Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.

USDA’s final 2006 Crop Report estimated corn production at 10.534 bil. bu., compared to 11.114 bil. in 2005 and 2% under its November estimate. The national average yield was placed at 149.1 bu./A, up 1.1 bu. from 2005, but a 2.1 bu drop from November. Grain traders were expecting a 10.706 bil. bu. crop estimate. Read more.

On the other hand, USDA’s final 2006 soybean crop estimate was placed at 3.188 bil. bu., above the 3.063 bil. bu. 2005 crop and the largest soybean crop on record. It faded slightly from November. The average yield was estimated at 42.7 bu./A. The USDA estimate was also below the grain trade estimate which averaged 3.235 bil. bu.

In USDA’s Grain Stock Report, December 1 corn stocks were estimated at 8.93 bil. bu., a 9% drop from 2005 stocks, with fall quarterly disappearance at 3.57 bil. bu. which is above the 3.41 bil. disappearance in the same period of 2005. Stocks at the end of the marketing year in August are now projected at 752 mil. bu. well below trade expectations. Read more.

USDA’s soybean stocks estimate was 2.70 bil. bu., 8% more than in December 2005. However, soybeans are being consumed at a 15% faster rate than in the comparable period of last year. Disappearance was estimated at 940 mil. bu. Ending stocks grew 10 mil. bu. to 575 mil. but not as much as trade estimates.

The wheat stocks report estimated December 1 supplies at 1.31 bil. bu. which is an 8% decline from the same period for 2005, with quarterly disappearance at a 12% slower clip than last year.

The Wheat Seedings Report indicated 9% more acreage than 2006, with 31.9 mil. for hard red winter, 8.3 mil. for soft red winter, and 3.9 mil. for white wheat. 53% of the crop was last rated at good to excellent, about the same as in 2006. Total wheat acreage is 44.089 mil. A, slightly below pre-report estimates. Read more.

USDA Chief Economist Keith Collins surprised the grain markets late Wednesday when he said ethanol would consume 1 bil. bu. more corn in 2007 than in 2006. While he said half of that could come from the 900+ mil. bu. carryover, there would be a need for an additional 6.5 mil. acres of corn to supply the additional demand. Collins was testifying at the Senate Agriculture Committee about renewable fuels.

Higher yields and higher prices not surprisingly are leading to higher net farm income, say IL Extension economists. In fact they believe 2006 income will be higher than any of the last five years, and 60% more than 2005 farm income. Read their newsletter.

The IL farm income study was based on average yields, but because of yield variations, the per farm average ranged from under $50,000 to nearly $120,000. Production expenses were based on a 9% increase in crop expense over 2005 and a 15% increase in fuel expenses. LDP and Counter-cyclical payments for 2006 were estimated at zero.

After three years of profitability, pork producers are entering 2007 with the specter of income that is barely breakeven, and possibly in the red, says Purdue economist Chris Hurt. Over all costs are expected to be 18% higher, including a 62% rise in corn costs. Cost of production was estimated at $47/cwt, with markets expected to average $48/cwt. Read more.

Pork producers needing corn, have some opportunities to manage costs says Hurt:
1) Acquire as much cash corn as possible for feeding needs through mid-summer.
2) Buy corn futures on the breaks when market prices soften.
3) Buy corn call options on the breaks, when option premium values drop.
4) Set a purchase price range buying calls and selling out-of-the money puts.

Can livestock producers expect corn prices to fade as they did in 1996? Jim Mintert at Kansas State says no. “Demand driven bull markets have more staying power than supply driven bull markets. Although ethanol demand is heavily dependent on government policy decisions regarding subsidies, tariffs, and mandated usage levels, it looks like demand for corn used to produce ethanol will remain strong in the foreseeable future.” Read more.

If you are considering a foliar soybean fungicide—regardless of soybean rust—Ohio State researchers say that might be money wasted. Their report said: “Across all studies on average, we gained 3 bu/A. For the application to be economically viable, soybean prices must be $8.00 or higher and the gain must be consistently greater than 3 bu/A.” Find their detailed report with fungicide performance data.

Wet fall and winter fields should not be worked, even if a light freeze seems to help. Ohio State agronomists suggest living with compaction for 2007 and work the field next fall. They also suggest light spring tillage to work out any ruts remaining from harvest. They recommend a tillage depth of only 2-3 inches and not kicking up wet soils.

If you are working on taxes, don’t join other farmers confused over whether CSP payments can be excluded from income tax. They can’t, but FSA had distributed some information that suggested CSP payments could be excluded. OH Extension tax specialist Don Breece said stewardship payments are ordinary income, along with incentive payments. However, he said share rent landlords, who report the payments as ordinary income, may not have to pay self-employment tax on CSP payments.

On another tax matter, Purdue tax specialist George Patrick says the domestic production activity part of the tax code can be helpful with a significant deduction. He says a farm family with qualified production activity income of $80,000 could qualify for a $4,800 deduction. More.

With grain exports outpacing USDA projections this week, Agriculture Secretary Mike Johanns said exports will be important for the 2007 ag economy, as he spoke to the AFBF convention, “In 2001, agricultural experts said exports had declined for five straight years and were down to $50 bil. Since then exports have risen every single year to a record of $68.7 bil. in '06. In '07, they are expected to reach a staggering $77 bil.”

In his same remarks to the American Farm Bureau convention Johanns says the farm economy is quite healthy, “Farm cash receipts increased for the fourth consecutive year in '06 to $242 billion. Now, that's a $42 billion increase since 2001. In 2001, the debt-to-asset ratio was at nearly 15%. In 2006 we reached a significant milestone: the lowest debt-to-asset ratio in recorded history. It is estimated to be approximately 11%.”