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Planting 2019: A daunting task

The Crop Progress report for the week of May 12 confirms only modest progress in planting. In the 18 reported states, just 30% of the corn crop and 9% of the soybeans have been planted versus 66% and 29% five-year averages respectively.

State

Corn planted as
of May 12

Increase from
previous week

Five-year average
for date

Iowa

48%

12%

76%

Kansas

46

5

67

Nebraska

46

11

72

South Dakota

4

4

54

 

Looking at soybeans, the 18 states added only 3 percentage points to planted acres. States we serve:

State

Beans planted as
of May 12

Increase from
previous week

Five-year average
for date

Iowa

13%

5%

31%

Kansas

7

2

16

Nebraska

20

6

20

South Dakota

0

0

19

 

Grain sorghum also is behind normal, but more modestly.

State

Sorghum planted as
of May 12

Five-year average
for date

Kansas

1

3

Nebraska

8

15

South Dakota

0

5

 

Spring wheat

South Dakota’s spring wheat crop is one percentage point ahead of the six-state average for planting, at 46%. This compares with the state’s average of 88% planted at this date and 67% average for the six states.

Little wonder, as the days suitable for fieldwork were very low:
Iowa 1.9 days
Kansas 1.1 days
Nebraska 2.7 days
South Dakota 1.7 days
Wyoming 3.1 days

Winter wheat headed

The winter wheat crop is running late as well given the cool wet weather.

State Winter wheat headed

Five-year average

Kansas

35%

64%

Nebraska

2%

12%

South Dakota

0%

1%

Condition is weighted on the top side, with 56% of the Kansas crop good/excellent and only 11% poor/very poor. Nebraska has 67% on the top end and 4 on the bottom and South Dakota, 68% and 6%. In the 18 states, 64% of the crop is good/excellent and 8% poor/very poor.

Huge swing from dryness

About a third of the crop land has surplus topsoil moisture, USDA reports, with the 48-state average at 34%. The states we report reflect the same tendency.

State

Surplus

Adequate

Short/Very short

Iowa

32

67

1

Kansas

36

62

2

Nebraska

17

79

4

South Dakota

39

61

0

Wyoming

10

83

7

Subsoil moisture is running similarly adequate to surplus, suggesting that when the crop gets into the ground, it will take a while before water becomes an issue – and the long-range weather outlook favors normal or more rainfall through the season.

Pasture conditions also look good, with 63% reported good/excellent in the 48 states and only 7% at the low end of ratings.

grain bin winter

Grain in the bin is not a plan

After the prolonged harvest many producers endured, followed by a scramble to get production reports pulled together, it isn’t surprising if a sigh of relief is the main emotion. But grain in the bin cannot be considered a marketing plan and the job isn’t finished if the grain isn’t priced.

If you don’t have your 2018-crop and a preliminary 2019-crop marketing plan in writing yet, this is a great time to sit down and do it. “Timely marketing of grain was a big delineator of winners and losers in 2018,” noted Tyson Anderson, financial officer, Frontier Farm Credit.

Start with your true and total cost of production, Anderson said, adding that using a computer-based software program or the association’s Magnify accounting program is critical. “Accurate accounting makes it easier to create a marketing plan and pull the trigger on sales when the time is right,” he explained.

Once you have calculated your cost of production and know what price you need to be profitable, there are three factors to consider in marketing old-crop production: futures price “carry,” local basis and the cost of grain ownership.

Separating futures from basis presents an opportunity to improve your price received.

Futures carry

Futures carry is the difference between the price of nearby futures and contracts further into the future: March, May and July. In times of large carryover, it is typical for the market to offer carry, to incentivize elevators and farmers to hold the crop off the market. This year was no exception. By late fall, corn futures carry was 25¢-30¢ from December to July – nearly the full cost of carry, and likely to cover the cost of on-farm stored bushels but not farmer-owned bushels stored commercially.

To capture that carry, farmers would have to hedge their bushels by selling futures in the deferred months or initiate a hedge-to-arrive contract. In either case, basis could be set separately, when it improves.

Basis

Basis is simply the local cash price minus the nearby futures contract. It reflects local supply/demand and can vary by elevator, co-op, processor or river terminal. Basis typically is weakest (and cash price lowest) at harvest, when supplies are ample, and then improves into the new calendar year. Basis appreciation in January and February tends to stall because large volumes of corn need to be moved out of temporary storage and farmers need to sell to meet winter cash flow needs. Then, during the summer, when stocks are drawn down, basis becomes stronger and more erratic until new-crop harvest begins.

five year average corn basis Kansas

five year average soybean basis Kansas

Cost of Storage is not free

Knowing what it costs you to store is critical. Even if your bins are paid off, there is an opportunity cost. The following assumptions are used in the graph below: cash corn at harvest, $3.30/bu. and soybeans, $7.60/bu.; interest at 5% annual percentage rate (APR); on-farm storage cost (bin depreciation, shrink, etc.), 1¢/bu./month; commercial storage charge, 5¢/bu./month. Clearly, these factors will be different based on your circumstances.

As the chart shows, bushels stored on the farm have a better chance of being sold above the cost to hold them than commercially stored bushels.

Note, however, that does not address whether it is possible to sell them for a profit. When the starting price is below cost of production, the ending price could be even more below the cost of production – unless futures prices and/or basis improve.

corn cost of ownership trends 2018

soybeans cost of ownership trends 2018

Spell out your plan

Identify your target price needed to create a positive return. Calculate your cost of ownership for stored bushels and adjust your target price accordingly. Consider creating a line graph like the one above to help assess profitability of storage.

As noted earlier, lock in futures carry – via a HTA contract or futures hedge – when it is available or at least set your target price for a cash sale on seasonal price strength. Historically, corn futures tend to peak seasonally between Easter and mid-July  – a little later for soybeans.

Keep track of your local basis at least weekly and lock in that component when it has improved post-harvest.

Consider using a variety of marketing tools, including basis or minimum price contracts so you can eliminate storage costs and lock in the basis if attractive.

And keep in mind that winter cash sales for cash-flow needs mean you will not be able to capture the futures price carry offered in the deferred contracts. That’s why it’s important to plan ahead.

Quality Issues Raise Crop Insurance Questions

Producers in some areas have experienced a perfect storm in weather in 2018. After a delayed growing season, crops caught up and matured ahead of normal, only to have rain delay harvest. That opened the door to quality problems ranging from soybean pod shattering to mycotoxin contamination.

In fact, USDA’s Crop Progress report this week shows harvest in the 18 states behind average for all crops, and Kansas is among those with crops still in the field:

Corn remaining (%)

 

Corn
5-year average remaining
Soybeans remaining (%) Soybeans
5-year average remaining
Sorghum remaining (%) Sorghum 5-year average remaining Sunflower remaining (%) Sunflower 5-year average remaining
Kansas 11 5 26 10 38 20 37 8
Reporting states  

16

 

13

 

12

 

7

 

27

 

16

 

39

 

25

 

More than a quarter of the beans in Kansas are still in the field, according to USDA’s count. “We were hearing reports of quality problems,” said Ruth Compton, crop insurance officer in Hiawatha. “I don’t believe it’s been a huge problem but with a lot of soybeans still in the field, there is a continued concern.”

Different situations

The crop insurance claim process differs depending on the situation. For instance, if a field is flooded and has standing water, you are not allowed to harvest for food use. You have the option to sell to a salvage buyer if you can find one who will take your production or you can destroy the crop and take a zero on your Actual Production History (APH). If you have a quality issue that your elevator discounts less than 8 percent, it doesn’t support a claim.

And, although the price drop from the spring guarantee of $10.16 to the harvest price of $8.61 appears large, in almost all cases, it would not produce a claim on its own, depending on the yield. The table below illustrates the yield needed to trigger a claim given various revenue guarantees. The October average falls between the $8.65 and $8.66 rows in the table.

revenue guarantee table

revenue guarantee table

In all cases, you need to weigh the impact on APH against the amount a claim might be worth. Your Frontier Farm Credit insurance offer can help identify the avenues you can use to ensure the impact on your APH is minimized.

A bigger question this year may be the effect on your Market Facilitation Program (MFP) payment. That is paid strictly on the bushels produced. The first of two possible payments is $1.65 on half your production. So the question is: Is it better to combine the crop to collect the 82 cents, plus a likely additional payment, or save the cost of combining and file a claim?

Your Frontier Farm Credit insurance team can help you make that determination – and guide you through the claims process when quality is at issue.

For those who want to review before proceeding, click to view the USDA/Risk Management Agency fact sheet on Soybean Kernel Damage Quality Adjustment Procedure.

Winter wheat

Winter wheat planting also is a bit behind average, with 90 percent completed in Kansas, 8 points behind usual. 77 percent has emerged, well behind the 89 percent average. As of Nov. 11, USDA rates 44 percent of the crop good/excellent, compared with 54 percent in the 18 reporting states. Fourteen percent is poor/very poor in Kansas while 12 percent falls in those categories in the 18 states, headed up by Oklahoma, Oregon and Texas.

Image: Purple seed staining of soybean in south central Nebraska. Photo courtesy of Jennifer Rees, UNL CropWatch

Ripe corn with snow

Poor Weather Stalls Harvest

Even though crops are largely mature, harvest has fallen behind average due to farmers getting just what they didn’t need right now — moisture. In the week ended October 12, Iowa and South Dakota had less than a day of suitable fieldwork, Kansas had one full day and Nebraska 1.3 days.

In the 18 reporting states, 39 percent of corn has been harvested, ahead of the 35 percent average. Soybeans, however, are 15 points behind the usual 53 percent for this week. The states in our area are slightly behind on corn and significantly behind on soybeans:

CORN

SOYBEANS

Oct. 14, 2018

5-year average

Oct. 4, 2018

5-year average

Iowa

17

24

19

51

Kansas

63

64

16

33

Nebraska

25

25

39

54

South Dakota

17

21

29

65

18 States

39

35

38

53

 

USDA’s condition ratings are unchanged for corn, at 12 percent in the bottom two categories and 68 percent in the top two. Soybean ratings slipped one point on the top and gained one point on the bottom.

Sorghum is six points behind average, at 42 percent harvested. Nebraska stands at 32 percent, five ahead of average. But Kansas and South Dakota – at 19 and 21 percent respectively – are both behind nine points.

Winter wheat, at 65 percent complete in the 18 reporting states, also has slipped two points behind average. Kansas and Nebraska are each three points behind, at 62 percent and 89 percent respectively; South Dakota is eight points behind at 82 percent complete.

Better weather in the week ahead will help, at least on fields that aren’t too wet for machinery.

 

Ripe corn field with standing water

Season Ends Much as It Started: Wet

Soggy conditions have slowed field work and narrowed the gap between this year’s progress and the five-year average. Days suitable for field work in the week ended October 7 ranged from 1.6 in Iowa to 1.9 in South Dakota, 3.2 in Nebraska and 4.6 in Kansas.

Corn harvest progressed to 34 percent, compared with 26 percent on average in the 18 states and soybeans, at 32 percent, trailed the average by four points.

Oct. 7, 2018 CORN SOYBEANS
Percent harvested Points gained in week Average Percent harvested Points gained in week Average
Iowa 15 4 13 18 3 31
Kansas 59 12 52 14 7 19
Nebraska 23 6 6 36 9 33
South Dakota 16 5 5 28 7 41

Corn and soybean condition in the 18 states was unchanged other than a loss of one percentage point on the high end for corn. Corn was rated 12 percent poor/very poor and 68 percent good/excellent; soybeans, 10 percent and 68 percent.

Sorghum harvest is complete in Kansas (equal to average), 23 percent complete in Nebraska (16 percent average), and two points behind average in South Dakota at 16 percent.

Soggy soils

Just as farmers were frustrated by wet fields at the start of planting, they are experiencing similar difficulties at harvest. The map below shows soil moisture in large portions of the Corn Belt and our service area are 40 to 160 millimeters above normal.

calculated soil moisture anomoly graph

crop protection network imagePlant diseases related to moisture, including northern corn leaf blight, gray leaf spot and tar spot, as well as Fusarium and Gibberella ear rots, are a concern in high-moisture areas. Lodged corn is at particular risk for developing mycotoxins.

Producers are encouraged to inspect their fields before harvest for signs of mold or mycotoxins. It’s important to work with your crop insurance agent to arrange an inspection of the field.

For those cutting silage, concerns caused by early plant maturity combined with inability to get into soggy fields go beyond mold and mycotoxins, which can develop and grow in storage. These include:

  • Higher dry matter silage: If dry matter is more than 40 percent, the digestibility of fiber and starch are reduced;
  • Less dense packing and greater oxygen content

South Dakota State University Extension offers the tips to improve results.

Looking ahead, an El Nino is likely in the weeks and months ahead. That points to a warmer than average winter in our service area. The Southwest and Southern Plains could see above normal precipitation. So much so in fact that during a webinar for our customers, Mike Murphy of Cattlefax predicted soil moisture in Texas and Oklahoma “could be fine by next spring.”