Blogging by the Bushel
With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.

Archive for May, 2011

Anna Kaverman – Mercer Landmark

  • Early planting favors higher yields, but does not guarantee higher yields.
  • Planting date is but one of many yield influencing factors.

Conventional wisdom says that the prime planting window to maximize corn yields in much of Ohio opens about the end of April and closes the third week of May or on or/preferably before Memorial Day.  This “window” typically opens about one week later across the northern tier of Ohio counties (later warm-up) and about one week earlier across the southern tier of Ohio counties (earlier warm-up).  Very little corn has been planted in Ohio to date. As of May 23rd   the USDA reported that only 11% was planted in Ohio. Delayed planting are two words that most farmers wish they wouldn’t have in their vocabulary this late in the season. Not only has planting been delayed but little other spring fieldwork has been completed either due to the frequent and sometimes excessive rainfall in recent weeks. For some growers, tillage operations, herbicide applications, and nitrogen fertilizer applications must be completed first before they can consider planting their crops.

What are the consequences of a delayed start to planting? How important a predictor of statewide corn yield is planting date anyway?  Does late planting in and of itself guarantee lower than normal yields?  It is true that corn grain yield potential does indeed decline with delayed planting after about mid May.  Estimated yield loss per day varies from about one bushel per acre after the first week of May to nearly two bushel per acre by the end of May (Nielsen, 2011). Yield potential goes down with delayed planting because of a number of factors, including a shorter growing season, insect & disease pressure, and moisture stress during pollination.

However, the good news is that planting date is but one of many yield influencing factors (YIFs) for corn. What is important to understand is that if all the yield influencing factors work together to determine that the maximum possible yield this year in Ohio is 160 bu/ac, then the consequence of a 10-day planting delay beyond May 31st (at 2 bu/ac/day) would be a yield potential of 140 bu/ac (i.e., 160 bu/ac potential minus 20 bu/ac due to delayed planting). However, if all the other YIFs work together to determine that the maximum possible yield this year is only 140 bu/ac, then the consequence of a 10-day planting delay beyond May 31st (at 2 bu/ac/day) would be a yield potential of 120 bu/ac (i.e., 140 bu/ac potential minus 20 bu/ac due to delayed planting). Make sense? Mind you these are just theoretical numbers.

Consequently, it is possible for early-planted corn in one year to yield more than, less than, or equal to later-planted corn in another year depending on the exact combination of YIFs for each year. According to data that was presented in a recent C.O.R.N Newsletter, yield losses associated with late plantings do not always translate into lower statewide yields. Since 1980, there have been significant planting delays associated with wet spring weather in eight years – 1981, 1983, 1989, 1995, 1996, 2002, 2008 and 2009. All these years were characterized by a “late start”. A “late start” means that in those years 40% or more of the corn acreage was not planted by Mat 20th. The table below shows the Performance of Ohio’s “Late” Planted Corn Crop– Yield.

  % of Crop Planted by        
Year May 20th May 30th 50% Planting Date Yield (Bu/Ac.) Avg. Yield of Previous 5 yrs. Departure from Yield Trend (Bu/Ac.)
1981 30 55 May 26 96 108 -10
1983 45 65 May 22 80 109 -36
1989 22 40 June 4 118 116 0
1995 60 77 May 19 121 122 -5
1996 10 54 June 1 111 122 -15
2002 22 58 May 28 88 138 -56
2008 50 66 May 20 135 153 -7
2009 42 95 May 22 174 149 15

  Favorable weather conditions subsequent to planting may result in late planted crops producing about average yields as was the case in 2009. About 42% was planted by May 20th and the crop yielded 15% about trend line yield. However, if late planted crop experience severe moisture stress during pollination and grain fill then corn yields may be significantly lower than average.

Bottom Line

While important, planting date is only one of many yield-influencing factors for corn. Profitability is also another huge factor to consider as well. Enterprise budgets are a great way to evaluate alternative plans. They represent common, workable combinations of inputs that can achieve a given output. Amounts of seed, types and quantities of fertilizer, chemicals, and most importantly price reflect recommendations and the experience of many Ohio farmers. The specific combinations of inputs and prices presented will not likely precisely reflect every given farm. In practice, actual costs will be higher or lower than shown. Thus the most important column is “Your Budget”.  The link to these budgets can be found at 2011 Ohio Enterprise Crop Budgets. Let’s look at a few different scenarios if we leave everything the same on these budgets except price, budgeted yield, labor charges, management charges and cash rent payments. I assumed cash rent was $100 and there were no labor or management charges. Using a budgeted yield of 140 bpa and a price of $7.00 would still yield $425.75 return above total costs. Using a budgeted yield of 150 and leaving the price at $7.00 takes return above total costs to $490.34. Let’s say the crop gets planted and things turn out like 2009 and the yield is bumped to 174 bpa at $7.00. That would return a profit of $645.35! What would happen if the weather straightens out and the price drops to $6.50 or even $6.00? A yield of 140, 150 or 174 at $6.50 would produce $355.75, $415.34 and $558.35 respectively. Even with the market dropping $.50 a bushel these are still fantastic prices. A yield of 140, 150 or 174 at $6.00 would produce $285.75, $340.34 and $471.35.

Another reason that it is probably too early to panic and jump ship about the anticipated late start to planting is that growers have the machinery capacity to “catch up” quickly once the weather and soil conditions become favorable for planting. We also know from past years’ experiences that, on average, 50% of the state’s corn crop is typically planted over about a 21-day period. Furthermore, it is not unheard of for growers to plant 45 to 50% of the state’s crop in a single week given good working conditions.

Let’s not succumb quite yet to full blown panic triggered by the prospects of a delayed start to corn planting in 2011. “Mudding in” a crop early to avoid planting late will almost always end up being an unwise decision.

Anna Kaverman

Mercer Landmark

Today we are going to play a game of fill in the blank. Fill in this blank with whatever you see fit. Mother Nature you _________. I am sure there more than a few choice words that come to many of our minds when we talk about Mother Nature right now, myself included but I will leave it up to your imagination. I don’t have to tell any of you that the relentless rain is getting to be old news fast and the clock is ticking to get corn or any crop planted at this point. With next week being the last week of May many farmers are starting to seriously look into taking preventative plant insurance for corn. In this first of a two part blog we will first look at how prevent plant works for corn and in the second look at soybeans

Prevent Plant

CORN

  • The FINAL plant date for corn is June 5th
  • The earliest you can file for prevent plant is June 6th
  • Must file notice of loss no later than June 30th.
  • Claims- At least 20 acres OR 20% of unit whichever is less.
  • Prevent plant pays 60% of your guarantee.

EX: 150 APH at 75% coverage = 150 x .75 = 112.5 BU/ACRE

112.5 x 60% = 67.5 Bu. x $6.01 = $405.68 PER acre.

** OR PLANT BEANS INSTEAD OF CORN **

 TO QUALIFY-

  • Must have 20 acres or 20% of unit, whichever is less.
  • Maximum number planted corn acres in any of the past 4 years is the total number of corn acres that can be turned in as prevent plant acres. All acres over will go to prevent plant as beans will be paid as beans.
  • Only 1 prevent plant claim can be turned in per field per year.

EX: If you had a prevent plant claim in a field for wheat…You can’t have a prevent plant claim in the same field for corn or beans.

  • If you turn in a corn prevent plant claim and on July 1 you decide to plant beans (heaven forbid the weather would keep you out until that date), you will lose 35% of your prevent plant payment. You must insure beans and it WILL effect the APH on CORN.
  • Cover crop on pp acres – You cannot graze or hay before Nov. 1 or you will have to pay back 65% of the pp payment.

 I just want to reiterate that I am no crop insurance expert and that was not my intent with the blog post. My intent was to inform. So please be sure to meet with your agent before making any decisions and review all the particulars that I may have missed. They are very well versed in this subject and I am sure can answer any questions you may have. In the mean time let’s hope the weather straightens out and we are able to get the crop in soon.

Anna Kaverman

Mercer Landmark

It doesn’t take a scientist to know that we are in no man’s land between the bulls and the bears of the grain market. With each passing day each camp is becoming more convinced of their position and as a result volatility is at an all time high. This increased volatility has caused the CME group to propose raising the daily corn limits. They are making this proposal to ensure that the market trades while allowing for price transparency and that limit moves are infrequent so as not to prevent price discovery. Basically, corn is moving to high, too fast. Currently, the corn price daily limit for futures and options is $.30. The current trading limit of $0.30 per bushel works to regulate speculative runs in grains. In recent months, like I mentioned earlier corn futures prices and volatility have increased significantly. In the first quarter of 2011 alone, 36 corn contract months settled at limit bid or limit offer, compared to 36 corn contract months settling at limit bid or limit offer in ALL of 2010. Wow! That is staggering.

This proposal was met with outcry from grain buyers, livestock feeders and other commercial customers. They expressed concerns that expanding corn’s daily limits would make an already volatile market subject to even wider price swings by boosting the amount of money, or margin, required to be posted as collateral against losses. Glen Semple, vice president of commercial lending with Farm Credit Services of Illinois, said “The proposal to increase the daily limit on corn futures contracts will require hedgers to hold much higher levels of working capital and arrange larger lines of credit in order to be in position to withstand the increased price volatility.”  The proposal will also increase the cost of doing business through higher margin requirements, higher interest costs due to larger borrowings, higher unused commitment fees charged by lenders and potentially could reduce an elevators willingness to offer forward contracts due to higher price volatility. All of which mimic what happened back in 2008.

Livestock producers who rely heavily on the ability to hedge grain and soy protein inputs in order to adequately manage operating margins also are opposing the increase in price limits and margin risks. For now in response last week the CME group revised its proposal to increase daily price limits for corn futures and options to $.40 per bushel, down from its initial proposal of $.50. The CME is awaiting approval from the Commodity Futures Trading Commission, the U.S. futures regulator, for the proposal.

Anna Kaverman

Mercer Landmark

With Mother’s Day coming up on Sunday I thought I would take a minute to reflect on the most important woman in my life and that is my mom.

My mom, like other farm wives and moms, is not the principal operator of the farm or the farm equipment. She doesn’t do the marketing or even keep the books…but she is still the most important person in my dad’s life, the family’s life and especially my life. When you are a farm mom, you don’t always get the luxury of having a babysitter, so I remember spending my fair share of time napping in the tractor cab. Mom worded a lot ground in my grandpa’s old John Deere.  Before my brothers were old enough to help my mother always ensured dads corn, beans and wheat ended up at the elevator throughout harvest. She was the regular grain trucker, sitting at the edge of the field with a truck and hopper wagon waiting for my dad to dump the combine hopper and make another round. Then she’d be off to the elevator to dump and start the process over day after day each harvest.  Mom also always ensured dad or us never went hungry either, even if it meant wrapping a sandwich in aluminum foil and bringing him a Pepsi. From the time she became a farm mom to four children, she had us enrolled in 4-H.  She even spent countless hours helping us break the livestock, chasing animals around the barnyard and was a regular fixture at the county fairs as we proudly showed our livestock.  

Without my mom making the effort and sacrifices she did, the farm wouldn’t have been the same. And I wouldn’t be the same either. Now I’m not a farm mom yet, but there is also a different category in which I will belong that we sometimes forget about—one who decided she wanted to explore the off-farm working world for benefits and personal desire. Regardless of who you are, you’re a farm mom if…

  • You’ve ever picked up a crank shaft, gear box, planter part, disk blade or any other mechanical item from the local tractor dealer.
  • You’ve ever hauled your kids to a 4-H or FFA meeting, telling them that this was an important part of growing up and knowing how to be a ag leader and good citizen.
  • You’ve ever gotten ready to go to a party, dinner or outing with your husband, but had a change of plans once he heard the weather forecast.
  • You’ve ever gone to bed wishing for the rain to come or the rain to stop so the seed planted yesterday could make it out of the ground.
  • You’ve ever held dinner a couple hours after you planned to eat because a hose broke on the tractor or combine.

If you’ve ever done those things and so much more around the farm and your community, you are a farm mom. There are many farm wives and moms these days in both categories of full time farm moms and off farm but either way you are needed, appreciated and most of all loved!

Anna Kaverman

Mercer Landmark

During 2008, grain markets were almost as high as they are now or higher, however, many farmers were not able to take advantage of these prices either through already having their crop sold or because they didn’t act.

I know I haven’t been trading for an extremely long time but I have been long enough that I cannot count how many times I have heard a farmer in my office or on the phone tell me “I will sell my crop when it reaches $5 a bushel (or some other round number).  This year the magical number seems to be around $7.00. Crazy! As you can guess, it usually reaches $4.95 and then turns around and drops to $3 a bushel where the farmer will then sell the crop to pay for next year’s inputs.

 Believe it or not this can be prevented! Right now any grain crop farmer should be able to lock in profits for this year and potentially next year.  Make sure to review your cash flow projections, average sales and if you have not locked in any profits and at least consider locking in all of your input costs. If you haven’t contracted something, I urge you to contract at least a portion of what you think you are going to produce because when the weather breaks, chances are the market will too. If futures do not basis levels may. If you aren’t ready to sell quite yet, make a list of open orders and leave them with your grain merchant before heading to the field because you will have enough to worry about. If you still want to participate in any upward major moves, you can purchase call options on your crop.  There are several services that can help you with this. Market Max is also a way to do this as well but without a hedge account or trading 5,000 bushels.

 Before the weather breaks, all heck breaks loose and planters are running around the clock I urge you to prepare yourself.

This year try to be the $5.00 and $6.00 farmer and not the $4.00 farmer because no one ever dis-liked locking in a guaranteed profit.

Anna Kaverman
Mercer Landmark

The other day I had a friend tell me that he could become rich this year if he invented a life jacket for his seed corn. This made me chuckle but I am really starting to think there is some truth behind it. I don’t have to tell anyone that all this rain is getting to be old new fast.

These days weather has became one of the main market moving factors. Last Thursday’s forecast was for drier weather and the grain markets tumbled. On Friday, rains reentered the forecast and they shot back up. The fact is we are running out of delay days and time when we can get the crop planted in a timely fashion. We keep looking 10 days out and then we look another 10 days out and so on and so forth. As rains persist across the Midwest, and snow is falling in North Dakota, fears are mounting that corn acres may not be enough this year. That concern starts in the Dakotas, where it was anticipated 35% or 1.4 million acres of the four million-acre increase in corn production would come from. This in turn puts pressure on their corn-producing brethren to the south, who are also experiencing their own planting delays due to continued cold and wet weather.  

With all of this in mind some are beginning to wonder whether we can even meet last year’s planted acres, let alone the increase totally. Can the weather warm up quick enough in Iowa, Illinois and Minnesota, where they do plant a lot of corn to make up the difference and plant another million acres? The incentive to do so is definitely there. As we progress into May our chances for a normal crop are dropping fast. We cannot compare this year to last year because it was an exception. Normally, 46% of the U.S. corn crop is not in the ground by the last full week of April. Normally, 23% of the U.S. corn crop is planted by April 24. But, this year, only 9% of the country’s corn crop was tallied as planted. This year we will be lucky to be beyond 15% planted tonight in the Crop Progress report. I think the crop will get planted, but it’s going to get planted obviously later than last and in less-than ideal planting conditions.

One analyst has went as far as saying that he thinks even if good weather prevails over much of the corn-growing states this week, 90% of the corn crop will not be planted by the third Monday of this month. There is no doubt in my mind that we will be planting a lot of corn in the Eastern Corn Belt in the later part of May. A lot of which has the likelihood of being planted in a cool and wet period, which is expected to be followed by a warm and dry pattern. Mother Nature has a history of going from one extreme to another and this year appears to be no exception.