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August 2012 Archive for Ask a Margins Expert

RSS By: Chris Barron

Chris BarronHave a margins question? Through this blog, you will gain insight into improving your bottom line, as a margins expert answers questions and provides farm business advice.

 

Crop Tour: More than Just a Number!

Aug 30, 2012

Now that the 2012 Pro Farmer Crop Tour is in the books, I thought I'd discuss some observations from the tour. Everyone knows by now that Pro Farmer pegged the corn crop at 10.478 billion bushels (120.25/ac.) and the soybean crop at 2.60 billion bushels (34.8/ac.). This is valuable information for those of us who farm. Confirmation on production and the potential supply for the rest of this year is also critical information. Thanks to Pro Farmer, we as producers have access to this type of information which has historically been very accurate.
 
The numbers are very important, but what is it that brings these numbers to farmers? The key ingredient as with any successful endeavor is always the "people"! Before this year, like most farmers, I enjoyed following the media coverage or attended one of the four evening meetings during the tour. The thing I didn't realize was how much organizing, long hours, thousands of miles, and dedication to accurate information that the staff of Pro-Farmer and the scouts are committed to for the entire week!
 
The opportunity to meet people from different countries is an amazing way to get a better perspective on global agriculture. The people I had the pleasure of meeting were fantastic, and it was a joy to learn different things about their countries as we scouted our US corn and soybean crops.
 
What a wonderful experience being a scout! Lots of long hours and hard work, which reminded me of fall harvest on my farm. It was exciting to see what the crop conditions and yields were at every stop. As the day went on it was interesting to average the findings for yields and then at the evening meetings see the results from our combined efforts.
 
I can’t go into the details of everything I learned this week in this single blog, but I would say this was the most educational single week for myself as a farmer! Even though I regularly work in the area agronomy, I was able to learn a tremendous amount from an agronomist from Argentina.  I had great conversations with a person from France who is based in Singapore involved in grain marketing. I had the pleasure of meeting a "grain originator" from Japan who was living in Chicago. I also had the opportunity to scout with individuals from New York and Chicago with amazing knowledge about commodities and other financial markets. I met some amazing farmers who were also on the tour, some who have been dedicated scouts for Pro Farmer Crop Tour over many years.
 
As I said in the beginning of this blog, the numbers are obviously the primary objective for the Pro-Farmer Crop Tour. But it's ultimately the wonderful people who dedicate their time, knowledge, and skills that make this information available. Thanks to the staff at Pro-Farmer and all of the scouts for a job well done!!
 
I can't wait to help out again next year!!
 

 

Pro Farmer Crop Tour Day 2

Aug 22, 2012

 

The second day of the tour began in Fisher Indiana and ended in Bloomington Illinois. Today's observations started out with decent corn yields. The first two yield checks on my route yielded 154bpa and 148bpa. The third check yielded 30bpa. As we headed across central Indiana toward Illinois we found some fields that received rains in late July, they had yields around 150bpa. Other areas that missed out on the July rain had yields between zero and 50bpa.
Field variability was evident as we ran across a farmer harvesting corn. We stopped and visited with him about the field conditions. The low ground in this particular field was yielding around 180. As he progressed up the hill, the corn yield dropped to below 50bpa. His field average was 105bpa with moisture at 27% and test weight at 54 pounds. See video below provide by my scouting partner (Ty Higgins)
Another observation in corn was the poor stalk quality. I was amazed at the amount of stalk deterioration in many of the fields. Some fields had as low as 20% of the stalks in severe condition. Other fields had as much as 90% of the stalks that could be easily pushed over with a simple touch. Obviously these fields will require early harvest to limit further yield loss.
Here is a link from one of my scouting partners (Ty Higgins) who took a video as we inspected stalk quality.
Soybeans were average to below average again today. We saw some fields with lower pod counts and short plant stature. I'll spend more time on tomorrow's blog discussing soybeans in more detail. We anticipate even more variability in soybeans through Illinois and into Iowa.
 

Crop Tour Observations--Day 1

Aug 20, 2012

 

This was my first time as a scout for the Pro-Farmer Crop Tour. I was somewhat apprehensive about dedicating the week to scouting crops, but I knew this would be a great way to evaluate the crops firsthand. I knew another huge benefit would come from the opportunity to network with farmers in the evening meetings.
My route today confirmed to me that this crop is highly variable; no matter where you go! On the first stop of my route we had a corn yield of 33 bpa. The second stop was only 38 bpa. The next two stops averaged 167 bpa. We continued to see this type of yield variability the rest of the day. Stalk quality seemed adequate, but many of the fields showed signs of rubbery stalks and deteriorating conditions. Most of the corn in Ohio and portions of Indiana had corn shorter than the field signs along the road. Much of the corn had a uniform appearance from the road, but low yield potential in the field.
Soybeans on the other hand looked great. We did see a few poor fields, but every field we scouted was extremely healthy with great pod counts. Most of our pod counts were similar to last year's numbers. Many of the soybeans are podded higher than usual due to the early dry conditions. It looks like most of these soybeans we scouted today had adequate rainfall - just in time to salvage decent yields.
 
 

Harvest Corn Timely

Aug 15, 2012

 

Harvest has already begun in some areas. As expected, yields are extremely variable.  Much of the early harvested grain has low yields, poor test weights, and marginal grain quality at best.
 Poor stalk quality, weak ear shanks, ear rots, and insect infestations are additional risks that may add significant challenges to harvest. Harvesting in a timely manner will help you manage these potential problems with less personal stress and cost to your bottom line.
Don’t Delay: While it may seem tempting to wait for higher moisture corn to dry down in the field, the risks outweigh the benefits.  Aflatoxin management for example, recommends harvesting grain above 24% moisture and drying it down in high heat to 15%. Other considerations such as grain shelling on the header can be minimized by harvesting at higher moisture levels. Delaying harvest can also be compounded by potential stalk lodging “Especially this year”. Harvesting down corn can easily double harvest costs and increase grain losses by as much as 30%. Even if the corn is only yielding 100 bu./per acre; at $8 corn, you could be leaving as much as $240 an acre in the field!
 Final yield, marketing decisions, and insurance coverage all remain a “BIG” unknown until harvest is complete. Once your grain is in the bin, you'll be in a best position for managing profit opportunities.
Look at it this way, a frustrating year will end with harvest. The sooner you get to it, the sooner you'll be done! The sooner you'll be able to plan for success in 2013!

Managing Your Numbers

Aug 06, 2012

 

One number that's been virtually impossible to predict is market price. The grain markets have not only been volatile, but they've been on a steady increase since June. The number one question I always hear is, "How high are these prices going to go?" As I keep saying, even the best "experts" are not certain. We're in unchartered territory, so marketing should be managed rather than maximized.
Since we have no direct control of what grain markets do, the best strategy we can employ is to stay focused on the situations that can be managed. There are four areas management focus can pay the best dividends which include live market quotes, accurate yield estimates, cash sale commitments, and crop insurance coverage.
Live market quotes are now available to virtually every farmer. If you have a computer, you should have live quotes! Fifteen minute delayed quotes quickly become irrelevant during intense volatility like we've seen recently. Time is critical as fast as these markets move; you could easily miss a target in less than 10 or 15 minutes. Many live quote tools also give you access to additional information that isn't offered through delayed grain bids.
Accurate Yield Estimates are purely dependent on your ability and willingness to walk your own fields. The more you walk and evaluate your fields the better your information becomes. The crops are unbelievably variable this year, as many of you already know. You know your fields best and the areas that are most representational to evaluate crop conditions and yield. Because of the variability this year, I would recommend measuring at least 1/1000 of an acre in each yield check you perform. If you remove every ear from 1/1000 of an acre you can visually inspect quality, variability, and harvestable ears all in one setting.
Cash Sale Commitments include any/all bushels you have sold for physical delivery. If you have cash contracts, be sure to continually calculate your "percent sold" as crop conditions either deteriorate or improve depending on your situation. I know of some producers who went from 30% sold to over 60% sold without selling anything! Because of crop deterioration, some producers may be faced with having to deliver physical bushels that they will not be able to produce. Even if you think you have ample bushels, be sure consider grain quality, storage, and pricing opportunities that may warrant delivering grain during harvest.
Crop Insurance Coverage: Until the fall price for corn and soybeans are determined, we won't know exact level of coverage. In the meantime however, be sure to review your APH and the level of coverage purchased for each crop. Be sure to stay in close contact with your agent to have a clear understanding of the exact revenue protection you have. Be sure to understand how many dollars per acre of revenue coverage you have at the spring price and be able to calculate how the fall price changes your coverage during the month of October.  Also, be sure to completely understand all of the terms and conditions expected by the insurance company in case you have a loss. There will likely be many operations this year that require an audit due to the large indemnity payments. Bottom line-be sure to read the fine print and stay in close contact with your agent.
No matter how crazy the markets get, staying focused on the parts of your business you can control will provide the best margin opportunities in the long run. There's obviously more complexity in these four areas than what I can cover in this blog alone. If you have specific questions and would like to go into more detail on any of these topics please send me your comments and questions.
 
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