Since I had a meeting in Austin, Minnesota today at 3 pm, I had to miss taking corn and bean counts for the day.  After taking counts yesterday for almost 12 hours straight, I actually did not mind the rest.

Also, during yesterday’s route, I ended up cutting two of my fingers with a corn stalk leaf and to use a farm term, bled like a “stuck hog”.  The other scout in the corn field did not do well with the sight of human blood, so I was running out of the field dripping blood all the way.  We got it cleaned and bandaged and since I seem to get a tetanus shoot every five years or so (I have way too many scars on my body to keep track of), I am fairly sure I will be fine.

Tonight, we had the recap of the corp tour with the meet up of the western and eastern legs of the crop tour in Austin, Minnesota.  A crowd of easily 400 farmers and more than 500 people total found out that the estimated corn crop for both Minnesota and Iowa will be down from last year.  Remember that this is the estimated biological crop.  The actual harvested crop per acre will be down probably even more due to all of the wind, hail, and maturity issues involved with this year’s crop.

The chance of this year’s crop being higher than the August 1 USDA estimate, in my opinion, is somewhere between slim and none.  We shall see.

Tomorrow is a travel day home and I will be posting again next week.

I am sorry I did not post about day three of the crop tour sooner.  I have had multiple issues with cell phone coverage and Internet service on this trip so far.

Yesterday, we had to go north about 25 miles from Nebraska City before taking the toll bridge over the Missouri River near Plattsmouth, Nebraska.  Again, as we crossed the river, we noted multiple buildings, pivots and other structures under multiple feet of water.  That area will still take many weeks or months to recover.

We then headed due south and got almost to the Missouri border and then turned East.  For about 30-40 miles of driving in this area, we saw many areas of hail and wind devastation to the crops.  In one 80 acre field, we saw maybe 3 ears of corn standing with the remainder of the whole crop laying completely on the ground.  I tweeted a couple of these photos to Twitter.

The average bushel count for corn in this district was barely 110 bushels.  As we crossed over I-80, we came upon our largest yield of the date at about 205 bushels, however, the land was very dry and this ended up being one of our worst soybean count.  The corn crop was set a few weeks ago, however, beans are still making pods, etc. and this heat and lack of rain is not helping.

We then traveled almost to the top of Iowa and turned West to get to Spencer, Iowa.  The corn  in this area was very steady in the 160-200 range and it appears that the two west districts in central and northern Iowa may be a little better than last year, however, Southwest Iowa is expected to be 20% or more worse than last year.

I will post you on the last day either tonight or in the morning.

Just finished up with the dinner and presentation on the numbers.  Appears there was almost 200 farmers in attendance.

Nebraska corn was called about 4-5 bushels less than last years crop tour’s numbers but almost exactly equal with the three year trend.  This was in line with my two days of going on the route.  I did not see any bumper crops out there, but also did not see any major disasters.

The big news of the night was the crop in Indiana.  The USDA was calling for 150 bushels on August 1.  The Crop Tour came in with about 143 bushels which is about 19 bushels under the three year trend.  Normally, the Crop Tour numbers need to about about 2-3 bushels to get the actual number for the year.  This means the USDA number may be about 5 bushels too high.

Since both South Dakota, Ohio and Nebraska call for lower numbers, it is up to Iowa and Illinois to make up for the Indiana shortfall.  We will find out on Illinois tomorrow and Iowa on Thursday.

I will keep you posted.

Today was our lightest day of traveling.  We left Grand Island, Nebraska this morning at 7 am and spent most of the day headed a little south, then east, then north, then east, then south and east to finish at Nebraska City, Nebraska at the Lied Lodge at the Arbor Day Farm.  If you have never been to this lodge, I would highly suggest visiting it.

On the route, I would call the counts we had nothing special either way.  We had a couple around 200, a couple around 110, and the rest in the 120 to 175 range.  We visited 10 counties and made a total of 10 counts.  Our average bushel per acre for corn ended up at exactly 150.

In comparing our counts to the county averages for last year, 2 were higher, 1 was even and the other 7 were lower, but you can not tell anything from one route on the tour.  Pro Farmer will issuing their calls for Nebraska and Indiana tonight and I have no way of knowing which way it will go.

Tomorrow, we leave and tour Western Iowa and end up at Spencer, Iowa in the Northwest corner of the state.

I will probably make a post after tonight with my thoughts on the numbers.

We arrived late Sunday night in Sioux Falls, South Dakota just in time for the meeting with all of the other tour participants.  With the flooding of the Missouri River near Omaha, we had to make several detours which probably added an hour to our drive.  The river looks like it has come down maybe a foot, but it is still very high.

We left Sioux Falls around 6:30 Monday morning and made a direct bee line to Sioux City, Iowa and crossed over the Missouri River there.  We took a sample in Dakota County which was in the 135 range and then moved into Dixon where we saw extensive hail damage from the storm of last Thursday.  Talking to some folks at the local convenience store, we noted that the storm took out a swath of about 5 miles by 100 miles and I know we saw about 25 square miles of this.  You would look at a bean field and all you saw was some light green stalks with no leaves or pods on them as far as you could see in the field.

We then motored another 30 miles or so west and then turned south for about 15 miles and then came back due east for about 40 miles.  In each County, we took a least one sample.  In about the fourth County, we got our first irrigated field sample and that ended up the best of the day at 230 bushels.

Bean samples were generally in the good range, however, there were several areas that we noted were extremely dry and if they do not get rain, the beans are in trouble.

We noted many areas where the stalks had been knocked over due to either wind or hail or both and all scouts noted hail damage in many of the fields.

Throwing out the high irrigated sample, our yield estimates ranged from a low of 102 to about 175 and compared to last year, our yields were down.  However, it appears that the call for South Dakota and Ohio is very much in line with the USDA estimates and tomorrow we will be finished with Nebraska and will have a better idea where we are at.

I tried to post during the drive, however, the cell service in Nebraska on our route was spotty at best and I could not get enough service to get my IPad to post to the site, so I will have to write a nightly recap of the trip.

However, I am tweating to Twitter (say that fast five times in a row) throughout the day at @farmcpa, so please follow me there.

I am spending the night in Spokane since my plane leaves at 6:30 tomorrow morning. I did not feel like getting up at 2 am to drive three hours to catch my flight. That is one of the joys to living in Yakima, Washington.

I will arrive in Kansas City tomorrow at about 1 and meet up with my farm partner and then make the five hour drive to Sioux Falls, SD to meet up with the Western leg of the crop tour group. Looks like there will be about 40 of us in the West and about 60 on the East leg.

I think with the very wet spring in the East nobody really knows how well that crop is doing. By the end of the week we should have a better idea.

I plan on writing two or three posts each day and I am writing this on Blogsy on my IPad and so far it seems to be going good.

I will keep you posted.

There was an interesting article in the Wall Street Journal this morning about how the USDA issued information regarding the current wheat harvest that normally would required a Freedom of Information Act request to get.

Previous reports from the USDA had pegged the spring wheat crop at about 12.7 million acres.  The report just released reduced this acreage report down to 11.7 million acres.  As a direct result, the price of spring wheat has gone from a low of about $8 this month to slightly more than $9.

The 12.7 million number was reported as part of the National Agricultural Statistics Services (NASS) and the 11.7  million number came from the Farm Service Agency (FSA) which is constantly getting updates from farmers that are not always incorporated into the NASS system.

The primary cause for the decrease in acres relates to the more than 2.6 million acres that did not get planted in the northern U.S. Plains.  The excess rain and flooding in these areas prevented many farmers from planting any crops.

Hopefully, this release of data without a formal Freedom of Information Act request will lead to this data being reported more timely in the future.

Historically, wheat prices have generally been higher than corn prices and sometimes the difference can be major.  In many years, wheat could be $1 or $2 higher than corn.  This is due to two main reasons:

• Corn was primarily used for feed
• Wheat was more heavily used for bread and other products directly consumed as food
• A bushel of wheat also provides slightly greater feed value than a bushel of corn

However, during many days in 2011, corn has now overtaken wheat in price.  This has been caused by these major factors:

• The Ethanol mandate requires almost 5 billion bushels of corn to be used
• China has rapidly increased their imports of corn
• Wheat is in plentiful supply and corn may have its lowest carryover in many years

In a recent Wall Street Journal article, it mentioned that due to this flip-flop in prices, many consumers of corn for feed such as poultry and hog producers are now blending in more wheat into their feed rations.  Also, wheat can be used to make Ethanol and some Ethanol producers are now blending about 5% wheat into their mix. 

As long as wheat remains cheaper than corn, this trend may continue.

On purpose, I skipped talking about session four since it was my discussion on income taxes which we have posted on many times already.

Session Five was presented by Tim Ohlde, President of Elk State Bank in Clyde, KS on the applications of the FFSC guidelines to Today’s Ag Lending World.

He stated that what bankers are good at:

• Desire to see customers/community succeed
• Lenders who are bright/capable talent of all ages and stages
• Role of collateral
• Importance of a “Good” loan
• Cash flow pays loans
• Select Sweet 16 ratios (current ratio, solvency, ROA, ROE)
• Understand debt
• Using a tax return for profitability analysis and cash flow analysis
• Bankers want to do a better job with financial analysis

Room for improvement is as follows:

• Understanding double-columned balance statements
• Classifying assets and liabilities correctly
• Role of working capital in the lending process AND in the farm operation
• Basis – Does anyone really know their true basis
• Implications of Deferred Tax on (1) liquidation, (2) business transition, and (3) estate planning

It appears that less than 10% of Ag bankers understand the conversion of cash to farm accural accounting (not true accrual accounting).  Also, bankers sometimes do not understand that a schedule F is not a profit and loss statement.  The joke is that a schedule F is a “highly manipulated profit and loss statement”.

Regulators are highly suggesting that bankers need improved, better financial loan analysis on an individual, global and portfolio basis which the Farm Financial Standards meet.

Danny Klinefelter from Texas A & M was the second speaker of the day and his discussion on Peer Advisory Groups and Continuous Management Improvements.  The studies from about 1,100 top producers around the US over the last several years attending the TEPAP conference show that only about 50% were using cash flow budgets and tracking profit and cost center.  Only about 25% were tracking key ratios and using a policy for dividing earnings and withdrawing capital.  After getting exposure to the use of these tools, after five years the percentage using these tools had increased substantially.

Douglas Adams, the author of The Breakthrough Company stated “Human beings, who are almost unique in the ability to learn from the experiences of other, but are also unique in their disinclination to do so”.  The use of a Peer Group is designed to spark this ability to learn from others in your industry.

The Rule of 72 no longer just applies to compounding of interest, but the compounding of knowledge.  Therefore, if you increase your knowledge at 6% per year, your total knowledge will double in 12 years.  If you can increase it at 24%, you can double in 3 years.  The use of a Peer Group can increase this compounding dramatically.

Peer Groups are in the range of 5-12 producers, but the optimum range is probably 8-10.  Make sure the group is full of “Eagles”, not “Turkeys”.  Try to not to have groupthink.  You want many differences of opinion in the Peer Group.  Many have monthly, quarterly or annual meetings.   You may want to be a member of two Peer Groups.  One based on operations and may involve competitors in your area and the other would be on the more sensitive areas of finance and succession planning, etc. that would be comprised of producers outside of your immediate area.

Danny’s goal is for 500 or more Farm Peer Groups to be in existance within the next five years.  Remember, nobody is smarter than everybody.

Some of the advantages of a Peer Group are:

• Multiple vantage points and different perspectives
• Sounding board for plans and ideas
• Identifying alternatives and exploring what if scenarios
• Increased insight and objectivity
• Benchmarking (production, financial, compensation, etc.)
• Identifying opportunities to capture economies of scale, reduce costs, improve asset utilization, gaining market access through collaborative efforts.
• Overcoming isolation

Even if you are top producer, you will find areas that others are Top Top producers and you can learn how to improve your operation to become the Top Top producer.