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APR: Fall 2016 Articles

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Succession Planning, Perceived Obstacles, and Attractions for Future Generations Entering Beef Cattle Production

Lee Schulz, Georgeanne Artz, and Patrick Gunn
Given the current demographics of beef cattle producers in the United States, a significant turnover of productive assets will likely occur in the industry over the next decade. The 2012 Census of Agriculture reported that 35 percent of US beef cattle and ranching and 28 percent of US cattle feedlot principal operators are over the age of 64. An additional 27 percent of beef cattle and ranching principal operators and 28 percent of cattle feedlot principal operators are between 55 and 64 years of age. Yet, according to the 2015 Iowa Farm and Rural Life Poll, among farmers who plan to retire in the next five years, only 55 percent have identified a potential successor.

Fuel Price Impacts of the Renewable Fuel Standard

Gabriel Lade and James Bushnell
Gasoline prices are the lowest they’ve been in a decade, and according to recent data from the Department of Energy, Americans are buying more gas than ever. While low gas prices are good for consumers, they may be troublesome to those who worry about greenhouse gas emissions. Meanwhile, two important federal policies are pushing ahead to decrease transportation sector emissions by increasing vehicle efficiency and the use of renewable fuels: the federal Corporate Average Fuel Economy standards and the US Renewable Fuel Standard (RFS). Both policies have substantial impacts on consumers’ vehicle and fuel choices as well as on their fuel spending.

Forward Contracting by Iowa Corn Producers: Connecting Hedging with Price Movements

Keri L. Jacobs, Ziran B. Li, and Dermot J. Hayes
In 2015, Iowa corn producers marketed approximately 2.5 billion bushels of corn and 554 million bushels of soybeans. As part of their marketing strategy, some crop producers make use of pre-harvest pricing tools such as forward contracting and hedging with futures contracts. These are tools intended to either enhance the price producers can receive for their product or mitigate some risks associated with uncertain prices. Forward contracting allows a producer to fully or partially price his crop for delivery to a processor or elevator at a later date. Hedging on futures is similar to forward contracting in that the producer is pre-pricing his crop by taking a short position in a commodity contract with a delivery date in the future. Unlike forward contracting, hedges can be removed if price conditions change, but even with the hedge in place, basis remains an important risk component faced by the producer. In both cases, uncertainty about the size of his crop limits a producer from fully pre-pricing his harvest.

Of Maize and Markets: China’s New Corn Policy

Qianrong Wu and Wendong Zhang
In early 2013, farmers in Iowa and across the Midwest braced for a difficult corn market, with prices declining from $7/bushel in late 2012 to $4/bushel in early 2015, and finally settling at $3/bushel. Shielded from the world market, corn producers in China enjoyed a steady elevated corn price of almost $10/bushel from 2011 until 2015—largely a result of China’s obscure price floor corn policy. While China’s corn production is mainly used for domestic consumption, policy changes in China’s corn markets have trade implications for the global corn, beef, and pork sectors. For example, last month, the United States filed a complaint with the World Trade Organization over China’s excessive subsidies to corn, rice, and wheat farmers (OUSTR 2016). In this article, we examine why China has ended its nine-year-old corn price support policy, and implemented new corn policies.

For Ag, It’s Mostly Good News on the Demand Front

Lee Schulz and Chad Hart
The crop and livestock markets have experienced significant swings over the past few years—record crop prices in 2012 and 2013 were followed by record livestock prices in 2014. Since then, prices have tumbled across the board. In most cases, price reductions have been driven by increases in supply, as opposed to drops in demand.