This Week in Ag #57

“What are you planting this year?” That may not sound like a trick question, considering it’s already mid-March. But ask any farmer south of the Mason-Dixon line that question and you’ll likely see their shoulders shrug. You see, unlike in the West, where permanent crops and processor contracts make planting decisions more straight-forward, or in the Midwest where viable options are still rather limited, Southern farmers have a wide array of choices. Springtime decisions aren’t necessarily unusual. Yet this year, they may be the norm. Deflated market prices have made corn an unattractive option. As a seed corn salesman friend told me last week, you‘ll have no problem getting whatever corn product you want this year. In fact, companies are already getting returns on seed corn. We are seeing greater interest in rice and cotton, as well as peanuts, soybeans, milo and sweet potatoes. Growers are carefully monitoring the markets and weather, as 2024 will be full of near game-time decisions. Patience is not only a virtue for Southern farmers, but for seed salespeople as well.

Last Friday was a red-letter date for farmers: the deadline for purchasing federal crop insurance. The name insurance is a bit of a misnomer. Unlike auto or home insurance, which is about loss protection, FCI focuses on revenue protection, making it a critical risk-management and enterprise tool. As the name implies, revenue protection guarantees a set amount of income per acre regardless of what happens during the growing season (weather, pests or other events), or what happens to market prices, provided a crop was planted. Here’s how it works. Farmers submit their Actual Production History (actual yields over a period of time) for each crop they want insured. That is multiplied by a set Projected Price (PP) per crop. Once that income per acre is established, farmers can purchase various levels of coverage, up to 85% of their calculated revenue. Of course, the higher the level of coverage, the higher the premium price. The PP is calculated based on the average futures price during the month of February. Unfortunately, commodity prices were depressed last month. The 2024 corn PP is $4.66. That’s the lowest in four years and 21% below last year. At $11.55, the soybean PP is $2.21 per bushel below last year. Let’s say your average corn yield over the past five years is 200 bushels per acre. At the maximum 85% coverage level, your insured revenue would be $792.20 per acre. That’s $212.50 less than last year. And while production expenses have dropped somewhat, mainly due to reduced fertilizer prices, they still remain historically high. Moreover, Iowa State University is projecting average production costs of corn at $901.86. So whereas farmers could enter last year knowing they would basically break even with FCI, that’s not remotely the case in 2024.

Tuesday is #NationalAgDay! Now in its 51^st year, the event celebrates the world’s greatest profession – and those of us who support it – with various events, promotions and classroom activities. While making up about 1% of the population, one US farmer feeds 166 people. Yet farmers only collect about 15 cents per every dollar consumers spend on food.