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Farmers need to become part fortune-tellers

News editor

Marion County farmers may want to moonlight as weather forecasters or economists if they can figure out the right choice for insuring their crops through the federal farm bill programs.

It’s an exercise in predicting the unpredictable. Farmers have to look five years ahead to guess what their crop yields will be, which depends in part on the weather, and what prices they’ll get.

“Does that sound crazy?” county extension agent Ricky Roberts said. “I don’t know what the price of wheat is going to be next week, let alone three years from now. The biggest challenge is trying to predict unknowns.”

Farmers must decide whether to choose a program focused on covering price losses or one that protects against lower-than-expected crop yields. If they make no choice, they’re automatically placed in the price loss coverage program.

“If what keeps you up at night is prices falling through the floor, what I call a market wreck, you’re going to sign up for one program,” Roberts said. “If you’re an optimist that thinks we’re going to see good prices, you’re going to sign up for the other.”

Hillsboro area farmer Jim Enns hasn’t decided which program he’s going to choose, even though he’s been busy looking at numbers.

“It’s causing me to spend a lot more time in the farm office instead of out in the shop working on things,” Enns said.

There are plenty of tools to use for making projections. The USDA Farm Service agency website lists several online scenario generators. Farm associations and private farm insurance companies have developed similar tools.

The tools suggest which program to choose based on the data a farmer inputs, but Enns said it’s still a guess as to which guess to choose.

“It’s interesting, because I’m with the Farm Management Association,” Enns said. “I’ve gone through what they have, and it’s leaning one way. I haven’t gone through with my crop insurer, but she’s leaning the other way.”

Enns has his own term for the process.

“They call it SWAG — scientific wild-ass guess,” he said. “It’s what you want to guarantee — do you want to guarantee on low price or low yields?”

Roberts said he meets with farmers almost every day to analyze options, and can do up to three consulting sessions a day.

“What we try to do is run different kinds of scenarios — high production and low prices, low production and high prices, and so on,” Roberts said. “Then we say, ‘What do you think is most likely to happen,’ and we go with it.”

Roberts pointed to the recent drop in oil and gasoline prices as an example of how prices can change unexpectedly.

“Six months ago oil was trading at $100 a barrel,” Roberts said. “I’m sitting here six months later and oil is $40 a barrel. I didn’t see that coming. You can apply that same analogy here. It’s hard to think about $3 corn again, but I didn’t think I’d see $40 barrel oil again, either.”

Whatever choices farmers make, it will be some time before they know if they made the right ones.

“We’re not going to know whether we make the right decision until five years from now, when we look back on it,” Roberts said. “But we’ve got to figure it out between now and March.”

Last modified Jan. 14, 2015

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