Grains

U.S. Secretary of Agriculture Sonny Perdue today announced the U.S. Department of Agriculture's Farm Bill and Legislative Principles for 2018 during a town hall at Reinford Farms in Mifflintown, Pennsylvania. "Since my first day as the Secretary of Agriculture, I've traveled to 30 states, listening to the people of American agriculture about what is working and what is not. The conversations we had and the people we came across helped us craft USDA's Farm Bill and Legislative Principles for 2018," said Secretary Perdue." These principles will be used as a road map- they are our way of letting Congress know what we've heard from the hard-working men and women of American agriculture. While we understand it's the legislature's job to write the Farm Bill, USDA will be right there providing whatever counsel Congress may request or require." USDA's 2018 Farm Bill and Legislative Principles: FARM PRODUCTION & CONSERVATION Provide a farm safety net that helps American farmers weather times of economic stress without distorting markets or increasing shallow loss payments. Promote a variety of innovative crop insurance products and changes, enabling farmers to make sound production decisions and to manage operational risk. Encourage entry into farming through increased access to land and capital for young, beginning, veteran and underrepresented farmers. Ensure that voluntary conservation programs balance farm productivity with conservation benefits so the most fertile and productive lands remain in production while land retired for conservation purposes favors more environmentally sensitive acres. Support conservation programs that ensure cost-effective financial assistance for improved soil health, water and air quality and other natural resource benefits. TRADE & FOREIGN AGRICULTURAL AFFAIRS Improve U.S. market competitiveness by expanding investments, strengthening accountability of export promotion programs, and incentivizing stronger financial partnerships. Ensure the Farm Bill is consistent with U.S. international trade laws and obligations. Open foreign markets by increasing USDA expertise in scientific and technical areas to more effectively monitor foreign practices that impede U.S. agricultural exports and engage with foreign partners to address them. FOOD, NUTRITION, AND CONSUMER SERVICES Harness America's agricultural abundance to support nutrition assistance for those truly in need. Support work as the pathway to self-sufficiency, well-being, and economic mobility for individuals and families receiving supplemental nutrition assistance. Strengthen the integrity and efficiency of food and nutrition programs to better serve our participants and protect American taxpayers by reducing waste, fraud and abuse through shared data, innovation, and technology modernization. Encourage state and local innovations in training, case management, and program design that promote self-sufficiency and achieve long-term, stability in employment. Assure the scientific integrity of the Dietary Guidelines for Americans process through greater transparency and reliance on the most robust body of scientific evidence. Support nutrition policies and programs that are science based and data driven with clear and measurable outcomes for policies and programs. MARKETING & REGULATORY PROGRAMS Enhance our partnerships and the scientific tools necessary to prevent, mitigate, and where appropriate, eradicate harmful plant and animal pests and diseases impacting agriculture. Safeguard our domestic food supply and protect animal health through modernization of the tools necessary to bolster biosecurity, prevention, surveillance, emergency response, and border security. Protect the integrity of the USDA organic certified seal and deliver efficient, effective oversight of organic production practices to ensure organic products meet consistent standards for all producers, domestic and foreign. Ensure USDA is positioned appropriately to review production technologies if scientifically required to ensure safety, while reducing regulatory burdens. Foster market and growth opportunities for specialty crop growers while reducing regulatory burdens that limit their ability to be successful. FOOD SAFETY & INSPECTION SERVICES Protect public health and prevent food-borne illness by committing the necessary resources to ensure the highest standards of inspection, with the most modern tools and scientific methods available. Support and enhance FSIS programs to ensure efficient regulation and the safety of meat, poultry and processed egg products, including improved coordination and clarity on execution of food safety responsibilities. Continue to focus USDA resources on products and processes that pose the greatest public health risk. RESEARCH, EDUCATION & ECONOMICS Commit to a public research agenda that places the United States at the forefront of food and agriculture scientific development. Develop an impact evaluation approach, including the use of industry panels, to align research priorities to invest in high priority innovation, technology, and education networks. Empower public-private partnerships to leverage federal dollars, increase capacity, and investments in infrastructure for modern food and agricultural science. Prioritize investments in education, training and the development of human capital to ensure a workforce capable of meeting the growing demands of food and agriculture science. Develop and apply integrated advancement in technology needed to feed a growing and hungry world. RURAL DEVELOPMENT Create consistency and flexibility in programs that will foster collaboration and assist communities in creating a quality of life that attracts and retains the next generation. Expand and enhance

Hay supplies in Michigan have definitely decreased in the last six months. Going into the 2017 summer season, the growing first cutting hay crop looked good and the carry-over from a second mild winter on farms had many feeling they should have plenty of forage. Granted hundreds of semitrailer loads of hay left the state in March to aid the ranches in the Western Plains States that were devastated by wild fires, but that hay was a very small dent in Michigan's supply. More donated hay left Michigan in July to support drought stricken ranches in the Dakotas leaving what appeared to be a still plentiful forage supply. But by mid-summer, weather patterns had divided the state of Michigan into two extremes with Central and Southern Michigan turning bone dry and the tip of the Northern Lower Peninsula and the Eastern Upper Peninsula being too wet. Both of these weather patterns made it difficult or nearly impossible to harvest dry hay. With most pastures in the south running out of forage in late summer, many pasturing livestock operations began feeding hay much earlier than planned. The eastern end of the Upper Peninsula had standing water in first cutting hay crops into mid-summer delaying harvest and in many cases causing mowed crops to rot in the field. Yields were 40 to 60 percent lower for the year in that Eastern Upper Peninsula region which is a significant hay producing region in Michigan. These weather events, compounded by the lower total hay acres in Michigan that had occurred over the last five years, have taken away the large hay surplus in rapid fashion. According to USDA surveys of farms conducted on December 1, 2017, hay stocks in Michigan were down 16.7 percent from the previous year. Many Midwest States have experienced similar declines with Wisconsin being down 17.2 percent, Iowa down 14 percent, South Dakota down 10.8 percent and North Dakota down 28.7 percent. Across the United States, total hay stocks are 10 percent lower than 2016 and are almost as low as what they were in the drought year of 2012. The states to our south may have more hay available as Ohio hay stocks are up 18.7 percent and Indiana stocks are up 35.4 percent. Hay can still be found in Michigan but it may not be as easy to locate, it may be a further distance to transport and it obviously will cost more than it did at last year's prediction from MSU Extension forage experts. Also with the wet conditions in the Upper Peninsula, the quality of some hays will not be quite as good as those conditions led to over- mature, late harvested hay that may also be dusty and moldy. Hay prices have been gradually moving higher as demand grows and knowledge of the short hay supply became known. The big movers were the low quality grass and legume mixed round baled hays that were selling for as low as $65 to $85 per ton in mid-summer. They now have moved up to $90 to $115 per ton. Most mid quality alfalfa and alfalfa/grass hays are selling for $120 to $150 per ton depending upon their quality and the type of bale package. The high quality alfalfa hays are selling for $150 to $200 per ton on average. These prices may move higher over the next few months depending upon the severity of the winter weather, since livestock in colder temperatures eat more hay, and upon how many farms are still in need of extra hay. These prices may hold because the corn silage harvest was sufficient in most areas, grain prices are relatively low and can offset some of the hay in the ration and because livestock and dairy farm profits are low to non-existent and trimming the feed budget is a goal of many.

Despite the controversy in 2017, it’s likely Roundup Ready 2 Xtend soybean and cotton acres will increase this year. Monsanto says there is enough supply to double soybean acres in 2018, compared with 2017, to 40 million acres, which is nearly half of the 91 million soybean acres. “You’ll have fewer sensitive varieties out there, so that leads to the potential for a decrease in damaged soybeans,” says Bob Hartlzer, Iowa State Extension weed scientist. “And I think, I hope, applicators are going to pay a lot more attention to what is adjacent to their field.” Regardless of the state you farm in, if you use dicamba tolerant soybeans or cotton you will face more restrictions this year per EPA’s label changes: Products are restricted use, which means only certified applicators can apply them, and they must have dicamba-specific training. Farmers must maintain records regarding use of dicamba products. Dicamba can only be applied when wind speed is below 10 mph. Reduction in time of day dicamba might be applied (specifics not stated). Clean-out language has been added to prevent cross contamination. Awareness of risk to nearby sensitive crops has been heightened by enhancing susceptible crop language and record keeping. These label changes apply to new formulations of Engenia, FeXapan and XtendiMax. Several states have imposed further restrictions on the products. State-Specific Restrictions on Dicamba Arkansas The Administrative Rules and Regulations Subcommittee of the Arkansas Legislative Council approved a proposed rule from the Arkansas State Plant Board that bans applicators from using dicamba herbicide between April 16 and Oct. 31. The regulations include exemptions for dicamba use in pastures, rangeland, turf, ornamental, direct injection for forestry and home use. In addition to banning dicamba products for use in row crops, the state is increasing fines for violations to $25,000. These decisions come after nearly 1,000 official complaints in the state. At press time, the rule will again be considered by the full Arkansas Legislative Council. Illinois While Illinois did not add any additional restrictions to EPA’s requirements, it is focusing more on education. Mandatory classes started in November and will continue through March to ensure all applicators can attend. The training is for use of Engenia, FeXapan and XtendiMax; all other dicamba formulations are illegal in soybeans. The classes review application methods and provide details about what label changes mean for applicators. “It is important that everyone in the stewardship chain understand the proper use of these products and effective weed management principles,” according to the Illinois Fertilizer and Chemical Association. Indiana On Aug. 30, 2017, the Indiana Pesticide Review Board voted to place all dicamba products used for agricultural purposes under restricted use. This decision means only certified applicators will be authorized to apply the product. The proposed rule would restrict “any dicamba containing pesticide product that (A) contains a dicamba active ingredient concentration greater than or equal to 6.5% and (B) is intended for agricultural production uses but does not also contain 2,4-D as an active ingredient; or is not labeled solely for use on turf or other non-agricultural use sites.” Iowa Iowa officials issued a Special Local Need label for XtendiMax, which requires expanded dicamba application training that includes: New use pattern for dicamba-tolerant soybeans. Application requirements including wind speed and direction and buffers. Information about temperature inversions. Detailed record keeping. Required spray tank clean-out. Information about off-target movement. The department worked with Iowa State University to develop these topics and will approve the training to reduce off target movement. Minnesota Minnesota has imposed restrictions for all new dicamba formulations. All three of the new formulations are restricted use pesticides for retail sales and can only be applied by Minnesota Certified Applicators. The formulations can’t be applied after June 20. Soybeans are still in the vegetative growth stage by June 20. Research shows plants in the vegetative stage are less affected by dicamba than in the reproductive stage. Applications aren’t allowed if air temperatures in fields are above 85°F or if the National Weather Service forecast high for the nearest location exceeds 85°F. Missouri After more than $145,000 in fines in 2017, the Missouri Department of Agriculture has issued restricted use labels for new dicamba herbicides. The restrictions state applicators must complete an online dicamba notice of application daily before applying the product and they cannot apply dicamba before 7:30 a.m. or after 5:30 p.m. Cutoff dates vary by county. Farmers in Dunklin, Pemiscot, New Madrid, Stoddard, Scott, Mississippi, Butler, Ripley, Bollinger and Cape Girardeau counties cannot use the product after June 1, 2018. All other counties must stop use after July 15, 2018. North Dakota North Dakota’s Department of Agriculture has added restrictions for new dicamba products. Requirements include: June 30 or first bloom (whichever comes first) application cutoff. No application if actual or forecast temperature is more than 85°F. Only apply one hour after sunrise to one hour before sunset. Drive 12 mph or less. Applicators must notify the Department of Agriculture and include contact info, certification, date, time and location of application. 15 gal. per acre. No applications with 80° or less nozzles. Tennessee The Tennessee Department of Agriculture is considering new rules for dicamba. The group is seeking a Special Local Needs label to restrict use of new formulations. If approved the state will require certified applicators to complete dicamba-specific training through the University of Tennessee Extension or dicamba manufacturers, apply product between 7:30 a.m. and 5:30 p.m. and use a hooded sprayer for all applications from July 15 to Oct. 1. Tennessee is also trying to prohibit application of generic formulations from May 15 to Oct. 1.

Corn Corn or grain production in 2017 was estimated at 14.6 billion bushels, down 4 percent from the 2016 estimate. The average yield in the United States was estimated at a record high 176.6 bushels per acre, 2.0 bushels above the 2016 average yield of 174.6 bushels per acre. Area harvested for grain was estimated at 82.7 million acres, down 5 percent from the 2016 estimate. Sorghum Sorghum grain production in 2017 is estimated at 364 million bushels, down 24 percent from the 2016 total. Planted area for 2016 is estimated at 5.63 million acres, down 16 percent from the previous year. Area harvested for grain, at 5.05 million acres, is down 18 percent from 2016. Grain yield is estimated at 72.1 bushels per acre, down 5.8 bushels from 2016. Rice Rice production in 2017 totaled 178 million cwt, down 20 percent from the 2016 total. Planted area for 2017 was estimated at 2.46 million acres, down 22 percent from 2016. Area harvested, at 2.37 million acres, was down 23 percent from the previous crop year. The average yield for all United States rice was estimated at 7,507 pounds per acre, up 270 pounds from the 2016 average yield of 7,237 pounds per acre. Soybean Soybean production in 2017 totaled a record 4.39 billion bushels, up 2 percent from 2016. The average yield per acre was estimated at 49.1 bushels, 2.9 bushels below the record yield in 2016. Harvested area was up 8 percent from 2016 to a record high 89.5 million acres. All cotton production is estimated at 21.3 million 480-pound bales, up 24 percent from 2016. The United States yield is estimated at 899 pounds per acre, up 32 pounds from last year. Harvested area, at 11.3 million acres, is up 19 percent from last year.

Putting 2017 in the rearview mirror is a relief for many of us in farming. Although yields for most producers were outstanding, prices fell short to such a degree that even with high yields, gross income per acre remained short of 2016 levels. In the dry pockets of the country, some producers got a double whammy of poor prices and poor yields. In 2016, many producers yielded their way out of an economic hole, as prices were just good enough with outstanding production to still have somewhat positive cash flow. One of the big issues for 2017 was few producers priced ahead grain. Even with strong yields, declining prices robbed many of a profit. This year also appears to have many fundamental challenges on the horizon for profitable price opportunities. Even if we see some sort of market rally in 2018, it’s likely to be limited on the upside and even more likely to be short-lived. Buckle Down. Assuming commodity prices stay under pressure, fine-tuning your budget is more important than ever. An accurate budget will help you discover a margin target instead of just a price target. For example, many of us held back on marketing with price targets in our minds at, say, $4 for corn and $10 for soybeans. In many cases, these prices never arrived. Yet, many producers could have sold at prices much lower than that and achieved some level of profit margin. This is precisely why an accurate budget can help drive your decision-making. Why are $4 and $10 magic numbers? Or any other price projection? Maybe your number is $3.47 for corn and $9.23 for soybeans. The point is, keep your budget current and use your five-year proven production history as a guide to keep your breakeven in front of you during the growing season. For the 2017 crop, everything is an absolute at this point. You know your exact cost of production. Now, it’s just a matter of determining an acceptable margin for your operation and targeting the opportunity. For some producers, that might not necessarily be a positive number. For others, the reality might be targeting a profit margin per bushel of only 10¢ or 20¢. Every operation is different, which is more reason to dial your numbers in accurately and often. Line By Line. Budgeting accurately isn’t a difficult task. It just takes discipline. Calculating production costs in today’s world is easy with the abundance of online tools and spreadsheets online. Focus less on the tools or programs and more on the numbers. Start by separating out each line-item expense into its own category including land, seed, fertilizer and equipment. The tool or spreadsheet you’re using should automatically calculate several factors based on your estimated or actual yield. Those factors include percent of cost, bushels required to cover the expense and cost per bushel. These three factors are all direct moving targets that depend on yield. Once you have your individual line-item expenses identified and accounted for, scenario planning becomes much easier. You can look at total expenses and ensure these numbers match up with cash-flow expenses in your cash and accrual accounting systems. For those with robust accrual accounting systems, this might seem like doubling up. But manually placing numbers into a scenario-planning tool forces you to think critically about the numbers. It gives you the opportunity to consider how to adjust expenses and income by line item. When you plan scenarios with these numbers, you will be enlightened about what’s going on within your operation. You won’t just be looking at numbers your accounting system spits out. One final note: There is a commonly overlooked line item expense called return to management. This category should include all overhead expenses such as family living costs, taxes, payroll, etc. In my next column, I’ll discuss budgeting and return to management and share three simple principles for your budget. Chris Barron is director of operations and president of Carson and Barron Farms Inc. in Rowley, Iowa. He is also a financial consultant for Ag View Solutions and appears regularly as a guest on Farm Journal Media radio and TV affiliates.