3.86 3.89 3.88 3.86 3.80 3.76 3.71ȱȱȱ Market net return/a. 107.74 81.80 84.93 89.11 90.91 87.78 83.47 76.99 71.19 66.33 60.50ȱȱȱ Marketing loan benefits/a.* 0.00 0.44 0.55 0.28 0.36 0.38 0.27 0.20 0.23 0.17 0.24ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 7.71 26.79 24.95 23.84 20.82 20.09 20.38 23.01 22.63 23.80 26.01ȱȱȱȱȱȱ ARC/base a.* 11.26 17.81 11.94 7.23 6.76 6.76 6.76 7.45 8.18 8.64 9.22ȱȱȱ Insurance net indemnities/a.* 6.63 18.73 15.73 15.93 16.85 16.60 16.07 15.68 15.63 15.26 15.33

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes. 

# Barley supply and use

June

Ȭ May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 2.98 3.33 3.43 3.39 3.33 3.29 3.27 3.21 3.17 3.06 2.99ȱȱȱ Harvested area 2.44 2.87 2.95 2.91 2.85 2.82 2.80 2.76 2.72 2.62 2.56 (Bushels per harvested ac re) Yield 72.4 71.8 72.5 73.2 73.7 74.2 75.0 75.8 76.7 77.5 78.4
Supply and use (Million bushels)ȱȱȱ Produc tion 177 206 214 214 211 210 211 209 209 203 201ȱȱȱ Imports 35 30 21 20 20 20 21 22 23 25 26ȱȱȱ Domestic use 202 216 213 212 211 209 211 210 212 210 209ȱȱȱ Exports 10 14 19 21 21 21 20 19 18 17 16ȱȱȱ Ending stocks 83 90 93 93 92 92 93 95 96 96 98
P rices, returns and payments (Dollars)ȱȱȱ All barley farm price/bu. 5.30 4.61 4.57 4.64 4.76 4.90 4.87 4.85 4.70 4.64 4.60ȱȱȱ Feed barley price/bu. 3.41 3.23 3.21 3.29 3.39 3.48 3.47 3.45 3.35 3.29 3.23ȱȱȱ Market net return/a. 185.12 140.19 138.98 144.54 151.39 157.46 152.66 148.57 139.62 136.05 134.16ȱȱȱ Marketing loan benefits/a.* 0.00 0.58 1.13 1.18 0.92 0.60 0.59 0.90 0.98 0.73 1.60ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 0.00 25.14 29.68 29.06 24.61 22.60 23.66 25.94 27.55 28.13 31.37ȱȱȱȱȱȱ ARC/base a.* 3.13 12.66 13.30 12.58 8.79 6.81 7.57 8.00 9.21 9.36 9.99ȱȱȱ Insurance net indemnities/a.* 11.13 12.08 10.57 11.30 12.11 12.16 12.58 12.62 12.75 12.08 11.85

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.

##  Reduced total supplies have helped keep oat prices from falling as much as prices for corn and sorghum since 2012/13.

 Prices of all the major coarse grains move together in the baseline.

 Projected prices for oats remain around $3.00 per bushel, and projected program payments are smaller than for other program crops.

 Hay yields and production increased in 2013 and 2014 after the drought-reduced hay crop of 2012.

 Hay production is expected to increase as lower returns for other crops allow land to revert to hay and cattle numbers increase.

 Increased production in 2013 and 2014 allowed stocks to rebuild.

 National average hay prices have declined in recent months to the lowest levels in four years.

 If production and stocks rebuild as projected, national average hay prices could continue to drop to about $150 per ton.

 Hay markets are particularly fragmented. National average prices might not reflect local conditions. 

# Oats and hay

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 23 

## Hay stocks stay high

0 20 40 60 80 100 120 140 160

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 May-April marketing yearMillion tons



### Production Disappearance Ending stocks



## Hay prices decline with increased production

80 100 120 140 160 180 200

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 May-April marketing yearDollars per ton



### All hay price 

## Oat prices decline less than corn

0 1 2 3 4 5 6 7 8

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearDollars per bushel



### All barley Corn Sorghum Oats

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 24 

# Oats supply and use

June

Ȭ May year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 2.72 2.60 2.61 2.60 2.59 2.56 2.55 2.57 2.59 2.62 2.64ȱȱȱ Harvested area 1.03 1.01 1.01 0.99 0.98 0.96 0.96 0.96 0.97 0.98 0.99 (Bushels per harvested ac re) Yield 67.7 64.4 65.0 65.7 66.2 66.6 67.2 67.7 68.2 68.5 68.9
Supply and use (Million bushels)ȱȱȱ Produc tion 70 66 66 66 65 64 65 65 66 68 69ȱȱȱ Imports 100 98 97 98 98 98 98 97 96 95 94ȱȱȱ Domestic use 162 160 160 161 161 161 160 160 160 160 159ȱȱȱ Exports 2 2 2 2 2 2 2 2 2 2 2ȱȱȱ Ending stocks 31 32 33 33 33 33 33 34 35 36 37
P rices, returns and payments (Dollars)ȱȱȱ Farm price/bu. 3.25 2.92 2.92 2.97 3.03 3.06 3.08 3.07 3.03 2.98 2.95ȱȱȱ Market net return/a. 104.65 79.04 81.75 85.06 87.28 86.86 85.83 82.61 80.07 76.54 73.43ȱȱȱ Marketing loan benefits/a.* 0.00 0.00 0.03 0.01 0.03 0.00 0.00 0.01 0.00 0.00 0.00ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 0.00 1.27 2.25 1.70 1.69 1.29 1.26 1.44 1.61 1.58 2.27ȱȱȱȱȱȱ ARC/base a.* 0.15 2.54 2.50 2.58 2.02 1.77 1.58 1.66 1.80 1.89 1.96ȱȱȱ Insurance net indemnities/a.* 0.23 2.12 1.90 1.95 1.93 1.90 1.96 1.87 1.85 1.85 1.86

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.



# Hay supply and use

May

Ȭ April year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Million ac res) Harvested area 56.8 58.5 58.4 58.4 58.7 59.0 59.1 59.1 59.1 59.0 58.9 (Tons per ac re) Yield 2.46 2.41 2.42 2.43 2.43 2.44 2.45 2.46 2.47 2.48 2.48

Supply and use (Million tons)ȱȱȱ Produc tion 139.8 141.0 141.2 141.8 142.8 144.0 145.0 145.6 145.8 146.0 146.2ȱȱȱ Disappearance 136.0 139.2 141.1 142.3 143.2 144.1 144.8 145.2 145.4 145.5 145.7ȱȱȱ Ending stocks 22.9 24.7 24.8 24.3 23.9 23.8 24.0 24.3 24.8 25.3 25.8 (Dollars per ton) All hay farm price 174.92 152.95 149.02 154.69 161.76 165.31 165.98 164.45 161.99 159.76 156.96

##  Long grain rice area and production increased in 2014, and competitor rice prices remained below U.S. prices.

 As a result, long grain rice prices drop below $13 per hundredweight in 2014/15. Projected prices are steady for 2015-2024.

 Japonica rice, produced in California, commands a large premium to other classes of rice.

 Future production and prices of Japonica rice depend on water availability.

 High prices and yields resulted in record levels of per-acre revenues for U.S. rice producers in 2013/14.

 Declines in rice prices in 2014/15 and 2015/16 reduce producer returns.

 Projected average long grain rice prices drop below the levels that trigger PLC payments.

 Despite a dip in 2015/16, sugar prices remain above the low prices experienced in 2012/13.

 The U.S.-Mexico agreement on sugar trade is incorporated in this baseline, resulting in lower expected exports from Mexico to the U.S.

 Average sugar prices remain above loan rates, but there are a few stochastic outcomes in which prices fall to support levels in years with big crops. 

# Rice and sugar

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 25 

## Long grain rice prices remain near 2014/15 level

0 5 10 15 20 25

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearDollars per hundredweight



### Long grain Japonica Other medium/short



## Rice returns peak in 2013/14, then decline

0 200 400 600 800 1,000 1,200 1,400

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearDollars per acre



### Market Program payments
Ins. net indemnities Variable expenses



## Sugar prices remain above recent lows

0 10 20 30 40 50 60

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 October-September marketing yearCents per pound



### Refined beet sugar Raw cane sugar

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 26 

# Rice supply and use

August

Ȭ July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 2.94 2.80 2.91 2.92 2.91 2.86 2.84 2.82 2.82 2.82 2.82ȱȱȱ Harvested area 2.92 2.78 2.89 2.90 2.89 2.84 2.81 2.80 2.79 2.80 2.80 (Pounds per harvested ac re) Yield 7,572 7,523 7,618 7,694 7,760 7,816 7,873 7,939 8,005 8,067 8,130

Supply and use (Million hundredweight)ȱȱȱ Produc tion 221.0 209.3 220.1 223.2 224.2 222.2 221.6 222.2 223.6 225.7 227.8ȱȱȱ Imports 22.1 23.2 23.6 24.2 24.8 25.3 25.9 26.3 26.7 27.1 27.4ȱȱȱ Domestic use 131.1 132.8 133.6 135.0 136.0 137.4 138.7 140.1 141.4 142.8 144.1ȱȱȱ Exports 103.5 100.7 107.9 110.6 112.1 110.7 109.5 109.0 109.1 109.8 110.8ȱȱȱ Ending stocks 40.4 39.4 41.5 43.3 44.2 43.6 42.9 42.4 42.2 42.4 42.8

P rices, returns and payments (Dollars)ȱȱȱ Farm price/cwt. 13.87 13.86 13.72 13.71 13.74 13.82 13.90 13.91 13.85 13.84 13.88ȱȱȱȱȱȱ Long grain 12.22 12.31 12.43 12.38 12.50 12.54 12.57 12.55 12.51 12.46 12.50ȱȱȱȱȱȱ Japonic a 20.24 18.73 18.55 18.53 18.57 18.68 18.80 18.81 18.73 18.71 18.76ȱȱȱȱȱȱ Other medium/short 14.88 14.41 14.27 14.25 14.28 14.37 14.46 14.47 14.41 14.39 14.43ȱȱȱ Market net return/a. 464.21 502.78 494.67 486.40 476.92 468.26 455.53 442.30 433.19 426.03 424.67ȱȱȱ Marketing loan benefits/a.* 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 66.40 67.12 65.29 67.49 63.79 62.69 60.69 62.80 64.50 65.04 64.33ȱȱȱȱȱȱ ARC/base a.* 0.23 2.18 7.25 6.45 4.86 3.61 3.62 4.31 4.49 4.99 5.07ȱȱȱ Insurance net indemnities/a.* 43.38 19.37 19.73 19.50 19.10 18.63 18.38 18.27 18.19 18.39 18.25

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes. 

# Sugar supply and use

Oc tober

Ȭ September year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Sugar c ane harvested 0.829 0.864 0.841 0.831 0.824 0.814 0.804 0.796 0.789 0.783 0.777ȱȱȱ Sugar beet planted 1.162 1.252 1.204 1.225 1.227 1.214 1.209 1.202 1.202 1.198 1.197ȱȱȱ Sugar beet harvested 1.147 1.222 1.175 1.196 1.198 1.185 1.180 1.173 1.174 1.170 1.169

Supply and use (Thousand tons)ȱȱȱ Produc tion 8,609 9,207 9,005 9,161 9,263 9,279 9,325 9,354 9,429 9,478 9,569ȱȱȱȱȱ Cane sugar 3,739 3,817 3,733 3,705 3,692 3,669 3,641 3,616 3,594 3,577 3,572ȱȱȱȱȱ Beet sugar 4,869 5,390 5,272 5,456 5,571 5,611 5,685 5,738 5,835 5,901 5,997ȱȱȱ Imports 3,557 3,457 3,362 3,378 3,405 3,457 3,512 3,571 3,629 3,689 3,751ȱȱȱ Domestic use 12,127 12,202 12,217 12,282 12,396 12,478 12,572 12,659 12,781 12,899 13,044ȱȱȱ Exports 250 250 251 250 250 249 249 249 249 249 249ȱȱȱ Ending stocks 1,584 1,796 1,696 1,703 1,725 1,734 1,750 1,766 1,794 1,813 1,840

P rices (Cents per pound)ȱȱȱ N.Y. spo t raw sugar 27.26 24.26 25.69 26.54 26.66 26.97 27.13 27.16 26.94 26.89 26.66ȱȱȱ Refined beet sugar 36.48 32.26 34.18 35.31 35.40 35.78 35.93 35.93 35.55 35.43 35.05

##  After the record crop of 2012, producers sharply reduced peanut area and production in 2013. 2014 production reverted to the long-term average.

 Peanut yields were above the long-term trend for the third straight year in 2014.

 2015 area is expected to increase as prices for competing crops weaken. More typical yields would offset this effect on production.

 Peanut returns have declined from the record levels of 2012/13.

 With average projected market prices significantly below the reference price, PLC payments could be quite large for peanuts.

 PLC payments are tied to base acres. Only in the case of generic base (former cotton base acreage) do actual plantings affect PLC payments.

 Sunflower seed prices declined in 2013/14 in response to larger global oilseed supplies and lower vegetable oil prices.

 In 2014/15, a further decline in sunflower seed prices was offset by a recovery in average yields, so returns are largely unchanged.

 Projected average sunflower seed prices are below the reference price. 

# Peanuts and sunflower seed

Reduced production draws down peanut stocks

0 1 2 3 4 5 6 7 8

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearBillion pounds



### Production Use Ending stocks



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 27 

## Peanut payments represent a higher share of income

0 200 400 600 800 1,000 1,200 1,400

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 August-July marketing yearDollars per acre



### Market Program payments Variable expenses



## Sunflower returns also decline with lower prices

0 50 100 150 200 250 300 350 400 450

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Septermber-August marketing yearDollars per acre



### Market Program payments Variable expenses

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 28 

# Peanut supply and use

August

Ȭ July year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 1.35 1.41 1.46 1.46 1.43 1.41 1.41 1.41 1.42 1.42 1.40ȱȱȱ Harvested area 1.33 1.37 1.42 1.42 1.40 1.38 1.37 1.38 1.38 1.39 1.37 (Pounds per harvested ac re) Yield 3,932 3,771 3,827 3,882 3,936 3,991 4,045 4,100 4,151 4,202 4,253
Supply and use (Million pounds)ȱȱȱ Produc tion 5,210 5,178 5,443 5,525 5,494 5,502 5,562 5,650 5,749 5,829 5,829ȱȱȱ Imports 65 65 65 65 65 65 65 65 65 65 65ȱȱȱ Domestic use 4,122 4,155 4,287 4,375 4,417 4,444 4,483 4,539 4,606 4,671 4,710ȱȱȱ Exports 1,052 1,056 1,108 1,148 1,143 1,129 1,133 1,142 1,157 1,170 1,163ȱȱȱ Ending stocks 1,960 1,992 2,105 2,172 2,172 2,166 2,176 2,210 2,261 2,313 2,334

P rices, returns and payments (Dollars)ȱȱȱ Farm price/ton 428.08 437.75 413.50 398.59 407.30 416.41 421.41 417.94 407.56 396.52 397.43ȱȱȱ Market net return/a. 278.69 275.02 232.67 205.22 220.78 233.68 233.75 223.41 203.91 183.55 188.63ȱȱȱ Marketing loan benefits/a.* 0.00 42.42 85.36 96.72 96.29 84.89 90.62 106.54 124.84 129.92 128.56ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 142.09 127.71 136.88 147.09 138.12 135.87 133.69 132.51 132.09 142.12 145.02ȱȱȱȱȱȱ ARC/base a.* 29.62 45.18 54.70 52.85 42.21 39.19 37.51 38.22 39.09 42.45 45.20

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.


# Sunflower seed supply and use

September

Ȭ August year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

Area (Million ac res)ȱȱȱ Planted area 1.56 1.70 1.74 1.74 1.74 1.71 1.70 1.69 1.67 1.65 1.64ȱȱȱ Harvested area 1.51 1.57 1.61 1.61 1.61 1.59 1.57 1.56 1.54 1.53 1.52 (Pounds per harvested ac re) Yield 1,469 1,551 1,558 1,570 1,574 1,580 1,589 1,596 1,598 1,605 1,615
Supply and use (Million pounds)ȱȱȱ Produc tion 2,215 2,447 2,512 2,531 2,535 2,512 2,506 2,499 2,467 2,455 2,452ȱȱȱ Imports 130 130 130 130 130 130 130 130 130 130 130ȱȱȱ Domestic use 2,013 2,094 2,149 2,168 2,172 2,162 2,181 2,217 2,237 2,270 2,303ȱȱȱ Exports 354 455 484 494 494 479 451 406 356 307 273ȱȱȱ Ending stocks 178 206 215 214 214 214 219 225 230 237 243

P rices, returns and payments (Dollars)ȱȱȱ Farm price/lb. 0.205 0.196 0.198 0.204 0.208 0.211 0.212 0.211 0.208 0.206 0.205ȱȱȱ Market net return/a. 145.62 151.30 154.05 163.44 167.90 169.61 168.89 164.38 158.48 153.08 151.19ȱȱȱ Marketing loan benefits/a.* 0.00 0.04 0.13 0.01 0.07 0.16 0.13 0.10 0.03 0.08 0.10ȱȱȱ Payments to participantsȱȱȱȱȱȱ PLC/base a.* 0.06 16.84 17.02 14.25 12.76 11.05 10.88 12.81 13.23 14.41 14.36ȱȱȱȱȱȱ ARC/base a.* 5.73 10.04 8.05 5.36 4.19 4.14 4.99 5.70 6.60 7.11 6.90

*Marketing loan benefits and insurance net indemnities are averaged ac ross all ac res. PLC and ARC payments are per participating ac re. All projec tions are averages ac ross 500 stochastic outcomes.

# Land use

Corn area falls in 2015, soybean area increases

40 50 60 70 80 90 100 110

2008 2010 2012 2014 2016 2018 2020 2022 2024 Year crops harvestedMillion acres



### Corn Soybeans Wheat



## Cotton acreage planted decreases in 2015

0 2 4 6 8 10 12 14 16

2008 2010 2012 2014 2016 2018 2020 2022 2024 Year crops harvestedMillion acres



### Upland cotton Sorghum Rice 

##  Lower corn prices lead to a reduction in corn area planted in 2015.

 Soybean area increased sharply in 2014, and is projected to set another record high in 2015.

 Wheat area is likely to decrease in 2015, as USDA reports that winter wheat seedings were down by 2 million acres.

 Low prices and returns will likely reduce the total amount of land devoted to corn and soybeans in 2015.

 Cotton acreage increased slightly in 2014, but declines in 2015 because of weak returns.

 Sorghum acreage is projected to increase slightly in 2015 in response to strong prices relative to other crops.

 Continued drought in California coupled with lower prices elsewhere push rice acreage down in the short-tem.

 Land planted to 12 major crops increased in 2014 as soybean area increased by about 7 million acres.

 Lower expected returns in 2015 put downward pressure on area.

 The CRP cap is lower under the new farm bill, allowing more potential acres for crop production. 12 crop planted area likely to fall

220 240 260 280 300 320 340 360

2008 2010 2012 2014 2016 2018 2020 2022 2024 Year crops harvestedMillion acres



### 12 crops 12 crops + hay + CRP - double-crop



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 29

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 30 

# Land use for major crops and the conservation reserve

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

P lanted area (Million ac res)ȱȱ Corn 90.60 87.92 90.29 90.70 91.05 91.21 91.14 91.13 91.09 90.92 90.71ȱȱ Soybeans 83.70 84.17 82.59 82.80 83.10 83.53 83.66 83.68 83.79 83.71 83.74ȱȱ Wheat 56.82 55.06 54.11 54.50 54.69 54.74 54.94 54.96 54.85 54.97 55.08ȱȱ Upland co tton 10.85 9.54 9.64 9.83 9.65 9.46 9.37 9.37 9.48 9.50 9.53ȱȱ Sorghum 7.14 7.56 7.60 7.57 7.56 7.55 7.53 7.53 7.53 7.56 7.58ȱȱ Barley 2.98 3.33 3.43 3.39 3.33 3.29 3.27 3.21 3.17 3.06 2.99ȱȱ Oats 2.72 2.60 2.61 2.60 2.59 2.56 2.55 2.57 2.59 2.62 2.64ȱȱ Rice 2.94 2.80 2.91 2.92 2.91 2.86 2.84 2.82 2.82 2.82 2.82ȱȱ Sunflowers 1.56 1.70 1.74 1.74 1.74 1.71 1.70 1.69 1.67 1.65 1.64ȱȱ Peanuts 1.35 1.41 1.46 1.46 1.43 1.41 1.41 1.41 1.42 1.42 1.40ȱȱ Sugar beets 1.16 1.25 1.20 1.22 1.23 1.21 1.21 1.20 1.20 1.20 1.20ȱȱ Sugar c ane (harvested) 0.88 0.92 0.89 0.88 0.87 0.86 0.85 0.84 0.84 0.83 0.82 12 crop planted area 262.70 258.26 258.47 259.63 260.14 260.40 260.47 260.43 260.44 260.26 260.15

Hay (harvested) 56.84 58.46 58.37 58.44 58.68 58.96 59.12 59.13 59.06 58.99 58.92

12 crops + hay 319.53 316.72 316.84 318.06 318.82 319.36 319.59 319.56 319.50 319.24 319.07

Conservation reserve (CRP ) 25.45 24.21 23.94 22.89 22.86 22.84 22.82 22.81 22.80 22.79 22.77

12 crops + hay + CRP 344.98 340.93 340.78 340.95 341.68 342.20 342.41 342.37 342.29 342.04 341.85

Double

Ȭ crop soybeans 5.61 5.09 4.94 4.99 5.05 5.09 5.10 5.08 5.05 5.01 4.98

12 crops + hay + CRP 339.37 335.84 335.84 335.97 336.64 337.11 337.30 337.29 337.24 337.03 336.87

ȱȱȬȱ double

Ȭ crop soybeans

##  Future biodiesel use of soybean oil is constrained by competition from corn oil and other biodiesel feedstocks.

 Per-capita domestic use of soybean oil for purposes other than biofuel production remains around 43 pounds per year between 2014/15 and 2024/25.

 Soybean oil exports increase after 2020. Foreign use of vegetable oil in fuel increases because of rising petroleum prices.

 Stagnant livestock and poultry production and competition from distillers grains have limited domestic use of soybean meal in recent years.

 Projected increases in soybean meal use result from resumed growth in poultry and pork production and slower expansion of distillers grains use.

 Soybean meal exports remain stable as growing world demand is met by Argentina and other competitors.

 Soybean meal and oil prices have declined in 2014/15 because of large global oilseed supplies, and a further decline in 2015/16 is projected.

 After 2020, vegetable oil prices are supported by rising petroleum prices.

 Projected crushing margins (the difference between the value of soybean meal and oil and the cost of soybeans) average $1.75 per bushel from 2015-2024. This is slightly less than the 2011-2014 average. 

# Soybean products

Expansion in biodiesel use of soybean oil ends

0 2 4 6 8 10 12 14 16

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 October-September marketing yearBillion pounds



### Domestic food use Biodiesel use Exports



## Soybean meal use grows with livestock production

0 5 10 15 20 25 30 35 40

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 October-September marketing yearMillion tons



### Domestic use Exports



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 31 

## Soybean meal and oil prices fall in 2014/15, 2015/16

0 100 200 300 400 500 600

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 October-September marketing yearDollars per ton



### 0 10 20 30 40 50 60Cents per pound



### Soybean meal Soybean oil (right axis)

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 32 

# Soybean oil supply and use

Oc tober

Ȭ September year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Million pounds) Supply 21,999 22,879 23,244 23,353 23,422 23,522 23,827 23,934 24,125 24,464 24,741ȱȱȱ Beginning stocks 1,165 1,429 1,724 1,763 1,819 1,869 1,919 1,900 1,907 1,926 1,934ȱȱȱ Produc tion 20,674 21,290 21,361 21,430 21,443 21,494 21,748 21,874 22,058 22,378 22,647ȱȱȱ Imports 160 160 160 160 160 160 160 160 160 160 160

Domestic use 18,476 19,201 19,555 19,949 19,744 19,737 19,968 19,888 19,900 19,974 20,023ȱȱȱ Biodiesel 4,651 5,110 5,372 5,670 5,366 5,236 5,381 5,244 5,174 5,165 5,161ȱȱȱ Food and o ther 13,825 14,091 14,183 14,278 14,378 14,501 14,587 14,644 14,726 14,809 14,862

Exports 2,094 1,955 1,926 1,586 1,810 1,866 1,958 2,139 2,298 2,556 2,772

Total use 20,570 21,156 21,481 21,534 21,553 21,603 21,927 22,027 22,199 22,530 22,796

Ending stocks 1,429 1,724 1,763 1,819 1,869 1,919 1,900 1,907 1,926 1,934 1,945

P rice (Cents per pound)ȱȱȱ Dec atur 32.77 30.50 31.64 32.28 32.84 32.97 34.04 34.84 34.93 35.02 35.63



# Soybean meal supply and use

Oc tober

Ȭ September year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Thousand tons) Supply 43,548 44,282 44,431 44,578 44,603 44,705 45,229 45,495 45,877 46,543 47,099ȱȱȱ Beginning stocks 250 299 303 308 307 305 306 313 318 325 330ȱȱȱ Produc tion 43,048 43,733 43,878 44,020 44,046 44,151 44,673 44,932 45,310 45,968 46,519ȱȱȱ Imports 250 250 250 250 250 250 250 250 250 250 250

Domestic use 30,357 31,706 32,563 32,770 32,801 32,973 33,294 33,634 34,310 34,805 35,364

Exports 12,892 12,273 11,560 11,501 11,498 11,426 11,623 11,543 11,242 11,408 11,398

Total use 43,249 43,979 44,123 44,271 44,299 44,399 44,916 45,177 45,552 46,213 46,763

Ending stocks 299 303 308 307 305 306 313 318 325 330 337

P rice (Dollars per ton)ȱȱȱ Dec atur, 48% pro tein 355.76 337.65 335.61 346.32 360.88 366.46 362.48 359.34 347.67 343.58 334.37

# Corn products

 Along with conventional ethanol production, there is modest growth in distillers dried grains with solubles (DDGS) production.

 Domestic use is sustained by rising livestock feed demand overall, but limited by competition from other feeds.

 Net exports remain flat throughout the projection period. Disputes regarding approved corn varieties make DDGS exports to China a key source of uncertainty.

 Prices for DDGS generally move with corn prices and slightly exceed them in the projection period.

 Export demand lends support to DDGS prices. China is a major source of uncertainty for U.S. exports and prices.

 Wet mills produce ethanol, HFCS and other products including food-grade corn oil. Dry mills can extract nonfood-grade corn oil from distillers grains.

 The baseline projects a further increase in the share of dry mill ethanol plants that extract corn oil.

 The oil removed in dry mill plants is used in feed rations and biodiesel production.

 A growing share of corn oil goes to these nonfood uses. Distillers grains production expands with ethanol

0 5 10 15 20 25 30 35 40 45

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearMillion tons



### Distillers, brewers grains production Domestic use Net exports



## DDGS prices generally follow corn prices

0 50 100 150 200 250 300

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 September-August marketing yearDollars per ton



### Corn DDGS Corn gluten feed



## Nonfood uses of corn oil increase

0 1 2 3 4 5 6 7 8 9

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 October-September marketing yearBillion pounds



### Food and other Feed Biodiesel Net exports



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 33

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 34 

# Corn product supply and use

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

High

Ȭ fructose corn syrup (Thousand tons, Oc t.

Ȭ Sep. year)ȱȱ Produc tion 8,630 8,601 8,682 8,791 8,840 8,897 8,946 8,998 9,019 9,047 9,059ȱȱ Domestic use 7,367 7,328 7,363 7,430 7,436 7,455 7,465 7,479 7,461 7,450 7,423ȱȱ Net exports 1,263 1,273 1,319 1,361 1,404 1,442 1,481 1,519 1,558 1,597 1,636 (Cents per pound, Oc t.

Ȭ Sep. year)ȱȱ Price, 42% Midwest 23.11 22.55 23.11 23.72 23.80 24.06 24.15 24.10 23.94 23.93 23.73ȱȱ HFCS price/ref. sugar price 63% 70% 68% 67% 67% 67% 67% 67% 67% 68% 68%

Distillers, brewers grains (Thousand tons, Sep.

Ȭ Aug. year)ȱȱ Produc tion (dry equiv.) 38,882 38,648 38,839 39,668 40,367 40,914 41,581 41,939 41,966 41,844 41,661ȱȱ Domestic use 27,609 27,338 27,559 28,402 29,114 29,651 30,278 30,606 30,604 30,472 30,272ȱȱ Net exports 11,273 11,310 11,280 11,266 11,253 11,263 11,303 11,333 11,363 11,372 11,389 (Dollars per ton, Sep.

Ȭ Aug. year)ȱȱ Price, IL points 144.18 147.82 149.15 153.68 158.61 160.69 159.57 158.26 154.37 152.46 148.82ȱȱ DDGS price/corn price 111% 106% 107% 107% 108% 108% 107% 106% 106% 106% 107%

Corn gluten feed (Thousand tons, Sep.

Ȭ Aug. year)ȱȱ Produc tion 8,803 8,894 9,075 9,036 8,890 8,770 8,772 8,809 8,856 8,919 9,000ȱȱ Domestic use 7,852 7,942 8,122 8,062 7,906 7,790 7,799 7,861 7,944 8,025 8,136ȱȱ Net exports 952 953 953 974 984 979 973 948 912 894 864 (Dollars per ton, Sep.

Ȭ Aug. year)ȱȱ Price, 21%, IL points 125.04 126.04 125.06 124.92 125.71 126.09 125.22 125.35 124.70 123.64 122.53ȱȱ CGF price/corn price 96% 91% 90% 87% 86% 85% 84% 84% 86% 86% 88%

Corn gluten meal (Thousand tons, Sep.

Ȭ Aug. year)ȱȱ Produc tion 2,317 2,341 2,388 2,378 2,339 2,308 2,309 2,318 2,331 2,347 2,368ȱȱ Domestic use 1,209 1,216 1,251 1,236 1,194 1,155 1,144 1,143 1,142 1,147 1,156ȱȱ Net exports 1,108 1,125 1,137 1,142 1,146 1,153 1,164 1,175 1,189 1,200 1,212 (Dollars per ton, Sep.

Ȭ Aug. year)ȱȱ Price, 60%, IL points 496.96 475.13 472.10 485.20 503.38 510.73 506.15 502.41 488.42 483.42 472.21ȱȱ CGM price/soymeal price 140% 141% 141% 140% 139% 139% 140% 140% 140% 141% 141%

Corn oil (Million pounds, Oc t.

Ȭ Sep. year)ȱȱ Produc tion 5,515 6,204 6,662 7,133 7,415 7,513 7,598 7,651 7,667 7,669 7,670ȱȱ Domestic use 4,412 5,085 5,567 6,038 6,333 6,439 6,530 6,585 6,600 6,603 6,606ȱȱȱȱ Biodiesel 893 768 1,439 1,681 1,951 2,055 2,120 2,178 2,176 2,206 2,267ȱȱȱȱ Feed 1,127 2,436 2,136 2,344 2,562 2,688 2,699 2,722 2,761 2,751 2,712ȱȱȱȱ Food/o ther 2,393 1,881 1,992 2,013 1,819 1,696 1,712 1,685 1,664 1,646 1,626ȱȱ Net exports 1,068 1,077 1,075 1,073 1,071 1,070 1,067 1,065 1,066 1,066 1,065ȱȱ Ending stocks 199 241 261 283 295 299 301 301 302 302 300 (Cents per pound, Oc t.

Ȭ Sep. year)ȱȱ Chic ago price 34.49 32.11 33.04 33.71 34.37 34.59 35.64 36.40 36.44 36.48 37.01ȱȱ Corn oil price/soyoil price 105% 105% 104% 104% 105% 105% 105% 104% 104% 104% 104%

# Ethanol and biofuel policy

 Record margins in 2014 led to a recovery in ethanol production relative to 2012 and 2013.

 Production is projected to decline slightly in 2015 as margins become tighter.

 Beyond 2015, ethanol production grows slowly as RFS requirements increase and production margins recover.

 Cellulosic and non-corn ethanol production levels contribute relatively minor quantities to the total.

 Sugarcane ethanol imports from Brazil continue at a very low level in 2015 before climbing in 2016.

 Growing RFS requirements for advanced biofuel and low-carbon fuel requirements in California motivate sugar-based ethanol imports at modest levels.

 Exports rebounded in 2014 and continue steady growth with domestic conventional ethanol prices competitive in the global market.

 RFS percent requirements are unknown. These projections assume growth to 10 percent of motor fuel use.

 Declining motor fuel use in later years implies a slight decline in volume requirements.

 Biomass-based diesel requirements remain slightly above 1.28 billion gallons based on estimated motor fuel use.

 RIN prices increase in the near term before declining in later years as market conditions make the RFS easier to meet. Ethanol production resumes modest growth

0 2 4 6 8 10 12 14 16 18

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons



### Corn starch ethanol production Other ethanol production



## RFS volume requirements hold steady

0 5 10 15 20

2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons (ethanol eqv.)



### Conventional gap Advanced gap Biomass-based diesel Cellulosic 

## Steady growth in U.S. ethanol export demand

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons



### Imports Exports



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 35

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 36 

# Ethanol supply and use

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

P etroleum fuel prices (Dollars per barrel)ȱȱ Petroleum, W. Texas interm. 93.01 58.24 71.07 80.64 89.90 98.69 109.47 119.86 126.36 133.40 141.39ȱȱ Petroleum, refiners ȇȱ acquis. 91.54 55.71 68.16 77.25 86.18 94.93 105.58 115.63 121.69 128.46 136.16 (Dollars per gallon)ȱȱ Unl. gasoline, FOB Omaha 2.66 1.71 1.94 2.14 2.36 2.58 2.86 3.13 3.31 3.49 3.68ȱȱ Unleaded gasoline, retail 3.37 2.37 2.63 2.83 3.04 3.26 3.53 3.79 3.96 4.14 4.33

(Million gallons) Motor gasoline use* 137,460 138,364 139,662 140,666 140,464 139,462 137,726 135,463 133,042 130,615 128,257

Ethanol supply and useȱȱ Produc tion 14,334 14,190 14,375 14,669 14,922 15,075 15,222 15,466 15,606 15,733 15,905ȱȱȱȱȱ From corn 14,175 14,047 14,194 14,449 14,674 14,806 14,935 15,156 15,269 15,365 15,500ȱȱȱȱȱ Other conventional 158 137 156 169 173 171 170 170 175 183 194ȱȱȱȱȱ Cellulosic 1 6 26 52 75 97 117 139 162 186 210ȱȱ Imports 60 45 267 299 302 298 321 293 270 281 316ȱȱ Domestic disappearance 13,481 13,369 13,750 14,031 14,211 14,311 14,419 14,576 14,669 14,766 14,952ȱȱ Exports 811 861 887 930 1,005 1,053 1,115 1,174 1,197 1,238 1,260ȱȱ Ending stocks 791 797 803 810 819 827 836 846 855 865 875

Ethanol prices (Dollars per gallon)ȱȱ Conventional rack, Omaha 2.34 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06ȱȱ Other advanced rack 2.40 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06ȱȱ Effec tive retail 2.56 1.89 1.84 1.91 2.00 2.10 2.25 2.37 2.48 2.58 2.66ȱȱ Ethanol/gasoline retail 76% 80% 70% 68% 66% 64% 64% 62% 62% 62% 62%

RIN valuesȱȱ Conventional ethanol 0.49 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05ȱȱ Advanced ethanol 0.54 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05

* Includes fuel ethanol 

# Renewable Fuel Standard

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Applicable percent standard Overall 9.50% 9.55% 9.35% 9.48% 9.63% 9.73% 9.80% 9.85% 9.90% 9.95% 10.00%ȱȱ Advanced bio fuels 1.33% 1.35% 1.38% 1.40% 1.42% 1.44% 1.47% 1.49% 1.51% 1.53% 1.56%ȱȱȱȱ Cellulosic bio fuel 0.01% 0.02% 0.05% 0.07% 0.09% 0.11% 0.13% 0.14% 0.16% 0.18% 0.18%ȱȱȱȱ Biomass

Ȭ based diesel 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13% 1.13%

Required volume (Million gallons) Overall 16,231 16,717 16,437 16,800 17,070 17,188 17,157 17,053 16,953 16,842 16,722ȱȱ Advanced bio fuels 2,095 2,368 2,418 2,475 2,516 2,547 2,565 2,575 2,586 2,594 2,600ȱȱȱȱ Cellulosic bio fuel 33 38 62 100 129 156 181 208 237 265 295ȱȱȱȱ Biomass

Ȭ based diesel 1,321 1,319 1,325 1,335 1,335 1,330 1,319 1,305 1,290 1,275 1,260 Gaps: Conventional 14,136 14,349 14,018 14,325 14,554 14,641 14,591 14,477 14,367 14,248 14,122ȱȱȱȱȱȱȱȱȱȱ Advanced 80 351 368 374 385 396 405 410 414 416 415

# Biomass-based diesel and biofuel plant returns

 The outlook assumes the RFS percent requirements for biomass-based diesel remain at 1.13 percent going forward. This implies a volume requirement slightly above 1.28 billion gallons.

 Biomass-based diesel production falls further in 2015 without the blenders tax credit in place but recovers in later years to meet RFS requirements.

 Corn oil based biodiesel and renewable diesel production increase from their current levels.

 Domestic biomass-based diesel use falls just below the RFS requirement in 2015. RIN stocks are used to make up the difference.

 In later years, biomass-based diesel is used beyond its own requirement to help meet the advanced or overall mandates.

 The U.S. remains a small net importer of biomass-based diesel in the near term, but is projected to be a small net exporter in later years.

 Average dry mill ethanol net returns over operating costs fall sharply in 2015 before recovering in 2016.

 Biomass-based diesel net returns continue their descent in 2015 without the blenders tax credit in place. They recover in 2016 and remain near the level of dry mill net returns.

 RFS implementation and the costs of selling larger volumes of fuels with more than 10 percent ethanol remain important sources of uncertainty. Biomass-based diesel production recovers

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons



### Soy oil Corn oil Other fats/oils Renewable diesel Cellulosic diesel



## Biomass-based diesel use exceeds RFS mandate

0.0 0.5 1.0 1.5 2.0

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion gallons



### RFS requirement Domestic use



## Biofuel net returns hold steady beyond 2016

-0.20 0.00 0.20 0.40 0.60 0.80 1.00

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearDollars per gallon



### Dry mill ethanol Soy oil biodiesel



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 37

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 38 

# Biomass

Ȭ based diesel sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Biomass

Ȭ based diesel supply (Million gallons)ȱȱ Produc tion 1,617 1,260 1,594 1,699 1,799 1,832 1,866 1,890 1,873 1,885 1,921ȱȱȱȱ From soybean oil 585 619 663 680 690 674 673 663 635 633 648ȱȱȱȱ From corn oil 116 100 187 218 253 267 275 283 283 286 294ȱȱȱȱ From o ther fats and oils 530 307 373 381 395 405 417 426 427 431 439ȱȱȱȱ From cellulosic diesel 0 0 2 9 12 15 18 21 24 27 30ȱȱ Renewable diesel 387 234 368 411 449 471 483 496 504 508 510

Biomass

Ȭ based diesel useȱȱ Domestic disappearance 1,768 1,296 1,711 1,780 1,830 1,842 1,869 1,847 1,803 1,820 1,883ȱȱ Net exports

Ȭ 96

Ȭ 109

Ȭ 105

Ȭ 76

Ȭ 29

Ȭ 9

Ȭ 4 43 70 65 38ȱȱ Ending stocks 136 208 196 191 190 189 189 189 189 189 189

Fuel prices and tax credit (Dollars per gallon)ȱȱȱ Biodiesel, rack 3.47 3.04 3.21 3.34 3.42 3.47 3.50 3.60 3.64 3.68 3.73ȱȱȱ #2 Diesel, refiner sales 2.81 1.86 2.10 2.29 2.51 2.73 3.01 3.28 3.46 3.64 3.84ȱȱȱ #2 Diesel, retail 3.83 2.83 3.20 3.40 3.62 3.84 4.12 4.39 4.56 4.74 4.94ȱȱȱ Biodiesel tax c redit 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RIN valuesȱȱ Per RIN gallon 0.56 0.55 0.73 0.71 0.64 0.54 0.39 0.28 0.18 0.10 0.05ȱȱ Per phyisc al gallon 0.84 0.82 1.09 1.06 0.96 0.80 0.59 0.42 0.27 0.15 0.07



# Biofuel plant returns

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Biodiesel costs and returns (Dollars per gallon)ȱȱȱ Biodiesel value 3.47 3.04 3.21 3.34 3.42 3.47 3.50 3.60 3.64 3.68 3.73ȱȱȱ Glycerin value 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11ȱȱȱ S oyoil cost

Ȭ 2.84

Ȭ 2.47

Ȭ 2.35

Ȭ 2.44

Ȭ 2.51

Ȭ 2.55

Ȭ 2.57

Ȭ 2.66

Ȭ 2.71

Ȭ 2.73

Ȭ 2.74ȱȱȱ Other operating costs

Ȭ 0.57

Ȭ 0.58

Ȭ 0.58

Ȭ 0.59

Ȭ 0.59

Ȭ 0.60

Ȭ 0.61

Ȭ 0.61

Ȭ 0.62

Ȭ 0.62

Ȭ 0.63ȱȱȱ Net operating retur n 0.17 0.10 0.39 0.41 0.43 0.43 0.43 0.44 0.43 0.44 0.46

Corn milling for ethanol (Million bushels)ȱȱȱ Corn wet milled for ethanol 576 482 548 555 527 497 475 468 464 468 486ȱȱȱ Corn dry milled for ethanol 4,662 4,644 4,624 4,700 4,800 4,868 4,927 5,004 5,039 5,060 5,082ȱȱȱȱȱ (Share de

Ȭ oiling DDGS) 89% 92% 94% 95% 96% 97% 98% 98% 98% 98% 98%

Dry mill ethanol costs, returns (Dollars per gallon)ȱȱȱȱȱ Ethanol value 2.34 1.77 1.88 1.93 1.95 1.96 1.98 1.99 2.00 2.03 2.06ȱȱȱȱȱ Distillers grains value 0.51 0.43 0.44 0.44 0.46 0.47 0.47 0.47 0.46 0.45 0.44ȱȱȱȱȱ Corn oil value* 0.07 0.04 0.06 0.05 0.05 0.06 0.05 0.06 0.06 0.06 0.06ȱȱȱȱȱ Corn cost

Ȭ 1.50

Ȭ 1.36

Ȭ 1.42

Ȭ 1.43

Ȭ 1.47

Ȭ 1.50

Ȭ 1.51

Ȭ 1.50

Ȭ 1.49

Ȭ 1.46

Ȭ 1.42ȱȱȱȱȱ Fuel and elec tricity cost

Ȭ 0.20

Ȭ 0.20

Ȭ 0.18

Ȭ 0.19

Ȭ 0.21

Ȭ 0.21

Ȭ 0.22

Ȭ 0.21

Ȭ 0.21

Ȭ 0.22

Ȭ 0.22ȱȱȱȱȱ Other operating costs

Ȭ 0.34

Ȭ 0.34

Ȭ 0.35

Ȭ 0.35

Ȭ 0.35

Ȭ 0.36

Ȭ 0.36

Ȭ 0.36

Ȭ 0.37

Ȭ 0.37

Ȭ 0.37ȱȱȱȱȱ Net operating return 0.88 0.35 0.44 0.46 0.44 0.42 0.41 0.43 0.46 0.50 0.55

* Weighted by share o f dry mills de

Ȭ oiling DDGs

##  The annual cattle inventory report released by USDA in early 2015 showed a 2.1 percent increase in beef cows, only the third annual increase since 1996 and the largest increase since 1994.

 Further increases are expected due to strong profitability levels and improved pasture conditions.

 Despite the expected growth, the beef cow herd will still remain smaller than the levels seen prior to 2010.

 The December 2014 quarterly hog inventory report noted a sharp increase in the U.S. sow herd.

 The 3.7 percent year-over-year increase is the largest in more than 16 years.

 Farrow-finish profitability was strongly positive throughout 2014, and as returns are projected to be positive in 2015, further growth in the herd is expected.

 The porcine epidemic diarrhea virus (PEDv) greatly impacted the number of pigs saved per litter in the first half of 2014.

 Disease impacts have waned recently, and in the absence of a further significant outbreak, the amount of pork produced per sow is expected to stabilize in 2015 and return to normal growth in 2016.

 The combination of a larger sow herd and more pork production per sow will result in a sharply higher pork supply. 

# Cattle and hogs

The beef cow herd increased during 2014

28 29 30 31 32 33

2008 2010 2012 2014 2016 2018 2020 2022 2024Million head (Jan. 1)



### Beef cow inventory



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 39 

## Pork productivity begins to recover in 2015

3,600 3,800 4,000 4,200 4,400 4,600 4,800 5,000

2008 2010 2012 2014 2016 2018 2020 2022 2024Pounds



### Pork production per sow 

## Sow inventory grows by largest amount since 1998

5.6 5.7 5.8 5.9 6.0 6.1 6.2 6.3

2008 2010 2012 2014 2016 2018 2020 2022 2024Million head (Dec. 1 prior year)



### Sow inventory

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 40 

# Cattle and hogs

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

CATTLE (Million head) Beef cows (Jan. 1) 29.0 29.6 30.5 31.0 31.2 31.3 31.1 30.9 30.6 30.5 30.3 Dairy cows (Jan. 1) 9.2 9.3 9.4 9.4 9.4 9.3 9.3 9.3 9.3 9.3 9.4 Cattle and c alves (Jan. 1) 87.7 88.3 90.5 93.2 94.9 95.2 94.8 93.9 93.0 92.4 92.1 Cattle on feed (Jan. 1) 12.7 12.7 12.6 13.0 13.6 14.0 14.1 14.0 13.9 13.7 13.5

Calf c rop 33.5 34.1 34.9 35.3 35.5 35.5 35.4 35.1 35.0 34.8 34.7 Cattle slaughter 30.9 30.0 30.3 31.7 33.1 34.0 34.3 34.0 33.6 33.3 32.9

Cattle imports 2.3 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 Cattle exports 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

P ricesȱȱ To tal all grades, (Dollars per hundredweight)ȱȱȱȱȱ 5

Ȭ Area direc t steers 154.56 156.07 149.83 136.29 126.33 121.87 121.62 123.68 126.24 127.89 129.31ȱȱ 600 ȱȬȱ 650 #, Oklahoma Cityȱȱȱȱȱ Feeder steers 225.21 234.16 219.45 191.68 170.55 159.74 157.87 161.80 167.23 171.53 175.05ȱȱ Utility cows, Sioux Falls 104.10 107.09 97.81 85.31 77.83 74.14 73.85 74.94 76.64 77.40 77.99

Cow

Ȭ calf returns (Dollars per cow)ȱȱ Receipts 1,173.71 1,216.35 1,136.58 998.09 896.88 845.27 836.81 855.25 880.95 900.55 916.56ȱȱ Feed expenses 246.01 241.75 251.91 254.68 261.88 268.21 270.01 268.62 266.17 262.69 260.09ȱȱ Non

Ȭ feed expenses 519.38 526.85 537.83 541.24 540.43 544.18 552.62 561.94 569.04 575.98 582.73ȱȱ Net returns 408.31 447.75 346.84 202.17 94.57 32.88 14.18 24.70 45.73 61.88 73.73

HOGS (Million head) Hogs for breeding (Dec. 1*) 5.76 5.97 6.19 6.19 6.07 5.93 5.82 5.75 5.74 5.76 5.80 Market hogs (Dec. 1*) 59.0 60.1 64.4 67.4 67.9 67.3 66.6 66.2 66.4 67.2 68.1

Sows farrowed 11.35 11.89 12.15 12.10 11.88 11.66 11.52 11.48 11.53 11.63 11.73 Pig c rop 112.7 121.8 127.8 129.3 128.6 127.5 127.2 128.0 129.9 132.2 134.6 Barrow and gilt slaughter 103.8 109.4 116.3 120.0 120.4 119.6 119.1 119.4 120.5 122.5 124.6
Hog imports 4.9 5.1 5.1 5.2 5.2 5.3 5.3 5.4 5.4 5.4 5.4 Hog exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

P ricesȱȱ Natl. base 51

Ȭ 52% lean equiv. (Dollars per hundredweight)ȱȱȱȱȱ Barrows & gilts 76.03 62.11 54.91 51.77 52.49 54.72 57.13 58.76 59.16 58.24 57.49ȱȱ IA

Ȭ S. Minn. #1

Ȭ 2, 300

Ȭ 400 #ȱȱȱȱȱ S ows 73.52 55.07 49.34 47.08 47.70 49.54 51.60 52.87 53.30 52.69 52.28

Farrow

Ȭ finish returns (Dollars per hundredweight)ȱȱ Receipts 81.23 66.51 58.96 55.53 56.01 58.02 60.37 61.91 62.32 61.40 60.64ȱȱ Feed expenses 35.35 30.46 31.84 32.29 33.56 34.83 35.37 35.28 34.95 34.10 33.56ȱȱ Non

Ȭ feed expenses 22.97 22.61 22.83 23.08 23.33 23.61 23.91 24.17 24.37 24.59 24.82ȱȱ Net returns 22.91 13.44 4.29 0.16

Ȭ 0.89

Ȭ 0.41 1.09 2.46 3.00 2.70 2.25ȱȱ * Preceding year

##  The total of U.S. beef, pork, chicken and turkey production should increase at the fastest rate since 2002 in 2015.

 All of the growth will come from the pork and poultry sectors.

 Beef production will decline for the fifth consecutive year as producers hold back more animals from market to rebuild the beef cow herd.

 This will lead to an even wider spread between beef and other meat prices.

 U.S. meat export volumes remained stable in recent years despite sharply higher prices and a strengthening U.S. dollar against most currencies.

 Some signs of weakening export levels began to appear in the final months of 2014, and meat imports (particularly beef) were higher than in recent years.

 With strong growth in domestic meat production projected for the next few years, the U.S. meat sector will need to expand international shipments to keep prices from declining sharply

 The amount of meat per person available in the domestic market fell by nearly 20 pounds (8.8 percent) from 2007-2012.

 Domestic meat availability is now projected to grow at rates not seen since the early 2000s.

 Future meat demand strength will play a large part in determining how far prices fall in light of additional supplies. 

# Meat

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 41 

## More pork and chicken production impacts prices

40 80 120 160 200 240 280

2008 2010 2012 2014 2016 2018 2020 2022 2024Dollars per hundredweight



### Choice beef cutout Pork cutout Composite chicken



## Domestic meat supply is set to increase

-2 0 2 4 6 8 10 12

1998-02 2002-06 2006-10 2010-14 2014-18 2018-22Change over the period, billion pounds



### Production Net exports



## Meat demand strength will be crucial to prices

195 200 205 210 215 220

2008 2010 2012 2014 2016 2018 2020 2022 2024Pounds per person



### Domestic meat consumption

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 42 

# Meat sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Beef (Million pounds)ȱȱ Produc tion 24,320 23,801 23,923 25,053 26,229 26,965 27,279 27,197 26,995 26,796 26,642ȱȱ Imports 2,928 2,772 2,753 2,699 2,644 2,617 2,634 2,671 2,711 2,758 2,794ȱȱ Domestic use 24,718 24,088 24,063 24,883 25,831 26,436 26,672 26,609 26,430 26,257 26,132ȱȱ Exports 2,584 2,511 2,602 2,825 2,998 3,119 3,230 3,260 3,282 3,301 3,306ȱȱ Ending stocks 530 503 513 558 601 627 638 638 632 629 627

P orkȱȱ Produc tion 22,866 24,036 25,281 26,133 26,290 26,189 26,143 26,315 26,635 27,188 27,750ȱȱ Imports 1,000 925 913 916 923 939 957 968 981 986 987ȱȱ Domestic use 19,114 19,787 20,693 21,354 21,360 21,130 20,948 20,958 21,108 21,451 21,805ȱȱ Exports 4,829 5,145 5,449 5,657 5,852 6,009 6,161 6,325 6,501 6,705 6,913ȱȱ Ending stocks 540 569 621 657 659 647 638 638 646 663 681

Broilerȱȱ Produc tion 38,173 40,176 41,209 41,868 42,389 42,812 43,279 43,867 44,499 45,202 45,895ȱȱ Domestic use 30,989 32,835 33,745 34,227 34,506 34,701 34,946 35,303 35,732 36,237 36,733ȱȱ Exports 7,291 7,407 7,556 7,753 8,005 8,240 8,462 8,691 8,894 9,090 9,289ȱȱ Ending stocks 675 726 752 760 759 754 752 754 757 765 772

Turkeyȱȱ Produc tion 5,739 6,001 6,155 6,280 6,349 6,384 6,417 6,470 6,533 6,607 6,680ȱȱ Domestic use 5,006 5,166 5,334 5,453 5,517 5,541 5,557 5,591 5,636 5,692 5,748ȱȱ Exports 799 814 830 842 854 870 888 906 924 942 960ȱȱ Ending stocks 200 248 268 282 289 292 295 299 304 310 316

Wholesale prices (Dollars per hundredweight)ȱȱ Boxed beef cutout 239.26 240.73 232.98 215.87 203.75 198.89 199.05 201.90 205.31 207.28 208.86ȱȱ Pork cutout 110.19 95.87 85.94 80.23 80.70 83.67 87.10 89.58 90.89 90.26 89.61ȱȱ National wholesale broiler 104.87 94.53 90.78 90.71 92.39 94.75 96.84 98.05 98.69 98.78 98.93ȱȱ Natl. wholesale turkey hens 107.64 101.85 95.85 93.29 93.56 95.37 97.50 98.89 99.74 100.04 100.38

Retail prices (Dollars per pound)ȱȱ Beef 5.97 6.20 6.15 6.02 5.89 5.86 5.86 6.03 6.18 6.31 6.44ȱȱ Pork 4.02 3.90 3.76 3.68 3.72 3.83 3.99 4.09 4.14 4.13 4.12ȱȱ Broiler 1.96 1.97 1.96 1.96 2.01 2.06 2.11 2.14 2.15 2.15 2.15ȱȱ Turkey 1.63 1.62 1.59 1.58 1.60 1.63 1.67 1.70 1.72 1.74 1.76

Per capita consumption (Pounds, retail)ȱȱ Beef 54.3 52.5 52.0 53.3 54.9 55.8 55.8 55.3 54.5 53.7 53.1ȱȱ Pork 46.5 47.8 49.6 50.7 50.3 49.4 48.6 48.2 48.2 48.6 49.1ȱȱ Broiler 83.5 87.8 89.5 90.0 90.0 89.8 89.7 90.0 90.4 91.0 91.5ȱȱ Turkey 15.7 16.1 16.5 16.7 16.8 16.7 16.6 16.6 16.6 16.6 16.7ȱȱ To tal 200.0 204.1 207.5 210.8 212.0 211.7 210.8 210.0 209.6 209.9 210.3

##  A decline in input costs coupled with a record high all milk price led to profitability at or near record levels in 2014.

 Input costs are projected to decline further in 2015, but an even larger drop in projected milk prices will cause 2015 profitability levels to be more in line with the historical average.

 The milk price outlook depends upon the strength of international demand for dairy products. China has sharply increased its purchases of milk powders this decade, but its slowdown in purchases in 2014 led to price declines.

 The U.S. dairy herd added 100 thousand cows (1.1 percent) during 2014.

 Further increases are expected during the first portion of 2015, though the rate at which prices decline will have an effect.

 Milk production per cow increased by 2.0 percent in 2014, the second highest growth in yields since 2005.

 The Margin Protection Program-Dairy (MPP-Dairy) became operational late last year.

 Enrollment information recently released by USDA shows that about half of U.S. licensed dairy operations signed up for 2015 coverage.

 If dairy margins fall at least as much as projected in 2015, participation could increase in 2016. Producers must enroll by September 30, 2015 to be eligible for 2016. 

# Dairy

FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 43 

## Producers have responded by building the dairy herd

9.05 9.10 9.15 9.20 9.25 9.30 9.35 9.40 9.45

2008 2010 2012 2014 2016 2018 2020 2022 2024Million head



### Dairy cow inventory



## 2014 was a profitable year for the dairy industry

0 4 8 12 16 20 24 28

2008 2010 2012 2014 2016 2018 2020 2022 2024Dollars per hundredweight



### Feed costs Other operating costs All milk price



## Margins retreat in 2015 and 2016

4 6 8 10 12 14

2008 2010 2012 2014 2016 2018 2020 2022 2024Dollars per hundredweight



### Calculated MPP-Dairy margin

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 44 

# Dairy sector

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Milk supplyȱȱ Dairy cows (thou. head) 9,255 9,362 9,393 9,385 9,353 9,325 9,323 9,330 9,339 9,354 9,371ȱȱȱȱȱȱ California 1,780 1,786 1,782 1,776 1,765 1,756 1,753 1,752 1,754 1,757 1,762ȱȱȱȱȱȱ Wisconsin 1,270 1,281 1,284 1,283 1,280 1,278 1,279 1,283 1,285 1,288 1,289ȱȱȱȱȱȱ New York 615 621 620 616 611 607 606 605 606 606 608ȱȱȱȱȱȱ Idaho 575 588 596 601 603 605 607 611 614 617 621ȱȱȱȱȱȱ Pennsylvania 530 532 529 523 518 513 511 509 508 508 508ȱȱȱȱȱȱ Minneso ta 460 464 465 463 461 458 457 456 455 454 454ȱȱȱȱȱȱ Texas 462 472 478 481 483 484 486 488 490 491 493ȱȱȱȱȱȱ Michigan 390 401 408 412 416 419 423 427 431 435 439ȱȱȱȱȱȱ New Mexico 323 326 326 325 323 322 321 321 320 320 320ȱȱȱȱȱȱ Ohio 266 269 270 269 267 265 264 264 263 262 262ȱȱȱȱȱȱ Rest o f U.S. 2,584 2,621 2,635 2,635 2,627 2,618 2,615 2,615 2,614 2,614 2,616ȱȱ Milk yield (lbs. per cow) 22,258 22,567 22,886 23,231 23,541 23,853 24,147 24,434 24,714 24,990 25,270ȱȱ Milk produc tion (bil. lbs.) 206.0 211.3 215.0 218.0 220.2 222.4 225.1 228.0 230.8 233.8 236.8

Min. FMMO class prices (Dollars per hundredweight)ȱȱȱȱȱ Class I mover 23.29 16.99 16.94 17.39 17.84 18.22 18.41 18.49 18.56 18.69 18.79ȱȱȱȱȱ Class II 23.34 15.74 15.94 16.48 16.79 17.17 17.29 17.37 17.53 17.71 17.84ȱȱȱȱȱ Class III 22.34 16.08 15.90 16.32 16.70 17.13 17.32 17.34 17.33 17.34 17.27ȱȱȱȱȱ Class IV 22.09 15.04 15.24 15.78 16.09 16.47 16.59 16.67 16.83 17.01 17.14 All milk price 23.97 17.59 17.55 18.01 18.39 18.79 18.96 19.02 19.07 19.16 19.19

Actual dairy prod. margin 13.32 8.33 8.50 9.12 9.26 9.34 9.33 9.38 9.49 9.79 9.96

Wholesale prices (Dollars per pound)ȱȱȱȱȱ Butter, CME 2.16 1.52 1.40 1.42 1.44 1.48 1.47 1.47 1.47 1.46 1.45ȱȱȱȱȱ Cheese, Amer., 40#, CME 2.11 1.59 1.57 1.61 1.65 1.69 1.71 1.71 1.71 1.71 1.70ȱȱȱȱȱ Nonfat dry milk, AA 1.74 1.23 1.32 1.37 1.40 1.42 1.44 1.45 1.47 1.49 1.51ȱȱȱȱȱ Evaporated milk 2.24 2.07 2.05 2.07 2.11 2.14 2.16 2.18 2.20 2.22 2.24

Dairy product productio n (Million pounds)ȱȱȱȱȱ Americ an cheese 4,510 4,606 4,660 4,691 4,716 4,740 4,785 4,839 4,887 4,935 4,992ȱȱȱȱȱ Other cheese 6,897 7,087 7,233 7,353 7,460 7,585 7,721 7,877 8,030 8,188 8,355ȱȱȱȱȱ Butter 1,823 1,886 1,943 1,988 2,019 2,043 2,070 2,096 2,122 2,148 2,174ȱȱȱȱȱ Nonfat dry milk 2,194 2,165 2,277 2,365 2,429 2,491 2,564 2,643 2,716 2,792 2,868

Dairy product exportsȱȱȱȱȱ Americ an cheese 229 230 248 256 259 263 267 272 277 282 287ȱȱȱȱȱ Other cheese 577 560 584 595 599 603 609 616 623 630 638ȱȱȱȱȱ Butter 139 139 154 160 156 154 158 162 165 169 173ȱȱȱȱȱ Nonfat dry milk 1,198 1,152 1,211 1,273 1,299 1,326 1,358 1,393 1,425 1,457 1,486

Per

Ȭ capita consumption (Pounds)ȱȱȱȱȱ Butter 5.4 5.4 5.5 5.6 5.7 5.7 5.8 5.8 5.8 5.8 5.9ȱȱȱȱȱ Nonfat dry milk 2.9 3.1 3.2 3.3 3.4 3.4 3.5 3.6 3.7 3.8 3.9ȱȱȱȱȱ To tal cheese 33.7 34.2 34.6 34.8 34.9 35.1 35.3 35.6 35.9 36.2 36.5ȱȱȱȱȱȱȱȱ Americ an 13.4 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.6ȱȱȱȱȱȱȱȱ Other 20.4 20.8 21.0 21.2 21.4 21.6 21.8 22.1 22.4 22.6 22.9ȱȱȱȱȱ To tal fluid milk 185.6 183.6 181.9 181.3 180.0 179.3 178.6 177.5 176.7 176.0 175.2ȱȱȱȱȱ Ice c ream 26.3 27.3 27.4 27.3 27.2 27.2 27.1 27.0 27.0 27.0 27.0

##  The CPI for food increased by 2.4 percent in 2014, despite growth of 7.2 percent in the CPI for meat.

 As additional meat supplies lead to reduced prices for most meat products in 2015, the CPI for food is projected to grow by only 1.6 percent.

 Food price growth should fall further in 2016 as lower commodity prices this year are not immediately passed through to the retail level.

 Raw commodity values only account for 15-20 percent of U.S. consumer food spending.

 The cost of transforming raw farm commodities to finished food products is highly dependent on a number of macroeconomic factors.

 Sharply lower energy prices and modest wage rate growth help to keep the costs of finished food products from growing much through 2016. 

# Food prices and expenditures

 Continued improvement in the U.S. economy has contributed to higher food price inflation for food away from home in recent months.

 Economic growth is one factor behind the long term trend of an increasing share of U.S. consumer food spending directed to food consumed away from home.

 Food away from home expenditures only accounted for 40-42 percent of total food spending from 1986-1992, but will soon account for more than half of the total. Food inflation slows in 2015

0 1 2 3 4 5 6

2008 2010 2012 2014 2016 2018 2020 2022 2024Percent change



### CPI for food



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 45 

## Slow growth in food marketing costs through 2016

-1 0 1 2 3 4 5 6 7 8

2008 2010 2012 2014 2016 2018 2020 2022 2024Percent change



### CPI for food Macro index for marketing costs



## Spending on food away from home increases

46 47 48 49 50 51 52

2008 2010 2012 2014 2016 2018 2020 2022 2024Percent



### Share of food expenditures away from home

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 46 

# Consumer price indices for food

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(1982

Ȭ 84=100) Total food 242.7 246.6 248.0 251.7 256.6 262.4 268.8 275.5 281.8 287.6 293.4ȱȱ (Inflation rate) 2.4% 1.6% 0.6% 1.5% 1.9% 2.3% 2.4% 2.5% 2.3% 2.1% 2.0%ȱȱ Food at home 239.5 241.6 241.5 244.9 249.7 255.5 261.9 268.6 274.8 280.4 286.1ȱȱȱȱ Cereal and bakery 271.1 270.0 272.1 276.9 282.8 288.8 295.1 301.3 306.7 311.6 316.8ȱȱȱȱ Meat 253.0 257.9 253.5 252.3 254.1 259.3 266.6 274.7 282.4 289.0 295.6ȱȱȱȱ Dairy 225.3 221.0 220.3 225.6 231.2 237.0 242.4 247.7 252.4 256.9 261.5ȱȱȱȱ Fruit and vegetables 294.4 300.2 304.3 312.4 321.1 330.2 339.5 349.1 357.9 366.3 375.0ȱȱȱȱ Other food at home 206.2 208.1 208.6 211.7 216.0 220.4 224.9 229.6 233.9 237.9 241.7ȱȱȱȱȱȱ Sugar and sweets 209.3 210.6 211.1 214.3 219.4 224.0 228.7 233.4 237.7 241.6 245.6ȱȱȱȱȱȱ Fats and oils 229.7 229.8 229.2 233.7 239.3 245.0 251.0 257.3 263.3 268.9 274.6ȱȱȱȱȱȱ Other prepared items 219.9 222.3 223.2 226.3 230.5 234.9 239.6 244.3 248.8 252.8 256.6ȱȱȱȱȱȱ Non

Ȭ alc. beverages 166.0 167.8 167.9 170.5 174.5 178.3 182.1 186.2 189.9 193.2 196.6ȱȱ Food away from home 249.0 255.2 258.9 263.1 268.0 273.7 280.1 286.8 293.3 299.3 305.4



# Consumer expenditures for food

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Dollars per person) Total food per capita 4,358 4,381 4,420 4,535 4,660 4,786 4,917 5,048 5,168 5,281 5,396ȱȱ Food at home 2,236 2,217 2,224 2,270 2,325 2,382 2,441 2,499 2,552 2,601 2,651ȱȱ Food away from home 2,121 2,164 2,196 2,265 2,334 2,404 2,476 2,549 2,616 2,680 2,745

Multiply by population for: (Billion dollars) Total U.S. food expenditures 1,389 1,408 1,432 1,481 1,534 1,588 1,645 1,702 1,755 1,807 1,861

# Government costs

 Net CCC outlays were $12 billion in FY 2014, with direct payments and livestock disaster assistance accounting for most of the spending.

 Under the 2014 farm bill, direct payments end and ARC and PLC payments begin in FY 2016.

 Average projected ARC and PLC spending peaks with the 2015 crop, and those payments are made in FY 2017.

 Net CCC outlays between FY 2015 and FY 2024 total $79 billion.

 Mandatory government outlays under the crop insurance program and certain conservation and disaster programs are not included in the CCC account.

 Like ARC and PLC outlays, crop insurance spending can vary a lot from year to year.

 Crop insurance net outlays total almost $85 billion between FY 2015 and FY 2024.

 Livestock forage assistance totals an estimated $5.7 billion in FY 2014 and FY 2015.

 USDA projects that livestock aid and the non-insured assistance program (NAP) will have annual outlays of over $700 million between FY 2016 and FY 2024.

 Other disaster aid from FY 2008-FY 2013 was provided from non-CCC accounts. CCC outlays total $79 billion over FY 2015-24

0 2 4 6 8 10 12 14

2008 2010 2012 2014 2016 2018 2020 2022 2024 Fiscal yearBillion dollars



### Grains, oilseeds & cotton Conservation All other



## 10-year crop insurance outlays total $85 billion

0 5 10 15 20 25 30

2008 2010 2012 2014 2016 2018 2020 2022 2024 Fiscal yearBillion dollars



### Net CCC Crop insurance Non-CCC conservation Other non-CCC



## Livestock aid totals almost $6 billion over FY 2014-15

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

2008 2010 2012 2014 2016 2018 2020 2022 2024 Fiscal yearBillion dollars



### CCC disaster and NAP Other disaster and emergency



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 47

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 48 

# Net government outlays

Fisc alȱȱ year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Feed grains (Million dollars)ȱȱ Corn 2,093 145 2,656 2,915 2,435 1,483 1,161 1,024 1,151 1,368 1,462ȱȱ Sorghum 181 3 90 263 234 215 189 183 186 209 207ȱȱ Barley 74 1 11 157 181 175 146 133 141 153 163ȱȱ Oats 3 0 0 6 8 7 6 5 5 5 6

Food grainsȱȱ Wheat 1,089 88 319 1,262 1,284 986 838 782 753 825 947ȱȱ Rice 350

Ȭ 1 267 269 266 274 259 254 246 255 261

Oilseedsȱȱ Soybeans 591 12 388 1,431 1,250 886 577 440 412 508 601ȱȱ Peanuts 46 9 328 380 416 434 394 401 423 450 452ȱȱ Other oilseeds 18 5 2 48 48 40 36 31 31 36 38

Other commoditiesȱȱ Upland co tton 607 1,192 630 546 546 429 418 406 403 323 356ȱȱ Sugar, feedstock flexibility 1 0 35 8 6 8 6 7 7 9 10ȱȱ Dairy 6 190 104 54 97 128 136 123 99 133 124

CCC conservationȱȱ Conservation reserve 1,732 1,748 1,698 1,670 1,626 1,648 1,616 1,678 1,720 1,706 1,678ȱȱ Other CCC conservation 5 5 5 5 1 1 1 1 1 1 1

Tobacco trust fund 1,093 278 0 0 0 0 0 0 0 0 0

Other CCCȱȱ Disaster payments, NAP 3,184 2,990 716 723 748 769 789 799 810 821 833ȱȱ Other net costs 1,129 996 595 653 666 629 485 463 463 464 466

Net CCC outlays 12,202 7,661 7,846 10,391 9,811 8,112 7,057 6,728 6,849 7,266 7,606

NRCS conservation 2,720 3,276 3,298 3,510 3,657 3,789 4,059 3,803 3,723 3,784 3,704

Crop insurance 8,311 6,971 8,121 7,694 8,064 8,487 8,794 8,996 9,063 9,176 9,220

Total mandatory outlays 23,233 17,908 19,265 21,595 21,533 20,388 19,909 19,527 19,635 20,226 20,531

No te: ȱȈ NRCS Conservation Ȉȱ deno tes mandatory spending on conservation programs authorized by the 2002, 2008 and 2014 farm bills that is no t included in reported CCC outlays. Fisc al years begin on Oc t.1 o f the previous c alendar year (FY 2015: Oc t. 1, 2014

Ȭ Sep. 30, 2015). All projec tions are averages ac ross 500 outcomes.

# Payments and crop insurance

 With the new farm bill in place, PLC and ARC replace DCP and ACRE for grain and oilseed producers.

 Projected ARC and PLC payments peak in 2015/16. After 2015/16, program rules force ARC revenue benchmarks to adjust downward for many crops and counties.

 Payments generally move inversely with prices, explaining both the decline from 2015-2020 and the increase from 2020- 2024.

 Cotton and peanuts receive most of the projected marketing loan benefits.

 Crop insurance indemnities spiked because of the 2012 drought.

 The projections include the new STAX policy for cotton and SCO for program crops.

 Projected average indemnity payments for losses top $10 billion per year.

 The average annual loss ratio (total indemnities divided by total premiums) over the next 10 years is 0.93.

 The crop insurance program has grown in importance relative to other farm programs.

 Projected net indemnities (indemnities minus producer-paid premiums) exceed the projected value of crop payments under Title I (PLC, ARC and marketing loans) of the new farm bill after 2016/17.

 Actual crop insurance indemnities will vary greatly from year to year, as will Title I benefits. PLC and ARC replace DCP and ACRE

0 2 4 6 8

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearBillion dollars



### DCP, ACRE PLC ARC Marketing loans



## Net indemnities exceed Title I payments after 2016

0 2 4 6 8 10 12 14

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearBillion dollars



### Title I crop payments Net indemnities



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 49 

## Indemnities exceed $10 billion most years

0 5 10 15 20

08/09 10/11 12/13 14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearBillion dollars



### Indemnities Premiums Producer-paid premiums

### FAPRI-MU Report #01-15 - 2014 U.S. Baseline Briefing Book - Page 50 

# Selected direct government payments

Marketing year 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25

(Million dollars) ARC payments 2,984 3,798 3,096 1,809 1,218 977 1,063 1,282 1,469 1,642 1,782 PLC payments 931 2,742 2,829 2,484 2,202 2,072 2,042 2,257 2,375 2,573 2,880 Marketing loans 509 667 644 653 546 509 505 534 472 531 505 Co tton transition payments 531 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.ȱȱ To tal 4,955 7,207 6,568 4,947 3,966 3,559 3,610 4,073 4,316 4,746 5,166

No te: Includes selec ted payments for feed grains, food grains, oilseeds, and upland co tton. All projec tions are averages ac ross 500 outcomes.



# Crop insurance

Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Million dollars, c rop year) Total premiums 10,036 9,813 9,949 10,454 10,986 11,443 11,660 11,799 11,870 11,939 11,785ȱȱ Producer

Ȭ paid premiums 3,844 3,716 3,719 3,908 4,109 4,280 4,361 4,413 4,439 4,465 4,406ȱȱ Premium subsidies 6,192 6,097 6,230 6,546 6,878 7,163 7,299 7,386 7,432 7,474 7,379 Total indemnities 8,469 9,728 9,196 9,649 10,177 10,568 10,821 10,906 11,037 11,101 11,008

Loss ratio 0.84 0.99 0.92 0.92 0.93 0.92 0.93 0.92 0.93 0.93 0.93 (Million dollars, c rop year) Net indemnities 4,625 6,012 5,478 5,740 6,068 6,288 6,460 6,492 6,598 6,636 6,602ȱȱ Corn 2,217 2,063 2,127 2,250 2,440 2,533 2,653 2,632 2,687 2,717 2,643ȱȱ Soybeans 337 1,296 1,161 1,242 1,332 1,428 1,457 1,491 1,514 1,504 1,511ȱȱ Wheat 1,194 993 615 655 692 717 733 738 731 718 731ȱȱ Upland co tton 440 422 477 487 486 494 502 509 527 534 542ȱȱ All o ther 436 1,237 1,098 1,106 1,118 1,116 1,116 1,122 1,138 1,162 1,175 (Million dollars, fisc al year) Net outlays 8,313 6,971 8,121 7,694 8,064 8,487 8,794 8,996 9,063 9,176 9,220

# Farm receipts and expenses

 Lower prices reduce cash receipts from sales of current and former program crops (grains, oilseeds, cotton and sugar) for the third straight year in 2015 and drop again in 2016.

 Increasing production and slightly higher prices result in a small increase in program crop receipts from 2016 to 2021.

 Receipts for other crops (including vegetables, fruits, nursery crops, hay and biomass crops) dipped slightly in 2014, but rise steadily in the future.

 Livestock, dairy and poultry sector receipts peaked at $209 billion in 2014, a $90 billion increase from 2009.

 Lower prices for poultry products, hogs and milk result in lower receipts in 2015.

 Cattle prices decline in 2016, and total livestock sector receipts reach their lowest point in 2018.

 Fuel, feed and fertilizer expenses are all projected to decline in 2015, resulting in the first year-over-year decline in total farm production expenses since 2009.

 Fuel prices and expenses increase steadily from 2016-2024.

 Feed costs increase between 2016 and 2020 in response to increased livestock production and higher prices for corn, soybean meal and other feeds. Program crop receipts return to recession lows

0 20 40 60 80 100 120 140 160 180

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Program crops Other crops



## Livestock receipts decline from 2014 record high

0 50 100 150 200 250

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Cattle Poultry & eggs Dairy Hogs & other



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 51 

## Fuel, feed and fertilizer expenses decline in 2015

0 10 20 30 40 50 60 70

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Feed Fertilizer & chemicals Fuel & electricity

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 52 

# Farm cash receipts

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars) Feed grains 66.10 60.54 60.93 63.36 66.27 68.74 70.21 70.92 70.79 70.24 69.55 Food grains 15.85 13.99 13.67 14.24 14.78 15.15 15.39 15.35 15.18 15.00 14.89 Oilseeds 40.68 37.85 35.79 36.84 38.73 40.35 41.05 41.42 41.30 40.74 40.48 Co tton 6.05 5.23 4.97 5.14 5.30 5.35 5.38 5.43 5.58 5.68 5.74 Sugar 3.10 3.20 3.20 3.32 3.40 3.44 3.47 3.49 3.49 3.50 3.50 Other c rops 66.43 67.74 69.98 72.28 74.56 76.91 79.40 81.87 84.24 86.68 89.18

Cattle 81.53 81.79 78.54 73.57 69.95 68.25 68.32 69.23 70.25 70.85 71.36 Hogs 25.31 22.46 20.88 20.33 20.71 21.50 22.40 23.19 23.63 23.74 23.92 Dairy produc ts 49.15 36.90 37.51 39.07 40.30 41.59 42.48 43.14 43.83 44.59 45.26 Poultry, eggs 47.52 45.54 44.49 44.79 45.87 47.29 48.66 49.78 50.73 51.43 52.21 Other livestock 5.68 5.48 5.48 5.50 5.56 5.66 5.78 5.91 6.03 6.13 6.24

To tal c ash receipts 407.39 380.72 375.45 378.44 385.44 394.24 402.54 409.75 415.06 418.59 422.33



# Farm production expenses

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars) Feed 59.21 53.02 53.19 54.49 56.46 58.10 58.81 58.83 58.44 57.72 57.19 Purchased livestock 32.84 34.18 32.66 30.10 27.94 26.65 26.38 26.75 27.22 27.61 27.94 Seed 22.68 22.55 22.66 22.96 23.37 23.88 24.54 25.25 25.86 26.32 26.73 Fertilizer and chemic als 43.28 41.43 41.20 41.38 42.05 43.17 44.55 45.32 45.41 45.51 45.52 Fuels and elec tricity 23.43 19.70 20.79 22.28 23.75 25.08 26.68 28.09 28.95 29.91 30.89

Interest 17.63 19.30 20.70 22.05 22.91 23.55 24.17 24.71 25.19 25.70 26.19 Contrac t and hired labor 34.86 35.56 36.63 37.80 39.00 40.22 41.44 42.71 44.02 45.37 46.79 Capital consumption 33.29 33.91 34.17 34.38 34.60 34.88 35.23 35.64 36.08 36.57 37.08 Rent to non

Ȭ operators 17.39 17.20 16.94 16.83 16.90 17.01 17.14 17.23 17.28 17.29 17.26 All o ther 83.30 84.55 85.86 87.70 89.58 91.52 93.64 95.56 97.18 98.85 100.45

To tal produc tion expenses 367.93 361.40 364.79 369.97 376.56 384.07 392.57 400.09 405.63 410.85 416.05

# Farm income

Cash income and expenses decline in 2015

100 150 200 250 300 350 400 450 500

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Gross cash income Cash expenses 

##  Gross cash income (sales receipts and government payments) was steady at record levels between 2012 and 2014.

 Lower prices for many farm commodities sharply reduce gross cash income in 2015.

 The much smaller drop in 2015 cash production expenses causes net cash income declines from $115 billion in 2014 to $95 billion in 2015.

 Net cash income averages about $90 billion per year for 2015-2024.

 For the first time since 2005, livestock receipts exceeded crop receipts in 2014.

 Projected crop and livestock receipts both decline in 2015, and livestock receipts do not hit their lowest point until 2018.

 Government payments average about $10 billion per year between 2015 and 2024, accounting for about 2 percent of gross cash income.

 After reaching record levels in nominal terms in 2013, net farm income fell sharply in 2014 and another large decline is expected in 2015.

 After correcting for inflation, 2013 real net farm income was the highest since the 1970s.

 Real net farm income in 2015 is only slightly above the recession low of 2009.

 Nominal net farm income from 2016-24 averages about $72 billion per year. Net farm income declines sharply in 2014 and 2015

0 20 40 60 80 100 120 140 160

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Nominal net farm income Real (2015 dollars) 

## Crop and livestock receipts both fall in 2015

0 50 100 150 200 250

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### Crop receipts Livestock receipts Government payments



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 53

### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 54 

# Farm income statistics

Calendar year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

(Billion dollars) 1. Farm receipts 434.72 408.34 403.26 406.76 414.65 424.26 433.24 440.91 446.64 450.56 454.52ȱȱȱȱ Crops 198.21 188.54 188.54 195.18 203.04 209.95 214.90 218.49 220.59 221.85 223.35ȱȱȱȱ Livestock 209.18 192.18 186.90 183.26 182.40 184.29 187.65 191.26 194.48 196.75 198.98ȱȱȱȱ Farm

Ȭ related 27.33 27.62 27.81 28.32 29.21 30.02 30.70 31.16 31.58 31.96 32.19

2. Government payments 10.76 9.77 11.76 11.22 9.65 8.84 8.63 8.57 8.95 9.31 9.63

3. Gross c ash income 445.48 418.11 415.01 417.99 424.30 433.10 441.87 449.48 455.59 459.87 464.14ȱȱȱȱ (1 + 2)

4. Nonmoney income 24.04 24.13 23.67 22.76 22.00 21.72 21.97 22.51 23.16 23.92 24.74

5. Value o f inventoryȱȱȱȱ Change 6.38

Ȭ 1.57 2.95 1.20 0.03

Ȭ 0.87

Ȭ 0.69

Ȭ 1.10

Ȭ 0.60

Ȭ 0.42

Ȭ 0.17

6. Gross farm income 475.89 440.67 441.64 441.95 446.32 453.95 463.15 470.90 478.14 483.36 488.72ȱȱȱȱ (3 + 4 + 5)

7. Cash expenses 330.34 322.95 326.09 331.11 337.52 344.73 352.79 359.78 364.74 369.33 373.85

8. To tal expenses 367.93 361.40 364.79 369.97 376.56 384.07 392.57 400.09 405.63 410.85 416.05

9. Net c ash income 115.13 95.17 88.93 86.88 86.78 88.37 89.08 89.71 90.84 90.54 90.29ȱȱȱȱ (3 ȱȬȱ 7)

10. Realized net farm inc 101.59 80.84 73.89 70.78 69.74 70.75 71.27 71.90 73.12 72.93 72.84ȱȱȱȱȱȱ (3 + 4 ȱȬȱ 8)

11. Net farm income 107.96 79.27 76.84 71.98 69.76 69.88 70.58 70.81 72.51 72.51 72.67ȱȱȱȱȱ (6 ȱȬȱ 8)ȱȱȱȱȱ Deflated (2015 $) 110.44 79.27 75.43 69.50 66.62 65.78 65.02 63.71 64.25 63.00 61.44

##  Corn prices depend on weather, energy prices, income growth and much more.

 To examine alternative futures for agricultural markets, we considered 500 different combinations of assumptions about factors driving commodity prices.

 Although corn prices average about $4 per bushel across the stochastic outcomes, there are some combinations of assumptions for any given year that lead to prices over $5 per bushel and some where prices drop below $3 per bushel.

 PLC program costs are uncertain. If season-average market prices are above reference prices, no payments occur, but payments can be large if prices drop far below reference prices.

 Given all the assumptions of this analysis, average PLC costs average less than $1 billion for the 2014/15 crop but increase to almost $3 billon in 2016/17.

 In some of the stochastic outcomes program spending is near zero. In others, it is more than twice the average level.

 Given assumed participation rates and the projected paths of average market prices and yields, average ARC payments increase from $3 billion for the 2014/15 crop to almost $4 billion in 2015/16, but then decline in subsequent years.

 As with PLC, spending can be far above or below the average for any given year.

 The provision that limits ARC payments to 10 percent of the benchmark revenue per acre puts an upper cap on program payments. 

# Ranges from the 500 alternative futures

PLC program costs are uncertain

0 1 2 3 4 5 6 7 8

14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearBillion dollars



### 90th percentile Average of 500 outcomes 10th percentile



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 55 

## Corn prices depend on weather and much more

0 1 2 3 4 5 6 7 8

08/09 10/11 12/13 14/15 16/16 18/19 20/21 22/23 24/25 September-August yearDollars per bushel



### 90th percentile Average of 500 outcomes 10th percentile



## ARC payments can also vary greatly

0 1 2 3 4 5 6 7

14/15 16/17 18/19 20/21 22/23 24/25 Marketing yearBillion dollars



### 90th percentile Average of 500 outcomes 10th percentile

##  Given the uncertainty over spending on the new PLC and ARC programs, net CCC outlays can be far greater or less than the projected average.

 If prices are above reference prices and revenues are above average recent averages, the conservation reserve program and livestock disaster aid may be the only major CCC outlays.

 In contrast, low prices or per-acre revenues could trigger payments that exceed the levels of recent years.

 Volatility in commodity yields and prices creates uncertain outlays for the crop insurance program.

 Higher crop prices, production and coverage levels increase crop insurance premiums and premium subsidies.

 In any given year, outlays will depend on yields, prices and resulting indemnities.

 In extreme weather years, indemnities and outlays can far exceed the average, as in FY 2013.

 Net farm income depends on production levels and the prices of agricultural outputs and inputs, all of which are uncertain.

 As a result, future levels of net farm income are also quite uncertain.

 The sources of uncertainty considered in this analysis lead to a wide range of possible farm income levels for any given year.

 There are certain to be risks not captured in these 500 alternative futures. 

# Ranges from the 500 alternative futures

Crop insurance net outlays are also uncertain

0 2 4 6 8 10 12 14 16

2008 2010 2012 2014 2016 2018 2020 2022 2024 Fiscal yearBillion dollars



### 90th percentile Average of 500 outcomes 10th percentile



### FAPRI-MU Report #01-15 - 2015 U.S. Baseline Briefing Book - Page 56 

## CCC net outlays could vary greatly from averages

0 2 4 6 8 10 12 14 16 18

2008 2010 2012 2014 2016 2018 2020 2022 2024 Fiscal yearBillion dollars



### 90th percentile Average of 500 outcomes 10th percentile



## Net farm income likely to stay below 2011-14 levels

0 20 40 60 80 100 120 140

2008 2010 2012 2014 2016 2018 2020 2022 2024 Calendar yearBillion dollars



### 90th percentile Average of 500 outcomes 10th percentile