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.

Is the market dominated by bad news? Not really, says MO Extension marketing specialist Melvin Brees, who outlines several positive developments in his newsletter:
1) Current prices discourage increased plantings in South America.
2) Lower prices reduce feed costs and support continued strong feed use.
3) World population and incomes suggest that food demand is solid.
4) Lower prices and freight costs offset the negative impacts of a stronger dollar.
5) While corn and soybean carryout is increasing, it remains below average.
6) The 2008-09 corn stocks/use ratio is the lowest in more than 10 years.
7) Lower fuel costs and fertilizer price weakness might offer some input cost relief.
8) Higher crop prices may be needed to encourage 2009 crop production.

“Market action this year has clearly demonstrated the importance of capturing profitable prices when they are offered,” says MO Extension’s Brees. He says for unpriced grain, “Market carry and basis gain potential suggest storage returns, but be aware that volatile price action can erase these returns in a single futures trading session.” Brees says your assignment is to work on 2009 cash flow and a marketing plan.

Corn storage is also the plan of Jim Hilker at Mich. State Extension. He says that is indicated by the basis and the spread between futures. “What it doesn't tell us, is whether to store it under a hedge, or store unpriced, ie, is the price going up down or up? As soon as I figure out what the oil price will do, I'll let you know what the corn price will do.”

Hilker feels sorry if you have unpriced wheat. “Futures have dropped as the world has learned it will have enough wheat, and with the drop in corn prices meaning the bid for land will not have to be as high. (Also) the basis is about a $1.00 weaker, $1.50 to $2.50.”

Regarding soybeans, Hilker says, “The problem here is that I would generally recommend a basis contract here if you wanted to stay in the market, when the market says it won't pay for storage, but here the basis may strengthen a bunch.”

The “new market territory” we entered two years ago is now in full force across the rest of the markets says So. Dakota State marketing specialist Alan May, who expects added uncertainty in coming months. He says, “All of these concerns about the economy still mean that your success boils down to applying sound risk management strategy to your business. Stay in front of the cost versus return aspect of your enterprises, evaluate constantly where your breakeven lies, and stay in close touch with your lender to make sure you are both on the same page in terms of credit availability and cost of that credit.”

Revenue Assurance is shaping up to make significant indemnity payments, but if the corn market goes up, the payment would decline, suggesting the necessity to buy a call option for “insurance insurance.” K-State Extension’s Art Barnaby says please consider:
1) If the market continues to slide, your RA indemnity check would get larger.
2) December calls are about to expire, so March calls are the best alternative.
3) Sell back a March call by mid-November to minimize the loss of the time value.
4) Don’t even consider any of this, unless you are very familiar with options.

If you farm for multiple landowners and make decisions for them on crop insurance, Kansas State risk management specialist Art Barnaby says land owners may be better off with APH policies than with a group policy that farm operators choose. A larger farming unit may benefit from GRP or GRIP, but does not protect the owners’ small tracts. Read more.

If corn drydown seems to be slow, you are correct. Purdue agronomist Bob Nielsen says planting was late, cool temperatures slowed development, and maturity was delayed. Read more.
1) The later grain matures, the smaller the daily rate of drydown due to temperature.
2) Harvest moistures are parallel to 2002, but drier than 2003, so not too unusual.
3) Estimated drydown rates for 10 of the past 21 days have been .4 points or less per day.
4) For corn that did not mature until late Sept., drydown time has been insufficient.

The past several years have allowed natural field drydown for corn, but because of the late maturing crop, nearly every load will have to be artificially dried. There will not only be an energy cost to remove water, but there will also be a weight loss or shrinkage. If your elevator calculates a “pencil shrink,” a good explanation of the process to improve your understanding is here.

If the economy does not permit consumers to demand beef, supply fundamentals will have no impact on the beef market says Purdue economist Chris Hurt. He says cattle prices dropped 10% in the past month, impacting small feeding operations with unpriced feeder calves. Read more.

Hurt says the price decline was moderated by the 25% slide in corn prices and 20% fall in soybean meal prices in the past 3 weeks, easing the cost of production for livestock operators. Hurt tells cattle feeders to expect a recession and not a depression so don’t panic. He says if you lock in bargain feed prices, also lock in your live cattle futures. He expects a $5-7 recovery in feeder calves and finished cattle moving into the low $90’s.

Cattle economist Dillon Feuz at Utah State says tight credit may be a problem for cattlemen with excess red ink. “Cattle feeders have generally lost money the last 2 years and based on current prices many cow-calf producers are likely to lose money this year. You will all likely need more operating money to work with, and if this financial crisis doesn't get solved, you may have a difficult time finding banks to loan you money.”

Cash rents are rising, and pasture rental agreements should be in writing just like cropland. “Cattlemen seem willing to pay more for the land, renting by the year, month or day; by the head and/or pair; or by the acre," says MO Extension’s Wayne Prewitt. A sample lease is here.

Exports are still contributing to the value of pork. MO livestock economist Glenn Grimes says in August, exports were responsible for $47.90 per head, compared to $27.27 for August of 2007. While exports continue to rise, the rate of growth has slowed. He’s expecting additional weakness in hog prices in coming weeks.

Country of origin labeling (COOL) is now law, but Ohio State economist Ian Sheldon questions the economic logic and says it will drive up already high food prices. “If it's about safety, then perhaps we should be spending money on food safety.” He says the across the board implementation means higher prices, whether consumers want it or not.

Regardless of market prices, you cannot afford to lose a bin full of grain. NE ag engineer Tom Dorn says, “Mold growth is reduced below 50°F and nearly stops at 40°F. Mold activity is greatly reduced below 16% moisture content at all temperatures. The university therefore recommends bringing corn down to 15% moisture and cooling it to between 30°F and 40°F if the grain will be held into the winter months. If held into the summer months, corn should be dried to 14% by May. Soybean moisture content should be two points lower than corn, 13% for winter delivery and 12% for spring delivery.”

If you are planting wheat, agronomists at Ohio State say we are at the end of the period when there will be adequate tiller development before winter dormancy. Even if soybean harvest is late, late planted wheat is at a greater risk for poor stand establishment, winter kill, and spring heaving. They say if freezing is delayed, wheat may still do fairly well.

For late planted wheat, increase your seeding rate up from the 1.2-1.6 mil. per acre to 1.6-2.0 mil. per acre. The latter would be 30 seeds per foot of 7.5 in. rows. Wheat at 13,000 seeds per lb. would require 123 lbs. to get 1.6 mil. and 154 lbs. for 2.0 mil.

If a fire reaches your chemical storage, and firefighters pour on the water to douse the flames, will your insurance pay for the environmental clean-up? Purdue pesticide specialist Fred Whitford says most insurance policies have “environmental exclusions” which makes farmers liable for cleaning up chemical spills. Read his factsheet, then ask an insurance agent:
1) What is the extent of coverage for environmental cleanup?
2) How much environmental cleanup coverage do you have?
3) Are you covered for spills from off-the-farm transportation accidents?
4) What is required of me if there is a chemical spill?
5) Are there any actions you might take that might void the policy?
6) Are you covered for chemical spills resulting from temporary storage accidents?

With all of the vineyards springing up around the Midwest, neighboring farmers are afraid of lawsuits alleging liability if they use 2,4-D nearby and the grapevines die. University of Illinois researchers have produced a biotech grape with 2,4-D resistance.