View From the Cab

Farmin' Hot, Hot, Hot

Pamela Smith
By  Pamela Smith , Crops Technology Editor
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Farmers Reid Thompson of Colfax, Illinois, and Ryan Jenkins, of Jay, Florida, are reporting on crop conditions and agricultural topics throughout the 2020 growing season as part of the DTN View From the Cab series. (Photos courtesy of Reid Thompson and Ryan Jenkins)

DECATUR, Ill. (DTN) -- There's a sizzle in central Illinois and it has nothing to do with leftover Fourth of July fireworks. Steamy days and nights are a concern for Reid Thompson as his Illinois corn crop races toward pollination.

Droughty conditions aren't helping Thompson either. With a farm headquarters based in Colfax, he and his father, Gerald, grow corn and soybeans in the central and east-central Illinois counties of McLean and Ford. "Our crops are hanging in there, but rainfall across the whole farm has been very limited since early June," he said.

Thompson is cooperating in DTN's View From the Cab reports, a weekly in-season look at crops and farm life. Also filing updates is Ryan Jenkins, who farms with his father, Rennie, in the western Florida Panhandle and into southern Alabama.

"It's hotter than three rats in a wool sock here," said Jenkins. "The good news is we're continuing to get rain ... oh ... every hour or so." He faced drought early in the season to the point of having to stop planting. However, tropical storms have worked to his favor so far and have left a well-watered peanut and cotton crop for the Jay, Florida-based farmer.

DTN Senior Ag Meteorologist Bryce Anderson noted the areas Jenkins farms are actually running a little above normal on rainfall since the first of June. "Total rainfall is close to 9 inches, and almost 1 inch above normal. The next week keeps shower periods in the forecast through Sunday, July 12, with a total rainfall amount of 1.5 inches. Additional showers during the next 7- to 12-day period, through Saturday, July 18, could produce close to another half inch," Anderson said.

However, Anderson observed that central Illinois where Thompson farms has been very warm to start out July with the mean temperature value around 80 degrees Fahrenheit, some 5 degrees above normal.

"That is a sharp departure from normal. On the other hand, precipitation is running below average. Amounts from June 1 to July 6 total around 1.6 inches, for that region more than 2.5 inches below normal. That's a big difference from last year when the June 1 to early July precipitation total was 6.5 inches," Anderson said.

"The next ten days do not offer much in the way of rainfall for central Illinois. Some shower activity the rest of this week may produce rainfall totals of a little over 1 inch. But from Monday, July 13, through Saturday, July 18, it's looking dry for this important production area," he added.

Read on to learn more about current crop conditions, markets and crop insurance specific to these farmers' regions and crops:

RYAN JENKINS -- JAY, FLORIDA

Hardly a season passes that Ryan Jenkins doesn't look at his crop and feel that it is just a little bit late. "It always ends up working out for the most part, but this year my crops are two to three weeks behind schedule," Jenkins said.

Like many other regions of the country, cooler than typical early spring conditions didn't light a fire under the crop out of the gate. Then, drought conditions delayed planting of cotton and peanuts.

"The crops didn't grow off like they normally would. It's nothing that we can't overcome with the rain and heat we are getting now. Overall, I'm calling it just a hair above average," he said.

This week USDA-NASS confirmed that the overall Florida cotton crop might be a tad bit tardy with 49% of the crop squaring or pre-bloom compared to 61% last year, but slightly ahead of a 48% average. Peanuts were rated as 59% pegging compared to 64% last year and a 57% average.

Jenkins enjoys educating others about peanuts since the crop is widely consumed by most Americans, yet few seem to understand much about the crop. "You can't believe how many people ask me to show them our peanut trees and they don't realize the crop grows in the soil," he said.

Except for a few, late-planted fields, most of his peanuts were starting to peg this week. Yellow flowers emerge on the above-ground foliage on the lower part of the peanut plant about 40 days after planting. The flowers pollinate by themselves and then, fall to the ground to form a budding ovary called a "peg."

The peanut embryo is in the tip of the peg, which penetrates the soil. "This peg grows down into the soil and forms ... the peanut," Jenkins said.

Like other legumes, the peanut crop fixes nitrogen in the soil. It is also an efficient user of water resources -- needing 1.5 to 2 inches per week during development. The peanut industry likes to note that it takes just five gallons of water to produce an ounce of peanuts, a mere dribble compared to the 80 gallons of water required to produce an ounce of almonds, the leading tree nut consumed in America.

"The rainfall we've been getting this year is about perfect for peanut production," Jenkins said. "While peanuts don't take a lot of water, we do want it moist enough during pegging to allow establishment."

Jenkins grows runner type peanuts, the primary commercial peanut raised to make peanut butter. This type of peanut production makes up the majority of acres in the Southeast. "It's also one segment of the economy that has been helped by the pandemic," he observed. "Kids at home. People at home. We're eating more peanut butter."

Futures contracts like those other row-crop producers use aren't available to peanut producers, so price discovery can be a tricky business. There is a marketing assistance loan provided by the government, which is currently $355 per ton.

"We're at the mercy of the buying point with peanuts," Jenkins said. "Sometimes the buying points will offer contracts ahead of planting. Right now, we are not contracted.

"The market looks like we should be able to get more than loan, and I would really like to be in the $450 to $500 per ton range. At that price I can breathe just a bit. Unfortunately, I think prices will shake out around $425 per ton," he said.

While every farm has a different breakeven, Jenkins figures a $700 per acre cost for producing peanuts -- which means he needs to produce 4,000 lb. per acre (2 tons) to breakeven. Yields for his farm typically range from 4,500 lb. to 5,200 lb. per acre.

Premiums of $20 to $25 per ton for planting a high oleic variety have helped shore up prices for Jenkins over the past few years. Traditionally, these varieties have come with a yield penalty, but he has worked to identify higher yielding, high oleic varieties that work well for his growing region and they now make up about 75% of his production.

Before the peanut crop is purchased, it is graded and inspected, according to industry standards. Jenkins said there are some opportunities to gain price enhancement if grades exceed those stated in a contract. However, aflatoxin can be an issue, particularly in hot/dry years.

"You can have peanuts that look great, but their grade comes back bad," he noted. "It isn't always a hurricane or drought that can cause a disaster with peanuts. Grade issues are another reason for crop insurance."

Crop insurance is an important safety net, but one Jenkins purchases hoping never to use. He opts for 70% coverage for the farm. He said enterprise pricing doesn't work for him since the farm is spread out over many different tracts of land with a wide range of yield histories.

"We can see a drastic difference in yield in short distances. For example, last year I had a corn field that absolutely burned up and averaged 76 bushels per acre, but 10 miles down the road I had another corn field average 216 bushel," he said.

Jenkins estimated crop insurance on peanuts costs him about $16 per acre. Corn is in the $25 per acre range. Cotton tends to trigger a few more claims and costs in the ballpark of $25 per acre for 70% coverage.

"If a hurricane shows up and your cotton is open and exposed, you are not going to be fine," he said. This year he took advantage of a new hurricane insurance program that fills the gap and increases coverage from 70% to 95% for an additional $10 to $12 per acre per crop. It triggers automatically if there are sustained hurricane force winds from a named storm in the county or any county touching the county, he said.

The farm does utilize a couple of marketing associations that pool cotton for sales. "We save out about a third of our crop to sell on our own by watching the market and trying to keep up with what is happening in the world.

"There's a benefit in that it keeps us closer to what is happening. And unlike the marketing pool scenario, when you do sell your cotton, you get all the money then and don't have it dribbled out over the year as you wait for the association to make sales," he explained. "It's a complicated way to go about things, but we're conservative and like to spread our marketing risk by utilizing different methods.

"Relationships built with brokers within those associations are also important sources of information," he said.

REID THOMPSON -- COLFAX, ILLINOIS

A quick getaway to the mountains of North Carolina this past weekend was like a soothing balm for Reid Thompson. "Perfect temperatures in the low- to mid-70s and when it rained, it was quite enjoyable. I wanted to bring it back with me to Illinois," he said.

Spotty precipitation may be watering other areas of the state, but Thompson Farms has missed the majority of those rain events. "Corn likes heat, but it also likes to cool down at night and we're not getting that cooling off period. We are fortunate that we aren't shooting tassels just yet, but we will be in a week. So I'm hoping we miss the majority of the hot, dry spell -- at least we're missing this first round of intense heat," he noted.

The latest USDA NASS Crop Progress report rated Illinois corn as 61% good to excellent -- down slightly from last week's 67% good-to-excellent rating. An estimated 10% of the state's crop was silking compared to 3% last year and 28% over a five-year average (2015-2019).

Soybeans were rated as 63% good to excellent compared to 67% last week and 37% last year. A 22% blooming rate this year compared to 1% last year and 24% for a five-year average.

Soybeans seem short of stature this year, but they are blooming heavily. "We're going to need rain to keep filling those pods out but having those flowers by summer solstice is key to maximizing yields," he said.

Having 5 million acres of corn disappear out of the market during last week's WASDE report came as a surprise to Thompson. "Usually when that happens, it gets reallocated to a different principle crop," he noted.

"Normally, they aren't that aggressive on this report. I kind of assumed there would be some change from the prevented planted from last year and issues in the Dakotas. It did give us a hot moment of hope for prices though," he said.

Thompson had recently cleaned out bins and still had a little overrun 2019 crop to sell -- which when combined with COVID-related dollars pushed old-corn cash sales into the area of $3.60 per bushel.

"For 2020 we're doing most hedge-to-arrive contracts right now because we just aren't sure what the basis will do yet. It's probably going to be a year where we don't set basis until the following March or April when we start delivering," said.

Thompson jumped at the chance to price about half his soybean crop, which is percentage based given they are grown under contract for seed. He also priced about a third of his commercial corn priced. "We'll end up in the $3.30 to $3.15 per bushel net cash range by the time we get basis factored out of it," he said.

Historically, his basis to the ethanol plant has been running zero to +10. "I'm guessing we're going to be -10 to -20 this coming year. But it's hard to know where that number is going to fall out. If we come into a little bit shorter crop because of this heat, that may not be an issue," he said. He said some of the local country elevators are currently running -30 to -35.

Thompson views crop insurance as a backup plan that sets a minimum amount of revenue in the event of loss. "I tend to use futures and options market well ahead of when I can buy my current year crop insurance to put a floor under the next crop," he says.

This is the final year Thompson will be able to take advantage of a Risk Management Agency (RMA) Beginning Farmer and Rancher provision that offers significant premium reductions. He's currently paying a discounted rate of $10 to $15 per acre to cover corn and soybeans at 85% level.

"Right now I'm only taking revenue protection insurance ... but we are not taking any extra, such as wind or hail type coverages. We studied our risk/payout on those tools and it has never paid out for us," he said.

One of the challenges he faces farming in multiple counties is how to manage risks when the soil types within a farming unit range from A-plus to B-minus to C-plus. "Last year, we had 120 bushel per acre yields on one 80-acre tract on the east side of Gibson City and 220 bushel per acre on the west side of town. As an enterprise unit, there was no loss," he said.

While Thompson doesn't make huge shifts in coverage, he said he is always looking and reevaluating. Slim margins mean not being afraid to take advantage of what the market is offering.

Recently he's had his eye on pricing fertilizer. "When I see dry fertilizer selling 15% under what I paid last year, I start to look at how can I manage current cash flow and start paying for my second more expensive input before the other crop is out of the field," he said.

Rolling home along highways lined with corn rolled tight and tassels itching to pop, Thompson said it was tempting to turn back to the mountains where heat doesn't feel so hot.

"Everything hinges on whether we can get some rain and give the crop a chance to rest at night," he said.

Pamela Smith can be reached at pamela.smith@dtn.com

Follow her on Twitter @PamSmithDTN

Pamela Smith

Pamela Smith
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