Author's Note: The numbers in highlighted area below have been updated from the print version. I apologize for any confusion and want to thank our readers for their comments and feedback.
Meteorologist provides hazy ball, but it could help with seed selection
If the 2013 growing season for many farmers is a repeat of last year, it’s worth asking "Should I spend $300 on seed when I can spend $100, and collect more from insurance?" The answer, experts say, depends on location and philosophy.
"The Corn Belt, as a whole, is most likely to have better yields than 2012, but still below trend."
The Ohio River Valley area has recently received excess moisture, so farmers there don’t need to worry about a soil moisture shortage, explains Elwynn Taylor, an agricultural meteorologist at Iowa State University. On the flip side, soil moisture is still a concern in central Illinois and gets worse as you move west.
"Based on current conditions, Ohio River Valley farmers should plant what they normally plant, knowing that there’s increased risk for extreme weather as we move into the summer months," Taylor says. "Excess moisture at planting means shallow rooting and increased susceptibility to adversely high temperatures and dryness late in the growing season.
"The western part of the Corn Belt is not likely to get the soil moisture it needs by the time planting rolls around. This means if we do not have ideal precipitation and temperatures this summer, we will lose yield."
For the upcoming growing season, Taylor says the Corn Belt as a whole is most likely to have better yields than 2012, but still below trend, which is about 160 bu. per acre.
"We have no indication of what the summer will bring, but we know we can expect to see more extremes in the next 20 years than we have the last 20 years," he says. "Last year was the first of this 20-year cycle."
Production Rehearsal. If you know you’re in for a bad year, should you spend all that money on inputs, such as seed, with the hopes of a bigger insurance check? One insurance specialist says no, and the numbers don’t add up. Steven Saveraid, a senior financial services officer with AgStar, walks through an example of a typical Nebraska corn farm.
Farmer John has 2,000 acres of corn with an average production history of 160 bu. per acre. Let’s say he purchases revenue protection insurance for 80% of production, which puts the mark at 128 bu. per acre. If the average price in February for December 2013 futures is $6, this sets the price for expected revenue.
Let’s say John had a repeat of last year and his field average was 123.4 bu. per acre—a loss of 4.6 bu. per acre (below what’s insured). This should result in a total payout of $55,200. John still has 246,800 bu. to market. If he is able to sell at $6 he receives $1.48 million plus his payout for the crop. If he can capture $7, he will receive $1.72 million plus the payout.
If John’s farm took a nose dive and averaged 90 bu. per acre, he’d be looking at a $456,000 payout. With 180,000 bu. to market at $6, John would receive $1.08 million plus the payout. If he can capture $7 corn, he will receive $1.26 million plus the payout.
How does seed play into the equation? If John purchases seed at $340 per unit, his total seed cost to plant 2,000 acres is about $278,000 (planting 32,800 seeds/acre). If John purchases seed at $220 per unit, his total seed cost is $180,400. If John purchases seed at $150 per unit, his total seed cost is $123,000. This does not factor in fuel, labor, fertilizer and machinery.
Farmer John also needs to add the cost of insurance to the equation. Saveraid says many farmers aren’t aware, but there is a "good management" clause that must be taken into account. "You can’t neglect the crop," he says, noting that a serious loss will hurt your average production history.
Deciding Factors. Taylor recommends checking out an online tool to compare growing degree days, precipitation and stress degree days of different years. "Look at 2004, which was a great year, and look at 1988, which was a bad year," he says. "Then look at where we are today to help you with your decisions."
If you expect hot and dry conditions in your area, give consideration to planting fewer plants per acre (but not below advised levels), Taylor says. If you expect moist and cooler conditions, you might want to put your plant population at the higher end of the recommended range.
The online tool Elwynn Taylor refers to is available at www.TopProducer-Online.com/Weather.
- February 2013