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June 29, 2007
Extension Update
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 Acreage Report today indicated 92.888 mil. acres of corn were planted this spring, up 19% from 2006, and above the range of 89.85 and 91.70 million acres expected by the market. USDA also reported 64.081 mil. acres of soybeans were planted this year, down 15% from the 2006 crop. That is well below the 66 to 69 mil. acre range expected by the market. The report was bullish for soybeans and bearish for corn.
USDA also released the Quarterly stocks report. Corn stocks were reported at 3.53 bil. bu. which is down 19% the 4.362 bil. bushels a year ago. Bean stocks were estimated at 1.09 bil. bu. which is up 10% from the 991 mil. bu. a year ago. Wheat stocks are estimated at 456 mil. bu. which is a 20% decline from the 572 mil. of a year ago.
The Kansas wheat harvest has low yields, low protein, low quality, and many abandoned acres says Kansas State’s Mike Woolverton. Soggy wheat and weeds are even expected to prevent or delay planting of double-crop soybeans, but Woolverton says unusually good soil conditions may even increase double-crop bean acres elsewhere.
Wheat prices are not usually strong at harvest. Woolverton says there are worries about Great Plains production, concern about disease development in US spring wheat areas, and production problems in China and the Former Soviet Union compounded by low world carryover stocks are keeping upward pressure on wheat prices that may continue through the fall and winter until the Southern Hemisphere wheat harvest.
Don’t forget the afternoon Hogs & Pigs report in Friday’s hoopla over crop acreage. Missouri’s Glenn Grimes believes the June 1 total herd to be up 2.3%, the market herd up 2.4% and the breeding heard up 0.9% from a year earlier. He says productivity growth in the US swine herd grew during the year ending in February, but at a rate of only .29% compared to the productivity of the prior four years, which was at 2.53% annually.
June hog slaughter will be up 4% from 2006, says Missouri’s Grimes. And he believes fall slaughter will be up 2-4% more than expected. That is because of the increased availability of vaccine for circovirus and less death loss from it, which puts more hogs on the market. Grimes says, “That much increase in production will likely push hog prices into the upper $30s to low $40s for the fourth quarter even with a strong demand.”
Feed costs make differences at the meat counter say Missouri economists. Distillers’ dried grain prices in northwest IA have declined $20 per ton in the last 10 weeks, while corn prices have increased $20 per ton during the same period. For the week ending June 15, the price of DDG per ton is over $40 less than corn. “This decrease in DDG price is increasing the relative competitiveness of the cattle industry to pork and chicken.”
With corn prices expected steady through the end of the year and variable cattle prices, Iowa State Livestock Economist Shane Ellis says, “Feeder cattle prices in the 3rd quarter will be less than those of a year ago, but still above the ten year average. Third quarter prices are expected to be 5 to 10% lower than a year ago. 4th quarter feeder cattle prices will be similar to those of last year after harvest corn prices dramatically increased.”
Cow-calf producers should see another profitable year says IA Extension’s Ellis. That is because feeder cattle supplies may be slightly lower this year, from fewer beef cows calving than a year ago. This may also help offset some of the weaker feeder cattle demand created by higher feed costs. However, he says it may be advisable to use some form of marketing strategy that will mitigate the risk of increased corn prices.
Japanese beetles are emerging and will be with us for a while. Individual beetles can live for 30 to 45 days. Because the beetles emerge from the soil over time, populations of Japanese beetles will be present in any given area for several weeks, well into August. If pollen and silks are unavailable, they’ll feed on leaves, but cause minimal damage there.
Scouting is imperative to determine when your corn is being threatened either by corn rootworm beetles or Japanese beetles. Densities of at least 5 corn rootworm adults per plant typically are required to affect pollination in commercial corn fields. Treatment decisions need to be considered when 3 or more Japanese beetle adults per ear are present and pollination is not complete. Read more .
Of most concern is the intensity of beetles clipping silks and the level of moisture stress in a field. Extension entomologist Mike Gray says, “Pay close attention to the amount of silk tissue protruding from the tips of ears. When ½ to 1 inch of fresh silk remains and soil moisture is abundant, successful pollination is likely occurring. Seed-production fields are likely to be at greater risk of economic losses caused by silk clipping.”
Corn rootworm beetles will be eating corn silks for several weeks, mating and laying eggs in soil cracks around the bases of corn. Eggs are dormant until next spring when they will hatch and the larvae will search again for corn roots. Scout your fields for adult corn rootworm activity to determine rootworm risk in 2008. If the number of beetles per plant exceeds an average of one then plan for control measures next year.
Much of the rootworm population is now full-sized larvae, which means they eat more and usually feed at the critical nodal root area. Nodal root systems are necessary for anchoring corn, especially when rapid vegetative growth occurs just before pollination. Beware of high winds because poorly anchored roots systems will cause plants to topple.
Its name is Binodoxys communis. But you can call it a friend, if your soybeans are susceptible to soybean aphids. It is a tiny parasitoid wasp that controls soybean aphids in China, and has been reared here in the US by entomologists who will be releasing it into the environment in several weeks to biologically control soybean aphids in the Cornbelt.
Hero insecticide has been approved by federal regulators for control of many corn pests. While it is not labeled for soybeans, Extension entomologists say is also has efficacy for controlling soybean pests. FMC may be still awaiting that regulatory permission. Check the rate application on corn.
Scouting is also imperative to check your soybean fields for Asian rust. There are hundreds of sentinel plots around the Cornbelt, but you may see it first. It is actively reproducing in LA, TX, and Mexico, and recent storms coming up the Mississippi Valley could have brought some of the spores into the Cornbelt. Get yourself a 20X hand lens and regularly check the USDA website for soybean rust info.
Soybean rust first appears on the bottom of the plant with some lesions unlike other crop rusts. First is a pustule that, using the 20X hand lens, looks like a little volcano; it has tan spores that are produced from the top of the pustule. The second lesion may be reddish brown with no spores evident and it is also on the underside of the leaf. Scout weekly.
If considering a corn fungicide, dry weather means the fungus spores might have been delayed. Purdue specialists say, “Had June been wetter, now is the time that lesions of gray leaf spot and northern corn leaf blight would be showing up on lower leaves of corn. Because spores were probably not being produced on residue until recently, the initial appearance of symptoms will be delayed this year.” Purdue’s Greg Shaner says, “There are no reliable thresholds or clear rules as to when a fungicide should be applied.”
The foliar fungicide Headline is being credited by some with increasing yield even where there is no fungus to control. Extension’s Carl Bradley says there is no way to check that claim, “We have clear evidence that such an effect can take place, but because it's likely to be a product of complex interactions between crop stress level, weather, and previous growing conditions, we do not know in advance, based on current knowledge, when it will happen.” Read more.
Will short corn yield less? Extension Specialist Emerson Nafziger says the canopy’s ability to capture sunlight is the key. “There is a general idea that tall corn means high yields. I think that the key is not how tall the plants end up, but rather how complete the canopy ends up being. Shorter plants have a tendency to have less complete canopies.”
The synchrony of pollen shed and silk appearance is shown by how early silks appear after the tassel has appeared (two to three days is good), says IL Extension’s Nafziger, and based on this the crop is in great shape to pollinate with few problems. A return to slightly cooler temperatures during pollination, with highs in the 80s, will be favorable as well, especially if night temperatures fall into the uppers 50s. Check your thermometer.
Cure your wet spots. IL Extension’s Bob Frazee says by installing a well-planned drainage system on poorly-drained fields, you get less flooding in low areas; less surface runoff; more time for performing field operations; improved soil structure; better soil aeration and greater oxygen concentration; enhanced root development; higher yields; improved crop quality; and greater fertilizer efficiencies, especially for applied nitrogen.
Posted by Stu Ellis at 12:11 AM | Comments (0) | Permalink
June 28, 2007
Conservation Reserve: Past and Future.
The site was a rolling hayfield near a pond just outside Peoria, IL, and then-Secretary of Agriculture John Block outlined to assembled farm reporters the concept of the Conservation Reserve Program which would become part of the 1985 Farm Bill. From that sunny, hot summer afternoon the CRP has been the primary engine of soil and water conservation, pulling many cars behind named WRP, EQIP, CSP, and others. Where has the CRP been over the past 22 years and where is it headed in the next Farm Bill?
Whether the CRP is the mainline engine of conservation or as Purdue’s Otto Doering calls it, “The 800 pound gorilla of American conservation programs—both in budget expenditure and in sheer size and geographical impact.” Doering’s analysis of the CRP reminds us that Congress has little to do with the Conservation Reserve Program, other than setting the acreage cap, which is currently at 39.2 million. The CCC administers the program contracts calling for 10 and 15 year grass and tree plantings on acreage accepted into the CRP program because of the environmental benefits provided idled acreage.
However, Secretary Block and his USDA colleagues were confronted with low grain prices, and the CRP was designed for a second purpose of supply management and income transfer through rental rates. The first big sign-up was in 1987, and since 10 year contracts can be renewed, 2007 will see considerable acreage become eligible for crop production for the first time in 20 years. But when the 1987 contracts for over 20 million acres were set to roll over in 1997 the USDA only accepted 16 million acres based on environmental benefits provided by the reenrollment.
Doering says the volume of acreage is an issue. Environmental groups want an increase to better support wildlife. Grain associations want a decrease in CRP acreage to ensure more grain production. Farmers have expressed concerns about the impact on the local agricultural economy when significant acreage is taken out of production. In 2006 USDA attempted an early extension program to ease the expected 2007 burden of work and 80% of the eligible land was given extensions up to 2010. When grain prices began to climb from acreage demand, there was a debate on whether land could come out of the CRP for corn ethanol production. USDA neatly delayed a decision until the issue was moot because of timing.
As the House Agriculture Committee embarked on Farm Bill debate several issues were posed for consideration as new policy
1) Extend the CRP to 2012 when the 2007 Farm Bill would expire.
2) Extend the pilot program for wetland and buffer enrollment to 2012.
3) Allow limited grazing for control of invasive species on CRP lands.
4) Use surveys in counties with 20,000+ acres to determine cash rents.
5) Allow CRP contracts to be modified where it would benefit social objectives.
6) Allow CRP contracts to be terminated by the landowner after 5 years.
Since the CRP is not likely to be changed very much because of its momentum within the environmental community, Congress will have some opportunity for small modifications, which include:
1) A decision of whether to allow contracts to be dissolved when acreage is needed for either food or fuel production.
2) Would the CRP be opened for biomass production to supply biofuels, and how would those provisions be met by the WTO.
3) Will the bidding process and the environmental rules be changed in ways that conservation becomes an entitlement program for landowners?
Summary:
The CRP will be included in the next Farm Bill because of its popularity. Policy makers are unlikely to shorten is funding because Congress is already insulated from acreage debate issues. However demand for corn acres to address ethanol needs may force the program to be opened at times previously unknown.
Posted by Stu Ellis at 12:23 AM | Comments (1) | Permalink
June 27, 2007
How Clear Is The Crystal Ball When You Look At The Pork Industry?
Who is currently raising hogs, how are they doing it, and are they making any money at it? Better yet, what is their perspective of the future, and for future profitability? Some probing questions have been asked by two prominent livestock economists, and the farm gate has the answers.
Subscribers to PORK Magazine, members of the PIG Improvement Company, and cooperators with the National Pork Board answered a comprehensive survey taken by John Lawrence at Iowa State and Glenn Grimes at the University of Missouri, whose research and analysis has been published in Production and Marketing Characteristics of U.S. Pork Producers. The survey was taken in February and March of this year and based on 2006 production. It is probably no surprise to hear Lawrence and Grimes say, “The US pork industry continues to evolve and consolidate to fewer and larger production operations.” It has been doing that and will likely continue, based on the intentions of the group.
Statistically, they found, 65% of US hog production was under control of 191 operations which marketed 50,000 or more hogs annually. Another 21% of the US production was attributed to 1,450 operations which marketed 10-15 thousand head annually. They indicated, “Operations marketing at least 10,000 head gained market share between 2003 and 2006, and farms marketing less than 10,000 head lost market share.” So operations selling fewer than 10,000 head annually were a “dying breed.” But overall, the entire industry is contracting. USDA identifies 56,350 owner operators of hog farms in 2006 and that is a 20% decline since 2003, and is down from 323,000 operations in 1988.
Among the operational differences, size was the major determinant of characteristics:
• A higher percentage of the 50-500-thousand-head producers outsourced the feed preparation and gilt development aspects of their business.
• Over half (54%) of the hogs ate feed prepared by the firm.
• Likewise, the 50-500-thousand head producers purchased a higher percentage of their replacement gilts compared to other size categories.
• The percent of firms raising hogs indoors and using split-sex feeding increased with firm size. The percent of all hogs under each technology was 94% and 64%, respectively.
• Wean-finish facilities were less common. Less than 20% of the under 50-thousand-head operations and 44% and 31% of the Large and Very Large producers used this technology and in total it was used on 29% of the hogs.
• The percent of firms raising grain declined as annual hog marketings increased. In total, 35% of the grain eaten by hogs was raised by the firms that produced the hogs.
There was also money to be made in 2006, and it saw an increase in the number of operations in the black and 95% of the 50,000+ head operations reported profits. In 2003, only half of the group was in the black and less than a quarter of the 50,000+ head group was profitable. Lawrence and Grimes say, “In 2006, all size groups anticipated increasing their production in 2007 and on to 2009. Thus, it appears that the supply of pork will continue to grow. Producers’ perceived obstacles to growth depended on the size of the operation, but in 2006 there were some common themes. Animal disease, productivity and compliance issues were the greatest perceived challenges.” Profitability was still an important issue, since the survey occurred at a time of $3.00+ corn. Less than half of the producers marketing less than 500 thousand hogs would continue to raise hogs if hog prices fell below $46/cwt liveweight. Seventy-five percent of the Very Large producers indicated that they would continue to produce at prices below $46/cwt.
Larger producers sold their production on a carcass basis instead of liveweight. Lawrence and Grimes discovered, “The use of contracts, negotiated or group, increased with the size of the firm. Nearly 90% of the over-500-thousand-head operations reported using negotiated contracts and 42% of the producers in this group reported selling to their own packing plant.” 57% of the hogs were priced using a formula tied to hog prices. The Large and Very Large producers sold a higher percentage using formula pricing. Approximately 20% of all hogs were sold on the spot market with smaller producers selling a higher percentage of their hogs this way than large producers. Contracts with pricing based on a formula tied to futures market prices or meat prices represented 7% and 6% of hogs respectively.
Would farmers continue using marketing contracts? All sizes of producers responded positively with a higher than average ranking. In spite of their lower ranking to the earlier question, larger producers responded more positively to this question than the smaller producers. When asked if marketing contracts should be more closely monitored by USDA an interesting trend developed:
1) First, agreement with the statement declined with the number of annual marketings.
2) Second, the level of agreement declined over time among the under 50,000 head producers, but increased, particularly since 2003, with the over 50,000 head producers. Producers’ preference for marketing all of their hogs on the spot market declined in 2006 and has declined over time. Preference declined as producer size category increased.
Contract production is expected to increase in the coming years. Over half of the over-500-thousand-head producers responding in 2006 expect to increase contract production. A portion of the under-50-thousand and 50-500-thousand-head producers expect to reduce contract production, but on average it is expected to increase from these two size groups. The vast majority of growers expect to continue contract production when their contract expires, 78% with current contractor and 6% with another company. Fourteen percent of the growers expect to become independent producers at the end of their contracts.
Summary:
In the past 20 years, five out of six pork operations have disappeared, but the 56,000 that remain are expecting continued profitability. 95% of those over 50,000 head marketed indicated profitability. However with the advent of $3+ corn, they have established that they would stay in business until 2009 as long as half of the producers marketing less than 500 thousand hogs would continue to raise hogs if hog prices fell below $46/cwt liveweight.
Posted by Stu Ellis at 12:11 AM | Comments (0) | Permalink
June 26, 2007
What Is Your Position On Critical Farm Bill Issues, And Will You Tell Your Member Of Congress?
Congressional Subcommittees have been debating and voting on major elements in the 2007 Farm Bill. Most recently, Members expressed a preference for extending the 2002 legislation with minor modifications instead of beginning anew. As Members return home for the Independence Day recess and the August vacation period, farmers will have the opportunity to express their positions. But first, you have to formulate an opinion and that might be easier said than done.
There are numerous issues pending in the Farm Bill debate, and you don’t have to be knowledgeable on every one to be able to express your opinion. However, there are some selected issues that will get more headlines and your Member of Congress will want your ideas. Farm policy economist Carl Zulauf at Ohio State University has assembled a list of key policy questions that will be important to most Cornbelt farmers. Some of those include:
Commodity programs:
1) Should farm programs focus on (1) enhancing farm income or (2) helping farmers manage
price/revenue risk? (Farm income is enhanced with payments that have been criticized by taxpayers and our trading partners, yet have kept many operations afloat. The alternative to per-bushel payments are revenue programs that are designed with payments that bolster the combination of price and yield, not just bushel prices.)
2) Should the direct payment program be redesigned as a “green payments” program? More broadly, should direct payments be reduced, even eliminated; with the $5.2 billion in annual spending redistributed among other programs? (Farmers are currently receiving 28¢ for corn, 44¢ for soybeans, and 52¢ for wheat in the form of a direct payment per bushel. Similar payments are issued for other program crops, but a contrasting viewpoint is to use the money for other areas, such as conservation, rural development, research, etc.)
3) Should permanent disaster assistance be authorized? Currently, disaster assistance is authorized on an ad hoc basis. (Disaster programs are approved by Congress almost every year to help compensate for drought, flood, or pestilence. The contrasting view is to use the money to help build a better crop insurance program and allow farmers to manage their own risk of production.)
4) Should the farm insurance program be brought into the Farm Bill? Historically, insurance has been addressed in separate legislation. (Currently, crop insurance programs will be reviewed and revised in two years, since that program is offset from the Farm Bill. A contrasting view is to include it in the Farm Bill debate.)
5) Should the restriction on planting fruits and vegetables by farm program recipients (e.g. corn and soybean producers) be eliminated to comply with a WTO ruling? If “yes,” what assistance should be enacted for fruit and vegetable (more broadly, specialty crop) producers? (Recent Farm Bills have prevented the planting of fruits and vegetables on base acres for program crops, something that the WTO opposes and would force a change. Would you want more freedom in what you planted, and what would current fruit and vegetable producers have to say about the increased competition?)
6) What should be the limits on farm payments? (With the recent public debate over the amount of money every farm operation and every farmer receives, there will be stronger calls for lower limits, and even implementing a means test that would eliminate some higher income farmers.)
Conservation
1) Should the criteria used to decide which areas and/or farmers receive funds from farm environmental programs be based on (1) the highest environmental benefits or (2) be distributed equally across U.S. farm land? (Early CRP contracts accepted nearly any acreage that was deemed highly erodible. However, recent regulations calculate formulas for environmental benefits that will eliminate some farms from any consideration.)
2) Under what conditions, if any, should Conservation Reserve Program land be opened up to growing crops used for cellulose-derived ethanol? (The demand for food and fuel has put a potential pinch on acreage, and the CRP is seen as a safety valve to allow production of biomass crops that could be used for ethanol production. Do you favor using the CRP for crop production?)
Trade
1) Should Congress act in advance to address programs that may conflict with multilateral trade agreements or maintain them as negotiating positions/tactics? (This reverts to the debate over whether the Farm Bill or the WTO should be negotiated first. As it is now, the WTO debate is floundering, while the Farm Bill debate is progressing. Our trading partners who caused a dismantling of the Cotton Program and threatened the same for corn and soybeans are watching to see what is included in the Farm Bill. Should typical programs be included that encourage production, or should agriculture be supported that will not encourage production and lower the value of commodities in the world market?)
Energy
1) How will jurisdictional issues between the agricultural and energy committees in the House of
Representatives and Senate affect what is written in the Farm Bill? (Recent energy legislation has established goals for ethanol and biodiesel production that did not take into account any farm programs that affect crop production. Should energy issues be included in the Farm Bill or can they be separately addressed?)
2) Should funding be directed at research that increases yields of crops, such as corn, switchgrass, etc.? (While current ethanol production goals are calling for increased production of corn, how does this impact the critical trade issue?)
3) What share of research funding should go to cellulose-based energy? (If federal research investments are directed toward conversion of switchgrass, miscanthus, and other biomass into ethanol, does that detract from the use of corn and will that threaten the demand for corn?)
Summary:
The Farm Bill debate goes far and wide, and covers many more questions that can be feasibly addressed here. However, there are critical issues to be decided on farm program payments and how they are determined, payment limitation issues, the impact of trade and energy legislation on farm programs, and numerous conservation issues that need to be refined. Farmers need to create their positions on the issues and communicate those to their Member of Congress prior to the approval of the Farm Bill, which needs to be completed before the start of the new federal fiscal year in October.
Posted by Stu Ellis at 12:05 AM | Comments (0) | Permalink
June 25, 2007
How Do We Produce Enough Corn And Soybeans To Meet The Demand?
Corn growers have been excited about ethanol for 20 years. Soybean growers have been excited about biodiesel for the past 10 years. Now that the excitement has become contagious and spread to Congress, automakers, environmental advocates, and the motoring public, agriculture is now faced with producing biofuels (along with food and all of those other things made from corn and beans.) Is it time to say Hooray! Or is it time to say Oooops!
Let’s think about this challenge for a bit says Kenneth G. Cassman, Director of the
Nebraska Center for Energy Sciences Research at the University of Nebraska-Lincoln. His presentation at the University of Illinois conference which addressed the renewable fuels and livestock feed challenge, was one of several which raised numerous issues that will impact every Cornbelt farmer. Cassman characterized the challenge as having “To meet energy and food needs of a rapidly growing and wealthier human population while avoiding global climate change caused by reliance on fossil fuels and irreparable destruction of natural resources.” Obviously this is a challenge that will not be resolved tomorrow or with some executive order. It will have impact on everyone’s livelihood, culture, economy, and way of life.
Cassman says the whole issue has come to a head quite suddenly. Among the reasons were increased demand for petroleum from India and China, the Congressional mandate for ethanol use and President Bush’s proposal for cellulosic ethanol research, as well as the tremendous amount of investment in ethanol and biodiesel production plants. He says current goals for ethanol production are 12 billion gallons by 2010 and 15 billion gallons by 2015. To meet that goal ethanol will require 34% of the US corn crop in 2010 and 46% of the corn crop in 2015, even with a 10% increase in acreage and trendline yield increases.
But, Cassman rhetorically asks, “If you lived in New York City, why would you pay taxes to support expansion of biofuel production capacity?” New Yorkers would not do that to increase profitability for agriculture or raise farmland prices, but they might do that “To reduce dependence on imported oil and decrease greenhouse gas emissions while protecting soil and water quality.” Again he rhetorically asks, “If you are a livestock producer, why would you pay taxes to support expansion of biofuel production capacity?” Livestock producers would not voluntarily do that to increase profitability for grain producers or to increase their own feed costs and reduce their profits. But he suggests livestock producers might go along with the concept if:
1) If adequate food, feed, and biofuel feedstock supply could be ensured at reasonable cost for consumers, livestock and biofuel producers.
2) If environmental benefits of biofuels are achieved and greenhouse gas emissions can be reduced, and soil and water quality could be protected.
3) If WTO negotiations for free trade could be facilitated by reducing certain program crop payments.
Cassman says that farmers around the world will have a share in energy production from crops, and many will be more efficient at that than US farmers. Based on volume of production, palm oil from Malaysia is 8-9 times more productive in biodiesel production than are US or Brazilian soybeans, and 60% more productive than corn for producing ethanol. To feed the demand for biofuels an insufficient volume of grain and oilseeds has been channeled into the food system causing food prices to rise. As a further result an increased amount of fertilizer has been applied to increase yields, water quality has been reduced, greenhouse gases have increased rather than decreased, marginal land has been put back into cultivation, and cropland has spread into fragile areas in other parts of the world. Cassman contends corn and bean yields have to be accelerated without the need for large acreage expansion; yields have to be achieved without a negative environmental impact, and potential yields have to be raised while stress tolerance is improved.
If those goals are to be achieved, Cassman says there are many things needed?
1) Development of high yield crop production systems that reach 85-90% of genetic yield potential, which absorb N with 70% efficiency, which have a positive energy balance and are 90+% efficient water use in irrigated systems.
2) Customized controlled release fertilizers.
3) Site-specific crop and soil management systems both in large farming operations and small fields in developing countries
4) Improved crop management dynamics for better using climate information and weather forecasting for better using fertilizers and controlling insects and disease.
5) Better use of improved hybrids and cultivars without dependence on biotechnology.
6) Inflation has to be avoided in food prices
7) Environmental expectations have to be met
8) There has to be an expanded use of distillers’ grains for cattle, swine, and poultry; with additional value-added uses for DDGS.
9) There has to be an adequate research investment focused on raising yields and increasing environmental quality.
10) More research on using co-products from biofuel production.
11) If there is a measurable increase in environmental degradation, public support and favorable tax incentives for biofuels will disappear!
Summary:
Agriculture has been criticized for causing food prices to increase while it also tries to satisfy the needs of the biofuels industry. The “overnight” rise in the demand for biofuels has created numerous policy and research challenges that need to be addressed. While the general consumer and the livestock producer will not voluntarily endorse increased profitability for corn and soybean producers, there may be support if resolution can be found for environmental and trade issues, along with reasonably-priced livestock feed. To reach agreement, corn and soybean yields will have to increase substantially without increased acreage and without increased environmental degradation.
Posted by Stu Ellis at 12:42 AM | Comments (0) | Permalink
June 22, 2007
Extension Update
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.
June 29 will be a big day for USDA reports. At 7:30 a.m. (CDT) the Planted Acreage and Quarterly Grain Stocks report will be released. The acreage report will indicate whether more than 90 mil. acres of corn were planted. The Stocks report will detail corn feed use to date. View the reports Friday .
Also on June 29, at 2 p.m. (CDT) a report on the Ethanol Co-Products used for Livestock Feed and the Quarterly Hogs and Pigs Report will be released. The Ethanol Co-Products will help reconcile past corn fed and help forecast future corn feed needs. The Quarterly Hogs and Pigs Report will indicate the number of hogs to feed.
Some private corn yield projections have been in the 155-157 bu. range, reports Iowa State’s Bob Wisner, who says that is despite all the poor ground that was planted to corn and all of the acreage with second year corn and its 9-12% yield drag. Comparatively, the 2006 yield of 149.1 was the second highest. The ag economist says, “If the private yield projections prove correct, new-crop corn prices would have a large down-side risk.”
Many in the grain trade, USDA, and other analysts have expected China to soon shift from corn exporter to importer, as it did with soybeans several years ago, according to Bob Wisner. “If that shift occurs in the next few years, it will create a need for extra cropland to be shifted into corn, and will be another upward influence on corn prices.”
Though the US has cut bean acres way back this year, projected US ending stocks are more than adequate, says Jim Hilker at Mich. State. “Projected world ending stocks for 2007-08 are expected to be down, but still as high as last year’s record. South America is expecting a bigger crop to make up some of the US cutback, but not nearly all of it. But if soybean prices stay high another year, and Brazil cuts its interest rate as discussed, there is lots of room for more soybeans.” Read more.
The challenge for beans is that basis is still very wide, says South Dakota State’s Allen May. “Unless there lower production and reduced US and world carryover, there is little indication at the present time of basis getting significantly better any time soon. However, one cannot necessarily look at the prospect of $7.50-$7.70 new crop beans and turn one’s nose up at that kind of price.” Read more.
Wheat prices are now officially higher than at anytime since 1996 and represent the best pricing opportunity since prices reached the mid $6.00 range in April of 1996 says May. “However, this massive upturn in price in such a short period of time is very prone to a downturn of the same magnitude.” Read more.
Iowa State’s Wisner suggests some key market indicators to watch in the near term:
1) Watch the 6-10 day weather forecasts because drought is becoming a serious concern. Rain would weaken prices, but dryness could add further upside potential for 2-3 weeks.
2) Watch export numbers to see if corn prices are slowing demand. Soybean exports remain strong relative to a year earlier, but are expected to slow in the weeks ahead.
3) Watch the June 29 USDA acreage report to see if corn acres grew and bean acres shrunk from the March report. Opinions on actual planted acreage are strong both ways.
4) Watch the June 29 USDA stocks report for corn feeding from March to May. Corn feeding in the first half of the marketing year was slightly below a year earlier.
The Drought Monitor indicates the eastern Cornbelt, including the southeastern 2/3 of IL and the bulk of MN & WI are either abnormally dry or are in a moderate drought. View the map. Moderate to heavy rain is expected in the southern Great Lakes region June 20 – 25 and the middle and lower Ohio Valley. Other areas currently experiencing dryness and drought are expected to receive light to scattered moderate amounts at best and above normal temperatures June 26-30.
Corn under water stress from midmorning produces very little sugar during that day, says Extension Specialist Emerson Nafziger. “That means that the plant has little ability to produce more growth, whether the growth is roots or leaves and stem. The symptom of this that we can see is the reduction in top growth that has been evident in the most stressed fields in the past week.” And he says root growth also has been diminished.
Except where there has been some death of leaf tissue from dry weather, Production Specialist Nafziger says loss in yield potential has been relatively minor so far. “Good yields are still possible, but to be realized, above-average growing conditions will be required, including a return to good rainfall amounts and distribution, favorable conditions into late September, and lack (or control) of insect and disease attack.”
Diligent scouting is mandatory, says Nafziger. He says given the water shortages, it is important to know when pollen shed begins. “Silks should appear within a day or two of the start of pollen shed. Because the rate of appearance of silks is likely to be slowed in fields with dry soils, and because late appearance of silks means less pollen available, it will be critical to watch fields to see if insects are eating silks. They might land in tassels and eat pollen as well, but the real danger is that they eat silks off to prevent pollination.”
During later vegetative stages, when kernel numbers per ear are determined, plants become more sensitive to stress. Ohio State agronomist Peter Thomison says four days of stress (i.e. corn wilted for four consecutive days) at the 12th-14th leaf stage has the potential of reducing yields by 5-10 percent. Read more.
Corn typically needs 20 to 22 inches of water and water requirements vary according to the stage of development says Ohio State’s Peter Thomison. “Corn reaches its peak water use during pollination when plants are silking. Every day from the 12-leaf stage to the dent stage, the corn plant needs two to three tenths of an inch of water per day.”
Morning glories are getting harder to control say Purdue weed specialists, because less atrazine and more glyphosate is being used. As adoption of Roundup Ready corn increases, it appears that growers have reduced reliance on soil applied atrazine premix herbicides. Read more.
Armyworms! Small, intense concentrations are being reported. IL & IA entomologists believe egg laying is concentrated where there is adequate foliage, that has escaped the drought. Subsequently, the armyworms will be concentrated, and because they can grow so fast, you may not see them until they are inflicting significant damage.
Japanese beetles!! A beetle trap in southern IL caught 309,352 over 7 days, and 68,372 in a 24 hour period, causing entomologists to express concern about the potential for crop damage. As the degree day count increases toward the north, Japanese beetles will be emerging and clipping silks, assuming the droughty corn plants can even muster silks.
If Japanese beetles can’t find any corn silks, they’ll visit bean fields. The economic thresholds for Japanese beetle control are 3+ beetles per ear (corn still pollinating) and 30% defoliation of soybeans before bloom, 20% defoliation during reproductive growth. Rescue treatments.
With corn rootworm adults appearing throughout the Midwest, many corn growers will get a good chance to compare the performance of their control efforts. Entomologists say there are striking differences between the Bt and non-Bt plots. Bt corn was faring much better and had considerably less leaf rolling than the non-Bt corn. Because of the very dry soil conditions the soil insecticides are facing a significant performance challenge.
Computer models are indicating some good news about soybean rust for this year says rust guru X.B.Yang at Iowa State. For the rest of June computer models predict limited northward movement from known Louisiana sources because the predicted weather seems less favorable to the disease. Predicted favorability for soybean rust occurrence for Texas in June is less than 20%. He says July weather will be too hot for soybean rust to develop. Read more.
A June 8 freeze in NE had a variable effect on the corn crop. Fields or portions of fields that were stressed from dry conditions, recent postemergence herbicide treatments, or cultivation seemed to have suffered more frost injury than fields where corn plants were not stressed. Agronomists say recovery depends on the degree of freeze injury, duration of the low temperatures, soil water status, stage of crop development and even hybrid.
Environmental researchers in IL, MN, IA, LA, and other universities have called for shifting some farm program payments away from annual crops and toward perennial crops, to modify the whole production and subsidy system to improve environmental performance and to financially reward farmers for the public benefits they provide. The program would focus on watersheds. Read more.
Posted by Stu Ellis at 2:07 AM | Comments (0) | Permalink
June 21, 2007
Careful Management Can Get Livestock Producers Through A Drought
The Drought Monitor maintained by the National Weather Service shows the dry conditions that began in the southeastern US are expanding rapidly into the heart of the Cornbelt. While crops that need water are one issue, a beef herd that needs a drink and something to eat is another. With few immediate prospects for the drought to be washed away, many cattle producers are in need of relief.
Maintaining livestock in a drought can create a lot of questions. How do you feed the cows? What about the calves? What are the feeding alternatives? What can be harvested and when? Before you add more questions to the list, let’s get some answers.
Manage your pasture says Dan Faulkner, the Extension Beef Specialist at the University of Illinois by weaning your spring calves early and getting them on feed. Putting the calves on feed is more efficient for them and will reduce grazing pressure by 35%. Faulkner’s advice is to do that before there is no grass to extend the grazing period. Another reason for weaning the calves is to sell your cull cows while the market may be better than in the fall, and that further reduces grazing pressure. Cull the cows that had the small calves, the ones that are unsound, and the ones that are still open after the breeding season. You don’t want them grazing on scarce resources when they are not productive.
Faulkner says, “To maximize forage production under dry conditions, divide your pastures and rotationally graze. Even dividing the pastures into at least 3 or 4 paddocks (8 are better) will dramatically increase forage production under dry conditions. Don’t wait until conditions are dry to divide the pastures because there will not be significant growth at that time even with rotational grazing.” He says don’t let the grass get clipped below the two inch mark because that threatens the vigor of the plant.
Feeding calves
Livestock researchers Francis Fluharty and Steven Loerch at Ohio State University say 100 to 205 day old calves, that are fed high-concentrate diets, can convert 3.5 to 4.5 pounds of feed to a pound of gain. “With the current price of corn, some may be concerned that it's too expensive to feed. However, our data suggests this is not the case and there is no reason to sell light weight calves at a loss.” They calculate that with $4 corn and protein at $250-300 per ton, the feed cost per pound of gain is 40-50¢.
Feeding the cows
Ohio State’s Fluharty and Loerch say, “Rather than buying expensive hay to feed to the cow herd, consider limit-feeding corn and a commercial supplement with limited amounts of hay. Even today, corn grain remains the least expensive harvested feed per unit of digestible energy available to cattle producers in Ohio. Hay has only about half the energy value (calories) as corn grain. When corn is priced at $4.00/bu, it is worth $143/ton. This makes the breakeven price for hay on an energy basis about $72/ton.”
Faulkner’s suggestion is a blend of half and half corn and corn gluten and hay. “You can limit feed high quality hay at about 15-20 lbs. per day. It is possible to limit feed hay by limiting the amount of time the cows have access to the round bale feeder. With high quality hay (58-62% TDN) about 3 hour of feeding is sufficient to get the desired level of intake. With good quality hay (54-57% TDN) about 6 hours of feeding is sufficient to get sufficient intake for maintenance.”
Considering silage
A third alternative is corn silage, which may be available on your farm or from a neighbor. In a drought, Faulkner says, “This corn will produce silage that is comparable in feeding value to silage from corn with a normal amount of grain. The ensiling process will reduce nitrate levels by about 50%, which reduces the chance of nitrate poisoning.”
However, creating unintentional silage needs to be managed, and Dairy Specialist Mike Hutjens at the University of Illinois offers some answers to typical questions in feeding drought-stressed corn as silage:
When should drought-stressed silage be chopped? Ensiling should occur at the same dry matter level (30 to 35 percent dry matter) as normal corn silage, but without ears and kernels it is difficult to determine total plant dry matter. Chop up several representative stalks and conduct a dry matter analysis because it must be optimal for proper fermentation to occur.
What is the feed value to drought-stress corn? The protein, energy, and mineral levels will be similar to normal corn silage, but the dry matter yield can be reduced by 10 to 50 percent. Conduct a forage test for starch and soluble protein.
If drought-stress corn is good quality forage, should I buy from my neighbor? Without grain, the silage yield is 1 to 1 ½ tons of 30 to 35 percent corn silage per foot of barren corn stalk. Price it on a dry matter and yield base.
What about nitrates? Hutjens says, “Nitrate nitrogen (N-NO3) will increase with drought stress. The plant’s photosynthetic surfaces (green material) are reduced and nitrates are not converted to plant protein and growth. If animals are adjusted to high nitrate containing feed, health risks are reduced gradually increasing the higher nitrate feed in the ration over a two week time period.” Have a commercial lab analyze your fermented silage.
What about adding dry corn or other additives to stressed corn silage? Inoculate your silage to jump start the fermentation process, since dry matter is variable, and the inoculant will return $3-6 for each $1 spent. Adding dry corn is not recommended, because it will reduce the moisture level of the corn silage and that is a potential fermentation problem.
Using stressed alfalfa
Ohio State forage specialist Mark Sulc says this year’s alfalfa was first frozen, then dried out, creating significant stress on the plants. With a typical late May cutting, the plants have had to spend a lot of energy on regrowth, at a time when tap root reserves were low. He says, “Many stands don’t appear to be growing any more, but that does not mean the plants are sitting idle. Alfalfa stems stop elongating during the initial phases of moisture stress, but the plant continues to manufacture carbohydrates and protein that are stored in the root system since they are not being used to produce top growth. Allowing those reserves to accumulate a little longer will benefit alfalfa plant health and longevity.” He says let it get into the bloom stage before a second harvest. Alternatively, controlled grazing is an economical way to use it, but be sure to prevent bloat.
Summary:
With the drought area growing weekly, many livestock producers will need to increase their management of pastures and creatively feed livestock herds. Early calf weaning and early culling of cows will reduce demands on scarce pastures. Calves can be started on feed, and cows can use blends hay, grain, and corn gluten and DDGS when pastures are short. Drought-stressed corn can also be converted to silage with the proper tests and management, and alfalfa can also be grazed, as well as harvested, while caring for its own early spring stress.
Posted by Stu Ellis at 12:15 AM | Comments (0) | Permalink
June 20, 2007
Marketing: So Many Decisions, So Many Uncertainties
With droughty conditions expanding in the Cornbelt, and crop conditions deteriorating measurably for the first time, market volatility has increased just as USDA prepares to confirm planted acreage. Any farmer who wanted to take advantage of profitable prices is likely nervous over the prospect of pulling the trigger. With only 10 days away from the USDA’s next market-moving report, let’s assess the crop, get a handle on the impact of the report, and conclude with some thoughts about marketing.
The Cornbelt is a dichotomy of wet and dry when you read the comments of Iowa State University Outlook Specialist Bob Wisner. He says the current market volatility results from traders being uneasy about the strong demand for grain and the less than satisfactory growing conditions in many parts of the world; “This week’s NOAA drought index map shows most of Ohio, Indiana, and about 2/3 of Illinois rated as ‘Abnormally Dry.’” Wisner notes that the grain trade is anticipating better corn this year because crop condition ratings have been regularly exceeding those of the past three years. But he warns that early season ratings are not good predictors of the crop at the end of the season. And he says his recent travels through and around Iowa indicates mediocre yield potential, “With ideal weather, above-trend yields cannot be ruled out, but the later-than normal plantings, increased corn-after-corn plantings, and increased acreage in lower yielding regions suggest caution is needed in translating the weekly crop condition ratings into potential yields this early in the season.”
Iowa State’s Wisner says the expected large increase in corn acreage this year will have to become the trend based on increased demand. He’s forecasting 150.5 bushels per acre with approximately normal summer weather. And he believes that with yield trends the 2012 crop will provide 5.5 billion bushels for ethanol production; but he doubts that sufficient acreage will be available, based on demands from other crops.
Wisner’s counterpart at the University of Illinois, Outlook Specialist Darrel Good, wants farmers to appreciate the importance of the information coming June 29 when USDA will be releasing its updated acreage information, as well as the quarterly grain stocks estimate. In his weekly newsletter, Good says the markets will be interested in three specific pieces of information:
1) “First, is the total planted acreage (harvested acreage of hay) of all crops. Intentions for all non-hay crops reported in January (winter wheat) and March (most other crops) totaled 256.37 million acres, 3.26 million more than planted to those crops in 2006.” He says there may actually be a 2% increase in acres, or the wet spring may have washed away planting intentions on those acres.
2) “The second important piece of information in the Acreage report is obviously the estimates of planted acreage of individual crops. A lot of the focus will be on corn and soybeans. In March, producers reported intentions to increase planted acreage of corn by 12.1 million acres (15 percent) and to reduce planted acreage of soybeans by 8.4 million acres (11 percent). There are clear differences of opinion about actual planted acres relative to these intentions.”
3) “The third piece of information to be gleaned from the Acreage report will be intentions for harvested acreage of individual crops. While it is early in the production cycle for spring planted crops, it will be useful to see if early season weather conditions had yet impacted the expected level of abandoned acres.” He says the dry southeast and eastern Cornbelt and the wet western Cornbelt may have resulted in less acres planted and more acres abandoned.
Darrel Good is anticipating that planted acreage fell a bit short of the USDA’s March projection and that abandoned acres will be higher than expected. If that is the case, he says mid summer weather will increase the volatility of the market.
So how do you adjust your marketing plan in the midst of uncertainty? Melvin Brees, the University of Missouri Outlook Specialist at the Food and Agriculture Policy Research Institute,
acknowledges that marketing is difficult, particularly when markets don’t perform as expected; “However, successful marketing is not necessarily being right by selling at the highest prices, which is nearly impossible to do anyway. Successful marketing is avoid¬ing price lows and capturing profitable pricing opportunities.” Brees says with the corn, bean and wheat markets disregarding significant fundamentals and making contra-seasonal moves, they are all currently in uptrends and it is hard to make selling decisions when you want to take advantage of potentially higher prices. But Brees also sympathizes with many farmers concerned about not raising a crop that had been forward contracted, “Delayed planting, flooded out crops or rapidly drying soils add to production risk in many areas and are making new crop sales deci¬sions more difficult. It is understandable that producers say, ‘What if I sell more than I produce, especially if prices go even higher and I have to buy out of the contract?’”
Another current marketing concern is the unusually weak basis. While there are some strong cash bids for old corn, that is not the case for new corn. Brees says a survey of Missouri elevators finds a 40¢ basis for new corn, a 60-70¢ basis for new beans, and a nearly $1 basis for new wheat. If the weak basis is an indication to avoid sales, what do you do with the crop? When you compare it to the USDA’s forecast for season average prices, Brees says even with the wide basis, cash bids are in the upper half of the range of season average prices. (The USDA’s current farm price range projections for 2007-08 crops are: corn from $3.10 to $3.70, soybean prices from $6.65 to $7.65 and wheat from $4.50 to $5.10.)
To avoid the wide basis, Brees says there are several marketing opportunities that need some consideration:
1) Weak basis can possibly be avoided by using futures/options to make sales or forward contracting with hedge-to-arrive (no basis established) cash contracts. However, basis may not improve anytime soon because of large old crop supplies.
2) Producers with storage facilities and semi-trucks can sometimes find alternative selling locations that offer significant returns within efficient hauling distances.
3) Wheat producers, who see no carry in the market that pays for long term storage, must realize that “storage returns will need to come from higher futures price levels or basis improvement. Basis improvement (strengthening or narrowing of basis) will likely be limited due to competition for storage space from corn and soybeans as the fall harvest approaches. Higher futures price levels may be possible, but it is important to recognize that prices are already historically high and that storing is the same as speculating on higher futures prices.”
Summary:
Highly profitable markets are providing great challenges to producers. Since the basis is wide, cash bids are weak, but are still in the upper range of season average prices. However, with the extremely wet or dry weather across the Cornbelt, forward contracting reasonable amounts of a crop have been a challenge. Many producers wanting to lock in healthy prices prior to next week’s USDA acreage report face the prospect of questionable yields. The report will have many important pieces of information, which will confirm planted acreage, and give indication of any slippage, as well as potential abandonment. While it will indicate acreage, the size of the crop remains in question as dryness overtakes much of the Cornbelt forcing crop ratings downward.
Posted by Stu Ellis at 12:32 AM | Comments (0) | Permalink
June 19, 2007
If Two Alternatives Aren't Successful, How About Using Both?
There is a new economic challenge at every fork in the agricultural road, and the growing ethanol industry has presented not only the opportunity for higher grain prices for corn growers, but presented a challenge to the livestock producer of either paying more for corn or consuming the ethanol feed co-product. There is currently a growing supply of distillers’ dried grains from dry milling ethanol plants and corn gluten feed from wet corn milling plants as increased quantities of corn are refined into ethanol. Can the US livestock industry really use all of those millions of tons of DDGS and corn gluten?
The answer is yes, says Terry Klopfenstein, a ruminant nutritionist at the University of Nebraska. He was one of a dozen speakers in late May at a University of Illinois conference focused on integrating the livestock and renewable fuels industries. The clash of those titans has thundered through grain and livestock markets, inflating costs for corn users, and dismantling some which were operating on the edge. The point made by Klopfenstein is that livestock will be able to consume the ethanol co-products at some level in their ration, saving on feed costs and extending the supply of corn.
He says if the ethanol plants in operation or being planned were making ethanol, they would consume 7.8 billion bushels of corn and make 21 billion gallons of ethanol. At that point the US would be producing 70.6 million tons of distillers’ dried grains, and if fed to livestock, it would disappear. Swine could consume 8.7 million tons, poultry could consume 6.9 million tons, dairy cattle could consume 16 million tons, and beef cattle could consume 39 million tons. Nutritionally, DDGS is 30% crude protein with .8% phosphorous, and 11% fat. It is a high fiber energy source with high digestibility energy content, which is 125% that of corn in either the wet or dry state. However, producers should watch the high fat content and the variable sulfur content.
Klopfenstein says there is an advantage to using the wet product from the wet milling plants. Once dried, there is a 30% savings under the cost of distillers’ dried grains, and if cattle feedlots were jointly operating with an ethanol plant, the feed cost would only be 75-85% of the cost of corn. Of course, the individual producer needs to evaluate how the animals perform on the feed. Klopfenstein’s presentation included numerous charts on daily gain, feed conversion, marbling scores, and other values; as well as price comparisons with corn and cost of delivery from the plant. Regarding the wet corn gluten feed, it is 19-24% crude protein and only 2% fat. Its energy content ranges from 85-110% that of corn and the sulfur content is stable.
But Klopfenstein offers a potential solution that few others have suggested, and that is feeding a combination of wet corn gluten feed and wet distillers’ grains which allows the two to complement each other’s shortcomings in nutrition, specifically the fat content, effective fiber and protein components. Klopfenstein and colleagues have authored more information for producers wanting to feed both of the ethanol co-products.
Summary:
The growing demands of the ethanol industry will continue to pose challenges for livestock producers, but the ethanol industry is also providing a feed alternative. While there are weaknesses in both wet corn gluten feed and distillers’ dried grains, there is a potential for a blend of the two to approach a more complete ration for the ruminant animal than would just one of the two. With creative feeding programs, the US livestock industry may be able to survive high corn prices by shifting to alternative feeds.
Posted by Stu Ellis at 12:49 AM | Comments (0) | Permalink
June 18, 2007
How Will Your Farm Fare Under The USDA Proposal For The Farm Bill?
The Congressional Agriculture Committees this week will be conducting their internal debates on what to include in the 2007 Farm Bill. A multitude of proposals are on the table, from special interest and commodity groups, from USDA, and from the respective committee chairmen. Earlier this spring, USDA offered its proposal as a starting point, which included increases in direct payments, decreases in loan rates, and replacement of the counter cyclical payment with a revenue oriented payment program. If Congress accepts any of those, how will the 2007 Farm Bill impact your farm revenue?
While those proposals seemingly are significant factors that could change your revenue stream, the bottom line may be a bit surprising, according to the economists at the Food and Agriculture Policy Research Institute (FAPRI)a> at the University of Missouri. They calculated hundreds of outcomes based on the USDA proposals under different market scenarios and policy alternatives for the three principal USDA proposals:
1) Direct payments under the USDA program would be slightly larger. For corn and wheat rates are unchanged through 2009. The rates increase for from 28¢ to 30¢ cents in 2010-2012 then return to 28¢ baseline levels in 2013. Wheat payments would be 52¢ and rise to 56¢ in 2010-2012, and then return to 52¢. Soybean direct payment rates remain at baseline levels (44¢/bu.) in 2007 then increase in 2008 and 2009 to 47¢/bu. The rate increases again in 2010-2012, to 50¢/bu, before dropping back down to 47¢/bu in 2013.
2) For the marketing loan, the administration’s proposal is to lower loan rates. Loan rates will be the lesser of: 1) the loan rate for the commodity proposed in the 2002 House farm bill, or 2) 85 percent of an Olympic average (the average of the most recent five years, excluding the high and the low) of season-average farm prices. For most commodities this results in new loan rates at the levels proposed in the 2002 House farm bill. Corn, wheat, and soybeans, loan rates are slightly lower than current levels, as the House version called for lower loan rates than the final bill.
3) The revenue counter cyclical program replaces the current countercyclical payment program, where payments are triggered by price alone, is replaced with a program that triggers payments when the revenue (yields times prices) is lower than national target revenue per acre. For each commodity, a target level of national revenue per acre is determined by subtracting the 2002 farm bill direct payment rate from the 2002 farm bill target price, and multiplying the result by the Olympic average of 2002‐2006 national yields per harvested acre. If actual national-average revenue per acre is less than the target revenue, then payment rates are calculated by dividing the difference by the current national average countercyclical payment yield.
So what happens to your revenue stream if these proposals make it into the 2007 Farm Bill? The economists at FAPRI applied the proposals to farms which had a mix of program crops. “For these 21 farms, average annual direct payments over the outlook period are five percent higher under the administration’s proposal.”
Regarding the lower rates for the marketing loan, FAPRI said, “The result of the lower loan rates has a negative, but small impact on marketing loan benefits on all of the representative farms. Under baseline market conditions, the Feedgrain-soy and Crop-beef farms are projected to receive little marketing loan benefits anyway. Therefore, the lower loan rates in the administration’s proposal have little effect on these farms.”
And for the switch to a revenue counter cyclical program, FAPRI said, “The change in the countercyclical program negatively impacts all (farms). Under baseline market conditions, the feed grain-soy and crop-beef farms are projected to receive very little income from the countercyclical program. The farms in these two categories average about $500 per year in CC payments in the baseline. These payments drop to an average of just over $100 in the administration’s proposal.”
Looking at total revenue:
1) The Feed grain-soy and Crop-beef total government payments increase by an average of three percent annually.
2) Crop prices are not affected much by the change in policy. Corn, soybeans, and wheat prices are within one or two cents of the baseline in the administration’s scenario due to little change in acreage planted for each of these crops nationally. Of the 22 representative farms, 21 have lower average annual market receipts under the administration’s proposal when compared to the baseline.
3) The impact on net cash farm income for the majority of the farms is minimal. Net cash farm income on 21 of the 22 representative farms changes by less than one percent. Five of the 22 representative farms have a reduction in net cash farm income under the administration’s proposal.
4) However, the increase in market receipts is greater than the decrease in government payments and results in an increase in net cash farm income.
Summary:
USDA’s Farm Bill proposal was written to have minimal impact on the federal budget but to remove threats to the US farm programs from their world trade critics. While the trade issues might be smoothed out with the changes, farm families will feel little impact to their bottom line.
Posted by Stu Ellis at 12:56 AM | Comments (0) | Permalink
June 15, 2007
Extension Update
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.
Monday’s crop report was a “tweaking” of prior estimates. Aug. 31 stocks were forecast at 987 mil. bu., and the average price was tightened to $3.00 to $3.10. Estimates of the coming marketing year were unchanged, except for carryout being raised to 997 mil. bu. and the average farm price for the coming year estimated at $3.10 to $3.70.
Outlook Specialist Darrel Good says December ‘07, ‘08, ‘09, and ‘10 corn futures contracts are over $4.00, with the deferred contracts reaching new highs. Prospects for extreme price volatility will make new crop corn and soybean pricing decisions very difficult, particularly for those in dry areas. Still, the high prices offer good returns.
For soybeans, the USDA made no changes in the projections for the current US marketing year. Extension’s Darrel Good says, “The pace of the domestic crush through April suggested that the projection for the year might be increased. Projections for the 2007-08 US marketing year were also unchanged from May, except that the forecast of the marketing year average price was increased by $.15, a range of $6.65 to $7.65.”
Soybean prices could still be bolstered by exports, according to Iowa State Specialist Bob Wisner. Exports from Sept. 1 through May 24 were up 22% from 2006, while the season total projected exports are up 14%. That means exports will have to decline 57% to reach USDA estimates. “If weekly exports for the next several weeks are not down this much, export demand will likely provide additional support for soybean prices.”
The market awaits USDA’s June 29th acreage report, which Bob Wisner at Iowa State says will indicate whether weather and market conditions caused farmers to deviate from earlier plans to sharply increase corn plantings and to sharply reduce soybean and cotton acreage. He says, “A weaker corn market than when the March 1 planting intentions survey was taken and delayed plantings open up the possibility that a few more acres of soybeans and a few less acres of corn were planted than farmers intended on March 1.”
Wheat markets have seen healthy advances this week, in part from USDA’s crop report, which decreased the 2007-08 ending stocks to 443 mil. bu., says Missouri ag economist Melvin Brees. “Also, world wheat production estimates declined 6.7 mmt, reflecting production problems in Russia and Ukraine. World wheat 2007-08 ending stocks continue to decline. They are now projected at 112.03 mmt and the lowest in 30 years.”
Hog slaughter is running 3.5% more last year, well above the 1.6% increase expected in the March USDA pig crop report. But imports from Canada are up 8.6%, which raises the US slaughter rate to only 3.3% since March 1. Livestock economist Glenn Grimes at Missouri expects USDA to make adjustments in the next hog and pig inventory report.
Hot and dry conditions will speed up the larval and pupal development of many soil insects, including corn rootworms, say entomologists. It is known that drought stress may affect the synthesis of proteins in corn tissue in positive as well as negative ways. The effects of drought on protein production depend on the severity of the drought.
Bt hybrids perform about the same as non-Bt hybrids with the respect to leaf appearance and tasseling going into a drought period, according to research at Iowa State. However, at the end of the growing season, there were significant differences between the two. Total plant weight and total grain yield were 9-10% more for Bt hybrids.
Western bean cutworms, which are quickly spreading across the Cornbelt, are expected to invade corn fields by late June, but accurate identification is needed before spraying. IL Extension Entomologists are soliciting reports of confirmed captures in pheromone traps, but are finding others also. Scouting tips.
Bug battles! It seems quite early, but entomologists are reporting significant numbers:
1) A trap averaged 4,700 Japanese beetle catches per day last week in Southern IL.
2) Soybean aphids in MI are at economic thresholds, even at early vegetative stages.
3) European corn borers may have a larger second generation this year than seen in 2006.
4) True white grubs are being found periodically, and are significantly damaging crops.
5) Asiatic garden beetles have become a new invasive threat to IN corn in sandy soils.
6) Burrower bugs are being linked to heavy root damage in IL corn for the first time.
7) Spider mites are being found in soybean fields where plants are stunted by drought.
At-risk corn should be checked for nematodes and this is a good time to do that. If you have second year corn, low or no-till corn, and have not applied a nematicide, or an insecticide that suppresses nematodes, get a soil sample and have it tested. Tips on sampling.
Dry soil conditions can reduce weed control efficacy of some postemergence herbicides, and some weeds can be difficult to control even though they are growing. Extension weed specialist Aaron Hager says increase application above 0.75 lb ae/acre if drought conditions are prevalent, weeds are over 6 to 8 inches tall, and/or "tough" weed species, such as annual morning glory, common lambsquarters, or perennial broadleaves, are prevalent in the field. Include Ammonium sulfate with all glyphosate applications.
Curled leaves in the afternoon are decreasing the overall growth rate of corn, but IL Extension’s Emerson Nafziger says crop prospects have not been compromised greatly up to now. If tasseling is less than two weeks away, it is close to the maximum sensitivity to dry soil stress, and the potential for yield loss will increase if the crop shows stress in the week before tasseling. If it continues into pollination, there can be serious yield loss.
Posted by Stu Ellis at 12:54 AM | Comments (0) | Permalink
June 14, 2007
When And Where Do You Get The Best Prices For Hogs?
Earlier this week Iowa State Economist Don Hofstrand said the successful farming operation of the future would leverage information as much as you leverage capitol today. Information can frequently be more important than any other resource required on the farm. And information about open markets gives the producer the opportunity to make a choice about where and when a commodity will be sold. If there are advantages offered by location and time, then you want to sell your commodity at those locations at that time.
Grain producers will closely watch the local basis to know when it provides an advantage. Livestock producers can do the same, and University of Missouri livestock economists Glenn Grimes and Ron Plain have analyzed USDA’s mandatory hog price data for the past five years to develop a trend of where and when producers will likely have an advantage in selling hogs, compared to random deliveries.
After market information was forced into greater sunlight by the 1999 Price Reporting legislation approved in Congress, actual values could be more readily determined. The information has been published by USDA since 2001, and the Grimes and Plain research focused on 2002-2006 for hog markets.
Everyone knows that today’s electronic marketing allow commodities to be traded around the clock, so the clock was divided into several segments to determine what time of day offered better prices than other parts of the day. USDA’s market reports cover 70% of the federally inspected slaughter and include:
1) The Morning Report covers hogs purchased by packers between midnight and 9:30 a.m. by state.
2) The Afternoon Report covers hogs purchased between midnight and 1:30 p.m. by state
3) The Prior Day Report covers hogs purchased by packers between midnight and midnight by slaughter plant location.
In addition to the time reports, USDA broke the information down into geographic areas of: Eastern Corn Belt, Iowa-Minnesota, Western Corn Belt (which includes Iowa-Minnesota hogs) and National. Grimes and Plain found that afternoon prices were higher than morning prices with only a few exceptions during the five year period. “These positive differences existed in quarters when prices were trending downward as well as quarters with uptrending prices. Over the years 2002-2006, the average afternoon price has been roughly 28 cents higher than the morning average. We believe that the best explanation for the positive difference is that many marketing contracts are currently priced off the Morning Reports, thus creating an incentive for packers to delay aggressive bidding until after the Morning Report data have been submitted to USDA. Afternoon prices are then bid higher.”
The Missouri economists discovered the prices in the Prior Day report averaged 12¢ more than the afternoon price in the Western Cornbelt, but only 5¢ more than the Eastern Cornbelt.
For the last five years, the Prior Day Report price for the Western Cornbelt averaged 12 cents higher than the afternoon price in the Western Cornbelt. The difference in the Eastern Cornbelt was only 5 cents. They say the Prior Day prices should be the hardest to manipulate of all those in the Mandatory Price Reporting system. They also found, “The Iowa-Minnesota afternoon price averaged 71 cents higher than the Eastern Cornbelt, 35 cents higher than the National average, and 13 cents higher than the Western Corn Belt.”
The bottom line for setting contract values is:
1) Use the Afternoon or Prior Day reports to set your base price.
2) Avoid using the Eastern Cornbelt price as a base for packer contracts.
3) The Iowa-Minnesota and Western Cornbelt prices are comparable, and slightly more than the National price.
Summary:
If you are selling hogs or setting base values for production contracts, the Mandatory Price Reporting system may offer several alternatives. The highest prices are found in the Afternoon and Prior day reports, as well as the Iowa-Minnesota and Western Cornbelt geographic areas.
Posted by Stu Ellis at 12:11 AM | Comments (0) | Permalink
June 13, 2007
Can We Really Produce Enough Corn With The Soil Moisture Conditions As They Are Everywhere?
Cornbelt weather is running from very wet to very dry, accompanied by wide ranging crop conditions, all in a year with very little room for slippage. Corn demand will draw down stocks severely, the soybean carryout will be cut in half, and demand will continue to increase. The latest crop condition reports indicate over three quarters of the corn and beans are in good to excellent condition, but is that a windshield estimate? It certainly is not a satellite view.
USDA’s National Agricultural Statistics Service today released the latest crop condition and soil moisture reports. You will be able to see the conditions in your part of the country are probably not the same as elsewhere, due to the great weather variability of 2007.
ILLINOIS: A majority of topsoil moisture is now in the short to very short category, with only 48% adequate and 1% surplus. Despite the shortage, the corn averages 26 inches, which is 8 inches more than last year. The chance of rain came and went for many areas across the state last week with only limited areas receiving any significant rainfall. The strong winds received on Thursday depleted topsoil moisture very rapidly. Topsoil moisture levels held fairly steady in northern Illinois which received the most rain but decreased greatly across the rest of the state. Last weeks heat and dry weather caused
corn leaves to roll in the heat of the day and is being credited with uneven emergence in many soybean fields. Soybean planting was virtually complete last week for all but the double crop beans. Farmers report that what remains of their wheat crop, after the Easter freeze, is maturing quickly due to the heat and dry conditions.
INDIANA: 66% of topsoil moisture is now short or very short, with 50% of subsoil moisture rated short or very short. The corn condition is 61% good to excellent, with 56% of the beans in the same shape. Another week of spotty rains has left topsoil moisture very short in many areas of the state. Soybeans have been slow to emerge in some fields due to lack of moisture. Corn fields are showing signs of stress in areas that have not received any of the recent precipitation.
IOWA: Topsoil moisture is 77% adequate and 16% surplus, with subsoil moisture rated 78% adequate, 20% surplus. Corn averages 14 inches, and 77% is in good to excellent condition. Beans are rated 78% good to excellent.
KANSAS: Topsoil moisture is 74% adequate and 9% surplus, with subsoil moisture 80% adequate and 11% surplus. 75% of the wheat has turned color, behind the 2006 and longer term averages. Forage is 74% adequate and stock water supplies are 82% adequate.
MICHIGAN: Topsoil is 71% adequate and 6% surplus, with subsoil 81% adequate and 4% surplus. Small grain crops are in the 60% range of good to excellent.
There was little rainfall seen across most of State. Variable weather conditions continued across the state. Most areas received rainfall, although precipitation amounts varied. Corn growth advanced with humid weather and the conditions varied but remained generally good. Soybean growth is slow.
MINNESOTA: Topsoil moisture is 88% adequate to surplus. Corn is 14 in. in height, above the 2006 and long term averages. Alfalfa crops are 67% good to excellent. Pastures are 69% good to excellent. Crop development continued ahead of the five year average. Areas in the northwest, west central parts of the state received an additional inch or more of rain which added to pockets of already surplus soil moisture.
MISSOURI: Topsoil moisture is 85% adequate to surplus. In general, corn, soybean condition is very good, although a few minor problems are appearing in different areas around the state. Uneven emergence was reported in the east-central district, while double-crop soybeans are struggling to emerge in dry Bootheel soils. Soybean planting, emergence are still well behind in the southwest district.
NEBRASKA: Topsoil moisture is 84% adequate to surplus, and subsoil moisture is 79% adequate. Corn condition is 86% good to excellent, and soybean conditions are 79% good to excellent. The wheat is 83% fair to good. Pasture and range conditions are 58% good, and 17% excellent.
NORTH DAKOTA: Topsoil moisture is 80% adequate, 20% surplus. Subsoil moisture is 79% adequate and 14% surplus. Durum wheat conditions 94% good to excellent. Spring wheat, barley, and canola crops are all ahead of long term averages. Spring planted row crops were delayed in planting because of wet weather but are generally progressing quite well. Hay conditions are 83% good to excellent. Stock water supplies are 97% adequate to surplus. Pasture and range conditions are 78% good to excellent. Rainfall occurred over most of the state last week, and warm, dry days are needed to dry out fields so that producers can finish their fieldwork activities.
OHIO: Topsoil moisture is 57% short to very short. Soybean emergence is above average, and wheat is turning earlier than usual. Corn is 68% good to excellent.
Hay condition is 73% fair to good. Pasture condition is 71% fair to good, and Soybean conditions are 80% fair to good. Most areas throughout the State need rain to replenish the topsoil moisture. Producers in the Southeast and Central districts report the beginning signs of drought dairy farmers are out of pasture, have begun feeding hay, silage to livestock, corn is showing drought stress, and milk production has dropped due to heat and loss of pasture.
SOUTH DAKOTA: Topsoil moisture is 96% adequate to surplus, and subsoil moisture is 88% adequate to surplus. The corn averages 9 inches, about the same as long term averages. Hay is rated 76% good to excellent, stock water supplies are 84% good to excellent. In a rare occurrence this week, the western part of the state received precipitation while the eastern part stayed mostly dry. The driest area is becoming more isolated to the extreme southwest corner of the state.
WISCONSIN: Topsoil moisture is 84% adequate to surplus. The average corn height is 11 inches, and 88% is in good to excellent condition. Beans are rated 83% good to excellent, and wheat is 82% good to excellent. Pasture conditions are 73% good to excellent. Rain continued to help corn progress as corn heights reached record levels.
While northern and western sections of the Cornbelt have had adequate amounts of precipitation and good growing conditions, the eastern part of the Cornbelt has been quite dry, as indicated by the state reports for Illinois, Indiana, and Ohio. Their dryness is depicted in the vegetation health index released today by NOAA.
Summary:
The eastern part of the Cornbelt has suffered from lack of rainfall in the past month, despite reports of corn crop conditions that are in the high 60% and low 70% range for good to excellent. However, the lack of rain has shown up in soil moisture conditions, and a satellite that depicts the health of the vegetation covering the eastern Cornbelt.
Posted by Stu Ellis at 12:54 AM | Comments (0) | Permalink
June 12, 2007
Today's Investment In Ag Research Yields Many Dividends Tomorrow
A recent survey of Cornbelt farmers indicated their belief that agricultural research would generate the greatest benefit toward increasing their profitability in the long term. Research that occurs both in the laboratory and in the field is expensive because of all the attempts needed to get one good result. While seed, chemical, and other input companies conduct their own research, they generally tweak the expensive basic research that occurs at universities and USDA research facilities. As the new Farm Bill is written, the funding mechanism for research will be on the table for a major overhaul.
As unlikely as it seems, funding for research is quite controversial. But there are hundreds of millions of dollars involved, so you should expect everyone wanting a share of the pie. The controversy is generally between those who believe certain universities should get a set share of funding allocated by formulas, versus those who want all universities and researchers to compete for available funding.
Pending in Congress for Farm Bill consideration are several different plans, including a complete USDA proposal for renovating ag research funding. Purdue University’s Farm Bill series includes an analysis of the alternatives.
In recent years, ag research funding has been part of a larger fund that also finances the Forest Service, Extension, and the Economics Research Service, but the funding for the umbrella agency has been flat. Over time research and Extension funding has been unable to keep up with inflation, while other federal research agencies such as the National Science Foundation and the National Institutes of Health have seen their funding increase by leaps and bounds. The result has been limits on ag research initiatives and decay at university facilities.
Numerous advocates of the ag research process have called for increased funding, but critics have contended there is a lack of coordination from state to state. The various state research coordinators contend they are addressing issues in their own states with their research funds, while communicating their findings to others. To solve the process without jeopardizing funding, several alternatives have been proposed:
1) The USDA’s Farm Bill proposal makes some administrative consolidations and creates several funds for research. Initially a $50 million fund would jumpstart bioenergy research, and a $100 million fund would expand specialty crop research. The agency would also research highly infectious foreign animal diseases on mainland locations in the U.S. and invest $10 million toward organic research.
2) The proposed National Institute of Food and Agriculture (NIFA), developed by a USDA panel led by William Danforth, Chancellor Emeritus of Washington University, St. Louis. It does not consolidate any administration, but proposes a new competitive grants program for fundamental research only, starting at $245 million per year and growing to $966 million per year in the fifth year. This new funding would be in addition to existing authorizations for ARS, CSREES, ERS, and the US Forest Service, which will continue to support integrative and applied research programs and invest in capacity.
3) CREATE-21 is an acronym for Creating Research, Extension, and Teaching Excellence for the 21st Century and is proposed by the National Association of State Universities and Land Grant Colleges. It combines elements of the Administration’s proposal and the Danforth Committee’s NIFA proposal. It ensures that adequate funding is available for public agricultural research to be distributed based on competitive and formula approaches, meets fundamental and applied research needs, provides for capacity building and infrastructure, and requires a complete reorganization and consolidation of federal and state agencies undertaking agricultural research. The suggestion in this proposal is that total authorized funding must start at a Fiscal Year 2007 baseline of $2.68 billion per year and grow to $5.35 billion per year in the seventh year.
Pending proposals in Congress include all of these proposals, nearly guaranteeing they or some of their elements will form the basis for ag research in the next five years.
Summary:
While the wheels of ag research seem to turn slow, continual rotation will provide financial benefits for farmers in future years. The new Farm Bill contains a major overhaul of the way basic agricultural research is funded, which is the most expensive kind. Federal investment in ag research has waned while health and science investment has expanded. Several alternatives for change attempt to increase the funding, while address criticism of the way the funding is allocated. Every farmer has a vested interest in the funding because of its impact on future profitability.
Posted by Stu Ellis at 12:18 AM | Comments (0) | Permalink
June 11, 2007
Buckle Your Seat Belt For A Visit To The Future Of Farming
You may not have much book work to do in your office at this point in the year. It is well past the lending and tax seasons. You are doing some crop scouting and monitoring the markets, but if your crops are all planted, you probably have time to do some thinking about your farm business. While that should always be at the top of your mind, let’s focus on analysis and new ways of thinking about your future.
Economist Don Hofstrand has a wealth of information about business strategies in the June issue of the Iowa State University Ag Decision Maker. But there are two particularly noteworthy elements in his section on Strategic Management for Farm Businesses.
To analyze where your finances are at any point in time you compile a statement of financial position. But to see were your business organization is, you need to conduct some external and internal scanning.
1) External scanning is analyzing the world around you. Hofstrand says, “External scanning involves looking past the farm gate and examining and assessing the economic, business and social environment surrounding your business.” Everything changes every day: technology, markets, farm policy, and neighborhood competition for land. If you are raising corn, beans and hogs, you need to scan those industries to ensure you are knowledgeable about the dynamics in those industries. Look at your competitors, particularly if you are producing a specialty item along with several other farmers in your vicinity. Scan such things as interest rates, business regulations, consumer preferences and anything that will impact your business from outside your control.
2) Internal scanning is exploring your business from the inside to identify strengths and weaknesses, evaluate your performance as a manager and the other personnel resources available to you. Look at each enterprise from the inside and break each down into different segments that can be analyzed for strengths and weaknesses. For example, if recordkeeping is a weakness, farm it out to a professional, or someone else in your operation that would do a better job than you.
After your internal and external analysis is complete, Hofstrand encourages you to consider some new ways of thinking about your operation. During your external scanning you probably determine that agriculture is in a constant state of change, from the realm of production, to the marketing change. We entered the biotech age less than 10 years ago, and now we are energy producers. Farmers who are quicker to adapt and take advantage of new opportunities will carve out their niche in the most profitable areas.
• Today you are producing commodities for the food industry, but tomorrow you will be producing food and energy commodities with potentially volatile markets.
• Today you are producing corn, soybeans, hogs and cattle for commodity markets where every unit of production is the same, but tomorrow you will be selling products with specific attributes, and if it does not meet specifications it may not have a market.
• Today you produced a commodity and then tried to sell it, but tomorrow you will determine what will sell for the best revenue for your operation, then produce that item.
• Today your focus is maximizing your production techniques of a few commodities, but tomorrow your focus of how to produce may be overshadowed by what to produce.
• Today you expanded until your labor and management were fully employed, but tomorrow you will have a team of consultants and specialists to assist with labor and management.
• Today you are an independent farmer working for yourself, but tomorrow you will be the CEO of a business with a team of specialists and managed labor.
• Today you worked for yourself to produce a commodity for the open market, but tomorrow, you will be producing specific desired traits for an integrated market system.
• Today you have managed assets because it took a large amount of capital to farm, but tomorrow you will be managing information which will become the most important resource to manage.
• Today you leveraged money by either borrowing or leasing assets, but tomorrow your ability to leverage information will be just as important as leveraging money.
• Today you expanded by farming more acres, raising more livestock or expanding horizontally, but tomorrow you will vertically expand by controlling a portion of the food and energy chain below and/or above your operation.
• Today you increased your income by maximizing your production with additional bushel or head of livestock, but tomorrow your revenue will be maximized with the specific traits or attributes you decide to produce.
• Today you were confronted with a mature, stable food market with little opportunity for increasing revenue, but tomorrow you will be challenged with the opportunity to produce for a volatile food and energy market.
• Today you have produced a generic commodity and been a price taker, but tomorrow you will produce items with specific traits and have more influence over their marketing.
• Today you have bought retail and sold wholesale, but tomorrow you will buy directly from an input producer at wholesale levels and market your specifically traited products to end users.
• Today you competed with buyers and suppliers on similar price levels, but tomorrow you will be partnered with buyers and sellers as part of a supply chain.
Summary:
Farmers have the opportunity to strategically control their operation and their future. A thorough analysis must be taken of both the business environment as well as the internal dynamics of the operation. Using those facts, farmers can prepare for a dynamic change in agriculture which integrates inputs and markets and creates supply chains of products with specific traits demanded by the market. Replacing the mentality of “today” with the opportunities of “tomorrow” can give a producer opportunities to create his own success.
Posted by Stu Ellis at 12:46 AM | Comments (0) | Permalink
June 8, 2007
Extension Update
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.
What are your basis charts telling you? Those kept by IL Extension’s Darrel Good indicate the old crop basis has tightened considerably, thanks to slow farmer sales, as well as increased ethanol consumption, brisk exports, and strong livestock feeding margins. The basis for July corn futures is the strongest in four years, he says. Read his newsletter.
The new crop basis is another story says Darrel Good. The basis for Dec futures is weaker than the average of the past four years, which he says reflects expectations of an abundance of corn and no storage for it. But Good says that may be premature because the total supply this fall will only be 900 mil. bu. more than last year when basis levels were relatively tight. With smaller crops of soybeans and other grains, and with newly built storage, he says storage shortages should not be more severe than in recent years.
Local storage problems may occur says Good, particularly where more corn than usual was planted, and where yields will be higher than average. Significant quantities of corn will likely have to be stored in temporary facilities, as has been the case in recent years.
Recent warmer weather has pushed emergence percentages for both corn and soybeans slightly ahead of the 5-year average says Outlook Specialist Bob Wisner at Iowa State. “These developments and the corn crop condition rating showing 78% of the major states corn in good to excellent condition are favorable indicators for corn yields this year, provided summer temperatures and rainfall are near the long-term averages.”
When Chinese soybean buyers purchased 70% of their 2008 needs last month, Iowa State’s Wisner said, “The aggressive Chinese purchases indicate its soybean needs may be greater than previously believed. That, would tend to support or increase soybean prices, and could strengthen corn prices as the corn market attempts to draw more acreage from soybeans next spring.” Read the rest of his Farm Outlook newsletter .
There is a 50/50 chance the US corn yield for 2007 will be 154 bu/A, says Iowa State meteorologist Elwynn Taylor. And he says there is a 30% chance of 163 bu/A and a 20% chance of 133 bu/A. Taylor says there is a 59% chance of exceeding the 148.4 bu.trend yield. He bases his estimate on 1) above average subsoil moisture in much of the Cornbelt, 2) a statistical risk of widespread drought, 3) the shift from El Nino toward neutral, and 4) sea surface temperatures in the central and North Pacific and in the Gulf of Mexico. He said late May crop reports indicate corn conditions exceeded recent years.
USDA cut its forecast for the national average yield in May to 150.3 bu./A. Mike Woolverton at Kansas St. says, “If realized that would give us about 12.5 bil. bu. of corn. That is near the minimum necessary to comfortably meet the needs of corn buyers including the 120 ethanol plants now on line and the 77 new plants under construction, most of which will come on line during the 2007-2008 marketing year.” He says corn supply will be weather dependent, but the chance for a hot, dry Cornbelt is diminishing.
Multiple surveys by farm managers, real estate brokers, and the Chicago Fed’s banking network “agree that farmland has continued to post impressive returns, especially in the context of a broader universe of alternative investments.” IL ag economists report “Annual returns comprised of capital gains plus current income less property taxes for IL farmland have been 15.6%, 17.8% 11.9%, and 10.8% on 1,3,7,and 15 year annualized bases.” The reasons were low interest rates, high income, and 1031 exchange pressures.
Should you buy farmland? The IL ag economists say cash rents are rising, crop share leases are diminishing, and while land values are not accelerating as rapidly, the trend is still higher and is expected to continue upward for the foreseeable future. Commodity prices remain an uncertainty with questions about the sustainability of increasing demand for ethanol. But the economists say market sentiment is bullish for farmland investment.
Soybean aphids are becoming easier to find in Midwestern bean fields, but that is not a recommendation to begin spraying, say entomologists. They say take advantage of:
1) Temperatures that approach or exceed 90 degrees, since aphids do not do well in heat.
2) Natural predators, such as the insidious flower bug and larvae of Asian lady beetles.
The discovery of soybean aphids is not unusually early according to entomologists, who have issued a number of pest management bulletins in recent days about aphid concerns.
1) Illinois
2) Indiana
3) Michigan
4) Ohio
5) Wisconsin
If you are spraying a foliar fungicide, because of corn prices, planting corn-on-corn and fungicide advertising, you are probably not alone. But Extension specialists suggest your decision should be based on the disease susceptibility of your hybrid; recent and future rainfall and humidity; and your own scouting observations about the need for it.
Giant ragweed, resistant to ALS inhibitors such as Classic, FirstRate, Synchrony, Pursuit, and Raptor, can be controlled if a PPO inhibitor such as Flexstar, Cobra, or Phoenix is used at a full rate in a tank mix with your ALS herbicide. Ohio State weed specialists say adjuvant selection should also be geared to maximize the activity of the PPO inhibitor, and the field may require a second postemergence application.
If you are considering producing a biomass crop, Iowa State has published factsheets on miscanthus and switchgrass, which address soil and site adaptation, life cycle and growth, fertility, yield, harvest considerations and pest and disease management. The factsheets are available here.
Producers and consumers of farm fresh commodities have new capabilities with the new national Marketmaker website, with most states on by the end of the year. 160,000 food industry businesses are now in the searchable database, enabling the user to find a truck load of sweet corn, an outlet for strawberries, a source for organic meat, and many others. The database and interactive maps are available here.
Mark your calendar for Aug. 16 for Univ. of IL Agronomy Day. Presentation topics include: corn yield determinants, managing continuous corn, foliar fungicides, SCN, weed control issues, soybean aphids, rootworm refuges and granular insecticides, yield trends, reducing nitrates in field tile, converting manure to crude oil, making and using biodiesel, alternative energies for farmsteads, producing miscanthus and switchgrass. Find details about presentations and crop tours.
Livestock economist John Lawrence at Iowa State says in spite of near record selling prices, feedlots lost money on cattle sold in Jan and Feb. Current profitability should continue at least into the fall as the purchase price paid for feeder cattle declined for cattle sold during this period. Feeder cattle prices have rebounded as fed cattle prices increased and corn prices decreased. Prices for feeder cattle will be sensitive to corn prices, but yearlings are forecast to remain above $1/pound for the remainder of the year. Read more.
2007 should be profitable for cowboys, but Lawrence says there are some wild cards:
1) Consumer demand has been good, but spending could collide with high gas prices.
2) Canadian imports are rising, Japan is buying more, and Korea is being stubborn.
3) Cheaper corn means heavier market weights, pricey corn accelerates marketings.
Hog prices are in their seasonal pattern says Iowa State’s John Lawrence. They were higher in May, will level off for the summer with a peak before mid August. Over the last 10 years hog prices increased an average of 12% from March to May. This year, prices increased 20% during this period and the summer peak may not be in yet.
If she is hot, cold, or cramped researchers at the Univ. of IL will know how a gestating sow feels, so pork producers can control the microenvironment around the sow and increase her productivity. Ag engineers have devised a 24 hour camera and video tape system with environmental sensors to detect discomfort and improve pork economics.
The U of IL environmental research will also include social interaction since 70% of gestating sows kept in individual stalls rather than group pens. The researchers believe pigs in general have a social ranking, no matter where they're housed, and that ranking carries a physiological consequence. They said younger sows suffer when housed with older sows, which can intimidate younger animals housed in adjacent gestation stalls.
Posted by Stu Ellis at 12:06 AM | Comments (0) | Permalink
June 7, 2007
What Share Of Your Household Budget Is A Farm Program Payment?
While the Congressional committees prepare proposals for a new Farm Bill, budget watchers have been raising the red flag of warning that too much money is being spent. Although farm programs are only ½ of one percent of the federal budget, there are many critics of how USDA funds are spent and distributed. Farmers who are receiving the controversial payments should be fully aware of how those funds are allocated because you have a seat at the table.
Farm program payments began as a means of ensuring there were enough farmers to provide food to a starving nation in the 1930’s. While that may be a tangential reason today for farm program payments, they have a significant role in keeping family farm operations in the black, and play a role for farm household budgets. That is the contention of USDA economist Robert Hoppe in his analysis, The Importance of Farm Program Payments to Farm Households.
Hoppe says USDA distributed $112 billion between 2000 and 2005 in the form of direct and countercyclical payments, LDP’s, and various disaster and conservation payments and grants. Payments are generally small for the less than half of the farmers who receive them. But because the size of their operations increases their eligibility, a few larger operations receive a greater share of the payments. The economist notes that larger operations, whether land is rented or owned, will have multiple households involved that might share in the farm program payments, diluting the impact of the payments to the operation. Additionally, the farm program payment become less important if there is non-farm income in the family budget.
Hoppe found that 75% of large family farms receive payments; and about half of small commercial farms do, as do a third of residential/retirement farms. That is primarily connected to production of program crops, and the smaller farms are more likely to have livestock making up part of their household income. However 58% of the farm program payments go to large family farms which produce 61% of the USDA program crops. Residential/retirement farms make up two-thirds of all farms and receive over half of all of the conservation payments, since many of them may have CRP land, which is 82% of all conservation payments.
The primary income for typical US households is wage and salary income, which is steadier than the great variability in farm family households. Policy makers see one of the functions of farm program payments is to provide financial stability. Hoppe says for most farm operations farm program payments are “a relatively small share of cash receipts and play only a minor role in smoothing out the effect of variable farm incomes on farm household well-being.” He says accumulated household wealth and off farm income play a much larger role than farm program payments within the total family budget. He says 15% of farms in 2005 received more than $10,000 in USDA payments, but payments went up as farm sales increased. The average payment was $76,900, and Hoppe says in that territory, "The importance of the payment to the well-being of even these high-payment farm households is likely to be overstated.”
While critics may find fodder in those statistics, they should acknowledge that farm program participation comes with obligations as well.
1) Receipt of some payments such as CRP does not indicate money is received on top of other money earned, but replaces lost crop income.
2) Some conservation payments are in exchange for expenses incurred for installing certain conservation practices, and converting the land from productive to a public conservation benefit that is a net loss to the producer.
3) Larger farms are more likely to rent significant portions of the land in the operation. Many of the farm program payments have been capitalized into rental rates that go to the landowner, and only pass through the operation bank account.
4) For larger operations there will be multiple households that will share in the income from the operation, including farm program payments, and that reduces the amount going to each household.
Summary:
One of the lightning rod issues of farm policy debate is the distribution of farm program payments. While the total exceeded $100 billion over a five year period, the amounts received by most operations was quite small, and represented a small portion of their household income. With increased needs for off-farm income, the importance of farm program payments may be seen as diminishing. However, many of the payments per farm operation have to be shared among multiple households. Many of the payments may be for conservation practices, and either replace lost income from CRP acres, or provide an increased public benefit for soil and water conservation.
Posted by Stu Ellis at 12:50 AM | Comments (0) | Permalink
June 6, 2007
Have Farm Programs Caused You To Be A Lazy Marketer?
How do you manage your price risk? Is it a case of prices are high so why bother? Is it a case of selling cash when prices drop? Or do you actually forward contract, and use the futures and options market? And just out of curiosity, does the fact of guaranteed farm program paym