Sources of Weather Information

The Web today has numerous sources of weather statistics, forecasts and information.  Here is a list of several that may be of interest to farmers:

http://www.geography.ohio-state.edu/faculty/rogers/statclim.html :  The State Climatology Office for Ohio strives to acquire, archive, process and disseminate all climate and weather information that is of value to public officials and organizations, corporations, research scientists, and private citizens of the state.  The fact that there is a state climatology office is not widely known around Ohio and many of the requests are either from central Ohio or they are from other states, from persons that know of climate services in their home state.

http://sisyphus.sws.uiuc.edu/index.html :  The Midwestern Regional Climate Center (MRCC) is a cooperative program of the Illinois State Water Survey and the National Climatic Data Center (National Oceanic and Atmospheric Administration, U.S, Department of Commerce).

http://www.extension.iastate.edu/notes/display.aspx?catID=102Weather :  Weather and Crop Comments by Elwynn Taylor, Iowa State University Extension climatologist.  According to Elwynn, on 4/27/05, “As of late April 2005 the Leading Crop Weather Indicators point to an above trend U.S. corn crop. The risk factors considered were: subsoil moisture(favorable or above usual moisture for the Corn Belt), ocean conditions north of Hawaii(PDO)(slightly unfavorable for the Mountain West and the western Corn Belt), El Niño (weak but still slightly favorable), Bermuda High Pressure(favorable), Benner 19-year Cycle (unfavorable), and the National Weather Service forecast for May-June-July (favorable).  With no strong trends in place, yields for 2005 are expected to exceed the trend by 2-5% (nationally about 42 Bu./a for Soybean and 145-150 Bu./a for Corn). No assessment of potential loss to Asian Soybean Rust was made.”  http://mrcc.sws.uiuc.edu/Watch/watch.htm :  Climate maps are available and are up-to-date through the previous day midnight using data received by 11:00 am Central Time each day.


http://twister.sbs.ohio-state.edu/ :  Ohio State University weather information site with lots of links.

Will Brazil Surpass the U.S. in World Soybean Production?

Brazil ‘the new soybean frontier’, as many enthusiasts are proclaiming, has a seemingly unlimited supply of untamed land that is readily available for soybean production. The USDA has estimated that the ‘Legal Amazon’ has an astounding one hundred million acres that is looking for investment opportunities to bring this land into production agriculture. Brazil is rapidly expanding its soybean production capabilities and gaining market share in supplying the world’s growing soybean needs. Many experts are predicting that Brazil will surpass the U.S. in soybean production by the end of the decade. Not only does Brazil have a seemingly unlimited supply of land to bring into production, but also the opportunity, in many areas, of planting year around. It is very common to see farmers’ double cropping soybeans with corn with Brazil ‘s tropical climate.

Brazil ‘s land values have appreciated significantly, as land values in the state of Mato Grosso have reportedly increased from an average of US$ 50 per acre to nearly $1,000 an acre over the past decade. Land values are relatively high in the established high production land in the south costing over $2,500 per acre. This land has infrastructure near what many farmers are accustomed to in the U.S. In the northern territory , land is significantly cheaper due to the high transportation costs from production areas to markets in these more remote areas. Similar to the U.S. , Brazil has a large variance of soil types with the majority of the soils devoted to agriculture being generally very deep and well-drained with excellent yield potential.

The rapid expansion of soybean production has intensified the need for large capital investment. High Brazilian interest rates make it very hard to borrow money domestically, which further signifies the need for foreign investment to spur the continued growth of this new land. Due to the high domestic interest rates, soybeans growers have started to barter where farmers will routinely trade bags of soybeans for fertilizer and land payments.

Sugarcane production is a very viable industry in Brazil where fifty-two percent of the sugarcane produced is used for ethanol production. The common sugarcane producing areas are primarily in the southern growing regions. A majority of gasoline stations has the selection of both an ethanol and a gasoline pump, as most Brazilian vehicles are capable of running a forty percent ethanol blend. Brazil normally prices ethanol at a thirty-five to forty percent discount to gasoline.

Brazil possesses almost all of the technological capabilities of the U.S. including the availability of new machinery with common lines such as Case New Holland and John Deere. The readily cheap labor force, with an average weekly wage of a meager $75 a week for unskilled factory workers, allows for low cost production.

The major grain trading companies such as ADM, Bunge, and Cargill have established facilities in Brazil capitalizing on the rapid soybean production growth. Interior soybean producing areas face extremely high basis volatility levels due to the large distance from major shipping ports. The town of Quencia, Matto Grosso that is 1000 miles from Port Parana (in the south of Brazil), had basis levels as weak as $3.30 per bushel under the May CBOT futures price during peak harvest last season (late March-early April of 2004). The large distance between elevator facilities, long harvest truck lines, and poor road conditions make it almost essential for a successful farming operation to own storage space. Logistical issues are a primary concern as truck lines of over sixty miles have been reported in the past at Port Parana’s shipping facility, which is Brazil ‘s leading exporting location. The lack of port storage space, under scaled shipping capacity, and Brazil ‘s rapid soybean expansion is adding to the growing logistical concerns.

Brazil has many positive aspects in soybean production but much of this does not come without challenges of overcoming Mother Nature’s natural barriers. Many of Brazilian soils have high acidity levels, in many areas ph levels on new virgin soil could be as low as 4.0 to 4.5, requiring up to four tons of lime per acre to put this land into production. The Brazilian climate is near ideal for Asian soybean rust as northern territories have had reports of spraying as many as six times for rust this season, but three and four applications are more common in this area. Another obstacle that Brazil faces is the cost of insecticides because there is no winter, making bugs a major concern in many areas with the need for spraying up to three times per year (about $12-15 per acre per spray).

The devaluation of the Brazilian Real has added considerably to the costs of production due to the higher costs of imported fertilizer, fuel and other variable cost inputs. Interior production areas have felt the greatest negative effects of the devaluation as the higher fuel costs have added significant transportation costs to interior land locked areas.

Brazilian agriculture has many positive attributes that encourage the interest of many entrepreneurial American farmers, but one must be able to sacrifice many of the modern conveniences that we have become accustomed to. Many recently cleared farming operations may be a three-hour drive to the nearest grocery store or to the nearest machinery parts dealer.

The Economic Drama of Soybean Rust in 2005

Asian soybean rust has arrived! The economic consequences of this disease will be a drama, but not a tragedy as rust can be managed. Brazilian farmers have demonstrated that they can manage the disease without severe reductions in national yields. However, it requires new understanding of the life cycle of rust, and especially how to identify and treat the disease. Every indication is that USDA, Land Grant Colleges , fungicide companies, local custom spray companies, and especially U.S. soybean producers are rising to this new challenge, and that we too will be able to manage soybean rust . To view the entire article, see the February 2005 Edition of the Purdue Agricultural Economics Report at: http://www.agecon.purdue.edu/extension/pubs/paer/

Emerging Issues in Agricultural Lending

Author: Donald J. Breece, Farm Management Specialist, OSU Extension Center-Lima

The agricultural lending market providing loans to US farmers and ranchers has been undergoing a rather rapid transformation in the last ten years. It took the proposed sale of the Farm Credit Services of America, a large association in the Farm Credit System, to the Dutch bank Rabobank to underscore how significant these changes could be. Although this sale ultimately fell through, it left in its wake a number of issues facing the Farm Credit System and agricultural lenders in general. The new international accords on banking, known as the Basel Capital Accords (Basel II), represent another force likely to cause change in agricultural lending.

The most recent issue of Choices provides a retrospective on the Rabobank near-deal and a broad view on the current state of agricultural lending. Click on the links below to explore these issues of emerging importance to agricultural lending:


Overview: Changing Face of Agricultural Lending

David M. Kohl and John B. Penson, Jr.


Growing Complexity of Agricultural Lending Decisions

Danny A. Klinefelter and John B. Penson, Jr.

This paper initially discusses the drivers of change in agricultural lending markets from the perspective of their customer base. As farms become larger and more complex, agricultural lenders will need to keep abreast of the broader set of markets, contractual and ownership arrangements, and a host of credit and portfolio risk management issues.


History and Unique Features of the Farm Credit System

Neil E. Harl

It is necessary to understand the underpinnings and uniqueness of the Farm Credit System as a lender to agriculture in light of the attempted purchase of a part of this lending cooperative. This includes its special tax-exempt status and the exit fee a Farm Credit System entity being sold must pay out of unallocated surplus.


Restructuring of the Ag Lending Markets: The FCS Dilemma

Michael Boehlje and Allan Gray

A changing competitor landscape and changes in their traditional customer base will challenge the Farm Credit System. These challenges include the efficiency of its capitalization and limits placed on ability to diversify its portfolio.


Selling a Piece of the Farm Credit System

Robert W. Jolly and Josh D. Roe

This paper describes the players in the proposed sale of an association in the Farm Credit System to Rabobank, the nature of the offer, and some of the unanswered questions that arose as a result of this proposed sale.


Are Rural Credit Markets Competitive? Is There Room for Competition in Rural Credit Markets?

Maureen Kilkenny and Robert W. Jolly

The question raised by the title of this article is motivated by the recent bid by Rabobank to become a major lender in the western region of the Corn Belt . This paper examines the competitiveness of this all-important market to farmers and ranchers, including its distance from urban competitors. Price discrimination and barriers to entry may result in credit rationing to farmers and ranchers.


FCSA Sale to Rabobank: Selling What? On Whose Authority? And For Whose Benefit?

Roger Ginder

The questions raised in the title over the failed sale of a large association in the Farm Credit System are the focus of this article. One of the major issues dealt with is who has a legitimate legal claim to the unallocated surplus of an association in the Farm Credit System if it is sold.


The New Basel Capital Accord: Implications for U.S. Agricultural Lenders

Ani L. Katchova and Peter J. Barry

An overview of the capital accords adopted by the global banking community will affect the calculation of individual bank capital requirements which are expected to go into effect by the end of 2006. These accords include alternatives for measuring credit risk and operational risk.

Agri-lending Vision 2020: When Vision and Reality Meet

David M. Kohl and Alicia M. Morris

The final paper in this theme takes a long-term look at what agricultural lending could look like by the year 2020. This includes continued consolidation in the farm sector and in the Farm Credit System. The paper characterizes different segments of participants in agriculture, including the super commodity/agribusiness operation, that will likely be highly geographically diversified.

Poster Requirements for Farm Operations

The State Safety Office has received questions about farmers being solicited by a poster service and the mandatory poster requirements for farm operations.We have reviewed the federal and state regulations and found this IS a labor regulation, and that farmers NEED TO BE IN COMPLIANCE.

Here’s a summary of the regulations: The poster requirements apply to ALL EMPLOYERS in the state of Ohio.  So this is not an agricultural regulation, but one that affects businesses that hire employees.  (More specifically, it is regulated under the Ohio Department of Commerce, Division of Labor and Worker Safety.)  There are no exemptions for agricultural operations, and the requirements apply if at any time during the year an employee is hired (even for one hour).  Three posters are mandatory:

  • State of Ohio Minimum Wage
  • Unemployment Compensation Coverage
  • Ohio Fair Employment Practices Law

If the farm hires minors, then the Ohio Minor Labor Law poster is also required.  If the farm hires large labor forces (more than 500 man hours in a year) or migrant workers, and/or contracts with the federal government, there are several other poster requirements.

A useful website for farmers to know about is:

< http://www.dol.gov/elaws/posters.htm >.  This service walks farm employers through a series of questions to determine their exact poster requirement for federal compliance.

The solicitation many Ohio farmers received was from a service that charges a fee to help get  them into compliance for the type of poster(s) they need on their farm.  While these service providers are legitimate and will certainly provide the posters meeting the regulations, they may not be tailored to the specific farm operation.  In other words, the farmer will still have to decide which posters to display.

These posters are FREE from the regulatory agency, whereas the poster service company charges $60.    These posters can be received from the the Bureau of Civil Rights within the Ohio Department of Job and Family Services at 614-644-2703.

If you have additional questions about this recent discovery of poster requirements for farm employers, please email Dee Jepsen at jepsen4@osu.edu.

The Effect of Fuel Price Increases on Custom Farming Rates

Whether you’re a custom farmer or someone in the market for custom farm work, rising fuel prices may have something to say about the price charged for your next custom farming job. Custom farming rates have changed very little in the last several years as tradition seems to govern many long-term custom rate arrangements. Well, we’ve charged Johnny Farmer $21/acre to harvest his corn for the last 3 years, so that’s what it’ll be this year. Times may be changing. Diesel fuel price increases the last several months have caused many to rethink their custom farming rates.

Diesel fuel prices have increased significantly over the last 24 months at the farm gate. Survey work has shown diesel prices in the spring of 2003 averaged around $1.10/gallon while today’s diesel prices for farm usage are in the $1.85/gallon range.

If we look only at fuel price increases as they relate to in-field operation of the farm equipment we see a significant increase in the cost of many farm operations. (And this assumes we ignore the effects of fuel price increases to the manufacturing and cost of the implements, cost of oil and lube, and cost of driving or transporting the equipment to the field.) The following list highlights the fuel requirements of farm equipment operations and increase in fuel cost from April 2003 to April 2005.

Implement                          Gal./Ac.   Fuel Cost/Ac.   Fuel Cost/Ac.  Increase

Diesel 1 2003 2 2005 3 03 to `05

Combine Corn-6 Row           1.93            $2.12             $3.57           $1.45

Combine Soybeans-25 ft.hd. 2.02            $2.22             $3.74           $1.52

Chisel Plow-23 ft.                 0.64            $0.70             $1.18           $0.48

Disk/V-Ripper-17.5 ft.          1.69             $1.86             $3.13           $1.27

Planting Corn -12 Row         0.34             $0.37             $0.63           $0.26

Round Bale-1000 lb.            0.77             $0.85             $1.42           $0.57

So what now? You may decide that changing custom rates will change other relationships with your customer that you may not want to forfeit. So you swallow the price increase and continue to spread your fixed costs over more acres. Or, you may decide that it’s time to rachet your custom rates up a little to avoid a lower return to your time and management.

If you are having second thoughts about raising those rates you might want to consider adding a “fuel surcharge” to your existing custom rate to offset the rise in fuel prices. This method may make it more palatable for your customer. Fuel surcharges have been used in the trucking industry and may be an option for custom farm operators. A base custom rate and a base fuel price are parts of this equation. As fuel prices increase from the base price, clients pay the difference between the base fuel price and the spot fuel price. This is a simple example that doesn’t take into account higher machinery, fuel, lube or transport costs.

Whatever you decide, understand that these cost increases are real and will impact the custom farming business, whichever side of the transaction you are on.

1 Gallons per acre diesel fuel values are estimates borrowed from the “Farm Machinery Cost Estimates for 2005” publication. See the full publication and estimates for diesel fuel use per acre for other implements at: http://www.extension.umn.edu/distribution/businessmanagement/DF6696.pdf

2 Diesel Fuel Price used for 2003 is assumed to be $1.10/gallon.

3 Diesel Fuel Price used for 2005 is assumed to be $1.85/gallon.

New 2005 Enterprise Budgets for Corn & Soybeans Including Soybean Budget Scenarios for Rust and Aphid Pressure

Whether it’s done in an Excel spreadsheet or simply mulled over in one’s mind, “budgeting”, or estimating profitability of an enterprise, is an important process. Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of providing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.

Newly updated Enterprise Budgets for 2005 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets have been published for the following field crops: Conservation Tillage Corn, No-Till Corn, Roundup Ready Conservation Tillage Soybeans, Roundup Ready No-Till Soybeans, Non-GMO Conservation Tillage Soybeans, and Non-GMO No-Till Soybeans. With the increased importance of new pest threats to soybeans we have included special budgets for soybeans with Asian Soybean Rust and/or Soybean Aphid pressure. These budgets include Roundup Ready No-Till Soybeans with Asian Soybean Rust Pressure, Roundup Ready No-Till Soybeans with Soybean Aphid Pressure, and Roundup Ready No-Till Soybeans with Asian Soybean Rust and Soybean Aphid Pressure. To access these budgets online, see the following website: http://aede.osu.edu/programs/FarmManagement/budgets/