Heavy rains have saturated fields, forcing producers to make tough decisions

Contributed by Steve JohnsonFarm Management Specialist, Iowa State University Extension, sdjohns@iastate.edu, 515-957-5790

Farmers should have kept accurate records of planting dates this spring. Write down the dates you planted that crop, number of acres and reference the farm name or number. “Good planting records are key for crop insurance coverage purposes and for completing the annual USDA’s Farm Service Agency acreage report prior to July 15,” notes Johnson.

Q: What should a producer do if his/her planted crops are affected by flooding, wind or hail?

A: Notify your crop insurance agent or insurance carrier within 72 hours of the loss. The agent’s company will assign a crop insurance adjuster that will work directly with the insured.

Q: Can I destroy the damaged crop and prepare to replant.

A: It is important not to destroy a field with crop damage until an adjuster has approved/released the field for other cropping or potential tillage practices. Listen carefully and document the adjuster’s recommendations. Work with your crop insurance agent regarding potential indemnity payments and continue “good farming practices” as required to maintain crop insurance coverage.

flooded fieldQ: What if the field remains underwater for an extended period of time?

A: If your field is under water for an extended period of time let your agent know.  The agent can help file a notice of damage and have the insurance company take a closer look.

Q: Isn’t there a 20-20 rule for crop insurance coverage?

A: Yes, to qualify for an indemnity payment under the replanted, delayed or prevented planting provisions, a minimum area of 20 acres or 20% of the insured unit, whichever is smaller, must be affected.

A unit could be a field or a farm – if you elected an optional whole farm or basic unit. An enterprise unit could also have been elected, which reflects all the corn acres or all the soybean acres grouped together in a particular county.

Q: I chose enterprise units to save on premium. Can I now change to basic or optional units because flooding has damaged my planted crop acreage on a few fields?

A: Because unit structure impacts the premium cost, and in the case of enterprise units, also the premium subsidy, the policyholder’s decision to elect enterprise units is made no later than the sales closing date to reflect the binding contractual agreement between the two parties on or before March 15, 2018.

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Prevented Planting FAQ for 2018

Steve Johnson photoWright, GaryReviewed by Gary Wright, Extension Farm Management Field Specialist, gdwright@iastate.edu

Originally Contributed by Steve Johnson, Extension Farm Management Field Specialist

Question: When is prevented planting available?

Answer: Prevented planting must be due to an insured cause of loss that is general in the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant when other producers in the area were planting will result in denial of the prevented planting claim.

There’s also the 20/20 Rule–a minimum of 20 acres or 20% of the unit must be affected. Total acres of planted and prevented planted cannot exceed the total cropland acres. Prevented planting claims must be filed with your crop insurance agent by June 28 for corn and July 13 for soybeans. Prevented planting acres must be reported on the FSA Form 578 acreage report. That deadline in Iowa is July 15, 2018.

Question: When is prevented planting not available?

Answer: On ground that is insured through a New Breaking Written Agreement; Conservation Program Reserve land—first year out of CRP; on ground where a pasture or forage crop is in place during the time of planting; when other producers in the area are able to plant; on county-based crop insurance area policies—such as AYP & ARPI.

Question: How much do I get paid for prevented planting?

Answer: 55% of the initial revenue guarantee on corn and 60% on soybeans.

  • For corn, an example of how it’s figured: 190 bushels APH x 80% x $3.96/bu = $602 initial revenue guarantee  x 55% = $331/acre PP payment
  • For soybeans, an example is 55 bushels APH x 80% x $10.16/bu = $447 initial revenue guarantee x 60% = $268/acre PP payment
  • Note that payments for prevented planting use the projected price (new crop futures price average in February).

Question: How are eligible acres for prevented planting determined?

Answer: The insurance company considers each of the insured’s crops in each county. They look at the maximum number of acres reported for insurance and certified in any of the four most recent crop years. The acres must have been planted in one of the last three crop years.

What happens if you are prevented from planting and there are not enough eligible acres for the crop being claimed? When the insured runs out of acreage eligibility for one crop, the remaining prevented planting acres will be “rolled” to another crop, such as corn to soybeans.

Question: What happens to my APH—actual production history– if I take prevented planting?

Answer: The insured farmer who receives prevented planting on a crop does not have to report the actual yield for the year. Generally, prevented planting will not impact the APH yield in future years, unless a second crop is planted on prevented planting acres.

Question: What happens if the first crop is prevented planting, but the second crop is planted?

Answer: If the second crop is planted it MUST be insured if there was insurance for that crop elected on or before March 15, 2018. The second crop must have been planted AFTER June 25 for corn and July 10 for soybeans. If the insured farmer plants a second crop they will still receive 35% of the indemnity for the prevented planting crop and pay only 35% of the premium.

Planting a second crop on prevented planting ground affects the following year’s APH:

  • 1st Crop – you get 60% of the approved yield (190 bu/A APH X 60% = 114 bu/A)
  • 2nd Crop – actual yields are used for APH

Question: What will crop insurance adjusters need to do for prevented planting claims?

Answer: Visually inspect all prevented planting acres to determine:

  • Acres are within 5% of what was on the acreage report
  • Whether the acres are left idle, or whether a cover crop or second crop has been planted
  • What the cause of loss was, and if it is general in the area
  • Determine eligible acres
  • Roll acres to other crops if insured is short of eligible acres for reported prevented planting crop

Question: What are the deadlines for filing prevented planting in Iowa?

Answer: These dates vary by state, but tend to be 3 days after the last day of the late planting period.

  • The deadline for filing prevented planting with your crop insurance agent is June 28 for corn and July 13 for soybeans
  • Acreage reporting deadline is July 16th. (This date is usually July 15th but this year the date falls on a Sunday)
  • Prevented planting acres listed on your acreage report (FSA Form 578) should match the information provided your crop insurance agent in order to qualify for a full indemnity payment
  • Work with your crop insurance agent well in advance of these dates regarding a prevented planting claim and whether a cover crop or a 2nd crop will be planted.

Question: To qualify for enterprise units on my crop insurance policy, I have to have at least the smaller of 20 acres or 20% of my planted acres in two or more different township sections.  If I have to leave some of my acres unplanted (prevented planting), will they still count toward my eligibility for enterprise units?

Answer: Only planted acres are considered when determining eligibility for enterprise units.  For example, a farm with 200 acres each in two sections would normally qualify for enterprise units. However, if fewer than 20 acres are planted in one of the sections, the farm would no longer qualify.  Possible increases in crop insurance premiums due to a change in unit designation should be considered when deciding whether or not to file for a prevented planting claim on some acres.

Question: If I take prevented planting on some of my fields and plant a cover crop, when can I harvest or graze the cover crop?

Answer: If you plant any kind of cover crop and expect to receive a crop insurance indemnity payment for prevented planting, you cannot harvest or graze those acres until after November 1.

ISU Extension Resources

More details can be found in the publication “Delayed and Prevented Planting Provisions” on the Iowa State University Extension and Outreach Ag Decision Maker website. An electronic decision spreadsheet is also available to help analyze alternative actions. Producers should communicate with their crop insurance agent before making decisions about replanting or abandoning acres.

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Despite Weather Issues, Yield Estimates Better Than Expected (8/10/17)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Chad Hart imageThe first official tour of the nation’s fields this summer resulted in better crop yield and production estimates than the market was expecting. The national corn yield estimate came in at 169.5 bushels per acre, down 1.2 bushels from trend, but that was still a couple of bushels above trade expectations. If realized that points to a 14.15 billion bushel corn crop, which would be the 3rd largest ever, continuing a string of large corn crops. The soybean yield estimate was 49.4 bushels per acre. That is 1.4 bushels above trend and sets up this year’s crop to exceed last year’s. So bushels and bins would continue to overflow with these estimates.

On the demand side, news was mixed. Soybean export projections were raised 75 million bushels, but domestic soybean crush was lowered by 10 million. Corn feed usage and exports were reduced by 25 million bushels each. Combined, the corn adjustments shrank 2017/18 ending stock projections by 52 million, but stocks are still projected above 2.25 billion bushels. For soybeans, ending stock projections rose by 15 million bushels, to 475 million. For prices, USDA held their price range for corn, leaving the midpoint at $3.30 per bushel. While for soybeans, the price range tightened a bit, losing a bit more than the high end than the low, with the midpoint now at $9.30 per bushel.

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Pricing drought damaged silage

Contributed by William Edwards, extension economist

Corn that has suffered severe drought damage is sometimes harvested as silage instead of as grain. It can still have significant feed value if harvested at the right stage. See the article “Alternatives for Drought-damaged Corn—Grain Crop or Forage” for harvesting recommendations. Any damaged acres that are covered by crop insurance should be viewed by an adjuster and released by the insurance company before harvesting takes place.

Grain producers may be willing to sell to the corn standing in the field, to be harvested by the livestock producer or a custom operator. The buyer and the seller must agree on a selling price.  The seller would need to receive a price that would give at least as good a return as could be received from harvesting the corn as grain. The buyer would need to pay a price that would not exceed the feeding value of the corn.  Within that range the price can be negotiated.

One ton of normal, mature standing corn silage at 60% to 70% moisture can be valued at about 10 times the price of a bushel of corn. For a $3.50 corn price, a ton of silage would be worth about $35 per ton. However, drought stressed corn may have only 5 bushels of grain per ton of silage instead of the normal 6 to 7 bushels. A value of about 9 times the price of corn would more appropriate. For silage with little grain content, a factor of 8 times the price of corn can be used.

If the crop is sold after being harvested and transported, those costs must be added to that value, typically $5 to $10 per ton, depending on whether it is done by a custom operator or the buyer, and the distance it is hauled. A buyer would only consider the variable costs for harvesting and hauling, whereas a custom operator would need to recover fixed costs, as well.

More information on valuing forage in the field, including an electronic spreadsheet for estimating a value for corn silage, for both the buyer and the seller, is available from Ag Decision Maker.

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Videos provide financial tips, explain mediation

Chad Hart, ISU Extension Grain Marketing Economist, highlights new Iowa State University Extension and Outreach videos for today’s current farm financial situation.

With commodity prices low and projected to stay that way over the next couple years, farmers have begun to feel the pinch in their pocketbooks. This has made managing the finances of the farm that much more important. With this in mind, Iowa State University Extension and Outreach has released two videos that deal with the current farm financial situation and what can be done to alleviate financial pressure.

I host the first video, titled Tips for Managing Margins. It offers ideas for how to weather the next few years of low crop prices like protecting capital, reviewing production costs and renegotiating loans.

The second video, called Understanding Farm Mediation, was created in partnership with Iowa Mediation Service and is about the process of mediation. Mediation is an option available to farmers as they work with their creditors to find a mutually beneficial solution to a delinquent secured agricultural debt of $20,000 or more.

This short video provides tips to help farmers better understand what mediation is and when it may be necessary. It describes the process and provides a step-by-step guide on how to prepare for mediation.

While mediation is available should it be needed, ISU Extension and Outreach also provides these financial resources to help farmers create a financial plan for their operation:

  • The Iowa Concern Hotline provides free legal information to both rural and urban Iowans. Services are available 24 hours a day, 7 days a week by calling 1-800-447-1985.
  • The Center for Agricultural Law and Taxation provides information about the application of developments in agricultural law and taxation.
  • Farm Financial Associates are available to provide a no-cost look at a farm’s complete financial situation.
  • The Beginning Farmer Center helps inform and support those who are getting started in farming. It also works with established farmers on succession planning for when they leave the industry.

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Consider Use of a Basis Contract to Market Corn

Steven D. Johnson, Ph.D., Farm Management Specialist, Iowa State University Extension and Outreach, shared marketing tools and tips for the 2016 crop.

Johnson_Steve_smKeep an eye on your local basis to see if you should continue to store or price some of your corn. Farmers who have unpriced corn might consider using a basis contract to market at least a portion of those bushels. An attractive basis in late December and the need for cash will be the main drivers for farmers to move some of those stored bushels. Most of the cash price movement in late fall and early winter months typically comes from better basis being offered as farmers slow grain movement. In addition, two 3-day weekends in late December increase the odds of potential “quick ship” bids to meet processor demands for additional bushels.

Seasonal futures price trends indicate corn futures prices don’t typically rally in the fall and winter months. That’s because most everything is known about the Northern Hemisphere feed grain crops by then, and that’s where nearly 85% of the world production takes place. However, most farmers will be reluctant to give up ownership of bushels at sub-$3.50 per bushel cash corn prices.

Farmers need to pay attention to the costs of ownership

Chart of storage costs, on farm vs. commerical
Cost of 2016 Corn Ownership

Compare the cost of storing corn at a commercial elevator to your own on-farm storage costs. The ISU Extension and Outreach Iowa Commodity Challenge website can show you how. It uses the following 2016 crop assumptions: cash corn is valued at $3.11 per bushel at a central Iowa elevator when about 50% of the Iowa harvest was complete. Interest is accruing on stored grain at a rate of 5% or 1.75% if the USDA marketing loan is used. On-farm storage is 1 cent per bushel per month while commercial storage is 16 cents for the first 90 days and 2.8 cents per bushel for each month thereafter. Note the cash prices (dotted line) are below the typical cost of corn ownership as of late November.

Cost of 2016 Corn Ownership

Once you store corn, imagine how much cash prices will need to improve each month to justify storage. Commercial storage could easily be 3 to 4 times more expensive per bushel than on-farm storage costs. The cash price received for commercially stored bushels will also reflect the basis offered at that commercial storage facility. If history is any indication, the likelihood of selling those cash corn bushels above the cost of storage probably means a significant futures price rally is needed (more likely in the spring months)and improvement in the basis.

How does a basis contract actually work?

Most grain merchandisers offer a marketing tool called a basis contract. A farmer delivers cash corn and eliminates storage costs and basis risks. The merchandiser buys a corn futures contract (goes long) in a deferred month on behalf of the farmer. The merchandiser will likely charge a small service fee of 1 to 2 cents per bushel subtracted when the basis contract is settled, likely in the spring.

Upon delivery of the cash bushels, a farmer can collect 70% to 80% of the corn’s value. The merchandiser holds the remaining 20% to 30% balance of the cash value to make potential margin calls should futures prices decline. Any excess funds minus the 1- to 2-cent service fee are returned to the farmer upon settling the basis contract.

Eliminating storage costs and basis risk

The farmer needs to convey to the merchandiser a date and price at which the farmer wishes to have this long futures position lifted. Consider being “long” the May 2017 or July 2017 corn futures contracts when using a basis contract to increase the chance of benefiting from a spring futures price rally.

Discuss risks and rewards with your merchandiser when you’re initiating cash sales and basis contracts. Be sure you understand the risk of being “long” futures and the flow of cash funds involved in the transaction. The farmer isn’t able to take advantage of the carry offered in the futures markets with a basis contract. However, there are several advantages a basis contract provides. Those include providing cash to help pay expenses and meet your farm operation’s cash flow needs, elimination of storage costs and basis risk, and minimizing the concern for on-farm stored corn quality.

Take the Iowa Commodity Challenge and learn new marketing skills

The website featuring the Iowa Commodity Challenge has related crop marketing information including 14 videos and a 65-page Marketing Tools Workbook.

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Iowa Commodity Challenge Helps Improve Crop Marketing Skills

Steve Johnson, ISU extension field specialist, shares details on the Iowa Commodity Challenge, a program developed with Chad Hart, ISU extension economist and Ed Kordick, Iowa Farm Bureau, offers simulation using real world prices to help explore various marketing strategies.

Steve Johnson, ISU ExtensionThe Iowa Commodity Challenge is an educational series developed by Iowa State University Extension and Outreach and the Iowa Farm Bureau that reflects real world crop markets so users can explore how various tools work – without putting their actual money on the table.

The materials, hosted on the Ag Decision Maker website, include 14 instructional videos explaining various aspects of marketing. Three new videos – Successful Market Planning, Using Crop Contracts and Working with Your Grain Merchandiser – have been recently added.

Also included is an updated 65-page Marketing Tools Workbook and a variety of learning activities. The workbook provides the basics on marketing tools as well as setting personal marketing goals and resources participants can use on their own farm operation.

Participants can choose to participate in an online grain market simulation game to help improve marketing skills. The game includes using futures and ag options as marketing tools, and participation can also help users improve strategies to sell cash corn and soybeans.

Iowa Commodity Challenge partners“It gives players a chance to look at commodity markets and how they work over the course of several months,” said Steve Johnson, farm management specialist with ISU Extension and Outreach. “The simulation reflects what is going on in the real world markets so participants are able to try out marketing strategies in a setting where they can explore how these various marketing tools work without risk.”

As a part of the online grain market simulation game; participants are given 75,000 bushels of corn and 25,000 bushels of soybeans stored commercially to market before spring using March 2017 corn and soybean futures. Storage costs will accrue on bushels as if they were in the bin (six cents per bushel per month).

Crop marketing is difficult and the stakes are high. Participating in the Iowa Commodity Challenge will provide greater understanding of marketing tools available and aid in making decisions in the noisy world of crop marketing.

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Farm Bill Safety Net Payments Provide Producers Small Cushion

ajsmplastina_alejandro_2014Alejandro Plastina, ISU Extension Economist, and Ann Johanns, Extension Program Specialist, provide an explanation of the data used in calculating 2015 ARC-CO payments in Iowa.

Final data on 2015 county level yields was recently released by the USDA Farm Service Agency. This is the final information needed for calculating payment rates under the Agriculture Risk Coverage-County (ARC-CO) program.

The Marketing Year Average (MYA) prices for the marketing year starting Sept. 1, 2015 and ending Aug. 31, 2016 were $3.61 for corn and $8.95 for soybeans. The payments released by the USDA Farm Service Agency starting in October 2016 are for crop acres enrolled during the 2015 crop year.

Payments under the 2014 Farm Bill are tied to the base acres on a farm and are not influenced by the crop grown in the payment year.

ARC-CO Payments

2015 ARC-CO payments on corn base acres (payments rounded to nearest dollar)
2015 ARC-CO payments on corn base acres (payments rounded to nearest dollar)

ARC-CO payments by base acre for corn and soybeans are shown in Figures 1 and 2. Under the ARC-CO program, producers receive payment on 85 percent of their base acres. This 15 percent reduction is factored into the values seen in the related figures. Furthermore, a 6.8 percent deduction is applied due to the federal government’s sequestration of the budget. Seven counties (Appanoose, Decatur, Henry, Lucas, Marion, Monroe and Washington), all located in the south central and southeast portion of the state, will not see a payment for corn or soybean acres.

Eight counties (Clarke, Jefferson, Keokuk, Pottawattamie, Ringgold, Van Buren, Warren and Wayne) will receive a payment on soybean acres and not on corn. Another 26 counties will receive a corn payment and no soybean payment (Adair, Bremer, Buena Vista, Calhoun, Carroll, Cerro Gordo, Clay, Davis, Dickinson, Emmet, Floyd, Franklin, Guthrie, Hancock, Howard, Humboldt, Kossuth, Madison, Mitchell, Monona, Palo Alto, Pocahontas, Sac, Winnebago, Worth and Wright). Base acres enrolled in ARC-CO in the remaining fifty-eight counties will receive a payment at some level for both crops.

soybeanpayments2016
2015 ARC-CO payments on soybean base acres (payments rounded to nearest dollar)

PLC Payments

With the 2014 Farm Bill, Iowa producers had two options to choose from, ARC-CO or Price Loss Coverage (PLC). The PLC program provided a safety net for producers should the MYA prices be below the set reference prices of $3.70 for corn and $8.40 for soybeans. No payments were seen in Iowa under the PLC program for 2014, but a small payment will be received for corn base acres enrolled in PLC for 2015. The payment per bushel will be $0.07 (after 6.8 percent sequestration) and based on yield information at the farm level. Producers were given the option to update their yield information with FSA during program sign-up.

Statewide Payments

The average ARC-CO payment per base acre on corn was $33.51 and $15.68 for soybean acres in Iowa. With over 22 million base acres in the state enrolled in ARC-CO or PLC, estimated payments for Iowa producers under ARC-CO for the 2015 marketing year is approximately $646 million with another $3.8 million going towards corn base acres enrolled in PLC.

More information on the 2014 Farm Bill, including decision tools to see detailed calculations of payments by county, are available through the Ag Decision Maker website. Maps of payments can be found through the Center for Agricultural and Rural Development Farm Bill mapping tool. Projections for 2016/17 payments are updated regularly as information is released by USDA FSA.

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Yield Adjustments, but Still Record Crops (10/12/16)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbUSDA updated its projections for the 2016 corn and soybean crops. And while the national corn yield is reduced, the national soybean yield is increased and record production is still on the books for both crops. The national corn yield is set at 173.4 bushels per acre, down a bushel from last month, but still 2.4 bushels above the previous record set in 2014. With the yield this high, a 15 billion bushel corn crop is projected to be heading in from the fields during harvest. Combined with the 1.7 billion bushel carryover, total corn supplies for the 2016/17 marketing year stand at 16.85 billion bushels. Corn usage is also projected at record levels, but demand has not been able and is not projected to keep up with the supply surge. Corn export projections are raised 50 million bushels, bringing total usage up to a record 14.5 billion bushels. The end result is an ending stock level roughly 600 million bushels higher than we had for the 2015/16 marketing year, but slightly lower than last month’s estimate. That slight tightening of ending stocks gave USDA a little room to raise their projected price range by 5 cents per bushel, with the midpoint now at $3.25 per bushel.

The national soybean yield is projected at 51.4 bushels per acre, up 0.8 bushels from last month and well above the previous record. With production approaching 4.3 billion bushels, the soybean market has never had more beans to work with. So again, it’s a story of record supplies and demand, but demand growth lags behind supply growth. Soybean export projections are raised 40 million bushels, bringing total usage to 4.1 billion bushels. But ending stocks are projected to double and price projections are held steady, with the midpoint of the season-average farm price range set at $9.05 per bushel.

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