The combines will soon start to roll as harvest gets underway. Have you thought about your marketing plan for 2013 crop soybeans? Do you have one? Also, be aware that 2013 crop insurance premiums need to be paid on or before September 30.
Crop insurance and crop marketing are the two topics Steve Johnson addresses in this week's "Farm Management Friday" column. Johnson, an Iowa State University Extension farm management specialist, offers the following observations and suggestions to help farmers prepare for harvest. Harvest is already beginning to get underway in the driest areas of the state where corn ran out of water and has died prematurely in the hot, dry conditions.
Many farmers haven't priced any of their 2013 crop soybeans yet
* Marketing soybeans--Soybean prices normally peak in late summer, yet much of the 2013 crop hasn't yet been priced by farmers. That could be because growing conditions this year have left many farmers wondering how much they will produce. Or maybe the reluctance to sell ahead is because farmers look at how prices have declined from year-ago levels. Many farmers are determined to simply hold onto their corn and beans, hoping prices will eventually return to higher levels. "However, holding and hoping is not a marketing plan," says Johnson.
Even if you are unsure about how much this year's crop will produce, he believes that if you haven't yet taken advantage of current pricing options, you should be looking at pricing some of your new crop now.~~~PAGE_BREAK_HERE~~~
"New crop November soybean futures tend to be at their highest level in the late spring and summer months. The highest November soybean futures price in history occurred in early September last year," notes Johnson. "This followed back-to-back drought conditions in both the U.S. and South America. The life-of-contract high for the November '13 soybean contract is $14.10."
Farmers who are looking to price soybeans need to be ready to act
* Be ready to take action--That $14.10 price has currently slipped back to the $13.50-per-bushel range after a run to $14.09 per bushel on August 27 and September 3. With an updated yield estimate for soybeans due out on September 12, Johnson says growers looking to price soybeans need to be ready to take action.
The November 2013 soybean futures price rose nearly $2.50 per bushel during August, which opens the likelihood that South American soybean acreage will expand this fall and winter. "This is why there's no carry in the futures market prices at this time," he notes. "The May 2014 futures contract is running 60 cents below the November."
Johnson says most farmers failed to anticipate the risk of lower futures prices last year just prior to harvest. Farmers stored lots of bushels and sold them at a lower price after harvest; while incurring several months of storage and interest charges.
Consider selling some new crop beans using forward cash, or HTA contracts
Johnson advises that you consider pricing some new crop soybeans by using one of these three methods:
* Selling November or January soybean futures,
* Using a hedge-to-arrive contract based on November or January soybean futures,
* Selling on a forward cash contract also based on November or January soybean futures.~~~PAGE_BREAK_HERE~~~
"You can expect the harvest basis that is usually 30 cents to 50 cents under the November contract at crushing facilities and river terminals to be 20 cents to 40 cents under at harvest. Early harvested soybeans at the same locations may have a positive basis with cash prices actually greater than the November futures."
This fall, the basis at local elevators and co-ops will be narrower than normal, likely 40 cents to 60 cents under at harvest. Using a January hedge-to-arrive contract allows more time for the basis to narrow after harvest, and can even justify paying commercial storage costs for two-to-three months, says Johnson.
Crop insurance premiums must be paid on our before September 30
If you haven't talked with your crop insurance agent recently, now would be a good time to pick up the phone and do that. Johnson suggests discussing the possibilities that you may be filing a claim, and going over the details of your coverage.
* What about crop insurance? 2013 crop insurance premiums are due in full by September 30. "This date was waived until October 31 last year, but is likely to be enforced this year," says Johnson. "And there will be an interest penalty for non-payment that could be as much as 1.25% per month (15% APR), dating back to September 1. Check with your crop insurance agent to be certain how your insurer is handling late payment, as interest rates may vary between companies."
Johnson also reminds farmers that keeping good records at harvest is not only an important thing to do, but essential if you anticipate you'll have an indemnity claim on your crop insurance this year.
Johnson offers five helpful harvest time reminders:
1. Contact your crop insurance representative within 72 hours after discovering damage to report potential loss and to protect your coverage.
2. Keep production separate for each unit using a written ledger and record loads of production for each crop with the field name or number, date of harvest and identify the vehicle or wagon, weight, moisture and estimated volume per load.~~~PAGE_BREAK_HERE~~~
3. Identify the specific bushels delivered whether they are sold, placed into commercial storage or stored on-farm:
* Mark your scale tickets by unit, farm name or reference number.
* Level your grain bins between each unit, identify the depth of grain in the bin and mark on the storage structure using a permanent marker.
* Avoid commingling old crop with new crop bushels in the same bin. The prior year's production must be measured by a crop insurance adjuster or USDA representative before adding new crop.
4. Keep track of feed records if production is being fed before a final count is tallied and verified.
5. Report production to your crop insurance representative right after harvest to update your APH yield information and to check for a potential revenue loss.
Final thought--Do you have questions about cover crops and crop insurance? Cover crops are raising some questions in relation to crop insurance coverage of corn and soybean fields, notes Johnson. There is a lot of interest among farmers and conservationists in establishing cover crops for soil erosion protection, water quality improvement and other purposes such as improving the health and productivity of soil.
Some of these legume forages, small grains and grass-type covers are sown or drilled into fields after corn or soybeans are harvested. Other farmers hire an airplane to aerially seed cover crops into standing soybeans and cornfields in August or early September. Also, some farmers have seeded soybeans or other cover crops on "prevented planting" acres this year.
"If you have questions about cover crops and how they may affect your crop insurance coverage, be sure to check with your crop insurance agent right away," Johnson advises.