Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest WASDE report.
For corn, national yield was set at 181.8 bu/ac, up 3.3 bu/ac from trend. That adds 278 million bushels to production, raising total production to 15.278 billion bushels. Iowa was estimated at 202 bu/ac (again, based on Aug. 1 conditions, up 2% from 2019), but the larger improvements in yields were to our north and east. Illinois was set at 207 bu/ac, up 14.4% from last year. Minnesota was set at 197 bu/ac, up 13.9% from last year. Indiana was set at 188 bu/ac, up 11.2% from 2019. On the demand side, exports were increased 20 million bushels on old crop and 75 million bushels on new crop. The weakening of the dollar, the lower prices, and advance export sales are all supporting these changes. Feed and residual was raised 75 million bushels as well, but the change here is more related to the thought that there are larger crop losses (residual use) for a larger crop than increased feed consumption. So usage went up 170 million, but supply grew by 278 million, so 2020/21 ending stocks rose by 108 million and the 2020/21 season-average price estimate dropped a quarter, to $3.10 per bushel.
For soybeans, national yield was set at 53.3 bu/ac, up 3.5 bu/ac from trend. That adds 295 million bushels to production, raising total production to 4.425 billion bushels. Iowa was estimated at 58 bu/ac (again, based on Aug. 1 conditions, up 5.5% from last year), but the larger improvements in yields were to our north and east. Illinois was set at 64 bu/ac, up 18.5% from last year. Minnesota was set at 51 bu/ac, up 15.9% from last year. Indiana was set at 61 bu/ac, up 19.6% from 2019. On the demand side, exports were increased 75 million bushels on new crop. The weakening of the dollar, the lower prices, and advance export sales are all supporting these changes. Crush was raised 20 million bushels and seed and residual usage went up 5 million bushels. Like with corn, soybean supplies grew more than soybean usage, so 2020/21 ending stocks rose by 185 million bushels (to 610 million bushels) and the 2020/21 season-average price estimate dropped 15 cents, to $8.35 per bushel.
Losses due to adverse weather conditions such as hail, frost, freeze, wind, drought, and excess moisture are insurable losses under multiple peril crop insurance.
In 2020, some Iowa farmers, especially in Western Iowa, are suffering the extremes of drought. Losses due to drought are an insurable loss under multiple peril crop insurance. Due to drought conditions, crop insurance claims are expected to be large for losses resulting from both corn and soybean yield declines in addition to a drop in the harvest prices used to calculate indemnity payments.
Another dynamic added to the mix is yield loss due to chemical drift, which is not a covered loss under multiple peril crop insurance.
Question: How many of Iowa’s corn and soybean acres are covered by crop insurance?
Iowa farmers planted 23.4 million acres of corn and soybeans in 2020. Approximately 90% of those acres have been insured using Revenue Protection (RP) multiple peril crop insurance. These insurance policies can guarantee various levels of a percentage of the farm’s average yield times the higher of the projected price (average futures price in the month of February) or the harvest price (average futures price during the month of October), using the November 2020 futures contract for soybeans and the December 2020 futures contract for corn. Most farm operators carry a guarantee of their APH from 65% to 85% level of coverage. The projected prices (futures average prices in February 2020) were $3.88/bu for corn and $9.17/bu for soybeans, respectively.
Question: What should an insured farmer do once a crop loss is recognized?
Notify the insurance agent within 72 hours of the discovery of damage, but not later than 15 days after the end of the insurance period. A notice of loss can be made by phone, in writing or in person. Although drought loss is not immediate, farmers should contact their agent as soon as they feel a loss is present.
Continue to care for the crop using good farming practices and protect it from further damage, if possible.
Get permission from the insurance company, also referred to as your Approved Insurance Provider (AIP), before destroying or putting any crop to an alternative use.
Question: Who will appraise the crops and assess the loss?
The crop insurance company will assign a crop insurance adjuster to appraise the crop and assess the loss. The insured farmer must maintain the crop until the appraisal is complete. If the company cannot make an accurate appraisal, or the farmer disagrees with the appraisal, the company can have the farmer leave representative sample areas. These representative sample areas of the crop are to be maintained – including normal spraying if economically justified – until the company conducts a final inspection. Failure to maintain the representative sample areas could result in a determination that the cause of loss is not covered. Therefore, no claims payment to the producer.
Once appraised the crop can be released by the company to be:
Destroyed – through tillage, shredding, or chemical means; or
Used as silage or feed.
Question: Once released, may I harvest my corn as silage for feed?
Check with your crop insurance company. In a county where corn can be insured as grain only, the corn will be released, or harvested as silage or sold as feed. Any grain will be counted as production for your claim. In a county where corn can be insured as silage, the harvested silage will be counted as production.
Question: What is the difference among insurance units?
Many farmers have chosen to insure their crops using enterprise units in order to pay less expensive insurance premiums. Under enterprise units, losses are calculated by crop by county. Therefore all the corn planted by a farmer in a given county would be added together to determine a loss. If a farmer has chosen optional units, then losses are calculated by crop by field unit. Premiums are typically higher if choosing optional units but a good yield on one field does not cancel out the loss on another field.
Question: When will farmers be receiving indemnity payments for their crop insurance losses?
Adjusters will be busy with the increase in losses in areas that have been impacted. As soon as you are finished harvesting notify your insurance agent and an adjuster will be assigned to you. Insurance companies cannot defer payments to the next tax year, but claims adjusted late in the year may not be paid out until the following year.
Question: What is the maximum price that the harvest time indemnity price (average October futures price) can reach?
The maximum harvest indemnity price values for 2020 are twice of the projected price; or $7.76/bushel for corn and $18.34/bushel for soybeans, respectively.
Question: Can indemnity payments be deferred for income tax purposes until 2021?
A taxpayer using the cash method of accounting claims the income in the year they receive the payment. The insurance company will send the insured a 1099 showing the amount and tax year to report the income.
A farmer, if they are using the cash method of accounting for reporting taxes, can elect to defer crop insurance payments if the loss is due to yield loss and they normally sell more than 50% of their crop the year following harvest. They cannot defer any loss that is due to price loss. Farmers that are using the accrual method of accounting for reporting taxes cannot defer crop insurance payments.
Question: Will I be asked to provide proof of my bushels this year for crop insurance verification?
All multiple peril crop insurance users are subject to production verification on a random basis. If a claim that exceeds $200,000 is filed for an individual crop and policy, verification of production is automatically required by regulation. This also requires a 3-year audit.
Contributed by Melissa O’Rourke, B.S., M.A., J.D. Farm and Agribusiness Management Specialist, Iowa State University Extension and Outreach, email@example.com
The farm economy is cyclical in nature, and in recent years has been impacted by one crisis after another.Agricultural credit conditions are described as having an overall decline which deepened in the first quarter of 2020 after some signs of improvement in the fourth quarter of last year. On the ISU Extension and Outreach Farm Management team, we hear from farmers and agricultural lenders about rising debt levels, cash flow issues and farm financial stress.
Farm financial stress can generally be thought of as an inability to meet debt service payments – both principal and interest. The severity of the financial stress depends on the debt level, interest rates (cost of the debt), and the farm income available for debt service. In recent years, low interest rates and sufficient farm income have kept financial stress at bay for many operations. Nevertheless, we continue to hear from producers and lenders about elevated levels of financial stress on the farm.
Confronting a tough financial situation is a challenge for anyone. It’s not unusual for producers to procrastinate and avoid facing the problem. Just hoping things will get better is not a solution – but many folks do not know where to start.
Following are several suggested actions to get started in figuring out how to proceed. This list of tactics to consider are not necessarily in a particular order – but presented as possible approaches to move forward and address the problems, depending on the farm business and family circumstances.
Tactic One: Seek support for stress management
Financial difficulties can cause significant emotional stress. Start by talking to someone. Do not be embarrassed to reach out to family members, friends, or professionals who can just listen. A good place to start may be the Iowa Concern Hotline via the website (which includes e-mail or chat) or the toll-free number: 1-800-447-1985. Since 1985, the Iowa Concern Hotline has been available 24/7 with trained counselors who can provide access to an attorney for legal education, stress counselors, information and referral services for a wide variety of topics.
Tactic Two: Gather debt and income information.
While good accounting would direct us all to have current financial documents – starting with a balance sheet (or net worth statement) and income statement – folks who are facing strained finances may have avoided record-keeping tasks. Start by gathering all debt information – both for the farm as well as personal debt (vehicles, credit cards, personal spending). It’s useful to have an online or computer-based accounting system, but do not hesitate to get back on track with a pad of paper or the back of a pizza box. Write it down – balance owed, to whom, and when the next payment is due (monthly, quarterly, annually) and the payment amount. After starting this process, explore the financial planning resources available on the Ag Decision Maker website. Guidance is available on how to build financial statements, including information on understanding and building net worth statements (the balance sheet) and farm income statements.
Next, estimate available expected income during the next twelve-month period. Again, include all possible income from on-farm and off-farm sources.
Part of this information gathering should include collecting any written communication or notices that may have been received from lenders. The act of compiling this financial data is a first step in facing the extent of the problems faced. Defining the problem may help stimulate ideas for solutions. And, to get help from advisors, a fairly-accurate picture will be necessary.
Tactic Three: Evaluate the assets
Again, an updated balance sheet would enumerate and place values on current, intermediate and long-term assets. But think about assets that may not appear on the balance sheet. Go over the most current balance sheet available, and add any assets that might not appear there. Include farm and personal assets. Are there items of equipment no longer needed? Is there a motor home no longer in use? Is there a land parcel that is no longer an essential part of the farm operation? Make conservative, best estimates of the value, and consider whether the asset could be used to generate cash.
Tactic Four: Outline possible plans, identify advisors
Have a personal brainstorming session. This is not intended to be a final, detailed plan, but an outline of possible strategies going forward. To assist, think about who might be able to help identify strategies. This might be the farm bookkeeper, accountant, tax or other financial advisor, a personal lawyer, an insurance professional – someone that can help with financial troubleshooting to focus on where solutions may lie. There may be other respected people with good judgment and a set of clear eyes who could give a fresh perspective on the operation. These are the kinds of people to sit down with, talk things through, and see what ideas might arise.
Tactic Five: Cash generation and belt tightening
Basically, financial problems arise when income exceeds expenses – due to an assortment of causes. Contemplate assets which could be used to generate cash, either through sale or lease—but remember there may be tax consequences of selling depreciated assets. Is there custom work or other services that would raise some income? Explore off-farm employment of one or more household members. Consider both farm business and personal or family-living expenses. Eliminate or reduce discretionary spending. Medical insurance is a significant expense which may be decreased via off-farm employment. Ideas on how to stretch cash flow can be found on the Ag Decision Maker website.
Tactic Six: In-depth farm financial analysis
Iowa State University Extension and Outreach offers a free farm financial planning and analysis program. This service consists of confidential financial counseling, a computerized analysis of the farm business, and possible referral to other useful programs or services. The program uses FINPACK software to provide a more complete picture of the farm’s financial situation. An in-depth plan with options helps a farm operator work with lenders to make decisions for the future. Trained extension associates meet with farm operators to discuss the results of the analysis as well as the impacts of possible changes. The service is offered at no charge.
Tactic Seven: Communicate with bankers, lenders, creditors
Avoidance is not a winning strategy, and it’s common for those facing financial stress to sidestep those to whom money is owed. Make a list of set times to visit in-person about the situation. Bring along the data that has been gathered – accompanied by an outline of proposals to address the problems. Before the meeting, review guidelines of good communication skills. If communication has become strained, consider bringing along one of the other advisors or professionals that may have assisted in brainstorming or analyzing the situation. A third party may be able to serve in a facilitation role, at least to take some of the stress out of the conversation. As part of the communication process, openly share ideas for cash generation or expense reduction. There is the possibility some aspects of the farm operations have become unprofitable and should be eliminated. Talk about ideas for debt restructure – perhaps debts that could be consolidated, or stretched out to reduce payments. In this regard, it may be worthwhile to talk to other lenders who might have a different view of the future potential of the farm business.
Tactic Eight: Professional advice on debt restructure or bankruptcy
Depending on a wide range of factors, it may be wise to seek professional advice on the need for debt restructuring. Iowa State University’s Center for Ag Law and Taxation (CALT) provides a number of resources and articles that can facilitate the thought process. In particular, there is an article on how to find an attorney who has expertise in this field and can provide solid advice on next steps.
Tactic Nine: Explore mediation services
Mediation is a process where parties meet with a neutral third-party who assists in identifying solutions to a problem or dispute. Information is available about agricultural mediation services at the CALT website, including a video about how mediation works. In Iowa, mediation may be a voluntary process – but it may also be mandatory. Iowa Mediation Service is a non-profit organization founded in 1985 and dedicated to solutions for farmers, families, and anyone who may find themselves in need of a dispute resolution expert. There is even a short video that explains agricultural mediation services. If the farm’s financial situation has reached a point where professional mediation services are needed, this is an excellent resource available to Iowa farmers.
Tactic Ten: Contemplate retirement or liquidation
For some folks – depending on age, health, family situation, and many other circumstances – it may be time to consider retirement or partial to full liquidation. Retirement from farming can lead to a new phase of life which could result in new accomplishments. Lessons learned in farming can be a basis for new experiences. While some approach retirement or liquidation with apprehension and a sense of uncertainty, many later report a feeling of relief and freedom to move on to other opportunities and interests. Of course, it is important to consult with a range of advisors regarding tax consequences and obtain guidance on managing future life plans.
In summary, these tactics are offered to provide possible actions for farm families facing financial issues. Consider each action and move forward. Most importantly, avoid isolation at times of stress and work to surround yourself with people who can listen and perhaps provide encouragement or assistance.
If you are a farmer or rancher who faced price declines and additional marketing costs due to COVID-19, you have until August 28, 2020 to file for the Coronavirus Food Assistance Program (CFAP) with your local USDA Farm Service Agency (FSA) office.
The CFAP application form AD-3114 is available online for producers who prefer to fill it out manually. However, according to the Paperwork Reduction Act, filling out the AD-3114 form is estimated to take one hour per response. In order to streamline the CFAP application in times of social distancing and phased reopening of businesses, the USDA has published a CFAP Payment Calculator that serves multiple purposes:
helps producers organize the information needed to apply for CFAP;
informs producers of the initial payment and the potential for subsequent payments;
automatically populates a printable version of the AD-3114 form; and
saves in-person or on-the-phone consultations with FSA staff.
This article provides a step-by-step guide to using USDA’s CFAP Payment Calculator. You will need a computer with internet access and spreadsheet software. In order to print the completed AD-3114 form, you will also need a printer connected to the computer.
Follow these steps to calculate your CFAP payment and print the AD-3114 form:
Open the Calculator from the saved location. A message highlighted in yellow might appear at the top of the spreadsheet asking your permission to “Enable Editing.” Press the gray button with the legend “Enable Editing” to operate the spreadsheet.
If a message highlighted in red appears at the top of your screen indicating “Blocked Content”, then proceed as described in Step 4. If no such message appears, go to Step 5.
Close the file in the spreadsheet software. To allow your computer to run the program embedded in the Calculator (called “Macros”), use the Windows File Explorer (PC computer) or Finder (Mac computer) to browse to the saved file in your computer, click the second mouse button on the file name to access its Properties, locate the “Unblock” option at the bottom, check the Unblock box, and press OK. Then open the file in the spreadsheet software and click on the “Enable Editing” button. The Calculator should be operational.
The spreadsheet is organized into 5 tabs, but you will enter data only on the “Data Entry” tab, and only in the cells highlighted in light-yellow. You only need to fill out the sections relevant to your operation: Dairy, Non-Specialty Crops, Livestock, Aquaculture/Nursery, and Specialty Crops.
Fill out the top section with State, County, Name, and Address.
If you produced Dairy in 2020, fill out Part 1: enter the total pounds of production, including any dumped milk, in January, February, and March 2020. If you do not produce Dairy, leave Part 1 blank.
If you produced corn, soybeans, oats, or other Non-Specialty Crops (including Wool) in 2019, fill out Part 2: in each row, select a crop from the drop-down menu; enter the 2019 total production across all your farms; and the 2019 total production not sold as of January 15, 2020. If your crop is not listed in the drop-down menu of Part 2, then see if it is listed in the drop-down menu of Part 5. If your crop is not listed in Parts 2 or 5, then it is not eligible for CFAP. If you did not produce Non-Specialty Crops in 2019, leave Part 2 blank.
If you owned Livestock in 2020, fill out Part 3: in each row, select a livestock category; enter the total sales between January 15, 2020, and April 15, 2020 for owned inventory as of January 15, 2020, including any sales of offspring from owned inventory; and the highest inventory between April 16, 2020, and May 14, 2020. If you did not own livestock in 2020, leave Part 3 blank.
If you were an Aquaculture/Nursery farmer in 2020, fill out Part 4: in each row, enter the name of the commodity that suffered value loss; the total value of sales from all farms between January 15, 2020 and April 15, 2020; and the total value of marketable inventory from all farms as of April 15, 2020. Note that reported losses in Part 4 are not included in the Calculated Initial Payment reported by this Calculator. USDA is continuing to review data associated with the impact of COVID-19 on value loss crops. Specific value loss crops that meet the eligibility criteria will be identified in the future. If you were not an aquaculture/nursery farmer in 2020, leave Part 4 blank.
If you produced Specialty Crops in 2020, fill out Part 5: in each row, select a crop from the drop-down menu; enter the total value of production sold between January 15, 2020, and April 15, 2020; the total volume of production shipped but not sold between January 15, 2020 and April 15, 2020; and the total acres with production not shipped or sold between January 15, 2020 and April 15, 2020. If your crop is not listed in the drop-down menu of Part 5, then see if it is listed in the drop-down menu of Part 2. If your crop is not listed in Parts 2 or 5, then it is not eligible for CFAP. If you did not produce Specialty Crops in 2020, leave Part 5 blank.
If the CFAP application is for a corporation, a limited liability company, or a limited partnership seeking an increase in the per-person payment limitation, fill out Part 6: enter the names of members/partners or stockholders who provide 400 hours or more of active personal labor or active personal management, or combination thereof, to the farming operation. If 2 or 3 members of the corporation, LLC, or LP are listed in Part 6, the payment limit will be increased from $250,000 to $500,000 or $750,000, respectively. If the application is not for a corporation, LLC, or LP, leave Part 6 blank.
Revise for completeness and correct any mistakes. Check for typos, and make sure you are not leaving out any eligible commodity in the Data Entry tab.
Check your Calculated Initial Payment by clicking on the orange button “GO TO ESTIMATED PAYMENT REPORT” in the top left part of the Data Entry tab. This action will take you to the tab called “ECPR”, and the Calculated Initial Payment amount will appear in the box at the top of the tab. The Calculated Initial Payment equals 80% of the Estimated Gross Payment before limitations and other reductions. For aquaculture/nursery farmers, the Calculated Initial Payment does not include value losses reported in Part 4 (see Step 10).
Your Initial Payment will be the lesser of the Calculated Initial Paymentor $200,000 per individual (equivalent to 80% of the $250,000 payment limit per individual). For corporations, limited liability companies, and limited partnerships, the limit is 80% of the payment limitation calculated in Step 12. You can print the calculations in the “ECPR” tab by clicking on the red button at the top of the tab called “PRINT ECPR.” Go back to the “Data Entry” tab by clicking on the blue button at the top called “GO TO DATA ENTRY”.
Save the file for future reference: go to File menu in your spreadsheet software, and select the Save command.
Print the AD-3114 form by clicking on the yellow button “PRINT AD-3114” in the top left part of the “Data Entry” tab. Depending on the number of eligible commodities you produced, some of your commodities might not show up in the printed AD-3114 form. In that case, click on the light-orange button “PRINT AD-3114 Continuation.” Revise the print out for accuracy, sign, and submit the CFAP application to your local FSA Office.
Any part of your Calculated Initial Payment (see Step 14) below 80% of your payment limit and above YourInitial Payment (see Step 15) might trigger subsequent payments at a later date.
Note that the present article was developed for USDA’s CFAP Payment Calculator Version 1, last accessed on May 29, 2020. The USDA might update the Calculator without prior notice and render some or all parts of this information outdated.
The USDA announced the producer signup for the Coronavirus Food Assistance Program (CFAP) allocated by Congress through the CARES Act that will begin on Tuesday, May 26, 2020. That enrollment will be through your local Farm Service Agency (FSA) office with additional CFAP details and the enrollment process at https://www.farmers.gov/cfap.
The $16 billion available for CFAP includes direct relief for farmers, with $9.6 billion for the livestock industry ($5.1 billion for cattle, $2.9 billion for dairy, and $1.6 billion for hogs). It has $3.9 billion for row crop producers, $2.1 billion for specialty crop producers, and $500 million for other crops.
USDA officials are urging farmers to begin the paperwork process using an online calculator available once sign-up begins. These payments will be coupled with actual production and based on losses due to price declines and supply chain disruptions from COVID-19. To qualify for a payment, a commodity must have declined in price by at least 5% between January and April 2020.
Producers will be paid based on inventory subject to price risk held as of Jan. 15, 2020. A single payment will be made based on 50% of a producer’s 2019 total production or the 2019 inventory still not sold as of Jan. 15, 2020, whichever is smaller. This amount for each crop will be multiplied by 50% and then multiplied by the commodity’s applicable payment rates featured below:
Producers must provide the following information as a part of their CFAP application:
Total 2019 production for the commodity that suffered a 5% or more price decline, and
Total 2019 production that wasn’t sold as of Jan. 15, 2020.
This video demonstrates how the new CFAP application form can be downloaded, completed, signed, dated, and then mailed or e-mailed to your local FSA office.
Producers should make an extra copy of this completed CFAP application form for their records. Attach any proof of how you determined the 2019 total production by crop and the 2019 production that was “not sold” as of Jan. 15, 2020.
The CFAP program will be open to all producers, regardless of commodity or size. Some farmers may not have traditionally worked regularly with FSA. Once signup begins, some producers may want to contact their local FSA office to schedule an appointment. In that case, FSA staff will help those producers complete portions of form CCC-902 Farm Operating Plan. Other forms will also be needed to apply for CFAP, although if you’ve dealt with FSA before, it’s likely they already have these on file.
These forms include:
CCC-901—Identifies members of a farm that is a legal entity. Member information will be completed by legal entities and joint organizations to collect member names, addresses, tax ID numbers, and citizenship status.
CCC-941—Reports your average adjusted gross income for programs where income restrictions apply.
CCC-942—This certification reports income from farming, ranching, and forestry for those exceeding the adjusted gross income limitation.
AD-1026—Ensures compliance with highly erodible land conservation and wetland conservation.