“Final Planting Date” of May 25th for Corn in Western KS – Crop Insurance and Likely Maturity Prospects (KSU-Haag and Vandeveer)

The crop insurance “final planting date” for corn across most of Kansas is May 25.  Corn planted after this date faces a declining level of coverage.  Following is an article by Lucas Haag and Monte Vandeveer of Kansas State University addressing these issues.

This article was authored by:

Lucas Haag – KSU Extension Northwest Area Crops and Soils Specialist – Colby, Kansas

Monte Vandeveer – KSU Extension Agricultural Economist – Garden City, Kansas

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Late Planting of Corn

While the precipitation received in western and central Kansas has been wonderful for filling the soil profile and thus has increased yield potentials, it has created significant delays in planting both irrigated and dryland corn.  This late planting situation raises several considerations for producers, particularly hybrid selection with respect to maturity and potential crop insurance implications of late planting from a risk management standpoint.

Corn Hybrid Maturity

Many growers are familiar with corn hybrid maturity being expressed as days of “relative maturity” or RM. This system, in place for many years, has generally been more effective at comparing hybrid maturities within a company as opposed to across companies.  Fortunately, in recent years many seed companies have started providing maturity information expressed as growing degree units (GDU’s). Some companies provide both GDU’s to silking and GDU’s to maturity.

What is a GDU?

Growing degree units or growing degree days are a weather based scale to measure the progression of crop phenology in thermally driven crops such as corn.  GDD or GDU’s are calculated as:

GDU = (Daily Maximum Air Temperature + Daily Minimum Air Temperature)/2 – 50

In the case of corn, when the maximum air temperature is greater than 86° F then the maximum air temperature is set to 86°, as the rate of growth for corn does not increase with increasing temperature above 86° F. Similarly, when the minimum air temperature is less than 50° F we use 50° as the value.

In general, it takes 90-120 GDU’s for corn to emerge, residue and soil conditions contribute a great deal of variability to this range. A 110-day hybrid typically needs around 1500 GDU’s to reach silking and 2670 GDU’s to reach black layer or physiological maturity.

Probabilities of Corn Reaching Physiological Maturity based on Location, Planting Date, and Hybrid Maturity

Using historical weather data, the probability of reaching physiological maturity before a 28° F freeze can be calculated. The threshold of 28 was used as long-term weather records only report the minimum, and not the duration of any given temperature. It takes multiple hours of 32° F to kill corn, but only a few minutes of temperatures at 28° F.

GDU’s were totaled for each year from each of multiple planting dates to determine cumulative GDU’s. This calculation was performed for 33 locations and 11 planting dates across western and central Kansas. GDU’s to physiological maturity for a given days of relative maturity were determined by averaging the GDU’s of a given relative maturity across multiple hybrids from multiple companies.

As an example, the probability table for Colby is shown below.  This is based on weather records from 1900 through 2016. If we were to plant a 113 day hybrid on May 22nd, we see that the probability of reaching physiological maturity before a 28° freeze is 52.4%. Switching to a 108 day hybrid would improve that probability to 80%.

Local data is important in evaluating these probabilities as relatively short distances can result in large changes in probability of success for a given hybrid x planting date combination due to changes in elevation and rate of in-season accumulation of GDU’s. For example, again looking at a 113 day hybrid planted on May 22nd, while the probability at Colby is only 52.4% (red circled value), it is 91.3% at Hill City, 64 miles to the east, and 88.5% at Hoxie, a mere 33 miles to the east .

Worst Case Scenarios for Probability of Crop Maturity

It is important to note that these tables likely represent the “worst-case” scenario for probabilities of success. Data from the eastern Corn Belt suggest that when a hybrid is planted later than its optimal planting date it takes fewer GDU’s to reach physiological maturity. Their data suggest that GDU requirements for maturity are reduced by 6.8 GDU’s for every day that planting occurs after May 1st.  Unfortunately, I have not been able to find data from the Great Plains to either confirm that rate or suggest another rate.

It’s reasonable to believe that corn hybrids here will also reduce their GDU requirement with later planting. To get a full view of possibilities I would recommend you look at the probabilities for the maturity of the hybrid you are considering and then also the probabilities for a hybrid that is 3-6 day shorter. This will likely give you a realistic range of potential outcomes. For example, if you are considering the probabilities for a 110 day / 2670 GDU hybrid, you should consider the range of likely scenarios to be between the values listed for that hybrid and those listed for 108 or 105 day hybrid. So for a 110 day/2670 GUD hybrid planted May 29th at Hoxie, the range of probabilities would be 87.2 to 94.9% (green circled probabilities).

Probability charts for additional locations can be found at www.northwest.ksu.edu/agronomy

Locations included in the analysis with tables that can be found at the link include: Alton, Atwood, Belleville, Beloit, Big Bow, Bison, Brewster, Burr Oak, Cimarron, Colby, Concordia, Ellsworth, Garden City, Goodland, Hays, Hill City, Hoxie, Johnson, Lakin, Leoti, Lincoln, Ness City, Norton, Oberlin, Phillipsburg, Plainville, Quinter, Russel Springs, Scott City, Sharon Springs, Smith Center, St. Francis, Syracuse, Tribune, Ulysses, and WaKeeney.

Crop Insurance Implications  

The final planting date for corn in the majority of Kansas is May 25th (see map below). After the final planting date there is a “late planting period” that extends for 20 days after the final plant date.

Full map can be viewed at: https://www.rma.usda.gov/fields/ks_rso/2017/final/kscorn.pdf

For corn acres that haven’t been planted by the final planting date growers have several options:

  1. Plant the insured crop during the late planting period, and insurance coverage will be provided. The late planting period for corn in Kansas and Nebraska is 20 days after the final planting date. The production guarantee is reduced 1% per day for each day that planting is delayed after the final planting date.
  2. Plant the insured crop after the late planting period has ended if you have been prevented from planting during the late planting period, and insurance coverage will be provided. The insurance guarantee will be 55% of the original production guarantee.
  3. Acreage that was prevented from being planted due to an insured cause of loss can be left idle and receive a full prevented planting payment, also equal to 55% of the original production guarantee.
  4. Plant a cover crop during or after the end of the late planting period and receive a full prevented planting payment as long as it is not hayed or grazed before November 1.   The cover crop cannot be harvested for grain or seed at any time.
  5. Plant another crop (second crop) after the late planting period (if also prevented from planting through the late planting period), and receive a prevented planting payment equal to 35% of the prevented planting guarantee.

For example, consider a grower with a dryland corn APH yield of 105 bushels per acre who has signed up for Revenue Protection coverage with a 75% coverage level.  Using the spring projected price of $3.96/bushel, this grower would have a production guarantee of 78.8 bushels per acre and a revenue guarantee per acre of $311.85 (= 105 bu./acre x 75% x $3.96/bu.).  An acre of corn planted five days after the final planting date, for example, would have its production guarantee reduced 5% (1% for each late day), meaning the revenue guarantee would decline 5% from $311.85 to $296.26.

 

Lucas Haag, Northwest Area Agronomist, Northwest Research-Extension Center, Colby

Monte Vandeveer, Southwest Area Economist, Southwest Research-Extension Center, Garden

KSU Wheat Market Outlook in Mid-May 2017 – “Next Crop” MY 2017/18 U.S., World, and “World Less China” Market Scenarios

This report provides an analysis of U.S. and World wheat supply-demand factors and “next crop” 2017/18 marketing year price prospects following the USDA’s May 10th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.  This article will be available in full on the KSU AgManager website on Monday, May 22, 2017 (http://www.agmanager.info/).

Following is a summary – with the full analysis-article for Wheat Market Outlook in “Next Crop” MY 2017/18 to be found at this web location:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

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Summary

Overview

Since the USDA’s May 10th World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat futures market prices first traded lower then turned higher again.  CME JULY 2017 Kansas HRW Wheat futures closed at $4.39 ¼ on 5/10/2017 – the day of the report.  But after trading lower to close at $4.21 on May 16th, JULY 2017 Kansas HRW Wheat moved higher again to close at $4.38 on Friday, May 19th.

Projected World Wheat Supply-Demand in “Next Crop” MY 2017/18

For the “next crop” 2017/18 marketing year (MY) beginning on June 1st, the USDA projected the following.

First, that World wheat total supplies would be 993.2 million metric tons (mmt) with total use of 734.9 mmt – both marginally lower than the record high levels of “current” MY 2016/17.

Second, that World wheat exports will also trend lower to 178.35 mmt in the “next crop” 2017/18 marketing year – down from a record high of 179.7 mmt last year, but up from 172.85 mmt two years ago.

Third, that World wheat ending stocks would be a record high 258.9 mmt in “next crop” MY 2017/18 – up from 255.35 mmt last year, and from 242.4 mmt two years ago.

And fourth, that World wheat percent ending stocks-to-use (S/U) would be 35.1% – up from 34.5% last year, and from 34.0% two years ago – up to the highest level of World wheat supply-demand balances since 36.2% in MY 1999/00 and 36.5% in MY 1998/99.

Comparisons to “Short Crop” MY 2012/13

For a perspective on how historically large World total wheat stocks and World wheat percent stocks-to-use now are, in MY 2007/08 the 34-year low in World wheat ending stocks of 128.2 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% stocks/use both occurred – the last significant World wheat “short crop” marketing year.  The “tight supply-demand” situation in MY 2007/08 compares to projections of 258.3 mmt ending stocks and 35.1% ending stocks-to-use projected for “next crop” MY 2017/18.  The present “large crop-over supply” situation in World and U.S. wheat markets have a prevailing negative influence on U.S. and World wheat prices.

The Existing “Large Crop – Over Supply – Low Price” Market Condition

However, the broader “large crop-over supply-low price” situation in the World wheat market may be “obscuring” at least a couple of other important market issues.

First, while the quantity of wheat available in the World is plentiful, the available supply of high protein milling wheat is less so.  This factor helps exports of U.S. Hard Red Spring (HRS) wheat (higher protein – good quality) relative to World wheat export competitors.

Second, while the aggregate supply of wheat in World markets has grown, the supply of wheat in the “World Less China” is projected to have actually “contracted” or “diminished” in “next crop” MY 2017/18. “World Less China” wheat percent stocks-to-use have declined to the tightest level since at least MY 2008/09 when average U.S. wheat cash prices averaged $5.70 /bu.  If this “China supply isolation factor” eventually leads to noticeably tighter global supplies of available exportable wheat occurring in coming months, it would likely have a positive impact U.S. wheat market prices in “next crop” MY 2017/18.

The Likely Direction of the World Wheat Market Unless Major S-D Changes Occur

However, unless there is a change in the broader, overriding focus of the World wheat market away from aggregate global supplies to available “World Less China supplies – it is likely that significant World wheat production problems and/or trade disruptions would need to occur in year 2017 in order to have wheat prices recover significantly in later 2017.  Also, ongoing strength in the U.S. dollar exchange rate continues to be a negative factor limiting the competitive affordability of U.S. wheat exports in World markets.  These factors together have resulted in higher U.S. wheat ending stocks and % ending stocks-to-use, and have caused U.S. and Kansas wheat cash prices to still be only $0.30 /bu above the marketing loan rate in many Kansas locations in mid-May 2017 (after earlier having to fallen below loan rates in Fall 2016).

USDA U.S. Wheat Supply/Demand Forecast for “Next Crop” MY 2017/18:

The USDA released their grain market supply-demand and price projections for “next crop” MY 2017/18 in the May 10th World Agricultural Supply and Demand Estimates (WASDE) report.  United States’ wheat plantings are projected to be 46.059 million acres (ma) – down from 50.154 ma in “current” MY 2016/17.  Harvested acres are forecast to be 38.500 ma (83.59% harvested-to-planted) – down from 43.890 ma a year ago.  The 2017 U.S. average wheat yield is projected at 47.2 bu/ac, down from the 2016 record of 52.6 bu/acre.

Wheat production in the U.S. in 2017 is forecast to be 1.820 billion bushels (bb), down from 2.310 bb in 2015.  Projected “next crop” MY 2017/18 total supplies are 3.105 bb (down from 3.400 bb in “current” MY 2016/17), with total use of 2.191 bb (down from 2.241 bb in “current” MY 2016/17).

The USDA projected “next crop” MY 2017/18 ending stocks to be 914 million bushels (mb) (vs 1.159 bb a year ago), with percent ending stocks-to-use of 41.7% S/U (vs 51.7% last year and 50.0% the previous year).  United States’ wheat prices are projected to average $4.25 /bu – up from $3.90 in “current” MY 2016/17, but down from $4.89 /bu in MY 2015/16, and $5.99 /bu in MY 2014/15.   It is assumed by Kansas State University that these adjusted USDA projections for “next crop” MY 2016/17 have a 50% probability of occurring.

Three Alternative KSU U.S. Wheat S/D Forecast for “Next Crop” MY 2017/18:

As an alternative to the USDA’s projection, three potential KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “next crop” MY 2017/18.

  1. KSU Scenario 1) “Trend Yield” Scenario (25% probability) assumes for “next crop” MY 2017/18 that the following occurs.  It is assumed that there will be 46.059 ma planted, 82.50% harvested-to-planted, 37.999 ma harvested, 47.0 bu/ac trend yield, 1.786 bb production, 3.070 bb total supplies, 1.000 bb exports, 180 mb feed & residual use, 2.200 bb total use, 870 mb ending stocks, 39.6% S/U, & $4.45 /bu U.S. wheat average price.
  2. KSU Scenario 2) “Higher U.S. Wheat Exports” Scenario (15% probability) assumes the following for “next crop” MY 2017/18.  Planted acres of 46.059 ma are associated with 39.334 ma harvested (82.50% harvested-to-planted), 47.0 bu/ac trend yield, 1.786 bb production, 3.070 bb total supplies, 1.150 bb exports, 180 mb feed & residual use, 2.350 bb total use, 720 mb ending stocks, 30.6% S/U, & $5.10 /bu U.S. wheat average price;
  3. KSU Scenario 3) “Short U.S. Wheat Crop” Scenario (10% probability) assumes the following for “next crop” MY 2017/18.  Planted acres of 46.059 ma, 80.60% harvested-to-planted, 37.124 ma harvested, 40.0 bu/ac low yield, 1.485 bb production, 2.769 bb total supplies, 950 mb exports, 125 mb feed & residual use, 2.095 bb total use, 674 mb ending stocks, 32.17% S/U, & $5.00 /bu U.S. wheat average price.

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KSU Corn Market Outlook in Mid-May 2017: Considering Acreage, Yield and Production Scenarios

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for the “next crop” 2016/17 marketing year following the USDA’s May 10, 2017 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports.

Following is a summary of the article on “Corn Market Outlook in Mid-May 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website (www.AgManager.info) at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

 

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Summary

Overview

Since the USDA’s May 10th World Agricultural Supply and Demand Estimates (WASDE) report, JULY 2017 CME corn futures have been moderately volatile – moving both higher and lower within the range of $3.65 ¼ to $3.74.  “Current” MY 2016/17 U.S. corn prices have found some support due to 2017 production uncertainties (i.e., wet soils impacting corn planting & establishment in some regions and varying weather forecasts for summer 2017) and strong U.S. corn use in ethanol production, wet corn milling, exports and to a moderate degree in livestock feeding.

In addition, in the March 31st Prospective Plantings report the USDA forecast fewer U.S. corn planted acres in 2017.  If in 2017 there is a return to trend line U.S. corn yields near 167-168 bu/acre, then 170 bu/acre in 2017, then 2017 U.S. corn production could be in the range of 13.500 to 13.750 billion bushels (bb) instead of the USDA projection of 14.065 bb or the record high of 15.148 bb in 2016.

Forecasts by the USDA and other market analysts that ending stocks of U.S. corn will stay above 2 bb in “next crop” MY 2017/18, coupled with ending stocks-to-use above 14.5%-15.0% in both “current” MY 2016/17 and “next crop” MY 2017/18 has limited any significant corn futures or cash market price rallies to date in Spring 2017.   IF excessive moisture conditions that have developed in the U.S. Corn Belt in late April – mid-May were to continue until late-May and significantly delay planting progress – THEN increased concerns about 2017 U.S. corn production prospects could lead to higher U.S. corn prices in late-Spring – Summer 2017.

Kansas Cash Corn Bids & Basis as of May 17, 2017

Cash corn bids at major grain elevators ranged from $3.07 ($0.65 under JULY futures) to $3.62 ($0.10 under) in Western Kansas and $2.98 ($0.73 under) to $3.31 ½ ($0.40 under) in Central Kansas on Wednesday, May 17th.  This represents a marked increase since October-December 2016 when corn price bids statewide had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel.  Cash corn price bids in east central and northeast Kansas – near river terminal locations – were near $3.48 ½ – $3.51 ½ on May 17th, up from the range of $3.26-$3.28 per bushel on 12/23/2016.  Cash corn bids at Kansas ethanol plants on May 17th ranged from $3.47 ¾ ($0.20 under) to $4.02 ¾ ($0.35 over) – indicating continuing strength in ethanol demand for corn in Kansas and nationwide.

While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive market signal that corn usage has not declined, and that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.

Other Factors that Could Affect the Corn Market in 2017

  • First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early-spring and some into summer 2017.
  • Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.
  • Third, at least moderate continued strength in U.S. corn exports – at least until what is forecast to be a sizable 2nd crop of corn from South America becomes available on global markets during Summer 2017.
  • And fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017.  World geo-political events have the potential to provide “shocks” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate depending on which countries may be involved and their role in global corn export trade.

USDA Supply-Demand & Price Forecast for “Next Crop” MY 2017/18

Early USDA projections are for 2017 U.S. corn plantings of 89.996 million acres or ‘ma’ (down 4.0 ma).   Harvested acres of approximately 82.4 ma (down 4.35 ma) are forecast, with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), leading to a 2017 U.S. corn production is forecast of 14.065 bb – down from the record high of 15.148 bb in 2016.

The USDA forecast “next crop” MY 2017/18 total supplies to be 16.410 bb – down 530 mb from last year’s record high.  Total use is forecast at 14.300 bb – down 345 mb from last year’s record high.  Ending stocks are projected to be 2.110 bb (14.76% S/U) – down from 2.295 bb (15.67% S/U) in “current” MY 2016/17.  United States’ corn prices are projected to average $3.40 /bu (range of $3.00-$3.80).  This equals the midpoint estimate of $3.40 /bu from “current” MY 2016/17. This scenario is given a 45% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.

Alternative KSU Supply-Demand & Price Forecast for “Next Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18.  Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields and production than projected by the USDA in the May 10, 2017 WASDE report for “next crop” MY 2017/18.

  • KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.556 bb” Scenario (25% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 167.3 bu/ac trend yield, 13.556 bb production, 15.901 bb total supplies, 14.255 bb total use, 1.646 bb ending stocks, 11.55% S/U, & $3.95 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.370 bb” Scenario (15% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 165.0 bu/ac yield, 13.370 bb production, 15.715 bb total supplies, 14.155 bb total use, 1.560 bb ending stocks, 11.02% S/U, & $4.10 /bu U.S. corn average price for “next crop” MY 2017/18;
  • KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.155 bb” Scenario (5% probability) assumes: 88.500 ma planted, 80.535 ma harvested, 150.0 bu/ac yield, 12.080 bb production, 14.375 bb total supplies, 13.460 bb total use, 915 million bushels (mb) ending stocks, 6.80% S/U, & $6.00 /bu U.S. corn average price for “next crop” MY 2017/18;

World Corn Supply-Demand Trends

World corn production of 1,033.7 million metric tons (mmt) is projected for “next crop” MY 2017/18, down 3.0% from the record high of 1,065.1 mmt in “current” MY 2016/17, but still up 6.8% from 968.1 mmt in MY 2015/16.  Near record World corn total supplies of 1,257.6 mmt are projected for “next crop” MY 2017/18, down marginally from the record high of 1,278.1 mmt in “current” MY 2016/17, but up from 1,177.5 mmt in MY 2015/16.

World corn exports of a near record 151.9 mmt are projected for “next crop” MY 2017/18, down 4.2% from the record high of 158.6 mmt in MY 2015/16, and up 26.6% from 119.95 mmt in MY 2015/16.  Projected World corn ending stocks of 195.3 mmt (18.4% S/U) in “next crop” MY 2017/18 are down from the record high 223.9 mmt (21.3% S/U) in “current” MY 2016/17, and from 212.4 mmt (22.0% S/U) in MY 2015/16.

Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine).   An ongoing, strong demand base for corn could help cause sharply increased corn market volatility in the summer of 2017 IF any serious threats emerge to the 2017 U.S. corn crop.

KSU Weekly Grain Market Analysis: Alternative Scenarios for “Next Crop” 2017/18 Corn and Wheat

Grain market summary notes, charts and comments supporting the Grain Market Update presented in the KSU Agriculture Today radio program to be played on Friday, May 12, 2017 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_05-12-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, May 12, 2017 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the May 12th recording will be available at the KSU Agriculture Today website after the recording.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

“Deep Numbers” Analysis of the May 10, 2017 USDA WASDE Report (D. O’Brien KSU)

A “deep numbers” analysis of the results of the May 10, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The May WASDE report considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available at the following web address:

http://www.agmanager.info/wasde-quick-analysis-spreadsheet

This “deep numbers” analysis considers how the May 10th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

Crop Insurance Alternatives for Winter-Damaged HRW Wheat in KS (Vandeveer-KSU 5/10/2017)

A decision worksheet assessing “Insurance Alternatives for Winter-Damaged Wheat” has been developed by Monte Vandeveer, Extension Agricultural Economist for Kansas State University.  This decision making tool was developed to assist producers in analyzing the options available for wheat damaged by the late winter storm in Kansas in late April, 2017.

This farmer decision making worksheet is available on the KSU AgManager.info website at the following web address:

http://www.agmanager.info/ksu-insurance-alternatives-winter-damaged-wheat

Following are snap shots of the decision making worksheet for review.

 

Grower Options For Insured Wheat Damaged By Late Winter Storm (Monte Vandeveer – KSU Ag Economist)

Following is an article by Monte Vandeveer, Extension Agricultural Economist with Kansas State University, concerning grower options for insured wheat damaged by the recent late winter storm in Kansas. A full version of the article is available on the KSU AgManager Website at the following web address:

http://www.agmanager.info/grower-options-insured-wheat-damaged-late-winter-storm

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Grower Options For Insured Wheat Damaged By Late Winter Storm

Monte Vandeveer (montev@ksu.edu), Kansas State Univ., Dept.  of Ag Economics, May 2017

The late winter storm which struck western and central Kansas, along with areas in neighboring states, caused cold-weather damage to the crop which was progressing into its later developmental stages.  A publication from K-State’s Department of Agronomy, Spring Freeze Injury to Kansas Wheat,” shows how wheat’s resistance to freeze injury varies with different stages of development, along with the types of injury due to low temperature and their effects on yield at later stages of plant development.

Another risk faced by growers is the problem of bent or broken stalks, pressed down by a foot or more of heavy wet snow from the storm.  K-State’s Department of Agronomy issued an e-Update on May 1 about the severe conditions across the state and the likelihood of wheat damage.   Agronomists advise that it may be several days before the extent of damage is known in some cases.

Fortunately, most wheat acres in Kansas are insured; in fact, the state typically has over 90 percent of its planted wheat acres covered by crop insurance.  Step 1 after potential damage to the crop is always prompt notification of one’s insurance agent.

With damage across such a wide area, the next challenge will be to schedule a loss adjustment.  Once the adjuster provides an appraisal, the acres will be released for other use.  If a grower disagrees with the appraisal of the damaged crop, he/she will need to leave intact strips in the field for later harvest and final resolution of the wheat claim.

What would a complete loss be worth? 

Assume a producer has a 40-bushel Actual Production History yield for insurance, along with the $4.59 Projected Price (determined prior to planting) to get an expected revenue of $183.60 per acre.  Combine this with an insurance guarantee level of 75% to get coverage worth $137.70 per acre for a complete wipe-out.

In general, insurance rules do permit the planting of a second crop when an insured first crop fails.  The Risk Management Agency indicates the following options are permitted for an insured wheat crop that has failed, provided it had not already headed out:

  • The acreage may be left idle (black dirt), or planted to a second crop and not insured, and receive a full indemnity for the first insured crop;
  • Plant and insure a second crop and receive a 65-percent reduction in indemnity for the first insured crop – you pay 35 percent of the premium for the first insured crop;
  1. If there is not a loss on the second crop, you will receive the remaining 65 percent of indemnity on the first insured crop and pay the full premium on the first insured crop; or
  2. If the second crop receives an indemnity, the first crop indemnity remains at 35 percent and the second crop indemnity is fully paid (no reduction). You may choose to not accept the second crop indemnity and receive a full indemnity on the first insured crop.

For most non-irrigated western Kansas growers, the likely second crop is grain sorghum.  Optimal seeding dates still lie in the future, farmers are already quite experienced with it, it is well-adapted to hot, dry western Kansas summers, and it is easily marketed.

For the example above, the producer could take 35 percent of the wheat indemnity, or $48.20 per acre, then plant grain sorghum as a second crop, and insure it.  If the grain sorghum has no loss, the producer would receive the remaining 65 percent of the wheat indemnity, $89.50 per acre, once the grain sorghum crop was harvested.  A second option would be to take the entire wheat indemnity of $135.70 per acre, still plant the grain sorghum, but leave it uninsured.

What should producers do with the damaged wheat crop in the meantime?

Again, producers need to wait until an adjuster inspects their fields and releases the acres before taking other steps.  Once an adjuster has made an appraisal and the acres are released, a producer may handle the damaged crop in any manner he/she desires.  This includes making hay or silage from the damaged crop, if conditions permit.

These rules apply for wheat that HAD NOT already headed out.  Of course, plant maturities vary widely across the storm area due to different varieties, planting dates, etc., and some wheat had already headed out.  Wheat which had in fact headed out prior to this storm is of course eligible for a full indemnity, but no second crop may be insured. 

If the damaged wheat was a summer-fallow crop and it is destroyed by June 1, producers can go back and plant wheat on those same acres this fall and have them considered as grown under summer-fallow practice.  If the damaged wheat is not destroyed by June 1 and wheat is planted there again this fall, it would be considered continuous cropping wheat.

Producers are reminded to consult with their crop insurance agent to ensure compliance with insurance program rules and maintain their eligibility for insurance coverage.