No doubt about it!

Yes Curt, There Is a Santa Claus!

There is no doubt about it, Santa delivers!  We have a new Farm Bill!

The economic outlook facing farm country is undeniably bleak, considering net farm income is expected to drop another 10-15% in 2018 and possibly further in 2019.  With this uncertainty looming over agriculture, I was pleased to see that the 2018 Farm Bill has passed with the largest bipartisan support of any measure in recent history.  Only 37 congressional members declined to support the final version that will be sent to the president’s desk for a signature.  I was surprised that both houses and parties could agree to anything, let alone at this level of support.  So what is the final outcome for farmers?

First and foremost, crop insurance came through the process with unparalleled support.  Most members of Congress could see the overall benefit of this stabilizing force in the farm sector.  Knowing that there is a safety net in place will make planning for 2019 much easier for ag producers.  With lower commodity prices and lingering effects from the tariff tussle, many farmers are dealing with tight margins and the reality that, if less than ideal weather conditions occur, it will be a struggle to break even.  Break-even doesn’t sound like too severe a situation until we compare this same scenario to another business type.  If I owned a store, and I borrowed money to purchase items to sell, sold them for the same amount of dollars as I spent initially, and then had to pay for operating costs (labor, lights, heat, etc.).  I couldn’t operate my store for very long.  Break-even is the outlook in farm country right now.

Two safety net options that were introduced in the 2014 Farm Bill were PLC and ARC.  Farmers were given the opportunity to choose between Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC).  These two programs will be reopened to farmers in early 2019.  The 2014 Farm Bill made our previous selections permanent through the life of that bill.  The 2018 version will now allow farmers to again select, by farm and county, whichever program looks to be the most beneficial to their operation, and then reconsider again in 2021 and yearly after that.  ARC uses Olympic average of a commodity price as a baseline for a county revenue guarantee and individual production is not considered in the calculation.  PLC uses a reference price established in the current law and the ability to update individual yields by farm and county.  Given the better yields we have experienced in recent years, the PLC option looks very attractive for the upcoming years.

Conservation is still a major focus of farm bill policy.  The CRP (Conservation Reserve Program) acre cap is back up to 27 million acres and the CSP (Conservation Stewardship Program) is expanded and is enhanced with increased flexibility.

With the passage of the 2018 Farm Bill my Christmas wishes have come true.  I can sleep with visions of a solid safety net dancing in my head.  The gloom of the Break-even scenario is lifting.  Thanks, Santa!  Happy New Year!

Image Credit: Angelo Amboldi

All I Want For Christmas Is a New Farm Bill

Dear Congress, 
What I would like for Christmas is a New Farm Bill! 
Sincerely,
Curt

 

One of my favorite things about living in South Dakota is the changing of seasons. While we can be burning up, working in the sun on a 95o summer day, we take comfort in knowing that in 6 months, we will be wearing 3 layers of clothing doing our best to stay warm in -10o while doing the exact same tasks.  The yearly seasonal weather extremes that are encountered in the Midwest reinforce the need for a strong crop insurance program to be included in the next Farm Bill.

The time for action is now as the Agricultural Act of 2014 – known widely as the Farm Bill – has expired and farmers are making their projections for the 2019 crop year. Funding for Multi-Peril Crop Insurance subsidies is included in the Farm Bill and widely used by farmers in South Dakota to help protect some of the risk that is inherent when raising crops in the upper Midwest. A farmer that operates 1000 acres and has a corn/soybeans crop rotation may invest between $300-500 per acre over the course of a growing season depending on crop type and yield goal. He/she invests the same dollar amount as the market price of a nice $300,000-$500,000 house. Farmers put that amount at risk every single year they farm.

Opponents of crop insurance generally voice the concern that subsidies for the farmer’s premium is too generous. The big fact often missed in many discussions about crop insurance funding is the level of loss incurred by the farm operation before any loss indemnity is paid to the grower. The typical deductible that SD farmers choose on their crop insurance policies is 25% or a 75% coverage level which keeps the cost of their crop insurance in the realm of affordable. This means the farmer must incur a loss of between $75,000-$125,000 before any payment is made on their policy. The same catastrophic weather events in this area that cause home damage consequently cause crop damage. If, in comparison, I had a $400,000 home, a common deductible on my homeowner’s insurance policy would be only $1000-$5000.

Since the adoption of crop insurance by a majority of farmers in the US, we no longer have ad hoc disaster relief bills coming thru Congress. Disaster relief comes after the fact and seems to always be offered to everyone, even though they have not contributed toward the funding.  With crop insurance, farmers choose their deductible, pay their premium, and are then paid in the event of a loss only up to your coverage level. Farmers pay a fair share of the premium and, many years, never have a loss (which is always the goal of policyholders.)  No farmer ever wants to incur a loss on their policy. They also understand that if there are fewer loss claims, there is a lower loss ratio, and, therefore, lower premiums – a win for everyone involved!

Our great country’s ability to have a sustainable and stable crop insurance program helps to ensure that farmers are willing AND able to continue providing the cheapest (based on % of annual income) and safest food supply in the world.  We hope that if the lame duck Congress doesn’t pass a Farm Bill, the new mix in Washington D.C. can come to common ground and quickly pass this important legislation in the New Year.

Featured Image Credit: J. David Ake

America Salutes the Farmer

Politics. By now, with a little over a month before the Election Day, we may be tiring of all the political banter surrounding us. We may like one candidate and object to the other, or dislike all of the options. Some may even prefer to bury their heads in the sand and hope it all goes away. With a concern over the election of just who will become the new commander-in-chief, it is more important than ever that our congressional delegations from rural states have backgrounds that support agriculture.

Agriculture and crop insurance are very politically charged issues.   Look how long it took to get the 2014 Farm Bill into action and the attacks waged on crop insurance from different fronts on Capitol Hill. Discussions on the 2018 Farm Bill will begin sooner than we think. Nearly every ag publication we read tells us that, as a whole, the American public doesn’t understand agriculture and that farmers and ranchers need to be better at telling our story.

Although they may not fully understand it, a survey, commissioned by National Crop Insurance Services and conducted by North Star Opinion Research, reveals a positive public perception of agriculture and crop insurance in America. This particular survey was conducted in April of 2016 with 1,000 registered voters interviewed by telephone with live interviewers. Quotas were set for state, gender, race, and age to reflect past voter turnout with a margin of error of +/- 3.1%.

When asked if funding for programs that help farms and farmers is important, more than half feel that it is very important and another third think that it is somewhat important. Only 7% of those surveyed replied that it was not too important or not important at all. This positive response reflects bipartisan support as the consistent results come across the board from Republicans, Independents and Democrats. The survey’s findings also show strong favorable and bipartisan views of farmers as a group (86%).

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Discounted crop insurance is supported by a 79% to 17 % margin. Presented with arguments for and against federal crop assistance for farmers, voters still say it is appropriate to help farmers by a two to one margin. 81% of voters agree that a strong farming industry is critical to national security. They also think farmers and taxpayers are better served by insurance delivered by the private sector, rather than the federal government, by a more than 20 point margin (54 to 33%). More than two-thirds of voters agree that farmer’s should share in the cost of the programs that protect them, and that farmers pay too much or the right amount for crop insurance. Similarly voter’s think the amount of loss sustained before payments are made is about right.

These overall positive results were honestly somewhat of a shock to me. On any given day, I don’t have to look very hard to see media that paints the agriculture industry in a negative light. There are numerous blogs, columns, Facebook pages, special interest groups, etc., whose main goal is to discredit the agriculture industry, the safety of our products, and the wellbeing of our livestock. This poll is reassuring to me in that the average American still has a high level of approval for farmers and the programs available to us that help ensure a safe, quality food supply. As the election nears and Farm Bill discussions begin, it is important to remind our congressional leaders of these findings. Voters believe that crop insurance and agriculture programs have a positive impact on America. This gives us something to build upon in this election year and the time leading up to the creation of a new farm bill, whenever it is enacted. The public’s bipartisan support is there and it is up to us to make that support be heard!

Image Credit: Julian Carvajal

If That Don’t Beat All

I used to think that the more years I farmed, the more experienced I became. With that experience, the less shocked I would be at certain scenarios as I should have “seen them all.” Then reality happens and I am reminded that I still have a great deal to learn when trying to discern our volatile markets. Let me shed a little light on how today’s market fiasco affects crop insurance coverage for 2016.

First of all, I have seen more variation in corn crop conditions this season, within just a few miles – sometimes in the same section, than I can remember in any previous year.  I have walked fields that could easily yield over 150 bpa (bushels per acre), while a field across the road will have a hard time achieving 75 bpa. It seems that in one field it paid to till, and a mile down the road it had a negative impact. Typically, our corn yields are significantly higher than soybeans compared to national averages, but this year, with some timely August rains, soybean yields could be well above the historical corn/soybean yield ratio.

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This Spring, both corn and soybeans were under price pressure as we set our crop insurance base prices with both crops well below the 2015 price guarantees. Corn experienced a short lived summer rally in late June that left prices well above our spring price, then rapidly retreated to levels that make producers cringe and buyers smile. Soybeans, on the other hand, initiated a rally that, even after softening, is still well above 2015’s levels.

Most market forecasts told producers that it would essentially be impossible to make money raising soybeans this season and for farmers to be sure to use any tools available to minimize their losses. Soybeans could well turn out to be the one crop that turns a profit in 2016 – if we accomplish the current yield estimation and still have our current prices.

Corn producers who had a 120 bu APH (actual production history) and selected a 75% Revenue Protection coverage level for crop insurance coverage were guaranteed 90 bpa or roughly $347 per acre of revenue coverage on their farm. If the current trend in corn prices holds through harvest (about 15% lower than the crop insurance spring projected price), that dollar coverage divided by a lower harvest price makes his new yield coverage 104bpa (about 15% higher than the projected price).

Soybeans on the other hand have experienced a price rally and so revenue coverage will go up to reflect the higher value of harvested soybeans. A producer who has a 36 bu APH with 75% coverage had about $240 /acre coverage. If the current price holds through harvest, his coverage will go up to $273 per acre. Given the outlook for soybean harvest in Beadle County we should be marketing up to our guaranteed bushels at the higher current levels. If market history rings true and my predictions follow the past years’ outcomes, every producer should do the opposite of what I say as the price may skyrocket to $12/bu!

One last thought, if ever we need to have a yield monitor, it is a season like this when we can discover the true winning hybrids and best management practices to use on our farms. Contact us about YIELDSENSE, a yield monitoring system that is available for your combine that will help make the best possible decisions for 2017. Let us help you use the tools you already have to identify what things worked and what didn’t. It is one of the few factors that is truly in our control.

Image Credit: United Soybean Board

Coming Soon: Acreage Reporting

Maize and wheatThough it may seem like you just selected your crop insurance levels and options for the year, acreage reporting will be here before we know it. Remember to keep note of your planting dates, crops, and acres to help ensure policy accuracy. Call Heather or Amanda at the office  at (605) 353-1112 once you complete planting or if you have any replant or prevented plant claims.

Image Credit: Uwe Pothoff 

 

Time to Consider Crop Hail Coverage

8808241108_6f16c17630_oIt is never too early to consider Crop Hail insurance on your crops. Rates don’t change throughout the growing season, so don’t gamble on Mother Nature. Policies can be put in place today that will cover your crops as soon as they are planted. Full coverage, deductible, and production based policies are available. Call Amanda, Heather, Curt, or Louise at (605) 353-1112 for a quote today. Our agents will work with you to find a policy that fits your farm’s needs and budget!

Image Credit: SF

 

Farming with the Odds

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As I sit down to write this month’s article, my TV is tuned to the local news station while I await the winning Powerball Lottery numbers for the historic $1.5 billion jackpot. Like most people who purchased a ticket, I spent a few minutes (ok, maybe more than a few…) daydreaming about how I would spend the winnings if my numbers were chosen. Thankfully the subzero temperatures outside the store snapped me out of my fantasy of being on a yacht in the Caribbean. I eventually decided that I would keep farming until it was gone! While farming can sometimes feel like we are just playing the lottery and gambling on making a profit, there are a few main principles of risk management we can all follow to up our odds.

First, we need to know our costs. As this point in the 2016 crop year, we should already know what our seed, fertilizer, equipment payments, rent, and chemical prices are. There will still be some unknown variables, but we can come up with a close estimate of what each acre will cost to get the crop in the ground and off to a good start. This number may seem uncomfortably high, and we might look for shortcuts, but we need to be mindful of where the costs are cut. It is important not to cut costs in a way that negatively affects our profit potential. Decision management is 2016’s key element to controlling costs.

That being said, we also need to have a profit goal in mind. Are you shooting for just breaking even, or is it your goal to raise the largest crop ever on your farm? Knowing where we want the bottom line at the end of the year will help decide what risks to take, costs to cut, or where to splurge. It is also important to lock in profits whenever possible. While farmers realistically won’t expect to see $8 corn like a few years ago, always pay attention to the markets and try to contract a profit when an opportunity presents itself – even if it is not extraordinary.

One of the most lucrative decision management tools a farmer can use to aid in risk management is his Multi-Peril Crop Insurance policy. Crop insurance is used as a means of helping farmers cover costs of production. There are several different coverage types and options to choose from to customize your own policy to fit your farm’s needs. Revenue Protection and Yield Protection will give guaranteed revenue or bushel amounts. These policies help protect against uncontrollable variables such as adverse weather, dramatic swings in the markets, and other naturally occurring losses. Policy options are available as add-ons to increase coverage in the event of prevented planting, widespread loss years, or outdated yield information. Farmers are encouraged to work with their crop insurance agents to build a policy that suits their risk management needs without being too costly.

Well, the winning numbers were just announced and I didn’t have a single digit that matched. I guess it is back to the grindstone tomorrow. It is nice to know that even though I am not a billionaire, I still have the risk management plan and decision management tools to keep farming for years to come – without having to make a dicey wager. I’m not sure if I would know how to sail that yacht on Lake Byron anyway.

Image Credit:Amespiphoto 

Climate Change: Are We to Blame?

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Frequently on the nightly news, the major networks run fear-mongering stories on the rising polar temperatures, El Niño, and greenhouse gasses. While we should be alert, climate change should not be considered a bad thing in all contexts. If South Dakota had not experienced significant warming over the last 10,000 years we would still be covered by what geologists estimate to be more than 1500 feet of ice – that is over ¼ mile thick! That’s a lot of frozen water and I’m glad that I wasn’t trying to no till corn under those conditions! I’m not sure I would want to dodge those pesky dinosaurs either…

So what is the immediate risk of climate change to farmers in our area? First and foremost, we need to acknowledge that our environment is ever changing and that even though we influence it to some degree, we do not drive the forces that are changing. According to Mark Seely, MN Extension Climatologist, the Midwest will move away from times of frequent, smaller amounts of widespread rainfall to times of fast, larger rainfall amounts less frequently. This means we are less likely to see light rainfalls that fall all day or over several days’ time, and more likely to experience events of heavy rainfall that lasts for a very short amount of time, with more time in between rain events. Annual rainfall in Beadle County has actually increased about 2” since 1960.

I can recall the winter of 1968 when I felt I lived in “Snowmageddon.” Our area got many lengthy snowstorms throughout the winter. We had to move it every single day before we could even start our daily chores. Maybe my memories of that winter, and several others similar to it, make me think that any move toward global warming is good!

Farmers, by nature and necessity, are good stewards of the soil, but we can always make improvements. The no-till practice has made central SD a grain producing powerhouse. We have learned to plant and produce in conditions that just 20 years ago would have been considered absurd. Who would have thought that we could grow a bushel of corn on 33% less Nitrogen than just 30 years ago thanks to better seed genetics and biotechnology? Are we at the top yet? NO WAY! We are just beginning to unlock the secrets of exactly when our crops need nutrients and how much at each stage. Our next challenge is to figure out ways to get those nutrients applied on time, but not too early so that they are lost to the environment.

If dramatic swings in weather is a forecast of the future, then crop insurance will play an even larger role in a farmers risk management portfolio. Crop Insurance is important to both farmers AND consumers alike, ensuring the safest and most reliable food supply in the world. Looking ahead to the next 35 years (2050) it will be important that consumers are educated as to why we farmers do what we do. How and when you apply nutrients should be an economic and environmental win/win for all sides in our symbiosis. A secure and safe food supply will be even more of a challenge as we move to support a 9 billion person world population. What works today may not be the best management practice of 10, 20, or even 30 years down the road. As our world changes so must our farming practices to keep ahead of demand.

I have the utmost confidence in the American farmer to adapt and meet those changing goals.

Image Credit: L. Braughler