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August 31, 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.
Wheat prices continue to set records. That is because of shorter crops in the US and strong overseas demand. At Kansas State, Mike Woolverton says, “The global wheat carryover stocks forecast is at the lowest level since 1979/80. Production and harvest problems in European Union countries and in Canada were cited as reasons for the drop. Persistent dry growing conditions are expected to limit replenishment of world stocks from Southern Hemisphere wheat producing countries. US exports are 90% over 2006.
Wheat prices will fade, and Woolverton says act quickly to take advantage of strong prices, “The market is pricing wheat at shortage levels now, but the shortage is likely to be alleviated by next summer, followed by even more wheat production the following year. The message from the market to producers is clear, lock in price on as much 08 and 09 wheat as possible now or expect to get at least one dollar per bushel less next July; even less the following July.” Read his newsletter.
But the corn and bean markets are different says Woolverton, who believes the strong demand for them will continue. “There are 4 Dec corn contracts on the board. At $3.60, the Dec. 07 contract is the only one below four dollars. All are well above the long term average price for corn. It might be a good business decision to lock in profits on parts of this and future year crops now. The same can be said about soybeans for 07, 08 and 09. While it looks as if soybean prices will remain high; and it might go to $10 per bushel sometime during the next three years, it could also fall to below the cost of production.”
Knowing your actual yield may be less than a month away, but if you can’t wait, make corn yield estimates based on kernel count in one-one thousandth of an acre. That is 17 ft and 5 in. for 30 in. rows. Pick 3 representative ears, then calculate average kernels by kernels and kernel rows. Total ears X kernel rows X kernels divided by 90 equals bu. per acre based on 90,000 kernels per bu. Repeat the process at random locations for accuracy, or visit the IL calculator.
Double crop and drought-stressed beans may make better hay or forage than their seed value. But Extension weed specialist Aaron Hager says beware of herbicide impact:
1) A Canopy (soil) application prevents grazing or harvesting beans for forage.
2) Ultra Blazer (post emerge) also prohibit use in livestock feed or forage.
3) Dual II Magnum prohibits feeding if applied post emerge, but not for pre-emerge.
4) FirstRate carries a 14 day restriction between application and harvest for forage.
5) Glyphosate also carries a 14 day restriction between application and feeding.
6) Some Glyphosates have a 25 day restriction if used on non-Roundup Ready beans.
Heavy Iowa rains have caused concerns about crop quality, and Iowa State’s Palle Pedersen says submerged beans will die because of high temperatures; however it is hard to predict the future for beans in 6-12 in. of standing water. Pedersen says beans in standing water for 48-72 hours will suffer stem rot, then lodging, and finally seed rot.
Soybean agronomist Pedersen is also concerned about moist pods that will attract bean leaf beetles, foliar diseases, downy mildew and phomopsis that will hurt seed quality. He says there is not much to be done, but hope water recedes rapidly and some yield saved.
Some Ohio beans are also flooded and Ohio State researchers are analyzing 220 Asian varieties that show abilities to survive flooding. Beans cannot usually handle the toxicity of carbon dioxide and will lose up to 60% of their yield. The Ohio State project hopes to find a flood tolerant bean that will lose no less than 20% of its yield.
The rains that flooded Iowa are atypical, since most research on the impact of standing water has been done on crops early in the growing season. Some Iowa State research indicates that “once corn has reached silking, shallow depths of flooding will not cause much damage.” Agronomists say root masses are typically declining now. Long term:
1) Stalk disease and lodging will increase with harvest delays to be expected.
2) Ear disease and molds will occur on submerged ears, making them unmarketable.
3) Poor grain quality will create storage and handling problems on farms and elevators.
4) The nitrogen content of the soil will change, and soil sampling should be scheduled.
Normally, healthy, intact kernels at the dent growth stage are not easily infected by fungi, however, Ohio State agronomists say these same kernels softened by excess moisture and damaged by birds become easy targets for both fungi and bacteria and ear rots, most of which are present in soil particles and debris found in flood waters.
But if you feed flood-damaged corn, animal scientist Bill Weiss at Ohio State says soil contamination is not a big concern, since silage will have more dirt. But microbial contamination can cause fermentation problems within the ruminant digestion process and increase the amount of mold and mycotoxins, possibly solved with feed additives.
Scout cornfields for stalk problems, says Purdue’s Bob Nielson. Any stress on a plant, such as too much heat or too many clouds, will impact the rate of photosynthesis, and if that rate declines during grainfill, then stored carbohydrates from the stalk and leaves are shifted into the grain formation process. He says some stalk problems are appearing.
Whether you have been wet, or hot and dry, your soybean aphid problems may have ended for the year. Purdue entomologists say the combination of heavy rains with hot conditions and maturing beans have aphid populations declining rapidly over much of the observation area. Note that the exception is late-planted beans, which will be vulnerable to any aphids looking for soybeans to feed on before overwintering. Keep scouting.
Soybean rust is a diminished threat to the Cornbelt at this point. The USDA’s Asian rust website reports, “In a majority of the areas that were confirmed with soybean rust, rust has remained active but at extremely low levels. Soybean rust is expected to remain at low levels with little movement to other parts of AR as long as the environmental conditions remain the same (hot and dry). Conditions across the region (AR, MS, LA, TN, MO) remain very unfavorable for infection and development of soybean rust.”
If you are drying grain, the drying time is a function of airflow, says NE Extension’s Tom Dorn. But air flows easier and with less energy in a larger diameter bin than a smaller one. The grain depth is shallower in a wider bin holding the same bushels as a smaller diameter bin. That saves on fan size and energy costs. Read the details.
Natural air drying is the recommendation of Ohio State’s Robert Hansen, who says it saves energy costs, but may take 25-30 days to dry 25% moisture corn to 15%. He says it takes extra management, but saves money and works best for long term stored grain.
Pork production is growing slowly despite high feed prices. Purdue’s Chris Hurt says beef and poultry cut back to the point that less meat supply left the door open for pork. He also says that pork was profitable when corn prices rose, and producers elected to absorb feed costs. Read his newsletter.
Chris Hurt says, “The future outlook for the pork industry appears to be one of near breakeven prices overall. Per capita supplies of meat and poultry are expected to begin rising again with pork production to expand by about 3% over the next year.” He is looking for 51-52% lean hogs to average $46-49 over the fall and winter. And he says with both higher market and feed prices next year, margins may be limited to $2/cwt.
China’s misfortune is a gain for the US pork producer, says Missouri’s Glenn Grimes. “It now looks like the speculation about exporting extra pork to China because of their pork shortfall due to disease is likely to happen. China has a zero-tolerance policy for ractopamine. China has just delisted seven more pork plants for finding traces of ractopamine in US pork products. The total number of pork plants delisted is 15.”
Everyone in the beef industry, but the packers, benefited from the higher retail prices for beef in January-July says Glenn Grimes. “The beef processor-retailer margin for this period this year was up 2.5% from last year and fed cattle prices were up 8.6%, but packers’ margin was down 14.8% for the first 7 months of 2007 compared to 2006.”
Beware of red ink in cattle feeding, if steers are purchased for $116-117. Extension livestock economist Dillon Feuz says $3.25 corn means 68¢ per pound feeding cost, and with typical economic deductions, the break-even cost for an 850 lb. steer at a NE or KS feedlot would be $1.16 per pound. He says there is no profit in feeding them.
Aptly titled, "Grain Marketing is Simple (it's just not easy)," is a new Extension publication from MN’s Center for Farm Financial Management, and profiles such marketing notables as “Barney Binless, Hank Holder and Darla Discipline.” Order it for $30 on-line. Readers will learn common mistakes in grain marketing, pre and post harvest marketing plans, and putting it all together.
Posted by Stu Ellis at 1:26 AM | Comments (0) | Permalink
August 30, 2007
Doing Right And Wrong. Do We Practice What We Preach?
We were all raised to know right from wrong. We were all raised to “do the right thing.” If we misbehaved, there may have been the pony whip or being sent to bed without supper. Those childhood lessons are supposed to carry over to adulthood, but do they always when we are confronted with some of the financial stresses that frequent rural America?
Farmers are the salt of the Earth. But sometimes our ethical attitudes may be challenged with perceived economic pressures, say ag economist Harvey James and rural sociologist Mary Hendrickson of the University of Missouri after surveying 3,000 Missouri farmers. They say the recent problems of melamine in pet foods imported from China and E. coli tainted spinach from California show the need to keep the public trust in food production. With the consolidation occurring in agriculture, the researchers believe some farmers may engage in unethical behavior in order to survive; despite the general public’s view of farming as a virtuous activity and rural life more conducive to family life than city life.
The researchers referred to a Farm Futures survey of farmer ethics, but one taken in 1991, and not the more recent one published a year ago. In that 1991 survey, one farmer responded, “Ethics have always been hard to maintain when profit and loss become a matter of survival or going broke.” The characteristics of the Farm Futures subscribers who responded to the survey may be different than the 3,000 random farmers surveyed by the Missouri researchers. In their report they used the responses of 400 farmers. “The average respondent in our sample farmed approximately 940 acres, had 31 years of farming experience, and had sales in 2005 of between $50,000 and $250,000.”
After asking for responses to more than a dozen scenarios, the researchers grouped the scenarios into ones that would be harmful to people, ones that would be unlawful, and ones that were just bad form.
Examples of harmful conduct include:
1. A farmer plants only a part of a field and later suffers crop damage, but he files a crop insurance claim on the entire field.
2. A farmer tells buyers his crops are organic even though some chemical fertilizers and pesticides were used.
3. A farmer continues using an herbicide, even though traces of it have begun to show up in wells in his community.
Examples of unlawful conduct include:
1. A farmer disposes of pesticide containers without rinsing them as required by law
2. A farmer growing a genetically-modified crop retains part of his harvest as seed in violation of the licensing requirements of the seed supplier.
3. A rancher claims business depreciation on a pickup truck used primarily by other members of his family
Examples of bad form include:
1. A bank forecloses on a farm loan without first offering to reduce the interest or principal owed
2. A farmer outbids a second farmer on rental farmland, even though the second farmer has farmed that land for years.
3. A grain elevator forces a farmer to fulfill a forward contract by buying grain from the market at a loss, even though drought caused the farmer’s yields to be low
They found a “relatively strong consensus among respondents that situations resulting in harm are more unacceptable than those that are wrong because they are defined so by law or contract or because they are socially inappropriate. Not surprisingly, this suggests that farmers recognize that not all ethical problems are the same and that some are more serious (i.e., unacceptable) than others.” They also found that perceived economic pressures are related to the greater willingness of farmers to tolerate unethical conduct, and if the practice is widespread in his community, he will be more likely to do the same. On the other hand, the researchers found a greater potential for harmful or unlawful conduct when there are economic pressures than for unethical conduct.
Summary:
The general public holds farmers to a higher standard because of the respect for the industry, but also because of the trust given to the US food supply. However, in times of economic stress, farmers told researchers there is a potential for increased levels of conduct and behavior that might be harmful, unlawful, or in bad form. And in some cases, when the improper practice is widespread in the community, they will join in, despite knowing of the impropriety.
Posted by Stu Ellis at 12:27 AM | Comments (2) | Permalink
August 29, 2007
US Soybeans And Other Oilseed Crops Are Holding Their Own In The World Market
All year Cornbelt farmers have been watching soybean prices that reflect changing demand scenarios in 2008, despite our current record carryover. Supplies may diminish and prices may strengthen if the analysis in USDA’s latest Oil Crops Outlook comes to fruition.
When the August 1 Crop Report was recently released, USDA indicated the smaller planted acreage this year would yield about 2.625 billion bushels of soybeans, a crop that will be small enough for demand to draw down some of the 590 million bushels of beans left over at the end of the month when the marketing year shifts to 2007/08. The current surplus has not been a burden to the futures market with $8 and $9 beans since last winter. However, the surplus has been a burden to the cash market which has sometimes been $1 or more under the futures price.
But that is changing, and while it will take a year to work through the current surplus, most market observers say the market fundamentals will be driven by demand next year, and now USDA says the market will be driven by supply as well.
USDA’s World Agricultural Outlook Board and the Commerce Department’s Census Bureau have continued to make minor revisions in stocks and use, including exports. The latest statistics call for a 1.1 billion bushel export demand for soybeans that are $3 higher than what a nearly 600 million bushel surplus would indicate. Current meal demand is more robust than expected by both domestic and foreign buyers. Additionally, soy oil demand has been robust because of international shortages. For the marketing year that begins in September, the average farm price for soybeans is expected to within 50¢ of either side of $7.75, thanks to the demand.
Within the soybean oil market there is a dynamic that is shifting use away from food and toward fuel. USDA says the loss of food demand will cut consumption back to 18.65 billion pounds, and ending stocks will rise about 120 million. Biodiesel will expand total use of soybean oil this year and next, but not enough to offset the reduced consumer demand.
However the dynamics are even stronger in the international market for soybeans and other oilseeds. China has been a significant customer, and while their soybean crop withers in drought this year, there are expectations for fewer US exports to China. The Chinese issue is not supply, but a decline in demand caused by a weaker feed use from swine diseases that have reduced the herd size.
Weather has been the issue for Western and Eastern Europe. In brief:
• Global rapeseed production is down about 3% from hot weather and flooding; and rapeseed prices are at a near record high.
• Global sunflower seed production is down about 10% due to heat and dryness in Europe.
• Adverse Canadian weather has also curtailed canola production, which has suffered from hot temperatures and lack of precipitation.
Summary:
While soy oil, sun oil, and canola have long been staples of consumer foods, increased demands by other uses have reduced the supply and raised prices on these vegetable oils that have long been in surplus. US domestic production of soybeans will diminish for the new crop, and with the help of strong prices for 2008 production, is expected to draw increased acres for soybeans.
Posted by Stu Ellis at 12:31 AM | Comments (0) | Permalink
August 28, 2007
How Generous Are You In Giving Away Food?
Ever since President Dwight Eisenhower promoted Public Law 480 because of his knowledge of starving nations after World War II, the US farmer has strongly supported food aid programs. One primary reason is that the USDA bought surplus grain and donated it abroad, reducing the surplus and bolstering the price. With very little surplus grain, are you still in strong support of PL-480 and seven other food aid programs included in the USDA budget?
Food aid programs are part of the trade section in the Farm Bill and are designed to provide food to the hungry, help develop foreign markets, and dispose of surplus. And any food that is shipped abroad must go on US ships, hence the familiar term “cargo preference.” In the 2006 agricultural appropriations, the programs existed but were not funded. When Farm Bills changed to a market oriented policy, the US was no longer generating surpluses.
Food Aid and Farm Bill issues are explored by Purdue economist Philip Abbott, who says the trade fuss with the European Union about its export subsidies has impacted US food donation programs, and both are lumped together in the current WTO debate. While the US might tend to be generous and ship food abroad, critics advocate a cash handout as being more efficient than food aid. The critics won the argument in the WTO and now donations are to be made in cash rather than food, and in grants, rather than loans.
Another problem is the counter cyclical nature of food aid issues. When recipient countries need food aid, there is less available and the short supply drives up the cost of the food, making world prices and import costs high. When food prices are lower, that implies abundance, and fewer countries need any food aid.
USDA recently celebrated the 50th anniversary of PL 480, but in its proposal for a new Farm Bill, Abbott says there is only one modest proposal related to food aid, and is the USDA approach to walking a narrow line between the WTO rules, and typical American generosity. Even the non-governmental organizations that hand out food around the world understand the controversy, as well as the inefficiency of trying to distribute food into war zones and into despotic countries where warlords control the populace with food.
In your job as the greatest food producer the world has ever known, how much of agriculture should be devoted to giving away food to the hungry? Should a trade war with Europe be started because of our desire to feed the world? Should strained tax resources be strained further to buy food from the market and pay the 60¢ that it takes to ship $1 of food abroad? Can you identify surpluses in the marketplace that could easily be transferred to the hungry? Is it better for those hungry folks to have a bag of US grain, or a meal within their cultural needs that might be paid for with a donation of US cash?
Rural America has know about PL 480 for 50 years, and has taken pride in its philosophy, but probably never kept up with what it did from year to year, and may be surprised it is nearly dormant. If you were faced with $1.50 corn and $5 soybeans, and burdensome grain supplies, would your generosity be stronger than it is now with a demand-driven market and negligible surpluses?
Summary:
The majority of the USDA budget helps the hungry, but those are US folks, and our foreign food aid programs have languished in the wake of insufficient funding and international trade politics. One of the reasons for international food aid programs was the US desire to ship our surpluses abroad, but with expensive shipping costs, and now farm policies designed to eliminate surpluses, food aid programs have declined in priority and importance.
Posted by Stu Ellis at 12:45 AM | Comments (0) | Permalink
August 27, 2007
If Risk Management Is A Challenge In Livestock Feeding, Here Are Two Ideas To Consider
Cattle and swine producers, concerned about volatile corn and soybean prices, will be able to sleep better with the help of either Livestock Gross Margin Insurance or Livestock Risk Protection Insurance. They are both provided by USDA, and livestock producers across the Cornbelt are now covered by both insurance plans. “What are the details and how do I sign up?” Glad you asked.
Livestock feeders face risks, not only in feed prices but in the price of feeder calves and feeder pigs. Management of that risk can be accomplished through hedging to ensure profits, but profit margins can also be insured with the help of LGM and LRP insurance programs. Nebraska livestock economists Darrell Mark and Josie Waterbury, in their recent Cornhusker Economics newsletter say that recent changes by USDA have expanded the programs to more producers by enlarging the eligible area and adding swine operations to the programs.
LGM for cattle provides protection against a decline in the cattle feeding finishing margins by simultaneously hedging the corn and feeder cattle input costs and the fed cattle selling price as a bundled option. It is available for calf finishing and yearling finishing
LGM for swine provides protection against a decline in the swine finishing margins by simultaneously hedging the corn and soybean meal input costs and the market hog selling price as a bundled option. It is available for farrow to finish, feeder pig finishing, and segregated early weaned pig finishing operations.
LRP covers the risk of price declines for feeder cattle, fed cattle, and swine. It provides producers an indemnity if a regional or national cash price index falls below an insured coverage price. Similar to a put option, the LRP policy is price insurance only, providing single-peril price risk protection for the future sale of insured livestock.
The University of Nebraska has created an educational website to help producers learn how to use the two forms of crop insurance for livestock. The LRP and LGM study guides address: premiums, beneficial interest, how coverage is purchased, basis risk, hedging outcomes, and enrollment details, including examples that help a prospective user correlate their operation. There are free home study courses, video lectures, and information necessary to understand and use the programs. “The website also contains an in-depth analysis of basis risk associated with LGM and LRP insurance, which differs from traditional basis risk.”
For the Livestock Risk Protection program, USDA made a number of changes beginning in July, in addition to the expansion to 17 additional states. (37 are now in the LRP program.) Both the livestock and the agent must be in the eligible states, but the owner can reside elsewhere. Additionally, USDA removed the prohibition on taking either a hedging or options position that was adverse to the insurance. USDA also extended coverage limits up to 100% of the expected ending value, however reduced the price adjustment factor to 85% for dairy livestock.
Summary:
Cattle and hog producers who are uneasy about volatility in the livestock and feed markets have an increased opportunity to manager their profit margins with the help of Livestock Gross Margin and Livestock Risk Protection insurance programs from USDA. Recent changes in both programs have extended the eligibility to more producers, and with that, the University of Nebraska has provided educational information on-line to learn how to use the risk management programs.
Posted by Stu Ellis at 12:58 AM | Comments (0) | Permalink
August 24, 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.
Tight storage space? IL Extension’s Darrel Good says new corn and beans will share space with other fall crops, 2007 wheat, and all of the 2006 crop being carried over:
1) USDA says the 9/1 stocks of corn, beans, and sorghum will be about 1.75 bil. bu.
2) The 9/1 stocks of wheat, oats, and barley will be about 2.16 bil. bu.
3) USDA estimates the new crop of corn, beans, and sorghum will be 16.154 bil. bu.
4) So, 2007 stored grain will total 20.064 bil. bu.; 1.518 bil. larger than the 2006 crop.
The largest previously stored crop was in 2005 says Outlook Specialist Darrel Good, which was 19.288 bil. bu., or 4% less than the 2007 crop to be stored. He says more bins are added every year, and last Dec. 1 the total capacity was estimated by USDA at 20.347 bil. bu. Good believes if the current rate of construction of on-farm and off-farm storage parallels 2006, total 2007 storage capacity should exceed crop supplies by 675 mil. bu.
Local storage problems will contribute to the already historically weak basis, says Good. “With a $.32 carry from December 2007 to July 2008 futures, the average harvest bid is $.775 under July 2008 futures. It appears that the market is currently offering about $.60 per bushel to store corn from harvest to June in this region of the country.” Read more.
Is storage in your marketing plan? Michigan State’s Jim Hilker says move out old crop corn on any market rally, then store as much as possible of the new crop unpriced, on-farm, especially if you have already priced much of the new crop. For those without, or without enough, on-farm storage for corn, consider waiting for larger rallies, relative to the mid-August corn price, to price much of the 2007 expected corn production.”
Hilker’s soybean advice parallels corn. “$7-8 soybeans were just a dream a year ago. Now it appears we will have several years at these levels, with more upside potential than down, as long as the present energy policies stay the same. For those with remaining old crop soybeans consider pricing them on rallies before harvest. For those who may still want to price more 2007 crop before harvest, consider the same. Cash prices moving back towards $8.00 would appear to provide some really good pricing triggers.”
Soybean supplies will be much tighter in the year ahead says Iowa State’s Bob Wisner. “However, for soybeans, recent rains and the potential for slightly increased US yields in later crop reports point to modest down-side risk in soybean futures and cash prices into the harvest season. With recent failures of the soybean futures delivery mechanism, prospects for the soybean basis at harvest time are uncertain,” says Wisner.
Total use of US soybeans in the marketing year ending next Friday is expected to be about 3.07 bil. bu. Even with a 3-7% decline in 2008 exports, Wisner says production would cut next year’s ending carryover stocks 61-67% from the 2007 high. Declining exports very likely would require a sizeable increase in the So. American soybean crop.
Market volatility can be expected this winter in corn and beans predicts Wisner, as they compete for land in 2008 and 2009. Although bean stocks will be low, he says ethanol expansion will demand corn acres, and $6-7 wheat will also get its share of acreage. Read his newsletter.
The 2008 soy:corn ratio has recently been at 2.25:1 says Ohio State’s Matt Roberts. “In Jan/Feb 2007, new crop corn averaged $4.08 and beans averaged $7.96, for a ratio under 2:1, which led to a loss of 11.4 mil. acres of soybeans and a gain of 14.6 mil. acres of corn. Many analysts are already predicting that corn will lose up to 2 mil. acres in ’08.”
Roberts’ take on the bean market is bullish. “While soybean prices have rallied this summer, the fall in the US Dollar has offset some of those gains. At this point, it appears that South American plantings will rise 5% or less over last year, which is unlikely to significantly alter the balance of the global soybean market.” Read his newsletter.
Consider the options market to protect wheat prices says Extension Specialist Melvin Brees at Missouri. With Dec wheat over $7 on tight supplies, July ‘08 futures are over $5.75, and Brees says a 50¢ premium on a $5.70 strike price will protect an “opportunity to sell 2008 production at prices seldom offered at harvest time.” Read his newsletter.
Climate change in the American Midwest could be good for agriculture over the next 10 to 20 years, says atmospheric researcher Gene Takle at Iowa State. His trends include:
1) Annual precipitation has increased by about an inch over the past 30 years.
2) There are more 3-inch rains than there were 30 years ago.
3) Longer growing seasons with 8 more frost-free days than there were in the 1950s.
4) The summer heat isn't as intense as it was 30 years ago, but the humidity is rising.
Back home in Indiana, it is dry, says the National Weather Service. A dry spell that began during April has worsened, with much of central IN experiencing its driest period during this time frame since 1966. Some portions of Eastern IN experienced the driest conditions in 53 years. Soil moisture, groundwater levels & river levels are dropping.
While Iowa State says the US may eventually use 75% of its corn for ethanol, Purdue economist Phil Abbott says, “If you read between the lines, their study shows that the US will have to import corn to accommodate this demand for corn to make ethanol. We would flip from an exporting country to an importing country, if their study is correct."
Soybeans across many areas of the Midwest are in the R6 or full seed stage, and likely beyond the need for any fungicide treatment for soybean rust, should it reach the Cornbelt. That’s the recommendation of IL Extension’s Loretta Ortiz-Ribbing, who says vigilant scouting is still the watchword. Recent findings were at a TX research station, and in a soybean sentinel plot in a MS county bordering LA. Monitor the Rust website.
Spraying bugs, weeds, or disease regardless of their presence in your crop, is becoming common, but IL entomologist Kevin Steffey says don’t try to keep up with the neighbors. Steffey says higher crop prices are causing some farmers to abandon Integrated Pest Management practices they have previously used. He says some farmers are ignoring required Bt refuges as well as spending money on pesticides because they can afford it.
An increasing practice among farmers is to plant Bt corn that is toxic to rootworms and corn borers, regardless of the need, because of their higher yields, and not plant any refuges. IL Extension’s Steffey says insects can become resistant to the genetics, making it even more important to plant non-Bt refuges, despite their potential for lower yields.
As you agonize over slow filling soybean pods, Ohio State entomologists suggest you also scout for bean leaf beetles. Defoliation is not a big deal at this point in the season, but their warning is about pod damage, particularly for food grade or seed beans. They say if beetle populations are high, and 10% of pods are injured, a treatment is warranted.
Manage grain storage for higher profits, says MO Extension’s Bill Casady, who urges bin sanitation and control strategies for eliminating insects and disease from fines.
1) Remove all old crop refuse from bins, trucks, combines, and handling equipment.
2) Inspect fans, drying floors, and prepare and lubricate augers and other components.
3) Depending on length of storage, bins may need to be sprayed with residual insecticide.
4) Set the combine to harvest clean, high quality grain, and eliminate fines and BCFM.
Check your GPS receiver, if your yield monitor seems goofy. Two old satellites were replaced with upgrades, and older GPS receivers may not tune in PRN#135 & PRN#138. If you have trouble, visit the manufacturer’s website to determine if you are affected and there is a software upgrade. If your unit is too old, there may not be any alternatives.
Pork producers lose $560 to 762 mil. annually from PRRS, but 20 years after the viral disease was identified, little progress has been made toward a cure. National experts met recently to identify research needs toward an effective vaccine, but say it may be 5-10 years before an effective strategy to fight the disease can reach the market.
Pork producers don’t want bacterial diseases becoming resistant to tetracycline. But that is the potential outcome found by IL researchers who tracked bacteria from waste lagoons to nearby water wells through the specific genes in the bacteria that were resistant to tetracycline. They say if the resistance genes get into the right bacteria at the right time, they can confer resistance to an antibiotic used to treat the disease.
Placements of cattle on feed in July were 18% under 2006 with most of the drop in light weight feeders says Nebraska’s Darrel Mark, as the industry reacts to higher feed costs.
Posted by Stu Ellis at 12:54 AM | Comments (1) | Permalink
August 23, 2007
How Much And What Kind Of Cash Rent Will You Be Willing To Pay To Keep Your Current Operation?
While the market has to compete for corn, beans, and wheat by bidding up prices, farm operators see themselves in the driver’s seat. But many farm operators may soon find themselves having to compete for land next year by bidding up cash rent. When big money is involved, families and longtime friendships can sometimes give way to cut-throat business practices.
For 30 years Howard Doster was a farm management specialist at Purdue, and now retired, he coaches land owners and operators. His recent “think piece.” What's Your Right Rent For '08? suggests that land owners are really the ones in the driver’s seat and cash renting operators may need to pay a bit more attention to the landowner in the current market, “If you’re the tenant, you face the risk of someone out-bidding you. I predict more tenants will lose their leases for ‘08 than at any time since the early seventies when crop prices also increased faster than non-land costs. Most of these turnovers could be avoided if only present tenants would do something nice for their owners. Perhaps tenants will want to check with their local FSA administrator to see if they can revise their ‘07 leases up until the end of August.”
Keeping Doster’s comments in mind, anyone who depends on leased farmland to make a living should consider creative opportunities for leases. Many landowners who are older or have minimal farming expertise probably are not interested in the obligations of a crop share lease. Their priorities are cash renting their land and some will put land up for rent auctions. Other landowners who appreciate the value of a good operator may be open to creative leases that provide a high return to their land investment. One of the more creative lease concepts comes from Farm Management Specialist Gary Schnitkey and Ag Economist Dale Lattz, both of the University of Illinois. Their proposal is “Flexible Cash Leases Based On Crop Insurance Parameters.”
It is the goal of both the land owner and the operator to maximize their income, and a fair lease will do that, but finding a fair lease in times of volatile commodity prices is a challenges. The Schnitkey/Lattz concept “bases its payments on parameters used in setting revenue guarantees on Group Risk Income Plan (GRIP) crop insurance policies. As structured, this flexible lease causes landlords and farmers to share in commodity price changes that occur between years.” With the explosive popularity of the GRIP crop insurance policies, this lease will be one that most operators will appreciate, and its simplicity of formula will be appreciated by the land owner.
In its simplest form, the payment mechanism based on corn is: Expected county corn yield x base corn price x rent factor.
1. The expected county yield is set annually by USDA, based on trend yields for the county.
2. The base price is computed by USDA at the beginning of March for crop revenue insurance policies such as CRC and RA. It is determined by the performance of the DEC corn contract during the month of February.
3. The rent factor is a percentage negotiated annually between the landlord and farmer depending upon productivity of the land and risk to the operator. Farms with lower productivity relative to the county average should have lower rent factors and vice versa.
The primary advantages to this lease are that it reflects the changes in commodity prices and the level of cash rent to be paid will be determined about March 1, which allows operators to use crop insurance and hedges to manage the risk of the cash rent payment. Crop yield history is not needed, and since USA would recognize this as a cash lease, any farm program payments would go to the operator.
The disadvantages are that yield and price risk are still on the shoulders of the operator and it only adjusts for price changes between production years. The rent factor will still need to be a point of negotiation and as costs and risks increase for the operator, the rent factor needs to be adjusted down. Some may also see March 1 as a late date for a cash rental rate to be determined.
Schnitkey and Lattz make several suggestions that may facilitate the rent calculation and negotiations with the land owner. Minimum and maximum cash rents can still be established; all crops can be used to establish the formula, not just corn; and rents can be based on harvest prices instead of the spring guarantees from the crop insurance calculation.
Summary:
Cash rent calculations are always difficult to determine, since the land owner says it is too little, and the operator says it is too much. Utilizing a cash rent calculation formula that is based on crop insurance and market prices will allow an operator to use crop insurance and hedging to manage the risk of the cash rent. At the same time, it allows a land owner to receive a fair rent, based on commodity market values. Such a concept may be needed by many landowners in an effort to retain their cash rented land from would-be renters.
Posted by Stu Ellis at 12:19 AM | Comments (1) | Permalink
August 22, 2007
Sugar? Why Should A Corn Grower Be Concerned About Sugar?
Sugar! I don’t raise sugar! This is the Cornbelt and I raise corn. Why should I be concerned about sugar? Don’t talk to me; go to the kids and the candy bar makers.
If that reflects your thoughts, you might want to brush up on how the corn market will be impacted by US sugar policy. There is a closer connection that most farmers realize.
Sugar is part of the Farm Bill, and it is a major crop in sugar cane production areas along the Gulf Coast and in the sugar beet production areas in Minnesota’s Red River Valley. Sugar is the commodity that provides pricing guidelines for High Fructose Corn Syrup (HFCS), a commodity that is produced by our trading partners throughout the Caribbean, and a commodity that can easily replace corn a feedstock for ethanol. Suddenly there is reason to become familiar with sugar politics, and the Congressional Research Service (CRS) has recently issued a report to Members of Congress to help familiarize them with sugar politics.
Sugarcane and sugar beet farmers and the refineries have a market loan program that provides a floor price for sugar and restrictions on how much can be imported. As a result sugar users perennially seek elimination of the program to obtain sugar at a lesser price. The USDA is required to manage the sugar supply so that the program has no cost to the tax payer, and it does that by managing import volumes to achieve a supply/demand balance. At issue in the Farm Bill debate are several issues:
1. Raising support prices. While producers want this, sugar users don’t since US sugar is usually 2 to 4 times as expensive as the world price. But loan rates have not been raised for 15-20 years, and the House version of the Farm Bill raises loan rates by 3%.
2. Managing the domestic supply. USDA allows imported sugar and marketing allotments on sugar refiners to keep the price just above the loan rate. But beginning next January, Mexican sugar will enter the US unrestricted as a result of Mexico having to accept unrestricted amounts of US HFCS.
3. Balancing costs. Because of the expected sugar imports from Mexico and other free trade countries, the USDA expects the sugar program will cost $1.4 billion over the next 10 years, and since the increased supply will likely reduce the market price for sugar, producers and producers will likely forfeit the commodity to repay their marketing loans and the USDA will likely own stockpiles of sugar.
The final issue is the increasing call to convert surplus sugar into ethanol, and that has become louder with the increased targets in the Renewable Fuels Standard. Disregarding the market prices for corn and sugar, it is a cheaper process to use sugar than corn to make ethanol, since there is no need to convert cornstarch to sugar. Brazil has been doing that for years. However, due to market prices for US sugar, sugar-based ethanol is estimated at twice as expensive as corn-based ethanol, and three times as expensive as Brazilian sugar-based ethanol.
In the House version of the 2007 Farm Bill is a requirement for the USDA to sell surplus sugar to the ethanol industry to maintain the sugar program at “no cost.” The CRS report expects a considerable subsidy would be needed for sugar-based ethanol to be economical. Currently operating corn ethanol plants would need to convert their processes, and due to transportation issues, the sugar ethanol plants would probably be limited to sugar beet and sugar cane regions. The Congressional Budget Office anticipates large forfeitures in the sugar loan program, which would increase its cost along with the ethanol production subsidies.
Since the CRS report focuses solely on sugar, it does not address the direct impact on corn. However, Cornbelt economists have indicated that corn prices would soften if ethanol plants in the Upper Midwest began using sugar. Such a softening of the corn market may or may not reach as low as the loan rate, triggering the LDP program; but that would be an additional cost to USDA that does not exist in current market conditions.
Summary:
Proposals to renovate the US sugar program, as a result of trade negotiations and ethanol demand, could have a significant impact on the monopoly corn enjoys for ethanol production. Congress is addressing the controversial sugar program which has had an economic relationship with corn through the contribution corn makes to the sweetener industry. However, with sugar surpluses anticipated by USDA and policy makers, sugar may also find its way into ethanol refineries and that has the potential to soften corn prices.
Posted by Stu Ellis at 12:42 AM | Comments (0) | Permalink
August 21, 2007
Future Soybean Prices Reflect Market Fundamentals
All year Cornbelt farmers have been watching soybean prices that reflect changing demand scenarios in 2008, despite our current record carryover. Supplies may diminish and prices may strengthen if the analysis in USDA’s latest Oil Crops Outlook comes to fruition.
When the August 1 Crop Report was recently released, USDA indicated the smaller planted acreage this year would yield about 2.625 billion bushels of soybeans, a crop that will be small enough for demand to draw down some of the 590 million bushels of beans left over at the end of the month when the marketing year shifts to 2007/08. The current surplus has not been a burden to the futures market with $8 and $9 beans since last winter. However, the surplus has been a burden to the cash market which has sometimes been $1 or more under the futures price.
But that is changing, and while it will take a year to work through the current surplus, most market observers say the market fundamentals will be driven by demand next year, and now USDA says the market will be driven by supply as well.
USDA’s World Agricultural Outlook Board and the Commerce Department’s Census Bureau have continued to make minor revisions in stocks and use, including exports. The latest statistics call for a 1.1 billion bushel export demand for soybeans that are $3 higher than what a nearly 600 million bushel surplus would indicate. Current meal demand is more robust than expected by both domestic and foreign buyers. Additionally, soy oil demand has been robust because of international shortages. For the marketing year that begins in September, the average farm price for soybeans is expected to within 50¢ of either side of $7.75, thanks to the demand.
Within the soybean oil market there is a dynamic that is shifting use away from food and toward fuel. USDA says the loss of food demand will cut consumption back to 18.65 billion pounds, and ending stocks will rise about 120 million. Biodiesel will expand total use of soybean oil this year and next, but not enough to offset the reduced consumer demand.
However the dynamics are even stronger in the international market for soybeans and other oilseeds. China has been a significant customer, and while their soybean crop withers in drought this year, there are expectations for fewer US exports to China. The Chinese issue is not supply, but a decline in demand caused by a weaker feed use from swine diseases that have reduced the herd size.
Weather has been the issue for Western and Eastern Europe. In brief:
• Global rapeseed production is down about 3% from hot weather and flooding; and rapeseed prices are at a near record high.
• Global sunflower seed production is down about 10% due to heat and dryness in Europe.
Adverse Canadian weather has also curtailed canola production, which has suffered from hot temperatures and lack of precipitation.
Summary:
While soy oil, sun oil, and canola have long been staples of consumer foods, increased demands by other uses have reduced the supply and raised prices on these vegetable oils that have long been in surplus. US domestic production of soybeans will diminish for the new crop, and with the help of strong prices for 2008 production, is expected to draw increased acres for soybeans.
Posted by Stu Ellis at 12:31 AM | Comments (1) | Permalink
August 20, 2007
Sharpen Your Pencil. The New Farm Bill May Ask You To Make A Long Term Financial Decision
The US House of Representatives and its Agriculture Committee have been drawn and quartered by critics wanting major reforms in agricultural policies and programs. While wholesale reform could upset a basic industry and the consumer food system with unforeseen and unintended consequences, there is a potential for evolutionary change that has marked US farm policy since it began in the 1930’s.
Going from nothing to something was revolutionary, but Depression Era economics that were bringing the US food system to a halt signaled the need for a radical change that would keep farmers on the farm and food choices in front of consumers. Since the first elements of farm support policies, change has been more moderate, including the switch from supply management agriculture to market oriented agriculture. The change proposed by the House, which will possibly be included in the Senate Farm Bill proposal, gently nudges farm supports from a price orientation to a revenue orientation, that includes both price and yield. And for that matter, that is exactly what the World Trade Organization wants to see happen or it will continue to dismantle US farm policy.
Extension Farm Policy Specialist Brad Lubben of the University of Nebraska says the change uses the familiar Counter Cyclical Payment concept in the 2002 Farm Bill, but instead of it based on price, it is based on revenue, providing producers with a financial safety net. In his Cornhusker Economics newsletter, Lubben says, “The revenue-based program would add yield to the safety net calculation and would make a payment to participating producers when the combination of national average yield and national average price produced a revenue calculation that fell below a target established in the legislation.”
Each program crop would have a target price fluctuating with a 5-year Olympic average (high and low discarded) that is multiplied by the existing price-based Counter Cyclical Payment. Lubben says the House plan, which has the potential to be adopted by the Senate, calls for “Any shortfall below this target for each crop would be paid out on participating base acres for the respective crop, after adjusting for differences in farm versus national average CCP yield levels, and accounting for payment on only 85% of base acres as with the existing direct and CCP programs.”
If a producer did not like the concept, the current farm program formulas could be retained, or the new revenue concept could be adopted, and that is a one-time decision which producers will have to make at the local FSA office. Sign up would be handled similar to sign up for the 2002 Farm Bill when decisions had to be made about details of participation. Lubben says the House concept does not affect direct payments or the loan program, except for some adjustments to loan rates. “The marketing loan would continue to provide price protection below the loan rate and would be the lower (limit) on the price factor used in the revenue-based CCP, the same as currently exists for the price-based CCP.”
Lubben believes the concept will be attractive to those concerned with the budget, since there will be less variability of revenue than variability of price, which means less stress on the federal budget. The attractiveness of the plan to producers will depend on how it works. With current pricing, corn growers would have a $344.12 target revenue, and the safety net would be only 69% of the current expected revenue from a $3.22 corn price and a 155 bushel average yield. Under the price-based option, the Counter Cyclical Payment would be made at $2.35, which is 73% of the same $3.22 corn price expectation. Lubben says there is a lower chance of a payment under the revenue-oriented proposal than the price-oriented proposal if the program was currently in effect. He says, “As proposed, the revenue-based CCP would not kick in as quickly as the price-based CCP, but it would make larger payments once it does kick in. And, the revenue-based CCP would pay for revenue losses due to price and yield, covering a greater degree of risk than the price-based CCP.”
When the Senate resumes its Farm Bill deliberations, one proposal that will be considered in the formula for farm program payments is the Durbin/Brown proposal to add an additional multiplying factor to have a target price based on 90% of the state trend yield multiplied by a 3-year moving average price. This would bring payments more in line with prices and yields in a given state, instead of national averages. While Lubben says that might make payments more relevant to producers, the 3-year average slowly tracks the market, and any extended period of low market prices such as 1998 to 2001 would result in a lower safety net for that extended period of time.
The current House Farm Bill proposal does not link the revenue safety net to any type of supplementary crop insurance, but the Durbin/Brown proposal contains a payment trigger that Lubben believes “would be a better substitute for farm or county-level crop insurance products currently on the market. As such, it is formally linked with crop insurance, such that any payments received under the revenue-based CCP would reduce any payments received on crop insurance for the crop on the farm.” He says the idea is not designed to eliminate the role of crop insurance, but to allow the farm program payment to address major revenue shortfalls, and to allow individual crop insurance policies to address individual farm production issues.
Summary:
The next evolutionary step in farm policy could see farm program payments switch from price to revenue based which would not only ease international trading tensions, but federal budget issues. While the impact on producers would likely be lower annual income from the USDA, years with low prices and yields would result in larger payments. Since the Senate has yet to decide on its policy, the concept could be discarded or refined further, to link the idea not only with crop insurance protection, but triggered by more localized circumstances than national averages.
Posted by Stu Ellis at 12:18 AM | Comments (2) | Permalink
August 17, 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 Supply/Demand Report last week reflected good news for corn exporters, says IL Extension’s Darrel Good. USDA forecast 2.15 bil. bu. being sold abroad. And Darrel says, “The increase reflects declining crop production prospects in the rest of the world, slightly less export competition, and expanding world consumption.”
The big new crop will be used, says Good, with ethanol’s help, “Domestic processing use of corn during the upcoming year is projected at 4.79 bil. bu., up 1.265 bil. from use during the current year. That projection is unchanged from the July forecast. Use of corn for all purposes during the 2007-08 marketing year is forecast at 12.69 bil. bu., 200 mil. above the July forecast and 1.315 bil. more than expected for the year just ending.”
Darrel Good says even with Thursday’s sell off, futures prices are above USDA’s estimates for the marketing year or at the high end. Even so, prices are expected to remain well supported until more is known about the actual size of the 2007 crop. Estimates of So. American bean acreage will continue to take on more importance.
On the issue of storage space, Good says if new space was added at the same rate this year as last, nationally there will be enough by about the same margin as in 2004 and 2005. “Even in Illinois, where the corn crop is expected to be 27% larger than in 2006, the deficit of storage space will not likely be larger than in 2004.” Read Darrel Good’s latest newsletter.
Where are grain prices going? Extension economists answered a survey from MO and IA colleagues, and their consensus opinion for December, March and June prices is:
1) CBOT Corn: $3.35 on 12/3/07; $3.52 on 3/3/08; and $3.65 on 6/30/08.
2) CBOT Beans: $8.84 on 12/3/07; $8.87 on 3/3/08; and $8.76 on 6/30/08.
3) KC Wheat: $6.02 on 12/3/07; $6.14 on 3/3/08; and $5.46 on 6/30/08.
Meat, milk, and egg production are expected to increase in 2007 and 2008, according to a survey by MO and IA ag economists. Beef is the only commodity expected to show a year-over-year decline. Iowa State’s John Lawrence says, “This increase is expected in spite of the higher corn prices. While expansion may be less that previously expected, it doesn’t look like higher feed prices have triggered liquidation in animal agriculture yet.”
The MO & IA survey says choice steers are predicted to set record high prices in 2007 and again in 2008. Feeder cattle prices will be held back by feed costs. Given the current forecast of corn and SBM prices, pork producers should remain at or above breakeven for the next two years. Milk prices are at record high levels and expected to post higher prices through the second quarter of 2008. Turkey, broiler and egg prices are declining.
There could be problems in your cornfield from ear rots and various fungi, some quite innocent, and some quite serious, such as an aflatoxin problem, according to IL Extension Specialist Suzanne Bissonnette. She says droughty corn could have an aspergillus fungus infection, producing aflatoxin.
Aflatoxin is a potent carcinogen, and the FDA prohibits consumption of more than 20 PPB by humans, immature animals, dairy cattle, or where the eventual use of the corn is unknown. The presence of aspergillus in a corn sample does not mean it is unwholesome or that it will contain high levels of aflatoxin, says Bissonnette. Black light and chemical analysis testing is necessary to determine how much toxin may have been produced.
So what do you do if you think your droughty corn could be harboring aflatoxin?:
1) Harvest any drought stressed or insect infested corn when the moisture allows.
2) Set the combine blower on high and slow the header speed to reduce fines and trash.
3) Dry the grain to 13% to 14% moisture within a 24-48 hour period after harvest.
4) Keep moisture at 13% or below for long term storage, 14% for short term storage.
5) Crop insurance will cover aflatoxin in the field, but ask your agent about storage.
Corn farmers who irrigated and planted Bt varieties will experience fewer problems with aflatoxin, says Missouri’s Allen Wrather. That’s because the kernels from irrigated corn will have fewer stress cracks due to drought and less injury from ear worm. Bt varieties are not resistant to ear worm, but will experience less ear worm feeding injury.
Did corn rootworms consume your corn roots? Researchers at the Univ. of IL have tallied the results of Bt and soil insecticide performance; and entomologist Mike Gray says, “Producers typically expect equivalent levels of root protection among Bt corn rootworm hybrids. Our data suggest that these expectations may not always be fulfilled, even though transgenic hybrids with the same Bt event have been used.”
Details of the corn root evaluations have been published by Gray and his colleagues. Getting a variety of results from the performance tests, the researchers, “…ask that producers not become complacent and assume that Bt corn rootworm hybrids will always outperform soil insecticides when it comes to root protection. This is simply not the case. For sure, the "bulletproof" image often portrayed of this technology for corn rootworm control is somewhat misleading.”
Despite the lack of August rain, corn kernels may be larger than expected due to the extra growing degree days, says Extension Crop Production Specialist Emerson Nafziger, “Growing degree day (GDD) accumulations have been steady since pollination, with some acceleration due to warm night temperatures.” Late planted fields are an exception.
Soybeans may be aborting the newest formed pods, if they are in drought stress says Nafziger. “It is thus possible under extreme stress to end up with few pods or seeds on a plant, hence little yield potential. At some point pods will tend to remain attached even as stress continues and intensifies.” He says in extreme cases pods will stop filling. Read his weekly crop comments.
Did you spray for weeds, bugs, and fungus, whether they were there or not? If you sprayed “as insurance against pests,” you’ll find a bushel of conservation incentives for adopting IPM practices instead..
Soybean rust has been slow to spread in AR and the hot, dry weather has slowed development in OK. LA and TX are seeing more rust activity because the weather has not been quite as extreme. With the slow movement of soybean rust north and the hot, dry weather throughout much of MO, Extension Specialist Laura Sweets suggests that fungicide applications for soybean rust are not necessary at this time in MO.
Soybean aphids continue to appear in hot spots, with populations approaching the treatment threshold, despite the hot temperatures. Entomologists say the Asian lady beetles are coming to the rescue and should suppress the aphid populations before overwintering. Researchers say most data to date suggest that “an insecticide application to R6 soybeans infested with soybean aphids will not pay for itself in yield benefit.”
If you are spraying spider mites or soybean aphids, should you add glyphosate to get the last few weeds? Ohio State agronomists say if you have not applied the maximum rate of 2.25 lb ae/A, then it may prevent seed formation in those weeds. If the weeds have survived prior doses of glyphosate, then your resistance problem will not be helped at all.
If you are spraying weedy beans with glyphosate, to prevent seed formation and problems next year, Ohio State’s Mark Loux and Jeff Stachler warn you about injury to soybeans that may be drought stressed. Glyphosate labels say the herbicide should not be applied after the R-3 stage begins in soybeans. Read more.
If forage is short, letting your cattle have run of an entire pasture will decrease plant health and hurt future forage production says Wisconsin’s Dennis Cosgrove. And he says a similar mistake is to let cattle graze in a rotational paddock as soon as there is some regrowth. “Plants overgrazed during drought will grow slowly in comparison.”
If your alfalfa suffered from the spring weather, and needs to be re-established, Kansas State’s Jim Shroyer says if you have enough moisture, a fall seeded crop will be more productive than a spring seeded crop in the first year. His recommendations include:
1) Plant early enough to have 3-5 trifoliate leaves before the first frost.
2) Test the soil and add lime before planting. P & K should be annual inputs.
3) Use a press wheel for good soil contact or no-till into small grain stubble.
4) Check for herbicide carryover, if planting into any type of crop stubble.
Pork prices could jump says MO livestock economist Glenn Grimes because of rumors that China is expected to import 70,000 tons of US pork and since it is in carcass weight equivalents it would be to close to 154 mil. lbs. Grimes says it would amount to 63% of the May total US pork exports and “if this turns out to be true, it will help hog prices in coming weeks, and the odds now appear pretty good for this to be real.”
Posted by Stu Ellis at 12:32 AM | Comments (0) | Permalink
August 16, 2007
The 2007 Crop Has Been A Dream For Some And A Nightmare For Others
At the middle of August most of the corn in the Cornbelt is in the dough stage, and with the help of 90 and 100 degree days, much of it is close to the blacklayer and the drydown phase. Soybeans are fully podded, but pods are not fully filled yet, and more moisture is needed or the “bloom” will come off the yield in many regions. Let’s take a crop check around the Cornbelt and see how crops have progressed and the moisture status.
The National Agriculture Statistics Service tabulates everything in agriculture, from mint and gravenstien apples in Michigan to windmill maintenance in New Mexico, and every week this complete report is available in capsule form from each state.
ILLINOIS: Topsoil moisture has fallen to the 57% short to very short range. Crops are ahead of schedule, with 40% of the corn dented, compared to 31% last year, and 4% is already mature. 2% of the soybeans are turning yellow, ahead of last year and the five-year average. “Dry, hot conditions throughout Illinois continued to place strain on field crops this past week. Scattered showers in parts of the state provided little relief from the extremely high temperatures received across the state. Topsoil moisture conditions continued to deteriorate and average temperatures were over 8 degrees above normal this past week.”
INDIANA: Topsoil moisture is 71% short to very short. And the subsoil moisture is even drier. 73% of the corn is in the dough stage, compared to 55% for the five year average. 57% is in the fair or less category for condition. 78% of the beans are setting pods ahead of the 66% for the five year average. However, 57% are in the fair to poor condition category. Livestock were reported under stress, with 100+ temperatures last week in southern counties. “Many central and southern areas continue to suffer from the intense heat and declining soil moisture. Farmers continue to spray soybeans to control aphids and spider mites.”
IOWA: With more rain, 80% of soils have adequate to surplus moisture, and 65% of subsoil moisture is also adequate. Only 52% of the corn is in the dough stage, 64% is in the good to excellent category. 89% of the beans are setting pods and 71% are good to excellent. “Select areas saw damaging winds. The week concluded with above normal temperatures and high humidity, causing stress to livestock and pastures. Spraying for soybean aphids continues, as population counts are high. A small number of counties are experiencing soybean sudden death syndrome.”
KANSAS: Topsoil moisture is about evenly split between adequate and short, but over 60% of the subsoil has adequate to surplus moisture. Kansas livestock producers report 86% of their stock has adequate feed grains, and 81% has adequate hay supplies.
MICHIGAN: 70% of the topsoil is short of adequate moisture, and 83% of the subsoil is short of moisture as well. The corn maturity is on track for Michigan, but that means 90+% is just now silking. “As of August 7, drought conditions from National Drought Mitigation Center (www.drought.unl.edu/dm), classified virtually all of State from abnormally dry to extreme drought.” Some recent showers were insufficient, but did relieve some stress. Corn condition continued to vary depending on amount of rainfall received. Scattered showers limited in other areas and drier areas continued to show considerable amounts of firing of lower leaves. Soybeans continued setting and filling pods. Spider mites continued to be present.”
MINNESOTA:. Topsoil moisture is 78% short of adequate. While nearly all of the corn has progressed into the milk stage, 3% of the soybeans are already turning yellow. Pastures are dry as well with 71% in the poor to very poor category. “Minnesota's crop conditions edged upward as scattered showers moved through the state during the past week. Although statewide topsoil moisture supplies were rated mostly short or very short, some drought areas of central Minnesota received an inch or more of needed rain. 90% of the small grain crop has been harvested, and soybean producers are currently fighting aphids and spider mites.
MISSOURI: It is dry in Missouri as well, with 84% of the topsoil in the short or very short moisture category. The southern two-thirds of the state experienced little to no relief from dryness and very hot temperatures. “Row crop and pasture conditions deteriorated considerably. There were reports of corn blown over by high winds during thunderstorms in the northwest. Reporters indicate that corn in the driest areas continues to mature rapidly. Double-crop soybeans are short and struggling to grow. Single-crop soybeans are filling pods slowly in many areas; the driest areas are seeing parts of fields wilt. Reports of producers feeding hay are common in most districts. Livestock water shortages are still isolated, although concern is mounting in several areas.”
NEBRASKA: Topsoil moisture is better than most Cornbelt states with a 64% adequate rating and 6% surplus. 60% of the subsoil also has adequate moisture. Corn is 78% good to excellent, with 77% in the dough stage and well ahead of the five year average. Soybeans are 73% good to excellent with 81% setting pods. The sorghum crop is 82% good to excellent and 3% is turning color.
NORTH DAKOTA:. Topsoil moisture is rated 33% short and 54% adequate, with subsoil moisture in the same condition. 25% of the durum wheat has been harvested, but only 39% of the soybeans are fully podded and that is well behind the 70% of last year, but right on the five year average. 68% are in good to excellent condition.
Stockwater supplies are 75% adequate, and pasture conditions are 80% fair to good.
OHIO: Topsoil moisture is 54% in the short to very short category. But crops are maturing rapidly with 96% of the soybeans setting pods and 67% of the corn in the dough stage. That is ahead of schedule for both beans and corn due to dryness. Corn condition are rated 61% fair or worse, and soybeans are 57% fair or worse with aphids breaking out. 85% of pastures range from fair to very poor conditions.
SOUTH DAKOTA: Topsoil moisture is equally split between adequate and short, with subsoil dryness more prevalent. Small grains are all ripe with 80%+ harvested. Corn is entering the pollination stage, but 5% of the soybeans are already dropping leaves.
Livestock feed supplies are rated 77% adequate, and stockwater supplies are 59% adequate. “For the second week in a row, much of the state received rainfall. Corn and soybeans benefited from the moisture, but more is still needed. Small grain harvest is nearing complete as some producers begin preparations for the row crop harvest.”
WISCONSIN: Topsoil moisture is 63% short to very short and only 33% rate as adequate. 39% of the corn is in the dough stage with 58% in the fair to very poor category. 82% of the beans are setting pods, and 54% of the crop is rated fair to very poor. Pasture conditions are 81% fair to very poor due to shortage of rain and abundance of heat.
Summary:
Some parts of the Cornbelt have been garden spots for much of the growing season, and for other parts there has been less moisture and more heat than found in a desert. As a result of the heat, many crops have maturing more rapidly than usual and there will likely be an early start to harvest in many regions of the Cornbelt. Some of those areas will need temporary grain storage based on the good crop conditions, but other areas will have unused storage due to droughty conditions.
Posted by Stu Ellis at 12:48 AM | Comments (2) | Permalink
August 15, 2007
Have You Noticed The Wheat Market Recently, And What Did That Do For You?
With the wheat market hotter than the fairgrounds in August, is your interest increasing in producing wheat for 2008 harvest? The wheat market is fired up because of poor overseas crops and the fear that corn or soybeans will eat into wheat acreage next spring. So what is new in wheat production that you should know?
Don’t know what to budget for production costs? Illinois economists Gary Schnitkey and Dale Lattz have prepared crop budgets which will help guide your estimation of production costs. A national resource asks for your state to help you find a crop budget.
Don’t know what varieties to plant? That is not a problem if you can identify your state on the map of the North Central Crop Evaluation Committee. Choose your state and it will take you to a report on yield performance for the popular varieties planted in your state, as well as other agronomic factors for those varieties. You will wonder whether to select a low test weight certified seed for your area, or whether to select a high test weight seed not for your area. Kansas State agronomist Jim Shroyer says go with what is adapted to your area.
Don’t know about wheat performance in a corn and soybean rotation? If you grew corn this year, there may be a benefit to wheat next year which will consume some of the unused nitrogen you applied this year, says Illinois agronomist Steve Ebelhar, particularly if you have had droughty conditions. Review his fertility information. And Kansas State agronomist Dale Leikam recommends a soil test before planting wheat.
Don’t have a grain drill? That may be beneficial says Ohio State agronomist Jim Beuerline. He says wide rows planted by a planter can produce 99 to 105% of the yield planted with a drill. “We have evaluated wheat varieties in 15-inch rows for several years and have learned that some varieties will produce about as much yield in 15-inch rows as in narrow rows.”
Don’t really know enough about the wheat market? USDA’s monthly Wheat Outlook released Tuesday indicates US production and carryover are both down, foreign production is also down, and US exports will be up. The season average price should be $5.10 to $5.70 per bushel.
Don’t know what pests to prepare for and scout for? That really depends on your state, so select your state from a list of crop production and pest management newsletters, offered by the Integrated Pest Management Center.
Summary:
If the price of wheat has tempted you to plant some this fall, there will be many preparations required, ranging from crop budgets and pest management, to seed selection and planting requirements. Numerous resources are available to jump start a desire for planting wheat this fall for 2008 harvest.
Posted by Stu Ellis at 12:15 AM | Comments (0) | Permalink
August 14, 2007
The Livestock Industry Still Lacks Focus In The Aftermath Of High Feed Prices.
For the past year, there has been a queasy feeling within the livestock industry. A group of entrepreneurs which adds value to agriculture, has been looking at its investment wither in the wake of a hot market for livestock feed. Now with acreage known and yield estimates in hand, the production cost uncertainties have been reduced. But how is the livestock industry reacting to the new era in agriculture?
The outlook for the US livestock industry is a bit more relaxed than it was six months ago when grain prices were rising and no one knew when they would peak. USDA’s Livestock, Dairy, and Poultry Outlook indicates transitions are being made by livestock producers to regain control of their economic lives.
The pork industry is growing according to the June 29th Hogs and Pigs Report, with a 1% increase in the breeding herd. At the same time, litter rates continue to grow with the second quarter reaching 9.15 pigs per litter. That is nearly 1 additional pig since 1995. USDA says that implies almost 22 billion pounds of pork to be produced in 2008, up 1.5% from 2007 production.
The export market slipped a bit in recent months due to 20-30% reductions in demand from Mexico and Russia, which are two major markets. Mexico’s economy is softening, but Russia business is responding to aggressive Brazilian pork exporters. Overall, pork exports are expected to be flat for the balance of 2007 compared to 2006, however USDA says lower pork prices from increased 2008 supplies will regenerate export business.
For the second half of 2007, pork supplies will grow and prices are expected to be $51-53/cwt, compared to a range of $45-49 for the fourth quarter. At the meat counter, retail pork has been more expensive than last year due to higher marketing costs.
For the beef market price volatility has corresponded to grain price volatility. Higher feed prices, reduced hay stocks at the end of the winter, and flood-prone pastures resulted in increased cow slaughter this year compared to the past two years. USDA says that sets the stage for a slower expansion in the cattle inventory. Despite high feed prices, the low inventory of feeder calves has supported that market. Fat cattle prices are 7% above last year and that corresponds to lower slaughter, lower slaughter weights, and overall lower beef production. Lower heifer retention and higher cow slaughter indicates a decline in the breeding herd.
Beef prices at the meat counter have been volatile, in part by lower supplies of choice beef. Retail prices currently are 1% above 2006, and the spread between wholesale cutouts and retail beef is narrowing. The increasing demand by Japan and Korea will help to keep upward pressure on retail beef.
Dairy prices are at record highs, not because of my consumption of ice cream, but due to tight world supplies of dairy products and the weak US Dollar that causes buyers to come first to the US. USDA says 2007 milk production is steady with 2006 at 184.3 billion pounds. However, the higher milk prices and lower feed costs will combine to increase dairy herds. The international demand results from low availability of dairy products in Europe and the inability of Australia to quickly increase supplies. USDA says milk prices will continue at current high levels and should average over $19.00/cwt for the year.
US lamb producers are rebuilding herds, and lambs kept from the market will be replaced by imported lamb and mutton, despite adverse currency issues.
Broiler production is down 2.4% compared to 2006, but with the breeder flock up and trends in place, production in the second half of 2007 should be 2.3% above 2006. Production declines had resulted from lower meat yields per bird. Turkey production is up about 3% over 2006, due to more birds and higher weights. However, prices are considerably higher than last year due to a strong export market for turkey meat. And egg production continues to decline month to month due to fewer birds in the laying flock. Egg prices are strongly higher, due to lower numbers and a stronger export market.
Summary:
The biofuels industry created economic issues with livestock feeds, but going into the second year of higher grain prices, the US livestock producer is making decisions based on those economics. The pork industry is expanding, the beef industry expansion may be over, the lamb industry is rebuilding, dairy is enjoying record high prices for milk and will expand, and poultry meat is in a transition from lower production to increased production.
Posted by Stu Ellis at 12:00 AM | Comments (0) | Permalink
August 13, 2007
What Are The Implications From The August 1 Crop Report?
You are probably familiar with the results of Friday’s USDA crop estimates by now. There is a 13.1 billion bushel corn crop with a 152.8 national average yield. Corn exports and feed use will go up, and we’ll have a 1.5 billion carryout. The soybean crop was estimated at 2.6 billion bushels, with a 41.5 bushel per acre yield. Supply demand numbers were generally left unchanged for beans. USDA adjusted its wheat estimate from the July report, and raised price prospects for the year. Let’s visit with several Outlook Specialists and get their perspective on the August 1 Crop Report.
Following the release of the report on Friday, Mike Woolverton at Kansas State, Melvin Brees at the University of Missouri, and Alan May at South Dakota State University provided comments on the USDA statistics, and said neither they nor the market seemed to be surprised with the numbers. However, they had some insight on the impact it would mean for producer.
Mike Woolverton said the biggest surprise for many was the nearly 153 bushel average corn yield and said corn producers in dry areas will question that. But he added, “Abundant moisture conditions in the Great Plains and parts of the Central Corn Belt are making a difference this year. Where the corn is good, it is very good.” Melvin Brees said the national yield estimate was a jump up, and found some conflict in the Illinois and Iowa statistics, “Probably the most surprising yield projection is Iowa’s 180.0 bpa. In a state with widespread dry conditions, this past weeks’s good to excellent crop condition received ratings of 61 percent. This exceeds Illinois’ average yield of 178.0 bpa which has the higher good to excellent condition rating of 77 percent!”
Monthly adjustments to the estimates will be made until harvest is complete, and Alan May believes that the current dryness in the Western Cornbelt will begin to show up in future reports, “With the dry weather conditions of the western corn belt moving further east and becoming potentially more problematic each week, projections will be more difficult to ascertain. In this demand driven market, production becomes even more critical to establishing price direction and range of movement, so only time will tell how accurate these early projections are to the final production estimate that will be released after harvest.”
In addition to the crop estimates from the National Agricultural Statistics Service, USDA’s World Agricultural Outlook Board also released its supply and demand estimates for the domestic and foreign crops. Woolverton says that report indicates world stocks of livestock feed will be tight in the coming year, “Hidden in the WASDE report were other numbers that should lend a bullish flavor longer term to the corn market. Global coarse grain production was lowered by 5.8 million metric tons; equivalent to 228 million bushels of corn. Drought and heat in Southeastern European Union countries and in Former Soviet Union countries that grow corn and other coarse grains are to blame. The reduction in coarse grain production and increased usage worldwide caused global corn carryover to drop by 6.1 million metric tons.” The only corn surplus anywhere is the 1.5 billion in the US, but May believes it is small enough to allow for market volatility, “This was viewed with little concern for the most part, even though it was a bit higher than the average trade estimate. The production estimates and carryover estimates will be watched closely in the September report but for the time being, this production level is viewed as sufficient to meet projected demand for the 2007-08 marketing year. However, expect this market to continue to be volatile through the rest of this year into next year.” And he said with the demand from the ethanol industry, corn will have to outbid beans next year for US acreage.
Speaking of beans, the estimated production of 2.6 billion bushels was anticipated, but Woolverton says adjustments were made in how it will be used in the coming year, “Estimates of higher crush and higher exports will reduce U.S. carryover stocks this year which gives a lower expected carryover next year; down to 220 million bushels, less than a four week supply. Carryover that low does not give much of a safety cushion and will be worrisome to a soybean trade trying to bid more South American hectares of soybeans into production this fall.” And he believes that the higher exports will be the result of Chinese demand, “Soybean production will be lower than expected in China this year because of dry conditions in the Northeastern part of that country. China, the largest soybean importer in the world, is now expected to import 34.5 million metric tons in 2007/08; 20 percent more than last year.” Alan May says the bean market will now be in transition from large to small carryover, and the market is already anticipating 2008 acreage, “If soybean prices continue to strengthen, will those prices be strong enough to entice farmers to cut back on corn acres to take advantage of potentially higher soybean prices?” USDA estimated average prices in the coming year between $7.25 and $8.25 for beans.
However, USDA boosted both ends of the range for wheat prices for the coming year by 30¢ from $5.10 to $5.70. Part of that is due to global demand, and part to a resurvey of the Kansas wheat crop. USDA reduced harvested acreage by 400,000 and cut the Kansas production from the 300 million bushel July estimate to 288 million bushels. Woolverton says the global wheat supply should support US prices into next spring, “In the WASDE report, projected global wheat production was lowered by 1.9 million metric tons, or about 70 million bushels, because of reduced production in the EU-27 countries, Canada, Turkey, and Brazil. Lower world production and a slight increase in global wheat usage reduced world carryover stocks by 2 million metric tons. This on top of what was already a 30 year low global carryover, should serve to keep wheat price high through the Great Plains planting season and perhaps into spring, when Northern Hemisphere winter wheat comes out of dormancy.”
Summary:
There were few surprises in the August 1 crop report, however Outlook Specialists said the estimates will continue to be adjusted through the harvest period. While the corn crop is the largest since 1933, there is demand for it both domestically and abroad and the corn industry may have to bid for acreage in 2008 to ensure supplies. The soybean crop is sufficient for the year, but carryover will be significantly reduced to the point of needing to also bid for 2008 acreage. Wheat prices will be even stronger in the coming year due to reductions in the US supply and strong foreign demand.
Posted by Stu Ellis at 12:41 AM | Comments (0) | Permalink
August 10, 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 August 1 Crop Report estimated the new corn crop at 13.053 bil. bu., 24% above the 2006 crop of 10.534 bil. bu. The national average yield was pegged at 152.8 bu. per acre, the 2nd highest behind the 160.4 bu. in 2004. USDA also increased export estimates by 150 mil., feed use by 50 mil. and put Aug. 2008 carryover at 1.516 bil. bu.
USDA’s August 1 Crop Report estimated soybean production at 2.625 bil. bu., 18% lower from the 3.188 bil. bu. of last year. The average yield was estimated at 41.5 bu. per acre, which is down 1.2 bu. from last year. USDA raised domestic use, lowered exports, but kept the crush steady. The August 2008 carryout was lowered to 220 mil. bu.
USDA’s August 1 Crop Report adjusted the 2007 wheat production estimate to 2.114 bil. bu., down 1% from the July estimate, but up 17% from 2006 production of 1.8 bil. bu. The national average yield was estimated at 40.6 bu. Winter wheat production was cut 25 mil. bu. Feed use was cut 35 mil, exports raised 25 mil. and carryout cut 14 mil.
USDA’s August 1 Crop Report estimated season average wheat prices to range $5.10 to $5.70, up 30¢ from July estimates, and driven by a tighter market from lower world production. The season average corn price is unchanged from July at $2.80 to $3.40 per bu. The seasonal average range for soybean prices was estimated at $7.25 to $8.25.
Has the crop been “made?” Extension’s Darrel Good says models relating trend yield and state average monthly precipitation and temperature to actual state average yields in IL, IN, and IA indicate that August weather has a significant impact on average yields. While August precipitation has less impact than July precipitation on average yields, August temperature appears to have an equal or larger impact than July temperatures.
How accurate are USDA’s estimates? IL Specialist Darrel Good says, “Over the past 11 good growing years, the average yield forecast in Aug. was below the Jan. estimate following harvest in 8 years. In those 8 years, the Jan. estimate exceeded the Aug. forecast by 5.8 bu., in a range of 1.7-11.5 bu. The Jan. estimate was below the Aug. forecast in 1999, 2000, and 2006, by 2.9 bu. and in a range of 0.9-4.8 bu.”
“5 or 10 percent of the soybean crop will not be harvested, or if it is harvested, yields will be very low,” said Ohio State agronomist Jim Beuerlein. He says 75% of the crop is fair condition or better and 25% in poor condition with the battle lost in NW Ohio.
28 ethanol plants operating and 20 more being planned have restructured the corn basis in Iowa says Iowa State’s Chad Hart. In NW Iowa he says the basis is usually 30-40¢, but currently is only 5¢. He says record production will soften the basis this fall.
Soybean pests: before you spray, ensure that you have the correct pest identification.
1) Aphid hotspots may have 1,000+ per plant, but look for natural predators also.
2) Whiteflies may have high numbers, but over time have caused minimal damage.
3) Spider mites can injure beans, but bean maturity may be beyond yield benefits.
Soybean diseases: several problems may be occurring that will cut bean yields.
1) SDS is just showing up, but the fungus arrived early in the season in wet soils.
2) Brown stem rot arrives early like SDS, but again, there is no in-season cure.
3) White mold can be controlled with resistant varieties and spray of Topsin M.
Soybean rust: Asian rust is making its way northward, so keep up to date.
1) Northeastern TX, and several counties in OK & AR have it for the first time.
2) The rust forecast says current weather conditions may carry spores into IL & IA.
3) Monitor the rust website, but yield loss is minimal when plants reach full seed.
Corn quirks have been appearing in a field near you. Production specialist Emerson Nafziger says there may not be an apparent problem, until you look at the ear. Some shoots have no ear, or only a remnant. Corn rows may have periodic problems, or entire rows full of undeveloped ears. He’s looking for a common cause, such as genetics or timing of pesticide application. Read more.
Continuous corn: is there a yield drag or not? Agronomists cite numbers about softer yields than a corn-bean rotation, however many farmers cite numbers counter to that research. Purdue agronomists are surveying 2,000 farmers with corn on corn to ask about weed control, tillage, pest management, drainage and other practices. Researchers believe their findings will help find the yields that are demanded from the biofuel market.
Cash rent levels in the past will not work in the future says former Purdue economist Howard Doster, who adds, “More tenants will lose their leases for ‘08 than at any time since the early seventies when crop prices also increased faster than non-land costs. Most of these turnovers could be avoided if only present tenants would do something nice for their owners.” He defines that as offering to pay more cash rent for 2007 and beyond.
A creative method for determining cash rent is using a flexible cash lease based on the GRIP insurance county yield, multiplied by the spring guaranteed base CRC price, and multiplied by a rent factor of 30-40% based on the productivity of the farm. IL farm economists Gary Schnitkey and Dale Lattz say the land owner picks up more risk in this concept when there are price changes between years, but the operator bears more risk if commodity prices have a larger change within the growing season. View examples.
If you are storing your own corn on the ground, you’ll have quite a few challenges that are addressed by a Purdue website designed to help farmers with temporary storage of grain. It has over 100 links to information sources about sanitation, loading, aeration and monitoring.
Wheat seeding is 4-6 weeks away, but selecting varieties should be an immediate priority. Many universities publish variety trials which give producers good input on agronomic traits, and yield data. Visit their joint website for multi-year information, along with pest, disease, and Hessian fly resistance.
A 10¢ hike in corn means a $1 drop in feeder calves according to Extension’s Dillon Feuz who analyzed 1991 to 2007 markets. He says, “Right now in the corn market there is equal money bet on DEC Corn prices being below $3.30 or above $4.00 per bushel this fall. That is a swing of $.70 per bushel which could swing calf prices $7 per cwt.”
The curiosity in the hog market is due to China says Glenn Grimes. “The futures market continues to have counter-seasonal price activity. The reason for the strong October and December contracts prices is the rumor that because of disease problems in China, they will be in the market for substantial quantities of pork this fall and winter.” OCT futures exceed AUG which Grimes said has happened only 8 times in 56 years.
A new manure handling concept is cheaper than hauling and has less odor than raw slurry application to fields. Researchers at the Univ. of IL and IL State have separated liquids and solids. The solids are composted to eliminate the odor. The liquid can be stored, then irrigated on nearby fields. The researchers say haulers typically charge 0.7¢ to 1.7¢ per gal. for hauling. Their cost is 0.9¢ for filtering and 0.1¢ for irrigating.
Biofuels will be a major focus of the IL Agronomy Day Aug. 16, where attendees will see how swine manure is converted to crude oil at 70% efficiency, with one pig yielding $10 worth of oil. Other topics include biodiesel, and producing cellulosic ethanol from switchgrass and miscanthus. Details.
You’ll soon be paying more for diesel fuel, if you aren’t already. That’s the analysis of Kansas State economist Kevin Dhuyvetter looking at petroleum futures. Summertime has provided savings of more than 12% under year ago levels. Beginning with September prices will begin at 5% more than 2006, and become 20% higher than last year. He said diesel fuel costs should fade next spring and equal spring 2007 levels.
Dec. 31 is the deadline to use a voluntary conservation easement, earn a tax deduction, and protect your farm against urban sprawl. The land must be donated to a qualified land trust and that allows a qualified owner to deduct up to 100% of their income. For all landowners, the law tripled the carry-forward period for deductions from 5 to 15 years. Examples.
Weed scientists report higher levels of carbon dioxide in future years will have a significant impact on poison ivy, by promoting growth, increasing vigor, and increasing its toxicity. They also found higher levels of carbon dioxide will increase dandelion seed production by 32% and improve its ability to be carried by the wind longer distances.
Ozone may be your next bin fumigant. A Purdue researcher says pulling oxygen into a bin, introducing electricity, and recycling it throughout the bin will destroy insects without leaving a residue. It did not impact food quality, and is used in potato storage.
Posted by Stu Ellis at 2:07 AM | Comments (0) | Permalink
August 9, 2007
As You Book Your 2008 Nitrogen, Here Are The Reasons The Cost Is Higher.
In agriculture you have to think ahead. Risk has to be managed so a crisis does not develop. Crops have to be marketed before prices plummet. Inputs have to be booked before costs increase. And it is that nitrogen input that impacts fertilizer and chemical costs that requires immediate attention.
Any farmer offered a higher price for a crop will produce more of that commodity. But a USDA economist says it is just the opposite for ammonia production that results in the reduced availability of nitrogen fertilizer. The Impact of Rising Natural Gas Prices on U.S. Ammonia Supply is a recent analysis by USDA’s Economics Research Service which warns of reduced availability for ammonia due to higher natural gas prices.
Any producer knows the importance of nitrogen, and USDA says, “Total nitrogen costs for U.S. production of corn in 2005 and wheat in 2004 were $3.66 billion and $1.02 billion, respectively. Nitrogen costs contributed to the largest operating expense for both corn and wheat producers. Nitrogen application accounted for 22 percent of the operating costs for corn producers and about 33 percent of the costs for wheat producers.” With 90 million acres of $4 corn this year, nitrogen use increased rapidly in all likelihood. If you remember your soil chemistry less from school, “When combined with phosphoric acid and potassium chloride, ammonia and its derivatives are the basic material used in the formulation of various mixed fertilizers containing nitrogen, phosphate and potash, which are used extensively by farmers. Thus, a change in the price of ammonia often leads to changes in the prices of all nitrogen fertilizers.”
The basis for ammonia production is natural gas, which accounts for 72%-85% of the cost of ammonia, subsequently; there is an 80% price correlation between natural gas and ammonia. The high cost of natural gas and low margins earned by ammonia producers since 2000 means low profitability and USDA says, “Because of low profitability in recent years, a significant number of ammonia producers ceased production or merged with other producers.” Production capacity dropped 35% from 2000 to 2006 and actual production declined 44%. With less US production, imports of ammonia have increased, with a 115% jump from 2000 to 2006, with shipments from Trinidad and Tobago, Canada, Russia, and Ukraine. Even with increased imports, the overall supply has declined.
Higher prices of natural gas means farmers will pay more for ammonia, and prices went up 130% from 2000 to 2005. Those higher fertility costs dropped profitability by 22% in corn and 32% in wheat. USDA says those costs can be controlled by adopting production practices that conserve nitrogen, “For example, a corn producer might reduce the nitrogen application rate by applying the amount as determined by equating the marginal return of nitrogen fertilizer to the high nitrogen price, by delaying the nitrogen application from spring before planting to summer after planting, by increasing use of alternative sources of nitrogen (such as manure), or by switching from corn to soybeans, as soybeans can obtain enough nitrogen from the atmosphere.”
When ordering ammonia for your 2008 corn and wheat crops, prices will be a function of overseas production costs and transportation costs.
1) Canadian natural gas prices are parallel with those in the US, so Canada will not have a significant advantage, and production capacities have recently declined as well.
2) Imports from Russia and Ukraine have high transportation costs, negating the lower costs of natural gas and lower costs of ammonia production.
3) The Mideast and North Africa have only limited production capacity for ammonia, losing their advantage for low costs of natural gas.
4) Any increase of imported ammonia will likely come from the Caribbean Republics of Trinidad and Tobago. Their natural gas price is low, and production capacity is expected to increase, and there is more incentive to ship ammonia than natural gas.
USDA believes that further increases in natural gas prices in the US will result in further decreases in domestic ammonia production, and more imports, most likely from the Caribbean. Because of the increased demand on imported ammonia, US farmers may be susceptible to global competition for nitrogen fertilizer. The US does have some unused production capacity, which could supply enough ammonia to provide nitrogen to an additional 10 million acres, should ethanol continue to push up corn acreage. But that will result in higher prices for ammonia and the cost of nitrogen fertilizer.
Summary:
High prices of natural gas have curtailed ammonia production, reducing the supply and increasing the cost of nitrogen fertilizer. The Caribbean is a potential source for increased imports, but with increasing dependency on imported nitrogen comes a chance for a volatile supply and a volatile price.
Posted by Stu Ellis at 12:14 AM | Comments (1) | Permalink
August 8, 2007
Does Conservation Funding Need Fixing, Or Just Some Minor Repairs?
The U.S. Senate’s debate on the Farm Bill has been postponed until early September, but in the meantime staff members of the Agriculture Committee will be working on the desires of Chairman Tom Harkin to create a proposal for committee consideration. And Senator Harkin has left little doubt that he wants more attention paid to conservation than what appears in the House version of the Farm Bill. But what does that really mean?
Ohio State University economist Brent Sohngren has delved into the process of conservation issues and identified several key issues:
• National environmental groups are focusing on the appeal for more money in the conservation title.
• CRP could end up looking more like an energy program.
• EQIP and other working lands programs need more than just a combining of programs.
National environmental groups are focusing on the appeal for more money in the conservation title. Sohngren says the special interest groups which want more funding for conservation are pushing Congress to fund a backlog of projects they say landowners want, but for which there have been no cooperative funds. Groups such as Environmental Defense Fund, Environmental Working Group, National Wildlife Federation and others have their priority lists of unfunded projects, but he rhetorically asks, “In the real world, is having proposals that go unfunded a bad idea?” Sohngren contends there are many projects in the world that should not be funded because they may not contribute enough payback, and instead of seeking more funding the environmental groups should focus on the process of how funding decisions are made and the performance expected. He believes money should be spent based on the outcome of the project.
CRP could end up looking more like an energy program. With much of the Conservation Reserve Program in grassland, it becomes a candidate to produce grass and similar biomass for harvest of feedstock for cellulosic ethanol plants. The soil conservation benefit of the CRP would not be jeopardized, but the biomass could be collected as it is sometimes used for grazing during periods of drought. However, Sohengren’s concerns about the concept is that the CRP is performing its duties of water quality, wildlife habitat, and other environmental issues, but there is other land that may be better suited for subsidized biomass production and the CRP would not have to be disturbed. He is an advocate for identifying land that should be conserved in the best ways, without focusing on acreage limitations and using better environmental formulas and more flexible contracts.
EQIP and other working lands programs need more than just a combining of programs. Sohengren believes the NRCS staff is too small to function and combining programs would improve efficiencies, “But simply combining programs does not address the fundamental issue raised above – whether the funds being spent are actually helping to improve the environment. If we could spend less money and have more of an impact on the environment, wouldn’t that seem like the win-win we are always seeking?” In all actuality, Sohengren wants Congress to better allocate the funds that exist, instead of seeking additional funds for conservation projects. He says rules that are written in Washington have difficulty working in rural America, but improvements could be made, such as using the CRP’s Environmental Benefits Index in the EQIP and CSP programs, and some of those latter projects could be completed with an EBI-based performance measurement.
Summary:
Sohengren says the key issue in the 2007 Farm Bill should be to increase program efficiency and improve funding allocation processes. There are questions about whether environmental goals have been reached, but changing the process could ensure that projects are successful and serve the public.
Posted by Stu Ellis at 12:33 AM | Comments (1) | Permalink
August 7, 2007
Are Biofuels Really Pushing Up Food Prices?
Grain producers have incurred the wrath of the cowboys over high prices for corn. But what about the non-farm consumer, who is paying higher prices for food, that he or she believes, is the result of more money going into a farmer’s pocket? The tug of war for corn between the food and fuel industries has created an uneasy relationship between the producer and the consumer.
While the typical consumer is unaware that biofuels have eased tight fuel supplies and that they will be paying fewer taxes to support commodity prices, today’s burr under the saddle is a bigger tab at the grocery store. Ag economists Helen Jensen and Bruce Babcock at Iowa State’s Center for Agricultural and rural Development rhetorically ask if Biofuels Mean Inexpensive Food is a Thing of the Past?
For years the proponents of farm programs advocated subsidies to ensure that food was plentiful and inexpensive, since farmers could sell it for less than the cost of production. Without those subsidies, higher priced grain would lead to higher priced food. Currently, we have higher priced corn (ethanol demand driven), higher priced soybeans (acreage demand driven), and higher priced wheat (short supply and acreage demand driven.) Jensen and Babcock say that theory calls for higher subsides to expand production so food prices could be low. They say, “By the same logic, high commodity prices caused by subsidized biofuels should result in a reduction in the production of food and higher food prices.” The economists contend that food prices are largely determined by costs and profits after commodities leave the farm.
The US consumer spends relatively little of his disposable income on food, which was 20% after World War II to about 10% today. That would be even smaller were it not for the cost of food consumed away from home which is 50% of the total food bill. The inexpensive food in the US is attributed to the efficiency of the producers and food companies. But that growth is being impacted by the biofuel revolution.
The demand for corn for livestock feed, for food ingredients, and for biofuels has resulted in higher prices for all. However, Jensen and Babcock say the 2¢ worth of high fructose corn syrup in a $1 can of a soft drink can would be increased to only 4¢ if the price of corn doubles. The economists say their fellow researchers found that a 30% increase in the price of corn, along with relative increases in soybean and wheat prices would increase egg prices by 8%, poultry by 5%, pork by 5%, beef by 4%, and milk by 3%. Incorporating the higher costs of restaurant food, they report that a 30% increase in corn would raise average food prices by 1.1%.
That is not currently the situation in the grocery store. Milk prices are at a record high, and meat and egg prices are high, but not because of high costs of corn. Milk prices are a function of the international demand that has outstripped the supply. At the same time, the motorist is looking to agriculture for biofuels. While the typical consumer may see little change in the cost of food, the low income consumer who is on a budget and is limited to home cooked meals, will be impacted to a greater degree. As a result, federal money once destined for commodity support programs will be needed to provide more food stamps for the low resource consumer.
Summary:
The demand for biofuels has created an increased demand for corn, needed also by the livestock and the food industries. While the cost of corn plays a very small part in the overall cost of food, meat, egg, and dairy prices have risen causing many consumers to blame biofuels for higher food prices. Traditional economic theory will not support the claim, even though farm program payments were designed to keep food prices low. Today those payments will not be going to farmers, but instead to consumers in the form of more food stamps with higher purchasing values.
Posted by Stu Ellis at 12:15 AM | Comments (2) | Permalink
August 6, 2007
Will Farm Programs Turn lnto Pumpkins If Midnight Strikes Without A New Farm Bill?
Congress has two months to finish work on a new Farm Bill before the 2002 legislation expires, and one month of that is summer vacation. What would happen if they don’t get the job done? Will Farm Service Agencies close up shop? Will meat inspectors walk off the kill line and slaughter plants close? Will USDA’s economists get pink slips? Will we revert to