Unprecedented Resurvey Effort
The process of bringing in and sizing the record 2009 corn and soybean crop may not be over for a while yet.
USDA's Annual Production Summary published Jan. 12, 2010, is typically the final word on the crop until the next annual summary issued a year later. This year, an unprecedented resurvey effort by the National Agricultural Statistics Service (NASS) will take place to zero in on the size of the 2009 corn and soybean crop. NASS saw a considerable amount of corn and soybeans standing when the data was collected from farmers in early December. Recall that even USDA's Crop Progress Report was to have ended Nov. 30 for the season but was continued until Dec. 22, 2009.
The agency will recheck corn acres in Illinois, Michigan, Minnesota, North Dakota, South Dakota and Wisconsin and soybean acres in Georgia, North Carolina, South Carolina and Virginia. "If the newly collected data justifies any changes, NASS will update the Jan. 12 estimates in the March 10 report, except for South Dakota and North Dakota,” says the agency. "Since the inclement weather has persisted in those two states, producers there will be reinterviewed at a later time.”
While NASS has done a resurvey on small grains before, Joe Prusacki, director of the NASS Statistics Division, confirms that "this will be the first one for corn and soybeans.”
Questions Asked. So what will NASS ask the producers they resurvey? For for the December survey, Prusacki says the agency asked farmers "how many acres they planted and how many acres they harvested or intend to harvest, and then expected production on all acres—harvested and those intended to be harvested.”
When it comes to the resurvey on corn, for example, NASS will go back to those who indicated they weren't done with harvest. The agency will ask, "On Dec. 1, you indicated you had X acres yet to be harvested. Of those, how many did you harvest or do you still intend to harvest? What was the production on what was harvested or what is the expected production on those acres you still intend to harvest?” —Roger Bernard
Revenue Insurance Frees Pricing Options
Although revenue products act like a put option, don't ignore marketing.
"With the crop insurance products available, we need to take advantage of profit opportunities. The insurance product removes much of the risk in getting ‘too heavily sold' early in the year,” says Pro Farmer editor Chip Flory.
Flory uses a 15% return over costs to start pricing. "In 2007, we sold 50% of expected production early in the year to cover 100% of expected production costs. That left 50% to sell for profit because all the costs were covered with the first 50% sales,” he explains.
Last year didn't offer such opportunities. "We would have had to sell 90%. The crop insurance would not have covered the entire amount if the crop was short,” Flory says. Thankfully, profit opportunities look somewhat better for 2010. —Linda H. Smith
"The U.S. is the richest nation simply because we produce more. In one hour, we outproduce Afghanistan for the year.” Ed Seifried, economics professor, Lafayette College
"Good decisions do not begin with facts, they begin with questions.” Bill Carden, president and CEO of the Carden Group
Railroad Rates for Soy in Question
The U.S. railroad industry represents one of the most important methods of transportation for the soy industry, but lately it has presented several challenges to U.S. soybean farmers. A study by the Soy Transportation Coalition (STC), with funding from the soybean checkoff, found that a percentage of soybeans and soy products is being transported at potentially excessive rates, specifically from states whose soybean industry is most dependent on rail.
"The soy producer pays the freight in and out,” says Roy Bardole, vice chair of the United Soybean Board's International Marketing and Global Opportunities programs and a soybean farmer from Rippey, Iowa. "We understand that, and that's OK, as long as we aren't being singled out and have to pay more than our fair share. The study looked at who pays, how much do we pay, is what we pay fair and is it what everyone else is paying?”
The study found that 43% of rail movements of soybeans, or 9.2 million tons, are transported at rates the U.S. Surface Transportation Board would classify as potentially excessive, resulting in a potential overcharge of $120 million in 2007.
"If you take $120 million in excessive charges and refund some of that to farmers, you could make a difference to rural communities,” Bardole says. "We're concerned about that and talking with Class I rails, trying to reduce what we're paying and make it a little more fair.”
The report also shows that revenue among the largest Class I railroads from transporting soybeans and soy products has nearly tripled in 10 years, from $549 million in 1998 to more than $1.5 billion in 2008. BNSF Railway transports the largest volume of soybeans, at 8.8 million tons in 2008. Union Pacific Railroad is the largest originator of soybean meal and soybean oil.
The current and future vitality of agriculture is dependent upon a healthy, profitable rail industry, explains Mike Steenhoek, executive director of STC. "There needs to be a way for railroads and the soybean industry to achieve a better balance so that one is not profiting at the expense of the other,” he says.
The STC study can be found at www.soytransportation.org. —Jeanne Bernick
Farm Assets Outpace Debt
Farm debt levels have been steadily rising since the 1980s, but asset levels have outpaced debt despite a recent fall in land prices, and equity has more than doubled for farm businesses, according to a recent USDA report, "The Debt Finance Landscape for U.S. Farming and Farm Businesses.”
U.S. sectorwide farm debt reached $234 billion by the end of 2009. Despite these high debt levels, debt relative to assets and income remains relatively low. Asset values in the U.S. farm sector have steadily increased since the farm crisis of the 1980s and increased even more rapidly after farmland values jumped in 2004.
Even though asset values dipped some by 2009, they still stand at 2.7 times their mid-1980s farm crisis low.
Meanwhile, the share of farm businesses that end the year with unpaid debt has declined, according to a recent USDA Agricultural Resource Management Survey. While many farm businesses use credit cards and lines of credit to finance input purchases, most pay off their loans during the current production cycle, according to the survey. The majority of remaining debt comprises loans with balances carried on the farm business balance sheet from one year to the next. —Jeanne Bernick
Fertilizer Helps the Bottom Line in 2010
Lower fertilizer prices could slash per-acre nutrient outlays by a third, says Purdue University Economist Bruce Erickson. Some farmers spent as much as $200 per acre to fertilize 2009 corn—more than rent in some cases—including nitrogen, phosphorus, potassium and lime. Erickson projects $100 to $130 for 2010, depending on soils and crop rotation (see table).
Purdue pegs total variable costs on average soils at $363 for continuous corn, $351 for rotational corn and $194 for rotational soybeans.
The University of Illinois breaks its estimates both by geography within the state and by high- and low-productivity soils. Their economists see fertilizer (they do not specify whether this includes lime) for corn in the $90 to $100 range. The total for fertilizer, pesticides, seed, drying, storage and crop insurance is approximately $150 to $300. They break out machinery and fuel costs separately, adding another $80 to $85 per acre. —Linda H. Smith
Top Producer, February 2010