Friday, December 21, 2012
Monday, December 17, 2012
Eastern Iowa Rent Up
Eastern Iowa Airport raises cash rent for farms on strong land demand- 2k acres at $400/ac renewed to same 5 farms. http://t.co/i8ydJftT -- Farmland Network (@FarmlandNetwork)
Rudolphi's Burning- December '12
Rudolphi's Burning on
News From The Coffee Shop
December 17, 2012 1:03 PM
In the Rearview Mirror
The old adage is that hindsight is 20/20. In farming there are many opportunities to look back and say to ourselves “If only”. “If only I would have sold!”.… “If only I would have waited”…. “If only I had back the money I sent the TV preacher who was screwin’ the hockey player!” (Name that movie and I’ll give you a nickel)
On the other hand, there is always enough work to be done, and enough plates to keep spinning that it is many times easier to just shrug off our bad decisions and continue plowing forward in a hurry to make more of them. I believe that it is important for all operations and producers to take a little time to sit down and really analyze what is working for them, what is not, and the reasons why.
I am not suggesting that you sit around and dwell on the past, agonizing over missed details and getting yourself into the kind of depressed state that only a 3 day bender can cure, (by all means you don’t need an excuse to go on a 3 day bender!). But rather take a hard analytical look at what went right, what went wrong, and how you can position yourself and your operation to do more things right in the upcoming year.
2012 in Review
To provide some food for thought, here is 2012 as I remember it. Perhaps other events and milestones stick out in your mind, and that is great. Feel free to share a few in the “Comments” section.
January— It wasn’t very cold, actually unseasonably warm. Not very snowy or icy either. The old crop markets were staging a rebound off of their fall lows and gaining speed due to dry conditions in South America. All in all spirits were pretty high coming off a good crop with good prices in 2011.
February— During the month we established the crop insurance guarantees. $5.68 for corn, $12.55 for soybeans. Both of which looked “Ok at best”, coming off of some of the prices received throughout the 2011 crop year, these seemed fairly mundane.
March— The news was released that farmers that the intentions of planting 96 million acres of corn. The new crop bulls were put out to pasture almost immediately in anticipation for a record corn crop. Livestock producers’ mouths began to water a little bit, while there was a little uneasiness amongst the row crop community.
April— By and large a really nice month in which a lot of work got done.
May— Just a continuation of April. Mid-late May, Iowa really looked good, work was completed in a very timely fashion, and the crop was off to the races. The first article of “Rudolphi’s Burning” was released, which will prove to be a valuable source of information and entertainment for many in the months to come.
June— We lost our dear friend Mark Pearson and it all kind of went downhill from there. The rains became increasingly scarce. We started to observe a few symptoms of dry weather that we had not seen in many years. Symptoms such as weeds escaping soil applied herbicide due to insufficient moisture for recharge; even glyphos treatment took a long time to take effect because the plants were in such a defensive mode. The hog markets rallied, the basis exploded, and despite corn inching upward, it was an enjoyable time for people selling pigs.
July— The water shut off for good. Across Iowa we had an extreme case of the “haves and have-nots” as there were pockets that received lucky showers, and other that just watched their crops wither away. Farmers begin to alter their production plans, cancelling planned fungicide and insecticide applications, content to just live to fight another day. Prices and basis levels for both old and new crops begin to climb higher and are on the brink of all time records.
August— Rains return and the air cools down providing some much needed relief. For the soybeans this is just what the doctor ordered. Most people are under the belief that the corn is toast and that the rains are just too little, too late. Corn climbs to $8.00 and stays there for a little while. Anyone with old crop corn or soybeans to sell is receiving record cash prices.
September—The combines begin to roll. Some are pleasantly surprised, others just as they predicted. Yields and outcomes are variable from field to field. The election heat really starts to turn up.
October—Harvest continues at the fastest pace on record. Yields remain fairly spotty, and the growing sentiment is that “It isn’t as bad as we thought”. Sandy hits the east coast, wreaking some havoc in the market place. We all watch on TV as a resilient group of people begin to piece everything back together after a natural disaster.
November—Harvest wraps up, the election takes place. For many the harvest outcome is better than that of the election. For the most part the markets are stagnant. While the markets are at very high historical levels, they seem boring and in need of some fresh news.
December— The legislators and the President continue to bicker, go round and round, and seem to get nothing accomplished. They seem to forget that their decisions actually do have significant impacts on the planning of the businesses that run the economy. We find ourselves discussing, worrying, and complaining about what might be the outcome of all of the last minute rhetoric.
And then the unthinkable happens; some big time loser with his mom’s guns does some really horrible stuff. We are forced to take a step back and realize just how easy it is to get caught up in our day to day battles and lose sight of just how bad things and people can be. Nobody in that classroom really cared about the fiscal cliff, tax policies, weather patterns, or the price of corn.
As you are sitting down to analyze and review what is working, and what could be working for your operation, please don’t forget to think about who is important in your life and livelihood.
Make sure they know just how important they are.
Editor's Note:
Rob Rudolphi resides in Eastern Iowa with his lovely wife Tara, where he is involved in several agricultural businesses. They currently have no kids, no dogs, and certainly no cats, and are generally up for anything involving a good time!
Rob Rudolphi resides in Eastern Iowa with his lovely wife Tara, where he is involved in several agricultural businesses. They currently have no kids, no dogs, and certainly no cats, and are generally up for anything involving a good time!
The mission of the column is to advocate agriculture, entertain (provided that you are entertainable), serve as a catalyst for critical thinking, and challenge the status quo amongst the agricultural community.
If you have a idea that would make a good "Burn Topic" for next month's Rudolphi's Burning column, please email the idea to prburmeister@gmail.com All entries will remain anonymous.
Thursday, December 13, 2012
Attention: Snowmobile Fans
This year the DNR is requiring riders to carry proof of liability insurance with them at all times.
From Smith D&L Insurance- Independence, IA
Tuesday, December 11, 2012
Monday, December 10, 2012
From Scott Hingtgen- Jackson County, IA
E.C. Iowa: Dec 6th and still in the field. This is the latest I have ever applied NH3. There is just enough moisture to run. We have rain chances all the time, but as the rain heads are way it disappears(like it has all year).
Thursday, December 6, 2012
Wisconsin Hunting Trip
These incredible photos were posted at Hiawatha Bar in Junction City, WI.
The hunter is 6'1". The wolf is 165lbs. The buck was shot as he was
climbing down his stand to admire the wolf. Both harvested somewhere
between Marathon City & Merrill. The hunter believes this to be the
alpha male as it dwarfed in size the 5 others in the pack that gave him
shot opportunities.
The hunter is 6'1". The wolf is 165lbs. The buck was shot as he was
climbing down his stand to admire the wolf. Both harvested somewhere
between Marathon City & Merrill. The hunter believes this to be the
alpha male as it dwarfed in size the 5 others in the pack that gave him
shot opportunities.
2013 Yields Projected Below Trendline
A top agricultural scientist at a US university is predicting that US will see below trend line yields for the 4th straight year in 2013, the CME reported. The report stated that he expects yields to fall to near 147 bushels per acre vs. a trend yield of 160. The report cited that corn yield will continue to see the effects of last year's drought and 16 inches of precipitation will be needed between October and May to recharge soil moisture levels. Normally it takes close to 12 inches.
"It's looking likely that we will have a fourth year of below-trend U.S. corn yields. But not as bad as in 2012, but still below trend," Elwynn Taylor, Iowa State University climatologist, told Reuters Ag Forum, an on-line chatroom.
As seen on MarketWatchOnline.com
"It's looking likely that we will have a fourth year of below-trend U.S. corn yields. But not as bad as in 2012, but still below trend," Elwynn Taylor, Iowa State University climatologist, told Reuters Ag Forum, an on-line chatroom.
As seen on MarketWatchOnline.com
Wednesday, December 5, 2012
From Unknown
Thanks 4 posting bankrupt post. 2 bad most who read it won't learn from it! If u r conservative u get run over, and if u r aggressive u can go down along with those u pushed out with your greed!
Monday, December 3, 2012
BREAKING- Legend Bags Buck of the Year
 |
| Urbana, IA- Local woodsman, Jeff Manson stumbles onto record-breaking Whitetail buck during a recent push in Buchanan County earlier today. He cites choice of footwear and clothing as keys to the sneak attack. |
Friday, November 30, 2012
Corn Prices Higher, Then Lower in 2013
Societe Generale forecasts corn prices to average $7.38 per bushel during the first quarter of the year before falling to an average of $6.57 during the fourth quarter, according to its 2013 outlook. The price forecast is the quarterly average of the nearby futures contract.
Rabobank's forecast is more favorable to farmers in the first three months of 2013 with corn prices estimated to average $7.90 per bushel, factoring in a rally in January following the USDA Grain Stocks report.
However, Rabobank expects corn prices to fall 24% over the course of the year to average $6 per bushel in the fourth quarter. The key factor in that price decline, the Rabobank report states, is the corn production estimate of 14.1 billion bushel. That figures in a 0.7-million-acre increase in corn plantings to 97.6 million acres, with increases coming in the Northern Plains, displacing soybeans and wheat, and the Delta, displacing cotton.
"Our base-case scenario shows stocks-to-use rising to 13.6%, although we acknowledge significant risks to our return-to-trend yield forecast," the report stated, noting current drought conditions. Rabobank used a trend yield of 157 bpa in its forecast.
"We see corn demand and prices pressured on reduced usage for ethanol, further reductions in the U.S. livestock and poultry sectors, and less exports," according to Societe Generale's outlook. "However, prices are vulnerable to adequate South American production. If production there disappoints, prices will likely see upside risks to our current forecasts."
As seen on www.DTN.com
Tuesday, November 27, 2012
Powerball Winning Numbers
Tomorrow's Winning Powerball Numbers Are: 8, 17, 22, 29, 44 Powerball: 30 -- The Onion (@TheOnion)
Weekly Update- Scott Hingtgen
E.C. Iowa: Harvest is done. Some fall field work is being done, but that may slow down or come to an end around here as temps dropped to 11-15 F overnight. Fertilizer has been applied, as well as a fair amount of NH3 in the county. Supposed to warm up into the 40's-50's for daytime highs, but overnight temps are supposed to be in the low 20's. Now it's bookwork time to get ready for the taxman (President Obama).
Tuesday, November 20, 2012
Monday, November 19, 2012
Old Fashion Harvest
Amish near Edgewood harvesting corn the old fashion way. Photo taken by Thomas DeHoff on October 30. http://t.co/MsTz3iIu -- Mark Schnackenberg (@KWWLSchnack)
Why all the recent farmland sales?
New Taxes on Farmland Sales for 2013
By Peoples Company | Published October 12, 2012
We continue to hear questions from clients regarding potential increases in capital gains in 2013, and the new 3.8 percent Medicare surtax. With many rumors floating around, we wanted to share a memo prepared by Bill Hanigan, a shareholder at the Davis Brown Law Firm, regarding how taxes could impact farmland sales in 2013.
We hope this memo helps clarify the potential impact of the Medicare surtax, and a likely increase in capital gains on your personal situation. If you are considering a sale prior to yearend, there is a small window to schedule a fall land auction and successfully close the transaction before these taxes are implemented.
New Taxes on Farmland Sales for 2013
Bill Hanigan
If there is a chance that you may want to sell your farm, then you should think hard about getting it done before the end of 2012. There is a load of new taxes on capital gains and unearned income coming into effect on Jan. 1, 2013. The amount of new tax depends upon whether you were “materially participating” in farming. In any event, you must act soon to avoid some of the tax.
Coming New Years Day 2013, the new “Unearned Income Medicare Contribution” was enacted to help finance the healthcare reform act. The Supreme Court upheld the healthcare reform legislation in a 5 to 4 decision in 2012, so it is the law. Technically, it is a “surtax,” which Webster’s Dictionary calls “an extra tax or charge.” This describes the Medicare surtax, because it is a tax in addition to the tax you already pay on your capital gains, rental income, and other unearned income.
If you are materially participating in your farming operation at the time of the sale, then that is good. The new 3.8 percent Medicare surtax will not apply to your farmland sale. Furthermore, if you were actively engaged in farming for the 10 years prior to the sale, and you sold substantially all of your farming business, then you may qualify for the Iowa capital gains tax deduction.
Regardless of whether you were actively engaged or materially participating, you should expect to pay more capital gains tax in 2013. Any gain on the sale of a farm is a long-term capital gain if you have owned it for more than one year. In 2012, long-term capital gains are taxed at the 15 percent federal rate for most taxpayers. That rate will go back up to 20 percent on Jan. 1, 2013, unless Congress acts first, which is unlikely.
If you were not materially participating in your farming operation at the time of the sale, then that is bad as it relates to taxes at sale time. Beginning New Year’s Day 2013, you will add the new 3.8 percent surtax, and you won’t qualify for the Iowa capital gains tax deduction.
The Medicare surtax is complicated. For individuals, the 3.8 percent surtax applies to the lesser of “net investment income” or the excess of “modified adjusted gross income” over the “threshold amount.” Net investment income includes capital gains derived from the disposition of property – other than property held in an active trade or business – interest, dividends, rents and royalties. For single persons, the threshold amount is $200,000. Married persons filing jointly or separately have thresholds of $250,000 and $125,000, respectively.
So if you sell your long-term capital gain farmland in 2012, then your federal capital gains tax rate will be 15 percent. But if you sell it next year, then your combined capital gains rate will be 23.8 percent, subject to the thresholds. The extra 8.8 percent federal capital gains tax results from the combination of the expiration of the Bush tax cuts – thus bringing back the 20 percent capital gains rate – and the implementation of the new 3.8 percent Medicare surtax.
Let’s put some numbers to it.
Assume that a retired cash rent widowed farm landlord sells her entire farm in 2013, and reports a $1 million net capital gain from the sale of the farm. Assume that she also received $25,000 from Social Security and pension benefits. Her total adjusted gross income in 2013 will be $1,025,000. The 3.8 percent Medicare surtax applies to the lesser of the gain, or the amount by which total income exceeds the $200,000 threshold. Here, total income exceeds the threshold by $825,000 ($1,025,000 – $200,000). The Medicare surtax portion of her tax is $31,350 ($825,000 x 3.8 percent). Her capital gain tax will be $200,000 for a total federal tax on the sale of $231,350 in 2013.
Alternatively, if she sells this year, her 2012 federal tax would be $150,000 ($1 million x 15 percent). So she will pay an extra $81,350 in federal taxes for waiting until 2013 to sell the farm.
Additionally, the Iowa income tax applies to any gain on the sale of farmland located within the state. Iowa has no special capital gains tax rate. Iowa taxes capital gains at the marginal Iowa income tax rate. For 2012, the highest marginal tax rate is 8.98 percent. However, Iowa law provides for capital gains deductions for the sale of farmland sold in “the sale of a business” owned for at least 10 years, if the seller was actively engaged in the business. Generally, you have actively engaged in farming if you file IRS Schedule F. Cash rent landlords have not actively engaged in farming unless they have otherwise materially participated in any five of the previous eight years. The Iowa capital gains deduction requires “the sale of a business.” This means the sale of at least 90 percent of the business assets. Accordingly, the sale of a small part of the farm does not qualify.
If you are an active farmer and are not yet ready to give it up, then there is an alternative to the capital gains tax increase. You might sell your farm in 2012, and then lease it back for a long term from the buyer as part of the sales agreement. Title will pass to the buyer, but you stay on the farm and in your house if that is where you reside. You will avoid the additional 5 percent federal capital gains tax.
The Medicare surtax also applies to farm landlords. “Net investment income” includes farm rental income. The 3.8 percent Medicare surtax applies to that, too, subject to the threshold. In 2013, the highest combined marginal tax rate on farm rents will be 43.4 percent. This extra 8.4 percent federal tax results from the combination of the expiration of the Bush tax cuts – thus bringing back the 39.6 percent ordinary income tax rate – plus the 3.8 percent Medicare surtax.
If you want to sell the farm, it is not too late to avoid a bunch of new tax. The extra federal tax on $1 million of gain in 2013, assuming no other income, will be $80,400. If you sell during 2012, the tax savings should pay for the selling expenses, with some left over.
- Bill Hanigan
Bill Hanigan is a shareholder at Davis Brown Law Firm located in Des Moines, Iowa. This article is not intended to be a definitive analysis of the subjects discussed. Material contained within this article is only a general review of the particular issues and should not be considered as a substitute for advice from your attorney regarding your independent situation.
Saturday, November 17, 2012
News from the Coffee Shop @ Notre Dame Game
@newscoffeeshop representing at the Notre Dame game today! http://t.co/FwbQO3Pz -- Jon Blin (@jjbcattleco)
Thursday, November 15, 2012
Complicated way to say "It's raining more lately!"
Rain brings top foot of soil to capacity & begins to moisten soil at the 2' depth (Calumet, IA) http://t.co/cz40Cv1n -- Elwynn Taylor (@ElwynnTaylor)
Rudolphi's Burning: November 2012
Rudolphi's Burning on
News From The Coffee Shop
November 15, 2012 10:44 AM
Swingin' for the Fence
Throughout the fall I have heard differing opinions on approaching the 2013 crop year and differing strategies on how to maintain and build on the momentum gathered as a result of 2011 and 2012.
Goin’ Yard
One theory that I have been told is that the best is over, because farmers only have the opportunity to hit a Home Run 4 or 5 times throughout their career. Given that the typical farming career lasts approximately 50 years, under this scenario the farmer has the opportunity for windfall profits every 10-12 years on average. Another theory is that a producer needs to position themselves to hit the Home Run every 3 or 4 years, which would create the possibility of windfall profits 12-14 times throughout a farming career.
Under the first theory (4-5 homeruns in a career) it could be argued that 2 of these have been hit in the last 2 years, and 3 homeruns in the last 5 years if you go back to the 2007 crop with 2008 prices. Under this scenario, if a farmer started their career in 2006, experienced windfall profits as a result of the 2007, 2011, and 2012 crops, they have already experienced 3 of their 4 or 5 big years, and really should find a new line of work, because statistically their luck is due to run out.
One theory that I have been told is that the best is over, because farmers only have the opportunity to hit a Home Run 4 or 5 times throughout their career. Given that the typical farming career lasts approximately 50 years, under this scenario the farmer has the opportunity for windfall profits every 10-12 years on average. Another theory is that a producer needs to position themselves to hit the Home Run every 3 or 4 years, which would create the possibility of windfall profits 12-14 times throughout a farming career.
Under the first theory (4-5 homeruns in a career) it could be argued that 2 of these have been hit in the last 2 years, and 3 homeruns in the last 5 years if you go back to the 2007 crop with 2008 prices. Under this scenario, if a farmer started their career in 2006, experienced windfall profits as a result of the 2007, 2011, and 2012 crops, they have already experienced 3 of their 4 or 5 big years, and really should find a new line of work, because statistically their luck is due to run out.
The second theory (a homerun every 3-4 years) would be fairly consistent with what this farmer experienced in their first six crops. They just so happen to be batting better than average. Good players typically do.
If Albert Pujols had a crystal ball, and could look into it and foresee that he had no homeruns left, do you think he would waste anymore time playing baseball? Probably not, because he would understand that the history books will remember him as the greatest $250,000,000 flop to ever round the bases. Albert doesn’t have a crystal ball to understand his future fate, but one thing is very clear…he only will hit a homerun if he swings the bat, and he won’t get paid if he doesn’t produce.
So which theory is right? Which is more realistic? It all comes down to your tolerance for risk and your cash position. Those with a more of a stomach for risk will position themselves to hit more home runs, and if your cash is in order, risk is inevitably more palatable. However, opportunities can also be passed up because there is a cash cushion that allows a person wait for a better pitch, and sometimes the pitches just don’t come. Just like in baseball, the players that chalk up the most home runs or highest slugging percentage are typically amongst the players with the highest incidence of strikeouts.
What’s going to happen in 2013?
There are several things I don’t like about 2013. First of all, it is an unlucky number. Second, we will be installing an unfavorable president…..again! Ready or not, the CHANGE is a comin’. And it certainly doesn’t appear to be a favorable change for most involved in agriculture. Third, the gravy train has to leave the station sometime. To drive forward thinking that some way, somehow the economics are going to keep getting better is pretty far-fetched.
With commodity prices testing the limits of demand and our South American counterparts primed to produce with huge price incentive, it is hard to make a case that we will be given the marketing opportunities for the 2013 crop that we have experienced recently.
Now, with that being said, I am certainly not of the belief that a producer needs to run out and cover themselves for the next three crop years out of price fear. This would only limit opportunity as there are still way too many production and inventory variables to warrant drastic measures on that end. But, coupled with looming changes in government policy and tax law, producers do have a fair amount of strategizing to do in regard to 2013 and beyond.
The Tax Man is Coming to Town
Now, with that being said, I am certainly not of the belief that a producer needs to run out and cover themselves for the next three crop years out of price fear. This would only limit opportunity as there are still way too many production and inventory variables to warrant drastic measures on that end. But, coupled with looming changes in government policy and tax law, producers do have a fair amount of strategizing to do in regard to 2013 and beyond.
The Tax Man is Coming to Town
This is where the farm fields transform from food and feed production assets into tax-deferred savings accounts. There will be huge incentive to keep fertility levels high and the soil pH in balance due to avoiding the tax man. No matter the price of fertilizer, relative to paying more tax, it will essentially always be on sale at 25-35% off. All made possible by a coupon given to you by your Uncle Sam.
Swingin’ for the Fence
The incentive to forward purchase inputs has never been greater, and with good pricing opportunities, there has never been more incentive to throw the “Kitchen sink” at the crop. Rather than trying to be the least cost producer by trying to skimp by with the least amount of inputs, why not focus on being the highest output producer, with more emphasis on final yield-not necessarily for the least total cost per acre. In the end, the fastest way to reduce your costs per unit of grain is to increase your output.
Who knows…you might just position yourself to hit another homerun, and isn’t that the point?
Editor's Note:
Rob Rudolphi resides in Eastern Iowa with his lovely wife Tara, where he is involved in several agricultural businesses. They currently have no kids, no dogs, and certainly no cats, and are generally up for anything involving a good time!
Rob Rudolphi resides in Eastern Iowa with his lovely wife Tara, where he is involved in several agricultural businesses. They currently have no kids, no dogs, and certainly no cats, and are generally up for anything involving a good time!
The mission of the column is to advocate agriculture, entertain (provided that you are entertainable), serve as a catalyst for critical thinking, and challenge the status quo amongst the agricultural community.
If you have a idea that would make a good "Burn Topic" for next month's Rudolphi's Burning column, please email the idea to prburmeister@gmail.com All entries will remain anonymous.
Wednesday, November 14, 2012
NWSS Stayin' Put
The National Western Stock Show will remain in northern Denver, where it has been for 106 years, the NWSS explored options to move. -- The Final Drive (@TheFinalDrive)
Done with Corn Harvest 2012!
E.C Iowa: DONE! 2012 is in the books. Hope next year isn’t a repeat. Most everybody finished thursday/friday before the rain moved in on sunday (received 1”). temps on saturday hit 65-70F, todays low is 22F. From Scott Hingtgen
Tama Livestock Results
Tama Livestock Auction
Wed. Nov 14, 2012
1024 Head
Choice Strs: 125.00-132.10 (1610-1682 118.00-122.75)Select Choice Strs: 123.00-124.50
Select Strs:115-122.75
18 hd 131.00-132.10
57 hd 129.00-130.35
109 hd 127.00-128.50
66 hd 125.00-126.75
47 hd 123.00-124.50
Choice Hfrs: 125.00-131.50
Select Choice Hfrs: 123.00-124.85
Select Hfrs:118.00-121.75
40 hd 130.00-131.50
90 hd 128.00-129.75
46 hd 126.00-127.85
39 hd 124.00-125.85
37 hd 123.00-123.85
Choice Hol Strs:109.50-115.75
Select & Choice Hol: 106.00-108.00
Select Hol Strs:95.00-103.00
10 hd 114.00-115.75
16 hd 112.50-113.50
8 hd 108.00-109.50
Cows:60.00-77.00
Low Dressing: 40.00-59.00
Bulls: 75.00-88.00
What Will Be the Crop Insurance Guarantee for 2013?
The drought of 2012 has reinforced the belief in crop insurance for those who carried it this year, and established a priority for many of those who did not subscribe to it. Regardless which group you may be in, the question of what the guarantees will be are reasonable questions. If you sign up next spring, how much will you be guaranteed for Revenue Protection policies?
Crop insurance guarantees may well dictate cropping plans for some farmers; subsequently it is important to pencil in some potential marketing objectives for the 2013 crop, just in case a lender wants to visit with you about that issue. Or in the case of farmers whose crop insurance policies paid off in 2012, you may want to know what to expect in the coming year should they be needed. University of Illinois Farm Management Specialist Gary Schnitkey worked through the process of potential spring guarantees for crop insurance to forecast what can be expected when you visit with a crop insurance agent.
Corn
Since the spring guarantee is based on the market performance of the December corn contract during February, Schnitkey says the current guarantee price would be $6.35/bu., if the guarantee would be set now. But there are nearly three months before that would happen, and the price of December corn could vary widely between now and then.
But will that really happen, and has it done that in the past? While it is difficult to say whether it would happen, history shows how the price of December corn has varied from November to February in prior years. In 1975 it declined about 10%, but in 2004 and 2008 it increased more than 20%. Earlier in 2012, the spring guarantee was $5.68, and if the current $6.35/bu. were to substantially remain in place it would be the highest in history. Schnitkey says, “While large price declines are possible, most years have modest price changes or price increases. Historical changes suggest there is a much larger chance that prices will be above $6 than below $6.”
Soybeans
What about soybeans? Currently, the November 2013 soybean contract is trading about $13.40/bu. Would you be satisfied with a $13.40 spring guarantee for soybeans, and would you increase acreage with that guarantee in place? When Schnitkey looked at the performance of the November soybean contract between the fall and the following February, he said the largest decline was an 18% drop that occurred in 1976. But he is quick to say, “While large price declines have happened, historical data suggests the 2013 projected price will most likely be above $12.75.” His data indicate a nearly 20% increase in 2008, at the other end of the scale. Only four years of the past 40 have seen a drop in soybean prices between the fall and the spring of more than 5%.
If you are ready to sign up for those levels of spring guarantees, make an early appointment with your crop insurance agent. But also you should beware of the downside of high guarantees, and that is the cost of the premium. When guarantees go up, so do premiums. Although the USDA subsidizes and average of two-thirds of crop insurance premiums, higher guarantees lead to higher premiums. So that is the downside of that benefit.
Summary
Schnitkey says, “The 2013 projected prices for corn and soybeans likely will be near historically high levels, providing farmers will the ability to set relatively high per acre guarantees using crop insurance. These are possibilities for falling prices, particularly for soybeans. However, historical chances suggest projected prices will most likely be at high levels.”
As seen on farmgateblog.com
Crop insurance guarantees may well dictate cropping plans for some farmers; subsequently it is important to pencil in some potential marketing objectives for the 2013 crop, just in case a lender wants to visit with you about that issue. Or in the case of farmers whose crop insurance policies paid off in 2012, you may want to know what to expect in the coming year should they be needed. University of Illinois Farm Management Specialist Gary Schnitkey worked through the process of potential spring guarantees for crop insurance to forecast what can be expected when you visit with a crop insurance agent.
Corn
Since the spring guarantee is based on the market performance of the December corn contract during February, Schnitkey says the current guarantee price would be $6.35/bu., if the guarantee would be set now. But there are nearly three months before that would happen, and the price of December corn could vary widely between now and then.
But will that really happen, and has it done that in the past? While it is difficult to say whether it would happen, history shows how the price of December corn has varied from November to February in prior years. In 1975 it declined about 10%, but in 2004 and 2008 it increased more than 20%. Earlier in 2012, the spring guarantee was $5.68, and if the current $6.35/bu. were to substantially remain in place it would be the highest in history. Schnitkey says, “While large price declines are possible, most years have modest price changes or price increases. Historical changes suggest there is a much larger chance that prices will be above $6 than below $6.”
Soybeans
What about soybeans? Currently, the November 2013 soybean contract is trading about $13.40/bu. Would you be satisfied with a $13.40 spring guarantee for soybeans, and would you increase acreage with that guarantee in place? When Schnitkey looked at the performance of the November soybean contract between the fall and the following February, he said the largest decline was an 18% drop that occurred in 1976. But he is quick to say, “While large price declines have happened, historical data suggests the 2013 projected price will most likely be above $12.75.” His data indicate a nearly 20% increase in 2008, at the other end of the scale. Only four years of the past 40 have seen a drop in soybean prices between the fall and the spring of more than 5%.
If you are ready to sign up for those levels of spring guarantees, make an early appointment with your crop insurance agent. But also you should beware of the downside of high guarantees, and that is the cost of the premium. When guarantees go up, so do premiums. Although the USDA subsidizes and average of two-thirds of crop insurance premiums, higher guarantees lead to higher premiums. So that is the downside of that benefit.
Summary
Schnitkey says, “The 2013 projected prices for corn and soybeans likely will be near historically high levels, providing farmers will the ability to set relatively high per acre guarantees using crop insurance. These are possibilities for falling prices, particularly for soybeans. However, historical chances suggest projected prices will most likely be at high levels.”
As seen on farmgateblog.com
Tuesday, November 13, 2012
North Dakota Oil Production
Amazing Chart of oil production in "Saudi Dakota" (N. Dakota), where oil output has doubled in the last 16 months. http://t.co/4CO1lBhZ -- Mark J. Perry (@Mark_J_Perry)
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