I am not a farm rental contract guru by any means. However over the past couple of weeks I've received several calls requesting what is an appropriate cash rent level in Clinton County. Obviously this depends on several factors which I'm not going to cover here. Instead, I want to talk a little bit about, or at least offer some resources on, flexible cash rents.
Among the calls I've been getting has been one which generally asks, "How do I put a rent together which lets both me and the farmer take advantage of really good years?" My response has been to take a look at a flexible contract. Flexible contracts set a floor or base rent for cropland with the landowner capturing a certain amount of income above a set level.
As an example, a landowner and farmer may set a base rent of $200/acre based on 200 bushels of $5 corn (I'm using these figures because it makes the math easy) or a gross revenue of $1000/acre.
If corn price is $6 and yield is 200 bushels, then the gross is $1200 and in a flexible rent system the landowner would receive a certain percentage of the $200 overage. The same type of overage might apply with a very good yield - say, 220 bushels at $5.
These systems are pretty simple in concept but because of the uncertainties they can be pretty complicated in practice. A key point is, How do you set the price? Is it a)local cash price twice a year b)averaged on a certain day of each month through the year, or c)some other way? From a farmer's perspective this type of rental agreement fails to take input costs into account. Crop prices may look very good but input costs have this pesky habit of rising when prices are good so this isn't the entire story. Also, if you want to share in the potential upward benefit, you should be prepared to share in some of the downward risk as well.
I'll also caution landowners that a 50-50 split of the overage isn't appropriate (at least that I can see). Keep in mind that for every additional bushel of grain harvested, the farmer has some costs associated with it. That bushel must run through the combine and be hauled to the elevator. For corn it will usually need to be dried and, in theory at least, each additional bushel will require additional fertilizer.
Rather than summarize what people more experienced and informed than I have to say about this, I'm going to refer you to an online resource (initially I was going to include links to Ohio State, Illinois and Iowa State but those are on this page).
Purdue's Farmland Leasing Page - This page has a variety of land rental resources including a link to the cash rent and land values survey. Toward the bottom of the first section are a couple of Purdue resources including a flex rent calculator. If you move further down the page under "Flexible Cash Rent Leases" you'll find information from other Universities.
Flexible rents can be a useful way of allowing landowners and farmers to share in profitable years. I do caution people to remember that to date, these agreements do not typically account for variations in input costs, something which will have a tremendous impact on profitability. Hopefully in the future this type of adjustment may also start being factored into agreements.
Sunday, November 13, 2011
Thursday, October 6, 2011
Pesticide Applicator Training Date Set
We'll be holding a Private Pesticide Applicator Recertification Program (PARP) on Friday, December 16, from 9:30 a.m. to Noon at the Clinton County Fairgrounds 4-H Building. Clinton County Private Applicators will receive additional information in a mailing closer to the event.
Christian Krupke from Purdue Entomology will present an Insect Control Update and Glenn Nice from Purdue Botany and Plant Pathology will provide a Weed Control Update. We'll also have a review of the bulk fertilizer and pesticide containment regulations. The cost will be $10 for private applicators. I'll request CCH's for commercial applicators and will have signup sheets for CCA's as well.
This will be part of a full day of programming. At 7:30 that day we'll host our annual Ag Outlook Breakfast, sponsored by The Farmers Bank and Regions Bank. Purdue Ag Economist Chris Hurt will be on hand to deliver the Outlook for 2012. At 1:00 p.m., following the PARP, we'll hold a Category 14 Ag Fertilizer Applicator testing program. This will be a test only session. No training. There will be no fee for either the Category 14 or Outlook breakfast though we will ask people to register in advance so we have an idea on numbers.
UPDATE: I've provided some additional information on the programs we'll be having on December 16 which you can access by clicking on this link.
Christian Krupke from Purdue Entomology will present an Insect Control Update and Glenn Nice from Purdue Botany and Plant Pathology will provide a Weed Control Update. We'll also have a review of the bulk fertilizer and pesticide containment regulations. The cost will be $10 for private applicators. I'll request CCH's for commercial applicators and will have signup sheets for CCA's as well.
This will be part of a full day of programming. At 7:30 that day we'll host our annual Ag Outlook Breakfast, sponsored by The Farmers Bank and Regions Bank. Purdue Ag Economist Chris Hurt will be on hand to deliver the Outlook for 2012. At 1:00 p.m., following the PARP, we'll hold a Category 14 Ag Fertilizer Applicator testing program. This will be a test only session. No training. There will be no fee for either the Category 14 or Outlook breakfast though we will ask people to register in advance so we have an idea on numbers.
UPDATE: I've provided some additional information on the programs we'll be having on December 16 which you can access by clicking on this link.
Tuesday, September 6, 2011
Corn Harvest Issue I: Aflatoxin
We're a little while yet from harvest but getting there, particularly with much of Clinton County corn suffering from a lack of rain. The good news is that many of the fields look better than they appear from roadside "windshield Surveys." Once you get into many (not all, unfortunately) fields, grain fill is better than along field borders.
One of the risks impacting drought-stressed corn is aflatoxin. We've had recent experience with that here so this is mainly a reminder. One tip is if you think this may be a problem, harvest at-risk fields early and make sure corn gets dried down quickly. Aflatoxin multiplies quite rapidly at higher moistures and temperatures but will not when corn is dried down to 13-14% and cooled. Avoid air-drying.
Another implication is insurance. Aflatoxin is a covered loss under many insurance policies, but not after corn is placed in storage. If you suspect you may have aflatoxin, you should contact your insurance agent as soon as possible.
Gary Schnitkey from the University of Illinois has additional information on crop insurance and aflatoxin.
For more information on grain storage issues, see Purdue's page on Managing Moldy Corn, developed in 2009.
One of the risks impacting drought-stressed corn is aflatoxin. We've had recent experience with that here so this is mainly a reminder. One tip is if you think this may be a problem, harvest at-risk fields early and make sure corn gets dried down quickly. Aflatoxin multiplies quite rapidly at higher moistures and temperatures but will not when corn is dried down to 13-14% and cooled. Avoid air-drying.
Another implication is insurance. Aflatoxin is a covered loss under many insurance policies, but not after corn is placed in storage. If you suspect you may have aflatoxin, you should contact your insurance agent as soon as possible.
Gary Schnitkey from the University of Illinois has additional information on crop insurance and aflatoxin.
For more information on grain storage issues, see Purdue's page on Managing Moldy Corn, developed in 2009.
Monday, August 29, 2011
Ag Outlook 2012 Webinar
The Purdue Ag Economics Department has scheduled a webinar, "Ag Outlook 2012" for Tuesday, September 13 beginning at 8:30 a.m. I will be showing this at the Extension Office so if you have a slow internet connection, or would just prefer viewing it here, feel free to stop by. But do me a favor and call or e-mail me first to let me know you're coming. The room I've scheduled has about 20 chairs in it so if I'd like to know in advance if I need to move furniture.
They didn't put an end time on it but I'd think it would be finished by 10:30 or so. We will be having our Ag Outlook Breakfast this fall. This is not 100% confirmed but I expect it will be Friday, December 16 at the Clinton County Fairgrounds.
The complete program announcement from Purdue follows:
"Purdue Extension Service will present a program titled “Agricultural Outlook 2012” at 8:30 am ET/ 7:30 am CT on Tuesday September 13. For those interested, the link is: https://gomeet.itap.purdue.edu/tuesdays/ The program is free to the public and is designed to help farmers, land owners, input suppliers, and those interested in agriculture make better business decisions in the coming year. The program will be presented by Corinne Alexander an Agricultural Economist.
U.S. farmers are facing disappointing corn and soybean yields this fall as late planting was followed by extreme July heat and dryness. Demand remains strong for grains, soybeans, and food around the world with limited supplies. This means prices will be high. The program will help answer “How high?”
The volume of corn used for ethanol is expected to set new records in 2012, however, some believe there won’t be enough corn this fall to meet all the demands and that EPA should consider reducing government ethanol mandates. In addition, China continues to excite the corn market with purchases for a second year with prospects for longer-term buying relationships with the U.S.
Increasing attention is being given to the general economy with growing fears of a double-dip recession. This program will outline the reasons why the economy is growing slowly and make predictions for future growth, interest rates, and inflation. A short discussion of the Federal government debt situation will also be featured.
The livestock sector faces another year of extremely high feed costs. Yet some animal product prices have also risen sharply over the past year. Some of the animal species can afford these record feed prices, others may face losses in 2012. Regardless, consumers are experiencing the highest costs ever to feed their families.
Crop prices are up, but so are input costs for 2012. This program will outline which inputs are headed higher and how that may affect margins for 2012 and 2013. The battle for acres is underway this fall as producers consider seeding winter wheat. The program will demonstrate the economic implications of that battle by showing which crops are currently bidding most aggressively for the limited acres.
Land values and rents are expected to move higher again in 2012, but by how much and how high can land values and rents rise before they are too high? What are the driving factors to be watching? These and other topics will be covered."
They didn't put an end time on it but I'd think it would be finished by 10:30 or so. We will be having our Ag Outlook Breakfast this fall. This is not 100% confirmed but I expect it will be Friday, December 16 at the Clinton County Fairgrounds.
The complete program announcement from Purdue follows:
"Purdue Extension Service will present a program titled “Agricultural Outlook 2012” at 8:30 am ET/ 7:30 am CT on Tuesday September 13. For those interested, the link is: https://gomeet.itap.purdue.edu/tuesdays/ The program is free to the public and is designed to help farmers, land owners, input suppliers, and those interested in agriculture make better business decisions in the coming year. The program will be presented by Corinne Alexander an Agricultural Economist.
U.S. farmers are facing disappointing corn and soybean yields this fall as late planting was followed by extreme July heat and dryness. Demand remains strong for grains, soybeans, and food around the world with limited supplies. This means prices will be high. The program will help answer “How high?”
The volume of corn used for ethanol is expected to set new records in 2012, however, some believe there won’t be enough corn this fall to meet all the demands and that EPA should consider reducing government ethanol mandates. In addition, China continues to excite the corn market with purchases for a second year with prospects for longer-term buying relationships with the U.S.
Increasing attention is being given to the general economy with growing fears of a double-dip recession. This program will outline the reasons why the economy is growing slowly and make predictions for future growth, interest rates, and inflation. A short discussion of the Federal government debt situation will also be featured.
The livestock sector faces another year of extremely high feed costs. Yet some animal product prices have also risen sharply over the past year. Some of the animal species can afford these record feed prices, others may face losses in 2012. Regardless, consumers are experiencing the highest costs ever to feed their families.
Crop prices are up, but so are input costs for 2012. This program will outline which inputs are headed higher and how that may affect margins for 2012 and 2013. The battle for acres is underway this fall as producers consider seeding winter wheat. The program will demonstrate the economic implications of that battle by showing which crops are currently bidding most aggressively for the limited acres.
Land values and rents are expected to move higher again in 2012, but by how much and how high can land values and rents rise before they are too high? What are the driving factors to be watching? These and other topics will be covered."
Monday, August 22, 2011
Indiana Farmland Values and Cash Rents on the Rise
The 2011 Purdue Farmland Values and Cash Rent Survey results are in. Land values and rents are both up significantly over 2010 survey numbers. You can read the survey results in the August, 2011 Purdue Agricultural Economics Report. You will need Adobe Reader for this document.
Keep in mind that Clinton County is considered part of the Central District in Indiana. Tables 1 and 2 are what people are generally most interested in but there's a fair amount of information if you have a chance to read the entire report.
Keep in mind that Clinton County is considered part of the Central District in Indiana. Tables 1 and 2 are what people are generally most interested in but there's a fair amount of information if you have a chance to read the entire report.
Viptera Corn Issue
If you haven't already heard, there's a potentially significant issue with Syngenta's Agrisure Viptera corn. Primarily, China has indicated that they will not accept Viptera corn with the MIR162 insecticidal trait. This creates obvious problems with the possibility of buyers rejecting corn.
There are some sdditional details in this article by Rich Keller which Bob Nielsen posted on his Chat 'n Chew Cafe.
The National Corn Growers Association has put up a Viptera page discussing this issue. Syngenta has also put up a Viptera export information page.
At this point, producers should mainly stay current on this issue and aware of developments. If you've planted this corn you may want to contact your buyer and make sure you won't run into any problems. Hopefully additional information will be forthcoming soon.
There are some sdditional details in this article by Rich Keller which Bob Nielsen posted on his Chat 'n Chew Cafe.
The National Corn Growers Association has put up a Viptera page discussing this issue. Syngenta has also put up a Viptera export information page.
At this point, producers should mainly stay current on this issue and aware of developments. If you've planted this corn you may want to contact your buyer and make sure you won't run into any problems. Hopefully additional information will be forthcoming soon.
Thursday, August 4, 2011
Weather Impacts on Corn
Everybody who grows corn knows that the recent hot, dry weather during pollination isn't ideal. The question then becomes how to assess what the impact has been.
The most accurate way is to simply go out and do yield checks by counting ears and kernels. Rather than spell this out here, I'll refer people to Bob Nielsen's article from last October, Estimating Corn Grain Yield Prior to Harvest. In talking to people who've done this already, the general response I'm getting is, "It's not as bad as I was afraid it might be." I know that's not terribly specific but it appears that the corn has been weathering this surprisingly well.
From "drive-by windshielding" there has been remarkably little visible signs of stress in corn, in particular leaf rolling. This has recently started to change a bit in areas of the county which have not received much rain. If you're wondering how leaf rolling equates to yield loss, I'll refer you to an article from July 15 by Roger Elmore and Elwynn Taylor from Iowa State, Corn and “a Big Long Heat Wave on the Way”. In particular, these passages in the final section are interesting:
"By rule-of-thumb, the yield is diminished by 1 percent for every 12 hours of leaf rolling - except during the week of silking when the yield is cut 1 percent per 4 hours of leaf rolling."
and
"The second impact is less obvious initially. When soil moisture is sufficient, as it is for the most part this July, the crop does not have a measurable yield response to one day of temperatures between 93F to 98 F. However, the fourth consecutive day with a maximum temperature of 93 F or above results in a 1 percent yield loss in addition to that computed from the leaf rolling. The fifth day there is an additional 2 percent loss; the sixth day an additional 4 percent loss. Data are not sufficient to make generalizations for a heat wave of more than six days, however firing of leaves then becomes likely and very large yield losses are incurred."
Unfortunately, just in the past few days there has been some lower-leaf firing in corn. As a caution, this goes back to my "drive-by windshielding" sampling method which tends to include quite a bit of end-rows which are generally more compacted and will show more of this.
The most accurate way is to simply go out and do yield checks by counting ears and kernels. Rather than spell this out here, I'll refer people to Bob Nielsen's article from last October, Estimating Corn Grain Yield Prior to Harvest. In talking to people who've done this already, the general response I'm getting is, "It's not as bad as I was afraid it might be." I know that's not terribly specific but it appears that the corn has been weathering this surprisingly well.
From "drive-by windshielding" there has been remarkably little visible signs of stress in corn, in particular leaf rolling. This has recently started to change a bit in areas of the county which have not received much rain. If you're wondering how leaf rolling equates to yield loss, I'll refer you to an article from July 15 by Roger Elmore and Elwynn Taylor from Iowa State, Corn and “a Big Long Heat Wave on the Way”. In particular, these passages in the final section are interesting:
"By rule-of-thumb, the yield is diminished by 1 percent for every 12 hours of leaf rolling - except during the week of silking when the yield is cut 1 percent per 4 hours of leaf rolling."
and
"The second impact is less obvious initially. When soil moisture is sufficient, as it is for the most part this July, the crop does not have a measurable yield response to one day of temperatures between 93F to 98 F. However, the fourth consecutive day with a maximum temperature of 93 F or above results in a 1 percent yield loss in addition to that computed from the leaf rolling. The fifth day there is an additional 2 percent loss; the sixth day an additional 4 percent loss. Data are not sufficient to make generalizations for a heat wave of more than six days, however firing of leaves then becomes likely and very large yield losses are incurred."
Unfortunately, just in the past few days there has been some lower-leaf firing in corn. As a caution, this goes back to my "drive-by windshielding" sampling method which tends to include quite a bit of end-rows which are generally more compacted and will show more of this.
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