2024 Weather Issues Create Difficult Crop Decisions

​The excessive rainfall and flooding during June in many portions of the Upper Midwest have created some interesting and in some cases very difficult decisions for several farm operators across the region. A widespread area of Southern Minnesota, Northern Iowa and Eastern South Dakota received 12-16 inches of rain or more during the month of June, which followed more than double the normal precipitation in May. This resulted in flash flooding near rivers and streams and an immense amount of standing water in many areas. The result has been considerable drown-out damage to crops and shallow root systems for crops, as well as loss of nitrogen and other nutrients for the corn crop.
 
By early July, fields in many areas for farmers to potentially consider replanting some early maturing varieties of soybeans into some of the drown-out areas. Most of the replanting occurred into existing soybean fields that had drown-out damage. Very little replanting occurred on drown-out areas in existing corn fields. Realistically, the best that farmers in the Upper Midwest can hope for with soybeans planted in early-to-mid July is probably a yield of 25-30 bushels per acre, compared to a normal yield of 60 bushels per acre or more. This assumes favorable growing conditions from now until September, as well as the first killing frost not occurring until mid-October. If the replanted soybeans do not produce a crop that can be harvested as grain, they still potentially can make a good cover crop for the drown-out areas. Some farmers were able to get some reimbursement through replant clauses in their crop insurance policies to help cover their replant clauses.
 
Probably the most difficult decisions that farmers in the Upper Midwest have been facing in mid-July are related to the remaining corn crop in the fields that did not drown-out. In many areas, large segments of corn fields have short, yellowish corn with shallow root systems that shows signs of deficiencies of nitrogen and other nutrients. In some cases, portions of these fields may need supplemental applications of nitrogen fertilizer. In addition, wet field conditions can lead to higher incidences of certain corn diseases, which can require fungicide applications.
 
If the remaining corn crop looked fairly viable and we had projected corn harvest prices above $5.00 per bushel, many farmers would probably make the investment into the extra nitrogen fertilizer or applying the fungicide to control the potential corn diseases. However, in many of the worst corn fields in Southern Minnesota, Northwest Iowa, and Southeast South Dakota, the remaining corn crop does not appear to have significant yield potential and the corn harvest price at local grain markets is below $4.00 per bushel. If farmers to choose to apply 30 pounds of extra nitrogen with some sulfur added, the approximate cost would be an estimated $30-$40 per acre. The cost of treating corn with fungicide would likely be an estimated $25-$30 per acre.
 
“Human nature” for most farmers is to try and get the highest corn yield that is reasonably possible, which in a year such as this would probably mean applying the extra nitrogen fertilizer and treating the corn with fungicide, if necessary. However, there is also the economic side of this decision. If a crop producer already feels that his 2024 corn crop may qualify for crop insurance indemnity payments, does it make sense to continue to put discretionary input costs into that crop to get a few more bushels of crop yield ? That decision probably varies from farm-to-farm and field-to-field, so more in-depth analysis may be required before a decision is made.
 
Most farmers carry revenue protection (RP) federal crop insurance policies, which are based on a combination of yield and price. The crop insurance guarantee for a RP policy is the APH yield on a farm unit times the Spring price or base price for a crop times the level of coverage. The 2024 Spring price for corn was $4.66 per bushel, so if a farm had a 200 bushel per acre APH yield with an 85% RP policy, the insurance guarantee would be $792 per acre (200 bu./A. x $4.66/bu. x .85). The harvest value of the crop is the actual yield times the final harvest price for corn, which is the average price of CBOT December corn futures during the month of October.
As of July 19, the Chicago Board of Trade (CBOT) futures price was $4.06 per bushel. If that were the final crop insurance harvest price, crop insurance indemnity payments on a RP policy in corn would begin with a yield loss of approximately 2-3 percent with an 85% RP policy and about 9 percent with an 80% RP policy. With a 200 bushel per acre APH yield, that means that at a $4.06 per bushel harvest price crop insurance indemnity payments would be initiated at a final corn yield below 195 bushels per acre and below 183 bushels per acre with an 80% RP policy. Farmers not only face the difficulty of realistically evaluating the yield potential of the corn remaining in field, but also projecting what likely direction is of the CBOT December corn futures price between now and November. In addition, they need to factor any drown-out acres into the final yield estimates.
 
Another factor that enters into this decision is whether the crop insurance policy insuring the corn is insured under “enterprise units” or “optional units”. Enterprise units combine all acres of a crop in a given county into one crop insurance unit, while optional units allow producers to insure crops separately in each field within a township section. Enterprise units usually have considerably lower premium costs compared to optional units; however, enterprise units are based on larger coverage areas that can make it more difficult to cover crop damage that affect individual farm units. In many instances, corn producers that have insured their crop with optional units will likely be in a better position to fine-tune their decisions regarding added nitrogen or fungicide applications to individual corn fields.
 
If a farm operator has already determined that an individual field in the case of optional unit insurance coverage or all of the corn acres in a county in the case of enterprise units will likely qualify for 2024 crop insurance indemnity payments, then they need to evaluate the potential economic benefits how investing more dollars into crop inputs this growing season. For example, Using the 200 bu./A APH yield with 85% RP policy and a crop insurance harvest price of $4.10 per bushel, a farmer with a final yield of 150 bushels per acre would collect an estimated crop insurance indemnity payment of $177 per acre. If that farmer paid the cost for the extra nitrogen fertilizer and/or fungicide and increased the final corn yield to 180 bushels per acre, the crop insurance indemnity payment would be reduced to about $54 per acre, the added crop value at $3.80 per bushel times 30 bu./A would be $114 per acre, resulting in a total of approximately $168/A. Once the cost of the added nitrogen and fungicide is included, the “net result” would probably close to $125/A., as compared to the insurance indemnity payment without the expense of the added inputs.
 
“One solution doesn’t fit everyone” and every situation is different. The first step is to make a realistic yield estimate of corn field in the case of optional units or all corn acres in a county in the case of enterprise units, factoring in any drown-out or acres with zero production potential. Then find out the cost of any crop inputs and what estimate might be for yield enhancement. A reputable crop consultant or agronomist can assist with evaluating the corn yield potential and benefits from added crop inputs. The next step is to consult with the crop insurance agent regarding the crop insurance coverage level on the 2024 corn crop and what the potential crop insurance indemnity payments would be at various final harvest price levels.
 
It is also good to review your situation with your ag lender before you make the added investment into the corn crop in order to have their input as to how that decision may affect your financial situation with the lending institution. Ultimately, the final decision regarding the investment into more crop inputs for the 2024 corn crop comes down those involved in the business management of the farm operation. If both a husband and wife are involved, or if there are several family members involved, discuss and analyze the situation thoroughly, weighing all the input that was received and the economic analysis that was done. These are challenging mental decisions for farmers, so make it a group decision rather than having the stress of the decision on one individual.
 
Kent Thiesse has prepared an information sheet titled: “2024 Crop Insurance Payment Potential”. To receive a copy, please send an email to: [email protected]
 
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960;  E-mail - [email protected]