Economics

Took out one of the nitrogen plots today. Its a calibration study of N testing to rate response.

Results were (are) most likely not significant and had more to do with field position and water movement in the field than anything.  The result could be broken down into two different field positions, one averaging ~147 and the other averaging ~161.  That being said when your 150# rate and your 225# rate yield the same in the same field location, then its not N that’s contributing to that yield, or at least this year.

Randomized plot design helps tell treatment affect from field position.  This is why I am so, lets say….skeptical with all the fertilizer dealer “research” that is done in this area.  They don’t randomize and replicate.  The side by side it, among a lot of other things, and call it research.

This year it seems that yield response studies are not going to be very reliable between the massive amount of rain we had from April to July and the intense heat and lack of rain from July to August.  Not to mention that some studies had replants and replant of replants in them in this area.

Big thanks to Christopher Johnson, my Pioneer sales rep for taking the time out of his day to bring the weigh wagon over and collect the data while I ran the combine.  Now all I have to do is forward the data on the the researchers and my work is done on Plot #1.

The good news is that my yield monitor calibration is pretty darn close on these plots, which means that I can do the next one with just the monitor and not bother anyone trying to work around schedules!!

Well it rained all day yesterday.  We ended up with 1.41 inches in the gauge and it was greatly appreciated.  It will help the double crop soybeans and it helped settle the dust.  Cool weather followed the rain in and you need a sweatshirt this morning outside.

Some general observations this morning as we hit the middle of September.  Corn harvest has started for about 80% of the farmers in the area but it is not a sprint this year but more of a walk-a-thon.  Very casual.  I think this has to do with lower yields and areas of higher moisture due to replants.  I have yet to see the roads loaded up with trucks but I know it is coming.

Fertilizer prices keep going up and as more corn is shelled the amount of P and K that is going to get spread keeps going down.  After a big hurry to get tonnage for prepay lots of folks are just not going to spread that much fertilizer this fall it seems.

Wheat acres are down it would appear. I say that now but know that a quick bump in the price will bring out more seed and more planting pretty fast.  Corn prices have everyone looking to Dec 12 and not July 12.  That being said there is also a lot of PP acres of DC Beans that will not get wheat planted back on it.

And last but not least……….the economy and the lack of direction and leadership out of Washington DC is weighting heavy on a lot of folks.  Enough bad news beats down on everyone.  Even in the Ag community where things are bright from a $ standpoint.  This country needs a warm fuzzy reason to have hope and I fear we are not going to get more than a cold slimy from Washington for a while to come.

A sign that progress, be it slow progress, is being made here on the farm towards starting corn harvest. I fulfilled my prediction and did get the combine out, head on, washed and shelled a hopper full of corn today!!!

Moisture was 18.7 on the corn planted on 13 May.  I planted two different numbers on that day, and one was running 20 to 20.5.  I took out some of the end rows so I could get a good sample from the field to see just what I was looking at moisture and yield wise.  The yield was about 145 bu/ac dry corn.  Not bad, not great, but for a year like this, I will take it all at that yield and not complain a bit.

So after all the excitement today, we sit idle for a few days.  First off, still working on getting the grain bins rewired and then we need to sit the fans back on the bins.  This has been a long overdue task.  Making things safer is a priority.  Making things safer and also more efficient is also a priority.  So even if I started shelling tomorrow, I can’t put it anywhere until that job is done.

Second, the grain truck is in the shop. Carb kit going on.  Just before I went to get it inspected, I found fuel puking out and around various bolts and screws.  Yep, the gaskets dried out.  Note to self…next grain truck will be a diesel.  Note to self…there won’t be a next truck……see paragraph below.  So even if the bins were ready, I have no way to get it from point A to point B.

In dealing with the grain truck and attempting to find and trade for a bushhog (or rotary chopper for some of you folks) I am reminded of the words of a wiser farmer than I:  Grain trucks and mowers are not profit centers, they are money pits.  (or something close to that)  After thinking that a bigger truck, diesel truck, with air conditioning, roll tarp and cargo doors would be the berries, I decided that it would be much easier to just build a big grain bin and pay Ty Jones, the local trucker I prefer to use, to just come and load and haul it all out of that big bin.  Between inspections, tires, insurance, gas or fuel, repairs and the possibility of overweight tickets (not to mention all the other assorted stuff that ISP and ISOS get all excited about checking a grain truck for when they pull it over) it just isn’t a money making piece of equipment.

And I didn’t even mention the amount of time sitting behind the wheel,  not to mention the amount of time sitting in LINE waiting for the grain to be weighed and graded, let alone dumped.  Yes, you need a truck. But I don’t want to have one or be in one,  on the road  anymore.

So by the end of the week, gain bins should be done, fans on, grain truck ready, combine ready. and corn harvest can commence.

After watching the news shows this morning I have decided that our country is no longer in the toilet.  Its in the septic tank.

I really like this song this morning.  No, its not all Obama’s fault, its both parties and all three branches of government. But then again folks, you voted for them so your at fault for our countries demise.

And if you live in Illinois, well, your getting a double screwing, one by the Feds and one by your good ole Chicago political machine and your local elected official who has sold his sole for money and backing from Chicago.

Think about that today………..

As for me, I am not investing in gold or silver, just brass and lead.

Got this via email, haven’t checked it out via Snopes, but even so true or not, it should get you thinking……..

To Put It All In Perspective ….

The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let’s put the 2011 federal budget into perspective:

  • U.S. income: $2,170,000,000,000
  • Federal budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)
It helps to think about these numbers in terms that we can relate to. Let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.
  • Total annual income for the Jones family: $21,700
  • Amount of money the Jones family spent: $38,200
  • Amount of new debt added to the credit card: $16,500
  • Outstanding balance on the credit card: $142,710
  • Amount cut from the budget: $385
Whew! I’m glad they got that all worked out to our benefit, aren’t you?  I feel better already.

Well, the heat has taken its toll on the corn crop around here.  This is my May 13 planted corn.  The earliest corn I planted.  Cant wait to see what the late May or June corn looks like……some of which hasnt tasseled yet.

I understand regression and inferential statistics.  I am not a statistical genius by any stretch, but I sure do like playing with statistics.  The two semesters I had of them in grad school just a few years ago were two of the hardest and most fun semesters of graduate school.  I really enjoyed the classes.  I enjoyed statistics. 

Enjoyed maybe too much. It ruined me on buying lottery tickets and raffle tickets at fundraisers.  Yea, I still buy a raffle ticket, but not a hand full, just one.  It also gets me in trouble at plot tours, field days and sales meetings with seed and chemical salesmen.  I question their sample size, plot design and resulting conclusions.  

I also question their yield vs. economic responses.  Farmers are hung up on yield.  Well that’s alright because everything we do is based on a yield.  You get paid on what you grow.  But you had better get paid more for that yield than what it cost you to grow it.  

And that is where I get in trouble.  Below are a couple of examples of selling yield or lack there of over the return in dollars to get that yield.  

Example 1 is a yield significant/economic non significant scenario that is pretty common in Ag right now.  The treatment to a growing crop results in a 5 bu/ac yield increase.  That yield increase is significant, as in the likely hood that the result is caused by the treatment is greater than random chance.  So by doing X you get a 5 bu yield increase.  Lest say that yield is corn:  Corn is $5 a bushel.  So you grossed a 5 bu increase at $5/bu for $25/ac.  But it cost you $26 to get the 5 bushel increase.  So I lost a dollar (-$1) in the end……….I lost money by increasing yield.  Then why do it?  

Example 2 is a yield non significant/economic significant scenario that is also pretty common today.  The treatment to a growing crop results in a 5 bu/ac yield increase.  That yield increase is NOT significant, as in the likely hood that the result is caused by the treatment is not greater than random chance.  So by doing X you get a 5 bu yield increase that could or could not be caused by the treatment.  But more often than not you get a 5 bu yield increase.  Lest say that yield is corn:  Corn is $5 a bushel.  So you grossed a 5 bu increase at $5/bu for $25/ac.  But it cost you $10 to get the 5 bushel increase.  So I gained or netted $15 in the end……….I gained money by increasing yield an insignificant amount.  Then why not do it?  

Both cases point to a flaw in our research models in Ag.  We assume that the underlying result of any practice we use has to be a significant yield increase.  Yes, I would hope anything I do results in a significant yield increase.  BUT ONLY IF IT MAKES ME MONEY.  I also would like to know if the economic return is significant (or at least greater than 50/50) for any treatment even when the yield may not be significant by a statistical model.  

In other words, farming is a business.  What is my return on investment for any practice despite the results of a significant yield response?  In the end it’s about net dollars earned, not winning the yield trophy. 

Don’t forget you can hear the entire presentation at the 2011 Farm Futures Management Summit Jan 4th and 5th in St Louis.  Register Here.

There seems to be the greatest interest in VRT this fall.  From lime to P and K producers who never gave VRT a second thought seem to be fascinated with doing it.  Its about time for many of them.

With fertilizer cost where they are and the prospect of a below normal or less than normal crop in many areas because of the heat this summer producers are looking for small ways to cut back on cost.  This is funny in some ways because not to long ago when Potash spiked at $1200/t producers either put some on or didn’t put any on at all.  In that year I wrote many a VRT recommendation, more than I had ever done, but it still is nothing compared to this year.  This year has seed a whole new level of interest. 

I think that we have found our point of “balance” between the price of an input and yield.  Kind of like $4 gas for our cars.  When gas gets to a point we watch our trips and how much we run in the tank.  When gas is $2.50 we buy gas and don’t think to much of all the running around we do.  But when gas is $3.00 we all at once buy gas and watch were we go because we know we are only going to buy what we need at $4.00. 

So I think we have reached that balance here in Southern Illinois.  Price is to the right of the middle.  Its not as high as it has been but its going up.  Yields are average to below average.  So between the two, farmers say lets buy but lets buy with caution and apply it in a conservative manner.  And VRT fits that line of thinking.

This is not a bad thing by any stretch of the imagination.

Well I have pretty much decided that I will plant wheat this fall. After making the proclamation during canola harvest that I would not plant wheat any more, the markets have swung to the positive side or more correctly the profitable side and now have me ready to plant all kinds of wheat this fall.

I have been looking at inputs and they are reasonable for the most part and between a $6 plus wheat sale and a $9 plus bean sale the cropping “system” is a pretty good money maker. So today will be spend locking in some inputs, seed and then watching the markets and making some advanced sales.

Today also begins eight weeks of being on jury duty. I suspect that I wont serve near eight weeks, but will have to serve on something. So this is a scheduling nightmare because I don’t have a clue as to when I will be on or off, and I have a lot of things to do to get ready for harvest.

Last but not least, today is the day for seeing what the MRI says on my shoulder. Not looking foward to this either.

Yea, that’s right, the top 25% of farmers are, on the average, only 5% better than the rest of the crowd.

Think about that for a minute. What does that mean? Well, it means that being consistent is everything. It means that being or doing good in a bad year makes all the difference in the world. It means that the last 25% are so far behind…. well lets just say that they are in trouble. It means that this business of farming is a lot of up and down turns.

It also means that the margins are slim at the top…………..no matter what the size.

I saw a poster once. One of those De-motivational posters, I think, that said something like the road of technology is like a marathon with no finish line.  Well, I think it is more like a death march:   Some people can endure to the end, others fall out along the way. 

Three things cause me to say this, so let me explain:

Why are there less farmers?  Because of technology.  Pure and simple.  We don’t need a farm or farmer every section when we have technology to make up for boots on the ground:  Tractors replaced horses.  Hybrid seed replaced open polinated.  Herbicides replaced cultivation.  GPS replaced markers.  I could go on, but you get the idea. 

The work that one man can do and the quanity of crops he can produce on the same land that once occupied several farmers, is amazing.  And his production capacity is growing by the year.  Grow with technology or die. 

Adapt to new technology or die!  Not a nice thought, but accurate.  I was at a meeting the other night and a man at the meeting said that he didn’t want or need to be a farmer after he saw the 37 acres farmed across the road from his house last week.  I thought he was talking about maybe organic, or not liking chemicals, or something but he wasn’t.  “You know, there were 5 different big four wheel drive tractors in that field before they planted it.  They killed that ground.  And the cost…how could they make money?  I don’t know what they were thinking.” 

What he was saying is that they might have had big iron, but they were not using the latest technology or techniques to farm the field.  Technology is going to be used by your neighbors so you had better be using it too.  If not, then be ready to be passed up and passed over.  All of us have access to the same technology.  GMO traits, GPS, consulting, tillage techniques, soil management techniques, etc.. 

Same in the consulting world.  GPS should be standard with your practices.  Email, text messages, electronic downloads and file transfer.  Just because you think using it makes you look like your competition instead of unique is stupid.  Yes, your unique.  Your uniquely useless.

Keeping up takes time!  Time is money.  Time is valuable.  Time is something we can’t make.  And time will pass you by if your not making time to keep up with changes in technology.  The most successful people in the world, not necessarily the richest, but most successful, spend an average of two hours a day reading materials not directly related to their occupation.  They are keeping up with the rest of the world and are able to anticipate changes in their field before they happen, because they have their fingers on the pulse of new technology.  Work smarter, not harder.

I try to spend two hours a day reading, surfing, blogging and listening to things not related to Ag.  The results have been enlightening.  I have tried to get my friends and colleagues to do the same, but they often spout the same old refusal recital:  I don’t have time, I am too busy.  MAKE TIME.  Make time to get away from what you do so that you can see the forest for the trees. You can see the big picture andyou are not judging the world from your back door or front window. 

I have had cause to think about technology the last few days. How I am not using it, how I am using it and how I should be using it.  My crooked rows on my first field of corn show me that I should have been thinking all along about my auto-steer in the sprayer being in the planting tractor as well.  My accounting software shows me where the money goes and for what.  It keeps track of profit and loss.  It tells me if I am a healthy operation or not.  And my management practices show me that if I implement the latest technology that I am not seen as an outdated farmer or someone who is not “with the times” but rather as a forward thinker who is ahead of the herd. 

Technology is a death march:  how are you enduring?

Three unrelated events into one topic today:  Crop Insurance.  As I start to type this I realize that this might take a while.  I also realize that some of the visitors to this site won’t care.  I also realize that it might take, you that are interested, a while to see how all three of these events fit together.  Hang with me……….

First off, the issue of Farm Journal that I received in the mail on the 18th of March had an article on using Enterprise Units in place of Optional Units for crop insurance.  It was a pretty good article and may have been useful to many a farmer, if the editors or publishers had some fore-thought and put it in an issue that arrived prior the to crop insurance deadline on March 15. 

Then, event two, this weekend I got my issue of Prairie Farmer.  On the cover is a small block of comments by three individuals who are featured inside.  Emerson Nafziger, U of I crops and extension educator, makes the following comment:  “We have half a million acres of wheat that weren’t planted.  They’ll have to go to something, so I don’t think well see corn and bean acres go down this year.“  That folks is a comment for the “Big Red Truck File”.  Yea, half a million acres of non-planted wheat is going to get planted to “something”.  Want to bet to what?  Beans Emerson, that’s what, beans! 

No, it has nothing to do with the agronomics of beans vs. corn.  It has nothing to do with the possible returns right now on beans vs. corn.  It has everything to do with the possibility that those half million acres are prevented planting acres on crop insurance.  Corn is a “first crop” and you can’t follow a first crop (wheat) with a first crop and get your full insurance payment.  99% of farmers will take the “guarantee” of the crop insurance PP wheat and then plant beans, a second crop, and get full insurance coverage on that. 

Hang with me because we are going to tie this all together with #3. 

The third event is a conversation I had with a farmer friend who for anonymity purposes we will call Sam.  I don’t have any friends named Sam so were safe with that one.  I have a sister named Sam, but that’s another story for another day.  Anyway Sam doesn’t read this site, he is technology challenged so to speak, which might be part of the problem.

Back to Sam and our conversation.  Sam has a problem:  Sam doesn’t know much about crop insurance.  Part of Sam’s problem is his agent or I should say former agent.  See, Sam views crop insurance the wrong way.  Sam doesn’t see that crop insurance pays.  The result is that his agent, in my opinion, just sold Sam a policy based on cost and not benefits.  And Sam has never had the benefits, the pros and cons, the reasons why or why not, the what-ifs and if-nots and forward selling opportunities explained to him in a timely, concise, coherent and plain English manner that would allow him to understand that when crop insurance pays you the most, is when you don’t collect on it. 

You don’t buy home owners insurance and then pray for a fire so you can collect, do you?  In the same vain you don’t buy crop insurance and hope for a crop failure.  The insurance is a tool, a risk management tool, that allows you to market and conduct business on the farm knowing that if things end up in the tank, your going to get compensated for the loss.  NO, your not going to get rich, your not going to be as good off as if you had raised a crop, but your not going to go broke. 

The three events fit together here:  For some reason there are many, many people who believe that decisions for crop insurance on spring seeded crops are made between the 1st and 15th of March.   ?????  What the ……….?  Why can’t the crop insurance agents (in general), educators and media get it through their heads that they can do some meeting and planning with their clients, students and readers/listeners and potential customers prior to the deadline of 15 March? 

Mind boggling to me!. 

Why can’t they explain that your choice of insurance might influence your choice of second crop, if you can’t plant?   

Why can’t they explain all of this in plain English?

Why is it that coffee shop talk, most often by fellows who have no clue themselves, is viewed as the gospel on such a serious topic?

Because of a lack of communication, farmers either don’t buy crop insurance because it doesn’t pay; don’t buy the right coverage because they don’t understand the policies and programs of each type of insurance; or they listen to “Fred” at the 1000 acre club table at the coffee shop and report the corn as prevent planted and then plant beans because Fred told them he did that before.  (yea, happened last year………)

And in the not to distant past, I was “one of those guys” who was looking at what it paidNot anymore.  There is too much risk in the business.  There are too many unknowns.  Having a risk management plan and studying and analyzing that risk management tool is more important, in my opinion,  than choosing which corn hybrid, or how much N to use, or if you should trade iron or buy the next farm.  Without crop insurance, the right crop insurance, your one crop failure away from never having to worry about those other decisions ever again. 

Luckily I have a very good agent who communicates with me on a regular basis and we engage each other to make each other to think and study prior to March 15.  We play “what ifs” and “why not” and” how come” and “here’s why” and sometimes I am wrong and sometimes he is wrong, and we will think again and try it again.  And when we get done, I know what I have, why I have it, what it will or will not do for me and a peace of mind to go out and market and conduct the business of farming knowing that I have a safety net under me.

Just in case………….not in hope of.

I wrote a short statement of philosophy on soil sampling for myself and some other consultants in Illinois a few years ago in hopes of changing the minds of some university and government bureaucrats.  It didn’t work, but I still think this holds true for me and some others who don’t subscribe to the “grid sample the world” mantra of the Land Grant University and the “sell fertilizer at any and all cost” retail industry here in Illinois. 

So here is my “thesis” with a few things thrown in for Ed Winkle’s questions…….

Robertson Philosophy on Soil Sampling

Each soil sample should represent a uniform soil area with similar past management. It is recommended that each sample represent 10 acres or less. Sampling areas should be determined by the soil type, soil color, topography, drainage, past management of the field, manure applications or presence of livestock, and productivity.  Maps of soil electrical conductivity (EC) and GPS yield maps can aid in distinguishing between field areas with contrasting soil properties or crop nutrient removal. 

Consultants should use field observations at the time of sampling to determine which local site factors should guide their sampling pattern within each field.  Soil survey maps, GPS yield maps, bare soil images and input from the farmer as to past land use (fence rows, pastures, building sites and old field divisions) can be used to create geo-referenced zone maps of these factors prior to soil sampling. This will help guide the consultants sample locations in combination with his or her field observations.  

Soil sample zones should be recorded via GPS or geo-referenced maps to insure location and repeatability of sampling.  This also aids in refining the sample zones as more information becomes available about the field or soil, and allows the zone to be used as part of a directed nutrient application (VRT) program. 

Soil sample probes should be taken to the depth of the furrow slice (6-7 inches) or modified based upon tillage practices or the lack of tillage (no till) for the farm.  Each sample should consist of between 10 and 15 cores with cores being collected in a zig zag method thought-out the sample zone.   Each core should be examined prior to placement into the sample bag to insure that it conforms to color, texture and depth for other samples in the management zone.  

Each soil sample should be air dried and all cores in the sample should be ground and thoroughly mixed prior to submission to the laboratory for analysis.  Doing so insures that each sample is truly a representation of the sample area.  

Soil samples should be collected on a regular sampling interval based upon crop rotation, fertilizer or manure applications, or tillage practices.  In many instances under high management it would be appropriate to sample fields every year.  Fields with high test levels or fields receiving manure should be tested every year.  In other cases sampling every two years under a corn-soybean rotation or under a bi-annual fertilizer application would be appropriate.  No more than three years should elapse between sampling intervals. 

Other random notes by GKR: 

1.  If your not going to GPS your sample locations, don’t even pull samples. Your waisting the farmers time. 

2.  If you not using or making GPS/geo-referenced maps, your waisting the farmers time and money.

3.  If you not doing VRT recommendations based on ECONOMICS but on just lbs. applied, then your waisting your farmers time and MONEY.  Whole field recommendations are appropate when there isnt that much varation to justify the extra cost of applicaiton. 

4.  If you can’t collect samples in good soil conditions then your waisting your time and the farmers money.

5.  Find a good lab that can provide you with good quality control, good turn-around time and give you the data set in a format you want, not what they want to do.

6.  Get rid of the paper.  Go electronic.  You can make recommendations, track history and do analysis so much easier in digital than analog.  Paper is still king when delivering your recommendaitons but poor for analysis.  Digital is king.

7.  If you can’t get your head around the ECONOMICS of your recommendations, but only on balancing the soil or applying some magical formula of inputs, your waisting your farmers MONEY.

But as Dennis Miller Says:  Then again, I could be wrong.

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