Hang on, help is on its way

Narrator: Hey podcast, thanks again for joining into part 2 of the series with Steve Johnson, Farm Management Specialist at Iowa State. Chris and Steve have an awesome discussion today. It's certainly one that you're not going to miss. Wanted to give you a quick reminder that if you guys are interested, we have a basis and storage calculation tool This is just something looking ahead to harvest, and while that may seem, uh, eternities away at this point right now, we do need to continue to plan, and we need to continue to plan for success even with the amount of uncertainty that we have in the world today. So if you're interested in that, please send us an email, cbarron@agviewsolutions.com. It's completely free. It doesn't matter if you're past client, current client, no one that's ever been a client. We want to get this information out there to help you and help your farming operation.

We look forward to hearing from you. Enjoy today's episode.

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and today we are going to have a conversation with Steve Johnson, Iowa State Farm Management Specialist, and we're going to have a little conversation around what's going on with the government, uh, what's going on with COVID-19 and some of the challenges economically that we have on the farm currently. So Steve, how's it going today?

Steve

Johnson: It's good. I feel like we need a theme song behind us. Maybe it's the Little River Band, uh, Help Is on the Way.

Chris

Barron: Yeah, there you go. I'll talk to Shea and see if he can make that happen. I think that would be awesome.

Steve

Johnson: So, hang on, help is on its way. I'll be there as fast as I can.

Chris

Barron: Hang on, it's We need— I think we need some help here, you know, talking to clients and looking at our own operation and just kind of scratching our heads here and saying, okay, our cost of production significantly higher than where these price— where these prices are at. You know, there's always this talk of issues with China, you know, maybe they're buying, maybe they're not. You know, what's the government looking like here? What are some of the, you know, things that may be coming our way from the government that we need to be paying attention to?

Steve

Johnson: Well, I think most importantly you've got to separate your '19 crop from your '20 crop. Most of the money that you've already received was in the form of a Market Facilitation Program payment. That was paid in 3 different tranches that was associated with the number of acres that you planted in '19. That was $1 per acre and it differed by county lines, so it differed across Iowa and Illinois. I got Illinois numbers in front of me. The average MFP payment last year was $71 per planted acre. So let me backtrack into that because I want to put that in a price per bushel. If I take that $71 that Illinois farmers collected, $67 in Iowa was our average payment at the county level, um, that would have been about 35 cents per bushel. The government's already given you 35 cents a bushel.

They put it into your checking account in August 50%, in November 25%, And in February they gave you another 25%, so you've already got roughly 35 cents a bushel that you should add on to your 2019 corn receipt. Uh, for soybeans, that number's closer to $1.20 a bushel depending on your county and your state. So don't forget that the government already sent FP money, and that was for Chinese trade. So the pot of gold that I want to make sure you know that you've already spent the money. MFP was associated with the 2019 crop.

Chris

Barron: Right, and that's, that's something, you know, that we've talked about in the past with a lot of our clients that, you know, we got to look at that dollar amount, and that was a county dollar amount. So it was, it was basically, you know, thought of as dollars per acre, but realistically it needs to be looked at just as you said, as dollars or per bushel. Okay, so, so what other, you know, you talk about '19 being separated from '20, what else are we seeing that then is going to come that's going to be associated or considered as part of the '19 crop?

Steve

Johnson: All right, Congress appropriated $19 billion to go out as COVID assistance to agriculture. $3 billion would be able to buy products, primarily animal protein products that would be given away to food pantries and food banks. So $16 billion left over, this is the producer disaster payments. Then within the $16 billion that's been appropriated, then of that $3.2 billion, that's all you're going to get, row crop farmers, $3.2 billion. Where you were getting almost $11 billion from the MFP, you're only going to get $3.2 billion associated with the disaster payments. Chris, I believe that's all associated with the '19 crop. They're going to use a fancy formula, but I think when the smoke clears in June, it's going to be a dollar per acre likely associated with the 19 planted acres. And so when I backtrack into that, how much money?

Um, in Illinois, I think that will be around $23 per acre total. So you got $71 per acre in MFP. Remember, that was Chinese trade, that had nothing to do with COVID Now here comes the disaster money at $23 an acre, and I'll just backtrack into that. I'll use last year's $178 a bushel That was the average yield in Illinois. That's 13 cents a bushel. So I'm saying I think there's money coming this summer in two different tranches, and my best guess, back of the napkin, 13 cents a bushel for corn is what you would get sometime this summer. You're going to have to sign up at FSA, and this will be what we'll probably call producer disaster, but it's associated with COVID-19, around 13 cents per bushel for corn.

Chris

Barron: So to make the math easy, if the farmer say had an average yield last year 200 bushel on their own farm and they get $20 an acre, that's 10 cents a bushel.

Steve

Johnson: Yeah, yeah, yeah, I think it'll vary by county. I think we'll go back to the county lines again and again, right? I don't think they're going to ask your inventory. I've had some farmers and merchandisers say, well, are they going to ask how much corn I've got on hand on June 1st? No, it's going to be $1 per county if you planted the crop, and I believe that will be a '19— this is the '19 disaster money. I don't think we've appropriated 2020 disaster money. I don't think I see disaster money out there yet. So the second pot of gold I'm going to call is the Producer Disaster Direct Payments, and again, it's only $3.2 billion across all row crop.

Chris

Barron: Right, so that's, so that's the, the additional, so that's number 2. So the first one was the MFP payment that we already got, like you said, we did, we were as farmers, we're pretty good at spending money, so that's probably gone, but it was part of our income on it and should be looked at as part of our income on a per bushel basis. Second one is the COVID-19 disaster money that, that looks like that's going to come through the COVID-19 disaster thing. Now let me get to the next one is the 2019 PLC, assuming that the producer signed up for PLC, what does that look like?

Steve

Johnson: Well, The effective reference price for the 2019 crop is $3.70. So on corn, late September we'll know what the weighted average cash price will be for this 2019 crop. University of Illinois came out with a number a couple weeks ago and the number was $3.48. So Chris, walk through the math with me. I signed up for PLC, all my corn-based acres are in the PLC. If we come in at $3.48 and the effective reference price is $3.70, that's 22 cents a bushel. So I'm going to backtrack into this, 22 cents a bushel times 85% of my corn base acres times what is my old yield. Again, this is this old PLC yield for '19, it can be the new PLC yield for '20, and I just use 160, and so I come up with a PLC payment that I'm going to get in October for the '19 crop corn, that's another 15 cents. So I'm going to get another check from the government because I elected and enrolled in PLC for corn.

I'm going to get it on my corn base acres. It has nothing to do with what I planted in '19, but because it's associated with the '19 crop, I don't think there'll be an ARC-CO payment there won't be a PLC payment on soybeans. So the only PLC ARC payment that I see coming this fall in the Midwest will be primarily on corn and of course wheat and sorghum. But we're going to trigger the PLC payment and much bigger payment than we thought. And I'm coming up with about $30 an acre, but of course it's on 85% of my base acres, so we're in the money. So here comes the third pot of gold. Here comes some more government money into my account, probably by the middle of October. Again, back to the napkin, 15 cents a bushel.

Chris

Barron: Okay, so we've talked about those three things. I want to hit on two more things. Number one, we've talked about this as being '19 revenue that should be considered and added, tacked on to our pricing. Structure for the '19 crop. So that gives us some solace and peace of mind to go ahead and maybe get some pricing done on this old crop corn and get bins cleaned out so we got a spot for the 2020 stuff. On the other hand though, you know, I have a lot of clients asking me and that are very concerned about how do we survive 2020. You know, so we're— and so this is, this is all good. These dollars and cents are are good to be plugging on to the '19 crop.

And that makes '19 probably not a very bad year because, you know, our fiscal year and our realistic, you know, accrual year— you're talking accrual here when we move these dollars where they're supposed to be from an accrual perspective. Any insight on 2020? And I know I'm throwing you a question you probably don't have an answer to, but Any guesses there?

Steve

Johnson: No, I mean, we'll trigger PLC payment likely for corn in 2020 that we won't get till October, but I think the money's coming into your account. So whether it's on an accrual basis, great, we'll go ahead and credit that back against our '19 crop. But most of the money that's coming from the federal government in the next, let's just roughly say, 6 months, it's coming associated with the '19 crop and it has nothing to do with the '20 crop. But there's the importance of having a good marketing plan of managing both futures and basis price risk. And by the way, we got crop insurance. And so if we're at the 85% coverage level, I think you'd mentioned offline, is if we take harvest prices down below— what was that, Chris, number 3—

Chris

Barron: 3,330 at 85% coverage, if a grower yields their APH, that's where you'll start to receive an indemnity payment actually starts right at about $3.29 for corn, and soybeans, I think it was like $7.79 or something like that on soybeans at 85% coverage. Yeah, if they yield their APH level.

Steve

Johnson: So there's— and hopefully you, hopefully don't collect on crop insurance. But yeah, I think the money for the 20 crop is going to be triggered by good marketing, generating good sales, especially the overrun bushels. And then Chris, I think crop insurance is probably going going to be in the money for anybody that, you know, only grows their APH because we're going to be way below the projected spring price of $3.88 a bushel for corn and $9.17 a bushel for soybeans. So the good news is this is where crop insurance, this is where PLC, maybe even ARC-CO trigger, and I don't think we've even thought about those, but remember we don't trigger ARC-PLC till a year after we harvest the crop. Crop until we're— we know what that weighted average national cash price is.

But the good news is I still think the importance of the things that you can control— let's do a good job of marketing this '20 crop, but then we're going to have money coming from the government, and it's going to involve a few trips and involvement with the Farm Service Agency.

Chris

Barron: So let's talk about that for a minute. We have COVID-19 and nobody can be around each other. We have social distancing. Lots of places are closed. Things may open partially, but then maybe they'll close back up. We just have a lot of uncertainty. So talk a little bit about, you know, what's this look like as we look at, you know, this trying to get certified. You know, we have to have these deadlines for certification, planted acres, information that we need to get to them. What do you say to that?

Steve

Johnson: I do not believe it's business as usual at the FSA office. It's not going to be 5 guys standing in line waiting to see the gal at the counter. I think most of the signup for the disaster program will be electronic. It will be your electronic signature, so you're going to be working at a distance, probably online, in working with the FSA office. And then Here comes acreage certification, same way. Is if there's 1,100 farmers in the county, there is no way with social distancing that we're going to have people standing at counters. I can go on the FSA site, I can see that there's an editable form, FSA 578, I go print it out. I just go ahead and plan on keeping really good records at planting and making sure I know what crop and the number of acres was planted on what farm or what tract, because likely I'm going to have to do that self-certification on my own.

Or what I'm saying, a lot of the crop insurance agents— we've got some really good crop insurance agents— work with your crop insurance agent as soon as you're done planting. Work with your crop insurance agent before everybody picks up on this, is that you don't have the FSA business as usual. That crop insurance agent could probably walk you through their same forms. They can backtrack you into exactly what you need to include on the 578, go ahead and self-certify, electronic signature, and not go to the FSA office. Same way with the disaster payments. Think smart of how you can avoid having to deal directly one-on-one at the FSA office. I think that's going to be a part of the challenge And the likelihood we're going to have to extend these deadlines, but you're not getting any money from the government until you meet the deadline for the disaster payments.

So I think a lot of inconvenience is coming in June and July, and the likelihood is you'll hear about these changes in the next few weeks of how are you going to interact with the Farm Service Agency.

Chris

Barron: So what you're saying for those who are, and there's a large percent of the people I'm sure that are listening to this podcast, that are done planting or pretty, pretty close, if they have marginal records, they better get on it and get stuff straightened out while they still remember what's what, right?

Steve

Johnson: That's right. Could you complete a 578 with what you know right now about planting? Do not be dependent upon the gal at the counter. All right, she might be there, but you probably have to have an appointment and she's got a mask and you've got a mask and they might even have shields up by then. I think you've got to be in a position that you could electronically put your numbers in to what fields and acres. I encourage you to keep track of dates, that's crop insurance purposes, and then work with your crop insurance agent. I mean, you pay them a lot of money and work with a crop insurance agent and let's go now. Not the end of June when your crop insurance agent's back up.

Let's work with your crop insurance agent and let's anticipate the likelihood is there's bottlenecks that are coming at the FSA office, but keep really good records at planting and anticipate that you're going to be completing that FSA Form 578, the acreage certification, either on your own or with your crop insurance agent. That, I believe, is a part of the challenge coming in June and July.

Chris

Barron: Anything else on the FSA office? Any other tidbits or things we should be communicating with them on other than what we've talked about?

Steve

Johnson: Well, remember there's some other deadlines with FSA. Hopefully you elected and enrolled in both the '19 and '20 ARC PLC program. A few people got really late, pushed the deadlines. That's what farmers do, and you might not have got signed up for the 2020 ARC PLC program. That'll be something you need to do by June 30, and I think all of these deadlines are going to get moved around because of the crunch that's going to happen to FSA. I would still go PLC on corn, no doubt about it. Mm-hmm. That's in the money for '20. The '20 crop will trigger even a larger payment in all likelihood. The ARC County payments probably still preferred beans. I just still don't see beans below the $8.40 effective reference price for '20. So I think most farms are going to go PLC on corn and ARC County on soybeans, including the '20 crop.

And then if you can update your PLC yield, most of you did that already, God bless you, but you've got till September 30th to update your PLC yield using 2013 to 2017 production records. So I think that interaction with you and your crop insurance agent, because they're gonna know all these deadlines, and I think by early June they're gonna know the crunch that's coming with FSA. So anticipate now the importance of good planting records and how now you're going to be working electronically either with FSA or working with your crop insurance agent, but I don't think the deadlines are going to be adhered to. Farmers are going to get extensions, but I just don't want to back all these decisions back out here until August and September. So again, two deadlines: June 30th, ARC PLC enrollment. You already elected, you can only enroll in the program you elected.

And then PLC yield update, September 30th, That's for the '20 crop and each year thereafter. And of course, July 15th is the acreage certification deadline. We have no deadlines we don't know about the disaster programs, but I anticipate a lot of information is going to have to flow from your local Farm Service Agency, and most of that's probably coming here in the next few weeks.

Chris

Barron: So get online, FSA office website, and pay attention to what's going on. And in all likelihood, we better sharpen our skills to probably self-certification.

Steve

Johnson: Yeah, I don't think they're online yet. I think that's what they're working on, but I would Google FSA 578. I would go out, pull down their 578, the editable form. I'd print it out.

Chris

Barron: I'd look how I'd have to edit it.

Steve

Johnson: Could I complete that? Could— do I have enough information? Because I'm going to have 578s for the last 30 years. Could I complete that editable form I can see online? It's on a USDA FSA site. Could I complete that? I can edit that, I can print it, I'm going to have to provide a digital signature. FSA will help you through that. I think that would be something that I'd want to do if I'm done planting. I'd have good records and I'd see if I could complete that 578 on my own and not make this, you know, some burden, you know, that I wait until a deadline. So yeah, I think being proactive is really key when I think about the interactions I've got with the Farm Service Agency.

And again, even though those deadlines look like they're a ways out there, I know in Iowa you've got 1,000 to 1,200 farmers per county that's got to go through, you know, the eye of the needle, and that is not going to be pretty. So I would plan on doing working on your own digitally, probably via the web. I think that's going to be where the future is.

Chris

Barron: Great advice. Just kind of wrapping it up, we've got the three, the MFP that already came, the COVID-19 disaster payment, the PLC that looks like it's going to come from the '19 crop and looking like there's going to be probably a '20. We just need to get things signed up. Any final thoughts?

Steve

Johnson: Help is on the way, but make sure you understand that there's going to be some bottlenecks as we start to interact with Farm Service Agency at It's not business as usual and it's not their fault.

Chris

Barron: Yeah. Yeah. Well, we're living through uncharted territory and unique times and hopefully we can get some people on the phone and I know some people like the phone too and hearing a voice and sometimes that might help us work through some of this stuff too if we can work on it that way as well.

Steve

Johnson: And I don't think I'd wait. I just think I want to be proactive. I think this is the spring where I was blessed with being done with planting early, I'm going to go ahead and start the paperwork and make sure those records are in order. Whether I'm working electronically online or whether I'm working with my crop insurance agent, I'd probably go ahead and start that process. Yeah.

Chris

Barron: Well, just like you said in the beginning, Little River Band, help is on the way. We'll have to make sure Shay gets that up somehow or another. Appreciate your time today. Again, we had Steve Johnson, Iowa State Farm Management specialist. Thanks a lot, Steve. Really appreciate your insight and information.

Steve

Johnson: My pleasure. Be safe.

Chris

Barron: Yeah, will do. And thanks everybody for listening again to the Ag View Pitch, and we will catch you next time. Thanks.