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Slow start to 2018 season; prevent-plant and replant odds increasing

It’s no secret that planting got off to a slow start this year. At the end of April, only 17 percent of the planned corn was planted in the 18 major states, compared with the prior five-year average of 27 percent. Iowa was 8 percent (average 18); Kansas 27 percent (35); Nebraska 17 (24) and South Dakota, zero (13).

Soybeans were right on their 5 percent average in the 18 states, and on average or slightly ahead the states we serve.

Many farmers and market analysts anticipate some fields will not be planted and others may require replanting, in which case it is important to:

  • Notify your crop insurance officer the day you decide land will not be planted – or by the crop’s final plant date.
  • Call your crop insurance officer before replanting so an adjustor can inform you of your replant options. Failure to obtain advance consent for replanting will result in denial of a replant claim. This is true even when you interseed or plant next to the original rows, or if representative sample areas have been left.

More information

Iowa State University Extension Economist Alejandro Plastina recently posted an article at https://www.extension.iastate.edu/agdm/crops/html/a1-57.html that discusses choices if you can’t plant timely or if you need to replant.

It also provides many of the Risk Management Association language and regulations, and illustrates how insurance coverage drops as days pass after the final planting date, as shown below.

late coverage percent of original coverage

Iowa State offers a “Delayed Planting and Replanting Evaluator”; AgDM Decision Tool A1-57, at https://www.extension.iastate.edu/agdm/crops/xls/a1-57delayedplantingevaluator.xlsx

 

Strive to Improve Crop Risk Management

As we enter another growing season with grain outlook unchanged, efficiency is paramount. That’s the bottom line carried away by the attendees at GrowingOn® meetings this past winter, here are a few of the key points.

Low- and High-Cost Producers: Income Comparison

A comparison of net farm income for two years, 2012 versus 2016, was based on records from 8,000 actual U.S. farms using the FinBin program at the University of Minnesota. It clearly demonstrates how results vary by farm size using annual gross farm sales when the top 20 percent of farms are compared with the bottom 20 percent.

In 2012, nearly all farms, regardless of farm size, had positive net farm incomes at near all-time record high levels. The low 20 percent of operations were near or above breakeven in 2012. However, the top 20 percent of farms were netting five to eight times as much as the bottom 20 percent.

The difference was more significant in 2016. The top 20 percent made money, but only about one-fourth to one-half of their 2012 net farm income. Positive returns for the most efficient farms hit $363,000 at $1 million in gross farm sales and more than $566,000 for those above gross farm sales of $2 million. By comparison, the bottom 20 percent of all sizes of farms lost money. The bigger the farm, the worse the picture was in this bottom category; net farm income plummeted to more than $156,000 in the red at $1 million in gross farm sales and to a loss of more than $316,000 at $2 million gross farm sales.

net farm income comparison

“Size and efficiency amplify the effects of being a low-cost producer,” according to Steven Johnson, the farm management specialist with Iowa State University Extension who helps lead GrowingOn. “That’s why it is important to get better before getting bigger.”

Presenters from Frontier Farm Credit highlighted how changes to various factors affect cost of production and breakeven. “When producers think about reducing costs, saving on inputs is the first thing they think of,” said Tony Jesina, senior vice president – related services. “But some customers are finding significant savings when they examine their machinery line up and identify equipment they don’t get real value from. It’s also important to consider other sources of income and possibly benefits such as health insurance, a major expense for many farm families.”

Frontier Farm Credit also highlighted how Revenue Protection (RP) crop insurance buffers losses and preserves working capital when crop revenue drops below the guarantee. “This can be as important as getting your unit cost of production down,” Jesina said.

Traits of Top Producers

Top producers are proactive, making incremental improvements, lowering cash rent, reducing input costs, keeping family living expenses at modest levels, employing sound financial management and using a “systems approach,” Johnson said. Capturing additional revenue through higher crop prices by utilizing a sound marketing plan is a great way to improve the bottom line since it does not risk lowering yields the way cutting inputs might.

The illustration below depicts some of the savings Johnson called out in his presentation. While the exact numbers will vary by operation and geography, the point is to set a target appropriate to your operation and to seek improvement in each area.

managing 2018 crop costsJohnson built on the Marty Merchandiser case study from GrowingOn 2017, showing the steps Marty has taken on his Iowa farm to improve his finances at a time when his net worth and working capital have slipped due to lower land values and a purchase of an adjoining 80 acres at $8,000/acre. Marty has actively managed crop costs and family living expenses, reducing his budgeted cost of production to $3.43 for corn and $9.11 for soybeans. Larger actual yields lowered those breakevens to $3.32 and $8.47, respectively.

Marty used 85 percent RP to underpin his pre-harvest hedges and hedged-to-arrive contracts to local ethanol plants. With scale-in incremental sales, Marty’s projected cash corn price was $3.96/bu. on 70 percent of his APH bushels, guaranteeing revenue of $619/acre on winter deliveries. He stored remaining bushels, planning to wait for basis to narrow and to use a variety of marketing tools to capture higher futures prices in late winter and spring.

The result: His operation remains profitable, with $85,000 net income estimated for 2017.

Johnson advised attendees to focus on improving both old- and new-crop marketing. Pre-harvest market on weather rallies in the late winter and especially the spring months. For bushels stored unpriced beyond harvest, understanding your basis trends, futures carry and your cost of ownership can pay off in several ways, Johnson said. Limit commercial storage costs and don’t store longer on-farm than the market will justify. Separate basis from the futures price to improve your net revenue by as much as 20¢/bu. on corn and 50¢/bu. on soybeans, depending on local cash bids.

GrowingOn is one of the opportunities the Association offers customers to learn how to manage the financial and business needs of today’s agricultural operations. Find more resources and information at frontierfarmcredit.com. Click to view the association and Johnson’s presentations and videos.

No Worries about Winter Wheat; Spring Wheat is the Concern

Forty-one percent of winter wheat has been harvested in the 18 reporting states, well ahead of the 39 percent average.  The Kansas crop is close to its 47 percent average, while Nebraska has harvested only 1 percent of its wheat compared with an average 8 percent. The condition of the Kansas crop is unchanged at 46 percent good/excellent and 23 percent poor/very poor.

The big concern is the spring wheat crop. Twenty-eight percent of the acres in the six states is rated poor/very poor and only 40 percent good/excellent. This compares with 5 percent and 72 percent last year. South Dakota is a large part of the reason: 62 percent is in the bottom categories and 12 percent in the top. At the same time, the Canadian crop will be down because of a major shift to alternative crops.

The futures markets are reflecting the difference in expected availability: The premium for September hard red spring wheat over hard red winter wheat has climbed from 60 cents in March and 80 cents at the start of May to close to $2/bu. Spring wheat open interest has jumped by 300 to 500 percent as traders bet high-protein supplies will be tight.

Spread for Minneapolis futures/Kansas City futures, September 2017 contract


Corn/soybeans

Corn silking is reported at 4 percent, one point behind average as of June 25, according to USDA.

The 18-states rating is unchanged. Iowa improved one point on the top side since last week. Nebraska’s crop condition lost four points on the top end and gained two on the bottom end of the ratings. South Dakota corn also deteriorated by several points at both ends.

States Corn (percent) Soybeans (percent)
Poor/very poor Good/Excellent Poor/very poor Good/Excellent
Iowa 4 79 5 74
Kansas 7 69 2 67
Nebraska 6 74 7 70
South Dakota 20 46 21 39
18 States 8 67 7 66

 

Soybean emergence, at 94 percent, is actually ahead of its 91 percent average. Blooming, at 9 percent is 2 points ahead of average. Iowa was virtually unchanged, with just a point added to its poor/very poor rating, while the Kansas crop saw improvement at both ends. As with corn, Nebraska saw a few points trimmed from its rating at both ends. South Dakota’s bean crop tumbled from 47 percent to just 39 percent good/excellent and its poor/very poor jumped from 16 to 21 percent.

Grain sorghum

Planting stands at 95 percent, a few points ahead of the 93 percent average in the 11 reported states. However, heading is 2 points behind the 22 percent average.  Condition, at 65 percent good/excellent and 4 percent poor/very poor is a bit behind last week’s 66 percent though the rating improved by one point at the low end of the range.

Pasture/Range

Pasture condition slipped from 63 percent good/excellent to 60 percent – one point behind last year. More than half the acres in the Dakotas are ranted poor/very poor, compared with 8 percent in Iowa and Nebraska and only 2 percent in Kansas.

 

Photo- Romulo Lollato, K-State Research and Extension

Conjecture regarding wheat freeze damage overblown?

Warm weather early in the year followed by below-freezing temperatures led to a lot of speculation about possible winter wheat losses, especially in soft red winter (SRW) areas.

However, our crop insurance officers say they have heard more concern in eastern Kansas about drought and possible disease pressure than freeze damage. Agronomists say damage to SRW may result in some insurance claims, especially Kentucky, but likely was not large enough to affect market prices.

Here is some perspective. Bryce Anderson, senior ag meteorologist for DTN/The Progressive Farmer, provided two temperature maps: the warmer-than-average weather (in yellow) for a portion of the affected area for February 19-March 20, which brought wheat out of dormancy in some areas, and the low temperatures (in blue) that hit March 15 and 16.

Avg Temp 2017, Bryce Anderson, DTN

Soft Red Winter

“Soft red winter in this area may have been injured,” said Charles Mansfield, Purdue University Extension agronomist based in Vincennes, Ind. “Some wheat fields in southern Indiana and many in Kentucky were already jointing when low temperatures dipped into the teens or even single-digits in mid-March. While there are some fields with significant injury – especially in Kentucky — early observations indicate injury is not as bad as would have been predicted.”

Varying levels of damage likely also occurred in Arkansas, according to Jason Kelley, wheat and feed grains extension agronomist at the University of Arkansas.

“Stages of growth ranged considerably across the state, but in most areas where temperatures dropped below the 28-degree threshold, wheat was in the Feekes 7 to 8 growth stage,” far enough along for damage to the growing point to be likely, he said.

Hard Red Winter

In Kansas, a March 17 agronomy update noted that temperatures from March 8 to 14 were somewhat below average for the central portion of the state but above normal in the western portion.

“While the western third of the state had temperatures below the damage threshold for jointed wheat, the majority of the fields in that region are not yet at that stage,” according to Romulo Lollato, extension wheat and forages specialist, who noted some leaf tip dieback has occurred in parts of the state. “In regions where the crop was more developed, such as south-central and southeast Kansas, temperatures did not reach low enough long enough to damage the growing point.”

In Kansas and Nebraska, moisture and wind are of greater concern right now, according to crop insurance officers for Frontier Farm Credit and Farm Credit Services of America (FCSAmerica). “Rust is going to be the issue most talked about this year,” said Darrin Clarkson, vice president of insurance in FCSAmerica’s Scottsbluff, Neb., office.

Wheat streak mosaic virus is a threat as well, as are aphids and wheat curl mites, Lollato said.

“Because wheat streak mosaic virus is untreatable and decimates crops, it may lead to abandonment this spring,” Lollato said.

Market Impact

An estimated 10 percent of the SRW area was at risk of damage from the mid-March freeze. Even if all that wheat went unharvested – unlikely as of this point – global and U.S. supplies would be sufficient to avoid a major price run up. USDA estimates SRW ending stocks for 2016/17 at 220 million bushels, slightly above last year. The stocks/use ratio is a heavy 68.8 percent. If the crop fell 10 percent, or 34.5 million bushels, and stocks fell by the same amount to 186.4 million bu., the ratio would drop to 58.1 percent — still more than ample.

HRW supply/demand balance tells a similar story, with the stocks/use ratio at 58.6 percent based on USDA’s ending stocks estimate of 566.2 million bushels.

Of course, winter wheat is not yet past the frost free date, so the jury is still out.

Getting Your Crop Insurance In Order

The March 15 deadline for spring crops in much of the Corn Belt is fast approaching. The spring guarantee for corn is $3.96, up from $3.85 last year, and soybeans are $10.19, up from $8.85.

The best mix of coverage level and supplemental products, such as Crop Hail, differs by location and by year as premiums change.

But it’s not just about choosing your policy levels. Here are a few other things that are equally or more important to consider:

  • Entity changes in your business, including marital status, change in partners, trusts, etc.
  • Any new breaking or high-risk ground.
  • Options such as Yield Exclusion, Trend Adjustment, Enterprise/Optional Units and Coverage Level by Practice.

And don’t let Mother Nature lead you astray. Before you head to the field earlier than usual, check with your insurance team to make sure you’ve reached RMA’s initial planting date for your area.

Changes to Whole Farm Revenue Protection make it more attractive – and maybe worth a second look — for beginning farmers and livestock producers than in the past.

Perhaps most importantly, be sure you get full value from your insurance coverage by using it to bolster your confidence in making advance sales. The seasonal price strength period lies just ahead.

Questions? Contact your Frontier Farm Credit crop insurance team.