Farm And Ranch Country Posts

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Farm BoysHow many farmers do we really need?

It is personal to us, at least one of our children wants to farm.

Farm And Ranch Country

“Beginning” and “Young” farmer may not be the same thing, many beginning farmers have already retired from a 30 plus year career in another job.

How does less farmers affect ag-businesses, farm organizations, politicians, bankers, agricultural retailers, manufacturers, etc? How more dependent on your customers does your business become when you used to have lots of small to medium sized customers, compared to the future when you will have very few, but very large customers?

Agriculture continues to do more with less, which translate into increased productivity per person.

Traditional commercial production agriculture does not need a bunch of “new” farmers. 210,000 (less than 10% of the total number of farmers) farmers produce 85% of total farm production in the United States.  The other 90% have room to grow to join the 10%.

Non-traditional, such as organic, grass fed, local sourced, is one growth area for “new” farmers, but it takes a different kind of farmer than what many “new” farmers from traditional backgrounds want to do. This type of agriculture is only about 1% of total production and is generally located near large population centers.  As long as people have excess money to purchase food, this type should grow in numbers.

Every farm group, political entity, agricultural journal, etc. either has a “new” program for “young” farmers or is writing about wanting more farmers.  Is this concern about farmers or about the survival of themselves? Less farmers probably means less of them.

crop insuranceWith March Madness upon us, no not basketball, but getting ready for spring planting, a major decision is what kind and at what level do we purchase crop insurance for the coming year.

The crop insurance industry has consolidated several different products into fewer major policies, but these “simplified” policies still have many decisions and coverage levels to choose from.  There have been lots of meetings to go to and “experts” to listen to, but we still have to decide what to do by March 15th.  Prices of crops have now been set (February daily closing average price) at $6.01 for corn and $13.49 for soybeans.  Wow, those are high, but so is our cost of production, have you bought any diesel fuel lately?

The high prices for crops means higher premiums, but also higher dollar amounts of coverage.  We had 85% level coverage with enterprise units (all units in one county of that crop added up together), crop revenue coverage last year.  Enterprise units helps lower the premiums, but also lowers insurer’s risk.  At our yields and these price levels we are insuring very good dollar amounts of coverage per acre.  But, the cost will be substantially higher than last year.

There are also all kinds of other crop insurance products out there. GRIP,GRIP HRO,  GRP, CAT, are all different kinds of crop insurance policies that are all different, but are used to mitigate risk for farmers.

Are we bored yet?  Have you decided what you are going to do on your farm?  We have.  We will go with RP (revenue protection) at the 85% level and use enterprise units.  I have a few new landlords who do not have yield production history who will stay with GRP (group risk protection) a few more years until they have yield data we can use on an individual policy.  Another landlord will go with the 85% level and two others at around 75% level RP.

Last thing to do is get all the signatures, check that all the social security and EIN numbers are correct, along with correct addresses, and what ever else needs to be done all by March 15th.

If you think this is fun just wait until I describe signing up for the farm program for this year at the county government office (Farm Service Agency/USDA).

My final comments – of all the “farm programs” that the federal government spends money on, this one, crop insurance is the one to keep.  It is run by private companies, sold by private crop insurance agents, and only is the premium subsidized by the government.  This may not be popular to many government employees, but let crop insurance agents do acreage reports like they report crop yields and keep this one program that only pays you if you have an actual loss and the farmer still has to “stand” the first part of any loss and the farmer is paying the bulk of the premium money.  When times are tight you really only need to hold onto the essentials and this risk management tool is very handy to have around.

 

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Tea Party has changed the Farm Bill debate in ways many in agriculture are Farm And Ranch Countrynot even thinking about.

The Tea Party has a lot of its strength from rural areas.  Rural areas get the majority of farm Bill monetary benefits.

Conservative Republicans have always been against spending big dollars on benefits of all kinds, but have been caught between a rock and a hard place when it comes to the farm bill.  Rural areas do not like to spend “welfare” money, but farmers and rural people do not necessarily look at farm payments and things like ethanol subsidies as “welfare payments”.

Between the Progressive liberals  which can defeat or weaken most democrats in their primaries and Tea Party Republicans that can defeat or weaken most republicans in their primary, politics is being drawn out to the ends, not the middle.  Not that this is necessarily bad, the people of the United States need to decide what they are, socialists like Europe or Free Market, Freedom loving people that this country was for its first 150 years.

The “middle” is losing ground which is not good for USDA funding, note I did not say bad for agriculture, just bad for USDA funding.  The middle is where things for years was done – but people in the middle did not always survive.  They did it for the greater good.  But, starting with the liberal republicans and then to the “blue dog” democrats the middle went into protection mode.  All for the benefit of itself not for the country.

Now with the Tea Party on the right and liberal groups, such as the Environmental Working Group on the far left, it will be interesting how and with what elected officials come up with for a farm bill in the next 2 to 3 years.

Add it upHow does USDA come up with 10 million more acres planted to crops this year?

A friend asked me how USDA can come up with these numbers.  I will try and explain.  Remember $7 corn and $13 soybeans and cotton at never before all time highs will get some big yards plowed up for crops this year.

Here is the math,

2.5 million from prevented planting / Last year prevented from planting acres were about 2.5 million over normal.  So, if we have normal weather those acres should get planted.

1 million plus from CRP / CRP (Conservation Reserve Program) contracts are expiring this spring on about 4 million acres, of course some of those very same acres were re-bid into the program during the just concluded sign-up.  But, some acres are coming out and did not get accepted or land owner did not put in a bid, and most all acres that are “new” to the program will not go into CRP until October 1.  Plenty of time to produce a crop.  My guess is a million plus or minus a few acres into production this year.

2 million extra double crop / More wheat growers will push the envelope on planting double crop soybeans and maybe some sorghum following winter wheat harvest this summer.

4.5 million out of pasture and hay ground / Lots of cows have gone to market in the last 12 months.  Several ranches in places like South Dakota liquidated herds numbering 4000 head or more and all that grass is going to crops.  You can make more money and it is a whole lot easier than raising cattle.  Pastures in western Illinois are going to crops.  We have a good friend who lost 2 pastures this year.  Hay ground will go to crops, sell half the cows, bale for hay half the pastures and you plant more corn and soybeans.  Lots of hay ground in western Illinois, southern Iowa, and northern Missouri last year was going to have one crop of hay taken off it and then planted to soybeans.  Only problem was it started raining during the late spring, hay could not be baled and crops could not be planted.  This will be done this year.  East Texas ground in grass will grow 100 to 125 bushel corn this year if weather cooperates.  Lots of acres there.

Problems with this?

Cotton is attracting more acres everyday from corn and soybeans. Cattle prices are rising and some will look to the future and keep the cows. Prices for breeding stock at the Iowa Beef Expo were very high. Failed wheat acres will be planted to something out west, prices are just too high. May lead to a few less double crop acres, but full season crops will yield more. May see an increase in irrigated acres as with higher prices a farmer can afford higher priced water. Prevented planting may though look very good this summer if we have a bad stretch of weather, because crop insurance guarantees will be high and if prices fall into summer prevent plant may look attractive if farmers cannot get the crop planted.

So my guess is USDA will get at least 10 million more acres of crops planted, or it will be until January 2012 at least until they admit they didn’t.


Just a short note today. Egypt, how does this affect American Agriculture? I will blog on this in a day or two. Need to let the dust settle. My first thought is that Israel and the radical elements in the Middle East will be at war by the end of October. I could be really wrong on that. At least I hope and pray so. How will these events affect agricultural markets and what is the macro economic effect? This event could be looked at as a major point in history or as a small blip in the road of world history. Unless of course you are directly effected by these events. Thoughts?/Comments?