Helping Farmers Process Timely Decisions on Late Planting and Markets

Some veterans in the ag industry are calling this spring a “100-year event.” Never in history has there been a year quite like this one. To complicate matters, the U.S.-China trade talks continue to struggle and tariffs have escalated once more, taking a toll on the markets.

This rare triple-whammy (trade, markets, and weather) creates questions for U.S. farmers already stretched for operating capital: “Do I still try to get crops in the ground? Do I switch corn acres to soybeans? Do I invest in fertilizer—if I can afford or locate some, with all the supply disruptions? What do I do and when do I do it?”

Those wrenching decisions are underway farm-by-farm these next crucial days—maybe on your operation? To help you weigh the variables, we’ve quickly pulled together a special two-part series of our podcast, In the Driver’s Seat. Doug Roose, Vice President of Producer Marketing for ADM, interviews four guests who are specialists in markets, crop insurance, and fertilizer:

• Kevin Van Trump, Market Analyst and Author of The Van Trump Report
• Blake Martin, Claims Audit Manager, Crop Risk Services (CRS)
• Ross Bareksten, Economic Research Analyst, ADM Economic Research
• Jake Niederer, Director, ADM Farm Direct Fertilizer

Listen to both discussions in Episodes 15 and 16 of In the Driver’s Seat:

The upshot:

Every farm is different, but our guests agreed on one course of action: Don’t act out of habit. Know your numbers as best you can. Assemble a trusted advisory team—your crop insurance agent, fertilizer dealer, marketing advisor, and banker. Work the financial scenarios. Then commit to a course of action that is best for your bottom line. As Van Trump says, “If you’re going in, go all in and maximize yield on the acres you plant. If you’re not, don’t go in at all. Call that shot before you start the battle.”

Here, from our guests, are some detailed perspectives on key questions you face. (Listen to the full podcasts for more.)

Does everyone who decides not to plant qualify for a prevented plant claim?

Martin: Being a federally insured program, CRS is required to evaluate each claim on an individual basis. Prevented plant claims can be submitted to your crop insurance agent up to three days after the end of the late plant period for the crop county. The main criteria will be whether the cause of loss is general to the surrounding area, and if neighboring producers were similarly affected. After we get a claim, we send an adjuster out and ask for a little more information: proof of inputs and four years of crop history for the county, compared to what the farmer got planted this year. The length of the late-planting period and the late-plant guarantees vary by crop and county. Please contact your crop insurance agent to discuss your specific situation.

Can a farmer plant after the insured late-plant date—and if so, what happens?

Martin: Yes, a grower can produce after the final plant date. If they do, there’s a late-plant reduction of 1% of their production guarantee each day through the end of the late-plant period. If they can’t get anything planted until after the end of the late-plant period, the producer can insure that crop at the prevented plant guarantee rate, and elect whether or not they’d like to insure those acres at the guarantee rate. That election must be made by the acreage reporting date, which they can discuss with their agent. If growers find themselves in a late-plant situation, have a good discussion with the crop insurance agent about their qualifications and options on what best fits their farming operation. Just know your numbers and CRS is here to help you out. Please contact your crop insurance agent to discuss your specific situation.

What should I consider regarding fertilizer—a big input cost?

Niederer: These are 100-year events—even our 40-year employees have never seen a situation like this. With wet ground, we expect there’s been leaching of fall anhydrous ammonia and the nutrient may not be there for the plant. That’s why we’re expecting a large top-dress season using urea and UAN. Usually one-third of the market top-dresses; this year it will be more like two-thirds. Farmers will be competing for product because of disruptions in barge transportation. We expect an in-season bump in premium. More inputs in a different time frame will impact cash flow and maybe drive some yield decisions. We’ve done as well as any company to deliver a product on time to people who need it, but this spring season of any year should teach us the value of having on-farm storage—something we’ve been preaching for the last three years.

No easy decisions. How can one best make them?

Van Trump: It’s a really critical inflection period. Call your insurance guy, your fertilizer guy, your banker. Come up with a strategic game-plan for these next few weeks. You have to know your numbers. Astute producers were sending me data breakdowns three weeks ago on their gross profit per acre in either scenario. Do you have the money to go all in—to throw fungicide at the crop and battle the insects? Are you going to chase the yield? You can’t get halfway into it, turnaround and say, ‘forget it’. You’ll shoot yourself in the foot, and this is not the time to be doing that. Be really careful and thoughtful.

Niederer: Operations on the margin may need the yield to pay for the debt they’re carrying on the balance sheet. Well-capitalized balance sheets—growers who’ve managed their cash flows well—I think do have the luxury to crunch the numbers and identify which acres to focus on planting for the maximization of yield and where is best to file those prevented plant acres.

Given planting conditions, how realistic is the large USDA acreage projection?

Ross: There are definitely questions in the industry about the 92.7 million corn acre projection from the USDA. Will late-planted acres transition into soybeans or into prevented plant? Our assumption (in the ADM economics team) is that we see some of both. I don’t think it’s out of line, with the current planting pace, that we could see a 2- to 3-million-acre reduction in those estimates.

Is a weather rally or a demand-driven rally in the cards, then?

Ross: May 10 tends to be the date for both soybean and corn that the market starts to reduce yield potential. As that date has come and gone, the market is starting to take off yield potential from the top. At the end of the day, the summer weather is going to have a huge impact on what those yields are. [Also], when you look at the record short fund position in the marketplace for both corn and beans, they just need a catalyst to spark that correction and that could give the potential for a marketing move for the producer. That’s something I think you need to watch for and take advantage of.

Van Trump: If we get these moves, and we catch some volatility on the upswing and the bears flush out, I think producers have to be looking for opportunities to reduce risk, just because this tariff thing could play out longer—or the African Swine Fever. There are a lot of bearish things out there. If we catch a weather play, we’ve got to be willing to take advantage of it.

How does a producer stay ready for such brief opportunities?

Van Trump: A lot of guys have a plan but fail to execute the plan when that time comes. That’s the Achilles heel for all of us: we move the goal posts. This market is going to take off and rally. Let’s say we bounce back to 4.10 or 4.20 (for corn). What’s going to happen? Most of my friends in the farming sector become the most bullish as we start to peak. It’s always most bullish at the top! And that’s when guys want to move their goal posts and they fail to execute. So, keep it as simple as possible. Know your break-evens as best you can, try to come up with a game plan, and try to execute and remove the risk.

Are U.S.-China talks leading to a settlement soon?

Van Trump: Negotiations may drag on. The U.S. is seeking to catch up and level a 30-year imbalance with China. But China wants equal compromise in the current deal. So we believe it could extend. That’s what [our investment group] is planning for. The timing couldn’t be worse after three to four years of unprofitable farming already, and the farmer is taking on the brunt of the pain. If it happened in 2012, we’re talking different lingo. Additional government subsidies may come down the pike and maybe additional rounds if we continue in this hole.

Ross: We’re coming up on some critical timelines as the U.S. market gears up logistics to maximize exports to China this fall. The further this conversation extends into the summer months, the more complicated our logistics are going to be to move production of very burdensome stocks in the U.S. So a quicker resolution would be impactful.

As you consider the impact of late planting for your farm, we encourage you to have healthy discussions with your trusted advisors. Have a game plan for production and grain marketing so that when market opportunities pop—they’ll likely be short-lived—you’ll be ready to execute.

Your ADM representative is here to help with that discussion. We have valuable experience in marketing grain as well as bulk fertilizer. We’d be honored to help your operation remain successful for years to come.

Here are more resources to follow on late planting and markets:

Websites
CropRiskServices.com
ADMadvantage.com
VanTrumpReport.com

Twitter
@CropRiskServices
@ADMGrain
@Kevin Van Trump