Optimism in Agriculture Confidence
The dramatic improvement in ag producers’ sentiment that started following the November election continued into the new year. The Purdue/CME Group Ag Economy Barometer—based on a monthly survey of 400 agricultural producers from across the U.S.—reached 153 in January 2017, 21 points higher than December’s survey and 61 points higher than in October. Ag producers’ sentiment in January was not only the most positive recorded in the Ag Economy Barometer’s history, but it was also the biggest month-to-month sentiment change since data collection began in October 2015.
The rise in the Ag Economy Barometer during January marked the third consecutive month the barometer moved higher. Continuing a trend that got underway in November, producers indicated that they were markedly more optimistic about the future which, combined with a more modest improvement in their view of current economic conditions, pushed the barometer up yet again. The improvement in the Ag Economy Barometer is tempered by the fact that over half of the survey respondents felt that their farm operation’s financial was worse off today than a year earlier and over 60 percent of respondents expect their financial condition to be worse yet 12 months from now.
Crop Insurance Saves $20B
Farm Credit Services of America released a report showing that federal crop insurance saved 21,000 jobs in Iowa, Nebraska, South Dakota and Wyoming alone during the 2012 drought. The report also showed that farmers paid $3.7 billion in crop insurance premiums in 2015, covering over 90 percent of all principal crop acres. This report comes only a week after the Congressional Budget Office released its January, 2017 baseline update showing crop insurance has saved $20 billion compared to estimated savings at the time of the 2014 Farm Bill’s passage.
Ethanol Records Positive Year
The ethanol industry appeared to have a good year in 2016. The drop in crude oil prices continued to stimulate driving and gasoline demand (June 10, 2016), the EPA maintained a policy of pushing the conventional ethanol mandate upwards (November 30, 2016), and ethanol exports boomed. An interesting question is just how much these favorable factors increased the bottom-line of the industry. The purpose of this article is to examine this question by comparing estimates of ethanol production profitability for 2016 and to those earned over 2007-2015.
The U.S. ethanol production industry had a good year in 2016. Net profits averaged $0.12 per gallon, about $0.05 higher than in 2015. The cumulative net profit for all of 2016 was $13 million, the fourth largest over 2007-2016. The most likely factor responsible for the upswing in profits, especially during the second half of the year, was surging ethanol export demand. To add to the good news, 2016 represented the fourth consecutive year of positive ethanol production profits. However, there are some storm clouds gathering for the ethanol industry. Ethanol prices and profits have declined sharply in recent weeks and there is a great deal of uncertainty about export prospects due to the potential for changing trade policies under the new Trump Administration.
NAFTA Countries Lead in U.S. Grain Purchases
U.S. feed grains saw a near-record level of exports in the 2015/2016 marketing year. In the last corn marketing year, which ran from September 2015 to August 2016, the top overseas customers of U.S. corn were Mexico, Japan, Colombia, South Korea and Peru, respectively. In the previous marketing year, Japan was the top U.S. corn destination, with Mexico ranking second.
U.S. sorghum shipments last marketing year were again led by shipments to China followed by Mexico, Pakistan, Sudan and South Africa, respectively. In the 2014/2015 marketing year, Sudan ranked second followed by Kenya, Japan and Ethiopia.
Based on the barley marketing year, June to May, the top five destinations for U.S. barley were Mexico, Canada, Japan, Morocco and Taiwan, respectively. In the previous marketing year, Japan was the largest U.S. barley market followed by Canada, Taiwan and Morocco.
The top U.S. ethanol customers were Canada, China, Brazil, India and the Philippines based on the corn marketing year. Canada, Brazil, the Philippines, South Korea and India were the top purchasers of U.S. ethanol, respectively, in the previous marketing year.
More Acres Available in CRP
USDA will accept over 300,000 acres in 43 states that were offered by producers during the recent ranking period for the Conservation Reserve Program (CRP) Grasslands enrollment with emphasis placed on small-scale livestock operations. Through the voluntary CRP Grasslands program, grasslands threatened by development or conversion to row crops are maintained as livestock grazing areas, while providing important conservation benefits. Approximately 200,000 of the accepted acres were offered by small-scale livestock operations.