Des Moines Register s15

Des Moines Register

05-13-07

Planting delays, fickle market worry corn growers

Other factors such as oil prices and Iowa's ethanol emergence help herald 'new world'

By JERRY PERKINS

Geneva, Ia. - Higher prices for corn and soybeans are making this year's spring planting season a time of excitement - and anxiety - for Iowa farmers like Don Wohlford and his sons, David and Terry.

Because of persistent rains, last week the Wohlfords were behind schedule, having planted 700 of the 1,100 acres of corn in the ground that they intended to plant. Every day after mid-May could mean fewer yields. "We'd normally be planting soybeans by now," David Wohlford said Friday.

The Wohlfords have plenty of reason to fret about planting delays now that corn prices have jumped to levels not seen in more than a decade.

"It used to be that 3-4 cents was a big swing in prices," said David Wohlford. "Now, we've had 20-cent drops in prices followed the next day by a 20-cent move up. It makes for some nervous moments."

The stakes for this year's corn crop are enormous, said Iowa Secretary of Agriculture Bill Northey.

"It's very, very important that we have a good crop this year," Northey said. "We'll be tight on supplies going into harvest with all the new demand for corn from ethanol plants coming on line."

Skyrocketing demand for corn to make ethanol has sent corn prices upward and caused farmers to say they intend to plant their most corn acres since 1944.

But if corn is king in Iowa, its crown rests uneasily these days on a petroleum market roiled by volatile global politics. The state's emergence as an energy producer is contributing to the anxiety, said Iowa State University Extension economist Mike Duffy.

"We're in a whole new world," Duffy said. "Corn, and therefore land prices, are now tied to the price of a barrel of oil."

Northey said corn markets are more volatile than they have been in a long time because of the uncertainty over this spring's weather and the need for a big crop.

"It used to be, when you sold your corn you could be wrong by 20 or 30 cents a bushel," he said. "Now, you can be wrong by a dollar."

The cost of buying and renting farmland also is higher this year, as are prices for products a farmer needs to put a crop into the ground.

Ray Gaesser, president of the Iowa Soybean Association, said farmers he has talked to like the excitement caused by higher commodity prices, but there's a little voice in the back of their heads telling them the bull market might not last.

"I'd say farmers like what's going on, but they also want to know when the other shoe is going to drop," he said.

Gaesser, 55, said he remembers that the boom times of the 1970s led to the farm crash of the '80s.

"Although we're enjoying these times, those memories are keeping us awake at night," he said.

A survey conducted last winter by the Iowa Soybean Association showed that farmers listed rising farmland rental rates and increases in the price of land as their biggest concerns, followed by increasing costs of fertilizer, fuel and seed.

Those increased costs of production have made marketing even more important than it has been in the past when government payments made up a large percentage of farm income.

USDA economists said they are expecting net farm income to reach $66.6 billion this year, up $6 billion from last year, largely because of the soaring prices for corn, soybeans and other commodities.

That's not a record - net farm income reached $85.4 billion in 2004 - but it is more than $9 billion above the average for the last decade.

Farmers should be relying a lot less on government payments this year than they have in recent years, farm economists say.

Iowa's net farm income was $3.4 billion in 2005, the latest year for which an estimate is available. Because the price of corn was so much lower that year, government subsidies accounted for nearly $2.3 billion in Iowa farmers' income.

This year, U.S. farmers are expected to receive $12.4 billion in subsidies, about half what they got as recently as 2005. Cotton growers are about the only farmers likely to be eligible this year for subsidies that are triggered when commodity prices are low.

The higher price of corn and prospects for less government largesse are leading many farmers to take a closer look at how they sell their crops.

Because of the increasing risk from a volatile market, the Wohlfords decided to sign up for the Cargill Risk Management program licensed by Christensen Farms, a Sleepy Eye, Minn.-based hog production company that has a feed mill in Iowa Falls.

"The bottom line is, we think the Christensen Farms' program will make us more profitable," Don Wohlford said. "That's what everybody is after."

Lori Nelsen and Ralph Friesen of Christensen Farms market the risk management program to farmers in an eight-county area surrounding Iowa Falls.

There are about 12 risk management tools that Friesen and Nelsen can tap through the Cargill program. One of the them is a grain bin program that pays for a portion of a grain storage system for producers who market their crops to Christensen Farms for three years.The Wohlfords signed up for the grain bin program because they needed more crop storage on their farm.

Having more storage adds flexibility to the Wohlfords' marketing plan, said David Wohlford.

Friesen and Nelsen each work with about 150 farmer-clients.

"With the markets up, it's a very exciting time, but producers are also very nervous about where the markets are going," Nelsen said. "I don't know if we'll go back to the low prices we've seen in the past, but there are lots of questions about where these new markets are taking us."

Friesen said farmers are signing up for the risk management program, in part, because they can't rely on government payments at these higher prices.

"Farmers are telling us they are interested in a more market-oriented approach," Friesen said. "The whole approach to farming is becoming more sophisticated."

The Wohlfords said having ethanol plants in Iowa Falls and Steamboat Rock, the Christensen Farms' feed mill and two grain terminals nearby gives them five solid corn markets within 30 miles of their farm.

More competition for their corn makes for better marketing opportunities, the Wohlfords said.

David Wohlford said that government farm payments have provided a safety net in times of low prices, but the current, higher price of corn is a welcome development.

"Farmers want to be paid from the market," David Wohlford said.

What's at stake for Iowans?

Almost every Iowan has a stake in this year's harvest. Here's why:

- Grocery shoppers, ethanol producers and livestock farmers all benefit from a big corn crop because it will keep a lid on prices for food, fuel and feed.

- Every dollar in farm income generates $1.50 to $2 in economic activity in Iowa's rural economy, including purchases of equipment, building improvements and purchases of consumer goods, said Dan Otto, an Iowa State University economist. Iowa's net farm income was $3.4 billion in 2005 - which resulted in a $5.1 billion to $6.8 billion economic impact.

When is it too late to plant?

Seed corn company agronomists say it’s late, but not too late, to plant corn.

“There’s concern about it getting late, but in the prior five years, we’ve had a good run of spring weather that’s allowed for mid-April planting,” said Brad Van Kooten, Pioneer Hi-Bred International Inc. area agronomist for the southern third of Iowa. “We’ve got time.”

Corn can compensate for later planting, Van Kooten said.

“Research shows that corn planted later takes fewer days to mature,” he said. “The corn plant allows us some flexibility.”

Bruce Battles, Golden Harvest Seeds’ Ames-based agronomist, said corn planted by May 20 loses 6 percent of its yield and 12 percent by May 30.

But with commodity prices considerably higher than in previous years, returns per acre should be considerably higher than last year even with a modest yield loss, he said.

“It’s unfortunate that we are losing some income because of late planting, but we still are drastically ahead of last year in terms of returns per acre,” Battles said.

— Jerry Perkins

Family, production firm team up

The Wohlford family has found value in waste.

The Geneva farmers contract with Christensen Farms to raise hogs. A hog building that Terry Wohlford manages is leased to Christensen Farms, also.

Manure produced by the hogs is spread as fertilizer on the Wohlfords’ cornfields. Some of the corn grown on those fields goes to Christensen Farms’ feed mill to make more hog feed.

The feed comes back to Wohlford’s hogs, the hogs turn the feed into meat and manure and the manure goes back into the soil to grow more corn.

Kelvin Leibold, a farm management specialist, said some hog producers sell manure as fertilizer for $30 an acre.

Farmers who use petroleum-based fertilizers can pay as much as $100 an acre, Leibold said.

— Jerry Perkins