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July 31, 2008
Soybean Aphids: You Have Diligently Counted Them, But How Do You Know When To Spray?
Admittedly, there is considerable confusion in determining the threshold levels of insects prior to spraying a crop. Is it 3 or 5 Japanese beetles per ear, or was that corn rootworm beetles, or was that something else? And by the way, does that threshold still apply if the crop value has increased threefold? Entomologists are doing as much number crunching as bug counting, and the answers are not always easily determined as some farmers may think. In the meantime, let’s listen in on their conversation about pest control thresholds.
The bug gurus at Iowa State University, Jon Tollefson, Matt O’Neal, and Marlin Edwards say soybean aphids may be the next pest that draws your attention, and their numbers on soybean plants can be Biblical in proportion. Since counting tens of thousands is not feasible, even for folks with a lot of time on their hands, their latest newsletter provides some guidelines to help with the task of deciding whether to spray. They want you to learn and use three levels of consideration:
1) Damage Boundary is the earliest stage, in which insects can be measured to determine whether there is yield loss. While five aphids on a soybean will not have an impact, five Japanese beetles on a silking ear of corn will have a major impact. The entomologists say there is no reason to spend any money on pest control if numbers are not present to begin any level of yield loss. The fewer the bugs the less chance of any economic return for your efforts.
2) Economic Injury Level is a significant threshold, and is the number of insects required for the value of the lost yield to equal the cost of control. In other words, if the chemical and custom application cost $30 per acre, then the bugs have to cause a two bushel per acre loss in beans, if beans are worth $15.
3) Economic Threshold is the decision point according to the Iowa State entomologists, and that is the number of insects required for pest control to be applied to keep pest populations from reaching the Economic Injury Level.
Prior to the rise in market values for soybeans, the soybean aphid Economic Injury Level threshold had been 654 aphids per plant, plus or minus 95 per plant, cost of control ranging from $8.65 to $21 per acre with a yield between 30 and 60 bushels per acre, and soybeans valued between $5.50 and $6.50 per bushel.
With $15 soybeans, that soybean aphid Economic Injury Level threshold drops to 452 aphids per plant, which are 200 fewer to count. Since the initial discovery of soybean aphids in 2000, entomologists have recommended a spray threshold of 250 per plant. But 250 aphids are also below the damage boundary in a new experimental protocol for the pest, meaning their presence at that level should not cause economic injury.
Research during the 2004 and 2006 aphid outbreaks indicated that populations rarely exceeded 250 per plant, and yield damage could not be quantified when fields were sprayed. Currently, aphids exist in soybeans at relatively low populations, but there is no guarantee they will multiply to treatable thresholds. That is why the Iowa State researchers are recommending use of the 250 Economic Threshold.
Along with the consideration of a new yardstick for making pest control decisions is the question about preventative spraying. Specialists say that only leads to the opportunity for resistance to be developed and for a resurgence of the aphids, should the preventative insecticide kill all of the natural predators.
Summary:
Soybean aphid populations should be on the radar of all soybean producers, since small numbers of aphids have been found in numerous locations. Spraying decisions should be based on existence of a number of aphids that could multiply into levels that will have an economic impact on the yield. There may always be enough aphids to count, but not always enough aphids to warrant a spray application.
Posted by Stu Ellis at 12:20 AM | Comments (0) | Permalink
July 30, 2008
Has The Grain Market Caught A Bad Case Of Volatility?
You would think that anyone who spent a half million dollars to buy a seat on the Chicago Board of Trade would assume that a seat belt was included. Anyone who has marketed grain in the past year probably wishes they had one, also. Seat belts are mandatory in motor vehicles, and may soon be necessary in grain marketing. There is nothing worse than to hurtle through buy-stop signs on a plummeting futures contract. With that in mind, let’s look at volatility in the commodities markets.
If you think that grain markets have hit the accelerator pedal, you may be correct. They have risen farther and faster than in many years, and within a short period of time. In just the past two years most grain commodity prices have at least doubled, and in the case of corn and beans, tripled in values. But with the higher prices, come other challenges. It is like mountain climbing and the higher the mountain, the farther the fall.
Ohio State University economists Carl Zulauf and Matt Roberts explored grain market volatility for corn, wheat and soybeans. The looked at various period from 1989 to 2007, and used two different statistical yardsticks to measure the volatility.
1) One yardstick was the coefficient of variation of monthly US cash prices, and measured historical cash price variability.
2) The second yardstick is the average of daily implied volatilities for the new crop futures contract over the course of a year. Zulauf and Roberts say this is a measure of the market’s expectation of price variability during the year.
Their findings and calculations indicate a rather slow upward trend from 1989 to 2003 for all three commodities, regardless of the yardstick. However, substantial changes occurred the past several years. Corn market volatility jumped from about 25% to nearly 35%. Soybean market volatility jumped from about 20% to nearly 35%. Wheat market volatility jumped to more than 40% from its prior points in the 20% range.
Zulauf and Roberts also computed the change in volatility between the periods of 1989 to 1991 and 2003 to 2006. While the historical corn variability was only 1%, its implied volatility—what the futures market expects—was 41%. Both beans and wheat recorded historical variability in the low 30% range and implied volatility above 40%.
Then the economists looked at the change from the three year period of 2003 to 2006 with 2007. They say while the increase in price variability in 2007 is larger, the increase prior to 2007 is also substantial. Their findings indicated:
1) Price variability has increased during the 2007 crop year, but,
2) This increase is part of a longer term trend of higher price variability.
The average crop year price volatility increased 32% in the period beginning in 1989 and ending in 2003. However it increased 50% between the 3 year period beginning in 2003 with 2007.
Zulauf and Roberts say the volatility increase suggests long term structural changes are responsible for the change, such as declining world stocks and increasing world demand. And if so, that means volatility could be higher in the future. The impact would be greater costs for managing risk, such as more costly crop insurance premiums, higher option premiums, and greater margins for hedging commodities. And if a farmer has to pay those costs, prices must increase, and that puts more pressure on processors and higher food prices.
Summary:
Grain market volatility has increased over the past 20 years, no matter how you measure it. Such volatility also seems to be increasing at a greater rate, and that means the structure of agriculture will be impacted, specifically, the management of risk and the cost of commodity trading. Farmers bearing those burdens will eventually see processors and the consumer sharing in that additional cost.
Posted by Stu Ellis at 12:43 AM | Comments (1) | Permalink
July 29, 2008
Catching Up With The Wheat Market, As Harvest Plays Catch Up
US wheat stocks had practically been “the only game in town,” for the past year, forcing the world wheat consumer to shop at the US grocery store. Global stocks remain tight, but supplies are loosening up a bit with the northern hemisphere harvest well underway and wheat returning to the international pipeline. As we begin a new wheat marketing year, we’ll assess what is known.
Higher wheat prices were the driving force for the US producer last fall and spring and USDA reports an additional 3 million acres were produced, with harvested acreage at 56.6 million, and that is the largest since 1998. USDA’s Wheat Outlook says less wheat was abandoned this year than last because 2007 spring freezes destroyed more acreage than did flooding this year. But delayed maturity is putting harvest progress well behind 2007 rates.
For winter wheat, acreage was about 1 million below last year, but the harvested ratio will climb because of high prices for the new crop. In addition to flooding and slow maturity, rainfall increased the incidence of disease. Spring wheat acreage is also 1.4 million more than last year, but the crop maturity is significantly behind 2007 and the five year average.
Total production is estimated at 2.461 billion bushels, up 394 million from last year with a national average yield at 43.5 bushels per acre and that would be the most since 2003. USDA’s grain stocks estimate at the end of June put ending stocks at 306 million, up 52 million from last year. The average farmgate price was calculated at $6.48 per bushel which is a record high, nearly $2 above the 1995-96 season price of $4.55.
But that was last year and this is this year, and ending stocks for the 2008-2009 crop will be up, with consumption about even with the old crop. Projected use for the new crop will be 2.329 billion bushels, which reflects 271 million bushels more domestic use and 267 million bushels lower export demand. The export demand is weak because of high US prices and larger world production. US wheat, because of its feed value relative to corn, is expected to remain at a high market price supported by corn. Subsequently, USDA is expecting the 2008-2009 wheat crop to average $6.75 to $8.25 for the marketing year, all because producers made an abundance of early forward contract sales.
Global production will rise slightly, and about the same amount of increased US production, since production in other nations is flat. In the EU, acreage is up, but yields are down. In Australia, acreage is up, and some sheep pasture has also been planted to wheat. World wheat consumption is projected higher and should reach 647 million tons, compared to 664 million tons of production. Consumption will be up in part because high corn prices are forcing livestock producers to feed wheat instead of corn. The global wheat surplus, with ending stocks is 133 million tons.
Global wheat trade is estimated at more than 120 million bushels, boosted in part by less control in the European Union, where wheat exports had been curtailed last year to preserve stocks for domestic use.
Summary:
US wheat growers will not enjoy quite the “sellers market” which they had for old crop wheat, however, many of them took advantage of the higher prices of the past year and forward contracted a large portion of the 2008 crop as noted by the high USDA estimates for average market prices. Nevertheless, global wheat demand will remain high, as stocks remain at historic lows. US domestic consumption is expected to rise about as much as the export volume is expected to fall, leaving rather static stocks levels. US production this year suffered slightly from abandoned acreage from floods, but not as much compared to the 2007 Easter freeze that reduced harvested acreage last year.
Posted by Stu Ellis at 12:56 AM | Comments (0) | Permalink
July 28, 2008
Making Money Feeding Cattle? You're Kidding Aren't You?
Livestock producers have been consuming a lot of red ink lately. Not that they want to corner the market on that commodity, but it has taken a lot to print their income statements, P & L sheets, cash flow projections and the like. In cattle country, the only person lonelier than the Maytag repairman is the fellow who sells black ink. We got to this point with high corn prices, but since they have backed off $2 from the June highs, let’s find out if any cowboys are having fun yet.
Along with the $2 drop in corn futures, Nebraska livestock economist Darrell Mark says fed cattle prices have dropped about $8 in the past month also. His monthly newsletter give cattle producers a bit of encouragement that the cheaper corn is a result of higher ratings of the corn crop and the market’s belief that a trendline yield and production is still a possibility for 2008. Livestock producers want nothing more than to see an abundant corn crop that will feed their herds and the ethanol plants also. Mark says that would be a 13 billion bushel corn crop, and combined with a comfortable one billion bushel carryover, the opportunity may arise for better times ahead. And he says sharpen your pencil to figure out how near you are to the point of breaking even, then locking in some corn and cattle futures.
Darrell Mark offers an example for feeding a 750# yearling, which averaged $117.77/cwt the past week in Nebraska. With a 3.69 lb. daily rate of gain this steer would hit 1,300 lbs. at the end of November (150 days). Feed costs are $5.25 for corn or $65 per ton for wet distillers’ grains. At the same time December live cattle futures are $107.10/cwt, and with basis and insurance, the hedge net is $105.81. Mark says the feeding cost of gain is just under $80/cwt with a potential profit of $53 per head.
Interestingly, since corn prices hit the June high and declined, there has been a slight increase in prices for both 500-600 lb. steers and 700-800 yearlings, meaning the drop in feed prices has not resulted in a wider premium for calves, which usually parallels a drop in feed costs, compared to yearlings. Darrell Mark says that means feeding calves will provide a $40 per head premium over yearlings. His assumptions include 1,250 lbs. market weight reached next February, with a $105.02 net hedge, feed cost of gain at $76.71, and a return to feed at $90 per head. One of his key points is the fact that corn or WDG bought on the spot market and not hedged resulted in calves returning $114 less than when both feed and cattle were hedged while the yearlings made $96 less, and while there is more profit potential on calves, there is more risk. Mark also notes that any rebound in feed prices will quickly erode the profitability of the feedlots, along with a decline in cattle prices.
So, does this scenario match recent history and will it hold up in the near term? Darrell Mark says there are several lessons to be learned from the research he has conducted:
1) The trend toward higher corn prices brought a change in practice with the cattle industry, which was increased interest in backgrounding fall-weaned calves on grass systems.
2) Over the past 10 years, returns have been highly variable for yearlings on the grass background system.
3) Profits for the calf-fed systems (November to May feedlot) ranged from -$151 to +$221 per head.
4) Profits for the yearlings (November corn stalks, spring and summer pasture fall feedlot) ranged from -$171 to +$356 per head.
5) Yearling profits may offer a higher maximum profit, there is also a greater loss risk. “Producers should consider the greater profit variability associated with backgrounding calves and then finishing yearlings.”
Darrell Mark says there currently is profit potential in feeding calves, but that is not guaranteed for the long term. He says risk has to be hedged and performance has to be good enough to get satisfactory returns.
Summary:
Corn prices and distillers’ grain prices have fallen enough and feeder calf prices have risen slightly, enough to pencil in some profits for feedlots which have hedged both their corn and their live cattle. Profits can be locked in for yearlings at $53 per head. But the expected widening of the price gap between calves and yearlings has not occurred, giving more premium to calves when corn prices decline and calves have become cheaper relative to yearlings, with a $90 profit.
Posted by Stu Ellis at 12:40 AM | Comments (0) | Permalink
July 25, 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 prices have declined $2 since the June highs, and IL Extension’s Darrel Good says that has revived ethanol profitability. “Lower crude oil prices have resulted in lower prices for ethanol. The average price of ethanol at Iowa plants declined from $2.82 per gallon on July 3, 2008 to $2.57 per gallon on July 18. The drop in ethanol prices over the past two weeks has been more than offset by the decline in corn prices. Spot cash prices for corn, ethanol, and distillers’ grain suggest that the current gross crush margin is at the high end of the margins experienced over the past 11 months. Corn consumption for ethanol should continue to increase as forecast as corn prices follow crude oil prices.”
Good is also watching crop ratings, and says, “As of July 13, only 13% of the corn crop was in the silk stage, compared to 50% on the same date last year and the 5-year average of 36%. Recent weather conditions, however, suggest that maturity will progress rapidly.” He’s expecting volatility to continue in the corn market. Read his weekly newsletter.
Agreement on the weather comes from Kansas State’s Mike Woolverton, who says, “We are dodging the bullet of excessive July heat damaging late pollinating corn,” and he expects the national average yield to be higher than currently projected. Read his newsletter.
Woolverton says wheat has been damaged the least by the current price slide and has only dropped $1.50 since harvest began. “The surprise was price didn’t fall further in the face of a projected 9% increase in global wheat production this year.” He says the current Kansas City cash bid of $7.82 has held up because of low global stocks, high global demand, and it will take a large amount of wheat to fill pipelines and warehouses.
Of the $4 increase in corn prices, $3 is due to oil prices and $1 is attributable to the ethanol subsidy, according to Purdue economist Wally Tyner in a new study for the Farm Foundation. His colleague Phil Abbott says the weak dollar has caused all commodity prices to rise, and whatever affects the dollar will also influence food prices. He said since 2002 the dollar has depreciated 45% and agricultural exports have increased 54%.
The Purdue study on food and fuel prices says decreased investment in agricultural research has lead to lower production growth, reduced stocks, and set the stage for higher commodity prices. But they said speculators have not had an impact. They believe the market is more volatile, but price levels have not increased because of speculators.
Heading into August, Ohio State meteorologist Jim Noel expects near normal rainfall and temperatures. But he says the August and September pattern may be slightly drier than normal. He does not see any long stretches of 90 degree days, and says it might be one of the cooler summers in that regard. He says the heat will stay in the western US.
Count your GDD’s. Extension specialist Emerson Nafziger says early May corn has accumulated 1,500 growing degree days since planting and only needs 1,200 more to reach maturity. He says it takes about 50 days to do that at this point in the season. Nafziger says so far the summer has been good in overcoming late planting problems.
You cannot cure uneven cornfields says Emerson Nafziger caused by unevenly wet soil conditions where corn will more quickly show water and nutrient stress. Before hiring a commercial sprayer, he suggests scouting the field to map out the greatest area for yield potential and focus any rescue spray on that instead of corn that may not mature.
Corn silking is 12 days late in Iowa, says Iowa State specialist Roger Elmore, and he says June 30th replanted acres will be silking in mid-August. Elmore says a late frost could allow 96% of optimum yield, but an early frost means a 45% yield. He’s warning farmers not to apply fungicides until after tasseling or it will damage the ear formation.
Aerial sprayers are busy as farmers try to control rust and fungus in corn. Extension’s Carl Bradley says the timeframe is from tasseling to blister stage if you are going to spray. He urges you to check the susceptibility of your hybrids to rust and fungus before spending the money. But he says with late corn, the risk for yield loss due to rust and other foliar diseases does increase. Read more.
If you applied N earlier and your corn looks healthy, Extension fertility specialist Fabian Fernandez says there should be no concern about it running out of N. If the corn was late, your concern should be on kernel development, and a short crop will not need as much N as in a typical year. Corn deficient in N can benefit if applied before tasseling.
Soybean prospects are questionable says Emerson Nafziger at Illinois because of the late blooming and podding, unless it can be sustained over a long period of time and a friendly September. He says pods and seeds fill faster with 80 degree days and 70 degree nights, but divergence from that means fewer pods, seeds, and lower yields.
Japanese beetles are more of a problem this year than last say Extension entomologists, who report 417,102 caught in 1 trap over the course of a week. However, specialists say populations are highly variable, and are worse in some areas and less of a problem in others. Read more.
Keep your fingers crossed that California researchers may have found a chemical to keep male Japanese beetles from finding females, and when their formula was tested, captures of Japanese beetles declined. IL Extension’s Mike Gray calls that “exciting.”
If you need to control Japanese beetles, Mike Gray and Kevin Steffey at Illinois suggest:
1) Pyrethroids kill Japanese beetles on contact, but they also are repellent to beetles.
2) High temperatures may reduce the efficacy of some pyrethroids
3) Tank-mixing different insecticides should not be necessary in most situations.
4) Assess the situation for the entire field, and spray only where necessary.
5) Japanese beetles become a non-issue in cornfields after pollination is complete.
Soybean aphid populations are increasing say crop scouts participating in a survey. Specialists say if a plant is found with numerous aphids, it warrants being vigilant well into August. The 2006 aphid population began to increase beginning late August into mid-September, and at that point beans were beyond being affected by aphids.
The cold, wet spring did have a detrimental impact on insects in IN and OH says Purdue entomologist John Obermeyer. He says the floods drowned corn rootworms and Japanese beetles, and very few are being found this year, and he expects low numbers in 2009 also.
IL corn rootworms apparently were not seriously affected by the cool temperatures, cold, wet soils, and late planting. Entomologists at the University of Illinois report “respectable levels of pruning” as they dig rootballs on corn stalks to assign root ratings to various insecticides. The analysis and insecticide evaluation is several weeks away.
Western bean cutworms are being found more frequently, and in increasing numbers. Extension Specialist Kevin Steffey says any corn that does not have the Herculex I Insect Protection trait should be scouted for the adults. He says look for eggs and larvae on the top side of corn leaves from the ear to the tassel, and the objective is to kill the larvae before they reach the ear. An 8% infestation of plants is the threshold for spraying.
You may be bumping the calendar in spraying weedy beans says Weed Scientist Aaron Hager, because of the lateness of planting. He says post emergent sprays are restricted to either a developmental stage of the soybean or days prior to harvest. Hager says violation of the label means chemical residue may be on harvested beans or yields may be reduced. Check his chart before spraying.
The decline in corn prices means it is time for cattle feeders to “pencil out some break-evens and see if feeding yearlings or calves could be profitable,” says Nebraska livestock economist Darrell Mark. “And, for those with cattle on feed and purchasing corn, it is a time to watch for a bottom in the corn market and consider making purchases.”
Since corn prices dropped, Darrell Mark says the spread between calf and yearling prices has not widened as would have been expected. Instead, he says calves have become cheaper compared to yearlings. “And, that current benefit is reflected in a bottom-line for feeding calves that is almost $40/head better than yearlings,” he says. Read his newsletter.
The export market is doing more than its share for the price of hogs says Ron Plain at Missouri. May pork exports were almost double that of May 2007 and contributed $43.62 per head slaughtered. For Jan. to May, exports averaged $33.51 per head in value; and Plain says 26.5% of every hog slaughtered in the US is exported.
Posted by Stu Ellis at 12:26 AM | Comments (0) | Permalink
July 24, 2008
Get Prepared, In Case Forward Contracts Are Again Unavailable.
Most farmers were cheering on the bull market this spring until elevators quit accepting forward contracts because they could no long afford the multi-million dollar daily margin calls. Sobriety set in. What does a farmer do when the market climbs, he tries to price part of his crop, and the elevator manager says “Do it yourself at the Board of Trade and pay your own margin calls.”
That happened to thousands of farmers across the Cornbelt last spring, who were concerned they did not have their favorite marketing tool, and were unsure about the others. Faced with the loss of the forward contract, more farmers probably just held onto their grain longer than switched to futures and options. What were the alternatives? Nebraska economists Darrell Mark and Rebecca Small and Oklahoma State economists Wade Brorsen and Kim Anderson outline their suggestions in the latest issue of Choices Magazine.
The economists say the diminished farm program payments and the availability of crop insurance to pay non-performance penalties in the wake of crop failures has increased the use of forward contracts. The big benefit is the avoidance of margin calls, typically paid by the elevator, but which became financially burdensome as prices rose earlier this year. Some elevators quit offering them; some reduced the basis to help pay for the margin costs; and some put short time limits on the delivery options.
When the Chicago Board of Trade increased daily price limits from the initial 20¢ on corn to 70¢, margin requirements also increased to amounts about equal to the daily price limits. Elevators quickly emptied their margin accounts, and then sought loans to cover more margin calls in lieu of closing out their accounts.
In addition to the margin risk, elevators also faced increased basis risk, which has been the lack of convergence between cash and futures for the past couple years in several commodities. That has resulted because of the growing number of ethanol plants that are drawing in as much corn as do river terminals, as well as the increased cost of transportation. The inconsistent convergence has resulted in action being taken by exchanges at Kansas City and Chicago to correct the problems. Parallel with that action, some elevators are controlling basis by selling to non-traditional buyers such as feedlots, or passing on their margin costs to producers obtaining forward contracts by widening the basis.
So what does a farmer do if faced with a forward contract that no longer exists, or does not approach the value the farmer has in the grain?
1) Hedging on the grain exchanges can lead to higher net prices than at local elevators since the merchandising margin is eliminated. The basis risk remains, but that may be controllable depending on location of the grain. The farmer still has the problem of margin calls and the economists calculate a producer who hedges half of his corn and soybean production from 2,000 acres may have a $42,000 margin liability.
2) A basis contract is another option, which leaves open the futures portion, but allows a farmer to lock in a basis when it is narrow and to his advantage. Payment on a majority of the production may be available upon delivery, but the producer still has to manage the futures portion and lock it in at an advantageous time, and that can be done with a commodities broker on a paper transaction.
3) Options on futures positions are another alternative, but they too, are a paper transaction and the basis risk remains. Using it to replace the unavailable forward contract would be the purchase of a put option on December futures in the spring. Gains in its value, should the market value diminish, leave the farmer with the right to exercise the option and force the buyer to complete the purchase, which would be similar to an insurance contract.
4) While option premiums are expensive, there are numerous ways to reduce the costs by selling options, and obtaining someone else’s premium. Those require risk that a user should be familiar with before entering into a option strategy.
5) A rarely used alternative is contracting with a user of the grain, such as an ethanol plant, or a feedlot, or a grain processor that pays premiums prices for specific grades and types of grain. Wanting to manage their financial expose, they may be quite willing to forward contract just to get the grain. The downside is the potential complexity.
6) Another alternative is the use of crop revenue insurance that covers both yield risk and price risk. Crop insurance does not protect against basis risk, and price level changes are capped. One aspect is the new ACRE program in the Farm Bill that will become effective in 2009, and indemnify producers with revenue shortfalls.
Summary:
Farmers lost an old friend earlier this year when forward contracts were denied by many elevators unable to meet margin requirements. That forced many farmers to abandon their marketing plans and either hold grain without selling or using a variety of other marketing tools including hedging on their own. If a similar scenario recurs, farmers will have opportunities to use either basis contracts with a futures hedge, option strategies, or look for alternative purchasers of their grain.
Posted by Stu Ellis at 12:51 AM | Comments (0) | Permalink
July 23, 2008
Corn And Soybean Markets: Is There Demand, Where Is Support?
Yesterday was “turnaround Tuesday,” but for the corn market it was a terrible Tuesday as selling continued. Yesterday we tapped into the thought processes of Darrel Good at Illinois and Melvin Brees at Missouri to gain their insight into the grain market as it weakens. Today we’ll find two more marketing specialists to see if they have different perspectives.
Looking at the influence of outside markets is Alan May at South Dakota State University, who says the falling price of crude oil has been a particularly strong factor on corn. But he also says the demand for commodities has slowed due to inflationary signals that have caused investors to liquidate their positions. May underscores the fact the market has been a demand market, rather than a supply market, and while that is still the case, demand projections call for fewer bushels of corn. While ethanol wants more, exports and livestock want less and the net difference is 215 million fewer bushels wanted by the market.
Even though ethanol wants more corn, Chris Hurt at Purdue, says, “We will likely look back at $7.00 corn and say that was just “too high.” He says ethanol plants slowed down at that point and exporters stopped doing business, and when that happened the carryover began to grow and prices began to fade. Hurt says about that time the corn crop ratings began to improve and he expects the August Crop Report to show corn averaging over 150 bushels per acre, which would push harvest prices into the $5 to $5.50 range.
May’s warning is that no one should be surprised at the downturn in the market, but the skid will not last, and in the meantime your marketing plan should be adjusted. He says the new crop production will play a major role in how the demand market views the sufficiency of supplies. Hurt agrees, but adds that corn values are linked to the energy output of ethanol and ethanol is linked to the value of crude oil, which means corn will have that level of support, except during the harvest glut. Hurt says corn prices have averaged 4.5% to 5% of the value of crude oil and 4.5% of $120 oil ($127 Tuesday) is $5.40 for corn. And Hurt adds, “New crop basis will likely be better than current bids, so this continues to favor producers selling futures through their commodity advisor rather than forward contracting at the elevator.”
In the soybean market, Alan May says there is less logic for the price decline compared to corn because soybean supplies are tight for the old crop and new crop as well. But he says demand has softened because of high prices and competing supplies from South America may be available. He also says the weaker crude oil prices have helped push down commodity values across the board.
Purdue’s Chris Hurt says the tight inventory will support the bean market, but the reductions in livestock production will slow the crush.
May says the downward skid in soybeans will not last, but should not have come as any surprise, and marketing plans should accommodate the changes until total production is determined and if the market decides if it can meet the demand. That is a major consideration to Hurt because of the uncertainty of acreage, the large double crop acreage, the large amount of replanted beans, and whether they will really mature. He says yields tend to be determined by weather in August and early September.
Hurt’s yield forecast puts production at 3 billion bushels, which does not build stocks, and he points out that current harvest delivery bids are well above USDA price range forecasts. That means the market wants bean commitments now, instead of later, and the harvest basis is about $1. He warns not to hold beans long because of the price drop going into harvest and a good sales opportunity for the old crop.
Summary:
Soybean prices have faded somewhat because of weakened commodity values and price rationing has softened the demand. But supplies are tight for both the old and new crops, and while new crop prices are above USDA estimates, the harvest basis is not pretty. Demand is expected to stay strong, but the supply remains uncertain because of the flooded acreage impact and late planting that could impact maturity. The market is seeking beans, but there is a strong price break as the new crop will be delivered. Soybean values are expected to remain relatively high throughout the year because stocks will not be built.
Posted by Stu Ellis at 12:46 AM | Comments (1) | Permalink
July 22, 2008
Up, Down, Up, Down, Down, Down, Will The Market Turn Around?
The wisdom of Sir Isaac Newton has manifested itself in the grain markets over the past several days. You know, “what goes up must come down;” and falling grain markets make one wonder whether the market is correcting itself or whether a significant top has been put into the market and those days are past. We’ll get the thoughts of some authorities.
Darrel Good at the University of Illinois reports in his weekly newsletter, “December 2008 corn futures increased about $2.00 per bushel during the month of June, topping out just under $8.00. During the same period, November 2008 soybean futures rallied more than $3.00, topping out just under $16.37.” But since those heady days, December corn has dropped $1.80 from its high in late June and November beans have declined about $2.30 since the early July top. While Good says corn prices have dropped more than 20%, beans are down about 15%.
Melvin Brees at the University of Missouri is not worried, and in his monthly newsletter
he says the declines are just the typical seasonal movement of the markets. Both Brees and Good point to bullish and bearish news in the market.
In the corn market, the high prices have curtailed feed, export, and ethanol demand to some degree, and the resultant rationing has allowed ending stocks to rise, which is a negative factor that has softened prices. However, the weaker corn price has allowed a wider margin for ethanol profitability and Darrel Good says, “Corn consumption for ethanol should continue to increase as forecast as corn prices follow crude oil prices.”
In addition to the demand scenario, the actual supply will be important in the analysis of Brees. He says there is still no real confirmation of a 78.9 million harvest acreage figure, nor the 11.715 billion bushel production; and all of the flooding could still cause acreage and average yield to fall from those levels.
In the soybean market, Brees says new crop production will be consumed by new crop demand and the tight carryover will remain tight. Good calls that resiliency in price, helped out by the uncertainty of the US crop size, and the on again-off again export conflict in Argentina. He says while crop ratings are generally good, the lateness of the crop has to make the market wonder. Good says the Climate Prediction Center is giving a favorable outlook for August weather.
Additionally, cash prices for both corn and beans are weaker because of the high energy prices that have affected the entire economy, says Brees. He also says ethanol’s negative publicity is generating calls for policies to be changed that would be negative to the grain demand and corn prices. He is also concerned about the criticism being leveled at speculators in the market because if they leave and liquidate their holdings, corn and beans would be sold at bargain basement prices.
So what is next? Brees says there is always significant downside risk and lower prices for corn and beans are quite possible. In Good’s insight, “The same factors that have been contributing to the extreme price moves of the past four months will continue to be important for corn and soybean prices for the next two months.” Both agree that supplies will be tight for the old crop, as well as the new crop, even with good growing conditions for the rest of the season. Brees says new crop corn futures are at the top of the USDA’s projected price range, and soybean futures are well above that benchmark.
Brees says with the downside risk it is important to watch for opportunities to make pre-harvest sales or obtain price protection for stored crops. Good says there is more than the typical amount of uncertainty about acreage, and even if prices continue to weaken, they could settle in a sideways pattern until production prospects unfold. He expects large daily price moves.
Summary:
Corn and soybean prices have dropped 15-20% since their highs in the last several weeks, as the market price rations the crop. That weakness has resulted from increased prospects for carryout, particularly in corn, but the weakness should also strengthen ethanol margins. Acreage is still an uncertainty for both corn and beans, and while large daily market moves should be expected, prices should shift from a downward slide into a sideways pattern until more information is known about production prospects. There is substantial downside risk to the market and good price risk managers will either make some pre-harvest sales or protect crops going into storage.
Posted by Stu Ellis at 12:27 AM | Comments (0) | Permalink
July 21, 2008
As Corn Profits Rise, So Do Ethanol Profits, Or Do They?
The July 12th USDA Supply-Demand Report revised the 2008 estimate of corn used for ethanol production downward by 50 million bushels. And University of Illinois Marketing Specialist Darrel Good reported that the market was beginning to cast doubt on whether this year’s projection of 3.95 billion bushels of corn really would be refined into ethanol next year, since high corn prices have trimmed ethanol profit margins. Does that mean the bloom is off ethanol?
Critics of high food and fuel prices have found it convenient to blame ethanol for US economic woes despite the truth. Kansas State ag economists Daniel O’Brien and Mike Woolverton and Iowa State biofuels economist Bob Wisner acknowledge that ethanol has added substantially to the demand for corn, but it will be a number of years before ethanol consumes more corn than livestock. In their recent analysis of ethanol profitability the researchers say ethanol production capacity will consume an extra one billion bushels of corn in the next marketing year, increasing to 4 billion bushels in the 2008-2009 marketing year.
O’Brien, Woolverton, and Wisner report the changing relationship between cash corn prices and the value of ethanol and its co-products is the key to ethanol profitability. They report that in early 2007, Nebraska corn prices (in the midst of ethanol plants and cattle feedlots) ranged from $3.41 to $4.16 then declined to nearly $3 at harvest. In the same period, the value of ethanol and its wet and dry distillers grain co-products on a per bushel of corn basis were at highs above $7.50 in March and down to $5 at harvest. Then corn prices climbed 136%, while ethanol product values increased 85%. The economists say the diverging percentages signal the declining profitability of ethanol.
The volatility of both corn and ethanol makes ethanol profitability unpredictable. Looking back, ethanol producers enjoyed windfall profits when ethanol quickly replaced MTBE in gasoline in early 2006. Profits and plant construction boomed and early 2007 brought margins of 40¢ to 50¢ per gallon, but by September, when ethanol prices had declined by 75¢ per gallon, profitability turned negative with market prices for ethanol below the cost of production. From December 2007 to May 2008, both ethanol prices and production costs went up, and during that time, profits averaged 13¢ per gallon.
When profitability was erased late last year, almost no new plants were begun because of low market values and increasing costs of corn. However, the rising price of crude oil, which determines the price of gasoline and ethanol, kept pushing ethanol prices higher. At the same time corn prices rose by a greater percentage and some less efficient ethanol plants either halted production or construction. In addition to corn prices, two other factors apply pressure to ethanol plants, and those are the distance that corn has to be hauled and the ability to market distillers’ grains within a reasonable distance.
The economists say the bottom line of profitability depends on corn and crude oil prices. For the first five months of the year, ethanol production was 41% higher than in 2007, and that would not have been the case if there was no profitability. They add that if corn supplies tighten and prices rise in the near future, the Renewable Fuels Standard will provide the incentive to produce ethanol and pay the corn price necessary to reach prescribed levels. However, ethanol output could fall if the mandates are changed, or if the marketing and distribution structure for ethanol fails, or if there is a sharp drop in crude oil and gasoline prices which provide buoyancy to the price of ethanol. Overall, the economists say ethanol profitability will remain volatile.
Summary:
Ethanol remains a major consumer of corn, and while it is supporting corn at current prices, it is those prices that jeopardize the profitability of ethanol plants. Ethanol profitability is a function of corn prices, the value added by its livestock feed co-products, as well as the price of gasoline which gives buoyancy to ethanol prices. When production costs rise faster than the value of ethanol and the distillers’ grains, then profitability of plants diminish and production is curtailed. Volatility is the future of ethanol profitability.
Posted by Stu Ellis at 12:37 AM | Comments (0) | Permalink
July 18, 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 dynamics are numerous says IL Extension’s Darrel Good, who notes increased wheat feeding has reduced corn demand. USDA recently reported lower demand from corn refiners because of high prices, which may keep corn short of the 3.95 bil. bu. forecast use by ethanol refiners. But, lower prices have strengthened margins. Read more.
Darrel Good says corn crop condition ratings continue to improve, and the average yield could climb 2-3 bu., even with just average weather for the rest of the growing season. USDA’s first field forecast will be released Aug. 12, and maturity is so late, yields will be hard to guess. But that report will also have updated estimates for harvested acreage.
The Illinois crop weather model puts soybean yields a bushel higher than USDA’s June estimate of 41.6 bu. if the weather is average for the rest of the season and there is not an early freeze. Good says the late planting and all of the replanting make production estimates difficult and the Aug. 12th report will be more valuable for its acreage numbers.
$529 per acre. That is the estimate for corn production costs next year, and that does not include land costs such as cash rent. Extension economist Gary Schnitkey says fertilizer prices have nearly doubled per acre, and that is helping push soybean production costs to $321 per acre, also just the non-land costs. Read the details in his latest newsletter.
Two things are flying over corn fields. Japanese beetles are metallic green. Air Tractors are yellow and usually have a cloud of fungicide trailing them. If you think you need one, scout your field to determine the presence of any fungal disease, and check your hybrid for its resistance level. If it is susceptible, then call an aerial applicator.
Fungal diseases in corn can be one of several say Ohio State specialists
1) Gray leaf spot is tan to brown, 3-4 in. long, and fits between leaf veins.
2) Northern corn leaf blight is gray/green to tan, 1-6 in. long and cigar shaped.
3) Eye spots are round to oval, 1/8 in. across, watery first, then tan to cream colored.
4) Common rust creates dark reddish-brown, elongated pustules, less than ¼ in.
The goal for fungicide application is timeliness. It should be applied before the ear leaf and the leaves above the ear are infected, since they provide 75% of the carbohydrates to fill the kernels. Due to the movement of the fungus, the fungicide should be applied when the first few lesions are observed on the leaf immediately below the ear leaf. Due to the variability in crop size and maturity, more than one application may be needed.
Japanese beetles don’t care about crop values, so manage judiciously. For soybeans, it only takes one bushel of damage to pay for an acre of crop protection. The published economic thresholds for all soybean defoliators is 30% defoliation before bloom and 20% defoliation between bloom and pod fill. Lower thresholds are still being researched.
The Midwest bug roundup has found relatively few problems this year, other than Japanese beetles in scattered swarms. Extension entomologists compared their notes:
1) Western bean cutworms are being found in all states,
2) Soybean aphids are common, but not numerous, and very low in the Eastern Cornbelt.
3) Very large numbers of armyworm moths are being captured in some traps.
How many corn rootworm beetles does it take to screw in a light bulb? If that bulb is your bright idea of scouting this year to protect your 2009 corn crop, then it only takes .75 beetles per plant in continuous corn and .56 beetles per plant in first year corn. That is the estimate of Bob Wright of NE Extension who bases that on 24,000 population. For 32,000 population the threshold is .56 beetles for continuous corn and .42 for first year.
If treatment thresholds for corn borers were established when corn was $2.50, what would be the threshold for $7 corn? Iowa State Extension’s Jon Tollefson looked at both $6 and $7 corn, and control costs of $15 and $18 per acre and prepared a decision aid.
Brown spots on soybean leaves do not necessarily mean soybean rust, but may prompt you to apply a foliar fungicide. However, IL Extension’s Carl Bradley says not all of the fungal problems will cause large yield decreases, and some cannot be controlled with a foliar fungicide. Read more.
Foliar soybean diseases need to be identified before any foliar fungicide is applied:
1) Septoria brown spot can be controlled, but does not always cause yield loss.
2) Frogeye leaf spot can be controlled, but does not always cause yield loss.
3) Downy mildew cannot be controlled with a foliar fungicide.
4) Bacterial blight is caused by a bacterium, and is not controlled with a fungicide.
For years, you have been applying atrazine to kill grass in corn. But researchers at Iowa State say a ground cover, such as grass, may benefit corn. They are not sure what kind of grass and how much, but their theory is to create a mulch that will preserve soil and soil moisture, return carbon to the soil, keep down weeds and insects, and maintain yields.
Maybe you don’t want to know, but now is the time to dig up some soybean roots and count the number of female soybean cyst nematodes. Don’t count the root nodules, but the white spots about the size of a period at the end of a sentence. If your beans are more than four to five weeks old, satisfy your curiosity and check out this crop stressor.
Mark your calendar for Agronomy Day, Aug. 21 at the Univ. of IL South Farms. All details are here and the Urbana tour topics include:
1) Corn nematodes, returns to fertilizer, soybean resistance genes, & soybean yields.
2) Ethylene, managing wheat scab, soybean aphids, & managing pests in corn.
3) Residual herbicides, waterhemp, giant ragweed, and utilizing fertilizer value in manure
4) Corn stover, biofuel impact on soil, biomass feedstock, & bioenergy markets
“Full season weed control” is a luxury, since you only need enough for your corn to reach the canopy stage, says Bob Hartzler at Iowa State. Before spraying full sized corn, evaluate your weeds, which should be at a disadvantage to the corn. “Research at ISU found that less than 1% of the waterhemp emerging at the V8 corn stage survived.”
Lower corn prices have been helpful to cattle feeders, says economist Dillon Feuz at Utah State, who also says calf prices have strengthened. But he says fall and winter cattle prices have declined in the past two weeks. “With present feed prices, feeder prices, and expected fed prices, there still is not much if any money to be made feeding cattle.” He says cattle prices will probably continue to decline as long as corn remains above $6.
Fourth quarter hog slaughter is being forecast higher than last year by MO economists Glenn Grimes and Ron Plain, who say packers will have to operate at all time high efficiencies, with the hope of averting a fire or strike and approaching the 1998 lows. “Do we expect $10 per cwt hogs this year? No, could it happen again? Definitely.”
The days may be numbered for PRRS virus, and that makes pork producers happy. IL vet med research has received a $400,000 federal grant to genetically engineer mutant PRRS viruses to create a vaccine for pork producers to use. Researchers have also discovered how such a vaccine could also immunize hogs against the porcine circovirus.
You are baling wheat straw and you suddenly break out in a cold sweat of concern about all of the nutrients you are taking out of the soil. IL Extension fertility specialist Fabian Fernandez appears surreally in your tractor cab and says, “Don’t worry; there are ways of calculating the fertilizer value and estimating the true cost of straw removal.”
Fabian Fernandez at the University of Illinois offers a method of nutrient calculation:
1) Calculate how much straw is produced, based on 1 lb. of straw per 1 lb. of grain.
2) Determine how much straw is actually removed from the field, such as 2.5 tons/acre.
3) 1 ton of straw will contain 9-12 lb. N, 3-4 lb. P, and 25-40 lb. of K.
Speaking of wheat stubble, is yours weedy? You don’t want the weeds to go to seed in the next few weeks, so mowing and herbicide applications are the choices. For a spray, Mark Loux at Ohio State says use glyphosate at 0.38-.75 lb. of a.e./acre blended with
2, 4-D at .5 lbs. per acre. Your objective is to prevent weeds there next year.
Producing biomass for an ethanol plant, your choice would likely be corn stalks instead of switchgrass. Purdue economist Wally Tyner says corn stover costs $40 per dry ton delivered, versus $60 for switchgrass. Corn stover will produce $80 per acre profit in addition to the corn crop. Switchgrass would produce a total profit of $160 per acre.
Posted by Stu Ellis at 12:31 AM | Comments (0) | Permalink
July 17, 2008
Buckle Your Seat Belt When Planning For 2009 Crop Expenses
Corn has, or will have reached, pollination; soybeans are blooming; and you are thinking it may be time to revisit your marketing plan since crop prospects look better than they did last month. And marketing will be more important than ever for the new crop, since it will have to pay the freight on higher priced inputs for the 2009 crop. If you have not yet looked at the cost of production of next year, that’s OK, we have.
Some farmers have been asked for a 100% prepayment for fall fertilizer, if they plan to order any. Others have heard that some units of seed corn will be similarly priced to what a tank of anhydrous ammonia used to cost. University of Illinois Extension Farm Management Specialist Gary Schnitkey has been exploring 2009 production costs to see if there is any profitability potential. His recent newsletter makes you wonder!
On average the non-land costs for corn will be $529 per acre, up $141 from the current year and 85% higher than the four year average. For soybeans, the non-land costs will be $321 per acre, up $82 from the current year and 78% over the four year average.
Fertilizer is the heavyweight. You will shell out more than twice as much in 2009 as you did in 2008, and Schnitkey estimates the cost at $215 per acre for corn and $98 for soybeans. That takes into account anhydrous ammonia at $1,000 per ton, DAP at $1,000 per ton and potash at $900 per ton. He says prices may vary depending on location, timing, and international energy markets. But if those are the prices you have to pay, they represent a 171% increase for anhydrous ammonia over 6 years, 302% for DAP and 456% increase for potash over the same period.
Seed costs run a close second. Schnitkey says count on a 25% increase in seed costs for 2009 compared to what you paid this past spring, and that includes both seed corn and seed beans.
Crop insurance premiums increase with little surprise. Higher values for crops mean higher premiums to insure them and Schnitkey calculates $27 for corn and $12 for soybeans, but premiums will be higher for revenue types of insurance.
Other costs rising as well. Fuel and machinery costs should be budgeted at $88 per acre, up $12 from 2008 corn and $75 for soybeans, a $9 increase. With many farmers trading machinery more rapidly in recent years, depreciation has gone up as well, which Schnitkey computes at $27 for 2009.
On the revenue side, your marketing plan will have to be precise and well-executed. Current prices exceed $6 for corn and $14 for soybeans which would provide a $641 return to land and operator for corn and $486 return to land and operator for soybeans.
Breaking even will be a significant challenge. The non-land costs of $529 for corn and $321 for soybeans do not include cash rent, which could average $200 and up on average to good land. That raises costs to more than $700 per acre for corn and over $500 for soybeans. Using Schnitkey’s example of 191 bushel yields for corn means a break even price of $3.82 and $9.65 for soybeans, based on a 54 bushel average yield. Yields that are less than that amount will push break-even prices higher. And Schnitkey says large income losses would occur if price returned to more traditional levels. He adds that the higher costs of production expected next year may also influence cash rent bids, marketing plans, and crop insurance decisions.
Summary:
Significantly higher prices for fertilizer, seed, fuel, and crop insurance will necessitate the use of a sharp pencil in formulating 2009 crop budgets. While prices are preliminary, they indicate non-land costs will rise rapidly, and that will impact how much farmers can bid for cash rent and their requirements for crop insurance coverage.
Posted by Stu Ellis at 12:31 AM | Comments (1) | Permalink
July 16, 2008
An Idea For Leasing Farmland Now, And Finalizing The Rent Later.
It may seem like we’re rushing the season, but both farm operators and landowners are probably thinking year around about calculating a fair rent the next time a farm lease is signed. While the leasing season begins after harvest and extends to about planting time across the Cornbelt, just about anytime is appropriate to discuss what is fair for both sides and offers the flexibility that variable yields and volatile prices demand. Let’s take a look at one option that can be tried and tested until it is time to sign on the dotted line.
The movement away from crop share leases and toward cash rent leases created havoc in determining what is a fair rent for farmland, particularly in a time of unprecedented grain price volatility. Agricultural law specialists Don Uchtmann and Bryan Endres offer one idea which adjusts cash rent with futures prices. The fluctuating market creates variability to the rent payment in line with the options that land operators and land owners have in marketing their grain.
Uchtmann and Endres suggest that a base cash rent be negotiated, then adjusted by the futures market, with an actual cash rent determined and set about March 1. They contend that land owners and operators, regardless of their locale, can obtain the necessary information to monitor the changes in rent between the time of negotiation and the time it is locked in at the outset of the planting season. The authors suggest that the flex factor could be indexed to input costs, county or actual yields, or other dynamics.
The ag law specialists suggest that an agreement can be signed at anytime stipulating a base cash price. At that time, there is a notation of the value of a specific futures contract, such as the Dec 2009 corn futures. When it is time to actually set the cash rent prior to planting, a subsequent notation is made about the value of the same futures contract, and the difference in those values would be used to adjust the base cash rent. The latter value could be an individual date or it could be the average closing prices over a period of time, such as USDA’s Risk Management Agency uses to determine crop insurance guarantees.
Uchtmann and Endres provide an example in which a $200 per acre base cash rent is negotiated in the fall when the December futures price for corn is at $6.50. On the date when the actual rent is set, the futures price is $7.15, which is a 10% increase that would be used to raise the base rent from $200 to $220 for the actual rent.
They contend an early date of signing a lease would provide continuity, and allow the operator to take care of any fall tillage, fertilizer application, pre-payment of seed purchases and order crop protection chemicals at special prices. The land owner would not have to wait for the following spring to negotiate a higher rent that might reflect an upward movement in market prices. Additionally, the rent is set about the same time that crop insurance decisions are made and those can be adjusted to the needs of the lease.
The land owner should be aware that the rent would be applicable to self-employment tax, and the issue of agricultural use valuations would be important in estate planning. The third issue of dividing farm program payments should also be discussed with the FSA office, however, this variable cash rent lease is not dependent upon production or yield to determine the cash rent amount.
The success of the lease is dependent upon all parties understanding it and understanding how the parameters are calculated, such as which futures contract is used, and when payments are made. In an effort to keep everyone knowledgeable, everything in the lease, should be written, and examples possibly given. Uchtmann and Endres not only provide a detailed example, but even a sample letter from the operator to the landowner that explains all calculations of the payments being made and how the numbers were derived.
Summary:
With the complexity of the grain market and production problems caused by the weather, the creation of a fair and equitable cash rent lease can be a significant challenge for both the operator and landowner. To facilitate an early leasing of farmland in the fall, but without determining a final rent figure until next spring, it is possible to negotiate a base rent that can be adjusted with an index of the futures market activity. The final determination is made just before planting, which benefits the operator on crop insurance decisions, and allows fall tillage opportunity with other marketing and business decisions to be made in a timely fashion.
Maybe you have a different method, and if so, please share it.
Posted by Stu Ellis at 12:46 AM | Comments (3) | Permalink
July 15, 2008
Marketing Decisions Can Be Based On Weather Data, If You Watch Those Weekly Crop Condition Reports
High demand of grain for feed, export, and biofuel use dance with the uncertain size of 2008 crops because of late planting, flooding, and other natural phenomena that will create question marks about crop size well into harvest. But would those weekly planting progress reports issued by USDA help with estimates of production, if compared to weather models?
University of Illinois agricultural economists Darrel Good and Scott Irwin, along with weather specialist Mike Tannura have evaluated the new crop yield potential for Illinois, Iowa, and Indiana using previously developed weather models. Their research adjusts the trend yield with the weather variables to project a state average yield.
Planting dates are important, and over the past 40 years it has been moved up by 2 weeks with a resulting positive yield response. While there is little difference in when crops are planted before a certain date, the yield falls significantly if planting occurs after that date. In a recent study of planting dates and weather variables, earlier planting was found to be the dominant reason for higher yields in the northern and western Cornbelt. The researchers looked through the weekly USDA statistics back through 1979 and analyzed the dates planting progress reached 50% complete vis-à-vis May 1. Despite variations, they confirmed the trend toward earlier planting, which was 20 days earlier for corn and 10 days earlier for beans than in 1960. The researchers also looked at the lateness of planting in given years to evaluate yield penalty, the amount of delays, and the impact of weather.
Interestingly, Good, Irwin, and Tannura found that the optimum precipitation in May was zero. They say while that seems unrealistic, the converse of too much rain means planting delays and lower yields. Late planting in Iowa and Illinois were frequently linked, but not between Iowa and Indiana, reflecting the variability in weather patterns. Another finding was that it is impossible to break down the trend yield into its dynamic components of plant modification, management and environmental changes. Their models explained 95% of the variation in corn yields for the three states and about 90% of the variation in soybean yields for the three states.
Among the findings:
1) Relative to average levels, corn yields in 2008 are estimated to drop 2.9, bushels per acre in Illinois, 3.5 bushels per acre in Indiana, and 6.3 bushels per acre in Iowa, due to May precipitation and late plantings.
2) Relative to average levels, soybean yields in 2008 are estimated to drop 1.1, bushels per acre in Illinois, 0.4, bushels per acre in Indiana, and 1.0 bushels per acre in Iowa due to May precipitation and late plantings.
3) The magnitude of the yield declines due to slow planting progress in 2008 are relatively small due to the fact that May precipitation, while high, was not extremely high, and the magnitude of late planting, while above average, was considerably less than previous highs.
4) It is important to keep in mind that these estimates do not take into account the impact of replanting due to flooding in some areas of Illinois, Indiana, and especially, Iowa during June 2008.
To estimate yields, based on observations of good to excellent percentages of the corn and soybean crops, the researchers developed formulas to modify the trend-adjusted yields. The formula incorporates weather through June and assumes average weather in July and August and forecasts based on crop condition ratings at the end on June. Applying the formulas to the crop conditions as of June 29, they project yields of 152.4 bushels per acre for corn and 42.9 bushels per acre for soybeans. While other models have a 33 bushel range for corn and an 8 bushel range for soybeans, the Illinois crop weather model is remarkably close to current production estimates.
The researchers say estimates of total production have to be weighed against the uncertainty of harvested acreage, remaining summer weather, and the statistical errors in the crop weather model.
Summary:
Earlier planting dates have contributed to increasingly larger corn and soybean yields in the Cornbelt, but weather can also explain about 90% of the yield variability. A study of planting dates and May precipitation found statistically relevant yield impacts for 2008 for corn and soybeans in Illinois, Iowa, and Indiana. That information, combined with crop condition ratings at the end of June and average July and August weather, can predict state-based yield expectations with relative accuracy.
Posted by Stu Ellis at 12:15 AM | Comments (0) | Permalink
July 14, 2008
The Livestock Industry's Reaction To Higher Feed Prices
Agriculture has many visionaries and out of the box thinkers, but were they all at the top of their game when it came time to predict the impact of high grain prices on the agricultural economy? The catch-phrase du jour is “unintended consequences,” and the impact of the grain market may have fed some of those rations to the US livestock industry.
Crystal balls are valuable, if they produce a clear picture of the future, but in the case of the pumped up grain market, a foursome of agricultural economists says the impact on the livestock economy was not foreseen. Writing in the current issue of Choices Magazine, the economists say livestock and poultry producers have absorbed significant losses from high feed costs, since they have been unable to pass along those costs to the consumer. The economists are John Lawrence of Iowa State, James Mintert of Kansas State, John Anderson of Mississippi State, and David Anderson of Texas A & M. However, they contend the consumer will ultimately feel the impact as producers adjust to higher feed costs, and many of them elect to leave the industry. And the speed of that adjustment will correlate with the production cycle of the various livestock species, meaning the first impact will be felt in poultry, which has the shorter cycle.
For the record, feed costs are 60-70% of the cost of livestock production, and they have increased 40-60% in the past two years. Corn prices alone rose 266% from the first quarter of 2006 to July, 2008, at Omaha. When corn prices increased 179% in the early 1970’s the swine breeding herd declined 15% and beef inventories decreased 19%.
Beef industry: Kansas State currently estimates the cost of gain for feedlot cattle has increased from 54¢ per pound in 2006 to 74¢ in 2008. Iowa State estimates cattle feeders have experienced a $167 loss per head, which was the largest since their records began in the 1960’s. The Kansas Farm Management Association documents feed costs per cow at $287 in 2006, and will approach $450 this year, pushing returns below variable costs and causing either liquidation or herd reduction. Consumer demand for beef has weakened and economic pressures will delay any recovery. Export demand has improved, but with exports 36% below 2003 levels, more meat is flooding the domestic meat case. The industry is expected to shrink with higher prices facing consumers, but allowing remaining producers to cover costs after several more years.
Pork industry: Profitability existed until 2007, in part due to disease problems that kept slaughter rates down; and when a vaccine was developed pork supplies increased 10%. The result was a drop in pork prices to the lowest level in 4 years at the same time feed costs were reaching record highs. Iowa State estimates producer loses from Oct. 2007 to Apr. 2008 exceeded the profits of the prior 13 months. Feed costs were 75% higher than April 2006. Breeding herd liquidation is underway in the US and Canada and pork supplies are continued to decline through the end of 2009. Demand growth in the export market will offset some of the economic problems. However, it will take possibly a 10% cut in production to cause prices to return to profitability.
Poultry industry: Producers were concerned about competing for corn, since they had few feed alternatives that were satisfactory. The initial price surge in 2006 saw poultry operators curtail production, and with the 2007 moderation in grain prices, the poultry industry responded with increased production, and feeding the overseas poultry market to help keep prices high. Despite seemingly high market prices, producers are cutting production in response to continued high corn prices. Feed accounts for 65% of the production costs and corn prices have increased 35% since the end of 2007. A 20% increase in production costs would result in a 2% decline in quantity offered to the market and a 6% increase in consumer prices.
Dairy industry: During the decade milk prices have hit two record highs separated by a record low; but were on the increase in 2006 when feed prices began to rise. As feed costs continued upward, milk prices began to fall from declining demand overseas, but producers have remained profitable. In the past two years, production costs have increased $2/cwt, and such an increase usually causes a production decline of 2% or more. But current demand domestic and foreign has continued to support prices. Increased production will be required to depress prices, but high feed costs will speed that shift.
Part of the ethanol argument is that it provides an abundance of co-products that make good livestock feeds, such as wet corn gluten, corn gluten meal, or distillers’ dried grains. But one of the unintended consequences is that the rising market price of corn has pushed upward the price for those co-product feeds. Due to their nutritive value, they are priced equivalent to corn, and while their overall price has declined over time, the rising price of corn has pushed up the cost of the co-products to the livestock industry. To take the best advantage of the co-products, livestock operations need to be located as closely as possible to ethanol plants. While conventional wisdom says cattle would most benefit from that, the economists believe that with higher feed prices the determinant would be efficiency of gain, which defines the poultry industry.
Summary:
Supporters of the biofuels industry pointed to the potential abundance of inexpensive feed from co-products as a boon to the livestock industry. But the livestock producer has to buy that feed at prices equivalent to the nutritive value of corn, and with skyrocketing corn prices that is pushing up production costs rapidly for the livestock producer. This is particularly challenging to the beef and pork producer, both of whom are losing money because of high volumes of meat supplies.
If you have been a producer, what has your reaction been? What is your threshold for taking action and what action is that?
Posted by Stu Ellis at 12:50 AM | Comments (0) | Permalink
July 11, 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.
Watch for today’s USDA Supply and Demand Report to provide some yield estimates that will take the flooding into account. USDA last estimated corn at 149 bu., based on the slow planting rate, but not on lost acres or ponded fields. Soybean yields will get some attention, based also on acreage, but little on plant development and maturity.
The yield and production estimates from the July report will figure prominently in the market moves over the next few weeks, says ag economist Chad Hart at Iowa State. “Another yield adjustment in corn could push estimated production below 11.5 billion bushels, well below last year’s record production. This would tighten the outlook for corn as projected usage was already above estimated production and similarly for soybeans.
Regarding beans, even at trend yields, if demand holds as projected, 2008 ending stocks could approach 100 million bushels, below the carryout projected for 2007. Any sort of downward yield adjustment would continue to tighten an already tight market.
Have you looked inside a corn whorl lately? That is the home to a wide range of bugs that are defoliating corn from the inside out. Unfortunately, Extension entomologists in the Cornbelt agree that little is known about such an impact, and have had to use data from hail defoliation to provide insight about how badly corn can be damaged.
Corn growers and researchers have found whorls to be harboring fall armyworms, Japanese beetles, and first generation European corn borer. Specialists say the winter did not increase their mortality, and the delayed planting and delayed corn development this year have synchronized V6-VT stages of corn with a host of defoliating insects.
So what do you do? Specialists say the defoliation looks worse than the effect it will have on yields. Species should be identified and evaluations made of their damage, which they add, tassel destruction is not an issue. But silk clipping needs to be monitored. Find out more.
High valued corn is even in more jeopardy from silk clipping insects, such as Japanese beetles and corn rootworm beetles. “An insecticide application may be warranted when there are 5 or more rootworm beetles per plant, pollination is not complete, and silk clipping is observed. An insecticide application may be warranted when there are 3 or more Japanese beetles per ear and pollination is not complete. Entomologists say the numbers of Japanese beetles may be overwhelming, but just protect the corn silks.
Late planted corn and beans may be hosting black cutworms. Normally they hurt young corn, but this year, the late planted fields are giving them a second wind. Crop scouts report the population of a replanted soybean field was clipped about 50%.
Western bean cutworms are becoming prevalent, and spreading quickly across the Cornbelt and even into Ontario, Canada. IL Extension entomologists say they are apparently replacing many of the insects killed off by YieldGard and Agrisure. So it seems that the western bean caterpillars are not hurt by those Bt genes. They say the Herculex Insect Protection products are an alternative. If an insecticide is needed, the determinant is when 8% of the plants are infected before larvae move to the ears.
Soybean aphids remain in relative seclusion or in very small numbers that have escaped crop scouts. Some discoveries have also found predators along with the aphids that have helped keep populations down. However, IL Extension entomologist Kevin Steffey says temperatures from 70 to 86 degrees will allow aphid populations to double in 3-4 days.
Is there a need to spray soybeans with a foliar fungicide? X.B. Yang at Iowa State says, “This year would be the year to see the benefits unless we are fooled by Mother Nature and the rest of season becomes hot and dry.” He adds, “The chance to see yield benefits from a spray so far is much higher than most normal years.”
Is there a need to spray soybeans with a foliar fertilizer? Agronomist Antonio Mallarino says, “The short answer is that it may, but probably not in fields that have been well fertilized or where growth is limited by factors other than nutrient supply.”
If your county was one of those in which USDA released the CRP for early grazing, you need to evaluate the benefit of the additional pasture with the fact that your CRP rental payment will be reduced by 25%. That calculation will also have to include the cost of fences and water supply for the livestock. A modified conservation plan must be submitted, and the FSA office must approve the plan. Find the list of states & counties.
If you can wait until August 1, you can either graze or bale hay on your CRP for only a nominal fee. Iowa State agronomist Stephan Barnhart says most CRP is going to have weeds and brush along with any grass that will reduce the value of the hay and could damage baling equipment. He says the nutritive value of the crop is low, because plants have now begun to lose their protein content and have begun accumulating fibrous tissue.
Posted by Stu Ellis at 1:11 AM | Comments (0) | Permalink
July 10, 2008
Are You As Familiar With ACRE As You Are With An Acre?
If you have been to the FSA office to report your 2008 acreage, were you asked if you wanted to sign up for the 2009 ACRE program? The ink is barely dry on the 2008 farm program and FSA is already recruiting farmers to participate in the support program for next year. No, they are probably not working on commission, but are just so efficient they are working ahead. And you need to respond like you know the program as well as they know it. So, what is your answer about ACRE?
The Average Crop Revenue Election has nothing to do with the Presidential candidates and their campaigns, but the choice you have the option to make at the FSA office to determine the type of farm program you want for your operation. There will be the same old, same old, same old, direct and counter-cyclical payments with a marketing loan to protect your interests. But by sacrificing 20-30% of those, you will have the chance to sign up for ACRE, and according to Iowa State University ag economist Bruce Babcock, “Almost all price scenarios favor enrollment in ACRE. ACRE payments will be double the level of traditional programs even if commodity prices drop back to levels last seen in 2005."
Before you make any rush to sign up for ACRE, remember the program does not start until the 2009 crop. Kansas State ag economist Art Barnaby says, “The ACRE program is a “put option” on expected state revenue. The strike price for 2009 ACRE is the two year average of 2008 and 2007 Marketing Year Average price. Because of weather combined with demand, this strike price is likely to be very “high” and there is no limit on the price in the first year.”
While the downside is not being able to switch away from ACRE once you are there, Barnaby says, “In 2010 the ACRE guarantee can not decline by more than 10% from 2009. Therefore, if the current weather market of 2008 sets a very “high” ACRE guarantee for 2009. Barnaby also says it is likely ACRE will be attractive to corn and bean producers, and the later one signs up for the program, the clearer the picture will be on the value of the 2009 Marketing Year Average price that will settle ACRE claims. And he warns, “If farmers only signup for ACRE when it is in the money and increase the odds of a payment, ACRE can still expire worthless, like a Board traded option.”
To assist you in making a decision, whether it is tomorrow or a year from tomorrow, the folks at Iowa State have created several decision aids that offer a picture of your farm program benefits from corn, soybeans, and wheat. Users of the Excel-based spread sheets will enter specific data about their state, expected commodity price for the new market year, the 2008 marketing year price, and the average yield per planted acre. The outputs of the spreadsheets are estimated ACRE payments and ACRE revenue guarantees.
The 10% limit on going up or down from one year to the next, will save many farmers from grief, according to Ohio state ag economist Carl Zulauf, “The 10% cup/cap is important. It limited changes in the revenue guarantee around half of the time in an analysis that calculated the breakeven price at which expected payments were the same from the ACRE programs and traditional farm programs.
As farm programs change over time, farmers initially will grumble about the changes being unfair and not be of any benefit to them. Then they get quiet about the farm program because they have figured it out and how they can benefit from it. It is always evolutionary, and farmers will soon be finding ways to benefit.
Summary:
ACRE will be the farm program du jour beginning next year for many farmers, who have figured out how the Average Crop Revenue Election program will be of greater benefit than staying with the old programs in full force. ACRE utilizes a myriad of calculations, and decision aids are available to assist farmers in making the best decision. While some folks will sign up now, the program will not take effect until after the 2009 crop is harvested, so later participants will be able to see more clearly how they will benefit.
Posted by Stu Ellis at 12:38 AM | Comments (1) | Permalink
July 9, 2008
Someone Wants To Buy My Hay, But What Do I Charge For It?
The addition of ethanol to the markets for corn helped push up corn prices, and to compete for acreage, soybean prices went up as well. Wheat prices climbed also to compete for acres, and that left hay, which was not to be left out of the party either. Hay prices have risen to ensure enough is produced, but since hay is not traded in Chicago, Minneapolis or Kansas City, what is the value of hay?
That is a good question, says Rory Lewandowski of Ohio State University Extension. His observations in the July edition of the OSU Ag Manager newsletter indicates that he believes hay is at least worth the nutrients it removes from the soil plus the cost of producing it. But he asks rhetorically, “Whether hay is actually worth what it costs to produce it is yet another question.” Let’s work through his estimates and see how close you are to his final answer.
Lewandowski uses a couple of recent anecdotes to frame the discussion. A land owner who was renting hay ground thought he should get $2 out of the $5 charged by the operator for small square bales. Another anecdote indicates that a lot of grass is being baled and will reduce the price of hay.
Lewandowski totaled up 40 lbs of nitrogen, 13 lbs of phosphate and 50 lbs of potash which are removed from the soil for each ton of hay produced. Depending upon the source of the replacement fertilizer, the ton of hay consumed $71.81 to $81.95 worth of nutrients. Spreading the fertilizer is an expense that might be hidden so Lewandowski used a $4.50 per acre rate for applying dry bulk fertilizer. He says if you are questioning the decision to account for the fertility cost, then consider the fact that those nutrients are removed from the soil and will not be available for corn, soybeans, or some other crop the following year. Even if you did not fertilize this year, your cost of production in the hay will have to reflect an expensive application in a future year.
The cost of machinery, labor and other expenses can be gathered in your state’s custom rate sheet or farm machinery cost estimates. You’ll have a mowing and possible conditioning cost, raking, baling and hauling. Utilizing cost per ton will allow prospective buyers to comparatively shop. And fertility produces more hay and that means more tons per acre. Add the mechanical costs to the nutrient cost and you may have a charge of $100-plus for a ton of hay.
If that seems to be a high price for someone to pay, maybe your fertilizer price is less or maybe application charges were built into the nutrient cost. Your mowing, raking, baling, and hauling charge could be a bit less as well, or maybe even more. If your hay contained alfalfa or another legume, its nitrogen contribution to the soil could mean a reduction in price.
But instead of lowering the cost, maybe your hay has been tested at various labs, and its quality can be certified. Owners of horses are looking for quality hay and may be able to pay more for a quality product they can read the nutrient value. Instead of lamenting the lack of a futures market for hay, there may be a hay auction nearby, or one within trucking range that would help you determine the value of the hay plus the basis. Nevertheless, the cost of hay needs to reflect its content and the cost of production. But you have also not paid yourself for the enterprise to produce and sell the hay, which is a return to labor and management. Add 25% to 30% to the basic cost, and that is your income that is necessary to feed your family and provide a profit.
Summary:
No matter how much demand there is for corn, soybeans, wheat, and other grains, there will always be a demand for good hay for horses and livestock, and its value will be competitive with row crops. Determine its value, either by auctions of relatively comparable hay, or by determining the value of the nutrients the hay removes from the soil plus the cost of baling, with a return to labor and management.
Posted by Stu Ellis at 12:23 AM | Comments (1) | Permalink
July 8, 2008
News Bulletin: Consumers Are Stealing Pork
All right boys, what am I bid for a good pork chop? Who’s got a five dollar bill? Hey, there I’ve got $2, gimme $3, now $3, $3.50, all right bid ‘em up, now $4, $4, got it, now $5, bid ‘em up, all up, $5, now $6, anyone at $6? Sold at $5 a chop, and that’s a steal!
Thieves are stealing bronze cemetery urns, copper wiring out of houses under construction, and gasoline as often as they can haul it off. But if they were smart, they would be trucking off hogs and selling them to international buyers for tons of cash. Purdue economist Chris Hurt says hogs are not only cheap in the US market, but compared to the foreign market, where foreign currencies buy more dollars than they used to, pork is a bargain.
In his latest newsletter, Hurt says the low price of pork is a subsidy to US and foreign consumers. With pork prices averaging $2.85 a pound this year and last year, pork producers have absorbed $1.4 billion in losses that consumers should have paid in value. It is all a function of the value of the dollar, which has benefited corn and soybean producers who have sold one billion bushels of beans and over two billion bushels of corn to the export market because of the low valued dollar. Through the month of April, pork exports expanded 52% compared to last year. Interestingly, Hurt says pork production is up 11%, but only 6% more pork has been available to the domestic market because foreign buyers are taking the rest. Over one hog in five is destined for the overseas market. Hurt says he believes the global market will buy the increased US production until pork prices in the US begin to “move sharply higher.”
When will that happen? Hurt says production has to decline, and the Quarterly Hogs and Pigs Report 10 days ago indicated sow slaughter was up 1%, farrowing intentions were down 2% for this quarter and down 4% for next quarter. With the increased slaughter, prices will remain weak, but once the glut is through the packing houses, Hurt says prices, “will improve very late this fall and winter and go wildly higher by next spring and summer.” He says the world is waiting to buy the last of the cheap pork.
If you are trying to pay off a hog house and still meet operating expenses, Hurt predicts pork prices to be in the low $60’s by winter and mid $70 by next spring and summer. With current corn and SBM prices, cost of production for farrow to finish producers is in the low $60’s. He says profits may even accelerate if CRP is released, if ethanol supports are cut, and if weather is favorable, all of which will reduce feed costs.
Hurt’s assessment of the Hogs and Pigs report is corroborated by Iowa State livestock economist John Lawrence, who said he was surprised by the liquidation of the sow herd, because of the higher sow slaughter that had been seen in recent months. In this monthly newsletter, Lawrence said even with farrowing intentions down, the 9.4 pigs per litter is preventing a more rapid decline in hog numbers. He is expecting production to remain above year earlier levels, until it levels off next January and begins a decline into the spring. His prediction for live hog prices is $55-$58 per cwt next January through March, and $62-$65 in the second quarter of the year. He feels the declining supply of hogs in 2009 is a function of the eroding profitability from high feed costs.
But intended declines in production will be bittersweet to many producers, since the June 2009 lean hog contract closed over $100 last week, the first time that plateau has ever been reached. Glenn Grimes and Ron Plain at the University of Missouri agree with Lawrence in their weekly Hog Outlook that hog slaughter will drop slightly below year ago levels in the first quarter of the year and stay down for an 18 to 24 month period.
Summary:
If pork producers can afford to skimp for the next six months, they’ll be in the money come 2009 when hog prices strengthen as production declines. High feed costs are forcing the issue, but the futures market sees the outcome and hog futures are in record territory. Helping the current demand is the value of the dollar, which has spurred foreign buyers to help themselves to inexpensive quantities of pork, and they will continue to do that as long as foreign currencies are at a premium to the dollar. That will not only help feed foreign consumers, but will help keep additional burdensome supplies of pork out of the US meat case, where prices remain at bargain basement levels.
Posted by Stu Ellis at 12:08 AM | Comments (0) | Permalink
July 7, 2008
Foliar Corn Fungicides: Are You Spraying Because You Need To, Or Think You Need To?
Your corn was planted late and has weathered the spring storms, but those delays will challenge the yield. But you have nothing to worry about because you plan to spray your corn with a foliar fungicide and another 25 bushels per acre will magically appear. Foliar fungicides have become a popular use of money and time the past several years, but is there any profitability in it?
The profitability question is quickly answered “no” by University of Illinois plant pathologist Carl Bradley in his July 3 newsletter. “Data summaries from both university and commercial sources all agree on this point--that foliar fungicides did not provide a benefit on corn every single time they were applied in 2007.” Will your field be one that did benefit, or will you field be one that did not benefit? Instead of a dice roll, Bradley suggests answering the question, “Under what circumstances a foliar fungicide applied to corn will be profitable?”
You can always spray a fungicide whether the corn needs it or not, and other than a guaranteed expense, there may have been a remote chance that you did the right thing. But what are those risk factors that you might want to consider, just in case you want to improve your management ability?
1) Since many corn pathogens survive in corn debris, planting corn after corn, and especially in no-till, will increase the chance that you made the right decision to spray. In other words, rotation and tillage are important.
2) If your planting date was late, your corn is more susceptible to gray leaf spot, so a late planting date is a high risk. So the calendar is important
3) Some hybrids carry susceptibility to such pathogens as gray leaf spot, and unless you are planting corn that has a high tolerance, spraying a foliar fungicide without knowing could be the right thing to do. But knowing your seed is the important factor.
4) Thorough scouting will give you an advantage because many pathogens begin to show up before tasseling. Fungicide applications are not recommended on resistant hybrids. For susceptible hybrids, location of the pathogen and its timing will be the determinant for spray.
5) Just like corn, foliar diseases like humidity and moisture also, and the greatest yield increases occurred in areas with high rainfall during recent university fungicide tests.
Bradley’s Iowa State colleague Alison Robertson says in a July 3 fact sheet that common rust is the first to appear, but it has not yet been seen. Next is gray leaf spot and northern corn leaf blight which appear at the end of July with hot and humid conditions. Robertson notes the timing could be critical because the delayed corn crop will just be starting to fill at that point, “Research has shown that the earlier in the grain-fill process that disease develops, the greater the impact on grain yield. This year, because tasseling and silking are delayed, grain filling will occur in late July through August, and may coincide with increased disease pressure.” She says with the more valuable crop, the use of a fungicide to protect every bushel may be appealing, but she tells corn growers to consider Bradley’s checklist.
Bradley and his colleagues at many Cornbelt universities and in Canada last year tested various foliar fungicide treatments. He says, “Results from university trials conducted in 2007 in 12 different states and Ontario indicated that hybrids with a "fair to poor" rating for gray leaf spot resistance had a 6 bu/A increase when a foliar fungicide was applied, compared to a 4 bu/A increase when a foliar fungicide was applied to hybrids with a "good to excellent" rating for gray leaf spot resistance.”
An important point made by Nebraska plant pathologist Tamra Jackson can be found in the latest Nebraska Crop Watch. She says most fungicides provide only 14-21 days of protection and in recent years, the appearance of fungal problems have spread throughout July and August. That means corn growers typically using foliar fungicides may need to schedule a second application. She also says it is going to take a two to three bushel response to pay for the cost of the spray.
When hail strikes, lesions are created on the corn stalk and on leaves that may provide an opening for pathogens. However, a simulated hailstorm, followed by the application of a variety of fungicides resulted in data that the fungicides did not significantly improve yield compared to the untreated check. The “hail” reduced the yield, but the fungicides did not help the yield recover.
If some of your neighbors insist a foliar fungicide makes the corn look healthier and yield more, Bradley says they are seeing the “greening” effect of some of the active ingredients in the fungicides. It does not automatically add yield to the plants, says Bradley after testing for that specific effect. He says fungicides are designed to kill pathogens, and that is the reason for their application, not a cosmetic reason. He says they will help increase production and profits, if use for their designed purpose.
Summary:
Fungal problems can reduce corn yields substantially, but can be expensive. There has been an increasing trend toward foliar fungicide applications, whether or not any pathogen has been detected in a corn field, with producers claiming that the yield was boosted as a result. While no research can confirm any yield increase due to a foliar fungicide, plant pathologists are saying that farmers whose corn is susceptible to fungal problems, may have reason for applications.
Have you applied a foliar fungicide hoping to increase yield, and if so, what happened? Are you concerned that corn pathogens may become immune to fungicides if they are over used?
Posted by Stu Ellis at 12:41 AM | Comments (1) | Permalink
July 4, 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’s USDA acreage and stocks numbers are now history, but the facts will continue to impact the market. IL Extension’s Darrel Good says the slow down in corn use will raise carryout at least 100 mil. bu. above the 1.433 bil. predicted in the June supply/demand report, and higher corn acres will mean less rationing than expected.
Soybeans told a different story in Good’s thinking, “Production may fall short of the 3.1 bil. bushels projected earlier by USDA, keeping stocks extremely tight for another year. For the next two months, prices will be all about US weather.” Read his latest newsletter.
How does your budget compare to typical farm families? The 1,232 IL farm families surveyed reported $5,025 monthly non-capital 2007 family living expenses. That is nearly 10% higher than 2006. Adding capital expenditures, the annual cost was $66,412. The high one-third averaged $103,668 and the low one-third averaged $45,517.
Over the past 4 years, farm receipts rose from $351,327 in 2004 to $440,952 in 2007. Net income from non farm sources was $17,491 in 2004, but had climbed to $31,668 in 2007. Borrowed money rose from $246,556 in 2004 to $306,747 in 2007. Read more.
Similar data from southern and western MN, and based on $74,804 family living cost, identified minimums that it would take to cover that cost: 890 A of corn, 970 A of beans, 369 A of hay, 4,308 head of farrow to finish hogs, 10,717 head of wean to finish hogs, 6,438 head of finish feeder pigs, 16,586 head of hogs in a contract finishing program, 831 head of feeder calves, 948 cows in a cow-calf operation, and 127 dairy cows. Read more.
If June weather stressed the corn crop, Iowa State meteorologist Elwynn Taylor says it will show up in ear size, “If we have a16 row hybrid ear that was stressed at the 4-leaf stage it may turn out as a 14 or 12 row ear. There is some offset in that ideal conditions from 8 leaf to 14 leaf (or to tassel if that comes first) can produce a longer potential ear and good weather from silking to dough can realize the longer row potential.”
Those “ideal conditions,” may be in the forecast of Jim Noel at Ohio State. He says the risk is toward wetter weather the next 20-30 days with temperatures close to average. Noel says there is minimal risk of hot dry weather, but some risk toward cool and wet. For the coming week, he expects early week rains, with storms the following week.
“Looking back at significant spring La Nina events,” Jim Noel at Ohio State says, “On the whole it yields cool and dry springs after wet winters. However, if we strip out 1988 and 1955 drought La Nina years, we find the other years are cool and wet into the summer. What this tells us is the North Atlantic Oscillation plays a role, and La Nina has a negative impact toward either dry or wet but not very supportive toward agriculture.”
The battery is dying on the degree-day clock and it is losing time. Cooler than normal temperatures and continued wet soils are causing crops to struggle, and Extension specialists in Iowa report a lag of 10-25 degree days behind the long term averages. They anticipate crops to recover as the summer wears on, but only if the degree-days catch up.
The 2007 Farm Bill is clearly designed to help farmers manage risk, not raise income, says Ohio State ag economist Carl Zulauf. He says the ACRE program and the disaster program are consistent with the current environment of high farm income and high farm price variability. And he said with the large number of new programs dedicated to fruits and vegetables, the only large acreage crop that does not now receive support is hay.
But is it a Farm Bill? Ohio State’s Zulauf says he is astounded by the breadth and depth of the new farm policy. He says over time, they have grown progressively larger and more comprehensive, and, “This one is a wide ranging omnibus bill.” Zulauf says, “It raises the question of whether or not it is appropriate to continue calling it the Farm Bill.”
Compared to corn after beans, how is your corn after corn doing? Iowa State researchers say it is not doing well in their state. They say plant height is not related to yield and there is a lot of growing season to go, so how will yields perform this year?
1) With climatic stress, corn following corn yields less than if it had followed beans.
2) Yields will drop from allelopathy, inadequate early N, lower biological activity.
3) Corn pathogens will remain in the soil and cause seedling disease the next year.
4) Permanent corn rootworm populations grow and stunt early growth of corn.
Repaired corn fields will have some unusual dynamics says IL Extension’s Emerson Nafziger. The early corn will compete well for water and do well in heat, and will lower the yields on the nearby repaired ponds. If the original corn was left, populations will be higher than normal, and there will be more competition for water and lower yields.
Nafziger says soil conditions were not very good at planting time, and that will have the most impact on the root systems of corn plants. That has been the reason for early afternoon leaf curling, signaling loss of as much water into the air as it is taking out of the ground. He says there is plenty of water in most soils, but some is below the corn roots.
Soybeans have lost a month of sunlight says Nafziger who believes it will be difficult to create a canopy before flowering and pod setting. He says that puts pod numbers at risk, and subsequently reduces yield. Timely rains during July will extend the flowering period and help increase the pod count, so a good yield depends on continued moisture.
Caution should be used in planting corn after July 1 in the northern Cornbelt says Iowa State agronomist Roger Elmore. He says an early frost could lower a 130 bu. yield to 24 bu. Perfect weather and a late fall could generate 130 bu., but you might also have 37% moisture and have to spend money drying grain with expensive energy as he simulated.
Corn pest #1. Corn rootworms may be sparse, but damage has been reported to non-Bt hybrids, with larvae maturing and adults ready to emerge. Rain and saturated soils may not have retarded their numbers, but their survival in ponded areas is uncertain says Kevin Steffey at IL Extension. Adult emergence is expected to result in silk clipping.
Corn pest #2. Corn earworms may be feeding in whorls, and not just damaging sweet corn and seed corn. Their timing this year found the perfect vegetative state of most corn fields for corn earworm damage. Economic injury thresholds have not been established, and control is rarely justified.
Corn pest #3. Western bean cutworms are just now emerging as adults, and eggs will be placed on the upper surface of corn leaves, where larvae will hatch and move into the whorl to feed on the tassel. They also feed on the ears and will cause economic damage.
Thresholds don’t fit well this year, says MO entomologist Wayne Bailey, who noted that late planting has caused crops to be small, so what little foliage exists needs to be protected. Bailey recommends a spray if the extent of defoliation is discomforting.
Use glyphosate in a tank-mix if you are controlling volunteer corn that is resistant; or if you have challenging broadleaves like morningglory which is more easily controlled by other herbicides; or if you have increasing populations of weeds that are glyphosate resistant like giant ragweed, and you need a second spraying with additional herbicides.
Don’t use glyphosate in a tank-mix if you are trying to control waterhemp that is already resistant to glyphosate. But the key is the size of the waterhemp, and plants in the 3-5 inch range are sensitive to glyphosate. If it is used with another herbicide in a tank mix, there would be little or no increase in control from the other herbicide.
Performance issues can be reduced in the use of glyphosate, and weed specialist Bob Hartzler at Iowa St. says there are several ways to address those performance issues.
1) It has to be applied timely, and that means before problem weeds are over 4 in.
2) A low rate of application causes problems, so base it on the difficult weeds to control.
3) Environmental stresses on a weed will stop its growth, and that can be when you spray.
If lost N is a concern, Purdue’s Bob Nielsen notes, “Many soil fertility specialists in the Midwest suggest adhering to the usual critical level of 25 ppm NO3-N for determining when no additional N is needed after the recent heavy rains. We suggest that this level of soil NO3-N may be insufficient where N loss conditions have been severe. We suggest recent levels of rain have depleted the lower soil profile as well as the upper foot of soil.”
Posted by Stu Ellis at 1:49 AM | Comments (1) | Permalink
July 3, 2008
Making Big Bucks From Specialty Corn And Paying Big Bucks For Contaminating A Neighbor's Corn
Very little of the corn in the Cornbelt has begun the pollination process, but when it does, we’ll be reminded how far and wide corn pollen can travel. One of your neighbor’s tassels will pollinate your corn, whether you want it to or not; and as higher value crops are produced, you won’t want his pollen anywhere near your silks. You insured your yield this year and your Bt performance, but how about insuring against genetic contamination from one field to another?
Corn is one of those crops that can carry the genetics of a new pharmaceutical, and high yielding corn can produce an antibody, enzyme, or vaccine in both quantity and quality, and it is conveniently stored in the corn kernel. Pharmaceutical maize (corn) is being tested in hundreds of plots, some in non-descript locations around the Cornbelt, says a collection of economists and agronomists from Iowa State University and North Dakota State, who analyzed the potential for insuring against unwanted genetic contamination. Such contamination is primarily the result of the weather, and when either severe weather strikes or when contamination tolerances are extremely low, serious losses can occur. The issue is pollen movement, and with recent interest in identity preserved