Field Crop Webinar Series - Late and Prevented Planting Issues: Lessons Learned from 2019
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EmailFebruary 10, 2020
MSU Extension Cropping Systems Agronomist Manni Singh and Farm Management Educator Jon LaPorte look back at the lessons learned from 2019. This session focuses on agronomic and financial strategies farms can use to become more resilient moving forward and how to better prepare for or manage against the risks that years like 2019 bring with them.
Video Transcript
- My name's Monica Jean. I'm a field crops educator based out of the Clinton County area, covering the Saginaw Bay, and I am your host tonight. We will be covering lessons learned from 2019. And what we really tried to do was blend the agronomic with the financial, to look at what we could learn from this wonderful year that we had, to hopefully carry some lessons over into future growing seasons. 'Cause, right? That's the best you can do, is learn something from it. And this is our first webinar in the 2020 series, so thank you for getting on. And with that, Manni Singh is on here. He's our cropping system agronomist. And our second speaker will be Jon LaPorte, and he is our financial educator in our firm team. So, go right ahead, Manni. - All right, thank you. Thank you, Monica. Welcome everybody. Good evening, good night, right. Hopefully you will have some productive couple of minutes here. Let's get going here because we have limited time. The topic I'm talking about today is, as Monica said, how we can optimize our planting time this season for corn and soybean production, based on some of the lessons we learned from the 2019 growing season. Because when we are planting, we're setting a yield potential and then we are trying to protect that yield potential as we go through that growing season. So it's important to do a good job at the time of planting. And a season like 2019 does not help. Where we had really delayed planting conditions. You all probably are aware of this, but if we looks at the soybean planting progress, by that early June time we were barely 25%, 30% planted, way behind the five year average. About the same deal with the corn planting, we're way behind our five year average has been. So seems like 2019 is a growing season we want to forget. But there's always lessons we can learn from a year like that. And it goes back to this trend of variability in our planting window that we have been seeing due to some of these extreme weather events that have occurred over, not only in 2019 but some of the years before that as well. There is some good data now that shows that the total amount of rainfall in these last 50 to 80 years in Michigan, has gone up by about 11% or so. And a lot of that is coming up in these heavy rainfall events, a 37% increase in those events. Just using 2019 as an extreme example of that. So we're seeing more rainfall. More of it is coming in that heavy rainfall events and moreso during that springtime, which is causing these poor field conditions for us to plant. When we are looking to do that field management, we are unable to do that. So that is a negative that we have to deal with. But then there is a positive, that in that same 50 to 80 year window, we have seen our frost-free season gone up by about nine days or so. And that is important for us in this northern production environment that we can benefit from this extended growing season. So the question becomes, how do we deal with the negatives and positives in terms of changing our agronomic management? Because we are unable to plant at that optimal window, and that window is extended. So it comes back to pretty much this concept of the planting time, and how do we manage those planting conditions in order to not only go to a high yield potential but maybe minimize our input costs, so we are making more profit at the end of the day, right? So looking into this planting window, when we look at that early season, trying to plant early in the growing season. Which is important, again, because we have a restricted growing season this far north for our soybean and corn production. If you are down farther south, that probably is not that important. But delaying planting does cause a yield decline for us. So whatever we can do to manage these planting conditions is important. So early season, we are dealing with these cool and wet soils. So that is a negative for us, that we have to manage. But then we have a longer growing season at our disposal. So we can benefit from that. That midseason planting, we are generally okay. We have adequate temperature and moisture, so we can probably stick with our typical management in that window. Late season, hopefully we do not need to be planting that late, but then 2019 happens. So we need to be aware of what our management options are, because we are dealing with a limited growing season. So what we can do agronomically to minimize that yield penalty that comes with a late planting season becomes important. So my talk will try to stick with these three planting windows and look at some agronomic options that we have looked into in our research. Starting with some of the soybean work that we did, and then we'll move into some of the corn work that we are planning to do based on how 2019 and previous years have been. So again, in soybean we came back to the same question, do we need to change our agronomic management based on when we are able to plant to deal with this longer, extended, variable planting window? The first question we looked at is do we need to be changing our maturity group of the soybean variety that we are using? So here on this map I have these three zones that are typically recommended, those maturity groups within each of these zones. So let's use that as a starting point. And then ask the question, if we are able to plant early in the growing season can we benefit by using a longer maturity group, taking advantage of the longer growing season that we have now? On the other side, if we had delayed can we go with a short maturity group and be able to benefit? Be able to minimize our yield loss while being able to mature in time. The second question we're asking is do we need to changing our seeding rates based on when we are able to plant? And then finally looking at the seed treatment, because both seeding rate and seed treatment has an input cost to it. So does that pay off based on when we are able to plant? So those are the questions we are asking. And they're pretty relevant on the corn side as well, right? At least the maturity selection part. We have had trouble in 2019 with that. So we'll come back to corn later on. Starting with some of the data that we collected over the last two years. So we did this study looking at those three questions in soybean, 2019, 2018, at two locations, here on the MSU campus and then bean and beet farm in the Frankenmuth area. So here I have four figures from all of those four site yields, so to speak. We used six maturity groups, looking at maturity group 1.0 on the left and then all the way to a 3.5 on the right. And this is looking at that early season planting. Here if you look at our data, what you will see is this trend of increase in yield as we went with a longer maturity bean in that early season planting. You can see that two or 2.5 maturity group, that is typical for these locations in both of these graphs. And you can see we were able to push to a higher yield when we used a longer maturity group. So one might be asking that, okay, early season we are able to benefit by using a longer group bean, but is it going to mature before that first killing frost occurs? And we did collect a lot of data over the last two years, and we did see that these beans were able to get to that R7 stage, which is when about 95% of yield is determined much earlier than that first killing frost. And the yield bump was coming by putting on more number of pods and more number of seeds per plant and then maintaining that seed rate. So we did see a benefit of pushing to a longer bean. In terms of the second question, looking at the seeding rate piece. Here's a picture of our five seeding rates. And you all, I'm sure, can tell which is the low and which is the high seeding rate. You can see a pretty diverse different as we went to that high seeding rate. We have almost only a single branch at those high seeding rates and almost close to four branches when we went with these low seeding rates, 50000 to 90000. And you can see with these lower rates we are putting more branches, and there are a lot of extra pods on those branches as well. And you will see that in the data that I will show you is that because of this ability of soybean plant to branch out for these medium bush bean varieties that we were using, we're able to compensate for that low plant stand. So that is a positive. We did see a negative in terms of the height of our lowest pod, which was about 4.5 inches off the ground at that high seeding rate, but only about three inches at that lower seeding rate. So we were seeing more harvest losses at that low plant stands. So maintaining the low height of the cutter bar is going to be important as we look into cutting down our seeding rates. Looking at the same picture in a data format, here I have, again, four site yields of my data. Final plant stand on the X-axis, which is accounting for any germination and any emergence loss. And if you look at these regression lines what we are finding out is that there is no relationship between plant stand and yield, meaning as we went with a low plant stand we did not see a yield penalty, even under these early season planting conditions where one would expect yield to probably show up with the high, high seeding rates. So we did not see that. And that goes back to what I showed in the picture I had in the previous slide. So coming back to this early season window, which we were targeting that late April to early May period. We are benefiting only in that window when we use a longer maturity group. In terms of using seeding rate and even seed treatment, we did not see a benefit of those. I did not show data on seed treatment but we did not see a benefit enough for locations of using that seed treatment in terms of economic return about that. But one of those could still be employed as an insurance policy, right? Because we are under early season planting conditions, and like what happened in 2019 a lot of cool and wet soil conditions prevailed. So at least keeping that in mind. Moving onto that midseason window, here we planted two times. We planted in mid-May and we planted early June, expecting that we might see a difference in the ideal maturity group, seeding rate, or seed treatment that we need to be using, but we did not. So meaning that midseason planting window extends from mid-May into early June, and we do not need to be changing our management. Coming back to looking at that seeding rate, the maturity group is, we had again same six maturity groups, 1.0 all the way to 3.5. And in any of these four locations we did not see a difference. So we did not see a benefit of pushing to a higher group bean or we did not see a penalty of going with a short group bean. So again, if the goal is to plant a cover crop or vetch or do any fall management, we can maybe push towards these early maturing beans in this midseason window and not lose soybean yield and be able to save some time at the end of the growing season. Unlike that early season planting where we did benefit by pushing to a higher group bean variety. Looking at that second piece, the seeding rate, just like what we saw with the early planting we did not see a benefit of pushing to a higher seeding rate. So again, meaning as we dropped less number of seeds we did not see a yield penalty, even going as low as 50000 seeds. - Hey Manni? I'm sorry. - Yes? - We have a question. What row width was the test done with? - So yeah, I forgot to mention that. So this was all done in a 15 inch row spacing. So all of the work is 15 inch using a conventional tiller system. - All right, thank you. - Yeah. So I assume the results would translate. We're looking at relative differences between our treatments. So that is a good point. So again, looking back at this data, as we are dropping to a lower seeding rate we are not seeing a yield penalty, even as low as 50000. But again, what this means is if we are planting at, let's say, 150000 or 130000, there's a potential to go down 10%, 15%, 20%. So go with a sequential decline and see how that works out at your farm. So there seems like a good potential of cutting down the input costs in terms of amount of seeds used while not getting a yield penalty during this midseason planting. So just to wrap that midseason, again, limited impact of changing maturity groups. So an option to push towards that early maturity beans if the goal is to save time after soybean harvest. No benefit in terms of increasing seeding rate in this window. So there's a potential to cut down on the input cost. Same is true for seed treatment. I did not present that data, but we did not see a benefit of using a seed treatment in terms of net profits at the end. So that is our midseason planting window. And let's look at what happens when we were planting in that late season. So that's typically June 15th or afterwards. Again, what's the ideal maturity group? Same six maturity groups. And you will see there's a lot of variability in this data, simply meaning that we did not see a benefit of changing maturity a lot. There was a trend towards losing yield if we kept that longer bean. Or, you can see in couple of these places we did see a yield increase in terms of using a short bean with this delayed planting. But more importantly, what we were seeing was a lot of difference in the harvest moisture. So with this delayed planting, when we used a maturity group anything 2.5 or higher, the moisture was almost always 22% or higher, which is not ideal, right? But when we used a maturity group 1.5 and short, we were almost always below 18%. So that comes back to the idea of benefiting by using a short group in terms of at least maybe a small yield bump, but more importantly, ideal harvest moisture in these delayed planting conditions. Looking onto the second piece, the seeding rate. Here, unlike the early and midseason planting, we did see a relation, a positive relation between increase in plant stand, seeding rate, and yield. So only under these delayed planting conditions we are seeing a benefit of using a higher seeding rate, higher than 130000, if we use that as a benchmark. Because now we are so delayed we need more canopy out in the field that can intercept more sunlight and give us more for photosynthesis for that yield accumulation. So coming back to wrap this late season window, which again, delayed starts from around mid-June time gives us the benefit of going with a short maturity group here, to get maybe a small yield bump but more importantly avoiding that poor seed quality in terms of high moisture content. In this delayed planting, we are seeing a benefit of increasing seeding rate. And seed treatment, again, very limited benefit based on our four site yields. So to wrap up our soybean work, I have all of my three planting windows over here, early, mid, and late season. And some of the management highlighted in red that we think is important. Early season, we are seeing the benefit only when we are pushing to that longer maturity group to improve yield. Midseason, we do not see a change impact of maturity group selection. So we can maybe go with some short bean varieties. Late season we definitely see a benefit of going with the shorter bean in terms of improved harvest ability. Seeding rate and seed treatment, again, input cost. So we can think about cutting those down, maybe starting with this midseason window where the planting conditions are better than the early or even the late season in terms of starting to cut down on those inputs. And maybe keeping one or the other as an insurance policy for those early planting conditions. So now we're, again, looking at what else is out there. So we looked at maturity group, variety selection, seeding rate, seed treatment. We're looking at what else might vary based on when we are able to plant. Do we need to be using a seed inoculation? Do we need to be changing, or what's the benefit of going with a narrow row spacing? Or is there a benefit of even fertilizer application based on the planting time? So we'll be planning to do more research and come back with more answers next year hopefully. So that was all of the work on soybean. So how about corn? Think I probably still have a couple of minutes, so I can talk some more about some of the thinking on the corn side of things. Same concept, right? So we are still looking at those multiple planting times, early, mid, and late season, and dealing with those growing conditions and what we can do management-wise to improve yield and cut down on the input costs. In corn, pretty much we are looking at the driver of that growing season is the growing degree day accumulation, how many heat units we are collecting. And that is an important factor for corn growth and development. A year like 2019, you can see on these maps our growing degree day accumulation was not far behind, at least in the lower Michigan. We were at least, actually, maybe little bit ahead of the 30 year long-term growing degree day accumulation if you see this map at the bottom right. But the issue was that the planting was so delayed. So this data is not valid at that point. So we need to have a better idea about how growing degree day accumulation works throughout that growing season based on the county we are in. So we have this really nice tool, Useful 2 Usable. It's online tool, it's free to use. I will highly recommend you to be using this tool in terms of having an idea about the maturity selection for corn. And how the change in planting time might impact that. So we are better prepared for that variable planting window. It's a very easy tool to use. Just a quick snapshot. It's a county-based tool, so you start with entering your location. And using that location, the tool pulls a long-term weather data based on the Michigan State University weather network. So very extensive data that goes into this system. And then we can enter our planting date, so here I'm using June First, so a delayed planting. And then we can enter the corn maturity in terms of either the number of days for the hybrid, or I prefer to know the growing degree days to black layer. And entering that information, the tool gives me this estimate of when the black layer is going to occur for that hybrid and compares that with all these blue bars, which is the probability of the first killing frost that occurs in that specific location. So in this example, I'm able to get to the black layer about 10 days ahead of that first killing frost. So again, a really useful tool in terms of planning what sort of relative maturities we need to be selecting and going with a portfolio approach. We know we are dealing with this variable planting window, so a tool like this can really help out making plants ahead of time. There is this phenomena of a corn hybrid needing less number of growing degree days if it is planted late in the growing season. Some of you probably heard this in the last planting window. It's called growing degree day compression. So we were very interested if that phenomena was occurring in Michigan or not. There is no Michigan data available. Some data coming from Bob Nielson out of Indiana shows that there's about seven growing degree days less requirement if we are planting after May First. So let's say we're planting May 30th, that means 30 day delay compared to May One, meaning that same hybrid planted May 30th will need about 200 less growing degree days compared to if it was planted May First. So that would mean that we probably don't need to switch the corn maturity as quickly as we might if this phenomena was not occurring, right? But there were reports of limited to no compression occurring in 2019. And we were tracking some of the fields. I have some data here that simply shows that we did not see that compression occurring. So that goes back to the importance of planning ahead of time and using a tool like U2U to know based on these planting times what is the ideal maturity we ought to be using. And something similar like that, that soybean data can be benefit by pushing a longer maturity hybrids early in the season and then going with the short maturity as we are delayed, and when do we need to be switching? So we're putting more research in ground this year to collect Michigan-specific data to answer some of these questions. And hopefully we'll have more information to you by the end of this growing season All right. With that I'll thank everybody. All of this information is available on our website that is listed over here. - So Manni went through a couple different things looking at the production side. So my end of it is to look at what are some of the financial strategies that we can use from what we learned in 2019 to make some better management decisions and maybe better protect ourselves against risk. So the first thing to look at would be kinda understanding where we ended up in '19. Now we had a lot of struggles with weather and getting everything planted, and so we thought a lot of that was going really, really back to poor yields. And what we were really surprised to find is that we actually had relatively good yields this fall compared to what we thought they were gonna be. And as you can see here from the USDA back in November, the estimate was 167 bushels for corn down from the 176 in '18, and you can kinda see where the trendline here is with the yellow line. Just here last month in January, USDA's got some better information and has actually updated that to now 168 bushels. So it's actually gotten a little bit better than what their initial estimate was. And so, while things were a struggle out in the farm, as you know, averages are based on you've got some folks that have really high yields and then some folks that had poor yields. We did have some areas, especially in Michigan, that were still hurt by the weather and had some poor yields, but as a whole we really weren't that down in terms of our production. Now one thing that we did see was that we had a lot of prevented plant acres. And really, it wasn't corn that was hurt so much by that as it was soybean acreages. As we were gettin' closer to that window of what do we plant, a lot of corn was still being pushed in and it was a lot of our soybean acres that actually had been put into that preventive planting option. There were still quite a few acres of corn that were in preventive plant but the majority of the acreage loss that we saw were really in soybeans. Now, the conventional thing is if we don't have all those acres, what happened to the soybeans that were planted? And we did have lower yields, but not as much as we expected there either. In fact, this same graph is from November, as was the corn. And USDA in January has actually increased that 46.9 bushel estimate up half a bushel to 47.4. So as they've gotten better information it's getting a little bit closer to what we've seen for a trend, which is the red line on the graph. But we did see a little bit lower yield in that aspect. And so again, we know we had some farms that were better than that and then some farms that were lower than that. So as we think about the financial struggles that we had in the year, what were some of the driving forces behind that, or what were some of the things we saw because of some of the situations we ran into in '19? We know that we had poor weather. That created a lot of havoc for us, even if we got things planted, we still had to deal with the weather during the summer and even into the fall. We also had lower commodity prices. We really didn't see the pickup in the prices that we thought we'd see with the lack of production actually being planted. We also did see some lower yields in areas of the state. There's a lot of conversation, if you've been looking around at your counties, some counties have been talking about 20% or 15% down from normal. Some individual farms much worse than that. Then we also had the preventive planting situations where those had empty fields, or maybe they were just no yields, that whatever they planted kept getting drowned out and then just finally said they weren't gonna have anything in that field. As a result, we saw a lot of lower actual net farm income, and we'll describe here a little bit here in a moment what actual net farm income is. We also saw higher dependence on our government programs. But really, what was the driving force behind some of these, or really what these situations caused for us was that we dealt with a lot of uncertainty, and it really kinda clouded what were the right decisions, or in some cases just the best decisions for our farm operations in 2019. And so, as we think about how we manage uncertainty, where would we normally turn to? Well, our biggest concerns are always price and yield. So the first thing we talk about is, well, we've gotta have better marketing, which means our first thought is we need higher prices. Or we need to increase our production, so we need more yield. We may even think about on our farm we need to make some improvements to the land by either putting in irrigation, putting in tiling, maybe looking at other options on the farm just to, again, create more production. And then maybe we think about cutting back expenses. But realistically, how many of these things are we really able to control? And that becomes a very important question as we think about how do we do some planning and how do we put ourselves in a good position for the 2020 year or even years beyond that? So as we think about managing uncertainty, we need to think about what is within our control. And I think the first place that's really important for people to start with is really understanding where the farm is now, financially. That's your foundation in terms of what you're actually able to do and what options are available to you from a financial standpoint. And by having that financial knowledge, that foundation, you're gonna know, are we really making money with what we're doing on the farm? Or have we been making money? Are we struggling more or less than what we think we are? The other benefit of understanding where the farm is at a financial standpoint is you can really dive into the details to figure out what is our cost of production? And really what we're getting is, where is the money going? What are our break-evens for the farm operation? Giving us some information to be able to make some decisions. The other thing that I think is really important to think about, what's within your control as a producer is identifying tools that can help you manage risk and really understanding how they work. And we're gonna talk a little bit today about crop insurance. We understand a little bit of the loss coverage, but I also wanna talk today a little bit about thinking of it as a marketing aid. Now, as we get to that, let's first think about the idea of are we really making money and really getting a good foundation, financially, where the farm is at? So as we think about, first, this'll be probably pretty familiar to most producers. Everyone files their income taxes, and so they know a Schedule F is where we list our farm incomes. So we recognize cash income, we subtract out our expenses, and then we've got depreciation. The real question is, are we making or losing money? Well right now we're showing this example farm is making $30000. But what about some of the other things that have been going on for the farm that really aren't in that picture? And this becomes real important because we think about it, we talked about the importance of balance sheets and kinda tracking some of the information, what about, with the crops we've got still sitting in the bin? The income tax has all of our cash transactions that have been going on during that actual calendar year, but we didn't really sell all of the crops from that year. Say this was 2019, and we still have some crop in the bin at the beginning of the year from 2018. So as we start to think about actual net farm income, we have to actually do some adjustment to account for what was really part of that production year. So in this example, we had $45000 worth of crop that we sold in the '19 year. But that was really from the '18 crop, so we need to subtract that out of our income. So our $150000 is now a lot lower than what it was. And what we've still got in the bin moving into 2020 we can see is worth about $5000. And so, to kinda make an easy adjustment, you've got about a $40000 adjustment to our Schedule F income of $30000. So that's an adjustment to income, one example of one that we look at. What about some adjustments to our expenses? At the beginning of the year we had prepaid for about $10000 worth of seed and chemicals, so that is a 2019 expense but it was captured in the '18 year. But we also, at the end of the '19 year, we spent about $25000 for 2020 inputs. So you wanna make sure that you're separating those out and keeping the $10000 as part of the '19 year but subtracting out what we had spent of the $110000 in the example, $25000 being for 2020. So when we think about the net result, we've got $30000 minus the $40000 change from our inventories, plus the $15000 change from our expense adjustment. And so, this farm actually made, in this example, $5000. Big difference between what you report on Schedule F and what you've got listed, or what is actually the farm's income. And this is really important, because we wanna analyze the production year because it gives us the whole picture. It adds in the missing pieces that you don't see on the IRS tax return. And we showed inventories and some prepaid expenses. This is important because a lot of you folks out there, myself included, as a producer, we go to that lender and our lender asks us to turn in a copy of our IRS tax returns. Well, it's not telling the whole story. It doesn't really even tell us the whole story. And we need to be thinking about that. And analyzing the production year tell us whether we really made money or not. It also gives us the foundation for us to be able to start putting the pieces together that we need to identify the cost of production. Knowing last year's cost of production helps us build this year's plan. It helps us identify specifically risks that we need to manage, where are the areas of concern for our operation? We can then think about what changes do we need to have made? Once we know the problem, what are the options to address it? Then we can identify what actions that we're actually gonna take. What exactly are we gonna do to resolve these concerns? And then also, cost of production leads us to developing our break-evens. And so, as we think about break-evens, a lot of cases we wanna define it very similarly to cost of production. They're very closely connected, but break-evens are really that point where our costs equal our revenues. So we're not making any money. But understanding where that is and analyzing that can help us kinda do some decision-making on the farm. So thinking about, if you wanna determine your fixed and your variable costs, every fall you have a dealer walk into the farm shop or give you a call that they wanna talk about having to lock in some of your inputs. Well, if you know your cost of productions and you know your break-evens, if you were asked, what is the fertilizer price they're offering, is it a good price? Well, you don't have to wonder if it's a good price for your operation, you actually know because you know kind of an estimate of where your cost of production's gonna be based on the historical information and any changes you're anticipating for the coming year. You can take that fertilizer price, for example, and input that into your estimated cost of production for, say, the 2020 year, and see how that changes your projected profit or even cash flow. And really help you to determine, is this really a good price or it's a good price right now that we anticipate it's gonna go higher, what other areas of the operation, what other inputs are we gonna need to adjust to keep this in line to be profitable or to cash flow. I also helps us to set prices. We think about marketing. I often tease producers in my local area, I'm like most producers, I like to go to a local coffee shop and hang out with my neighbors. And all the time, every year at some point someone's gonna say, you hear what the price on the board is today? And someone'll say, yeah, that's a good price. How do you know if you don't know your cost of production? And so, the question becomes does the price on the board cover our costs? If you know this information, you're gonna be able to say definitively, yes, that is a good price, and actually make some decisions on it. And that's why when it comes to marketing, it's very important to remember that marketing is really all about confidence, and do we have that confidence to go ahead and take out a contract on that price? So let's think about how confident producers are, and really look at that a little bit. This is a graph from USDA that they highlighted in 2017. As you can see, all commodities are the orange line and then the dotted green line are crops. And these are all crops, corn, soybeans, wheat, barley, et cetera. In 2019, 21% of all crops being grown was all that was marketed. And historically for the last 20 years, that number has barely fluctuated. In fact, as you can see in the graph about that 2010, 2011 period is about the first time that it really fluctuated really significantly. In 2017, corn made up only 12%. So 12% of that production was marketed. 18% of soybeans were marketed that same year, so a little bit better than corn. But again, for the last 20 years we haven't seen a lot of fluctuations on that. So as producers, we haven't been very confident in terms of taking out a whole lot of contracts on our production. So how do we go about actually improving that marketing and giving ourselves some more confidence? This is where cost of production and break-evens really come in. We know if the price being offered is good or bad because we've got a really good idea of what our cost of production has been historically, and we've used that to do some planning. We also have that information to secure farm profits because we can take that information and utilize it with some of our risk management tools, which not only for coverage purposes but as a marketing aid. And this is where we're gonna talk a little bit about crop insurance. So let's look at a little bit of example. For those of you that have had revenue protection with your crop insurance, you kinda understand some of these numbers here. In our example we're looking at a farm that's got 600 acres of soybeans. Their actual production history is about 40 bushels per acre. Their revenue-based insurance coverage is 75%. So a little bit of quick math here on the screen and you see that 600 times 40 times 75% is 18000 bushels. So as we think about crop insurance as a marketing aid, what does this information really tell us? Well, what it really tells us is that 18000 bushels is the amount that we can actually feel confident taking and doing some pre-harvest marketing with. 75% is a lot further away than that 21% or the 18% for soybeans that we were seeing on the graph the previous slide. But what if there's no yield to cover those marketing contracts? Of course, if the yield goes down, what if the price goes up too? That's usually the common question we think about when we start talking about marketing that much of our production. Well, let's look a little bit about that. So if there's no yield and the market price goes up, well the first thing to remember is that revenue protection actually recalculates the final guaranteed payment. What it does, it looks at the harvest price and it will recalculate using that if it's higher than the base price earlier in the season. So in this case, our price concern is covered. And then also, the insurance increase that happens because of that harvest price adjustment can actually help to offset the cost if we have to go out and buy those higher-priced bushels to actually fill our contracts. So in this case, our yield is covered too. Now it's a little easier to kinda put some numbers to this. So let's look at this from a standpoint of we have our 18000 bushels. We marketed them at $9.54, so we've got $171000. But we only produced 13200 bushels, so we're gonna have to buy back about 4800 bushels and the price has gone up to $11. Well, because the price has gone up and we look at that purchase cost of $52800, but because the price has gone up, our crop insurance actually pays us based on futures. In our example, our futures are at $11.25. And so, we actually get a crop insurance payment of $54000 we can use to offset the cost of buying those bushels. So then when you do the net, you actually end up a little bit better than what you would have to start with, which is not always the case. But the idea is that you have the insurance protection. The way that the program actually works offers you the opportunity to be secure in case you run into this situation. As you know, if you've got a poor yield and the prices don't go up, you still get the yield protection. And if there is a price change by itself you also have the protection. So you've covered the number of scenarios that your crop insurance actually can give you some confidence that I can go out to about 75% of my production history and feel confident that I'm gonna be covered. Now again, 21% to 75% is a big leap, so in a lot of cases what I would recommend for folks is to be thinking about a number somewhere in between. Even if you're going up 40% or 50%, you're still doing a lot more than what the average producer is, and you've got a good insurance program that actually helps to offset some of that risk. And you wanna remember that there is basis and opportunity risk that you need to be thinking about when you're making these decisions. So as we think about crop insurance, remember it's coverage on losses. We've got yield protection, revenue protection, and as we saw in 2019 we have preventive plant, which is not the greatest thing in the world to have but it's a protection that helped a lot of farmers this last year. And then we also have a really good marketing aid. The other thing to think about as you're trying to mitigate some of that risk for this next year is to really think about what our government programs have to offer. We've been having a lot of meetings across the state the last couple months really focused on the Farm Bill programs and whether or not you're looking at the PLC or either of the ARC programs. There is also what's called a Supplemental Coverage Option that if you go with the PLC program, something you wanna talk to your insurance agent about because it may be another level of production, or protection, excuse me. But when you think about government programs as a whole, what you really wanna be thinking about is where is my risk concern as a producer? Am I concerned about price? Am I concerned about yield? And then if I'm concerned about my own yield, am I also concerned about what the county yield might be and how that influences which of these programs offers reasonable opportunity for a payout to help my operation. So as we think about the different programs we see that PLC covers us in price. It does not give us anything in terms of yield. PLC plus SCO, and this may be where you wanna talk to your crop insurance agent, does give some added yield protection that PLC by itself does not, but keep in mind that it's county yield based. ARC County gives us some price and then also some yield base. Again, like PLC plus SCO, it's more of a county-based. And then ARC Individual is more individual. So you wanna understand, where is the concern and which program offers the payout. Because depending on your situation as a producer, any one of these programs or combination of these programs actually can help your operation mitigate some risk here for the coming year. Biggest thing that both Manni and I really want to kind of stress for everybody is that it may not feel like it at times, we certainly felt like it a lot in 2019 that we really didn't have the opportunity to really manage our way through these uncertain times that we found. But we do have the resources and even the resiliency within our farms to really manage our way through that.
