Grain Farmers to see record profits this year?

[vmbplayer]

Can this be right? I don't know anything about the source, but they seem to be citing the USDA.

Are grain farmers really going to be better off this year even with the drought by offsetting it with subsidies and crop insurance?

US farmers eye record profits - FT.com


I know it's saying livestock farmers are going to see a hit with grain prices going up, but so many farms in Iowa at least got rid of hog operations after the price hit 15 years ago (or whenever it was). Are Iowa farmers going to be more profitable this year?

Mods move to cave if needed. Thought more farmers would be able to offer insight in off-topic that don't post in the cave.

 

[isufan]

It depends a lot on what the fall crop insurance price ends up being.

 

[cy1010]

There were a lot of hoops to jump through to get to that article and I'm not much of a jumper. But, I'd assume that if your yields were substantial or only slightly offset by the drought then the record prices could possibly put you into a "record profit" category.

I don't know how the article dealt with crop insurance. (Hoops and whatnot).

 

[vmbplayer]

It depends a lot on what the fall crop insurance price ends up being.

How is that figured? I assume an adjuster comes out and estimates the percentage of the crop that is lost and then applies the price to that, but where does the price come from?

 

[Go2Guy]

One thing for sure is the escalating price of farm land; seems many are considering selling out while prices are high.

 

[isufan]

Crop Insurance uses a spring or a fall price to determine a farmer's revenue guarantee. The spring price was set at $5.68 on corn. For example, if you have a proven yield of 160 on corn with 75% insurance, you are guanteed 120 bushels. 120 times 5.68 equals 681.60. That is your revenue guantee per acre.

Now when you buy crop insurance, you can add a fall price option. Meaning that they take the average price of the december contract during the month of October. Normally, the fall price is lower, except for years with a short crop. This year, the fall price will be higher than $5.68.

Pretend the fall price ends up being $7.00. 120 bushels times $7 equals $840. So if a farmer has the fall price option, their revenue guarantee could go from 680bucks per acre to 840.

 

[bringmagicback]

One thing for sure is the escalating price of farm land; seems many are considering selling out while prices are high.

This is definately not something ive seen. I work closely with several land management companies (not by choice and id love to see them fail) and they are begging to sell land.

 

[cyfan4St8]

Yes some guys will have a great year regardless what their fields yield. But in my area there is going to be some good yields that they won't hit their insured levels. The thing to know though about the crop insurance thing is they might not get their payments till next spring and if they go over the $200k make in payment the will be audited for the last three years of production. And most guys don't have zero bushels out in the field so like the example from a earlier post if the are insurned at 120 bu and the still get 80 bu with their represented sample that the adjuster will look at they will only get paid on the 40bu they didn't grow.

 

[Tre4ISU]

Yes some guys will have a great year regardless what their fields yield. But in my area there is going to be some good yields that they won't hit their insured levels. The thing to know though about the crop insurance thing is they might not get their payments till next spring and if they go over the $200k make in payment the will be audited for the last three years of production. And most guys don't have zero bushels out in the field so like the example from a earlier post if the are insurned at 120 bu and the still get 80 bu with their represented sample that the adjuster will look at they will only get paid on the 40bu they didn't grow.

You're guaranteed revenue, not bushels. It doesn't matter if you produce 100 or 120, you are guaranteed a certain dollar amount.

 

[bringmagicback]

Another thing to consider is record input costs.

 

[vmbplayer]

Another thing to consider is record input costs.

Assuming the article is accurate it's discussing profit which would account for cost input.

 

[buf87]

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

 

[ajk4st8]

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

Less grain = less transportation/drying cost as well.

 

[bringmagicback]

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

Thats what i was thinking, my beans will yeild half but worth x2. So im even, but i paid more in inputs so im actually down.

 

[Bobber]

Check back in 6 months and will have a more definitive answer. That's what crop insurance is all about and the current products do a great job of protecting revenue. My impression is it will be a good year overall, but record is a stretch. Most farmers would rather have have higher yields and lower prices rather then what they were delt this year.

 

[Tre4ISU]

Less grain = less transportation/drying cost as well.

Insignificant dollar amount. Drying cost have been basically zero the past couple years anyway when our next highest profits would have been. Yeah, if you have 180-200 bushel corn this year, you will be doing very well but that is such a small amount of the acres I hardly think that you can write and article on it. We were supposed to be one of the garden spots and if we average 150, I will fall over.

 

[Sparkplug]

How is that figured? I assume an adjuster comes out and estimates the percentage of the crop that is lost and then applies the price to that, but where does the price come from?

Many are chopping their corn for silage so either the adjuster came before they started chopping or they are required to leave a check strip to be looked at when the adjustor is available.

Others will provide evidence of yields (weigh tickets, bin measurement, monitor reading, etc) to their agent for their claims.

The corn price is determined in spring by Feb Avg. of Dec. CBOT Futures. Fall prices Oct. Avg of Dec. CBOT Futures

But the type of insurance purchased is also a factor For example = If the farm has RP coverage they are protected against a loss of revenue caused by price increase or decrease, low yields or a combination of both. RP HPE coverage provided protection against loss of revenue caused by price decrease, low yields or a combination of both. Unlike RP, the revenue protection guarantee for RP HPE is based on the projected price only and it does not increase based on harvest price.

 

[kilgore_trout]

Only the smart ones. That is, the ones who understand risk management, the multi-year nature of the business, and know how to work the subsidy/disaster farm welfare game.

 

[swiacy]

Only the smart ones. That is, the ones who understand risk management, the multi-year nature of the business, and know how to work the subsidy/disaster farm welfare game.

Work the subsidy/disaster farm welfare game? I have no idea what game you are alluding too but it does not exist in my County. But we do understand the long term nature of agriculture and marketing. The premise of this thread is asking whether record profits are possible and yes, those who have normal yields and sell at record high prices will have a great year. Those that have low yields with RA crop insurance will have manageable financial situations. Those that have livestock operations and have not pre-priced some of their feed needs will be in dire straits.

The new "wrench in the system" is the potential of aflatoxin in the corn which will be a shipwreck to the corn producer but could bale out the livestock folks.

 

[cycfan1]

Work the subsidy/disaster farm welfare game? I have no idea what game you are alluding too but it does not exist in my County. But we do understand the long term nature of agriculture and marketing. The premise of this thread is asking whether record profits are possible and yes, those who have normal yields and sell at record high prices will have a great year. Those that have low yields with RA crop insurance will have manageable financial situations. Those that have livestock operations and have not pre-priced some of their feed needs will be in dire straits.

The new "wrench in the system" is the potential of aflatoxin in the corn which will be a shipwreck to the corn producer but could bale out the livestock folks.

Don't expect the livestock producers to run and feel sorry for you with that attitude. And still only bails out beef cattle and hogs.

Would love to be guaranteed a manageable financial situation every year. Tell me, with 0 yield and a 150 APH, that is guaranteed 120*8 = 960 an acre... and I know the Oct price is not set yet, but you can do your part to protect yourself against it.

Guess I am a little peeved at all the grain farmers saying that livestock guys should have bought all their needs when corn was $5. Still have to be able to lock in a margin. Just be lucky you were 'baled' out by the worst drought in the last hundred years or you would be looking at $3-4 corn.