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March 31, 2008
Are You Getting The Biggest Bang From Your Nitrogen Buck?
If you have winced while writing out a check for your anhydrous ammonia requirements, you will probably be quite interested in using it efficiently, and getting the most for your money. Nitrogen prices are high, and yes, corn prices are high also to provide payback. But no one wants to waste the liquid gold in the white tanks.
Corn prices may have peaked for the time being, but nitrogen prices show no indication of weakening. Your goal should be to apply just enough nitrogen to maximize your yield. While that may seem to have an easy answer, it is one of the most impossible questions in all of agriculture to answer. If you ask, “How much nitrogen should I apply?”; the most honest answer is, “Well, that’s hard to say.” In his recent newsletter, University of Illinois Crop Production Specialist Emerson Nafziger outlines the reasons why your question can’t be answered, but provides some guidance to work through the challenge.
First start with some of the facts that are known, to help put the challenge in context:
• At maturity, corn will have 0.7 lbs. of N in a bushel of grain, about 0.3 lbs. of N in the stalks for each bushel, so a 200 bushel crop will account for 200 lbs. of N per acre.
• There is little correlation between yield and the amount of N that is applied, since efficiency of use can depend upon the amount taken up by the crop, placement, N loss, soil moisture and root growth.
• The organic matter in the soil is a good source of N, but is unpredictable because of microbial breakdown, and that depends on soil conditions, such as moisture and temperature.
• Nitrogen fertilizer needs to make up the shortfall, and since the shortfall is nearly impossible to quantify, the fertilizer requirements remain a question mark. Fertilizer trials have demonstrated that optimum yields can be produced with fertilizer applications ranging from 50 to 250 lbs of nitrogen per ace.
Finding the optimum rate has changed in the past few years, and research shows that it depends on the price of the nitrogen and the price of the corn, instead of the highest yield per acre in terms of bushels. The ratio of prices has remained surprisingly steady at 10 to l. $2 corn and 20¢ nitrogen. $5 corn and 50¢ nitrogen. However, additional research data added each year tends to refine the recommendations, and based on your current cost of nitrogen and what you have 2008 corn booked for at the elevator, it is highly recommended that you utilize an on-line decision aid calculator.
Decision aid calculator for IA, IL, MN, and WI
Decision aid calculator for NE
Decision aid calculator for OH
The calculators may suggest a range of nitrogen application or a midpoint of a range, which provide some flexibility. The recommendations also take into consideration the nitrogen needs of corn following corn versus corn following soybeans. As you make your decision, considerations that may also play into your decision include:
• Application close to the time of use by the corn plant will decrease nitrogen loss.
• Plants take up nitrate, and efforts to keep nitrogen in ammonium form are often unnecessary in the spring if there is a short time between application and use.
• Corn roots are designed to absorb nitrogen, leaves are not. Leaf health is determined more by nitrogen supplied to the roots than to the leaves.
• Corn plants can suffer root burns and death if the nitrogen is applied in the row or too close to the roots, particularly if the soil is dry; so it is recommended that nitrogen be applied between the rows instead of under.
• Urea can deteriorate rapidly, and nitrogen will be lost, if it is applied on a warm, dry surface or if there is excessive crop residue. Incorporation is needed to place the urea where it can be used by the crop, if rain is not forthcoming. Compare the cost of the incorporation to the cost of a urease inhibitor.
Summary:
Nitrogen cost is high, but its contribution to a high value corn crop is priceless. The unfortunate part is not knowing exactly how much nitrogen to apply. Numerous issue impact the optimum application rate, including soil conditions, organic matter, placement, etc. On-line decision aids are available to assist in making a reasonable decision. Good agronomic practices will also assist in efficient use of your resources devoted to nitrogen application.
Posted by Stu Ellis at 12:41 AM | Comments (0) | Permalink
March 28, 2008
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
Monday will be busy at USDA’s lock up with the Prospective Plantings Report and the Quarterly Grain Stocks Report. IL Extension’s Darrel Good analyzes them in his weekly newsletter.
The market is expecting a forecast of 87 mil. acres of corn and 70-71 mil. acres of soybeans. Darrel Good says, “That estimate compares to 2007 acreage of 93.6 mil. and 63.63 mil., respectively. Intentions for spring wheat are expected to exceed 2007. The planting intentions estimate will provide a benchmark for anticipating actual plantings.”
6 mil. acres shifted last year after the report says Good. “Recent price changes that include much lower soybean futures and an extremely weak new crop soybean basis have shifted potential profitability significantly in favor of corn over soybeans in much of the Midwest. At the same time, generally cool and very wet conditions in some areas may lead to anticipation of corn planting delays and a swing to more soybean acres.”
Purdue’s Chris Hurt agrees with Darrel Good, saying there has been a reversal in new crop futures. “During the last three weeks, market prices for corn have actually increased the incentive to raise corn as soybean prices dropped more sharply.” He believes the report will be bullish for corn with surprisingly low acres with a resulting corn rally.
It will be the opposite for beans, says Hurt, who believes there will be so many bean acres forecast by USDA that it will be a bearish report for soybeans. “The markets and the financial incentives provided by the grain prices, as well as the costs are very dynamic. Producers have some tough decisions to make this year, but they need to take a step back and make the best decisions they can.” He recommends planting more corn.
The USDA survey was taken about March 1, and Hurt says at that time new crop soybean futures were peaking at $14.66, but since then beans have collapsed more than has the corn market, and there has been a reversal in new crop futures.
Also Monday is the Grain Stocks Report, which will detail the actual feed use in the past 3 months. The December report pointed to record feed use, and Monday that trend will either be confirmed or prior estimates adjusted. Good expects corn use about 4% more than 2007 levels, helped by the large livestock herd and growing ethanol refining.
USDA wraps up this week with the Quarterly Hogs and Pigs Report, following Friday’s market close. The December report indicated the pig crop was 4% more than the prior December, pointing to a large feed demand this spring. The forecast could have a significant impact for both corn and hog prices, if hog production remains strong.
Has your elevator quit offering forward contracts? Many have backed away from routine marketing tools because of margin calls and high loan levels to service their CBOT hedges in a volatile market environment. That leaves producers to manage their own price risk with futures contracts, but that requires substantial margin money also.
It leaves a lot to be desired, but MO marketing specialist Melvin Brees says an option strike price minus the premium cost will lock in the bulk of a forward contract, then use a basis contract at the elevator to manage the balance of the price risk. He acknowledges that the expensive premiums and weak basis bids won’t come near lofty futures prices.
The combination of buying and selling options may help manage price risk at a lower cost, but Brees says you should understand that risk is not eliminated, and selling an option incurs a futures obligation that could be exercised by the buyer. Read more.
There is a 72% chance of corn yields being under the trendline this year says Iowa State meteorologist Elwynn Taylor. He says the La Nina weather pattern may have peaked, he’s not sure, but he says the crop yield risk for 2008 is still very real. Taylor says the chance for a sub trend yield is 72%, but only 60% if La Nina fades before June.
Continuous corn tillage research compared a coulter chisel plow with either deep tillage shanks or a mini-moldboard plow at the Northern IL Agronomy Research Center. The more intense tillage produced an average 207 bu. compared to the 204 for the coulter chisel plow, reports IL Extension agronomist Jim Morrison in the 2005-2007 study.
Continuous corn fertility research reported by Morrison resulted in a 208 bu. average yield with more intense fertility, which included 320 lbs. of N, 172 lbs. of P, and 270 lbs. of K. Compare that with a 203 bu. average yield from 220 lbs. N, 92 lbs. P, and 150 lbs. of K. The cost of the additional nitrogen would have been more than the value of 5 bu.
Continuous corn population research at the Northern IL Agronomy Center compared 32,000 with 40,000 plants per acre. Results indicated the higher population yielded 206 bu. compared with 205 bu. per acre for the lower population. Comparing all three trials indicates that inputs for continuous corn do not need to be different from rotational corn.
With more stacked trait corn being sold this year, more refuge acres will be planted. IA State entomologist Jon Tollefson says the 20% acreage refuge should have been planned by now. “The refuge must be grown the same way the Bt rootworm corn is; that is if the rootworm corn is corn on corn, then the refuge must also be continuous corn. If the rootworm corn is rotated corn, the refuge should also be corn grown in rotation.
Accurate records will help you avoid federal penalties or falling profits, says IL Extension’s Dennis Epplin. He says troubleshooting problems are easier with reliable records about EPA registrations of restricted pesticides used on specific fields, as well as fertility levels, yield maps, planter settings, tillage, weed maps, and herbicides used.
An IL natural resources economist has a dim view of ethanol production and policy. Madhu Khanna says federal energy policy takes corn away from the export market, and the additional corn production comes at the expense of wheat and beans, which are also needed in food exports. She says corn-based ethanol reduces carbon emissions only 15-20% per gal. relative to gasoline, (but) energy crops could reduce emissions by 80-90%."
No-till fields need to be clean says Iowa State weed specialist Bob Hartzler, and first identify the weeds. Then:
1) Winter annuals are easier to kill now in the vegetative stage, before going to seed.
2) Kill the weeds 10 days before planting to avoid damage to your crop.
3) Adding 2, 4-D to glyphosate improves the consistency of control on many annuals.
What is your weed control program for corn? MO weed specialist Kevin Bradley has evaluated 37 different trials over the past 5 years. “In 64% of the trials, the highest corn yields were obtained with a 2-pass program consisting of a pre-emergence herbicide followed by a postemergence herbicide. A 1-pass postemergence program that also contained a residual herbicide provided highest corn yields in 29% of the trials, whereas in 7% of the trials a 1-pass pre-emergence herbicide program provided highest yields.”
Planting may get blamed for compaction problems this year according to a Purdue specialist, who says the cool wet conditions leave the soil at risk of compacting with minimal fieldwork. Corey Gerber says that restricts root growth, jeopardizes moisture and nutrient uptake, and can bring on diseases and insects as seed sits in the cold soil.
Going to the field before the soil is ready can be costly in terms of having a good crop this year, say soil specialists at Iowa State. They say that saturated soils make it too wet for suitable working soil conditions. Other problems include soil compaction induced nutrient deficiency such as potassium, root development and ultimately yield reduction.
Soil compaction can occur during any field operation, even wintertime manure spreading or spring anhydrous ammonia application. Under wet conditions, the use of heavy equipment can significantly change soil structure and cause soil compaction. Operating in wet conditions and especially doing extra tillage will increase fuel use per acre as well.
Do you really understand the reason for high fertilizer prices? WI soil scientist Carrie Laboski says the main reason is that fertilizer is a world commodity and demand is up:
1) Demand for N, P, & K are up 14%, 13%, and 19 % respectively from 2001 to 2006
2) US producers have to compete with farmers from China, India & Brazil for fertilizer
3) US nitrogen demand is higher because of the 15 million acre increase in corn in ‘07
4) We import 50%+ of N, 90%+ of K, but we are the largest exporter of phosphate.
5) The weak dollar increases the cost of good imported into the US.
For several years IL agronomists have grown soybeans in an atmosphere that resembles the high carbon dioxide atmosphere 50 years from now. The purpose was to create high yielding soybeans. An offshoot of the research found that insecticides will need to be developed also. It seems the high carbon dioxide air grows more and bigger bugs.
Posted by Stu Ellis at 12:17 AM | Comments (0) | Permalink
March 27, 2008
Economic Injury Levels: Where Are They In High Value Corn And Soybeans?
With the higher prices you have booked for 2008 corn and soybeans, what will be the basis for your decision on any type of pestilence that might arise this year? You might have Asian rust decimating soybean leaves. You might have Japanese beetles eating your corn silks. And if you know what your price risk is, does that increase or decrease your threshold level for a rescue treatment. Let’s recalibrate your sights as you aim at the bug in the bull’s eye.
Entomologists Mike Gray and Kevin Steffey at the University of Illinois have offered a couple thoughts that may help you profitably adjust your plans to cultivate and protect a truly valuable crop. In their latest newsletter Gray and Steffey consider when a rescue treatment is “needed.” Usually the answer has to do with economics, and whether there will be a return on the investment made in the insecticide or will the value of the yield offset the cost of the control. You have probably used those concepts in the past to determine when it is time to climb on the sprayer.
The specialists say, “In simple terms, the economic injury level is the point (of injury or insects) at which the value of expected crop loss equals the cost of control.” There is no rocket science here, but one issue that needs some clarification is the threshold or insect population density which causes you to pull the trigger. They quote a theory that “the economic injury level equals the cost of control, divided by the market value of the crop, the injury units per insect, the damage per injury unit, and the proportional reduction in insect injury.
While you are wondering what numbers to plug into that formula, Gray and Steffey say, “The question of whether economic thresholds for making insect control decisions will be lower in 2008 refers directly to the market value of the crop. Most people know that as the value of the crop increases, economic thresholds decrease.” In other words, if you pulled the trigger when four Japanese beetles were found eating the silk on $2.50 corn, you will be spraying a field of $5 corn much quicker. But is the number two beetles or three beetles?
Gray and Steffey share your lament that the answer does not come easy. Just because the price of soybeans has doubled from $6 to $12, that does not mean it only takes half the number of soybean aphids to warrant a rescue treatment. In their terms, “the relationship is not linear.” The entomologists admit they do not have an exact formula for economic thresholds that will accommodate the new commodity prices; and they say lowering the range is not a light decision, but will take several years to confirm. And to complicate the calculation will be changes in yield, plant populations, and input costs, all of which necessitate further adjustment.
The entire concept of calculating economic thresholds is designed to manage crop production with the greatest intelligence and management of risk. That applies also to managing your corn rootworm, corn borer, and weed problem, with the use of triple stacked genetic hybrids. While the bag of seed is higher in cost, the corn at the end of the year has a higher value this year. A recent Gray and Steffey commentary on Bt hybrids underscores the need for the prescribed refuges on 20% of adjacent acreage despite the temptation to plant all of your corn acreage to the premium seed. The threat to the viability of the Bt genetics is increased by the absence of the refuge, but the viability of the Bt hybrids is retained with a refuge. Two outcomes that are possible with the lack of prescribed refuges are regulations and the lack of efficacy in the Bt hybrid in controlling corn rootworm and corn borers. The loss of effectiveness will result in increased production costs and reduced profitability in future years.
Summary:
The higher prices you will be getting for corn and soybeans this year mean the crop is more valuable per acre, and with the higher value is a lower threshold for applying a rescue treatment in the event of pestilence. But the question is, what is that new threshold? Entomologists say just because the value of your corn and beans is twice as much, does not mean the threshold is cut in half. 2008 economic threshold ranges will be less than prior years, but the exact parameters will need research and testing.
Posted by Stu Ellis at 12:15 AM | Comments (0) | Permalink
March 26, 2008
Do You Really Think Soybeans Will Be More Profitable Than Corn This Year?
So you are going to plant more soybeans this year, you say? Half of your acreage? More than half? Mad at anhydrous ammonia prices and planting 100% soybeans? Booked beans for $13 and planning on retiring? Well, we’ll all find out next Monday morning when USDA releases its Prospective Plantings Report, and then it will be time to make adjustments if your intentions are different than what the market wants. Instead of gut feelings, have you penciled out the revenue returns? We have, and they may be different than what you think!
Your acreage decisions should be based on relative profitability of corn and soybeans say Gary Schnitkey and Darrel Good, University of Illinois agricultural economists, whose latest newsletter will make many Cornbelt farmers rethink any radical cropping decisions for 2008. Granted, Schnitkey and Good looked at Illinois farm returns, but their findings were consistent across all 9 crop reporting districts in Illinois and those will probably be representative of nearly all of the Cornbelt.
They found that corn income exceeded soybean income anywhere from $230 to $277 per acre. Schnitkey and Good used trendline yields and March 20 bids for beans and corn, which ranged from $4.70 to $4.90 for corn and $10.61 to $11.06 for soybeans. Yields throughout the study ranged from 132 to 173 bushels for corn and from 36 to 52 bushels for soybeans.
If you are questioning crop production costs, you will be interested to know that Schnitkey and Good created crop budgets for last fall and this spring, comparing crop income and rising production costs. Last fall, the non-land production costs were projected at $364 for corn and $215 for soybeans, which favors corn by $149. The numbers were recalculated this spring with anhydrous ammonia prices rising from $580 in the fall to $700 in the spring. The spring budget put non-land costs at $389 for corn and $227 for soybeans, which favors corn by $162.
Even with the increased nitrogen cost, soybeans are still less profitable than corn. Schnitkey and Good acknowledge that $700 may still be less than what farmers had to pay for a ton of anhydrous ammonia. However they say a $100 per ton increase will only increase per acre costs by $8.90, and that will not eliminate the advantage that corn has on crop returns per acre.
Schnitkey and Good calculate a 50/50 rotation to provide a $488 per acre average revenue. Increasing corn acreage to 2/3 provides a $498 per acre average revenue. And planting 100% corn provides a $520 per acre average revenue.
The economists also provided some qualifiers, and said the relative corn and bean price could change and that would impact the profitability projection. Any variance in yield will impact the revenue, and there will be some minor adjustments for yield drag on corn following corn. Additionally, pestilence is a risk that would need to be managed at some unknown cost.
Summary:
Even with expectations for high soybean prices and good revenue per acre, many Cornbelt farmers may find more profitability in corn than had been expected. Even with higher production costs, corn revenue substantially outdistanced soybean revenue in all sectors of Illinois, which indicates a reasonable cross section of the Cornbelt. Even with more soybean acres expected in 2008, conservative crop budgets and spring pricing opportunities many farmers may find corn to produce more revenue than anticipated.
Posted by Stu Ellis at 12:44 AM | Comments (0) | Permalink
March 25, 2008
Will Distillers' Grains Become A Dynamic In The Livestock Industry?
If the tail sometimes wags the dog, what are the implications for the beef industry as mountains of distillers’ dried grains are produced in the US? Do ethanol refineries attract feedlots? Do beef rations undergo a renovation? Will cattle production change as a result of the availability of a new feed? What does the crystal ball have in store for the cowboy?
Ethanol refinery capacity in the US increases daily and high oil prices will allow it to reach the maximum of 15 billion gallons per year from corn before the 2012 target date. But for every bushel of corn converted into ethanol, there are 17 pounds of distillers’ dried grains (DDGS) that are also produced, and this perishable product has to find a home. The Center for Agricultural and Rural Development (CARD) at Iowa State forecasts 40 million metric tons of DDGS will be produced by 2011, and possibly 88 million metric tons by 2016. The CARD analysis looks at future use of DDGS, its implications for the livestock industry, and the impact of surpluses of DDGS to the ethanol industry.
Within the corn refining industry in 2006, 70% of the ethanol was from dry milling plants and that share will grow, compared to the wet milling industry which produces wet corn gluten. Both products have the starch removed, and the feed is a high protein, highly digestible fiber with fat. They range from wet products with 70% moisture to DDGS with 10% moisture. Wet products can be transported a maximum 300 miles and still be a profitable ration, but many feed lots are locating near ethanol refineries to take advantage of lower transportation cost and the short shelf life of wet distillers grains. The chief objective is to increase the adoption rate of DDGS as a viable feed and to increase the percentage of use in livestock rations. Regarding the latter, University of Illinois researchers have found that up to 50% DDGS in a ration may reduce performance, but can be profitable if the price is right. On the other hand, Iowa State reports 15% to 20% of the ration will meet protein and energy requirements of the cattle, but anytime the net cost is less than corn, there is an incentive to feed beyond the protein requirement.
In 2006 9,400 livestock producers in the Cornbelt told USDA about their use of DDGS and wet distillers’ grains. A that time 36% of feedlots were using them, and another 34% were considering it. The inclusion rate in livestock rations ranged from 11% to 26% in feedlots and 22% to 31% for beef cattle operations. The survey also found that cattlemen not using the ethanol co-products generally cited unavailability of the products. The Iowa State researchers concluded, “Overall, the survey results indicate that, if producers have the economic incentive to feed distillers grains and if product availability, quality, and consistency improve, there is excellent potential for increased use in the U.S. beef industry.”
But what about the nutritional issues? Ethanol refiners are in the business to produce ethanol and their attention is given to that product. Very little attention is given to the quality of any co-products, such as DDGS, particularly nutritional quality.
1) Because of the processing with inexpensive sulfuric acid, high percentages of DDGS in a ration may have a sulfur content beyond the ability of the animal to metabolize it.
2) High fat content in DDGS may also be a limiting factor for feeding DDGS because of its suppression of fiber intake and digestion. Fat is going to be less in corn gluten feed than in DDGS, but both can vary widely in fat content.
3) Phosphorus content will be higher in distillers’ grains than in corn, but the high levels can be offset with calcium, so it can be managed. However, phosphorus becomes an environmental issue around feedlots.
4) Extensive analysis has been reported about the impact of DDGS on beef carcass and meat quality issues. Rations that contain more than 40% DDGS or wet gluten feeds show quality deterioration.
Based on an equitable distribution of distillers’ grains among various livestock species and the export market, the Iowa State researchers say the US beef industry would have to consume 48% of the supply and possibly as much as 62% of the distillers’ grains, both of which are more than nutritional and quality levels allow. To achieve those levels, the beef industry will have to solve the sulfur, fat, phosphorous, and quality issues. One of the solutions is to feed a blend of equal parts of DDGS and wet distillers’ grains, which complement each other, and can become 75% of the total ration without a negative impact on performance.
Another solution to the growing mountain of ethanol co-products is an aggressive development of export markets. That lessens the amount that has to be consumed domestically, but that only amounts to 4-6% increase annually. By 2017, a total of 28% of US production would be exported, compared to 10% in 2006 and 14% in 2007.
Summary:
As more corn is refined into ethanol and more distillers’ grains are produced, the beef industry has the ability to consume the bulk of the supply, but economics will be determined by supply and demand along with nutritional characteristics. More research is needed to address appropriate rations and optimize performance. Economics will also determine whether refiners invest more in the co-products to optimize their value to the consumer.
Posted by Stu Ellis at 1:00 AM | Comments (0) | Permalink
March 24, 2008
The Farm Bill, The WTO, And The Cornbelt Farmer
It has to be frustrating for farm policy writers. The 2007 Farm Bill is not finished and the 2002 policy expired 5 months ago. But at the same time the House, Senate, and Administration are haggling over domestic policy, the enforcers of international farm policy are methodically dismantling the structure of US farm policy. Where do you start in sorting out the issues and its impact on Cornbelt agriculture?
You’ve followed the progress, then lack of progress, in creating a 2007 Farm Bill. The Senate did not like the House version because of its lack of a disaster program and insufficient conservation programs and wrote its own. The Administration did not like either because the House wanted to raise taxes and both would cost more than the Administration wanted to spend. In brief, the stalemate has continued since late last year, but House, Senate, and Administration leaders are talking about their differences, at least.
The basic structure of prior Farm Bills remain in place, although some tweaking has occurred. There are payments to farmers. There are nutrition, crop insurance and rural development programs, plus funding for research. There are also food aid programs, and export promotion programs that offer credit to foreign buyers. While each Farm Bill contains a new program or two and makes minor adjustments in the way price supports are calculated, there is very little difference in them. That is the problem that international critics have with US farm policy, and The Congressional Research Service (CRS) has just provided a summary to Congress that outlines those complaints, just in case Congress wants to reshape domestic policy to comply with international trading rules.
The primary complaints are from Canada, which is our top trading partner, and Brazil which is one of our top trading competitors. They contend that all of the support programs that USDA provides to farmers exceed what is allowed by the World Trade Organization, and violated maximum support limits in 6 of the last 8 years; in addition to the export credit program being an illegal export subsidy since it does not recover its cost.
The Canadian complaint follows several years of arguments about wheat, and then spilled over to corn with the allegation that US corn was being exported to Canada at less than production cost. Although the Canadian government did not officially agree, it succumbed to political pressure to lodge the WTO complaint. Because market prices have risen well above support prices, and were expected to remain for at least ten years, Canada has dropped the complaint about price subsidies.
The Brazilian complaint followed a successful dismantling of the US cotton program and most recently was focused against the US feed grains program. Since the cotton complaint established a legal precedent that US support programs were improper, Brazil decided to press the issue on other US farm programs. Brazil initially joined in the Canadian compliant, but has lodged is own WTO complaint. Because each complaint was joined by a multitude of other nations, both the cases have been merged by the WTO.
The trade complaints contend US spending on various farm programs distort trade and distort the market by nearly $20 billion per year. The US says its support programs are well within WTO spending limits, but Canada and Brazil say the US did not total up everything it should have, and in actuality those spending limits would be surpassed. At issue are Production Flexibility Contract payments, Direct Payments, Non-insured Crop Disaster Assistance Program payments, Emergency Feed, Livestock Indemnity, and Tree Assistance payments. Additionally, both sides differ on how Counter-Cyclical Payments should be treated. Brazil’s also contends the US should be penalized for USDA direct and guaranteed loan programs, exemption of tax for farm use of petroleum, deductions on Schedule F income tax forms, benefits received from membership in cooperatives, and benefits from irrigation that is part of a government program.
The CRS has told Congress that if the WTO agrees the Production Flexibility Contract and Direct Payments are included, then the US farm program has violated the WTO limits in two of the six years. Also, if the market loss assistance and Counter-Cyclical Payments are added in, then the US has overspent its limits in five of the six years.
Regarding the complaint about the export credit programs, the WTO has already ruled in Brazil’s case against the US cotton program that it is illegal because it does not recover all of its costs. Consequently, the complaint is being raised against the program for all other commodities.
An initial ruling on the complaint is scheduled for late this year, but appeals could push a final decision well into the future. If the US is found to be at fault, then Congress would likely have to re-open the Farm Bill and write new commodity programs and other programs that aid farmers. The House and Senate Farm Bill proposals would cure the problems with the export credit programs. However neither version addresses the issues of Direct Payments and maintains the status quo on other programs. But most of the issues have been temporarily resolved by the fact market prices have risen well above support levels and the USDA has substantially reduced its financial outlays.
Summary:
Cornbelt farmers are particularly in jeopardy of losing their safety net, if the WTO finds that many US farm programs are providing more financial help than is allowed. Currently, however commodity prices are above support levels, and USDA expenditures are minimized. The new Farm Bill could address the international trade complaints, but does little to do that, and Congress may have to rewrite the Farm Bill in the next few years the US is held to be in violation.
Posted by Stu Ellis at 12:29 AM | Comments (1) | Permalink
March 21, 2008
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.
Corn market volatility continues says Extension’s Jim Hilker at Michigan State. “December 2008 corn futures made new highs of $5.90 before going back as low as $5.43. And we haven't even gotten to the growing season. Get used to it, if you want to do some pricing you will need to be ready.” Read more.
Hilker says the Prospective Plantings Report will keep the soybean market on its toes. That report will be released on March 31. With US carryover stocks only at 140 mil. bu., Hilker expects USDA to forecast 71 mil. soybean acres in 2008. He says with expected soybean use that will only leave 149 mil. bu. for the 2008/09 marketing year carryout.
Soybean oil prices have plummeted, and IL Extension Marketing Specialist Darrel Good is not surprised, believing they have been overvalued, even in the wake of strong demand and declining stocks. He says soy oil prices will be heavily influenced by 2008 world soybean crop, and the soy oil market will watch forecasts for US soybean acres.
Darrel Good says the high price of soybean oil has impacted biodiesel production. He said soybean oil use in biodiesel production was 469.4 mil. lbs. in August 2007, but only 318.8 mil. lbs. in January. And USDA expects 2008 conversion of soybean oil into biodiesel will not grow from 2007 levels. However, global consumption of soy oil is up, and Good says China will use 14% more soy oil this year than last, 29% more than 2006.
La Nina will likely remain moderate through May and weaken in July, says Iowa State meteorologist Elwynn Taylor, “Possibly influencing North American weather until December. This outlook includes a slightly greater than usual chance of below normal precipitation in July.” He says odds favor a below trend corn yield this year.
Cycles can give a good insight to the weather if you watch what Elwynn Taylor does:
1) The 30 year wet/dry cycle will give us drier times for the next 20 years or so.
2) The peak of the 89 year warm period should be reached in 2025, then cooler years.
3) The 20 year harsh winter period has just begun, compared to milder since the 1980’s.
4) This year was a peak (of a sawtooth pattern) for cold air intrusions into the Midwest.
5) Changes in the short cycle events (7-42 days) have bigger seasonal impacts.
Analyzing your 2007 production costs, you probably found an 8% to 12% jump in corn production costs, and a 7% to 17% rise in soybean production costs. Those were ranges for IL farms from the top to the bottom of the state, with “The non-land interest cost per acre being one of the items that increased the most due to higher grain inventory values and more capital investment into machinery,” says IL ag economist Dale Lattz.
$542 per acre was the total cost to produce corn, averaged across IL. Economist Lattz says, “Variable costs increased $22 per acre, or 10%, other non-land costs increased $21 per acre and land costs increased $11 per acre. In 2007, cash costs accounted for 44% of the corn production cost, other non-land costs were 30%, and land costs were 26%.
$418 per acre was the total cost to produce soybeans, averaged across IL. Lattz says, “Variable costs accounted for 32% of the total cost of production for soybeans, other non-land costs 34% and land costs 34%.” His newsletter gives details for 1,559 farms.
2008 crop budgets prepared by MO Extension economists show substantial returns.
1) 155 bu. dryland corn has $534.42 total cost, and $773.65 gross revenue at $4.90.
2) 200 bu. irrigated corn has $690.03 total cost, and $994.15 gross revenue at $4.90.
3) 50 bu. soybeans has $343.79 total cost, and $545.15 gross revenue at $10.80
4) 60 bu. wheat has $352.43 total cost, and $554.15 gross revenue at $9.00
Other than cash rent, your biggest per acre investment will be fertilizer; so what is your thinking about cutting back to save on expenses, or pouring it on to maximize yield and revenue? NE fertility specialists say one place not to cut back is on soil sampling. Because of increased fertilizer costs, the relative cost of an accurate fertility measurement is only 52¢ per $100 of fertilizer expense this year, compared to 88¢ per $100 in 2006.
Using the example of a 140A center pivot irrigated cornfield, the NE fertility specialists said using 30 lbs too much N would waste $2,100 on the 140 A field. Using 50 lb. too little N below the recommended rate would cut yield by 15-20 bu. per acre and reduce income on the field as much as $14,000. They stressed using the on-line nitrogen calculators which make recommendations based on crop prices and nitrogen costs. Find a calculator here.
That 20% non-Bt refuge applies whether you are planting YieldGard, Herculex, or Agrisure. However, the rules vary for refuge placement depending on the insect.
1) For corn borers, the refuge can be inside, adjacent, or within one-half mile of the Bt.
2) For rootworm, the refuge has to be in the same field or adjacent to the Bt field.
3) For stacked hybrids, Ohio State recommends a common refuge in or next to the Bt.
Your planting options for the non-Bt refuge are numerous. Adjacent fields can be separated by a ditch or a road. Internal refuges can be a block, a strip alongside the field, or split rows with your corn planter. The stewardship of biotechnology is a priority for researchers and NCGA. But don’t forget that you are urged to use traditional insecticide tools in the refuge.
Asian soybean rust is alive and well in the sunny southland and preparing for its return to the Midwest with the rest of the snowbirds. The national Asian Rust website is here. Among the latest findings about ASR:
1) Rust overwinters on kudzu, but populations are reduced each year and must rebuild.
2) Kudzu can suffer from drought, so rust population depends on local moisture.
3) Asian rust survives further north than was previously predicted.
4) Rust has survived on kudzu further west in LA and TX than in prior years.
5) More efforts have been made to track rust in Mexico than in prior years.
Beef exports are growing, and NE livestock economist Darrell Mark says thank the low value of the dollar, which is curtailing beef imports as well. January tonnage was 35% over January 2007. January beef exports to Canada were up 89% and up 15% to Mexico. Exports to Japan and Korea, the largest customers prior to 2003, continue to lag.
Lock in those futures prices, say MO livestock economists Glenn Grimes and Ron Plain, “With pork production in 2008 likely to be up between 5-6%, we expect live hog prices negotiated in Iowa to average between $41-44 per cwt. The lean hog futures price in mid-week was offering a live price in the mid $50 per cwt for June 2008 through April of 2009. The odds are very high that the demand for live hogs will not grow enough or slaughter declines enough to get close to the prices currently being offered for hogs by the futures market in the coming year.” Read more.
Dairymen should not skimp on feed, then suffer a revenue loss, says IL Extension Dairy Specialist Mike Hutjens, “By reducing feed intake by one pound of dry matter, for instance, you may save 10 cents but lose 36 to 40 cents a day in milk income."
1) Fuzzy cottonseed may be expensive, but it has functional fiber and slowly releases fat.
2) Replacing forage with straw reduces total dry matter intake, and cuts milk yield.
3) Cutting back on hay reduces rumen digestion and microbial growth.
4) 3-5 lbs of hay yields 5 lbs of milk, so if milk is 18¢/lb, hay is worth 11-18¢/lb.
Spring wheat may have been the major crop in your area in the 1800’s and early 1900’s but it has risks in the Cornbelt today compared to other crops. Concerns to address are adaptation, variety, type of soil, fertility, rotation, planting rates, etc. Iowa State has a new guide for spring wheat here.
Does this describe you? “University agronomists and county ag professionals, along with many crop consultants and professionals, have all noted that many producers are spending less time choosing varieties and hybrids, less time scouting and walking fields, not testing the soil as often as needed, failing to rotate crops, not paying attention to crop disease control, not harvesting in a timely manner, and overlooking other basics that are sure profit generators.” Ohio State’s crop checklist is here.
Build your library to more quickly identify crop problems and find solutions. The following manuals and reference guides can be ordered.
1) 2008 Illinois Agricultural Pest Management Handbook, a comprehensive guide.
2) Field Crop Scouting Manual, covers pests, injuries, nutrient deficiencies, etc.
3) Pocket Guide to Soybean Diseases in the Midwestern U.S., covers 24 diseases.
4) Field Guide to Corn Diseases, covers 50 different diseases and abnormalities.
Posted by Stu Ellis at 12:04 AM | Comments (0) | Permalink
March 20, 2008
Double Crop Soybeans Could Payoff If The Risk Is Managed
Are you a bit greedy, and are you thinking about planting double crop soybeans into your wheat? Certainly, two high value crops in one year will help pay the cash rent, but make sure you take care of both crops, or you may create significant problems and not have any crop. Oooops!
First, the risks. You will have a significant chance at increasing the disease pressure for both crops. You are also negating the weed, disease, and insect control opportunities received from a typical crop rotation. Those are the primary warnings of Ohio State University agronomist Jim Beuerlein, who offers a roadmap toward doublecropping.
Beuerlein also warns there are two requirements for a profitable double crop:
1) Adequate time for the second crop to mature.
2) Adequate water for the second crop to mature.
Time and water, water and time. That is the bottom line to profitability. But Beuerlein also notes that because soybean maturity is determined by the length of the day, it is particularly suited for a second crop since it will begin growing when the days are the longest. But the water factor at that point is also important, and Beuerlein says the top three inches of soil cannot be dry when beans are planted into wheat. That will slow down the germination and retard any root growth that starts. He says the best soil for double cropping are ones with good water holding capacity and are considered “good corn soils.”
Your wheat crop needs to be harvested as early as possible. If you have planted a full season wheat, don’t go to the expense of buying soybean seed. If you are going to be successful in doublecropping, your wheat crop should be an early to mid-season wheat variety, and what is more, you are going to harvest it early. Beuerlein suggests cutting the wheat when moisture starts to dip below 20%, in order to get it off the field and let the sun hit the soybeans. That means you will probably have drying costs associated with the wheat. By letting it field dry below 14% moisture, you have saved drying money but you have also lost a couple weeks that the soybeans need.
Watch the June temperature, which will be integral for rapid maturity and dry down of the wheat. If that is not happening, reconsider your double crop plans. In addition to the short season wheat, you also need a short season soybean variety. That will improve your chances of the beans maturing before the first frost next fall. Beurlein says,” Ohio studies have shown that early planting and July-August rainfall have a much greater impact on double crop soybean yield than does variety.”
Your wheat straw must be managed to avoid problems for the soybeans. They need to get up and out, and if you can clip the straw and bale it, that provides additional income. If you are not baling the straw, chop it and spread it so that a no-till drill can plant through it. At that time, soil moisture is imperative. Beuerlein says July and August rain usually will not replace what the second crop is capturing, and the double crop beans need a head start provided by the moist soil at planting. He says, “An important rule of thumb to consider is: “If June is dry, don’t try to double crop.” Increased nitrogen application for the small grain produces more vegetation, which increases soil moisture use. Because wheat uses moisture from the upper 8 to 12 inches of soil, growers should be aware of the moisture remaining below that depth.”
The Ohio State agronomist is highly recommending that the double crop beans be planted with a no-till drill, and ideally planted the same day the wheat is harvested. He recommends a narrow row of 7.5 inches, with a planting rate at least 250,000 per acre to obtain sufficient leaf canopy and yield. He recommends that rate because the beans will be short and will need to create a canopy as soon as possible.
Weed control is necessary, but Beuerline says it is not difficult. Weeds surviving the wheat harvest should be knocked down with glyphosate or grammoxone. The use of Roundup Ready beans may already be in your plan to control post-emergent issues. Earlier, when the wheat reaches the hard dough stage Beuerlein says a 2,4-D amine application can be used to control some weeds that might be a problem for the soybeans that follow the wheat.
Summary:
Double crop soybeans will provide added cash flow, but will require sufficient time to grow and sufficient water to grow. An early departure of the wheat, helped by an early maturity and an early harvest, will allow soybeans to be planted the same day. However, there must be sufficient moisture, and if the time is still in June, there would be time available for soybean growth and maturity before the onset of frost. The beans should be drilled in narrow rows with a high population to achieve a canopy as early as possible.
Posted by Stu Ellis at 12:31 AM | Comments (0) | Permalink
March 19, 2008
Is The Churning Corn Market Churning Your Stomach?
Is the corn market making you nervous? If so, you may not be fully protected. Do you make up that protection on the way down, or in the midst of volatility? But with the acreage report due out in two weeks, with spring planting nervousness, and with summer weather issues, is the corn market really finished with its bullish performance?
Most of the commodity market analysts and marketing specialists are not making any predictions until USDA’s Prospective Plantings Report is issued on March 31. And Purdue’s Chris Hurt is one of those who believes the acreage report will have a significant impact on the market. In his recent newsletter, Hurt suggests that the corn market has been in winter dormancy, while the focus has been on soybeans and spring wheat nibbling away at potential corn acreage.
Hurt’s expectation is for 88 million acres of corn, and he says that’s not enough. 88 million would be more than 5 million less than last year, and with a trend yield, the 12.4 billion bushel production would be insufficient to supply the demand. Additional demand will come from more ethanol plants starting up which will require 1.4 billion more bushels than were needed from the old crop. Hurt adds that to the 13 billion bushel utilization from the current marketing year, and that means 14.4 billion bushels of corn will be needed. Subsequently, there will not be enough to go around, and substantial rationing will occur.
Of the ethanol, industrial, export, and livestock industries, Hurt rhetorically asks who is going to get cut first?
1) Ethanol production will be determined by the ethanol margins, and whether it is profitable to refine ethanol at a given price. The profitability will be determined by the price of gasoline and that means the price of crude oil. High crude oil prices means that ethanol producers will be able to bid higher for corn, and Hurt says the futures market suggest that ethanol plants can bid $5.25 to $5.50 and remain in the black.
2) Higher prices for corn-based industrial products such as high fructose corn sweetener can be passed on to consumers. Food and soft drinks may cost a couple cents more, so Hurt believes that industry will get the corn it needs with steady demand.
3) The export sector has been at a high demand level, despite high prices, which are mitigated by the low value of the dollar. The currency value and world economic growth are expected to continue driving export demand for the new crop. It could soften somewhat with Hurts concerns about a strengthening of the dollar and more corn being produced around the world.
4) The livestock industry is the most fragile with its current financial stress, and Hurt predicts feed use will drop 10%.
The Prospective Plantings Report will be bullish for new crop corn, says Hurt, but old crop corn prices could also move higher, with an early spring peak the first part of April. But he suggests continued volatility in the corn market throughout the growing season due to USDA reports, weather issues, and hedge funds shifting in and out of the commodity market.
Hurt believes that the March 31 report will be bullish enough for December prices to move above the $6 mark. But if your elevator is not offering forward contracts to price grain for fall delivery, how do you sell it? The only choice may be to use the futures or options market with a broker or elevator merchandise helping guide you through the pitfalls. There is little time to learn market strategies if you are preparing to go to the field. But one of the issues that you will need to address with a hedge is to meet the margin calls that may be required, if you have sold (gone short) and the market continues to rise. There may be large amounts of cash that are required to maintain a legitimate hedge, and that may require a conference with a lender.
Purdue’s Chris Hurt says the market could turn into a dangerous turmoil for producers, if there are weather problems. He strongly advises against any speculation and to be sure of any risk you are taking.
Summary:
The 2008 corn market could be dangerous for the faint-hearted and unprepared, due to strong demand for a potentially insufficient crop. Increased demand from ethanol, continued demand from the export and industrial markets will more than offset an expected softer demand from the livestock industry. The March 31 USDA report will indicate planting intentions, but so far, intended corn acreage may not be enough to meet the domestic and foreign demand for corn. Farmers may have to finance their own marketing tools, such as hedges and options, but should know all of the risk being taken.
Posted by Stu Ellis at 12:33 AM | Comments (0) | Permalink
March 18, 2008
Would Your CRP Produce A Valuable Crop Of Switchgrass?
If you are growing all of the corn your farm can produce for the local market, what about that rough ground that may be in the CRP for the next year or two? It just is not adaptable to row crops, but if the USDA opens the Conservation Reserve, would it be adaptable to switchgrass?
Ethanol plants have popped up in most counties in Iowa, and there are dozens more throughout the Cornbelt. But there are limits on the amount of corn that can be refined into ethanol, and still meet the demand for livestock and the export market. That is why the Congress put a 15 billion gallon upper limit on corn-based ethanol. Beyond that our thinkers have said the biomass-based ethanol industry is nearly unlimited. If one of those type of ethanol plants pops up down the road, would you begin feeding it switchgrass?
University of Nebraska researchers Richard Perrin, Jim Roberts, and Brian Williams analyzed the economics of switchgrass on behalf of Cornbelt and Great Plains farmers who may be considering it for an alternative crop. Switchgrass provides cellulosic ethanol, and most of the plants converting biomass into ethanol are in the experimental phase. Several federally-subsidized plants are under construction that will produce 140 million gallons per year by 2011. The federal mandate for ethanol calls for 100 million gallons of production by 2010, one billion gallons by 2013, and that will require investors to start construction on 30 more plants in short order.
Let the plant investors worry about that aspect, but your job is to evaluate the financial return for producing switchgrass on your farm. The Nebraska researchers analyzed the operations of 10 farmers, who have produced 15-20 acres of switchgrass for the past five years, on acreage that would qualify for CRP land.
The average production cost was $60 per acre, with an average 2.2 tons per acre yield. The better farms averaged 2.5 tons with a $47 per ton cost, and the poorer farms averaged 1.6 tons per acre with costs exceeding $80 per acre. Costs per acre included:
• $12.15 for planting
• $13.53 for herbicide application
• $15.03 for fertilizer application
• $32.64 for harvesting.
• With a $59.67 land rent, the total cost was $133.02
The Nebraska researchers acknowledged the relatively low land cost and say a doubling of rental rates would increase costs to $87 per ton.
The cost of the switchgrass feed stock would be about 75¢ per gallon, if 80 gallons could be refined per ton of switchgrass. Compared to corn, it would be $1 per gallon, which is still competitive even with high land costs.
Commercial plants are not prepared yet to solicit delivery of switchgrass, so please don’t plant any in the coming spring, unless you have a contract for delivery. The researchers believe that once plants are operational, and switchgrass is being delivered locally, then economics will begin work in favor of the “switchgrass economy.”
Summary:
Switchgrass is currently not an economical feed stock for ethanol production, but federal mandates will require it to be used soon, as the nation transitions from corn to biomass for its ethanol production. Researchers have indicated that switchgrass can be competitive as an ethanol feedstock, when compared to corn.
Posted by Stu Ellis at 12:29 AM | Comments (0) | Permalink
March 17, 2008
Land And Grain Prices: What Happens If Ethanol Demand Increases?
As the grain market bids on corn and soybean acreage for 2008, values of commodity prices rise and fall. But the primary resource being targeted is farmland. Its quantity is finite and the marketplace is attempting to establish a value on it, via the price of grain. But the grain traders are only tools of the food, livestock, and ethanol industries, and it is those entities that are really becoming the land barons of the 21st Century. Which one will dominate the others?
That issue is investigated by a corps of agricultural economists, led by Jacinto Fabiosa, Co-Director of the Food and Agricultural Policy Research Institute at Iowa State University. The analysis explored US and global agriculture production, commodity prices, energy policies, and primarily land allocation, with the impact of Brazil, China, India, and the European Union.
Ethanol demanded a thorough focus and the economists found that Brazil and the US are the largest producers, Brazil is the only exporter, and China, India, and the EU are significant users and those five countries constitute the bulk of the world ethanol market. On the other hand, the lack of profitability in bio-diesel production essentially cancels its consideration in the study. For ethanol, its price impact induces land reallocation away from other crops which may have a softer price.
In the US the researchers found that an increase in ethanol demand will only impact US ethanol expansion, but the impact on feed grain supplies will be felt in other countries which depend on the US for imported grain. That change in coarse grain supplies in the US also impacts the price of wheat and soybeans, as land is shifted from them into corn production.
If Brazil expands its ethanol production and use that action will affect the world ethanol market as well as the land used for sugarcane production. The sugar production will have ripples felt in other sugar producing countries.
The 54¢ tariff applied by the US on imported ethanol insulates the US producers from the world market, and a removal of that tariff would increase the world price of ethanol and jolt the US ethanol market. Brazil would increase its ethanol production to benefit from the higher world price.
The researchers looked for any impact that a 3% increase in US ethanol demand would have. They found:
• The increase in U.S. ethanol use directly affects the corn and sorghum markets, with reduction of stocks, and expansion of land devoted to coarse grains.
• Corn falls as a feed for livestock and is replaced by sorghum, barley, oats, and wheat.
• Feed use of corn falls and seed use increases. Food use falls primarily for high fructose corn syrup.
• U.S. land area allocated to corn increases and could potentially increase by higher rates in the long run when inventories bottom out at their minimum required levels for markets to function.
• In U.S. oilseed markets, there is a sharp reduction in land devoted to soybean and, to a lesser extent, to sunflower. These reductions lead to higher oilseed prices which lead to biodiesel production to fall.
• In livestock and meat markets, the ethanol shock translates into higher feed grain prices, lower DDG prices, and a small increase in meal prices. The shock leads to a small reduction in aggregate meat production. U.S. beef production increases slightly and wholesale meat prices increase moderately. Retail prices increase by even less.
• World land area devoted to corn increases moderately in aggregate, but more substantially in Argentina. Growth in land devoted to corn in Brazil and India follows nearly with the aggregate corn supply. Higher world prices for other feed grains also occur.
• World soybean land allocation falls slightly, but it expands in Brazil, the most competitive soybean producer in the world.
The researchers also looked at a 3% increase in the world ethanol use, which is reflected in nations other than the US. They found:
• The impact on the world ethanol markets has a direct impact on the world ethanol price, as well as, on the local ethanol markets.
• The average impact on the world ethanol price is very high, but the U.S. ethanol price (Omaha price) is left nearly unaffected. This lack of impact is a result of the 54¢ import tariff. Brazilian ethanol exports rise despite the increase in its domestic demand.
• In feedstock markets, the largest price effects are registered for sugar given the importance of sugarcane and sugar by products as a feedstock in Brazil and India.
• The effect on world corn prices is a tenth of that on sugar price, because of the limited size of the grain-based ethanol production outside of the United States, namely in China and the EU.
• Similarly, the price of other feed grains increases slightly. The world ethanol demand increase has some impact on grain stocks and grain trade flows, but land area devoted to grains and grain production remain nearly unchanged in most countries.
• To summarize, the impact on sugarcane and sugar is the only significant change in feedstock markets. Brazil sugarcane area increases substantially
• Sugar production falls as it competes with ethanol for the sugarcane feedstock and sugar exports fall. Other competitive sugar exporters expand their land area devoted to sugar crops.
Summary:
Based on the significant impact that ethanol has had on domestic grain markets and land prices, it will have an even greater impact if demand suddenly increases by 3%. Higher corn prices will boost prices of other commodities and there will be significant land reallocation. However the US and world ethanol markets are separated by the 54¢ import tariff imposed by the US, so the US will be insulated from a 3% increase in ethanol demand in the rest of the world. That will be primarily changed by the expansion of sugar cane production in Brazil where the rest of the world’s ethanol will be produced. The increase in world demand will have little impact on US agriculture.
Posted by Stu Ellis at 12:22 AM | Comments (0) | Permalink
March 14, 2008
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.
You can now exhale. Everyone holding their breath that permanent agricultural law was about to occur can relax. The Congress averted that twilight zone Wednesday with a 4 week extension of the 2002 Farm Bill. Congressional leaders are miffed that the ag and finance committees cannot come to agreement on financing a new Farm Bill, and finally agreed to the extension. Committee chairs say they will have an agreement by April 18. Permanent law would have meant parity prices and elimination of some USDA programs.
Steep rallies in the grain markets have faltered in the past week says IL Extension’s Darrel Good. December corn moved to a high of $5.85 fell 45¢ then recovered, and November beans reached a $14.73 high before declining over $1.50. July wheat declined after twice reaching the $12.50 mark, losing more than $2 in between. Read more of his newsletter.
Darrel Good notes the volatility is due to energy, currency, and financial markets, but corn and beans will soon be concerned with the March 31 USDA Prospective Plantings Report. “A decline in corn acreage and increase in soybean acreage is expected, but the market will have an opportunity to influence final planting decisions.” He said 2007 acreage was 3 mil. more for corn and 3.5 mil. less for beans than USDA had predicted.
Don’t forget the Stocks Report on the same day says Darrel. He said the December report indicated a surprisingly small inventory of corn, implying large feed demand. That caused USDA to raise its feed projection for the balance of the marketing year. Darrel says USDA will either validate that projection or admit overestimation of the 2007 crop.
High commodity prices and volatility are blamed by Kansas St. economist Mike Woolverton, who says, “Commodity exchange margin requirements have been stretching the financial resources of all agribusiness firms including grain traders and speculators. Hedge funds and other speculators have had difficulty coming up with cash when faced with margins calls. Rather than go to lenders, the speculators have raised money by cashing out of profitable commodity positions causing temporary price fluctuations.”
Woolverton notes that producers are being affected secondarily by the margin call issue. “These developments have had the effect of reducing cash forward contracting opportunities for grain and oilseed producers unless they are willing to use futures forward contracts, and put up the margin money themselves, or buy options. But it hasn’t had much effect on the bullish tendencies of the markets.” Read more of Woolverton’s market analysis.
USDA’s Supply/Demand Report made no changes this week for US corn, but raised the world supply because of better corn crops in Brazil, India, and several other countries, and also increased trade, consumption and ending stocks. USDA cut US soybean carryover to 140 mil. bu., pushing exports above 1 bil. bu. with strong sales to China. Global soybean and oilseed production was lowered, but Brazilian production was raised.
The USDA report this week raised soybean oil production estimates because of a higher extraction rate. Soy oil stocks and exports were raised, but overall domestic use was cut due to lower use for biodiesel. USDA said “The US Census Bureau has reported reduced biodiesel production from soybean oil for 6 consecutive months, and a declining share of total biodiesel production from soybean oil as soybean oil prices have climbed.”
USDA again raised exports and lowered the ending stocks for US wheat to 242 mil. bu. and tightened the average farm price to a range of $6.50 to $6.80. But global wheat production estimates were raised with better crops coming from Brazil, India, Australia, and the EU. Global trade numbers were raised, but global wheat stocks are now building. The USDA report is here.
A few more hours remain before the crop insurance deadline March 17. NE economist Paul Burgener suggests, “For producers interested in forward contracting corn, grain sorghum, and soybeans, the crop insurance decision is important this year. If you feel that prices may increase by more than the CRC limits on corn and soybeans, then an RA-HPO product may be best for you. The RA-HPO products tend to carry a little higher premium, but they will allow your coverage to remain in place if prices increase.”
Revenue crop insurance guarantees are $5.40 for corn and $13.36 for soybeans in the Cornbelt and that carries the higher premium. Nebraska’s Burgener says if you want the economy model, “Multi peril crop insurance (MPCI) is available on all of the major crops, but may leave you seriously short of coverage if bullish prices continue through harvest. Established prices for both corn ($4.75/bu) and soybean ($11.50/bu) are already well below the market. If these crops are significantly damaged this year, the return from this insurance will be significantly lower than the value of the crop.”
If feedlots have been losing money, can they expect to make it later in the summer? Utah State’s Dillon Feuz says, “When you factor in corn over $5 per bushel, it is easy to see why feedlots are losing over $100 per head on many current closeouts and have been losing money in 2008. How realistic are summer and fall live cattle contracts which are trading in the upper $90 range and even over $100/cwt on Oct and Dec Live Cattle? I can suggest that if you are buying feeder cattle to place against those fed cattle contracts, I would hedge in those contracts if you want to insure your price expectations are met.”
A light at the end of the pork tunnel? Thus far in 2008, hog slaughter has been up 11.7% compared to a year earlier. But pork economist Glenn Grimes at Missouri says, “This week's hog slaughter was up "only" 4.9% compared to the same week in 2007. Thus the string of double-digit increases in weekly hog slaughter is over, I hope.”
If you are buying feed, and concerned about costs, USDA’s latest Feed Outlook says, “Given the strong demand for corn, prices in 2007/08 are expected to average $1 per bushel higher than in 2006/07. The projected price range for 2007/08 is unchanged this month at $3.75-$4.25 per bushel, up from $3.04 per bushel in 2006/07.”
Do you use a fungicide or not? IL Crop Specialist Loretta Ortiz-Ribbing says 2007 fungicide applications were profitable 38% of the time, based on a $20/A cost for $3.50 corn. She says expect the same in 2008 because the economics are parallel. She says use hybrids that are disease resistant, and scout your fields before making a spray decision.
Weeds in your wheat? 1) Identify the specie and severity, since control is easiest when they are small. 2) Apply herbicide between the full-tiller and boot stage of the wheat, but not after that. 3) Legumes could be damaged by 2, 4-D esters and other herbicides. 4) Calculate the cost of the herbicide application versus increased yield and grain quality.
High soil organic matter means saving money on nitrogen for wheat. IL Extension agronomist Steve Ebelhar says, “This is due to the nitrogen released from organic matter, along with a lower probability of nitrogen losses from the soils with higher organic matter." He says cut the N rate by 40 lbs, for soils with 4%+ organic matter. Read more.
If you don’t think weeds adapt, Bob Hartzler at Iowa State says consider the winter annual Hawksbeard. It produces a heavy seed that drops straight down, and a light, wind-blown seed. He says French researchers found Hawksbeard weeds in urban settings were making more heavy seeds, because the lighter seeds did not survive because they landed on pavement. The heavier seeds fell to the soil which nurtured the original Hawksbeard.
Develop an effective drift management strategy before the spray season suggests Bob Hartzler, the Extension Weed Management Specialist at Iowa State University:
1) Equip your sprayers with appropriate spray nozzles
2) Effectively use spray drift retardants,
3) Adjust your sprayer setup: boom height, operating pressure and driving speed,
4) Identify drift sensitive locations: organic crops, vineyards, or concerned citizens,
5) Properly train personnel for operating the sprayers.
If your glyphosate bill has doubled, consider an alternative, such a pre-emergent control suggests Missouri’s Kevin Bradley, “Most pre-emergence soybean herbicides like Authority First, Boundary, Canopy, Dual II Magnum, Envive, IntRRo, Prefix, Prowl H2O, Sonic, Valor and Valor XLT will cost about the same or less than a glyphosate treatment.” He says yield loss is reduced, since early weed competition is eliminated.
Soybeans are bitter out of the field, but made into a breakfast cereal they will taste better and will keep you going until lunchtime. IL food scientist Soo-Yeun Lee says it meets the FDA’s high fiber and high protein thresholds, and will lower cholesterol and triglycerides, which bacon and eggs can’t do. And it comes with a cinnamon flavor!
Posted by Stu Ellis at 1:22 AM | Comments (0) | Permalink
March 13, 2008
What Impact Would A Drought Have On The Ethanol-Based Corn Market?
You have wondered about the impact of a drought on the tight corn market. So let’s talk about that scenario. We already have $5 corn resulting from ethanol demand, export demand, and hungry livestock. What happens to the price if La Nina brings a short crop? Remember, there are federal mandates that require minimum levels of ethanol production, and that is the elephant in the room.
Getting a good handle on the issue requires consideration of many variables, such as planted acreage, yield, export demand, gasoline prices, and capacity of the ethanol industry. Those issues were analyzed by Iowa State University economists Lihong McPhail and Bruce Babcock in their report on the corn market. They say the corn market has been linked to the gasoline market through ethanol, with the goal being less dependence on foreign oil.
Federal energy policies have continued to raise the target for corn ethanol production, which now stands at 15 billion gallons by 2022, but at the end of 2007, the ethanol industry was halfway there. That has pushed corn above the $5 level with increased market volatility and the latter affects the decisions of players in the marketplace. The corn market had been used to supply shocks of drought or acreage setasides, but market shocks now come from export demand, ethanol production and the price of gas. And today the price of gas determines the price of ethanol and that affects the price of corn.
The Iowa State researchers say current corn prices are sensitive to planted acreage and yield because stock levels are relatively low and the demand for corn is strong, helped by the declining value of the dollar. Estimating a 90 million acre corn crop in 2008, a $4.97 corn price, 82% ethanol production capacity, and a continuation of the 51¢ blenders’ credit for ethanol, the researchers applied that baseline to the potential variables. They found:
1) The federal ethanol production mandate increased the average corn price to $5.32, with an average ethanol price of $2.37 per gallon.
2) Corn price volatility is directly correlated with the volatility of gasoline prices.
3) With the prospect of a La Nina drought affecting 2008 production, a 113 bu. national yield (1988 style drought) would push corn prices to $6.42 and only 27% of the ethanol plants could operate and the ethanol production mandate would not be met. If the mandate was enforced, corn prices would reach $7.99 and ethanol plants would require a $6 billion subsidization to continue operating.
4) A 169 bu. national yield would mean a $4.06 corn price and 99% of the ethanol refineries would be operating, producing more than the target amount of ethanol.
5) Removal of the 51¢ tax credit reduces the price of ethanol by 51¢ and corn prices average $4.15 per bushel, but only 54% of the ethanol plants can afford to operate and the ethanol production target would not be reached. If the 51¢ tax credit was replaced by a variable credit that encourage ethanol refiners to produce the target amount of ethanol, taxpayers would not pay as much to subsidize ethanol production.
Summary:
The relationship between corn, ethanol, and gasoline prices has resulted from the federal ethanol production mandates, and they will have an impact on corn prices particularly if a short corn crop results from weather issues. The reduction in production will raise corn prices to levels that ethanol refineries cannot afford to operate, and either the ethanol production mandates will have to be relaxed or refineries will have to be heavily subsidized to be able to buy corn at nearly $8 projected prices.
Posted by Stu Ellis at 12:41 AM | Comments (1) | Permalink
March 12, 2008
Crop Insurance: Are You Prepared for 2008? (Part 2)
The deadline is March 17. There is less than 1 week to make your crop insurance decisions for 2008. Your cost of production per acre for corn and soybeans in the Cornbelt this year may be more than your gross revenue per acre last year. Should the $5 corn and $13 beans you have booked for sale be protected? USDA is offering a wide variety of crop insurance programs, but Monday is the final day to sign up.
No one can force you to obtain crop insurance, but with many reasons to use it and many types to pick from, there will be many Cornbelt farmers who will have it this year. Crop insurance will provide coverage for either loss of yield or loss of revenue, and the revenue policies have become the most popular. There are many resources on the Internet to learn about crop insurance, if you need to brush up.
What is new in 2008? The February edition of Iowa State’s Ag Decision Maker covers several issues. The first issue this year will be price sticker shock, but once you realize that you are insuring twice your typical revenue per acre, that is the reason for the higher premium rates. (Since that was written, USDA posted the price guarantees of $5.40 for corn and $13.36 for soybeans.)
What type of policy? Bill Edwards at Iowa State says, “This year they need to consider carefully the odds that prices at harvest will be higher than in February. If there is only a small chance that the market will be higher in October or November, it may not be necessary to spend the extra premium to buy CRC or RA with the harvest price option instead of basic RA.”
Amount of coverage? Consider your cost of inputs and any cash rent first to get a total of needed coverage. With the higher spring prices and your increased proven yield, your required coverage level may actually drop from last year. You can also consider the coverage as a “revenue put option” and use the insurance as a marketing tool by using a high guarantee. Doing that will increase your cost, so weigh that against a forward contract, a hedge, or a CBOT put option.
Biotech Yield Endorsement? If you have purchased YieldGuard VT Triple or YieldGuard Plus with Roundup Ready Corn 2 technologies, and are planting 75% of your corn acres with that seed, then premium discounts are available that will be about 13%.
Other resources? The University of Illinois Farmdoc website has a crop insurance section with several features.
1) The Premium Calculator is updated with the 2008 USDA information for corn, beans, and wheat in the Cornbelt, along with the Biotech Yield Endorsement for the applicable states.
2) The Payment Simulator provides insight to what you can expect from various crop insurance products.
3) Historical Payments are provided for corn and soybeans on sample Cornbelt farms.
4) “What If” Analyzer estimates your payment under various scenarios that you select.
5) Links to various University of Illinois and Iowa State University farm management newsletters which address a wide variety of crop insurance issues.
Summary:
One of the more important deadlines of the year will be March 17 which is the final date for either signing up for crop insurance or changing the type of policy used on your farm. With crop production costs that may exceed gross revenue from prior years, it is important to manage your risk of a short crop that would not enable you to pay for the production cost. Many types of decision aids and information sources are available for Cornbelt farmers to use in making that decision for 2008 crop insurance.
Posted by Stu Ellis at 12:35 AM | Comments (0) | Permalink
March 11, 2008
Buckle Your Seat Belt For The Arrival Of Permanent Agricultural Law
Mark your calendar for Sunday, March 16, 2008. Unless Congress passes a new Farm Bill or extends the 2002 Farm Bill, which Speaker of the House Nancy Pelosi says she will not allow, the 1938 and 1949 permanent farm legislation will go into effect. Buckle your seat belt.
Let us return to those thrilling days of yesteryear when Grandpa and his flock of boys were scratching out a living for the family on 160 acres. It was probably a corn, wheat, oats, and hay rotation, with milk cows, fat hogs, and a yard full of chickens and geese. Grandpa would visit the ASCS office to get his acreage allotments about this time of year. You can do the same, 70 years later. Same name, same farm, just a bit bigger. (And here we thought agriculture had been making progress!)
USDA program staff members have provided Congress with an analysis of how USDA farm programs will be affected without Congressional action by March 15 (Saturday.) In lieu of a new Farm Bill or an extension of the 2002 Farm Bill, there will be considerable changes in farm programs, elimination of others, and some, such as crop insurance, will not be affected. To avoid confusion, keep in mind that when new farm legislation is approved every four or five years, it suspended the permanent legislation implemented in 1938 and 1949, and now the 1938 Agricultural Adjustment Act and the 1949 Agricultural Act are about to come to the forefront.
All of the Direct Payments and Counter-Cyclical Payments in the 2002 Farm bill will come to an end, along with Marketing Assistance Loans, Loan Deficiency Payments, the dairy price support purchase program, and the Milk Income Loss Contract program. When those programs will expire Saturday, they will be replaced with an allotment program, which provides a $7.80 support price for wheat producers with a wheat allotment. Wheat cannot be planted on greater acreage than the allotment, and farmers will have to produce records that their farm had an allotment in 1958, and had also planted wheat the past three years. Since acreage allotments have not been issued since 1971, and USDA does not have your annual acreage records back to that year, it is unclear how the program will be brought into the 21st Century. Don’t worry about soybeans or any other oilseeds, since amendments have eliminated them from allotments and price supports.
Without marketing quotas for feed grains, all corn and other feed grains would be eligible for price supports. The price support for corn would be 50% to 90% of the parity price, as determined by the Secretary of Agriculture. The current parity price is $7.56, so the range would be $3.78 to $6.80 for the Secretary to determine the support level. The Farmer-Owned Reserve will return for wheat and feed grains, as will a base and yield program. There actually seems to be part of the 1949 Act that allows the Secretary to convert commodities into industrial hydrocarbons.
For conservation programs, enrollments would cease at the end of this week; but participants in the CRP and the Wetlands Reserve would still receive technical assistance and program payments. EQIP and CSP programs would continue, but funding ratios, assistance caps, and optional parts of the programs would all be terminated. Compliance parts of the continuing programs would not be terminated.
Since the USDA trade assistance programs developed after the 1949, they would expire this week. That includes PL-480 programs, export credit guarantees, and market access assistance programs.
Food stamps will continue in the 50 states (it will expire in the US territories). Child nutrition programs, school lunches, Women’s Infants, and Children’s and other such programs are authorized under a different schedule and will expire at the end of next year.
Nearly all of the Rural Development programs are expected to continue. Many of them are incorporated into permanent law, such as the Rural Electrification Act, Rural Housing Service, and others. However, their activities are dependent upon annual program funding, and that expired at the end of last September.
Farm loans serviced by the Farm Service Agency received temporary funding for the current fiscal year, and that is considered an implicit authorization. However, some farmers seemingly eligible for renewal of loans will be unable because of an expiration of the authority that allows renewals. Also expiring is the provision that sets aside a portion of the money for beginning farmers.
Crop insurance is governed by a permanent law that does not expire, and that program will continue without being affected.
Summary:
Congress has a deadline of March 15 to either pass a new Farm Bill or renew the 2002 Farm Bill, and if neither occur, the suspension expires for various provisions of the 1938 and 1949 Agricultural Acts and those permanent laws come to the forefront to govern farm programs. While many USDA services like crop insurance, nutrition, and rural development will continue with little change, commodity programs will undergo a major overhaul. Price support mechanisms will convert to base and yield, production allotments, and prices will be supported at a percentage of parity levels.
Posted by Stu Ellis at 12:34 AM | Comments (0) | Permalink
March 10, 2008
Crop Insurance: Are You Prepared for 2008? (Part 1)
One more week. March 17 is the deadline for crop insurance sign up for Cornbelt row crops. If you are concerned about Asian rust in soybeans and have never carried crop insurance, March 17 is the deadline. If you are concerned about La Nina, and have never carried crop insurance, March 17 is the deadline. If you have already booked a large amount of your expected 2008 production, and want to protect your decision, March 17 is the deadline. For either signing up for the first time or changing plans, the deadline is a week away.
An alternative to the typical Actual Production History (APH) insurance are the Group Risk Plan (GRP) and the Group Risk Income Protection (GRIP). The group plans are different from other types because they compare your crop yield (GRP) or revenue (GRIP) against the average for your county. Keep in mind that you will be indemnified only if your county average goes down, but not if your county average is stable and your farm average falls. A good summary is provided by Iowa State University ag economist Bill Edwards.
GRP users will select a trigger level, ranging from 70 to 90% of the expected county yield, which is determined by the National Agricultural Statistics Service and announced about 5 months after harvest. A GRP user will receive an indemnity check, regardless of their own crop, if the county average yield falls below a trigger yield, which is determined by the expected average multiplied by a trigger level selected by the producer.
GRIP is a revenue version of GRP calculated by a price factor, which is determined by the performance of the corn and soybean delivery contracts during the month of February. That establishes a revenue guarantee level, and if the county revenue falls below the trigger revenue selected by the producer an indemnity payment is received. The county revenue is calculated with the actual county yield, and the performance of the corn and bean delivery contracts in the preceding month.
What is the cost of GRP and GRIP? That depends on the coverage level selected, and as expected the higher the coverage level the more expensive the premium. Find your premium level at the University of Illinois Farmdoc premium calculator. If you have found GRP and GRIP to be inexpensive in the past, you will find the premiums higher this year because USDA has a maximum subsidy level per acre, and crop values are much higher this year. Under GRP and GRIP a farm is considered an enterprise unit and all acres of a given crop must be insured.
Keep in mind that a yield history is not required, adjustors do not inspect losses, only one policy is required per farm per county, and higher coverages are available. The downside is the fact that isolated crop losses are not covered, and neither are planting delays and crop quality issues such as aflatoxin. A primary user of GRP and GRIP are farmers whose yields typically parallel a given county average. But if you utilize a group policy to save on premium cost, discuss supplementary hail, fire, or other peril insurance with your agent.
Summary:
GRP and GRIP are group policies that provide economical crop insurance coverage, but will jeopardize a user if the crop yield is hurt without the county average declining also. GRP insures the yield, and GRIP provides revenue insurance, but payments are delayed for about 5 months after harvest until county average yields can be verified. Both plans are helpful to a producer where a yield history is not available.
Posted by Stu Ellis at 12:42 AM | Comments (0) | Permalink
March 7, 2008
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.
Grain prices will remain high over the next decade, fueled by high crude oil prices and new bioenergy mandates. That is the opinion of FAPRI which says, “New biodiesel mandates in the Americas and Europe almost double the price of biodiesel, pushing it to $6.00 per gallon with the doubling of net trade over the next decade.” FAPRI says ethanol prices will fall in the next 5 years, then increase to a projected $1.52 per gallon.
FAPRI’s expectation for corn prices is about $5 per bu. for the rest of the decade from ethanol, livestock, and export demand. Vegetable oil prices are expected to increase 1-3% annually for the rest of the ten year period. China is forecast to continue importing soybeans and will buy 57% of the world soybean trade at the end of the ten year period.
Tight US and global wheat stocks have pushed up prices says Daniel O’Brien at Kansas State Extension. He says world supplies declined 6% over the past 3 years, and in the same period, wheat trade declined 9%. But global stocks have declined 26%, causing humanitarian organizations to be concerned about wheat availability in poorer countries.
Interestingly, O’Brien says non-US wheat exports have declined 17% in the past 3 years, but US exports have increased 20% & 32% in the past 2 years. “This reinforces the idea that the US has been the primary source of available wheat for world exports during the 2007/08 marketing year – a fact that exacerbated the recent increases in US wheat prices.”
Foreign wheat production will depress US exports, says O’Brien, raising US ending stocks to 538 mil. bu. for the next marketing year. However, he says US wheat prices are expected to be about $7, compared to the $6.65 per bu. in the current marketing year. He says that is due to the uncertainty about wheat production prospects here and abroad. Read more.
La Nina’s days may be numbered, says Iowa State Meteorologist Elwynn Taylor, and he says that diminishes the risk of a serious Midwest drought. The changes underway in Pacific water temperature also suggest a good season for the High Plains. Taylor says the weather pattern may be shifting toward an El Nino. He adds that weather conditions in the US continue to reflect a La Nina, but the peak intensity has passed. Nevertheless Taylor says it is too early to write off a drought just because La Nina was diminished.
Midwestern snowfall could make this one of the 10 wettest winters. MO meteorologist Pat Guinan says there is still snowpack in IA, WI, and northern IL with soils near the point of saturation. He says MO will have one of the wettest winters since 1895, and IL expects to have its third wettest winter. He says average temperatures are near normal.
Name your poison: excess pork production or high feed prices. Without a choice, Chris Hurt at Purdue says the North American pork industry is on pace for the most damaging financial year ever. And his latest newsletter he says there seemingly is no cure until the breeding herd is cut. Read more.
But that is not happening. Livestock economist Hurt says sow slaughter is not rising, and the high rate of farrowings will extend through Feb, with high volume marketing through next Sept. First quarter losses are forecast at $34/hd, and expecting prices to improve in the spring and summer, Hurt says expect a $47/live cwt average for the year.
Unprecedented volatility is how Hurt describes feed prices, pushing finishing costs near $60 this summer. That would yield a $27/hd loss, compared to the 1998 losses of $15/hd. Hurt says lean futures suggest higher cash prices, and using them provides hedging opportunities at $54 for the third quarter of 2008 and $52 for the fourth quarter of 2008.
On the positive side, pork exports were at a record level of 3.14 bil. lbs. in 2007, up nearly 5% from 2006. Beef exports were 1.43 bil. lbs., which is slow expansion but only 50% of 2003 levels. Poultry exports were 5.77 bil. lbs. Iowa State economist Shane Ellis says compared to 1990 exports, beef is up 42%, poultry up 405%, and pork is up 1,242%.
Despite corn prices, feeder cattle prices are strong. NE livestock economist Darrel Mark says from 1980-2005 a $1 increase in corn meant a $9 drop in feeder calf prices. But for 2006 & 2007, Mark says, “Feeder cattle prices have been less responsive to corn prices compared to the previous 16 years. In fact, a $1/bu corn price increase only led to a $3/cwt drop in feeder cattle prices on average during 2006 and 2007.”
Why have feeder calf prices stayed relative strong despite high corn prices? Darrel Mark has 3 reasons.
1) Calf supplies are very tight as a result of liquidation in the cow herd
2) Ample bunk space in feed yards
3) Feeding of ethanol byproducts which improves performance, and lowers cost of gain.
Beef demand at the consumer level for the 3 month period of Nov 2007 to Jan 2008 was down 1.8% from a year earlier, say Glenn Grimes and Ron Plain at Missouri. The weakness is probably due to high energy costs and large competition meat suppliers. The good news about demand in the beef industry is that live fed cattle demand for these 3 months of Nov to Jan was up 2.6% from 12 months earlier. Large exports of beef and population growth are probably the main reasons for the stronger live fed cattle demand.
If planning spring wheat, consider when heads will fill. Kansas St. agronomist Jim Shroyer says that is a hot, dry time in Kansas and the wheat will have low test weight and shriveled grain, along with low yields. He says if spring wheat is still on your agenda, choose a variety with early maturity, with resistance to leaf diseases. He says it is not realistic to anticipate hard red spring wheat anywhere will draw Minneapolis prices.
IA Weed specialist Bob Hartzler chuckles at the DowAgro Sciences ads for SureStart, Sonic, and Durango, about being new herbicides, and says they are combinations of 6 herbicides, none of which is less than 15 years old. Hartzler says they are still good weed management tools and will slow down glyphosate resistance. He nominates the ad for the “Hall of Shame.”
Your corn fields are not the only fields where excess rainfall has floated corn stalks toward drain inlets. And you need to know they are not going to decompose before planting. Purdue agronomist Tony Vyn says drainage and yield will be reduced.
1) Spread them back out with a tillage tool or blade, preferably on frozen soil.
2) If the residue is no more than 2” thick, tined tow cleaners can do the rest.
3) Burning the residue is an option, but move the pile away from plastic drain tiles.
4) The residue can be buried, but that’s hard if it is in a low wet spot.
Speaking of flooded areas, did your soybeans produce enough N before being flooded out that will be sufficient to take a nitrogen credit for this year’s corn crop? Ohio State agronomists say the nitrogen present comes from biomass degradation, because an insufficient amount would have been produced by the soybean nodules to benefit corn.
Wooly and fluffy fields interfere with planting if you are a no-tiller, so burn-down is one of your critical decisions in the spring. The Purdue weed crew says glyphosate or paraquat will do, but give 7 days for the glyphosate to work. However, with glyphosate resistant horsetail around, the Purdue specialists recommended a pint of 2,4-D ester. However, that delays soybean planting by 7 days, or 30 days if more than a pint is used.
Out smart the bugs, if you can, suggest Ohio State entomologists, and that means judicious use of preventative measures. Read more.
1) For rootworms first use transgenic seed before insecticides and seed treatments.
2) Corn borers can be controlled with transgenics, if you really need to control them?
3) Flea beetles and Stewart’s wilt can be controlled with resistant corn hybrids.
4) If plowing under heavy weed growth, seed treatment is needed for seed attackers.
5) For fields with a lot of black cutworm, alternate transgenics with seed treatments.
6) Seed treatment will not manage bean leaf beetle populations, so don’t waste money.
7) If beans are food grade, use foliar sprays for bean leaf beetles after emergence.
Monthly prices for diesel fuel are computed to be 40% more than 2007 prices, based on fuel futures, through planting season. For the balance of the growing season, diesel prices will be at least 30% more than last year, comparing month to month says Kansas St. economist Kevin Dhuyvetter.
Every farm needs a poly tank, but before you buy a new one, ensure it is the right one for the job it needs to do. IL Extension specialist Dennis Epplin says don’t buy just on price, but when pricing, compare tanks with similar specifications. If you are hauling liquid chemicals it may require a specific gravity rating. Baffles, tie downs, multiple walls, heaters, insulation, valves, sight glasses, and pad locking are alternatives.
Posted by Stu Ellis at 1:30 AM | Comments (0) | Permalink
March 6, 2008
If You Are Marketing Hogs, How Do You Manage Your Price And Cost Risk?
Fewer and fewer hogs are being sold on the cash, spot, or futures market, or with some marketing formula that allows a producer to manage price risk. Negotiated sales are nearly a thing of the past. And what does that trend predict for the future?
The price reporting mechanism of USDA is titled “Mandatory Price Reporting” but University of Missouri livestock economists Glenn Grimes and Ron Plain remind everyone that implementation details are incomplete and the system is just as voluntary now as it was in 2006 when the law was renewed. The MPR is the key to knowing the price at which hogs are sold in the US. And that system, as incomplete as it is, indicates that overtime hog marketing has moved nearly completely into a set price system at the outset of a contract. That is the conclusion of Grimes and Plain in their recently completed study of US Hog Marketing Contracts.
Despite incomplete data, the economists say their information can be reconciled with prior years, and for January they can track sale information on nearly 91% of the federally inspected hog slaughter, which approached 10.5 million head. During the past ten years, negotiated and spot sales of hogs dropped from 35.8% of hogs in 1999 to 9.2% this year. Non-negotiated sales accounted for 90.8% of hogs slaughtered in January. A similar survey in 1997 indicated only 56.6% of hogs were slaughtered following non-negotiated transactions, resulting from contracted production.
Grimes and Plain say 46% of hogs slaughtered in January could be considered as sold by negotiated markets if you combine both the spot sales and the percentage of hogs purchased on a swine-pork market formula. However, that percentage increases somewhat because that formula is also used for hogs owned by packers prior to slaughter.
When measuring the number of hogs sold under a system that “supposedly” reduces price risk to a producer, Grimes and Plain calculate that to be just under 25%. Some of the systems used to establish a payment to producers do not provide price risk protection, say Grimes and Plain. They say it is impossible to determine how many hogs are sold in which the actual production cost is disregarded by the contract, when the payment is made. Their 2004 study indicated that it was 71% of those agreements, and 29% of sales were made with the help of trackable production costs.
From 2006 to 2007, Grimes and Plain say the number of packer-sold hogs increased from 2.6% to 6.7% and held just above 6% in January, and they add, “We still believe the number of hogs sold on the spot market is sufficient to represent actual supply and demand conditions and result in a fairly accurate price for hogs. This belief is based on the fact that packers’ margins have not indicated that they are purchasing hogs at prices much, if any, below their value based on actual supply and demand conditions.”
The federal pricing laws also required reports on weight and carcass prices, and the economists report:
1) The negotiated price hogs had the second lowest average percent lean and the lightest average weight.
2) The other market formula hogs (contracts tied to futures market) had the highest average weight at 209.0 pounds.
3) The packer-owned hogs had the lowest percent lean.
Summary:
Although pork slaughter is at an all time high, a greater percentage of those hogs are being marketing with contracts that do less to protect producers from price risk. Less than 10% of hogs are sold on a cash or otherwise negotiated price arrangements. And less than 25% of hogs are sold with an arrangement that allows producers to manage any of their production risk, such as higher feed costs.
Posted by Stu Ellis at 12:30 AM | Comments (0) | Permalink
March 5, 2008
Glyphosate Will Cost HOW Much? What's The Alternative?
If you have worked on crop budgets for 2008, you probably already know that Roundup and its glyphosate brothers have increased in price substantially. (High demand and insufficient supply have been the reasons given.) If this poses an opportunity to consider an alternative weed control plan, it may be the time to take action to prevent or further delay any glyphosate resistance on your farm. (Did the light bulb just flash on?)
You are sharing your soil, moisture, and nutrients with weeds, which are unwelcome and uneconomical. But a single weed control program in your soybeans for the past 15 years and in your corn for the past 3-5 has given many of those weeds the opportunity to develop glyphosate resistance. Prevention (or management) of that resistance is a significant challenge says Bob Hartzler of Iowa State University, but he has developed a plan to help. Developing your own plan may not really be feasible, given all of the variables, the time involved, and the fact that if your plan fails, you have a real problem!
One of Hartzler’s colleague, Dave Stoltenberg at Wisconsin, calculated that before glyphosate was used in a field, one in 10 billion individual plants in a weed specie would have resistance to it. As you know a weed management system using only glyphosate had a higher risk of creating resistance than other weed management systems. But it all depends on the specific weed specie:
1) Annual rotation away from glyphosate was equal to the use of metolachlor in managing GR risk in lambsquarters.
2) In pigweed, rotation of herbicide chemistries resulted in five times greater risk of GR than the use of metolachlor.
Weed specialists in Australia who worked with Roundup Ready cotton “found the effectiveness of adding a pre-emergence herbicide to a glyphosate based system varied among weed species based on the weeds sensitivity to the herbicide.”
A Monsanto scientist working to predict glyphosate resistance found “Rotating away from glyphosate every third year was slightly more effective (~2 to 8 years) than including an alternative herbicide in delaying the onset of resistance in two different weed species.”
The bottom line, says Hartzler, is that glyphosate resistance is a real threat. And he says, “For most farmers, the resistance management tactics most likely to be incorporated into weed management systems are either herbicide rotation or inclusion of alternative modes of action.” But he says the success depends on the weed specie how it is controlled by the alternative herbicide used. While other herbicides will not have the weed control success of glyphosate, their success depends on whether the labeled rate was used in the post emergence phase of spraying.
Summary:
Glyphosate resistance is a threat if Cornbelt dependency on glyphosate continues at its current high level. That problem can be prevented or delayed if an alternative weed control program is used, which would include either alternating years or adding an alternative herbicide at the full labeled rate to the glyphosate.
Posted by Stu Ellis at 12:07 AM | Comments (0) | Permalink
March 4, 2008
Get A Congressional Grasp Of The Wheat Market.
The average price of wheat in the current marketing year will take a nearly 50% jump from the prior all time high of $4.55. USDA’s projected range for all wheat in the marketing year that ends in May will be $6.45 to $6.85 per bushel. Over the past 30 years wheat has only averaged $3.33 per bushel. So what has suddenly overtaken the wheat market, even pushing futures for certain varieties above the $20 mark in Minneapolis?
The Minneapolis issue seems to be a trading problem and is entirely different from the supply and demand scenarios that have consumed the world wheat market. But the goings-on at the Minneapolis Grain Exchange are indicative of the fervor that has pushed wheat prices higher. In response to Congressional inquiries about the wheat market, the Congressional Research Service has summarized the issues. (This document is not yet available on the Internet.) CRS analyst Randy Schnepf outlined several factors that have contributed to the higher wheat prices that began in 2007.
Major producing countries. Many of the nations that typically supply the world’s wheat demand began having crop shortages late in 2006. Following the Australian drought, an Easter time freeze in the US, and heavy rains in Europe cut the quality and quantity. Then in the summer, the northern crops in Canada and the Ukraine were also found to be short because of adverse weather.
Limited exports. Early in 2007 some countries began halting sales to foreign buyers, and Europe halted the practice of subsidizing its exports to get rid of surplus wheat. Late in 2007 the only exportable supplies of wheat were in the US and Russia, but they were tight.
Strong demand. With the world demand up and supply down, buyers were coming to the US with orders for wheat unseen for more than 30 years. Even though wheat prices and ocean freight costs were up sales were strong, to both wealthy and developing countries. The typical decline in US wheat exports that occurs in the spring did not occur and monthly sales exceeded the prior month. By last August and September wheat prices had reached record levels, but so had export volumes.
Low stocks. By July, global stocks are expected to reach a 30 year low, while consumption continues to exceed production. And the three decade US trend of fewer acres will contribute to the least carryover in 61 years.
Price premiums. Because of shortages of milling wheat, prices for wheat with 13% to 15% protein have risen faster than standard protein wheat. Additionally, USDA’s wheat seedings report in early January indicating acreage was under market expectations. That ignited interest in owning wheat, as well as sending a message for more spring wheat acreage. Futures contracts for hard spring wheat reached $24 at the Minneapolis Grain Exchange a week ago in unprecedented trading activity. Prices have also risen for other preferred varieties as buyers search for limited supplies.
Competing for acres. US wheat acres have declined for the past 40 years because of higher revenue potential from other crops. Even short season corn and soybeans have forced wheat out of the Northern Plains, and the spread of ethanol plants has continued to increase the value of corn where it can be grown.
2008 outlook. High commodity prices will encourage planting expansion. USDA is expecting wheat acreage up 6%, soybeans up 12%, and corn down by 4% from 2007. With normal weather, wheat production could rise by 13%, and globally wheat plantings are expected to increase. If that is the case, demand for US wheat will decline as world stockpiles are rebuilt, as will be US supplies. That means prices will decline from their recent highs, but are expected to remain in the $4-$5 range over the next five to ten years.
Domestic food price impact. 2007 saw food prices increase by 4% due to higher commodity and oil prices, and the forecast for 2008 is another 3%-4% more. Products made primarily with wheat are rising slightly faster. This situation is causing inflation fears to rise, but most economists are blaming oil prices as the primary cause.
International food price impact. Countries dependent upon food imports are at a greater risk of higher food costs, but the impact depends on how much consumers typically spend on food out of their income. In the US that is about 10%, but low income consumers will spend higher amounts, and in importing countries that problem is magnified. Humanitarian groups have been expressing concerns about that issue. Typically, US food aid programs might be of assistance, but because the federal budget fixes dollar amounts, purchases for export donations will be limited.
Summary: