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Focus on Agriculture by Kent Thiesse, Farm Management Analyst and Vice President, MinnStar Bank |
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May 23, 2011PAY ATTENTION TO CROP INSURANCE WITH LATE PLANTING Many farm operators in the upper Midwest are dealing with very late planting conditions for corn and soybeans in 2011. Some of these operators will soon be facing decisions on whether to plant corn, the intended crop, at a later than normal planting date, switch to an alternative crop such as soybeans, or decide to collect prevented planting coverage on their 2011 corn crop. For producers with Federal Crop Insurance coverage on corn and soybeans in 2011, the "Prevented Planting" provisions of their crop insurance policies could affect the late planting decision. It is very important for producers to consult with their Crop Insurance agent before finalizing any decisions on planting a crop after the final planting deadline, or switching from corn to soybeans after May 31 in Minnesota and other States. According to the USDA Risk Management Agency (RMA), producers have the following options with regards
to delayed or prevented planting later than the established Final Planting Dates
The Final Planting Date for corn in Minnesota, Iowa, and South Dakota is May 31, meaning that the Late Planting Period is June 1-25. For soybeans, the Final Planting Date is June 10 in Minnesota and South Dakota, and June 15 in Iowa, with the Final Planting Date extending for 25 days until July 5 in Minnesota and South Dakota, and until July 10 in Iowa. It is important to pay close attention to the Final Planting Dates and the Late Planting Period when making late planting or prevented planting crop insurance decisions. To qualify for Prevented Planting insurance coverage and payments, affected areas must be a minimum of 20 acres in size, or 20 percent of the total insured acreage, on farm units of less than 100 acres. Very small areas of land do not qualify for prevented planting coverage, which could be a factor on some smaller land tracts with optional unit insurance coverage. Meeting the 20 percent threshold may be easier with enterprise units, if most crop acres are affected; however, it could become more difficult if some farms are affected, and some are not. It is very important for producers to document all prevented planted acres and crop losses with their Crop Insurance Agent before switching crops, or doing any other practices on the affected acres. Producers also need to keep good records and documentation of crop losses and prevented planting for future calculations of crop insurance indemnity payments. Every producer’s situation is different when it comes to late and prevented planting situations, as a result, the best option will vary considerably from farm-to-farm. In addition to differences in production practices and yield potential, there are differences in level of insurance coverage, optional or enterprise units, and other crop insurance provisions. The choice that a producer makes could result in a difference of thousands of dollars in the potential insurance coverage that is available. That is why it is so very critical for producers to consult with their Crop Insurance Agent before finalizing late and prevented planting crop decisions. ********************************************************************************** May 16, 20112011 ACRE PROGRAM DECISIONS Producers that previously enrolled in the ACRE for the 2009 or 2010 crop year will be enrolled in ACRE for 2011 and 2012, provided they annually sign-up for the Farm Program at County Farm Service Agency (FSA) offices, and meet all other program criteria. Other producers can enroll in ACRE for 2011 when they sign-up for the 2011 Farm Program at anytime until June 1, 2011, at County FSA Offices, provided that they meet all criteria for 2011 farm program enrollment. ACRE program enrollment was quite limited during the first two years of existence, with only about 8 percent of crop producers nationwide, and about 13 percent of the total eligible acres enrolled in ACRE for the 2009 crop year, with a few more farms and acres being added to the ACRE program for 2010. Direct Payment and CCC Loan Rates With ACRE Direct payments will be reduced by 20 percent (approx. $3.00-$5.00 per acre), and National and County CCC Loan Rates will be reduced by 30 % on farms enrolled in the ACRE Program for 2011. The national loan rates will drop from $1.95 per bushel to $1.37 per bushel for corn; from $5.00 per bushel to $3.50 per bushel for soybeans; and from $2.94 per bushel to $2.06 per bushel for wheat. Price Guarantees with ACRE The ACRE price guarantee for all crops is the national average price for the of the previous two years, which is based on the 12-month marketing period for corn and soybeans from September 1 in the year of harvest until August 31 the following year, and June 1 to May 31 for wheat and other small grain crops. The 2010 price guarantees were based on the national average price for 2008 and 2009, while the 2011 price guarantees will be based on the national average price for 2009 and 2010. The final ACRE price guarantees for 2009 were $4.13 for corn and $10.04 for soybeans, and for 2010 were $3.81 for corn and $9.78 for soybeans. The preliminary USDA guarantee price estimate (as of April 1, 2011) for the 2011 crop year were $4.48 for corn and $10.55 for soybeans; however, 2011 prices for corn and soybeans will not be finalized until Oct. 1, 2011. Yield Guarantees With ACRE The state yield guarantee for 2011 is the "Olympic average" state yield for the past five years (2006-2010), with the highest and lowest yield being dropped, and the three remaining yields being averaged. (Example --- MN Corn yields of 161, 146, 164, 174, and 177, with the 177 and 146 being dropped, and a resulting average yield of 166 bushels per acre for 2011, which is the same as 2010.) The average State yields for a given year are based on the National Ag Statistics Service (NASS) yields. The farm-level yield guarantee will be the "Olympic average" actual or "proven" farm yield for the past five years (2006-2010), with the highest and lowest yield being dropped, and the three remaining yields being averaged. For each year that the program crop was not raised (2006-2010), or that the yield can not be proven, a "plug yield" equal to 95 percent of the County average yield (from NASS) will be used. (Example --- County average corn yield of 170 Bu./A. x .95 = 161.5 Bu./A.) Future Yield, Price, and Revenue Guarantees With ACRE Both state and farm level guarantees will be recalculated each year (2011-2012), based on changing average yields and prices. ACRE revenue guarantees can not vary up or down by more than 10 percent from one year to the next. Revenue Guarantees With ACRE State Revenue Guarantee = "Olympic Ave." State Yield x 2-Year Ave. Price x .90 ( MN Corn Example (2011) --- 166 Bu./A. x $4.48/Bu. x .90 = $669.31/Acre; however, State Revenue Guarantee will be reduced $626.13/Acre (10 % max. increase) Farm-Level Guarantee = Ave. Farm Yield x 2-Year Ave. Price + 2011 Crop Ins. Premium ( Corn Example (2011) --- 178 Bu./A. x $4.48/Bu. + $30.00/A. = $827.44/Acre ) "Revenue Triggers" With ACRE There are two "revenue triggers" that must be met before ACRE payments will be made, one based on actual state revenue for a given crop in a particular year, and the other based on actual farm-level revenue for that crop in the same year. In order for a producer to receive a payment under the ACRE program, the "actual revenue" for both the state and farm-level must be lower than the corresponding established revenue guarantees for a given year. The actual revenue is based on the actual 12-month average price (Sept. 1 − Aug. 31 for corn & soybeans) for a crop in the year of production, times the actual state average yield, and actual farm yield, respectively. If both "revenue triggers" are reached, the ACRE payment will be made for that crop on that FSA farm number for the given year. Acre payments for corn and soybeans will be made after October 1 in the year following production. Calculating ACRE Payments ACRE program payments will be the difference between the state guarantee and the actual state revenue, times 83.3 percent (.833), times the producer adjustment, and the total ACRE payment cannot exceed 25 percent of the state revenue guarantee for a given crop. The ACRE payment will be paid on 83.3 percent of crop base acres (same as for direct payments). The final ACRE payment to producers can be adjusted upward, if farm-level yields that are higher than the State yield guarantee. ACRE Decision Summary For 2011 Remember, that farm owners and operators have until June 1, 2011 to finalize their decision on enrollment in the ACRE program for 2011. ACRE enrollment does require a signature from landlords on cash rental farm units. Producers are encouraged to analyze situations and scenarios that are more favorable for ACRE enrollment for 2011, as well as situations where the best option may be continuing with the traditional DCP farm program. The national average corn price needs drop to approximately $3.77 per bushel (from Sept. 1, 2011 to Aug. 31, 2012) to reach the threshold for 2011 ACRE payments in Minnesota for corn in 2011, at the 166 bushel per acre average yield for 2011; however, the ACRE price threshold increasing to approximately $4.20 per bushel at a statewide 2011 average yield of 149 bushels per acre (10 percent yield reduction). Even though the ACRE program did not pay out in 2009 for corn and soybeans in Minnesota, and will likely not result in an ACRE payment in 2010, producers should not automatically "write-off" ACRE program enrollment for the 2011 crop year. The likely increase in the ACRE price guarantees for 2011, will lead to higher revenue guarantees for the 2011 ACRE program. This increases the likelihood of ACRE payments for the 2011 and 2012 crop years for corn and soybeans, as compared to the 2009 and 2010 crop years. However, current Chicago Board of Trade futures prices for corn and soybeans suggest that the potential for an ACRE payment in corn and soybeans in 2011 may be limited, unless there are reduced statewide yields in 2011, along with reduced crop prices after September 1, 2011. ********************************************************************************** May 9, 2011CORN PLANTING PROGRESS MIXED Just as existed a week ago, if you ask someone: "How much corn is planted, or how much Spring fieldwork has occurred in your area ?", the response is likely to be quite different, depending on where the person resides. Frequent rainfall events in late April and early May across Minnesota and Northern Iowa have raised major concerns in some areas regarding delays in corn planting. Most of the region has received rainfall amounts of 1-2 inches or more during that period, on soils that were already saturated. Some areas of South Central Minnesota were able to make some excellent planting progress during the first week of May, with over 50 percent of the anticipated corn planted by May 8. In other sections of Minnesota, very little corn has been planted, because field conditions have remained too wet, which was reinforced by some additional rainfall this past weekend. The best news for Spring planting, as of May 9, was a rapid warm-up in soil temperatures, which should help alleviate many of the soil temperature concerns as far as corn or soybean planting. Prior to May 5, the soil temperatures in most areas at the 2-4 inch planting depth had remained below 50 degrees F, which is considered the minimal desirable temperature for good corn planting conditions. At the University of Minnesota Research Center at Waseca the average soil temperature at the 2 inch level was only 45 degrees F on April 30, and dropped even lower to 37 degrees on May 3, before rebounding to 59 degrees by May 8. In the very wet areas, the soil temperature should be very favorable for good planting conditions, once the fields dry out adequately for corn planting. In areas where corn planting is completed, the soil temperatures should be very favorable to begin planting soybeans at this time as well. The warmer soil temperatures should allow for rapid germination, and should provide good conditions for early growth, once the corn is planted. If the average soil temperature in the planting zone is above 60 degrees Fahrenheit, corn should emerge in ten days or less after planting. Most growers will probably stick with planting full-season corn hybrids for at least another 2-3 weeks, until May 20-25, then will move to earlier corn hybrids, before switching major acreage to soybeans. Weather conditions in the next ten days to two weeks will determine if we just have planting delays with minor impact in this region, or if it becomes a major concern with potentially significant economic impact. Delayed corn planting issues are also a major concern in parts of Iowa, Illinois, Indiana and South Dakota. The "planting window" for soybeans is significantly wider than it is for corn. In Southern Minnesota, full-season varieties of soybeans can be planted until mid-late May, and still maintain close to full yield potential. 2011 CORN PRODUCTION CRITICAL Some crop production and grain marketing experts are now questioning whether U.S. farmers will be able to get the full 92.2 million acres of corn planted in 2011, which was projected in the USDA Planting Intentions Report on March 31. If there is a reduction in the intended corn acreage in 2011, it could cause concerns over already tight corn supplies for the coming year, and could lead to further increases in the already volatile corn market prices. According to the USDA, and grain marketing experts, a U.S. corn production of about 13.6 billion bushels is needed in 2011 to meet corn usage demands, and to maintain the projected corn carryover at current estimated levels. To achieve this level of U.S. corn production in 2011 will require that close to the 92 million acres of corn is planted, and that we have a national average corn yield in 2011 close to trend line yield level of slightly above 160 bushels per acre. Both the projected national planted acreage and the estimated yield targets may be lofty goals for 2011, given the delays in corn planting that exist in many areas of the Midwest. Of course, any shift in corn acreage due to late planting will likely result in added soybean acreage for 2011, which could put downward pressure on soybean prices in the coming months. Most crop production experts feel that Midwest farm operators will stay with planting their intended corn acres at least until May 20-25, before switching planned corn acres to extra 2011 soybean acres. There may be some grain marketing opportunities in the next few weeks resulting from the planting delays in portions of the Midwest. ********************************************************************************** May 2, 2011CORN PLANTING DELAYED The initiation of full-scale corn planting has been delayed across most of the upper Midwest due to continued wet weather, and cold soil conditions. A few farm operators were able to plant a limited amount of corn during the period of April 25-29 in some portions of southern Minnesota and Northern Iowa. However, no corn is planted in most portions of the region. By comparison, nearly all of the corn, and a substantial amount of soybeans were planted by early May in 2010, and field conditions were excellent. Nationwide, experts are saying that this is among the latest corn planting dates that we have seen in the past decade, and in some areas it is the latest since the disastrous year of 1993. Estimates are that only 9 percent of the corn nationwide was planted by April 24, which is far below last year’s record planting pace of 60 percent, and compares to a 5-year average of 23 percent planted by that date. In Minnesota, no corn was reported planted by April 24, compared to a 5-year average of 22 percent by that date, while in Iowa only 3 percent of the corn was planted, compared to a 5-year average of 28 percent. Very little planting progress occurred in most areas of Minnesota during the week of April 25-May 1. Most of Southern Minnesota and Northern Iowa received 1.0-2.0 inches of rain from April 24-30, which came on top of soils that were already close to saturation in most areas. Rivers, streams, and drainage ditches are near capacity at a many locations, which means the field dry down process is slowed compared to normal. At the University of Minnesota Research Center at Waseca, the total precipitation for the month of April (as of April 29) was 4.30 inches, compared to a normal of 3.23 inches. Precipitation was recorded at Waseca on 21 days during April. The other big issue this Spring has been soil temperature. The daily average 2-4 inch soil temperature was well below 50 degrees F on May 1 in most areas of Minnesota and Northern Iowa. A soil temperature of 50 degrees is usually recognized as the minimal planting zone soil temperature for acceptable corn planting conditions. At Waseca, the average 2 inch soil temperature on April 29 was 43.5 degrees F, while the average soil temperature at the 4 inch soil depth was only 42.5 degrees. The average 2-4 inch soil temperature at Waseca barely reached 50 degrees on only a few days during April. The average air temperature at Waseca during April was 43.6 degrees, compared to a long-term average of 44.9 degrees; however the last half of April was far below normal temperatures. According to research studies, at 50 degrees F it takes corn nearly three weeks to emerge, compared to an emergence time of about 10 days at 60 degrees F. Once we reach May 1, most crop experts would recommend planting the corn once field conditions are fit, regardless of soil temperatures, due to potential yield losses associated with later planting dates. We will soon be reaching the point with corn planting dates in Southern Minnesota, where optimum yield potential starts to decline with the full-season corn hybrids. Most University and Seed Company research shows that optimum yield starts to decline with corn planting dates after May 5-10; however, yield declines become much more significant with corn planting dates after May 20. Most experts recommend that growers stay with their full-season corn hybrids until at least May 25, because the shorter-season corn hybrids have much lower yield potential than the full-season hybrids. The later corn planting dates also increase the likelihood of increased corn drying costs in the Fall, due to the later maturity dates of the corn. We are now also entering the optimum time for soybean planting, so most farm operators will begin planting soybeans as soon as they complete corn planting. ********************************************************************************** April 25, 2011SPRING FIELDWORK IS SLOW Like the start of a big race, or the beginning of a Championship game, farmers in Minnesota and Iowa are anxiously awaiting the initiation of full-scale field work. Very cool temperatures and moist soil conditions have existed across the region during the first three weeks of April, resulting in excess soil moisture and cold soil temperatures, which has not been conducive to the initiation of corn planting in Minnesota and Iowa. A few farm operators have planted some early peas and small grain crops in isolated locations. In most areas, soil conditions have remained too cold and wet to begin full-scale Spring fieldwork. At the U of M Research and Outreach Center at Waseca, Minnesota, the average soil temperature at the 4 inch level on April 21 was only 40 degrees F., and 41 degrees F. at the 2 inch level, which is far too cold for good corn planting conditions. The long-term average soil temperatures on April 21 at Waseca are 48.9 degrees F at the 4 inch level, and 49.3 degrees F. at the 2 inch level, which is very close to the minimally desirable daily average soil temperature for corn planting of 50 degrees F at the 2-4 inch level. Normally, in late April and early May, the soil temperatures warm up quite rapidly, so there appears to be no reason to delay corn planting in 2011 due to soil temperatures, once the field conditions are fit for planting. The stored soil moisture in the top 5 feet of the soil profile is at or near capacity in most areas of Southern and Western Minnesota, as we head into the 2011 growing season. According to University of Minnesota and private Seed Company research, the "ideal time window" to plant corn in Southern Minnesota in order to achieve optimum yields is April 20 to May 5. Even though Spring planting is off to a much slower start than in recent years, the good news is that we are still in the early portion of this "ideal time window" for corn planting. Unless conditions turn very wet in the next couple of weeks, there is sill a good chance to get a significant amount of corn in Southern Minnesota and Northern Iowa planted during the "ideal window" in 2011. EARTH DAY 2011 For the past four decades, an annual event called "EARTH DAY" has been held in late April across the United States, which has been a time for all U.S. citizens to reflect on our Country’s environmental resources, and what we can do individually and as communities to help enhance our environment for the next generation. In recent years, it has become fashionable to point the "finger of blame" at agriculture and farmers for many environmental issues. However, in reality farmers have been some of the best "environmental stewards" in the U.S. in the past couple of decades. This has been accomplished with a relatively small investment of Federal tax dollars. Consider the following environmental facts about U.S. agriculture :
Following is some data from the National Corn Growers Association :
There is still a lot to be accomplished to manage potential global warming and other environmental issues; however, we can rest assured that the agriculture industry will do their part to find solutions. ********************************************************************************** April 18, 2011IMPORTANCE OF AG EDUCATION April 19th has been designated as "Agriculture Education Awareness Day", which is a good time to focus on the large number of career opportunities that exist in agriculture, food, and natural resources (AFNR). It also a time to focus on the importance of making sure that the agriculture, science, and business curriculum and coursework in our secondary schools in Minnesota are enhancing the AFNR career opportunities for our students. Minnesota currently has agriculture education (AFNR) programs in 187 school districts, with 226 AFNR teachers, reaching about 26,700 students in grades 9-12, and an additional 5,500 students in grades 7-8. There also 176 Future Farmers of America (FFA) chapters in Minnesota High Schools, with over 9,000 total members. The number of secondary schools currently offering AFNR education has actually increased slightly compared to 2005-2006, when 182 schools offered AFNR programs. In 1985-86, there were 254 secondary schools in Minnesota offering AFNR educational programs; however, the total student participation was only 12,766, which is less than half of today’s enrollment in AFNR coursework. The larger number of students participating in AFNR programs today is largely the result of dramatic changes in the type of courses being offered in secondary schools as part of an AFNR program. The AFNR programming at Minnesota secondary schools focuses on the following broad topic areas : plant sciences, animal systems, agri-business systems, food processing systems, power and technical systems, natural resources, and environmental systems. In previous times, AFNR programs were primarily career and technical training programs for agriculture. However, in the past decade or so, with more focus on basic academics and "high stakes" student testing, AFNR programs have needed to focus more on science and economics to be a viable segment of academic requirements. One of the biggest challenges facing public school districts is limited current and future funding resources. Tight budgets can greatly impact AFNR programs in secondary schools, especially if the AFNR courses are treated as "electives", rather than being courses to meet science or other curriculum requirements, or being part of science, technology, engineering, and math (STEM) initiatives that exist in some school districts. There are many innovative AFNR teachers have worked with school curriculum leaders to integrate AFNR courses into the overall course requirements and student career development objectives within a school district. However, there is a shortage of highly qualified AFNR teachers to meet the demands at our secondary schools. The United States Department of Agriculture estimates that that the annual number of job openings requiring a college degree with expertise in agriculture, food systems, renewable energy, and environment will increase by 5 percent from 2010-2015, as compared to 2005-2010. USDA projects that over 54,000 college graduates will be needed each year to meet this job demand from 2010-2015, with 74 percent of these jobs being in business and science type of occupations. USDA estimates that only about 49,000 qualified college graduates will be available each year to meet this growing job demand, with about 29,000 of those graduates coming AFNR programs, and the balance from other college majors. Some of the largest food and agricultural companies in the world are based out of Minnesota, and have many career opportunities available to college graduates. Of course, there are also many job opportunities available in regional centers and local communities throughout Minnesota that would prefer some AFNR training and coursework for available positions. Too often, we correlate "ag education" as being coursework to prepare young people for farming, or production agriculture, rather than considering the vast array of career opportunities and job openings that exist in AFNR. There are going to be many future career opportunities for our students in food safety and quality, renewable energy, environmental issues, business management, and other areas. Enhancing AFNR programs in our secondary and post-secondary schools is certainly one strategy to help prepare our students for these future opportunities. ********************************************************************************** April 11, 2011CUSTOM FARMING AGREEMENTS An alternative to leasing farmland is a "Custom Farming Agreement". In a typical Custom Farming Agreement, the custom operator agrees to perform all the machine operations on the owner’s land in exchange for a set fee or rate. The landowner pays for all seed, fertilizer, chemicals, crop insurance, and other input costs; receives the all grain produced and all eligible farm program payments on the land; and is responsible to store and market the grain. Following are the average Custom Farming for 2011, based on the "Iowa Farm Custom Rate Survey" (Includes tillage, planting and harvesting costs) :
One obvious advantage to the custom operator is that a Custom Farming Agreement provides some extra farm income, with little or no additional operating capital or farm machinery investment. Fuel, lubrication, and repairs are usually the only added costs. In addition, custom farming offers a fixed return per acre to the custom operator, and although there is some possibility of higher repair bills, this is minor compared with the price and yield risks typically faced by a farm operator in a normal cash rental contract. Of course, in a good year, profits from a Custom Farming Agreement will be lower than under most cash rental leases; however, in this era of much higher land rental rates there is much more risk to the farm operator with a cash lease as compared to a custom agreement with a landowner. Landowners also find several advantages to a Custom Farming Agreement. Landowners with small acreages can make most of the crop production and grain marketing decisions without the investment into a full-line of farm machinery. The landowner does not have to negotiate land rental rates or worry about collecting lease payments, since the owner receives all of the crop. The landowner does have to pay the farm operator an agreed upon per acre fee for the custom farming services by specified dates. The landowner is considered to be the material participant for income tax purposes, and the landowner is typically entitled to all government farm program payments. Key Issues With Custom Farming Agreements :Although the concept of a Custom Farming Agreement is simple, close communication between the custom operator and the landowner is essential. A written contract for the Custom Farming Agreement should definitely be prepared that specifies the amount of payment by the landowner to the custom operator, and all other pertinent details. Following are some points to consider for Custom Farming Agreement :
For more details on Custom Farming Agreements and other farm machinery information, please refer
to the Iowa State University "Ag Decision Maker" Web Site : ********************************************************************************** |
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