Summer 2019 KFMA Newsletter (Web Version)
Welcome to the Kansas Farm Management Association (KFMA) E-Newsletter! The KFMA E-Newsletter is sent quarterly throughout the year to update KFMA members and others interested in KFMA work on new research being conducted, new publications available, Economist spotlights, upcoming events, and much more!
The newsletter is free to subscribe to. To subscribe, click here or contact Mary Huninghake at firstname.lastname@example.org or 785-532-1506 to get on the list. Questions or feedback can be directed to Anthony Ruiz, KFMA Professional Development Officer, at email@example.com; or Kevin Herbel, KFMA Executive Director, at firstname.lastname@example.org.
Anthony N. Ruiz - KFMA Professional Development Officer
Welcome to our Summer KFMA E-Newsletter! As you read this you may or may not have begun to cut wheat, may or may not have crops (re)planted, and below average to excessive soil moisture levels. Whichever situation you find your operation currently experiencing, please join me in taking a short pause to think about what you are grateful for and count the blessings of an agrarian life.
2019 is halfway complete and it has revealed itself as one to remember for years to come. Recent history has given us memorable experiences one after another. Has agriculture always been this way? How do we retain useful details from those “memorable” years after many moons? Production and financial data from current and previous years can pay handsomely to make better, wiser decisions in the face of economic uncertainty and weather roller coasters. As valuable records are, I want to discuss something I feel is even more valuable: your Extension Agricultural Economist.
Across the state of Kansas, in each of the 105 counties, KFMA Extension Agricultural Economists serve farmers and ranchers just like you. Operations differ greatly across the state, but your Economist is educated, trained, and constantly learning and adapting to help you thrive amidst whatever markets and weather throws your way. KFMA E-Newsletters are built around Economist insight and experience. This summer’s edition is no exception. Trenton, Will, and Bob, representing the North Central Association, bring you interpretation on topics and issues at the forefront of members’ minds. These articles represent a minute portion of the subject knowledge ripened with wisdom our team of Economists bring to your kitchen table and farm visits this summer and long afterwards.
While reading this E-Newsletter, you may notice some slight changes in formatting. KFMA data has been analyzed by numerous K-State Agricultural Economics Department researchers and educators with the aim at finding answers to questions members ask their Economist throughout the year. Articles, links, and audio files representing their work with your data are incorporated into our design to give you greater access to solutions geared at applying critical thinking for farm and ranch decision makers.
After you click, listen, or thumb through KFMA’s Summer 2019 E-Newsletter, let us know what you think. Tell your local, friendly Extension Ag Economist what lingering questions keep you up at night and what topics you’d like to learn more about. At KFMA we serve you and seek to be a valued member on your team and on your side, summer after summer.
Building Strong Relationships … Producing Excellence
Trenton Hargrave - North Central KFMA Economist
Last fall, as farmers were receiving their ARC or PLC government payments, the common theme of those who had chosen ARC at the beginning of the program was disappointment that the payments were considerably lower than years past. Thankfully, with the new Farm Bill, there is a chance to change which program you are enrolled in, as well as, update your program yields.
For a quick review of the programs, you will be able to choose between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Under ARC, there is a county level or individual level. For this discussion, we will only be discussing county level, as it didn’t appear in 2014 and it doesn’t appear now that ARC individual will be a good option for Kansas producers. The ARC program is in place to protect per acre revenue from falling below a benchmark revenue. If your county revenue (county average yield multiplied by the marketing year average price) for a crop falls below 86% of the benchmark revenue (five-year Olympic average of the national marketing year average price multiplied by a five-year Olympic average of the county yield) then there is a payment. However, this payment is limited to 10% of the benchmark revenue. Under PLC, payment is received based upon a farm’s program yields if the marketing year average price falls below a set benchmark price. Statutory benchmark, or reference, prices are $5.50 for wheat, $3.70 for corn, $3.95 for milo, and $8.40 for soybeans (a provision in the new farm bill could potentially raise effective reference prices to 115% of these levels). Payment is received on 85% of a farm’s base acres. Both program options are computed with a marketing year average price, which means that the payment cannot be figured until the end of the marketing year (typically a year after the crop has been harvested). While it makes sense to use a marketing year average price, this creates a situation where payments are always lagging a year behind the actual price and production activity. In a year when prices and/or yields are poor, the payment is not received until the next year, and the current year may have a low payment if the previous year was not as poor. In 2018, this lag in payment came at a time when many farms were already cash strapped.
Five years ago, in 2014, when these decisions were initially being made, we had what we now consider decent prices, but were unsure of production estimates. There was also the chance to update your program yields and, more importantly, reallocate your base acres. Reallocation of base acres can be important, as the opportunity isn’t available very often, and won’t be happening this time around. Probably the biggest decision maker in 2014 was that it was known going into signing up that wheat acres across much of Kansas would be receiving a maximum ARC payment. This, along with benchmark prices that seemed low at the time, caused most Kansas farms to choose ARC for corn, soybeans, and wheat. With a relatively higher reference price for milo, many chose PLC for that crop. While the initial payments were good for ARC, as lower price years were added and higher price years were removed from the calculations, later years of the program produced higher PLC payments for many. In 2014, it seemed easy to select a known payment now. There is now opportunity to use what happened in the past to guide our choices going forward.
One good thing about the current Farm Bill is that you won’t be locked into a 5-year decision. If circumstances change, you can change which program you are utilizing. This fall, producers will be enrolling in either ARC or PLC for the 2019 and 2020 program years, which will be paid in the fall of 2020 and 2021. Going forward, you will be enrolling only for the upcoming program year, so in 2020 you will enroll for 2021 (paid in 2022). An important detail has changed in the new program. In 2014, if you did not enroll, you were automatically enrolled in PLC. This time around, you will not be in any program if you do not go enroll. It is vitally important that you educate your landlords and make sure that every farm is enrolled in one of the two programs. Remember, landlords and tenants must be in the same program.
After all this reminiscing and information, you probably want me to tell you which program to enroll in this fall. One good thing, like in 2014, is we will be able to partially know what our 2019 payment will be. The 2019 wheat crop will be harvested, and the price within the first few months after harvest is typically close to the marketing year average price (since most of the crop is sold within this time frame). Even though fall harvest will not be finished, it may have begun, and you should have an idea of potential yields and where harvest prices could end up. This information can be plugged into a Farm Bill Decision Tool, like the one at AgManager.info that was used in 2014. As more information becomes available, a new decision-making tool for this year will be posted. Currently, Texas A & M has a web-based decision tool, https://www.afpc.tamu.edu/tools/farm/farmbill/2018/, and so does the University of Illinois, https://fd-tools.ncsa.illinois.edu/#/. Please run calculations in at least one of these tools before signing up again.
Here are some general ideas to try to keep in mind: Similar to 2014, if price is a greater concern for you, choose PLC. For example, if wheat marketing year average price is below $4.85 (cash is currently $4.41) then PLC will pay more than the maximum ARC payment; for corn, the price has to be below $3.21 (cash is $4.30); for milo, the price has to be below $3.48 (cash is $4.00); for soybeans, the price has to be below $7.19 (cash is $8.40). Cash prices are in Abilene, KS on June 18th, and will most likely change by the time you read this. If your main concern is production, or prices are closer to the reference prices of $5.50 for wheat, $3.70 for corn, $3.95 for milo, and $8.40 for soybeans, then ARC would be the program to choose.
General recommendations for signing up this fall, based upon current information, would be to sign-up wheat in PLC, soybeans in ARC, and we will have to see how the corn and milo crops are progressing and if these relatively high corn and milo prices can hold through harvest. If prices can remain where they are, I would lean towards ARC for both, but probably still be in favor of PLC for milo because of the higher reference price. I would highly recommend that producers attend as many meetings on this topic as possible to help them make the correct decision. K-State Research and Extension along with FSA are planning on hosting ten Farm Bill meetings later this summer. They are listed below. After attending these meetings, contact your economist for any further questions as you seek to plan for what program would best suite your operation’s needs.
Lead Extension Agent
1:00 - 4:30 pm
8:30 am - Noon
2:30 - 6:00 pm
10:00 am - 3:00 pm
8:30 am - Noon
8:30 am - Noon
1:00 - 4:30 pm
8:30 am - Noon
1:00 - 4:30 pm
David Hallauer & Margaret Chamas
1:00 - 4:30 pm
For more information on Farm Bill meetings check out AgManager.Info or click the link below:
The Kansas Farm Management Association (KFMA), through its affiliation with K-State Research and Extension, will be the valued and trusted provider of integrated data management systems to apply critical thinking and strategic business planning for farm and ranch decision makers; and will be the premier sources of farm-level economic data in the world.
Will Feldkamp - North Central KFMA Economist
2018 was a year of challenges across Kansas and the North Central association was no exception. We saw dry spring planting conditions, wheat that didn’t look like it would pay to fire up the combine, summer pasture running weeks behind, and a fall that had farmers remembering the great flood of 1993. Prices reached levels I never believed we’d see again, and trade disputes dominated farmers concerns. It was hard to put pencil to paper and figure what farmers could produce that would turn a profit in 2018. Despite all this, the farmers in the North Central Association and around the state persevered. They controlled what they could, put in many long hours and sleepless nights, maybe sent up a prayer or two, and turned in a year that exceeded expectations with incomes reaching our best levels since 2014.
As you can see from the table below, soybeans and alfalfa were the two most profitable crops for North Central in 2018. This was a result of alfalfa prices being up $40 from 2017, and above average soybean yields coupled with the $1.65 per bushel of Market Facilitation Program payments. Effective price is a combination of market price, crop insurance proceeds, government payments, and miscellaneous incomes (patronage, futures, etc). It is, essentially, the gross revenue per unit produced. Net return above variable costs per acre is shown in the table.
Effective Price (Gross Rev/Unit)
Yield Per Acre
Revenue Per Acre
Variable Cost Per Acre
Return Over Variable Costs Per Acre
Unfortunately, not every farm made money in 2018. In fact, about 1/3 of our farms had a negative NFI last year. The top 25% had a NFI average of $222,108 with an Expense Ratio of 72.02%, while the low 25% had a NFI of -$33,092 and spent $1.11 to make a $1. This was largely a result of $75 less in gross crop value per acre. However, they also tend to have higher crop production costs and machinery costs year to year. Good management makes a difference! In past years, there is often not a correlation of harvested acres to NFI, but this was not the case as the larger farms had the highest NFI. While the 2018 numbers were a pleasant surprise and the best in many years, I don’t think any of us are looking for a repeat in 2019. Challenging times remain ahead and good data to make informed management decisions is more important than ever. AgManager.info has many great resources to help you make wise decisions. If you are not a member of our Kansas Farm Management Association, but feel you could use some help, please give us a call.
Bob Kohman - North Central KFMA Economist
As I travel through North Central Kansas and sit across the dinner table at one of the many farms I have the good fortune to serve as their KFMA Economist, I find that there are certain questions that are posed to me somewhat frequently. A few examples include, “What direction are the grain markets headed? Does it pay to put fungicide on wheat? How much do you see folks using cover crops?” However, probably the most frequent of all questions that I receive would be, “How much should I pay for cash rent?” This question is on the forefront of many producers minds due to a variety of circumstances. As we’ve seen a reduction of grain market prices in recent years, most folks believe that we should have seen a retraction in cash rents and may be looking to negotiate with their current landowners. Producers also have opportunities to rent new farmland and must submit bids. There has been an uptick in absentee landowners that seem to prefer the security and simplicity of cash rent arrangements. With all this said, anytime I am posed with the cash rent question, I find that it creates a great deal of interesting discussion. Often the producer asking about cash rents is surprised at the answer they receive. For the remainder of this article, I would like to work through the simple calculation that I use with my producers that can give them a starting point for negotiations with current landowners or bidding on prospective acres.
In order to have an idea of what you should pay for cash rent, you must be familiar with the productivity of the acres in question. Each piece of land is unique in its ability to produce bushels and tonnage and it may vary within certain areas of the field, depending on size. With the variability of productive potential comes variability of potential gross revenue for each piece of land. Obviously, river bottom ground here in central Kansas will be treated much differently than upland ground. This would also be the case across Kansas or other parts of the U.S. where you may reside. A producer should also take into account current crop rotations. Our most common rotations in central Kansas include wheat, soybeans, milo or corn and back to wheat. Also factor in if you use multiple years of wheat in the rotation since it is often our lowest grossing crop. There are many variations of this rotation and we have experienced quite a rise in the amount of double crop acres after wheat that has worked really well for our producers in KFMA-NC.
Let’s discuss the concept behind the cash rent calculations I use to figure out the average gross revenue potential for a specific piece of land on a three-year crop rotation. Once I have figured average gross revenue for a piece of land, I would account for 20-25% of that gross revenue figure to be the value given to the landowner for cash rent. Keep in mind on a 2/3 & 1/3 share rental arrangement the landowner is receiving 33% of the revenue and will more than likely be sharing in fertilizer and in-crop herbicide expenses. The landowner also has a production risk premium associated with share rent that a cash rent landowner does not have, which would account for the lower overall percentage of gross revenue than a cash rent landowner should receive.
Here is an example for a wheat-soybean-milo crop rotation and a wheat-soybean-corn rotation:
In the above example, I have used current grain market values at the grain terminal in Abilene, as well as, typical production potential for an “average” crop in our area. Keep in mind that I have not accounted for any double-cropping in the above example. I would encourage you to include a double crop revenue figure into the calculation by adding the gross revenue potential to the wheat crop if double-cropping is part of your crop rotation. If you are in a competitive bid situation, 25% of gross revenue might not be enough to obtain additional rental acres. That being said, is it wise to pay higher than 25% of gross revenue potential just to rent additional acres? That’s probably a separate topic for another time, but it’s certainly worth considering.
What I find most interesting about this method of cash rent calculation, is how often producers are surprised at how high the final numbers come out, even with our depressed commodity markets. How many of you are already paying, and have been paying, these types of rental rates for many years? Go back to the grain markets of the “good years,” from 2007 to 2014, and calculate these numbers for when our average gross revenues were north of $400 per acre. It would have been $80 to $100 per acre for the very same ground that I figured earlier in the article. I am certain there wasn’t very much upland ground being rented at those rates when our producers were highly profitable.
In the end, I encourage anyone looking to answer the “cash rent question” to use this simple calculation as a starting point. This figure will not be the hard and fast answer for all cash rents, due to multitudes of variables that play into cash rent scenarios. However, I find it very useful for starting the conversation between the producers and landowners I work with daily, and I hope you can find it useful as well. If you would like to know more about factors affecting cash rents or have questions about farm management decisions, please don’t hesitate to call, email, or stop by my office in Abilene or the Kansas Farm Management Association office near you (http://agmanager.info/kfma/kfma-contacts).
KFMA Core Values
Relationships Integrity Service Excellence
In the past three decades many facets of agriculture have changed. One portion that has not changed is the commitment to service and customer-driven work ethic of KFMA Extension Ag Economist Bryan Manny. For 30 years, Bryan has helped farmers and ranchers across the South-Central Association.
Bryan joined the KFMA South Central team after graduating from the University of Missouri at Columbia. There he earned a Master of Science degree in Agricultural Economics. This came after he earned his Bachelor of Science degree in Agribusiness from Iowa State University, during the Big 8 Conference era. His coursework in farm management economics, accounting, and agricultural law attracted him to the role of KFMA Ag Economist and have proven beneficial to him throughout his career. Bryan’s favorite college class was “Fundamentals of Agricultural Law”, taught by Dr. Neil Harl, Professor of Ag Economics and Ag Law at Iowa State University. Dr. Harl was known as the “Godfather of Agricultural Law” in his teaching and extension days.
During this time, he has seen quite a few cycles in ag markets. Despite this, Bryan’s favorite part of the job is the one-on-one relationships with farm families and the opportunity to have a positive impact on their farming business. After growing up on a family farm near West Point, Iowa, which is operated by the sixth generation now, his passion for agriculture and his members remains.
Bryan and wife Barbara, an elementary school teacher, have raised daughters Bethany, Brooke, and son Brandon in Hutchinson. When he isn’t working with clients or in the office, Bryan enjoys spending time with his family, being active in his church, and watching sports. He especially loves rooting on the K-State Wildcats and Iowa State Cyclones.
Dedicated and knowledgeable Ag Economists like Bryan Manny are the foundation KFMA was built upon. Serving members and personifying the core values of relationships, integrity, service, and excellence is what separates KFMA from the rest. If you see Bryan in the near future, be sure and congratulate him on his recent tenure award (he was recognized at the KSU Annual Extension Conference for thirty years of Extension service as a KFMA Ag Economist) or ask him about news stories on local television.
Up in the Northeast KFMA Association, we catch up with Travis Heiman, Ag Economist in the Hiawatha office. Travis has been on the KFMA team for seven and half years. Travis and wife, Julie, stay busy chasing three active kids, Alice (10), Helen (9), and Leo (5). Between 4-H and chores on the farm, you can expect to see the Heimans heading from their home in Beattie to all parts of the Midwest; possibly on a country cruise, or possibly on the hunt for a used feed wagon in mint condition.
Travis is a native of Baileyville, Kansas. Upon graduation from high school there, Travis studied at Cloud County Community College. After earning an Associate of Science degree, he enrolled at K-State and majored in Animal Sciences and Industry with an emphasis in Agricultural Economics. Being the lifelong learner he is, Travis later continued his formal education through K-State’s Masters of Agribusiness (MAB) degree. He is a natural numbers guy; the classes and professors at K-State used real-world economics to push Travis to find solutions to real-world problems common to those that feed the world.
Farming is in Travis’ blood. For several years he has farmed row crops in partnership with his brother. In addition to this, his family runs a Katahdin hair sheep operation. He says the most interesting feature of his life is actively trying to make farming, family, and work balance. Travis loves the people he serves through his role as KFMA Economist. The chance to help them make wise decisions, strive for profitability, and plan for the next generation make the hours worth it.
Travis embodies the KFMA Program Motto: building strong relationships...producing excellence. As you interact with Travis down the road, be sure to ask him about his K-MAR matchmaking skills.
The following research articles can be found on the KFMA webpage (www.AgManager.info/kfma/research-articles) or look under “KFMA Research”. Each newsletter will feature new publications that are available.
The KFMA Operator Database: A short note on age and experience of Kansas farmers
Terry Griffin, Elizabeth Yeager, Alex Shanoyan, Gregg Ibendahl – K-State Agricultural Economics
This short note is intended to serve as an example to assist researchers using farm demographics such as age and experience from the Kansas Farm Management Association (KFMA) Operator Database. This unique KFMA data empowers researchers to conduct advanced analyses. This data demonstration supports applied research and outreach projects by reporting details otherwise not readily available in respective studies..
Agriculture Today Interviews with Eric Atkinson
Kansas Farm Operations – The Generations
Terry Griffin – K-State Agricultural Economics and Gregg Ibendahl – K-State Agricultural Economics
K-State agricultural economists Terry Griffin and Gregg Ibendahl discuss the initial findings of a forthcoming research series on the generational makeup of Kansas farm operations and how that impacts managerial decisions on the farm. They’ve tapped KFMA data to examine this and today they report on two areas of interest, beginning with the actual breakdown on generations in both sole proprietorship and multi-proprietor farms.
Generations and Precision Cropping
Terry Griffin – K-State Agricultural Economics and Alex Shanoyan – K-State Agricultural Economics
Terry Griffin and Alex Shanoyan, K-State agricultural economists, are interviewed by K-State Today’s Eric Atkinson and take a look at how the generational makeup of a farm impacts the rate that farm adopts new precision cropping technology. This is part of an ongoing, multi-layered analysis of farm management decisions made by the different farm generations based on several years of KFMA data.
The Age Demographics of Kansas Farms
Terry Griffin – K-State Agricultural Economics and Beth Yeager – K-State Agricultural Economics
K-State agricultural economists Terry Griffin and Beth Yeager are interviewed by K-State Today’s Eric Atkinson about age demographics of Kansas farms, based on KFMA data, and the impact of the different farm generations on decisions to adopt precision agricultural technology. This analysis sheds light on important trends of interest to producers and technology providers.
Farm Family Living Expenses
Kevin Herbel – Kansas Farm Management Association
KFMA Executive Director Kevin Herbel and K-State Today’s Eric Atkinson talk more about trends in farm family living expenses, as indicated in the latest KFMA data, and how those expenses factor into the profitability of Kansas farms. Kevin talks about the main living expenses and how farm families have managed those as farm income has declined over the past several years.
August 22-23, 2019: Risk and Profit Conference, K-State Alumni Center, Manhattan
September 13, 2019: K-State University/Washburn University School of Law Agribusiness Symposium, Hutchinson Community College, Hutchinson
October 8 & 9, 2019: K-State Agricultural Lenders Conference, Garden City & Manhattan
For more information about these and other events, visit http://www.agmanager.info/events/ or contact Rich Llewelyn at email@example.com or 785.532.1504. Other events hosted by the Department of Agricultural Economics can be found at http://www.ageconomics.k-state.edu/events/index.html.
Kansas Farm Management Association
308 Waters Hall, 1603 Old Claflin Place
Kansas State University
Manhattan, KS 66506-4026
Kevin Herbel, Executive Director
firstname.lastname@example.org | 785-532-8706
Mark Dikeman, Associate Director
email@example.com | 785-539-0373
Anthony Ruiz, Professional Development Officer
firstname.lastname@example.org | 785-539-0373
Vision: The Kansas Farm Management Association (KFMA), through its affiliation with K-State Research and Extension, will be the valued and trusted provider of integrated data management systems to apply critical thinking and strategic business planning for farm and ranch decision makers; and will be the premier source of farm-level economic data in the world.
Kansas State University Agricultural Experiment Station and Cooperative Extension Service K-State Research and Extension is an equal opportunity provider and employer. Issued in furtherance of Cooperative Extension Work, Acts of May 8 and June 30, 1914, as amended. Kansas State University, County Extension Councils, Extension Districts, and United States Department of Agricultue Cooperating, Ernie Minton, Interim Director.