CQ Perspectives Jan 2006

8/4/2019 CQ Perspectives Jan 2006

1/4

1C r o p Q u e s t P e r s p e c t i v e s

Volume 16 Issue 1 January 2006

Marketing Experts Stress.. .

OFFICIAL PUBLICATION OF CROP QUEST AGRONOMIC SERVICES, INC


2/42 C r o p Q u e s t P e r s p e c t i v e s w w w . c r o p q u e s t . c o m

Market Experts Stress ... Continued from Page 1

farmers can consistently and successfully predict and react to

market swings that yield a much greater return vs. those farmers

who do not track the markets at all.

The KSU economist says there is little evidence that supports

the claim that some farmers are better marketers than others.

Dhuyvetter explains, We have looked at 10+ years of data in our

Farm Management Association program

and found that being persistently better (or

worse) than neighboring farms is much

easier to do with management areas other

than marketing. Trends in that data haveindicated which management factors make

producers more money over the long term

it is not outguessing the markets.

Dhuyvetter s data indicate that farmers

who consistently make better money on

their crops tend to be low-cost producers.

This does not necessarily mean they dont

spend more money, but rather they are

willing to spend more to make more, he

states. These same people seem to be faster

adopters of new technology, (specically

no-till practices) and are farming more

intensively (i.e., eliminating fallow in western Kansas and more

double cropping in eastern Kansas). They tend to be bigger

farmers, too, Dhuyvetter adds.

However, when we look at what kind of price they get relative

to the average farmer, we seldom nd any statistical differences

in price received for the crop, he continues. We know that in

any given year, one farmer is going to do a better job of marketing

than another does; but on average, the chance of one farmer

consistently out-gaining another is not evident.

The KSU economist adds, We tell people that if you are hiring

a marketing advisory group because you think they are going to

get you a better price, you are hiring them for the wrong reason.

However, if you are hiring them because you do not want tohandle that responsibility yourself, that is a legitimate expense.

I think a farmers time is best spent making good machinery and

cropping decisions, not watching market trends and thus hiring a

market advisory service might be a good investment.

How to Avoid the Pitfalls of Marketing

It all starts with developing a plan that focuses on how

much you plan to produce and then being able to get ahead of

harvest time to be in position to take advantage of these sales

opportunities.

Dever suggests that farmers divide their marketing window into

four to ve primary periods, not just the one after harvest. Your

marketing plan should be set up to allow you to make sales duringthese various time slots to spread nancial risk, he advises.

Those windows can be broken into, for example, pre-

planting, planting, the growing season, harvest and post-

harvest. A person needs to be in a position to get something

sold in each of those windows or have a good reason

why he does not, Dever explains. Spreading

sales becomes a part of your risk management

plan. It will help producers develop a basic

marketing plan that allows for more market-

selling exibility and the ability to take

advantage of seasonal sale opportunities.

The worst business mistakes are frequently made in the paralysis

and fear of indecisiveness.

Dever adds, Good planning could be the single most

determining factor to the success of a farming operation

planning in terms of setting up a marketing plan, cropping

decisions with your consultants, water planning, nancial

planning, overall tax planning, etc. Largely, farming has become

a nancial planning enterprise, not a work-type enterprise like the

way we use to look at it. It all starts with good market planning.

Plan Your Management Steps in AdvanceAccording to Dever, In January, we should be looking at the

regional, national and global market outlooks for planting to see

what adjustments need to be made. We also need to be prepared

to assess our own production prospects in terms of the new winter

wheat stand in many of our elds. Is it in line from a production

standpoint with your expectations? Do you have a good price

established? If not, are you going to wait until the market dictates

that price to you?

Usually we get some decent spring rallies, particularly with

corn and soybeans, Dever notes. I like to make sure we get

something priced in the pre-planting or planting window of the

2006 harvest. A producer should always look to lay an early

foundation for their marketing program during that time slot.

Dhuyvetter adds, I dont believe there is an easy way of

determining a good time to sell. Make sure that you are doing

the little things right. Haul to the best elevator if there is a few

cents difference in the bid. In the past I would say, Dont sell for

cash-ow reasons. Nowadays though, there may be some value,

especially if it eases the process of loan renewals. Selling for tax

reasons may pick up a little difference, but not a lot. If you store

grain on-farm, know some of the historical patterns that say, do

not store corn past March and do not store wheat past January.

We have some long-term studies that show that there might be

some long-term gains storing grain, but do not be too attached to

it. These are not huge things, but they are things that you can doyear-in/year-out to gain a few pennies more for your crop.

In conclusion, Dhuyvetter adds, We have some consistent

data gathered over the past 30 years that show that people who

do some pre-harvest marketing, have come out fairly well. If you

have not done it in the past, seriously look at selling some feed

grain prior to harvest. Spread your sales,

i.e., sell a third of it in March/April. Be

aware of the long-term patterns and

be ready to pull the trigger on some of

these opportunities.

Kevin Dhuyvetter


3/4C r o p Q u e s t P e r s p e c t i v e s

W i n t e r W h e a t P l a n t i n g I n c r e a s e d By:Ron OHanlon,

President

Member, National Alliance

of Independent Crop

Consultants, CPCC-I

Certied

Winter wheat

has been a popular

crop choice for

many farmers this

fall. Due to the

higher fuel prices

and increased fertilizer cost, more acres were planted to wheat

(maybe as much as 10% more) as the farmers response to these

higher input costs.

From an agronomists point of view, wheat is an excellent

crop choice when there is so much uncertainty as to what fuel

and fertilizers are going to do by next spring. Wheat is one

of those crops that requires minimal inputs up-front, but can

still yield well by topdressing nitrogen in the winter or spring.

In addition, wheat can be grazed for additional income if it is

planted early enough to obtain forage growth.

The planting of a wheat crop allows many optionsfor the farmer:

The wheat can be harvested for grain.

The crop can be grazed and harvested for grain.

The wheat crop can be cut for hay or ensilage.

The crop can be grazed out and then double-cropped to

soybeans, sorghum or sunowers.

The wheat can be burned down with an herbicide in

the spring and planted to another crop using a no-till or

strip-tillage planting method.

If and when the economic situation improves next spring,

farmers need to remain exible regarding their wheat acreage

(especially irrigated wheat) and visit with their Crop Quest

agronomist about which option will make the farmer the most

economical sense.

Are Urea Fertilizers Safe To Use Due To Their Potential

Loss From Volatilization?Due to the higher cost of natural gas and the increased

price in anhydrous ammonia, farmers have a tendency to look at

other nitrogen sources for meeting their crops nitrogen needs.

The most common forms of nitrogen fertilizers used today are

anhydrous ammonia - 82% N, urea - 45% N, and UAN solutions

- 28 to 32% N. There are advantages and disadvantages with

each source. Anhydrous ammonia is the least expensive of the

nitrogen fertilizers and the most concentrated, but it must be

injected into the soil to prevent ammonia losses. If anhydrous

is not properly used and applied, there is also a safety hazard

concern.Dry urea is popular as a nitrogen fertilizer because of its

relatively high N content, good storage and handling properties,

and its widespread availability. Another popular source of

nitrogen is the urea-ammonium nitrate (UAN) solutions. UAN

solutions are widely available and are versatile as a liquid source

which can be mixed with other solutions such as herbicides.

Another advantage for urea-based fertilizers is that they can

be broadcast on the surface instead of injected, which is faster

and less expensive. However, the disadvantage is the risk of

nitrogen loss to the atmosphere by ammonia volatilization from

broadcast applications.

There have been a number of experiments conducted at th

various universities to measure this potential loss from the

urea-based fertilizers and to determine the cause for this loss

In a three-year study at the University of Nebraska at Lincol

two years had adequate rain in the rst week after applicatio

to minimize N loss; but in 1992, little rain, coupled with low

humidity, resulted in urea remaining on the soil surface for a

extended period. The soil was relatively moist (74% of eld

capacity) at planting. The rst substantial rain (0.8 inches)

occurred 26 days after fertilization. The grain yield from the

urea treatments was almost one-half the yield from othertreatments and showed little difference from the unfertilized

check. The research report indicated that yield reductions du

to ammonia volatilization of this magnitude are uncommon,

but this shows how much loss is possible with certain climati

conditions.

Ammonia volatilization from urea can be minimized by

incorporating the fertilizer, either mechanically or by sprink

irrigation, or by attempting to anticipate when rains may

occur and fertilize just ahead of them. Refrain from applying

urea (especially dry urea) to moist soils during low humidity

conditions.

By: Ron OHanlon

President

A


4/4

Mission StatementCrop Quest is an employee-owned company dedicated to providing the highest quality agricultural services for each customer. The quest of our network of

professionals is to practice integrity and innovation to ensure our services are economically and environmentally sound.

PRSRT STD

US POSTAGE

PAID

DODGE CITY KS

PERMIT NO. 433

Employee-Owned & Customer DrivenCrop Quest Agronomic Services, Inc.

Main Ofce: Phone 620.225.2233

Fax 620.225.3199Internet: www.cropquest.com

[email protected]

Crop Quest Board of Directors President: Ron OHanlon

Director: Jim Gleason

Director: Dwight Koops

Director: Cort Minor

Director: Chris McInteer

Director: Rob Meyer

High Fertil izer Prices

The high energy prices that we are

experiencing are signicantly impacting

fertilizer prices. In many areas, we have

observed anhydrous ammonia well over $500/

ton, and phosphorus and potassium prices

have also shown dramatic increases.

These prices will change cropping plans across the country. In

the Midwest, farmers will look towards planting more soybeans

than corn, since soybeans require much less nitrogen. Where corn

is planted, the trend will most likely be to reduce fertilizer amounts.

Over the High Plains, we can expect similar trends, except we may

substitute a variety of crops rather than soybeans.

These macro trends will denitely impact overall production of

feed grains.

Fertilizer is the one input that you can show a direct correlation

between yield and amount applied, so you can determine the return

on the dollar of fertilizer applied. Nitrogen probably has the best

correlation, and if you decide to cut back on nitrogen use, you can

expect a direct yield loss. For most crops, for each 1 to 2 lbs. of

nitrogen reduction, you can expect a one-bushel decrease in yield.

A producer needs to evaluate whether a reduction in fertilizer use

is really the proper management choice, and many decisions go intothis. A good soil sampling program is the rst and largest step

towards helping producers make the right decision on fertilizer

use. This is also the year to consider ne-tuning soil sampling with

Grid Soil Sampling. Proper placement of fertilizer will have as

great of an impact on your fertilizer dollar as any management

practice you can employ. If proper levels of nutrients are alread

in the soil, we can take advantage of those areas and apply fertili

to only the areas that require additional amounts. This program w

allow a much higher return on the fertilizer dollar.

We encourage our producers to take full advantage of this

program this year.

Higher commercial fertilizer costs also make manure a mo

viable fertilizer source over a larger area. The cost of manure

is related to hauling and spreading charges. In the past, the highe

hauling and spreading costs have made manure less economical commercial fertilizer. This gap has narrowed signicantly and m

producers are taking advantage of the benets of manure this yea

With the possibility of fewer corn acres and lower average yie

due to high input costs, producers need to be aware of opportuni

that may present themselves. There is a good chance that traders

will try to buy corn acres

on the board this winter and

spring. Producers need to be in

a position to take advantage of

these marketing opportunities. In

turn, traders may also compete

for soybean acres, and marketing

opportunities may show up in the

soybean pit.

The agronomists at Crop Quest

encourage their producers to think

twice about reducing fertilizer

inputs, if they are required. That

fertilizer dollar may be the best

dollar spent, even under these

high prices. Sometimes acting

contrary to the trend is the right

decision. Taking advantage of

marketing opportunities will improve the bottom line much bette

than trying to save a few bucks on inputs such as fertilizer expenThis is the year to look at crop rotation and spreading out risk.

regardless of the crop that is planted, make sure that you properl

fertilize that crop to ensure the best return on the dollar spent.

By: Dwight Koops

Regional Vice President

Ulysses, Kan.

Have Large ImpactOn Farm Plans

Documents

CQ Perspectives Jan 2006