2021 marketing and financial management plans for Michigan State University
EAST LANSING, MI. – Weather. The mild and dry winter weather may be changing by mid-January due to a moderately intense La Niña weather pattern that is occurring in the Pacific Ocean. Jeff Andresen of MSU says this event is currently in progress across the equatorial Pacific region and may result in above normal precipitation (and snowfall) and increased odds of normal to below normal average temperatures to finish out winter and into Spring.
Government Reports and Marketing. Tuesday, January 12, 2021 saw four USDA reports coming out that is having a big impact on grain prices and strategies for 2020, 2021 and 2022. First and most important was the WASDE (World Agricultural Supply and Demand Estimate) report is one of the three most important government reports of the year. This report of world grain stocks and supplies affects both buyers and sellers and impacts the food, feed and fuel (biofuels) industries. As a result of this report alone, Monroe County farmers have a unique opportunity to sell some 2020 grain stocks or contract for 2021 or 2022 crop prices for a portion of their anticipated crops and lock in some price protection or profits.
The second report released on Tuesday was the 2020/2021 marketing year crop production report of the government’s estimate of 2020 crop acres and yield. This report showed fewer planted and harvested acres of corn and soybeans and lowered their previous yield estimates. The third report was the quarterly grain stocks report which takes production and allocates it to domestic usage, feed, exports, ethanol or biofuels and residual supply. This report was also bullish for grains and projects a possible rationing of corn to keep the pipeline full. Corn exports are up 137 percent from a year ago and soybean exports are up 84 percent. Normally Mexico is the leading importer of US corn and China is the leading importer of US soybeans. Part of the reason for the increase is the dry weather in Brazil and Argentina and China is increasing its hog and pig production, which means they need more grain for protein.
In their spot grain market at the Dalian exchange, corn was selling for $11.85 per bushel and soybeans were selling for $18.32 per bushel. Somewhat similar to the New York Stock Exchange or commodities exchanges, such as the Chicago Board of Trade, prices change constantly as buyers and sellers agree on a price. In our area most grain is shipped out of the Port of Toledo by boat or by rail via unit train. The biggest bottleneck to shipping commodities in or out of the Great Lakes is the antiquated Welland Canal. The fourth report issued last Tuesday was the winter wheat seedings report for hard and soft red and white wheat.
Budgeting and Financial Management. One important job in any business, including agriculture, is budgeting and financial management, let alone tax management and reporting. Farmers, whether they borrow money or not, should complete a balance sheet, likely on December 31, to show how the farm did last year. The balance sheet provides a picture of the farm’s financial position on a specific date every year. Since most farms use a calendar year for their reporting, the end of the year gives a snapshot to compare with previous years. For budgeting purposes, Ohio State and others provide sample budgets of various crops and livestock to compare with an individual farm’s own records. MSU has the Telfarm Accounting and Financial Analysis service to provide cash crop, dairy, livestock, fruit, vegetable and greenhouse farm businesses with a complete business analysis that than be used with the lender. This fee-based service includes balance sheets, cash and accrual income statements and enterprise or profit center analysis. This service is helpful for year end planning, depreciation and accounting records and updates on new regulations and agricultural programs, including payroll software.
Crop Insurance. USDA’s Risk Management Agency (RMA) is the government’s “answer” to seemingly annual crop and livestock disaster legislation and assistance. This agency was created in 1996 with changes in the Farm Bill, thanks in part to Senator Debbie Stabenow, who will again be the Chair of the Senate Committee on Agriculture, Nutrition and Forestry. RMA has announced a new crop insurance product – Enhanced Coverage Option (ECO) for 2021 that farmers need to look at in deciding their crop insurance coverage for 2021. This option provides additional area (county) based coverage for a portion of a farm’s underlying crop insurance policy deductible. Crop insurance is handled by private companies, somewhat similar to how people buy auto or home insurance. Farmers interested in more information about the new ECO coverage can participate in a computer based zoom meeting on Monday January 25, 2021 sponsored by Roger Betz, MSU Extension District Farm Management Educator. Participation is free of charge, but registration is requested. Contact Roger at: email@example.com or 517-230-0110.