Livestock Producers May Face Limited Feed Supplies

schultek_final Contributed by Kristen Schulte, Extension Farm Management Field Specialist, kschulte@iastate.edu and Lee Schulz, Extension Livestock Economist, lschulz@iatste.edu.  

The changing weather and crop conditions over the past year have raised questions again regarding quality and quantity of feed availability for livestock producers across parts of Iowa. Some producers stretched forage supplies over the winter due to the widespread drought that affected last year’s crops. Some of these same areas are facing a potential limited supply of forage or corn for the coming year due to a wet spring that caused prevented planting or inability to harvest early forages. As of the first week of July, over 70 percent of corn, hay, and pasture acres are in fair to good condition; however, crop progress in much of northeast and north central Iowa is behind the other regions of the state. Although it is unknown what the rest of the growing season will bring, livestock producers can start to plan if they anticipate limited feed inventories. Livestock producers should evaluate feed inventory, feed required and financial position.

Calculating Feed Inventory

Feed inventory can account for what is currently on hand and what is expected to be harvested this growing season as feed for the coming year. Inventory should be recalculated at the end of harvest. All forages and grain allocated for feed need to be accounted for. Forages in upright silos or bunkers can be calculated with estimated capacity tables based on dry matter (DM) and size of the silo or bunker. Feed grain stored on farm will need to be accounted for based on estimated capacity measurements or starting amount less shrink and amount fed. Also, pasture conditions should be monitored to account for supplemental forage if needed.

Feed Inventory Required

Livestock inventory needs to account for all animals that consume raised forage or grain. For each species type, total tons of raised feed fed per year is needed. Also, one needs to account for expected livestock inventory, accounting for expansion or fluctuation in inventory. Daily rations or weekly feed amounts can be used to reach a yearly feed intake value for all raised feed. Differences in DM or nutrient quality may influence amount of feed required over a years’ time. Total feed required will need to last until the following year’s harvest or feed availability date (e.g., alfalfa/grass – June 1; corn silage – September 15; corn – October 1); also, this time can be extended as some forages need to ferment before feeding.

The difference between raised feed available after 2013 harvests and annual feed inventory required will determine if additional feed is needed.

Low Feed Inventory

If feed needs surpass feed availability the producer has a shortage of raised feed. If there is a surplus of feed inventory, one should evaluate if there is an adequate amount of needed carryover. If there is a shortage, one should plan for purchase of additional feed and/or evaluate alternative feedstuffs with their nutritionist or livestock specialist. Although producers may want to save money when purchasing additional feed, it is important to keep in mind quality, feed efficiency, and adequate nutrition for long term viability.

Financial Impact Considerations

Some feed decisions may have an effect on the bottom line. Is purchasing feed a financially feasible solution based on projected breakeven and profitability? What funds are available to purchase additional feed? How do crop insurance proceeds from prevented planting acres correlate with purchased feed at market prices? What ration alternatives can be made to accommodate feed costs or limited feed availability and what are the associated costs? How do these changes affect feed cost per head and how does that compare to your desired feed cost benchmark? All of these answers are ones that each livestock producer will need to evaluate for their operation.

ISU Extension Resources

Estimated feed rations for beef, swine, ewes, and dairy can be found in the livestock budgets on Ag Decision Maker, http://www.extension.iastate.edu/agdm/livestock/html/b1-21.html. A sample feed inventory worksheet can be found on the ISU Extension Dairy Team website, http://www.extension.iastate.edu/dairyteam/sites/www.extension.iastate.edu/files/dairyteam/ISURecovery44FeedInventoryAidMgmt.pdf.

 

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Communicating with Landlords, Lenders, and Grain Dealers

Leibold_K03-LContributed by Kelvin Leibold, Extension Farm Management Field Specialist, kleibold@iastate.edu.

If you haven’t already started to talk to your landlords, lenders and grain dealers you may want to take some time to bring them up to date with what is going on with your farming practices. Plans that were put in place months ago are being revised due to events beyond anyone’s control.

Keeping them up to date with what is going on with your farm operation is critical. Some farmers are going to take “Prevented Planting” option for corn and possible for soybeans. Many of the landowners will not understand why tenants took that option. The idea of not planting may seem unreasonable. Producers are trying to maximize returns considering unpredictable outcomes such as yields, prices, and input costs such as drying costs or cover crops. You need to communicate this to your landlords. Negotiation of rental rates for 2014 will soon be underway so providing information such as satellite pictures of the farm can help “tell the story”.

Lenders, for the most part, understand the challenges you face. Most of the producers have some level of crop insurance. However, if the timing of the payments for claims or the total income available to service debt is going to be an issue you need to visit with your lender about restructuring or adjusting the timing of payments. You may also have some issue regarding your income tax liabilities and may need to spend some time with your tax advisors on how to deal with the change of timing of your income. There may be options if you need to defer income if you may end up with two years of income in one tax year.

Many producers have forward contracted grain to end users. These end users need the commodity to operate their plants, make feed, or meet their export contracts. The sooner these people are aware of challenges you may have in meeting these contracts the sooner that both of you can start to work on ways to mitigate the impact. Defaulting on these contracts is not a viable option.

Communicating early and often will go a long ways to deal with these issues. The Ag Decision Maker has several articles on improving your communication skills.  File C5-116 Improving Business Communication Skills https://www.extension.iastate.edu/agdm/wholefarm/pdf/c5-116.pdf gives some suggestions. In addition to landlords and lenders you may face challenges with your own family or co-workers in these stressful times. File C6-56 Good Communication Can Help Solve Problems http://www.extension.iastate.edu/agdm/wholefarm/pdf/c6-56.pdf can help with communication with family.

If you feel overwhelmed or are looking for some answers check out the Iowa Concern website    http://www.extension.iastate.edu/iowaconcern/ or call the HOTLINE at 1-800-447-1985.

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Updated survey on farm employee compensation

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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Mowing Restrictions Remain in Place until July 15

Melissa O’Rourke, ISU Extension Farm & Agribusiness Management Specialist

Farmland owners and operators should be aware of recent changes to Iowa law regarding mowing along Iowa roads.  The mowing restrictions apply to private landowners as well as local government units.  Changes to mowing regulations were enacted during the 2010 legislature – so 2011 is the first full year of effectiveness. 

Mowing regulations now apply to secondary roads throughout Iowa as well as to interstates and primary roads.  This is a significant change to the roadway mowing regulations contained in Iowa Code 314.17

Secondary roads are those roads under county jurisdiction.  Primary roads are any roads or streets under the jurisdiction of the Iowa Department of Transportation (DOT). 

Mowing is prohibited prior to July 15th along any secondary road, primary road, or interstate highway in Iowa.  

However, the law contains a list of exceptions to the July 15 date.  Mowing along roadways is allowed prior to July 15th within 200 yards of an inhabited dwelling, for visibility and safety reasons, or along a right-of-way within one mile of corporate city limits.  

Mowing prior to July 15th is also allowed for purposes of access to a mailbox or other accessibility purposes – such as field access.  Additionally, mowing is permitted within 50 feet of a drainage tile or tile intake. 

Mowing is also allowed to promote native species of vegetation or other long-lived and adaptable vegetation, or to establish control of damaging insect populations, noxious weeds and invasive plant species. 

Mowing is permitted on rights-of-way adjacent to agricultural demonstration or research plots. 

Finally, the law also points out that mowing is allowed in rest areas, weigh stations and wayside parks at any time. 

Prior to enactment of these changes, the Iowa Department of Transportation (DOT) issued mowing permits as early as July 1.  The significance of changing the prohibited mowing date to July 15 is to allow a second nesting season for pheasants and other Iowa native bird populations. 

According to the Iowa Department of Natural Resources (DNR), pheasant hens that were unsuccessful in nesting during May or June will attempt a second nest. For those birds, the first two weeks of July is  critical because that is the time chicks begin to hatch from second nesting efforts.  The DNR points out that pheasants – as well as many songbird specieis – use roadside ditches for nesting and brood rearing habitat. 

Recent years have seen weather patterns making for challenging nesting seasons.  2011 is no exception throughout much of Iowa.  

With struggling pheasant populations, the DNR encourages everyone to follow the mowing regulations to provide additional opportunities for nesting success.  Summer weather patterns of dry, warm weather increase nesting success and chick survival.

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Thoughts on rents…

Contributed by Craig Chase, ISU Extension Farm Management Field Specialist

craig_chaseThe highest rent doesn’t always get the landlord the best return depending upon how the tenant treats the land, etc. The general economic condition for agriculture, land values, input prices, and farm profitability and land values and land rent have to over the long-run reflect the profitability of farming.

Another way to look at land rent is on a per bushel corn basis, at $3.50 per bushel for corn, how much could a tenant afford to pay for rent? Maybe about $1.15, and with 190 bushel average for good farm ground in this case should be somewhere around $220, give or take.

Also consider 1 yr versus 3 yr lease terms and the reasons for a long term agreement such as a stability of income as long as the tenant can afford to pay the rent. More on leasing is available on Ag Decision Maker.

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Risk Management in Agriculture

Contributed by Craig Chase, ISU Extension Farm Management Field Specialist

Craig Chase
Agricultural risk falls into five basic categories: production, price, financial, legal, and human.  In each of these categories there are methods to lower risk or transfer it. There is a lot of information on risk management at the Agricultural Risk Education Library (www.agrisk.umn.edu).  

For production risk, enterprise diversification (longer term rotations) is commonly used to lower risk.  Longer-term rotational crops tend to have different planting and harvest periods.  Crop insurance is normally used to transfer risk. 

Price risk is typically reduced through sales contracts. 

Financial risk can be lowered through keeping good production and financial records, as well as understanding asset management.  The key to agriculture, as well with other businesses, is the control of assets and not necessarily the ownership of assets.  In many cases, risk can be transferred through rental or leasing agreements

Legal risk for organic transitioning farms would focus on certification rules and making sure rules are met.  If involved in producing food, then compliance with food safety regulations would also be necessary.  Mitigation can come through various organizational structures and cooperative or collaborative agreements. 

Human risks come into play primarily through the hiring of laborers.

 I recommend reviewing the information on the agricultural risk education library (www.agrisk.umn.edu) and if you have specific questions, please let me know what those are.

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