Grain Farmers to see record profits this year?

**vmbplayer** · 08-29-2012, 09:52 AM

Can this be right? I don't know anything about the source, but they seem to be citing the USDA.

Are grain farmers really going to be better off this year even with the drought by offsetting it with subsidies and crop insurance?

US farmers eye record profits - FT.com

I know it's saying livestock farmers are going to see a hit with grain prices going up, but so many farms in Iowa at least got rid of hog operations after the price hit 15 years ago (or whenever it was). Are Iowa farmers going to be more profitable this year?

Mods move to cave if needed. Thought more farmers would be able to offer insight in off-topic that don't post in the cave.

**isufan** · 08-29-2012, 09:59 AM

It depends a lot on what the fall crop insurance price ends up being.

**cy1010** · 08-29-2012, 10:02 AM

There were a lot of hoops to jump through to get to that article and I'm not much of a jumper. But, I'd assume that if your yields were substantial or only slightly offset by the drought then the record prices could possibly put you into a "record profit" category.

I don't know how the article dealt with crop insurance. (Hoops and whatnot).

**vmbplayer** · 08-29-2012, 10:03 AM

Originally Posted by isufan

It depends a lot on what the fall crop insurance price ends up being.

How is that figured? I assume an adjuster comes out and estimates the percentage of the crop that is lost and then applies the price to that, but where does the price come from?

**Go2Guy** · 08-29-2012, 10:06 AM

One thing for sure is the escalating price of farm land; seems many are considering selling out while prices are high.

**isufan** · 08-29-2012, 10:08 AM

Crop Insurance uses a spring or a fall price to determine a farmer's revenue guarantee. The spring price was set at $5.68 on corn. For example, if you have a proven yield of 160 on corn with 75% insurance, you are guanteed 120 bushels. 120 times 5.68 equals 681.60. That is your revenue guantee per acre.

Now when you buy crop insurance, you can add a fall price option. Meaning that they take the average price of the december contract during the month of October. Normally, the fall price is lower, except for years with a short crop. This year, the fall price will be higher than $5.68.

Pretend the fall price ends up being $7.00. 120 bushels times $7 equals $840. So if a farmer has the fall price option, their revenue guarantee could go from 680bucks per acre to 840.

**bringmagicback** · 08-29-2012, 10:11 AM

Originally Posted by Go2Guy

One thing for sure is the escalating price of farm land; seems many are considering selling out while prices are high.

This is definately not something ive seen. I work closely with several land management companies (not by choice and id love to see them fail) and they are begging to sell land.

**cyfan4St8** · 08-29-2012, 10:24 AM

Yes some guys will have a great year regardless what their fields yield. But in my area there is going to be some good yields that they won't hit their insured levels. The thing to know though about the crop insurance thing is they might not get their payments till next spring and if they go over the $200k make in payment the will be audited for the last three years of production. And most guys don't have zero bushels out in the field so like the example from a earlier post if the are insurned at 120 bu and the still get 80 bu with their represented sample that the adjuster will look at they will only get paid on the 40bu they didn't grow.

**Tre4ISU** · 08-29-2012, 10:28 AM

Originally Posted by cyfan4St8

Yes some guys will have a great year regardless what their fields yield. But in my area there is going to be some good yields that they won't hit their insured levels. The thing to know though about the crop insurance thing is they might not get their payments till next spring and if they go over the $200k make in payment the will be audited for the last three years of production. And most guys don't have zero bushels out in the field so like the example from a earlier post if the are insurned at 120 bu and the still get 80 bu with their represented sample that the adjuster will look at they will only get paid on the 40bu they didn't grow.

You're guaranteed revenue, not bushels. It doesn't matter if you produce 100 or 120, you are guaranteed a certain dollar amount.

**bringmagicback** · 08-29-2012, 10:32 AM

Another thing to consider is record input costs.

**vmbplayer** · 08-29-2012, 10:33 AM

Originally Posted by bringmagicback

Another thing to consider is record input costs.

Assuming the article is accurate it's discussing profit which would account for cost input.

**buf87** · 08-29-2012, 10:35 AM

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

**ajk4st8** · 08-29-2012, 10:38 AM

Originally Posted by buf87

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

Less grain = less transportation/drying cost as well.

**bringmagicback** · 08-29-2012, 10:40 AM

Originally Posted by buf87

Lots of variables this year. Did you sell alot of corn early at $5 - $5.50? What are your yields? This combination could be bad for some farmers, Poor yields and sold early for $5. We are fortunate in North central - Northwest Iowa, we are going to have good yields (150+, maybe some 200+), so yes we will see good profits, others are not near as fortunate.

180 bu corn at $5 = $900/acre
120 bu corn at $8 = $960/acre

Lots depends on marketing

Thats what i was thinking, my beans will yeild half but worth x2. So im even, but i paid more in inputs so im actually down.

**Bobber** · 08-29-2012, 01:05 PM

Check back in 6 months and will have a more definitive answer. That's what crop insurance is all about and the current products do a great job of protecting revenue. My impression is it will be a good year overall, but record is a stretch. Most farmers would rather have have higher yields and lower prices rather then what they were delt this year.