Creative seed companies offer growers new programs or alliances that cover yield loss and reduce grain-selling risks - all for buying more seed.
A unique program from Agricultural Revenue Management (ARM), a wholly owned subsidiary of The J.C. Robinson Seed Company, guarantees a 90% corn yield so producers can aggressively market their crop early in the growing season. The company also gives advice about raising hybrids for the best yields.
"We're trying to give producers the methods and tools to capture an end use value so they can confidently market their crop," reports ARM CEO David Bracht. "Then we provide them with agronomic practices to maximize that yield."
Coverage expanded. The program, called DollarGard, grew out of pilot projects the company tested this past summer on 40,000 acres in Kansas and Nebraska. Now corn growers in the central section of J.C. Robinson's trade area in the western Corn Belt may sign up for DollarGard. Because J.C. Robinson Seed is a member company of Golden Harvest, growers must plant Golden Harvest seed on about 10% more of their total acres than they did last year to be eligible for the program.
DollarGard is a production agreement, Bracht says. The producer agrees to grow and deliver 100% of production from the program-covered acres to an agreed-upon participating elevator. The producer pays a service fee and in turn receives protection for 90% of the crop, based upon his farm's actual production history (APH). APH is figured on a 4- to 10-year field average, depending on what is available.
If production on any field enrolled in DollarGard falls below the 90% APH average, the program provides a bushel adjustment payment for the yield loss down to the federal crop insurance coverage level. The price paid per bushel is based on the December futures price.
"We cover the area between 90% of yield and where federal crop insurance starts," Bracht says. "Our program is designed to add to the grower's protection he receives from his federal insurance program."
Complements crop insurance. Producers must purchase federal crop insurance to participate. Bracht says that, in the pilot programs, most producers bought federal crop insurance for 65 to 75% of APH yield.
Growers interested in joining DollarGard provide yield history and agronomic information for each field they want enrolled. ARM then calculates a service fee, taking into account farm location, yield history, hybrids and crop insurance coverage. The fees run from $12 to $20/acre. High and inconsistent yields result in higher service fees, Bracht adds. Most fees average $15 to $16/acre.
ARM uses the service fee to manage the DollarGard program. The company covers its commitment by hedging the yield risk through a commodity contract.
Agronomic recipe. "Once enrolled, the producer agrees to grow a crop and follow an agronomic recipe that is not restrictive, but contains guidelines to optimize yields," Bracht explains. For example, Golden Harvest will provide information about the best chemicals for different hybrids at various stages of growth.
Other Golden Harvest programs such as Agronomy Up Front that emphasize optimum agronomic practices will be employed. Plus, seed dealers will help growers select the best hybrids for field conditions.
Throughout the growing season, the farmer provides three reports to ARM. The first report details how many acres of what hybrids were planted in the DollarGard program. If the grower plants fewer acres than originally planned, ARM returns that portion of the service fee. The other two reports come at the pollination and dent stages. "We need to have an estimate of yield," Bracht says.
When growers enroll in the program, they agree to deliver 100% of what is produced on the covered acres, even if it is 125% of yield or 20% of yield.
"We notify the elevator of the delivery obligation," Bracht says. "So the elevator expects the grain and will contact the producer to ask about marketing.
"The producer knows he will either grow the corn or receive a bushel adjustment payment that allows him to buy corn to substitute for any shortfall. So he's not concerned about not producing a crop and can go out and take advantage of the opportunities the marketplace offers him."
Bolsters early marketing. "The year 2000 will be a poster child for having a marketing plan and marketing some of the crop early," Bracht adds. This year's peak corn prices came from March to May. Unfortunately, many growers didn't take advantage of the prices because early drought concerns had them worried they would not get the yield needed to fulfill forward contracts.
"In talking with elevators, about 25 to 35% of the new crop usually is forward contracted by June 1," Bracht says. This summer, Nebraska elevators reported only 5% was contracted.
"More times than not, emotions will pull you the wrong way," Bracht says. He hopes growers won't make this mistake next year and will begin marketing the crop early with help from the elevator if needed.
"Admittedly, not every farmer will market ahead," he adds. "But we've had positive reactions from bankers, elevators and producers."
Pushes top performance. Although DollarGard covers yield loss and promotes smart marketing, Bracht also emphasizes the program pushes for top crop performance.
"This program goes beyond looking at yield risk," he says. "Most farmers say they need more than a 90% yield on a year-in, year-out basis. So our program is focused on helping the grower produce as much and as efficiently as he can while getting more value for the crop."
For more information, contact your Golden Harvest dealer or ARM, Dept. FIN, Box 908, Elkhorn, NE 68022, toll-free 877/218-4289 or circle 210.
Corn growers in Iowa, Indiana, Minnesota and Nebraska last winter participated in a pilot project offering a grain contract with revenue protection. Cargill AgHorizons offered the Performance 90 corn contract to cover potential crop yield losses and low market prices.
Cargill expects to offer the program again for 2001 and expand it to more locations. The company is still working on details for next year's program.
In its pilot offering, Performance 90 paid growers a bushel adjustment if revenue per acre fell below a target amount. The target revenue was determined by multiplying 90% of the historic yield per acre by the average December 2000 futures prices as reported in October 2000. So Cargill paid a per-bushel premium for grain delivered to the company if a grower's actual yield multiplied by the December futures price reported in October was less than the target amount.
Growers who signed on to Performance 90 agreed to purchase Cargill Hybrid Seed and commit at least 200 acres of corn or 50% of total corn acreage to the program. They needed to purchase catastrophic federal crop insurance to participate. They also agreed to work with local ag retailers to put together an agronomic program for the contract acres.
Cargill assessed a service fee ranging from $0.15 to $0.20/bu., depending on location, for the first 100 bu./acre delivered under the contract.
During harvest, growers delivered the grain from committed acres to a Cargill facility or other designated location.
For more information, contact your local Cargill AgHorizons office, visit www.cargillaghorizons.com or circle 209.