Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Friday 08/31/12

Disaster-Proof Ag
It pains me to say this, but if you're a Grain Belt crop producer with decent insurance, droughts appear good for business. When adjusted for inflation, farm incomes this year could top 1973 levels set during the Russian Grain Robbery aftermath--the all-time high water mark for farm revenue--USDA said this week.[Read Full Blog Post]
Posted at 1:19PM CDT 08/31/12 by Marcia Zarley Taylor | Post a Comment
Comments (3)
Marcia, in response to your blog..when will USDA recognize that high income is based off of 2011's crop being sold at high levels in 2012? The 2012 crop, at reduced yields, is not going to produce record income even with crop insurance proceeds that only guarantee 75-85% of 10 year yield history. We will have a good year financially but that is because we really sell our crop in the year after it is produced. Our 2012 crop does not impact us financially until 2013 and its results are yet to be determined until we harvest and then market the crop. I have seen several news stories talking about drought producing record profits - not sure that is telling the correct story. Maybe if 2012's crop gets sold at harvest and farmers income gets doubled up in 2012, 2 crops sold in 2012, then maybe we get to record levels. However, I can't imagine farmers taking a bunch of income all in 1 year so they can pay lots of taxes this year. Just questioning what is getting reported and if it actually represents this year's crop that has suffered severely. --Alan Karkosh
Posted by Marcia Taylor at 1:01PM CDT 09/05/12
Alan, you make a good point about carryover crops accounting for a big share of 2012's high income. Thanks for pointing out my oversight. Yes there will be some 2012-crop returns that look subpar because growers went insurance "lite"--they bought less than 70% coverage, they elected the harvest price exclusion and will get no bump up in price and they didn't take the trend-adjusted yield if offered in their county. Next year those decisions will likely be reconsidered. Still the question seems to be are you better off on 2012 crop revenue now than you were last February? For most farmers that's a yes as long as prices have escalated more than they've lost yield.
Posted by Marcia Taylor at 1:14PM CDT 09/05/12
"Schnitkey is quick to point out predicting cash prices and revenues more than a year in advance is a perilous occupation these days and strong 2013 incomes may not necessarily materialize. A year ago, he was plugging $5 corn into 2012" Honesty is always a breath of fresh air! I like to go back and read articles about weather and market forecasts made several months prior - usually good for a chuckle. Many of the farmers I know were sucker punched by predictions of sub five dollar corn and contracted what has turned out to be most of their crop in the five dollar range. Has that been factored into record income projections?! Also, same farmers are livid that hypothetical situations are broadcast by the media to impress others that we are making huge profits at the expense of taxpayers and consumers.
Posted by Curt Zingula at 8:35AM CDT 09/09/12
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