News from the Minnesota Association of Wheat
Growers for Wednesday, February 16,  2000

RURAL RESPONSE/RISK MANAGEMENT: CROP INSURANCE IS PART OF A GOOD RISK MANAGEMENT PLAN
Dry weather patterns, a lack of stored soil moisture and low commodity prices make risk management a key phrase for farm families as they look ahead to the coming year.  And crop insurance is a major part of risk management, says Kent Thiesse, educator with the University of Minnesota Extension Service.

Buying crop insurance gets more confusing every year due to the many alternatives available, Thiesse says.  One set of crop insurance alternatives only provides protection against reduced crop yields. The most popular of these insurance coverages is the "Multi-Peril Crop Insurance" (MPCI).  In most cases MPCI provides coverage up to 75 percent of guaranteed yields, although there are many options available."Catastrophic Insurance" (CAT) or  "Group Risk Policy" (GRP) coverages are available at a lower cost, but provide very limited yield loss protection compared to a good MPCI insurance policy.

Thiesse says "revenue protection" insurance policies that provide protection against losses from yield and/or price fluctuations have become more popular in recent years. The most popular of these policies is "Crop Revenue Coverage" (CRC), which converts a yield guarantee into a dollar-per-acre guarantee by incorporating a base crop price per bushel on the guaranteed yield.

The coverage offered by CRC is adjusted during the growing season if the actual harvest crop price is varied from the original base price in the insurance policy. "Revenue Assurance" (RA) and "Income Protection" (IP) are other insurance alternatives that also incorporate the commodity price.

Verifying crop yields every year and understanding "unit structure" are two key elements to gaining the most from crop insurance coverage, Thiesse says.  When a producer has a minimum of four years of verified crop records, that becomes his "actual production history" (APH) used to determine yield guarantees with most crop insurance policies.

Farmers with no verified yields must use a "t-yield," which is a county average yield that is factored downward.  For example, a farm operator with a verified APH of 140 bushels per acre on corn would have a bushel guarantee of 105 bushels per acre with a 75 percent MPCI insurance policy. That same operator would likely only have about a 60-bushel per acre guarantee with a county t-yield and no years of verified yields.

"Unit structure" refers to the division of farm units and fields for crop insurance coverage. Many times there are advantages for a producer to have small land parcels in case of weather-related crop losses (hail, excess moisture). A "basic unit" is all the land for a specific crop that is owned or cash rented in a county grouped together for insurance coverage. An "optional unit" structure allows each township section to be considered a separate unit for insurance coverage. Producers do need to maintain individualized crop yield records on each separate unit.

Thiesse says there are many good crop insurance agents throughout Minnesota who are very skilled at helping producers analyze which insurance options are the best risk management tools. An information sheet titled  "Crop Insurance Alternatives and Provisions" is available at county offices of the University of Minnesota Extension Service. It's also available on the National Risk Management Web Site at www.agrisk.umn.edu.

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Source: Kent Thiesse (507) 389-8141
Editor: Jack Sperbeck (612) 625-1794,
jsperbeck@extension.umn.edu

DON'T RISK LOSING MONEY ON UNPROVEN CROP INPUT FADS
When buying fertilizer and other crop inputs for the coming year, don't risk losing money on unproven fads.  Two fads from past years have not been profitable, according to George Rehm, soil scientist with the University of Minnesota Extension Service.

"The promotion of the additive 'ACA' was one fad that has come and gone," says Rehm. "It was promoted as an additive that would increase corn yield. However, this product had no consistent effect on corn yield when evaluated in several research trials in Corn Belt states. It was not economical to use this product."

A practice promoted more recently was application of nitrogen to soybeans after flowering and early pod set. "This practice was thoroughly evaluated at several locations across Minnesota from 1997 through 1999," says Rehm. "There was no consistent positive effect on soybean yield from using the nitrogen. This was another fad that wasn't profitable."

Rehm says it's impossible to predict what the next fad might be. He urges farmers to use caution in planning input purchases for the 2000 growing season. "Use common sense and don't be afraid to ask questions and get opinions from others," he says. "If something sounds different from the traditional, use caution. It could save you from spending money for nothing."

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Source: George Rehm, (612) 625-6210
Editor: Joseph Kurtz, (612) 625-3168
  pkurtz@extension.umn.edu

GLICKMAN CONFIDENT ON PERMANENT NTR FOR CHINA
USDA Secretary, Dan Glickman, in a speech at a recent Commodity Club luncheon in Washington, DC, said that if China is granted permanent Normal Trade Relations (NTR) status and is accepted into the WTO, the US can expect to see an additional $1.6 billion in sales of grains, oilseeds and cotton annually by 2005.  He went on to say that if citrus and livestock products are included, additional revenue from Chinese purchases may well grow to $2.0 billion.  Glickman told reporters after his speech that, even with the pressure being placed on politicians to oppose NTR for China, he is confident that there is enough support in Congress to grant China permanent  status.

SHORT EXCERPTS FROM THE NAWG WHEAT CONVENTION
Prime Great Plains wheat country particularly hard hit by a lack of economic opportunity and resulting depopulation was another focus of the recently concluded 2000 US Wheat Industry Conference held in Las Vegas, Nevada.  Mark Drabenstott, Director of the Kansas City based Federal Reserve Bank's Center for the Study of Rural America was the conference's keynote speaker.  In his speech, Drabenstott highlighted three key "north star challenges" he feels are needed to improve prospects for rural America:  1) closing the "digital divide" between rural and metropolitan areas, 2) encouraging rural entrepreneurs, and 3) taking full advantage of a new, product-driven agricultural industry.

Sano Shimoda, President of BioScience Securities, in his speech to the conference, said he foresees a shift in agriculture from a product-driven system based on cost to an end-user, demand driven system focused on value added products.  Shimoda predicted a new, integrated production structure where farmers would become subcontracted suppliers of specialized crops having specific qualities desired by a particular end user.  Shimoda went on to say he does not see introduction of transgenic wheat into the marketplace for several years.  " Right now we are looking at transgenic wheat being available to the US farmer sometime after 2005" with the biotech industry facing "two to three years of negative market forces before the sentiment turns positive".

In closing, Drabenstott found optimistic signs for rural America.  He said that while agricultural prices are down, farmland values have not declined as they did in the mid-1980s.  He said his organization's study found that rural areas with "scenic value" have booming economies, and challenged rural policy makers to take a deeper look into potential economic growth opportunities for their areas, saying that while "agricultural policy was rural policy in the 20th century … a broader approach will be needed in the 21st century".

WORLD WHEAT STOCK TO USE RATIO DECREASES
The February USDA supply/demand estimates were released Friday with no real surprises.  On the world numbers, feed use was increased 1.82 MMT to 104.3 MMT.  World export was lowered roughly 1 MMT to 125.3 MMT.  The good news is projected world carryover stocks were reduced 2.15 MMT to 127.2 MMT.  This puts the world stocks-to-use ratio at 18.1%, down from 20.8% last month.  This is the lowest stocks-to-use ratio in a very long time, more than a full percent below the price peak period of three years ago.  Unfortunately 41% (53 MMT) of that projected carryover resides in the bins of the "Big 5" exporters.

The US numbers were bearish with projected exports down 700 TMT to 28.6 MMT.  This put projected carryover up correspondingly to 27.14 MMT.

Aussie production was increased 500 TMT to 23.5 MMT.  Many anticipated the numbers going to 24 MMT.  Exports were up correspondingly at 18.5 MMT.  You might ask, "How can Australia get a straight line relationship between production and exports?"  Simple.  They use a monopoly marketing board that will price the wheat as necessary to sell it.  They WILL undercut US prices to make the sales.

The only other significant change among the Big 5 was EU exports were cut 200 TMT to 36.5 MMT (includes intra EU trade), with carryover stocks down correspondingly at 15.5 MMT.

THE PRECAUTIONARY PRINCIPLE OF THE INTERNATIONAL BIOSAFETY PROTOCAL EXPLAINED.
Negotiations on an international biosafety protocol ended January 29 with all of the 135 participating countries agreeing to endorse new rules regulating the trade of genetically modified organisms (GMOs).  Another 50 countries have yet to ratify the agreement.  The protocol defines GMOs as "living modified organisms" or "any living organism that possesses a novel combination of genetic materials obtained through the use of modern biotechnology". 

The protocol, which is to take effect in two years, creates an international framework that  1) addresses the environmental impact of bioengineered products, and  2) requires labeling of shipments that "may contain" genetically modified crops, and  3) segregates GMO crops from non-GMO crops.  The protocol also allows for the export and import of living modified organisms under the oversight of a precautionary principle that would allow importing countries to reject the import under rules contained in the agreement.  The precautionary principle, as defined in the protocol, states, "potentially dangerous activities can be restricted or prohibited even before they can be scientifically proven to cause serious damage", giving countries the right to effectively ban GMOs.  US officials say there is a "savings clause" that will prevent WTO rules from being overridden.  It requires countries to base food import rules on "sound science".