Bill Sahs, a producer in the area north of Lincoln but south of the
Hartsburg/Atlanta mount, said that all the central Illinois farmers
had short yields due to the heat and drought conditions, but the
ones who got hurt the worst were producers who did not take part in
the federal crop insurance program. Those producers "self-insured"
their own crops and bore the brunt of short yields and corn ruined
by aflatoxin all by themselves.
Statistical information on what
percentage of producers were in this uninsured category was
unavailable, but most, including Troy Bauer of Hartsburg Grain,
agreed that they were in the minority. "I could count on one hand
the number of my customers who came in here with loads who were
totally without insurance," Bauer said.
Federal crop insurance has become one of the staple inputs for
farmers, just another cost among all the others to guarantee their
success and cash flow. In a very good production year, it might seem
attractive to lower the expense of insurance to increase the profit,
but this gamble doesn't always work out. Sometimes it means the
difference between higher profits and an inability to even cover
your input costs.
Troy Bauer of Hartsburg Grain, an 18-year veteran of the ag
industry, says that the second party in line who got hurt in last
year's drought was the local grain elevator. Elevators all run on
razor-thin margins, and low yields alone can make for a difficult
economic year for an elevator. The 2012 corn yields were around 50
percent of what farmers have in a good year, and coupling that with
the aflatoxin problem, elevators in central Illinois really got
Elevators make their money on services like grain storage,
transport, drying and sales. In 2012 producers were urged to bring
all their corn to town right away and not put anything in on-farm
storage, so producers brought everything to the elevator as it came
in from the fields. Elevators such as Hartsburg Grain dried the corn
down to moisture levels far below usual in order to stabilize the
corn and prevent aflatoxin from growing in the elevator bins. So,
energy costs were higher for the elevator to prevent the corn in
storage from all becoming further corrupted with the aflatoxin
Corn put in on-farm storage generally doesn't go through any
drying procedure except having air circulated in the bin, giving the
aflatoxin mold an opportunity to permeate the entire on-farm stored
crop, meaning total loss.
Along with higher energy costs, the elevator was plagued with
cash-flow problems associated with very low yield. The elevator had
much less product to transport, dry and store, and suffered because
the income-producing services were underused. Bauer said it is hard
enough trying to stay alive when we have a low-yield year, and then
there was the aflatoxin problem to deal with also.
The old-timer name for aflatoxin is "shiners," because if there
is enough aflatoxin present in the test sample, the corn sample will
glow under black light. The FDA has limited the amount of aflatoxin
that elevators can accept to 20 parts per billion. Bauer said many
loads that came in and tested with 20 ppb aflatoxin didn't glow at
all under the black-light test, so they threw the black lights away
and relied only on modern testing methods. "We developed
standardized routines for testing the corn samples and believe we
came up with the best ways to fairly protect the public and the
producer," Bauer said.
Bauer said he had loads come in to the elevator with aflatoxin
levels between 3 ppb and 500 ppb.
Although it was legalized in Illinois to blend affected loads
with clean grain, Hartsburg Grain did not do any of that kind of
blending. "You have to be certified by the FDA to do that kind of
blending," Bauer said, and they instead sought other ways to remedy
the aflatoxin problem and bring the producer some level of income.
Loads that came in infected with aflatoxin got discounted based
on quality and purity. Loads with high amounts of aflatoxin were not
brought into the elevator, but were instead trucked directly to
cattle operations at a deep discount or hauled to grain terminals
accepting corn with aflatoxin levels higher than the cattle
operations would accept. Bauer said they found enough
"outside-the-box" solutions for aflatoxin-infected corn that they
did not have to deal with any grain salvage operations, which would
give them pennies on the dollar for aflatoxin-affected corn.
[to top of second column]
Bauer said that while the crisis is over for the non-insured
producers who brought their product to town and sold it off for a
discounted amount, thus suffering a one-time loss, the elevator
continues to suffer. There is the lack of corn coming to town from
on-farm storage, the lack of product transportation, and the lack of
elevator storage in a normal production year just isn't there this
year. "The only corn we have in the bins today belongs to the
elevator, and we are waiting for the right time to sell it off to
make a profit," he said.
Uninsured producers were injured by the 2012 drought, and so were
elevators. It is also widely accepted that since the 2012 crop
didn't adequately tax the fertilizer values present in the soil,
chemical and fertilizer applicator companies like FS and Beason Ag
will also be hurt by the 2012 drought because they won't be able to
sell and apply as much product for the 2013 production year.
Local hub towns like Lincoln, Mount Pulaski, and Delavan were
also hurt by the drought of 2012. When rains failed to come in late
June and early July, people stopped buying things in town and slowed
down payment on the products and services they had already purchased
on account out of fear. The local economies of the towns supplying
nonagricultural products and services were greatly affected because
the optimism for a normal corn yield was lost, and businesses put on
the brakes as they saw their cash flow slow to a trickle.
But not everybody got hurt. Current federal banking and financing
regulations prevented the farm financing industry from taking risks
without adequate coverage and collateral, so ag financiers seemingly
were not injured by the 2012 drought.
The insurance agents and agencies selling federal crop protection
insurance made their commissions on the policies they sold but were
not injured by claims because they were paid out of the deep pockets
of the federal government rather than local coffers. Insurance
agencies selling crop insurance should in fact see a rise in 2013
crop insurance sales because the remaining holdouts have now become
believers because of their 2012 losses.
And it is said that local producers who with foresight and
planning purchased federal crop protection also made out all right,
all the way from having their inputs covered to having some of their
normal profits protected as well.
Bauer said the producers coming to the elevator in February for
coffee and doughnuts in the morning were expressing optimism about
the 2013 production year because they have seen precipitation here
in Logan County at the right times and the right amounts, and that
water was once again starting to flow from farm tiles. The National
Weather Service and The Old Farmer's Almanac both predict that we
will have normal precipitation in this area in 2013, along with
warmer than normal temperatures.
And Bauer himself expresses optimism in the 2013 production year
and hopes that the drought of 2012 was the kind of event that only
happens once in the career of an elevator manager.
[By JIM YOUNGQUIST]