105 – Commodity Deflation or what the hell happened to grain prices?

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Commodity Deflation

Grain prices suck right now.commodity deflation grain prices

And, Fertilizer Prices Increased ??????

OK, where am I going with this.  Profitability in farming is going into the tank right now.  Talked to a very good farmer and with him using $360 an acre cash rent, which could be low for his area, he needs over $10 and close to $5 for a break even price.  And, he was using 68 and 220 as yields for soybeans and corn.

Now, he is not in trouble he owns enough of his own ground to get through this, but he is in a “big farmer / high cash rent district” and on many of his neighbors it is going to be tough.

Consequences????

Only 86 million acres of corn gets planted.  Not as much seed corn has been ordered let alone paid for as in the past.  They know what the numbers are and from what I hear that is leaking out it is not good to be a seed corn salesman this winter.

Of course at $300 a bag for seed of  commodity that is half in price what it was 2 years ago is hard to swallow.

$3.74 and $9.57 is not allowing for a profit on the above cash rent acres.

Now the fertilizer guys are figuring that we did not get it applied in the fall so they can charge us more for it in the spring.  They also can send the fertilizer to South America.

And, if we don’t plant the corn and plant more soybeans do bean prices go into a free fall?????

Do acres way out west even get planted to something this year when the prices they have out there because of transportation issues are at a loss level????

Looks to me spring wheat may be their best option.  Grain prices are really low in the northern plains.

Insurance levels are at a losing point in many scenarios right now.

Good elevator manager told me today $3.75 cash corn will buy a lot of bushels if it ever gets there.

Where does one start to price new crop??????

Cycle lows due about now?????

corn mid Feb. 20 &40 week lows

wheat mid Feb. 20 & 40 week lows

soybeans 3 year low last fall 16-18 week low about now

These ideas are from a very good commodity adviser.

But, do we rally much from here????  Most farmers are in the “hope so” column.

Livestock well off their highs.  Beef expansion is underway and more than the experts expected.

Oil is lower and will help with some costs, but not near as much as the general commodity inflation that is underway.

Baltic Dry Index made a big low today.  Does it go lower?  Why is it important?  Back to 1986 levels.

Greece is an economic mess.  So is much of the rest of Europe.

U.S. Dollar is going up in value which lowers the price of all things in dollars.

High US dollar in the 1980’s really killed agricultural exports.

Ukraine is a mess, French tanks are heading to Poland, Ukraine is moving its tanks east.  Russia is totally dependent on energy prices.  Will Putin go down without a fight?

US stock market looks toppy????

Look what happened to the Swiss currency.  Is Hong Kong next????  What about the 800 pound huge Nation in the world China??  They are buying lots of agricultural stuff.  Lots!!!!!!

Gold and Silver, have they put in a bottom???

So what is my marketing and crop insurance plan???

Am I in my 1980’s survival tactics????

 

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104 – ARC or PLC which to choose in the FARM PROGRAM

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New farm podcast on the latest info on the FARM Program

I say episode 105 but it is 104.

Get into the FSA office now and prove your yields if you can and update your base acres if it is in your best interests to ARC PLC SCO FARM Programdo that.

Remember FSA has the actual rules not a lot of these other “experts” who may be giving you their own interpretation of the rules.

You also can use the “plug” yield in certain cases where you do not have any evidence of what the actual yields were.  Talk to a good FSA employee about what your options are.

You have to get your base and yield updates done before you decide which program option you want.

ARC or PLC which is better?

Depends on many factors or just a few factors depending on your situation.

In my neck of the woods most will take ARC county.  In other parts of the country with other crops PLC with the SCO insurance option will be the best option.

PLC with SCO may work in my neck of the woods on high risk farms for corn acres.

Remember you can elect different options on different crops on different FSA farms unless you choose ARC individual which would be all farms all crops thrown in together.

For me forget all the details and scenarios, ARC county will be the choice on all my farms and crops except maybe corn on a high risk farm.

One final thought on ARC vs PLC

Do not forget about payment limitations.  $250,000 per married couple.

So you are a big farmer lots of corn acres and you get a year with $50 per acre ARC payments.  At 5000 acres of corn you hit the payment limit.  Seen some big farmer cash flow predictions with 2015 crop year {paid in October 2016} payments of $60 per acre.  But, don’t forget you will limit out at $250K.

So if you have lots of acres you may want to hedge a bit and put “excess” acres in PLC.  So, if prices go completely to crap you get maximum payments early off of ARC and as the ARC formula goes down in the out years you pick up payments from PLC.  Of course if losses are very “shallow” through the entire farm bill you could leave $$$$$ on the table.

Remember ARC is revenue based, so if you were like me and your county had tremendous yields in 2014 we probably will not see a payment for the 2014 crop year since the bushels help make lots of revenue, even at lower prices.  If your yields were just so so you may get a payment in your county if the price average is not too high.

PLC is strictly price based.  For soybeans and corn at a price level that is way under what we have been getting the last several years.  But for other crops it may work very well.

About SCO insurance

I am still trying to get all the SCO details, but talk to a good crop insurance agent about this before you decide to go into PLC.

On my high risk farm if SCO works the way I think it will I will give up some potential ARC payments in return for a much better and more affordable crop insurance option on that farm.

More things to think about on proving yields

Double crop acres

Failed acres

Subsequent acres

they all need to be discussed with FSA

Get into your county office and get this started.  First of at least 3 trips.

Still need to sign up for which option you want after you update base and yields.

And then you still have to sign up for 2014 and 2015 actual farm program sign up.

You also have to get lots of landlord’s signatures.  Or use POA’s if you have them.

Editorialsecretary of agriculture vilsak

Vilsack has grand designs on where his career will go in the future.  I also think he takes a lot of advice from the farmers union crowd in Iowa.  He also holds lots of farm program decisions very close to his office.

He may be best remembered as the first Secretary of Agriculture that does not get a farm bill implemented for all farmers in a timely fashion.  Lots of deadlines coming up, FSA help is stressed and stretched thin.  Lots of veteran help has retired and morale is not high.

So as a farmer get into the FSA office and get this done ASAP.

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103 – High risk discoveries 2014 Farm Bill

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New Discoveries for high risk farms in the Farm Billhigh risk fields

So, you farm corn and soybeans in the Midwest and you are going to choose ARC county for all your acres.  Not so quick.  If any of these farms have high risk ground you may want to re think that.

I go over why on a high risk farm I am going to go PLC for the farm bill choice, at least the corn acres.  It has all to do with SCO- supplemental coverage option for crop insurance.

Listen and enjoy the farm podcast.

It really shows why for those high risk acres without high levels of affordable insurance that are in the then chairman of the House Ag Committee’s district., why he wanted 2 options for every program participant.

It really gives farmers with high risk acres cheap affordable crop insurance.  Of course now loss ratios are going to be much higher and the anti farm bill crowd will go after crop insurance.  But, hey get it while you can.  As many learned in 2012 you can make more money with a disaster than you can with a big crop.

How did I figure this out?  One I do not always sleep at night. I just run numbers in my head. Then I went to my very good crop insurance agent and looked at the quotes. That sold me on it.

Give up those big ARC payments?  You bet, in 2012 the crop insurance with SCO would have given me $420 more per acre, on high risk ground.

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2014 Elections -What is an Agricultural take on this.

Predictions

OK, these are my predictions on how the 2014 mid-term elections are going to turn out and what it may mean for Agriculture.

Sorry this is not done as a podcast, but a wet muddy, very muddy harvest is still underway around here.  And yes, we have a 40 that still has water in the road ditch, been that way since the first of September.  It may just have to freeze for some of it.

Ryan & Edward

Ryan & Edward TN farmers

Republicans keep the house and go over 245 seats.  Which means without a huge wave type election in 2016 for the democrats, the republicans maintain control of the house until at least 2022 when new redistricting takes place to reallocate the house seats based on the new 2020 census.  Money and effort will probably not be there for the dems to make a charge at the house republicans.  Thank you to “we have to pass it before we read it” comments that will in the history books will go down as what really started the dems slide backwards in the House of Representatives. Just for the record 245 is a huge number.

The Senate is the big prize and the Republicans win control somewhere between 52 and 55 seats.  This number is big because 2016 is a Presidential year and democratic voters seem more motivated to vote in these elections.  Why you ask is the margin of victory important.  In 2016 Republicans have to defend 24 of the 34 seats up for election that year and 3 of those are going to be very hard for the Republicans to hold onto.  If only 52 this time, minus the 3 then Republicans are in the minority again.  Very, very outside chance at 56 to 57 but that is a perfect storm type of scenario.  Other side it all has to go the dems way along with a lot of ballot stuffing for them to maintain nominal control of the senate.  50-50 ties are broken by the vice-president so in a tie dems really win.  Joe Biden has a real job again.

Side note on ballot “stuffing”.  Now one just has to know how to program the screen so the “right” votes get counted.  Great quote from Joseph Stalin ” its not who votes that matters its who counts the votes”.  I could go off on 500 words that a ballot is an actual piece of paper that can be stored for an historical record not a touch screen.  Of course the touch screen makes it so you no longer have to dump ballot boxes in the Chicago or Des Plaines rivers.

Democrats “Winning While Losing”?

So in every election where you know you are going to lose you pick some place to “hold the line”.  Which I believe the dems want to keep the republican gains in the Senate to no more than 52.  They have 2 more years where Obama can veto anything the republicans do that try and roll back anything that they have done (move the country farther to the left, more socialism) and if they then can take back the Senate in 2016 they can “veto” any attempted roll back then also.  Would not matter who wins presidency, only if we move farther left or just keep from rolling it back. So nothing gets done, but ratchet the country farther and farther to the left and then hold the line against any roll backs.  This is the main reason I see conservatives quit politics, the dems just wear you out and wait you out.  This is a 100 year strategy not something a one time tea party election will reverse.  This is not a knock on the tea party.  I also explain this to great business people and then they really get disgusted with politics.

I also believe that Obama and the national democratic machine, which is now very similar to the Cook County democratic machine that has just about ruined Illinois also have one other “line” they would like to hold.  That is they would like or should I say need to defeat Thompson who is running for re-election for Governor of Wisconsin and win the Governorship again in the, and I use this term loosely, “home” state of Illinois.

Effects on Agriculture

House becomes more republican and more conservative.  Look for a few people to get even with Collin Peterson and some of his farm bill policies especially the dairy portions.  These will not be other house committee members but suburban lawmakers from very conservative districts.  Look for hearings into what Vilsack has or has not done on a couple things.  Rs may try and not fund some white house priorities.  USDA climate hubs may be on that list.  COOL and GIPSA are on a short list to be deleted.

Senate stops most of these attempts to not fund stuff especially the white house “priorities”.  Real battle may be for control of the republican side of the Senate.  Will the mainline republicans or true conservatives really run the show over there.

Obama will now be able to really show what he has wanted to do as President through executive orders now that he has no more elections to go through.  Immigration, health care, pardons, and a whole lot of other stuff that may not help the mood in Washington.  This long term does not bode well for bipartisanship working on the next farm bill.

In the Senate I look for southern Senators to dominate agricultural policy.  This may not be done from the ag committee, but a southern influence will make sure crops like rice and cotton continue to be well taken care of.

Ethanol supporters who have courted Midwestern democrats could see some western conservatives “go after” anything that helps ethanol stay competitive in the market place.

The last thing that I think agricultural groups need to think about is that Congress is becoming more suburban.  Suburban constituents have less at stake than most rural and inner city people do.  While many rural people do not directly get government farm payments, many indirectly benefit from them.  Lots of inner city constituents get food stamps.  Now some suburban residents get food stamps and a few may work in an agricultural related industry and once in awhile you run into somebody who owns a farm that gets program payments, many do not benefit in anything of a direct way from program payments.  There lies the problem with passing future farm bills and why many agricultural groups do not want to split the food assistance program away from traditional farm programs.  Even though food assistance makes up over 80% of farm program spending.

 

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102-Young Farmers

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FFA – New Century Farmeryoung farmers

The last two summers I have made a presentation to the FFA – New Century Farmer conference.  I really enjoy doing this.

In this podcast I go over the questions I always get asked when speaking to just starting out producers and what I tell them.  I also raise questions that I really do not have an answer for.

I also ask them questions, such as “do you really want to farm?”  I also ask them if they and their family are ready to sacrifice to make this happen.

Times have been very good the last few years and that will not always be the case.  Just want to make sure they understand that.

Enjoy this one.

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