April Fools

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Partners,

Growing up, on the 1st of April every year my mom would wake us up announcing, "It snowed last night!" Then there would be a pause and the words, "Aprils Fools!" Well this year the trick was on us: we received about 3-4 inches of white stuff on April 1st. It was gone the next day, but we enjoyed the beauty of it while it lasted.

On the farm we are keeping busy with hooking up our new (to us) planter, tractor maintenance, building organization, grandbaby sitting, and tree clearing. The weather has not been conducive to planting and it is actually giving the market some support. Today's farmer has proven over and over the past decade that we can put 80% of the crop in the ground in a week, so this delay isn't too serious yet, but another two week forecast of wet and cold will start getting attention. We know one of the keys to high production is early planting. 

The farm economy seems to be in a holding pattern. Our friends in the dairy industry are really suffering with low prices, and even the Wall Street Journal picked up on the issue for a front page story. We are watching the trade talk negotiations going on which looks to me like posturing and some scare tactics to let our trading partners know we are tired of giving away the farm to reach a deal. If nothing else our president does have a lot of experience making deals. Stay tuned where this one goes, and ag is usually one of the first whipping boys for retaliatory measures.

The family is doing well and we appreciate all the blessings of health and new life. Opa and Oma got to meet their 10th great-grandchild (our niece's son) this week. Alison is still in college search mode for the right fit. Our house reconstruction has begun and looks to be a longer process than we would prefer, but it'll be nice when it's done.

Fall Prices:

Corn 3.80

Soybeans 10.09

Keep in touch,

Steve

Same Kind of Different

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Partners,                   

We are keeping as busy as we want to be at this time of year.  It won’t be long until we find ourselves back in the field!

I want everyone to know that things do change here on the farm.  Here is a list of some changes we are implementing for the 2018 cropping season:

  • Per our fertility consultant’s advice, we are applying higher rates of dry fertilizer. (Producing larger crops means more nutrients taken from the soil.) This has increased our dry fertilizer cost approximately 15%.
  • We will be implementing an improved method of nitrogen application (split applying) in order to increase N efficiency and reduce nitrate runoff.
  • One result of the water quality study we have been participating in is to see how we can supply N to the plant when needed with less chance for leaching.
  • We are applying supplemental elemental sulfur to all acres with a straight spread of P and K. With fewer coal-fired power plants there is a decrease in available sulfur in the soil.
  • We plan to reduce soybean seed planting population. Research shows lower populations do not reduce economic yield. The money we save on seed is spent on inoculants and biologicals and seed treatments.
  • We are planting more full-season varieties of corn and soybeans.  This may result in additional drying costs, but will help prevent phantom yield loss in corn, and help keep moisture in the SB crop to reduce harvest loss.
  • We are using multi-mode of action herbicides for pre-plant and post-planting to help prevent weed resistance. Our biggest weed issue right now is tall water hemp. We have been told that the invasive plant, palmer amaranth, is only a county away and it is a very tough weed to combat.
  • We are moving forward with the purchase of an additional planter for soybeans. Even though this does increase our equipment cost per acre, we expect an increase in yield since we will have the ability to plant corn and beans at the same time. Research shows higher yield in both crops when planted by the first of May. This is going to increase pressure for the two-week planting window so any offers for planting assistance would be welcome!
  • We are putting sensors on our planter to give us the ability to measure soil organic matter on the go. We hope to use this data to fine-tune our management zones for our multi-hybrid planting (seeding rates and varieties). 

The planter has been delivered and we are in process of getting both units hooked up and ready. Some parts are replaced almost every year. We have also been shipping corn, and hoping our seed beans will be called for delivery soon. 

The agriculture industry is watching with great interest the trade talks with our partners and the buzz about changing the RFS (renewable fuel) standards. It has been estimated that within 5 years Brazil will grow more corn than the US. We need world trade and cannot afford to seem like the bullies on the block!  Grain markets are showing some life as the drought in Argentina hangs on. 

Family is doing well--Lindsay and Keith had their third son on March 4th. Alison is on a school trip to Germany during spring break and is still undecided about college choice. Phyllis and I have returned from a few weeks in Florida.

Fall bids--

Corn--3.70

SB--10.14

Keep in touch,

Steve

Data Decisions

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Partners,

We are in the middle of winter, reminding ourselves that we live in Illinois and winters can be harsh! Doing chores for the heifers can be brutal some days, especially when the waterers are having issues. We do have two waterers currently that we cannot thaw out. Thank goodness the temperatures are moderating and hopefully soon we can get back to normal operation.

It is still meeting season. Last week Marcus and I attended the Precision Planting Conference in Tremont to learn the latest agronomy tips and equipment available to raise corn, soybeans, and wheat. The planting pass is the most important one of the year and we are learning new things all the time about how to fine tune the process to give us a better chance of successful harvest. It struck me during the meeting how much data is digested in agriculture now, to come up with practices which will give us better chances of economic success. The technology in our multi-hybrid planter is coming of age, and the decision process regarding how to place varieties is being modified all the time. The number of tests and trials to pick which agronomic practices to implement is mind boggling. After 40+ years of farming and collecting data, I finally feel like we are getting useful information for decision making out of the time and money spent collecting the mass of information.

Also striking is the amount of money we must spend to keep up with the equipment technology advances. Our technology budget is around $10/acre/year. One of our take-homes from our data analysis is that we should be able to pencil in a payoff of a separate bean planter in three years or less. Having the ability to plant beans and corn at the same time, and planting in narrower rows to take advantage of sunlight and weed control make this decision seem like an easy one. We are also adding seed firmers to the planter which will be able to sense five things on the seed trench, on the go while planting.

Agriculture is trying to digest the new tax laws. It appears to me that we will have somewhat reduced personal taxes, while the tax rates for our corporation will be higher. We have unlimited equipment write-offs but what good is that in an environment of such low margins? The president's appearance at the American Farm Bureau annual meeting was a great PR event, but little substance. Fuel prices are slowly rising as crude oil supplies remain tight. 

Family is doing well. School is back in session for all elementary and high school students and college professors in the family. Alison has applied to several colleges of her choice. Our house had a pipe freeze and break and we have been drying out for two weeks now. Phyllis slipped on the ice and is slowly recovering from two cracked vertebrae.

Fall Prices:

Corn 3.51

Soybeans 9.58 

Steve

Summit

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Partners, 

Meeting season has begun, and Phyllis and I attended the DTN Summit this past week in Chicago. Here is a brief summary:

Global Outlook
Look for inflation and interest to gradually rise
Under Obama regulations were implemented at the rate of 1-2 per day--rate now is 0
Oil prices relatively flat

Landslide or Landrise?
Land values predicted to soften 2-4% in 2018
Farmers are struggling to pay for land (rent or principal payments) or capital investments (equipment)
Today's rent implies 4.23/bushel corn price

Your Farm, Their Food (General Mills, Kellogg's)
Food transparency is vital today--where did this food come from?
Safety and quality of products is a priority company decision
People are interested in progress toward the goal of food sustainability--not necessarily perfection

Do You Need a CFO?
How are growing operations keeping a grasp on financials during periods of expansion?
Outside eyes on business operations can be very objective and beneficial

Over The Wall: Think Like an Athlete by Andy Papathanassiou
Racers must be safe and conservative to stay in the race but also aggressive to win
We must look for new ways of thinking and solving problems
1. Iteration
2. Coaching
3. Overcoming distraction
4. Do the impossible

How Will Technology Producers Compete
There will be increased cooperation between ag tech suppliers to make farm data more accessible and useable
Data will become easier to collect and more useable
Sustainability is doing more with less, something farmers do all the time

Market Outlook
Huge stocks of corn, beans, wheat
Strong carry in market now--near 70% in corn
In pattern of lower highs and lower lows

Social Media Tips
Riverview Farms, Wild Farms--Education strategy; why are we doing what we're doing
Silent Schade Planting Co
Bryant Agricultural Enterprises, Ohio--community outreach, history and future
Tom Farms, Indiana--clear up misunderstandings, engage followers, not everything needs to be positive--post things happening right now

Weather
La Nina with ocean cooling now predicts some weather patterns in Midwest
Winter colder than normal with above average snowfall
Spring time above normal temps and rainfall
SA weather--rainfall returning to normal--predicted normal weather ahead

Fine Tune your Financials, Rabo and Farm Credit 
Recovery still 3 years out--production costs still average above farm gate prices
Planting discipline--reduce seeds per acre to lower costs
Cost of debt is increasing
Debt coverage ratios are expected to continue negatively
Cost of land has adjusted--needs to adjust lower over next two years
Diversify, Peer benchmarking, Data Management, Analysis, Cost levers

 

On the farm we are working on many projects--tiling, tree clearing, grain delivery, equipment cleanup and major year-end office tasks. The weather has been great--clear and dry--and the forecast is for no precipitation for the next two weeks (looks like no white Christmas).  We are in the process of breeding about 80 heifers this month which puts them calving next fall. 

Farmers are watching our president's handling of our various trade agreements with some major trading partners. We understand it is a global economy today and we cannot wall ourselves off from the rest of the world and have a very vigorous economy. The tax bill in Congress is not even a step toward simplification, as very few loopholes are being addressed. Our children and grandchildren will be dealing with these huge deficits and not eager to make sacrifices to live on a balanced budget.

The family is doing well and looking forward to Christmas break with some down time from school and studies. Looks like we will be spending a quiet day on the 25th and will get everyone together after the holiday week.

Current prices:

Corn 3.29

Soybeans 9.49

Keep in touch and any questions welcome!

Steve

Changing Times

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Partners,

Phyllis and I attended the annual meeting of the Association of Agricultural Production Executives (AAPEX) this past week.  

The keynote address was given by Marci Rossell, PhD (Former Chief Economist at CNBC & Leading Financial Expert). She is currently the Senior Economic Advisor for Delphin Investments. I will bullet-point some of what she shared so you can have a quick read about her observations and opinions about developments in the world.

  • Since the November election there have been great returns in the stock market because of anticipation of tax cuts and deregulation in financial sector -- this is probably not going to happen 
  • There will be a lot more volatility in the stock market
  • A Border Tax Adjustment (tariff) will strengthen the dollar which will cripple ag exports even more
  • The European Union is not an 'Optimal Currency Union' (she had several points about this), and the euro is failing (Brexit only the beginning)
  • Mass communication is contributing to the breakdown of commonality of the US
  • China is giving way to India economically -- India is the "fasting growing economy on the planet"
  • India has a youthful and entrepreneurial population and is accepting of the West
  • Over the next 15 years, the Boomer generation will give way to the Millennial generation because they (Millennials) outnumber the GenXers.  Millennials are generally laid back/not in a hurry about life; tend to be risk adverse, and typically have not chosen to vote. Their generation was hit hard by the downturn in 2008 and have experienced unemployment in a way the GenX generation has not.
  • one key question is will the millennials become more conservative as they age (like the Boomers have)

Her presentation was excellent, and very fast-paced so it was challenging to jot notes. This is just an overview of what I heard.

On the farm we are taking advantage of the open weather to cut brush, haul grain, prep equipment for spring, paint a tractor, relax the pace a bit before spring, get inputs delivered, and finalizing field operation plans for 2017.

Families are doing well. Marcus is taking a leadership development class and planning a family trip during spring break. Phyllis and I are appreciating our 40th year of marriage.

Fall prices:

Corn 3.64

Soybeans 10.17

Keep in touch,

Steve