2014 Season Highs & Lows Impact Profitability

Summary:
  • New farm bill programs mean growers have important new decisions to make  now through 2018
  • Commodity price drops will impact acres in 2015
  • Regional weather conditions and record yield year

wheat 

What shaped the 2014 season? How will 2014 shape the 2015 season? In this issue, we’ll take a look at the Farm Bill, economies of scale and in-season challenges. Let’s get right to it!

Soybeans started off strong in the 2014 season, with increases that were confirmed in the June USDA planted-acreage report. A record high 84.8 million acres of soybeans were planted, up 11 percent from 2013. On the other side of the coin, corn acres showed a 4 percent reduction at 91.6 million acres, the lowest planted acreage reported in the United States since 2010.

After more than two years of discussion, the country saw a Farm Bill signed into law on February 7. It will remain in force through 2018. The Agricultural Act of 2014 will be implemented in 2014 and 2015. New acronyms and new limits are hallmarks of the complex program.

Highlights of the new law include:

  • Repeals Direct Payments, Countercyclical Payments, and the Average Crop Revenue Election (ACRE) program.
  • Creates two new programs—Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). Producers of covered commodities can choose to enroll in one of the two programs.
  • Revises payment limitations and adjusted gross income eligibility rules.
  • Continues the marketing assistance loan program unchanged, except for an adjustment in the loan rate for upland cotton.
  • Continues the sugar program unchanged.

According to Michael Langemeier, director, Center for Commercial Agriculture, Purdue University, before growers choose ARC or PLC they need to pay attention to their base acres and their payment yields. Both should be listed in mailings growers have received from USDA.

“Choosing between ARC or PLC is a little harder decision,” he said. “With corn and soybeans prices as they are, it looks to us that ARC will be more favorable than PLC. Corn prices would have to drop substantially for PLC to be attractive. And for soybeans, the PLC price is very low. With current prices, ARC appears to be the more attractive choice for soybeans as well.”

Wheat growers will have a more difficult decision to make and will have to consider their situation carefully with ARC and PLC, according to Langemeier.

“I’d like to see growers spend a little more time considering crop insurance this year,” Langemeier said. “Crop insurance provides excellent protection against relatively low yields or a large drop in price between February and harvest.”

Corn and Soybean Economics

For both corn and soybeans the economics have changed. Langemeier said that growers are looking at some significant losses for both corn and soybeans in 2014.

“Most costs for 2015 are projected to remain the same,” he said. “With lower prices and costs at an even point, the elephant in the room is what’s going to happen with cash rents. They usually don’t adjust down that quickly, but there will need to be some small adjustments in upcoming years.”

So why was there such a price drop for corn this year? Langemeier said the question really should be, why were prices so high from 2011-2013? “The high prices during 2011-2013 were more of a blip than what we’re currently seeing. Those prices were unusually high for several reasons: increasing ethanol production; strong exports to China; and a severe U.S. drought in 2012. It became the perfect storm for high prices. Now, the ethanol markets and exports to China have stabilized. Production and demand are in a better place and the prices we’re seeing now will likely be here for quite a while.”

Langemeier believes that while the irrigated corn acre will remain the mainstay, non-irrigated acres will see more of a 50/50 corn-soybean split with some areas increasing soybean acres or wheat in the far southern climates.

Regional Conditions

It looks to be a record year for yields, but that’s only the end of the story. To look at the journey of the 2014 crop year, it’s best to start at the beginning.

The year got off to a rough start with wet conditions that caused delayed planting and pushed back the start of the season. Growers were happy to get their crops in the ground, but with rain holding on, they found crops growing in wet conditions. Late planted crops are more susceptible to fungal diseases.

According to Jason Manz, cereals marketing manager at Crop Science, the conditions were just right for wheat and barley disease development this year. Cereal growers who didn’t apply a fungicide found themselves with high levels of DON in their grain. “Once scab is present in your field, you cannot fix the problem. The timing of a fungicide application is key to protecting your crop,” he said. “Some growers are finding themselves getting docked at the grain elevator and taking a hit on their profits.”

The story is similar in some parts of the Midwest for corn and soybean growers. Growers saw disease, but if a timely fungicide treatment was not made, they will still see a bottom-line impact at harvest.

Weed resistance is a theme that seemed to come through louder in 2014. Though not as tough of a problem in cereals, resistance of weeds such as Palmer amaranth and waterhemp is still growing in the Midwest. “Growers are finding if they have resistance, they can’t get away with a one-pass program anymore,” said Jody Wynia, corn marketing manager at Bayer. “Their only answer is having zero-tolerance for weeds in their fields.”

Growers have to be diligent about putting down a preemergence herbicide at burndown to give fields a clean start, followed by a postemergence application to control any remaining yield-robbing pests. “With lower commodity prices, growers need to find ways to be successful,” Wynia said. “The key is to protect the yield you do have and find ways to be strategic. An early fungicide application can be made with a postemergence herbicide application, thus lessening your application cost and helping to control both pests.”

A recommended two-pass program for corn starts with a preemergence application of Corvus® herbicide. The second pass could include a postemergence product such as Capreno® herbicide. Another postemergence option is Laudis® herbicide. If using Laudis following an application of Corvus, add another herbicide with a different mode of action, such as atrazine, to ensure you are using multiple modes of action in your corn weed control. If you do apply Laudis as the second pass of a two-pass program, consider also including a fungicide in the tankmix. For example, Laudis can be tankmixed with Stratego® YLD fungicide at a lower application rate of 2 oz/A to 5 oz/A from the V4 to V7 growth stages, optimizing weed and disease control with fewer passes. A V5 application of Stratego YLD saw an average 6.8 bu/A yield bump over untreated checks.

Work with your local sales representative or agronomic experts to develop a program that will protect your yield and provide the largest return for your fields.

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