Ag Decision Maker

Contributed by William Edwards, extension economist

Anyone who is involved with the rental market for Iowa farmland knows that rental rates have been pushed significantly higher by the favorable corn and soybean prices that farmers have enjoyed since 2010. This trend continued in 2012.

Results from the most recent Iowa State University Extension and Outreach rental rate survey estimated that the average cash rent for corn and soybean land in the state for 2012 was $252 per acre, an increase of $38 per acre or 18 percent from last year. This is the largest one-year increase since the statewide survey was started in 1994. The second largest increase was in 2011, with an increase of $30 per acre. Average rents were higher in all nine crop reporting districts, with increases ranging from $57 per acre (26 percent) in north central Iowa to $16 per acre (9 percent) in south central Iowa.

Typical rental rates for land growing oats and hay were reported, as well as rental rates for grazing pasture and corn stalks. This year rental rates for letting people hunt on farmland were included, too.

The intent of the Iowa State survey is to report typical rents in force, not the highest nor the lowest values heard through informal sources. Rental values were estimated by asking over 3,000 people familiar with the land market what they thought were typical rates in their county. The number of responses received this year was 1,419. Of the total responses, 37 percent came from farmers, 28 percent from landowners, 16 percent from professional farm managers, 16 percent from lenders, and 3 percent from other professionals.

The Cash Rental Rates for Iowa 2012 Survey is available online as a downloadable document; from the Ag Decision Maker website.

Other resources available for estimating a fair cash rental rate include the Ag Decision Maker information files Computing a Cropland Cash Rental Rate (C2-20) and Flexible Farm Lease Agreements (C2-21). Both documents include decision file electronic worksheets to help analyze leasing questions.

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Farmland Leasing

Contributed by Steve Johnson, Extension Farm Management Field Specialist.

Everyone who plants an insurable crop should be keeping track of what date you plant each field and how many acres were planted to that crop. That information has to be reported to your local Farm Service Agency (FSA) office on FSA Form 578; the acreage report.

 Some 2012 acreage certification and crop insurance changes to keep in mind:

•  July 15 is the deadline for acreage certification for spring planted crops
• Crop insurance billing date of August 15 – a penalty will attach for late payment of premiums not received by October 1
• In certifying acres, the farm operator needs to report crops planted, practice (irrigated vs. non-irrigated), number of acres and planting date
• FSA Form 578 needs to include the farm serial number, tract number and field number
• FSA assigns each field a unique identifier called a Common Land Unit (CLU).

Across the Corn Belt, hundreds of thousands of farmers are finding that acreage reporting just got easier. However, many farmers can now report this data while viewing a map of each field boundary. CLU data is contained in the USDA’s Comprehensive Information Management System.

Approved Insurance Providers represent the crop insurance industry and they have access to this data and are already using it to assist clients. Some early findings indicate the crop insurance agents working with clients may be able to speed up the process of acreage certification and provide more accuracy.

Advantages of CLU Information

The initial intent of CLU reporting was for USDA agencies like the FSA and the Risk Management Agency (RMA) to have consistent information. Heading into the third year of this nationwide effort, producers are beginning to see some real benefits:

1. Easier and likely more accurate, tracking of data using maps versus using just alpha numeric data.
2. Map-based information can be compiled immediately following planting in advance of acreage certification with FSA and filing FSA Form 578
3. It is easier for crop insurance adjusters to verify policies, adjust claims and make indemnity payments when viewing map-based information.
4. CLU information integrates well with precision technologies and the use of planter and yield monitor data for reporting

Conclusion

Since the crop insurance billing date has been moved up to August 15, providing a copy of that acreage report well in advance of the July 15 deadline will assure timelier crop insurance data entry and receipt of your premium notice. The 2012 crop insurance premium is due in September. Anything received after October 1 incurs a penalty.

Consider working with your crop insurance agent in advance of acreage certification. This might provide an opportunity to use CLU information and move to map-based reporting. A farmer that has added additional land for 2012, or perhaps their FSA office has not assigned CLU identification to each field, may see additional time during acreage certification.

Contact your local FSA office regarding acreage certification and completion of FSA Form 578. Contact your crop insurance agent should you have particular questions or concerns regarding your coverage or potential access to CLU information and map-based reporting opportunities.

Source: USDA Risk Management Agency-Informational Memo IS-12-002 & Iowa Crop Insurance Providers, April 2012.

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Crop Insurance

Contributed by Steve Johnson, Extension Farm Management Field Specialist.

The USDA Farm Service Agency (FSA) is wrapping up enrollment for the 2012 Direct and Counter-Cyclical Program (DCP) and also the 2012 Average Crop Revenue Election Program (ACRE) Program. Sign-up began on January 23^rd, 2012 and ends on June 1^st, 2012.
 
The 2012 DCP and ACRE contract signatures for enrollment are also due by the signup deadline of June 1^st.  It is the responsibility of the operator and owners of a farm to obtain and submit all necessary signatures on election and enrollment forms by this deadline.
 
The DCP provides producers an income safety net in the form of annual direct payments. Also, counter-cyclical payments can be provided when commodity prices fall below certain price levels. Some of the delay in this year’s sign-up might have been the fact that there will be no advanced direct payment for the 2012 crop year. Entire direct payments will be issued after October 1^st, 2012 and will reflect on 85% of your farms’ base acres.

The ACRE program provides eligible producers a state-level revenue guarantee, based on the 5-year state Olympic average yield and the 2-year national average price. ACRE payments are made when both state and farm-level triggers are met.

By participating in ACRE, producers elect to forgo counter-cyclical payments, receive a 20-percent reduction in direct payments and a 30-percent reduction in loan rates. The decision to elect ACRE binds the farm to the program through the 2012 crop year.

The projected 2012 ACRE state trigger revenue for Iowa is $709.50 per acre. It might be difficult to trigger the ACRE payment in Iowa for the 2012 crop. Considering an Iowa average corn yield of 171 bushels per acre, the national average cash price for corn in the 2012-13 marketing year would need to fall below $4.15 per bushel.

If you have specific questions or need details regarding USDA farm programs including DCP or ACRE, contact your local USDA FSA office. You can also get news and information about USDA programs at www.fsa.usda.gov

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Farm Bill

Chad Hart , ISU Extension Grain Marketing Specialist, provides a summary of the May 10th report from USDA.

The USDA projects that the 2012 corn and soybean crops will be significantly bigger than the 2011 crops.  But let’s start with the 2011 demand numbers.  For corn, old crop feed demand was lowered 50 million bushels, based on alternative feed availability.  That change put 2011/12 ending stocks at 851 million bushels, nearly 100 million bushels above trade expectations.  USDA also lowered the 2011/12 season-average price midpoint by 10 cents to $6.10 per bushel.  For soybeans, crush gained 15 million bushels and exports gained 25 million.  These changes put 2011/12 ending stocks at 210 million bushels, 11 million below trade expectations.  USDA estimates the 2011/12 season-average price for soybeans at $12.35 per bushel.

Crop Outlook

Chad Hart , ISU Extension Grain Marketing Specialist, provides a summary of the March 9th report from USDA.

Given the earlier Grain Stocks report, the trade had anticipated lower corn ending stocks and steady soybean ending stocks.  It got that general pattern, but the crops were switched.  All of the corn numbers were held steady in this update with feed demand at 4.6 billion bushels, ethanol at 5 billion, and exports at 1.7 billion.  2011/12 ending stocks remain at 801 million bushels.  The season-average price range was tightened by 10 cents on each end, leaving the midpoint at $6.20 per bushel.  In their write-up, USDA noted that weekly ethanol production data has been on the decline through 2012 and corn feed demand through the 1st half of the marketing year was nearly 240 million bushels lighter than last year.  With the prospects of larger corn and wheat crops this summer and fall, the feed outlook remains weak.

Soybean demand was boosted both domestically and internationally.  Domestic crush demand was raised 15 million bushels as soybean meal demand via feed and soybean oil demand via biodiesel has been stronger.  Export demand was also raised 15 million bushels as the South American crop continues to shrink.  After some slight adjustments to seed and residual use, 2011/12 ending stocks are projected at 250 million bushels, down 25 million from last month.  USDA also boosted and tightened its season-average price range, putting the mid-point at $12.25 per bushel, up 25 cents from last month.

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Crop Outlook

Contributed by William Edwards, extension economist

Unusually warm and dry weather has allowed crop producers to start spring field work earlier than can be remembered by most people.  Getting an early start on tillage and planting reduces the risk of getting behind schedule later if an extended period of rainy weather occurs, but it also has its risks.  The Risk Management Agency (USDA) has some specific rules about early planted crops with regard to crop insurance coverage.  For each insurable crop RMA has set an “early planting date.”  The earliest planting dates allowed for counties in the state of Iowa are April 11 for corn and April 21 for soybeans.  Dates will vary in other states, and by county within a state.

Acres planted before these dates are no longer eligible for replant coverage payments should it be necessary to replant them.  The maximum replant payments each year are equal to 8 bushels of corn and 3 bushels of soybeans, times the RMA projected price for that year, which is the price used to establish the value of the insurance guarantees that the producer  purchases.  For 2012 the projected prices are $5.68 per bushel for corn and $12.55 for soybeans, so the maximum replant payments are $45.44 and $37.65 per acre, respectively.

Any acres that are planted  before the earliest planting dates lose replant coverage, even if the entire farm or insurance unit has not been planted.  However, early planting does not affect a producer’s normal yield or revenue insurance guarantee.  That guarantee is still in effect, and any indemnity payments will depend on the final harvested yield.  Normal good management practices must still be followed, included replanting of crops if the potential yield increase is enough to offset the costs of replanting.

Records should be kept of when all acres are planted.  Check with your local crop insurance agent for questions.

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Crop Insurance

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Other

Chad Hart , ISU Extension Grain Marketing Specialist, provides a summary of the March 9th report from USDA.

Today’s USDA reports showed acreage shifts outside the bounds of pre-trade expectations, but stock levels that were close to expectations.  For acreage, corn was well above expectations while soybeans and wheat were below.  Wheat is still gaining ground, but compared to the pre-trade estimate, wheat lost just over 1.5 million acres.  Corn acreage came in at 95.9 million acres, the highest acreage since the 1930s.  That is up nearly 4 million acres from last year.  The biggest gains are in the upper Midwest and Great Plains as North Dakota moves up 1.17 million acres and Minnesota, Iowa, Nebraska, Ohio, and South Dakota add between 300,000 to 600,000 acres each.  The intentions show record corn area in North Dakota, South Dakota, Minnesota, and Iowa.

Soybeans gave up roughly 1 million acres, with just over half of that drop occurring in Iowa.  The shift to more continuous corn is on.  North and South Dakota added soybean area.  In fact, North Dakota projects to have record soybean area as well.  Farmers up there intend to pull in a lot of the prevented planting area from last year.  Among the other crops, hay area is up, especially in the Southern Plains, while cotton area dropped by 1.5 million acres.

While the stock numbers came in as expected, they are moving in different directions for corn and soybeans.  Soybean stocks are up 10 percent from last year and quarterly disappearance is down 3 percent.  Corn stocks are down 8 percent from last year and quarterly disappearance is up 3 percent.  Wheat stocks are also down significantly from a year ago.

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Crop Outlook

Contributed by William Edwards, extension economist

Over 20,000 people make their living each year as full-time employees on Iowa farms. Iowa State University and the North Central Risk Management Education Center recently conducted a survey to study the wages and benefits they receive. The average compensation paid to these employees in 2011 was $38,929 per year, before deductions for taxes. Cash wages accounted for $33,320, or 85 percent of this total. In addition, the average employee received fringe benefits valued at $4,185 and cash bonuses of $1,424.

In a similar survey conducted in 2006 the average farm employee received $34,640 in total compensation. The change represents an average annual increase of about 2.1 percent. Employees worked an average of 2,602 hours in 2011, so on an hourly basis cash wages averaged $12.96 and total compensation averaged $15.05. The average employee had 12 years of experience working on a farm, seven of which were with the present employer. Six percent of the employees included in the survey were female, and 16 percent were born outside the United States.

The most significant benefit provided was some type of insurance plan, usually medical. Other common benefits included housing, meals, farm produce, work clothing and recreational opportunities.

Factors such as farm size, employee duties, number of other employees supervised, education and years of farm experience had a major influence on how much each employee was paid. For more details about the farm employee compensation survey see the information file link.

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Whole Farm

Many Iowa farmers hire some custom machine work done in their farm business, or perform custom work for others. Others rent machinery or perform other services. The information in the 2012 Iowa Custom Rate Survey is based on survey responses from 276 Iowa farmers, custom operators and farm managers. For each operation, the average rate and the range reported are shown. Twenty-eight percent of the respondents perform custom work, 11 percent hire work done, and 61 percent indicated doing both.

Values are rates expected to be charged or paid this year, and include tractor, implement, fuel and labor. The average price for diesel fuel was assumed to be $3.25 per gallon. A fuel price increase of $0.50 per gallon will cause total machinery costs to increase by approximately 5 percent. This rate schedule is intended only as a guide. Actual custom rates may vary according to availability of machinery in a given area, timeliness, operator skill, field size and shape, crop conditions, and the performance characteristics of the machine being used.

Rental rates for some machinery items are shown on page 2 of the publication, along with a worksheet for estimating rental rates for other items. Ag Decision Maker website offers a Decision Tool to help custom operators and other farmers estimate their own costs for specific machinery operations. View the 2012 Custom Rate Survey.

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Crops, Machinery