Volume 16 Issue 1 January 2006

OFFICIAL PUBLICATION OF CROP QUEST AGRONOMIC SERVICES, INC.

Marketing Experts Stress...

Production and financial planning require that at least tentative decisions be made about what the 2006 crops might be worth. Placing a value on the new crop is difficult to do this far in advance. Uncertainty still surrounds the price outlook for grain in the bin, and new crop-growing conditions are anybodys guess. However, it is not too early to make sure your yet-to-be-determined cropping decisions pay as big a dividend as possible in 2006. According to Allen Dever, Senior Economist and Wheat Market Analyst for Doane Advisory Services in St. Louis, Mo., now is the time to start your crop and financial planning. First you need to do a good job of assessing your expected production, says the market analyst. Start as early as possible. You need to look at least a year prior to harvest at your potential crop.

Start Your Crop Plans Now For Success In 2006 And Beyond
adjust the information to the reality of the market. For instance, if the market is going up, then you need to get some upside objectives in place to best position you for solid sales. Likewise, you need to be prepared to lean on your pre-planned contingency plan if the market drops. Good data puts you in a better position to make a good sale. Dever says there are several keys to developing and implementing a good marketing plan, but the key points include discipline and avoiding disastrous mistakes. Discipline is the key to marketing and managing your own emotions, Dever says. You need to set some time objectives for getting the sales in place, and some price objectives. It does not always work out as planned, so you have to have the discipline to do something, regardless of what the market is doing. Avoiding the really disastrous mistakes takes planning as well, he continues. For example, if you are set on getting your wheat price at, for instance, $3.25/bu., but the price never gets there and you hold too long, you could wind up making a bad sale out of desperation. Avoid being forced into a sale. In addition, most farmers tend to be reactionary and let the market dictate sales terms to them. Having a marketing plan in place does not allow emotion to dictate your sales. Kansas State University Professor and Farm Management Economist, Kevin Dhuyvetter, has a slightly different approach to marketing. He says, Do not spend a lot of time trying to outguess the market and trying to figure out its highs and lows. There is very little evidence that shows that
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Crop Quest Perspectives

Take Advantage of Market Data

Producers need to be aware of basic marketing information so they can start making their cropping plans as early as possible. This information is offered either through a contract advisory service or by gathering the information yourself through sources like USDA, DTN, etc. Producers not utilizing a contract advisor need to do their homework, Dever says. That starts with gathering the latest background information offered by multiple trusted services. After that data is gathered, you need to accurately Allen Dever

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 have indicated which management factors make producers more money over the long term it is not outguessing the markets. Dhuyvetters 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, (specifically Kevin Dhuyvetter 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 find 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 to handle 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. 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, financial planning, overall tax planning, etc. Largely, farming has become a financial 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 Advance

According 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 fields. 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-flow 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 do year-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.

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 five primary periods, not just the one after harvest. Your marketing plan should be set up to allow you to make sales during these various time slots to spread financial risk, he advises. Those windows can be broken into, for example, preplanting, planting, the growing season, harvest and postharvest. 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 marketselling flexibility and the ability to take advantage of seasonal sale opportunities.

Crop Quest Perspectives

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Winter wheat has been a popular Member, National Alliance crop choice for of Independent Crop many farmers this Consultants, CPCC-I Certified 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.
By: Ron OHanlon,
President

Winter Wheat Planting Increased

The planting of a wheat crop allows many options for 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 sunflowers. 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 flexible 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?
By: Ron OHanlon President 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 the 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 Lincoln, two years had adequate rain in the first week after application to minimize N loss; but in 1992, little rain, coupled with low humidity, resulted in urea remaining on the soil surface for an extended period. The soil was relatively moist (74% of field capacity) at planting. The first substantial rain (0.8 inches) occurred 26 days after fertilization. The grain yield from the urea treatments was almost one-half the yield from other treatments and showed little difference from the unfertilized check. The research report indicated that yield reductions due to ammonia volatilization of this magnitude are uncommon, but this shows how much loss is possible with certain climatic conditions. Ammonia volatilization from urea can be minimized by incorporating the fertilizer, either mechanically or by sprinkler 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.

Crop Quest Perspectives

High Fertilizer Prices

Have Large Impact On Farm Plans
By: Dwight Koops Regional Vice President Ulysses, Kan. The high energy prices that we are experiencing are significantly 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 definitely 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 into this. A good soil sampling program is the first and largest step towards helping producers make the right decision on fertilizer use. This is also the year to consider fine-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 already in the soil, we can take advantage of those areas and apply fertilizer to only the areas that require additional amounts. This program will 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 more viable fertilizer source over a larger area. The cost of manure is related to hauling and spreading charges. In the past, the higher hauling and spreading costs have made manure less economical than commercial fertilizer. This gap has narrowed significantly and many producers are taking advantage of the benefits of manure this year. With the possibility of fewer corn acres and lower average yields due to high input costs, producers need to be aware of opportunities 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 better than trying to save a few bucks on inputs such as fertilizer expense. This is the year to look at crop rotation and spreading out risk. But regardless of the crop that is planted, make sure that you properly fertilize that crop to ensure the best return on the dollar spent.

Crop 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.

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Crop Quest Agronomic Services, Inc. Main Office: Phone 620.225.2233 Fax 620.225.3199 Internet: www.cropquest.com cqoffice@cropquest.com

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Crop Quest Board of Directors

President: Director: Director: Director: Director: Director: Ron OHanlon Jim Gleason Dwight Koops Cort Minor Chris McInteer Rob Meyer