Hot and Dry Weather of Summer 2012

I started this post a few days ago.  Quite frankly, this is a little depressing, but I’d like to attempt to give you an idea of some of the issues that we, as farmers, have been considering with the triple temperature heat and severe drought.

This post should probably be called “Ramblings by me”.  It’s been a difficult several weeks.  Backtracking to April, one of our friends from church asked me how planting was going on our farm.  I’m pretty sure that I jinxed everything because I answered, “perfect”.  Overall, our planting weather was great, and the seed was all planted timely and in good conditions.  The problem started when the rain shut off then was exacerbated when triple digit temperatures set in for several days.  Prior to the sizzling temperatures, we had hot winds which are not good either.  We have had to make several very difficult business decisions in the past few weeks.

Corn field on July 19, 2012. This corn is about 4 1/2 foot tall, normally it would be about 8 foot tall. Notice how almost half of the plant is already “fired” or turning brown.

These are some of the challenges that we have been facing the past few weeks:

Irrigation – We do consider ourselves fortunate that we have a few fields that have irrigation.  We prefer center pivot irrigation (sometimes called a sprinkler system).  As with most things this equipment has improved over time.  There are “drops” which are hoses that hang down from the pivot so that the water is sprayed directly to the ground.  We prefer this type of irrigation because the water is most efficiently used.  There is a pre-determined amount of water that we are allowed to use each year.  We’d prefer Mother Nature to do all the watering herself, but in years like this one, we’re glad to have the irrigation.  When we have temperatures like this and no rain it is easily a full-time job for one person to keep up with the irrigation.  About 15% of our fields have irrigation.

Yield Uncertainty – We know that yield has been hurt dramatically with the heat and drought, but the million dollar question is by how much?  We can estimate, and make educated guesses all day long, but until we harvest, it will continue to be uncertain.

Chopping corn for silage rather than harvesting for grain – We have had to make a lot of difficult business decisions in the last 4 weeks since the severe drought set in.  One of those decisions was to chop some of our corn for silage which will be fed to cattle rather than allowing that crop to continue to mature.  My husband’s education is in agronomy, so his education along with experience and the input of other industry consultants helped us to make the decision to make this atypical move for our farm.  About 10% of our crop was chopped and sent to a neighbor who will later feed it to their cattle.

Prices moving significantly higher – Many people may think that prices moving higher is a great thing, and in some ways it is.  If you have a crop to sell, that’s a wonderful thing.  Part of our risk management plan is to sell some of our crop ahead of time, most of the time this is a very good business decision.  Not unlike other businesses, we try to lock in profits when there is the opportunity.  However, now that we have a lot less crop to sell (because of the drought), this is not such an easy statement.  Plus, the businesses that we sell to need to also make a profit – which leads me to the next point.

End Users threatening to close down their operations – With the poor crop and higher prices, some of our local end users are threatening to close down their operations.  As businesses, they need to be doing their due diligence, and if they are not making profits this is something that they need to look at, but it makes it much more difficult for us to plan and limits our options of where we will move our crop.  As you can see, our farm ties into a bigger picture, and it’s very important that each piece have the ability to make profits.  If one piece gets too out of line, then it can cause long term damage to the other pieces.

Crop Insurance – We do carry crop insurance, and this year we, along with many others will have a claim.  We consider crop insurance to be a part of our overall risk management.

I hope this gives you an idea of some of the issues that we have been thinking through the past few weeks on our farm.

 

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2 thoughts on “Hot and Dry Weather of Summer 2012

  1. LaVell,
    Could you expand on the issues of end users closing down theire operations? I think it would help those not involved with production agriculture to understand in greater detail who those end users or our customers are and what $8 + corn means to these businesses.
    Thanks for the great job you are doing!!!

    • Thanks for the comments Duane. There are basically 3 markets that our corn goes to – 1) an ethanol plant to be processed, 2) fed to livestock primarily chickens, turkeys, pigs, or cattle from where we live, or 3) it can be loaded on a train and shipped to an export facility (such as in the Gulf of Mexico) to be loaded on a boat and shipped somewhere else across the world. Ethanol plants have been running “in the red” for a few months. Without the drought, it looked like there would be a very big crop and lower prices, so their margins would have gotten better once harvest hit. Now grain is very expensive, so they are reevaluating whether they can continue to run. Second, livestock feed. I think the livestock ranchers are the hardest hit with this drought. Some of the decisions that they will be considering is whether to continue to feed their animals or sell them to someone else who can finish feeding them out. Difficult decisions. Third, the export markets. Other countries who buy grain from the United States are now looking at other places to buy grain from. If it’s cheaper for them to buy the grain and ship it from another location, world buyers will buy it elsewhere. World buyers are always price sensitive and consider the cost of ship freight. All of these issues are further complicated because this is such a large area that is being impacted by the drought.

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