AuthorThe “FOCUS ON AG” column is sent out weekly via e-mail to all interested parties. The column features timely information on farm management, marketing, farm programs, crop insurance, crop and livestock production, and other timely topics. Selected copies of the “FOCUS ON AG” column are also available on “The FARMER” magazine web site at: https://www.farmprogress.com/focus-ag Archives
July 2024
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The excessive rainfall and flooding during June in many portions of the Upper Midwest have created some interesting and in some cases very difficult decisions for several farm operators across the region. A widespread area of Southern Minnesota, Northern Iowa and Eastern South Dakota received 12-16 inches of rain or more during the month of June, which followed more than double the normal precipitation in May. This resulted in flash flooding near rivers and streams and an immense amount of standing water in many areas. The result has been considerable drown-out damage to crops and shallow root systems for crops, as well as loss of nitrogen and other nutrients for the corn crop.
By early July, fields in many areas for farmers to potentially consider replanting some early maturing varieties of soybeans into some of the drown-out areas. Most of the replanting occurred into existing soybean fields that had drown-out damage. Very little replanting occurred on drown-out areas in existing corn fields. Realistically, the best that farmers in the Upper Midwest can hope for with soybeans planted in early-to-mid July is probably a yield of 25-30 bushels per acre, compared to a normal yield of 60 bushels per acre or more. This assumes favorable growing conditions from now until September, as well as the first killing frost not occurring until mid-October. If the replanted soybeans do not produce a crop that can be harvested as grain, they still potentially can make a good cover crop for the drown-out areas. Some farmers were able to get some reimbursement through replant clauses in their crop insurance policies to help cover their replant clauses. Probably the most difficult decisions that farmers in the Upper Midwest have been facing in mid-July are related to the remaining corn crop in the fields that did not drown-out. In many areas, large segments of corn fields have short, yellowish corn with shallow root systems that shows signs of deficiencies of nitrogen and other nutrients. In some cases, portions of these fields may need supplemental applications of nitrogen fertilizer. In addition, wet field conditions can lead to higher incidences of certain corn diseases, which can require fungicide applications. If the remaining corn crop looked fairly viable and we had projected corn harvest prices above $5.00 per bushel, many farmers would probably make the investment into the extra nitrogen fertilizer or applying the fungicide to control the potential corn diseases. However, in many of the worst corn fields in Southern Minnesota, Northwest Iowa, and Southeast South Dakota, the remaining corn crop does not appear to have significant yield potential and the corn harvest price at local grain markets is below $4.00 per bushel. If farmers to choose to apply 30 pounds of extra nitrogen with some sulfur added, the approximate cost would be an estimated $30-$40 per acre. The cost of treating corn with fungicide would likely be an estimated $25-$30 per acre. “Human nature” for most farmers is to try and get the highest corn yield that is reasonably possible, which in a year such as this would probably mean applying the extra nitrogen fertilizer and treating the corn with fungicide, if necessary. However, there is also the economic side of this decision. If a crop producer already feels that his 2024 corn crop may qualify for crop insurance indemnity payments, does it make sense to continue to put discretionary input costs into that crop to get a few more bushels of crop yield ? That decision probably varies from farm-to-farm and field-to-field, so more in-depth analysis may be required before a decision is made. Most farmers carry revenue protection (RP) federal crop insurance policies, which are based on a combination of yield and price. The crop insurance guarantee for a RP policy is the APH yield on a farm unit times the Spring price or base price for a crop times the level of coverage. The 2024 Spring price for corn was $4.66 per bushel, so if a farm had a 200 bushel per acre APH yield with an 85% RP policy, the insurance guarantee would be $792 per acre (200 bu./A. x $4.66/bu. x .85). The harvest value of the crop is the actual yield times the final harvest price for corn, which is the average price of CBOT December corn futures during the month of October. As of July 19, the Chicago Board of Trade (CBOT) futures price was $4.06 per bushel. If that were the final crop insurance harvest price, crop insurance indemnity payments on a RP policy in corn would begin with a yield loss of approximately 2-3 percent with an 85% RP policy and about 9 percent with an 80% RP policy. With a 200 bushel per acre APH yield, that means that at a $4.06 per bushel harvest price crop insurance indemnity payments would be initiated at a final corn yield below 195 bushels per acre and below 183 bushels per acre with an 80% RP policy. Farmers not only face the difficulty of realistically evaluating the yield potential of the corn remaining in field, but also projecting what likely direction is of the CBOT December corn futures price between now and November. In addition, they need to factor any drown-out acres into the final yield estimates. Another factor that enters into this decision is whether the crop insurance policy insuring the corn is insured under “enterprise units” or “optional units”. Enterprise units combine all acres of a crop in a given county into one crop insurance unit, while optional units allow producers to insure crops separately in each field within a township section. Enterprise units usually have considerably lower premium costs compared to optional units; however, enterprise units are based on larger coverage areas that can make it more difficult to cover crop damage that affect individual farm units. In many instances, corn producers that have insured their crop with optional units will likely be in a better position to fine-tune their decisions regarding added nitrogen or fungicide applications to individual corn fields. If a farm operator has already determined that an individual field in the case of optional unit insurance coverage or all of the corn acres in a county in the case of enterprise units will likely qualify for 2024 crop insurance indemnity payments, then they need to evaluate the potential economic benefits how investing more dollars into crop inputs this growing season. For example, Using the 200 bu./A APH yield with 85% RP policy and a crop insurance harvest price of $4.10 per bushel, a farmer with a final yield of 150 bushels per acre would collect an estimated crop insurance indemnity payment of $177 per acre. If that farmer paid the cost for the extra nitrogen fertilizer and/or fungicide and increased the final corn yield to 180 bushels per acre, the crop insurance indemnity payment would be reduced to about $54 per acre, the added crop value at $3.80 per bushel times 30 bu./A would be $114 per acre, resulting in a total of approximately $168/A. Once the cost of the added nitrogen and fungicide is included, the “net result” would probably close to $125/A., as compared to the insurance indemnity payment without the expense of the added inputs. “One solution doesn’t fit everyone” and every situation is different. The first step is to make a realistic yield estimate of corn field in the case of optional units or all corn acres in a county in the case of enterprise units, factoring in any drown-out or acres with zero production potential. Then find out the cost of any crop inputs and what estimate might be for yield enhancement. A reputable crop consultant or agronomist can assist with evaluating the corn yield potential and benefits from added crop inputs. The next step is to consult with the crop insurance agent regarding the crop insurance coverage level on the 2024 corn crop and what the potential crop insurance indemnity payments would be at various final harvest price levels. It is also good to review your situation with your ag lender before you make the added investment into the corn crop in order to have their input as to how that decision may affect your financial situation with the lending institution. Ultimately, the final decision regarding the investment into more crop inputs for the 2024 corn crop comes down those involved in the business management of the farm operation. If both a husband and wife are involved, or if there are several family members involved, discuss and analyze the situation thoroughly, weighing all the input that was received and the economic analysis that was done. These are challenging mental decisions for farmers, so make it a group decision rather than having the stress of the decision on one individual. Kent Thiesse has prepared an information sheet titled: “2024 Crop Insurance Payment Potential”. To receive a copy, please send an email to: [email protected] Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected]
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The late June USDA Acreage Report is always highly anticipated, because it becomes the first “hard data” after the March USDA Plantings Intentions Report to give an indication of crop production levels for a given growing season. Many times, the June USDA Report can have a big impact on grain market trends, either upwards or downwards, and 2024 is no exception. The crop acreage report was initially viewed “bearish” for corn markets and fairly neutral for soybeans. Based on the June 28th report, farmers planted more acres of corn and less acres of soybeans in 2024 than was projected in the March 30 Planting Intentions Report. USDA surveyed more than 70,000 agricultural producers during the first two weeks of June to gather information for the June 28th report. However, it should be noted that as of early June there was an estimated 3.3 million acres of corn and 12.8 million acres of soybeans remaining to be planted. Crop acreage numbers will be adjusted in future months following the producer acreage reports to Farm Service Agency (FSA) offices in July.
The biggest surprise in the June 28th USDA Acreage Report was the estimate of 91.5 million planted corn acres planted in the U.S. in 2024. This was an increase of over 1.4 million planted acres from the March USDA Planting Intentions Report and was over 1.1 million acres above the estimates of grain marketing analysts. The 2024 corn acreage estimate was a decrease of 3 percent from the 2023 planted corn acres of 94.6 million acres. The estimated 2024 corn acreage also compares to 88.6 million acres in 2022, 93.6 million acres in 2021, 90.8 million acres in 2020, 89.7 million acres in 2019, and 89.1 million acres in 2018. The 2024 corn acreage was increased above the March planting intentions in 6 States, including increases of 600,000 acres in Kansas, 300,000 acres in Iowa, 250,000 acres in Nebraska, 200,000 acres in Minnesota, and 100,000 acres in both Ohio and South Dakota. Based on the June 28th Report, 2024 corn acreage is expected to decrease in 9 of the 12 primary corn producing States, increase in 2 States, and stay the same in 1 State, as compared to 2023 acreage. Following is the estimated 2024 corn acreage in selected Upper Midwest States (with the change from 2023): Iowa at 13.1 million acres (same as 2023); Illinois at 10.9 million acres (down 300,000 acres); Nebraska at 10.1 million acres (up 150,000 acres); Minnesota at 8.1 million acres (down 500,000 acres); Kansas at 6.3 million acres (up 550,000 acres); South Dakota at 6.1 million acres (down 200,000 acres); Indiana at 5.1 million acres (down 350,000 acres); North Dakota at 3.8 million acres (down 250,000 acres); Wisconsin at 3.7 million acres (down 300,000 acres); Missouri at 3.5 million acres (down 350,000 acres); and Ohio at 3.4 million acres (down 200,000 acres). The June 28th USDA Report estimated that 86.1 million acres of soybean acres will be planted in 2024 in the U.S., which was a decrease of 410,000 acres from the March 1st USDA acreage estimate and would be over 650,00 acres below the average estimates of grain marketing analysts. The 2024 U.S. soybean acreage projection does represent an increase of 3 percent or 2.5 million acres from the 2023 planted acres. The estimated 2024 U.S. soybean acreage compares to other recent acreage levels of 83.6 million acres in 2023, 87.4 million acres in 2022, 87.2 million acres in 2021, 83.1 million acres in 2020, 76.1 million acres in 2019, and 89.2 million acres in 2018. The record U.S. soybean acreage was 90.2 million acres in 2017. The 2024 soybean acreage is expected to increase or remain steady in 24 of the 29 reporting soybean producing States, as compared to 2023 acreage, with only Iowa showing a slight year-to-year decline among major soybean producing States. The estimated 2024 soybean acreage in selected Upper Midwest States (with the change from 2023): Illinois at 10.7 million acres (up 350,000 acres); Iowa at 9.9 million acres (down 50,000 acres); Minnesota at 7.6 million acres (up 250,000 acres); North Dakota at 6.8 million acres (up 600,000 acres); Indiana at 5.75 million acres (up 250,000 acres); Missouri at 5.6 million acres (same as 2023); Nebraska at 5.3 million acres (up 50,000 acres); South Dakota at 5.1 million acres (same as 2023); Ohio at 4.85 million acres (up 100,000 acres); Kansas at 4.55 million acres (up 120,000 on acres); and Wisconsin at 2.15 million acres (up 40,000 acres). JUNE 28th QUARTERLY GRAIN STOCKS SUMMARY The USDA Quarterly Grain Socks Report was also released on June 28, which showed the highest inventory of corn stored on farms since 1988. Following is a brief summary of the June 28th Grain Stocks Report: Corn --- The June 28th report indicated a total U.S. corn inventory of just over 4.99 billion bushels on June 1, 2024, which represented an increase of about 22 percent from the corn inventory a year ago on June 1. Approximately 60 percent of the total U.S. corn inventory, or just over 3 billion bushels, was in on-farm storage on June 1, which is up 37 percent from last year at this time. The level of on-farm corn inventories on June 1st included 570 million bushels in Iowa, 460 million bushels in Minnesota, 445 million bushels in Illinois, 250 million bushels in Nebraska, 225 million bushels in South Dakota, 205 million bushels in Indiana, 135 million bushels in Missouri, and 120 million bushels in North Dakota, all of which are well above comparable on-farm inventories in recent years. The June 28th report implied that the estimated total U.S. corn usage from March 1 to May 31 was 3.36 billion bushels, which compares to 3.29 billion bushels during that same time period in 2023. Soybeans --- The Grain Stocks Report showed a total of 970 million bushels of soybeans in inventory as of June 1, 2024, which is an increase of 22 percent from a year ago. It was estimated that 466 million bushels of soybeans, were still in on-farm storage on June 1, 2024, which is up 44 percent from a year ago. This included 83 million bushels in Iowa, 68 million bushels in Minnesota, 66 million bushels in Illinois, 39 million bushels in Ohio, 38 million bushels in Indiana, 37 million bushels in South Dakota, 30 million bushels in Missouri, 18.5 million bushels in Nebraska, and 17.5 million bushels in North Dakota. The level of on-farm soybean stocks on June 1st is significantly higher in many States compared to other recent years. The June 28th report implied that the estimated total U.S. soybean usage from March 1 to May 31 was 875 million bushels, which was down two percent from the same time period a year ago. GRAIN PRICE IMPACTS December corn futures prices on the Chicago Board of Trade (CBOT) fell by 13 cents per bushel following the release of the USDA Crop Acreage and Quarterly Grain Stocks Reports on June 28. The CBOT December corn futures price declined by ten percent or $.47 per bushel during the month of June, which is not a normal early Summer price pattern. This obviously is being driven by the much larger U.S. corn inventory and higher than expected 2024 corn acreage, along with stagnant corn usage and export levels compared to a year ago. The CBOT December corn futures price closed at $4.20 per bushel on June 28. This compares to December CBOT closing futures prices in recent years following the June USDA reports of $4.95 per bushel in 2023, $6.20 per bushel in 2022, $5.54 per bushel in 2021, $3.50 per bushel in 2020, and $4.31 per bushel in 2019. New crop 2024 corn price bids for harvest delivery have dropped below $4.00 per bushel at many locations in the Upper Midwest. CBOT November soybean futures held firm following the June 28th USDA reports and were trading at $11.04 per bushel. Even though the level of soybean stocks in inventory is up from a year ago, the 2024 estimated soybean acreage came in a bit lower than was anticipated by the grain trade. The $11.04 per bushel on June 28 compares to November CBOT closing futures prices in recent years following the June USDA reports of $13.43 per bushel in 2023, $14.10 per bushel in 2022, $13.99 per bushel in 2021, and $8.91 per bushel in 2020, and $9.32 per bushel in 2019. New crop 2024 corn price bids for harvest delivery have dropped below $10.50 per bushel at many locations in the Upper Midwest, with slightly higher bids at soybean processing plants. The stagnant or declining cash and forward contract prices for both corn and soybeans during June is limiting opportunities for farmers to sell remaining grain inventories and to forward price some of the expected 2024 corn and soybean production. Unless there are some weather issues later in the growing season that cut into the anticipated 2024 U.S. crop production, it may be difficult to get any significant increases in corn and soybean price levels between now and harvest-time. Farmers with remaining 2023 corn and soybeans to sell will need to watch for some localized short-term rallies in grain markets to liquidate the remaining inventories before harvest. Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected]
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Many farmers across the Upper Midwest have been dealing with the impacts of the heavy rains and flooding that have developed in late June. A widespread area of Southern Minnesota, Northern Iowa and Eastern South Dakota received 12-16 inches of rain or more during the month of June, which followed more than double the normal precipitation in May. This has resulted in flash flooding near rivers and streams and an immense amount of standing water in many areas. The result has been considerable drown-out damage to crops, some loss of livestock, and some physical damage to buildings and other property on farm sites. The USDA Farm Service Agency (FSA) has announced that there is some assistance available through USDA
Following is some of the assistance that is available through USDA:
All Farmers need to pay attention to FSA and Crop Insurance Deadlines Once the crop is planted and we get into mid-Summer, it is easy to overlook some important deadlines at Farm Service Agency (FSA) offices, crop insurance, and other important deadlines. Missing some of these deadlines can be a costly mistake, as many of the program payments and benefits are linked to compliance with these deadlines. Following is a couple of those important deadlines:
Farm and Rural Stress Assistance The combination of the lowest grain prices in the past five years, together with the likely crop loss from the recent flooding and natural disasters, is likely to result in reduced farm income levels for many farmers in 2024. This is likely to increase the mental stress level for many farmers and farm families. There are some good resources available to assist farm and rural families in the Upper Midwest States that have been impacted:
Website --- https://www.mda.state.mn.us/about/mnfarmerstress
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected] |