At Iowa State University, ag economist Bruce Babcock explores the odds of an ACRE payment to corn and soybean farmers, saying futures market prices point to a good chance of that occurring. His analysis is here.

Also at Iowa State, ag economist William Edwards discusses the pros and cons of using default or "plug" yields in place of historic yields in the Ag Decision Maker.

At Kansas State University, risk management specialist Art Barnaby has been filing many updates on ACRE. He is holding 2 webinars (Internet web broadcast seminars) entitled “Will ACRE pay on my farm?” on Aug. 4, with sign-up details here.

Some of Barnaby’s most recent calculations for prices and yields are located here.

Barnaby also provides an exchange of questions and answers that farmers have been asking him about program details, which may very well be some of your questions. Find his answers here.

At Michigan State University, marketing specialist Jim Hilker’s latest market outlook explored the impact of ACRE on Michigan farmers. If you are one of them, you would be well served to review his comments.

Several members of the Michigan State University ag economics department, including Hilker, Roy Black, and Roger Betz issued an alert for farmers to sign up for ACRE. Their explanation and examples are listed here.

University of Nebraska agricultural economist Brad Lubben provides his analysis of the program with an observation that is appears to be an attractive option for Nebraska producers. Find that analysis .

At Ohio State University, ag economist Carl Zulauf has been one of the more prolific authors of material about ACRE, creating brief fact sheets. Six of his factsheets are located here.

Economists at Purdue University used their Top Farmer Newsletter to provide an analysis of ACRE and give an Indiana example of how it works. Find that here.

Purdue marketing specialist Chris Hurt provides ACRE help on corn and on soybeans.

Texas A & M University created a series of links to ACRE websites and presentations. Those are located here.

In Minnesota, the chance for an ACRE payment is better for wheat than row crops says economist Kent Olson in his latest newsletter.

If any of these are helpful, please remember that August 14 is the deadline to enroll your farms in the ACRE program. Only a signature is needed, including signatures of the operators and owners. All production evidence should be submitted by July 2010. However, you will need to have a good handle on the comparison of your farm yield with the state yield to determine whether that farm should be enrolled in the program.

Summary:
Obviously, the time to decide on whether to sign up for ACRE for the 2009 crop is quite soon, and many farmers are undecided. If the reason for the indecision is insufficient information, there are numerous resources, many of them recommending that farmers enroll in ACRE for 2009, because of the greater potential for financial benefit, compared to the conventional program.

Stu Ellis

Posted by Stu Ellis at 12:33 AM | Comments (1) | Permalink

July 29, 2009

Are Your Crops Developing As Slowly As They Are Everywhere Else?

Four months into the primary Cornbelt growing season, but do crops show four months of maturity? USDA’s weekly crop condition report indicates the majority of corn and soybeans are in good to excellent condition, but many farmers are wondering whether the crop or Jack Frost will be first at the finish line.

USDA’s July 28th Weekly Weather and Crop Bulletin indicates that crops have a lot of growing to do in a short period of time, and maturity must be reached in the next two months without concerns of weather risk and market volatility. From the “eye in the sky” view there are many states that are well behind the norm on crop development.

ILLINOIS: Corn is 53% tasseled, compared to 76% at this time in 2008 and the five year average of 93%. Current conditions are 62% in good to excellent, but 27% is rated as fair. The soybean crop is setting pods in only 9%, compared to 14% last year and 39% for the five year average. Soybean conditions are rated as 61% in good to excellent condition with 29% rated as fair. The 70ºF statewide average temperature for July has held back the oat crop, which is more than 10% delayed in turning yellow compared to average maturity, and only 10% of the alfalfa is in its third cutting, which by now would have 23% in a third cutting. Soil moisture is 94% adequate to surplus, but the cool temperatures are nearly 6º below normal, setting 2009 up as the coolest July on record.

INDIANA: 53% of the corn is silked, compared to 64% last year and 84% for the five year average. 2% is in the dough stage, compared to 16% for this typical time of year. 63% of the corn is in good to excellent condition with 28% in fair condition. 51% of the soybeans are blooming, about the same as 2008, but behind the 71% expected for this time of year. Typically 27% would be setting pods, but only 7% currently are doing that. 64% of the beans are in good to excellent condition, with 26% listed as fair. 83% of the alfalfa has had a second cutting, about average for the recent and longer term. Indiana temperatures have ranged from 4 to 11 degrees below normal, slowing growth and development of major field crops.

IOWA: The corn crop generally ahead of 2008, but behind the five year average. Specifically, 78% has tasseled, compared to the five year average of 88%, 60% of it has silked, compared to the 74% average, and 7% is in the milk stage, versus the 21% five year average. 80% of the corn is listed in good to excellent and only 15% as fair. 81% of the soybeans are blooming, which is comparable to the five year average of 84%; and 35% are setting pods, which is behind the 46% five year average. 79% of the beans are rated good to excellent. Iowa crop reporters indicated that some area of the state have not had any measurable rainfall for two weeks, but the cooler than average weekly temperatures have kept crop conditions at high levels. Topsoil moisture was rated 82% adequate and 10% surplus.

KANSAS: The sunflower crop is on schedule for emergence and blooming, with 74% in good to excellent condition. The second cutting of alfalfa is also on schedule, but the third cutting is slightly behind. Topsoil moisture is 77% adequate and subsoil is slightly better. Forage supplies are in good shape and 66% of the range and pasture are good to excellent.

MICHIGAN: The corn crop averages 55 inches, and tasseling is variable throughout the state. Corn and soybeans benefitted from moisture, but both crops are not as tall as they should be by this time. Winter wheat is rated 70% good to excellent and harvest is underway; but the oat crop is rated slightly less and is reported all headed. Recent rains were needed and, “growers welcomed much needed rainfall. Some areas of State remained dry. Most crop conditions improved with recent rainfall; however crop development remained behind normal due to cool temperatures. Growers continued to report need for warmer temperatures to advance crop development.”

MINNESOTA: Corn is beginning to enter the milk stage, which is slightly ahead of 2008, but behind the five year average. Winter wheat harvest is just beginning. Spring wheat is 24% ripe, which is behind the five year average of 61%, but none is harvested. Both the oat and barley crops are behind the five year average, as well. Less than 60% of the canola and sunflower crops are rated good to excellent. The topsoil is 43% short to very short, and moisture supplies are declining.

MISSOURI: While moisture is 81% adequate for crops, coolness prevails and temperatures were 4 to 8 degrees below normal across the state in the past week. The Missouri climatologist reported last week that July should set a record for being the coolest on record. Hay cuttings are on schedule, and pastures are rated 66% good to excellent.

NEBRASKA: Corn maturity is better than 2008, but slightly behind the five year average with 77% silked and 8% in the dough stage. Between dryland and irrigated corn, the crop is rated 79% good to excellent. Soybeans are also rated 82% good to excellent, with 75% blooming, which is comparable to the 5 year average. 24% of the beans are setting pods and that is slightly behind the 35% average for the past five years. The sorghum crop is in good shape and ahead of average. 99% of the wheat is ripe and 85% has been harvested which is slightly behind normal. Precipitation has been good with 82% of the topsoil having adequate to surplus moisture, but temperatures averaged 5 degrees below normal for the past week, some dipping into the 40’s.

NORTH DAKOTA: Better weather is being reported, “Near normal temperatures and below normal precipitation aided crop conditions in wet areas and hindered it in drier areas.
Observers in the central district reported that limited precipitation was negatively affecting crop development. However, reporters in the northeast commented that the dry, warm weather was beneficial for a variety of crops.” However, the development of the durum wheat crop, spring wheat crop, barley crop and oat crop are all slightly behind the five year average.

OHIO: The corn crop is rated72% good to excellent, but only 59% is tasseled and that is behind the 78% for the five year average. Soybeans are 66% in the good to excellent categories, but only 68% are blooming, and that is behind the 80% average for this time of year. The winter wheat is nearly all harvested, and that is on schedule. Topsoil moisture is rated 64% adequate and 25% short, which is also being reflected in conditions of the hay crop and pastures.

SOUTH DAKOTA: Cooler weather has given way to warmer temperatures, and “Warmer, drier weather helped with row crop development, harvesting of small grains and cutting of alfalfa; but insects are now becoming a hindrance for both crops and livestock.” The corn crop is 36% tasseled, compared to the five year average of 68%. The sunflower crop is on par with prior years. The winter wheat crop development is marginally behind schedule, as are barley, oats and spring wheat. Better than half of the topsoil has adequate moisture, but nearly a quarter of the topsoil and subsoil are short of moisture.

WISCONSIN: Coolness also prevails, with “Average high temperatures ranged from 76 to 80 degrees across the state. Lows averaged from 52 to 61 degrees for the week. Average temperatures were below average again, and the lack of heat units has many crops behind five-year averages.” The corn crop averages 68 inches in height, with 21% silking. 42% of the soybeans are blooming and 9% are setting pods.

Summary:
In only rare instances are 2009 crops developing in line with the five year average, and in most cases, corn and soybean crop stages are 20% behind the five year average. Many small grains are also behind in their development, but not as much. Nearly all state reports have indicated the problems stem from cooler than normal temperatures, hampering expected crop development.

Stu Ellis

Posted by Stu Ellis at 12:21 AM | Comments (2) | Permalink

July 28, 2009

Climate Change: Profit Or Problem?

The popular agricultural press has taken the USDA to task over its position that the Climate Change legislation (HR 2454) will have little impact on agriculture. USDA’s analysis of the House-passed legislation, which is now in the US Senate for consideration, originated in the Office of the Chief Economist. The study says, “In summary, USDA’s analysis shows that the agricultural sector will have modest costs in the short-term and net benefits – perhaps significant net benefits – over the long-term.” But how did it come to that conclusion?

The USDA analysis is based on energy cost estimates of the Environmental Protection Agency, applied to agricultural supply, demand, prices, and net farm income over the near term (2012-2018), medium term (2027-2033) and long term 2042-2048.) USDA says its estimates are predicated on several assumptions:
• Farmers will receive payments for offsetting the carbon released into the atmosphere by industry.
• Some cropland and pasture will be planted to trees and that will reduce grain supplies causing higher values for grain. While that will help grain farmers, livestock producers will be hurt financially.
• There will be increased demand for biomass to produce renewable electricity, but that addition to farm income has not been calculated.

USDA acknowledges greater production costs because of higher energy costs, and says 50% of the cost of production of wheat and feed grains can be traced to energy costs. Over the past 4 crop years, 55% of corn production costs, 31% of soybean production costs, and 58% of wheat production costs are attributable to energy. USDA quotes EPA as expecting petroleum, electricity and natural gas costs will rise significantly above baseline levels, but while energy prices would be felt by producers, the cost of fertilizer would be unaffected until 2025. EPA has placed the fertilizer industry into a category that would be expected to experience high costs, but since foreign competitors would avoid those costs, they would not be charged against US fertilizer producers. However, that immunity would be phased out in 2025 and fertilizer costs would then catch up to where they would normally float.

The Chief USDA Economist also says a 2006 survey found more than a half million farmers took some action to reduce fuel or fertilizer expense, such as servicing engines, cutting back on trips across the field, or reducing fertilizer use, as well as negotiating price discounts. And USDA says efficiencies have increased in agriculture’s use of energy to the point that it is nearly half of what it was in the early 1950’s. Going forward, rice and sorghum producers are expected to see a more than $3 per acre increase in energy costs in the near term, while soybean producers will only see a $0.45 increase per acre. USDA says energy costs are forecast to be 6.4% more, pushing up total production costs only by 0.3% in the near term. That translates into a small decline in planted acreage, and a subsequent rise in market prices for grain commodities. Those include 0.1% for corn, and wheat, but no change for soybeans or livestock. Net farm income is expected to fade during the 2012-2018 period by $600 million per year. If the immunity were not given to fertilizer, net farm income would fall an estimated $1.3 billion per year.

In the longer term, over the next 40 years, USDA again used EPA-estimated energy costs, which would see higher costs for fertilizer because its immunity from higher natural gas costs would be phased out. Additionally, allowable emissions in the manufacture of fertilizer and chemicals would be reduced and that would have an increased cost for fertilizer. As a result, USDA says corn production costs would increase about 10%, but soybean production costs would go up less than 5%. With an estimated 22% rise in energy costs in the long term, higher commodity prices are not sufficient to offset the hike and farm income will decline over 7% from baseline levels. However, USDA says if farmers adopt production of biomass crops, annual net farm income would actually increase, but less than 3% by 2045.

The USDA analysis of the Climate Change legislation says farmers and ranchers would receive compensation for offsetting the release of carbon by others, not only through reduced tillage, but forest maintenance and conversion of pasture and some cropland to forest. Initially, USDA says those $2 billion in annual payments would rise to $28 billion per year, and in the long run, there would be more income than cost for agriculture resulting from the legislated climate change that will come in the form of higher taxes on fuel and energy.

Summary:
Climate Change legislation pending in Congress would place a tax on energy, and cause higher production costs for agriculture, not only from fuel, but also from higher costs from fertilizers. USDA believes the change will cause some farmers to reduce production to the point that higher commodity prices will result, as well as other farmers changing their production and cropping practices to earn money from industries that emit carbon beyond their limits.

Stu Ellis

Posted by Stu Ellis at 12:54 AM | Comments (0) | Permalink

July 27, 2009

Are COOL And "Swine Flu" Really Acts Of God When They Reduce Pork Profits For Integrators?

Row crop and small grains producers are familiar with “Acts of God” that can devastate fields with either too much or too little water, and that is why crop insurance is popular in territories with great vagaries in the weather. But on the other side of the fence is the livestock producer, whose insurance opportunities have been limited to changes in revenue that are more manmade than “Acts of God.” But are there “Acts of God” that can be brought into livestock production contracts that benefit the integrator?

“Acts of God” are included in a more broad legal term called Force Majeure, a French term meaning a greater force than which can be reasonably controlled. And Force Majeure defenses are designed to get one party out of a contract requirement. With the increasing amount of pork production that is under contract, integrators usually retain title to the livestock, and contract with livestock producers to raise the hogs and prepare them for delivery to the market. But agricultural law specialists Roger A. McEowen and Erin C. Herbold at Iowa State University report that some integrators with Force Majeure clauses in their contract have been using that to protect themselves against adverse market conditions, such as “swine flu” or Country of Origin Labeling. Their recent newsletter reports that some hog integrators have claimed those factors have affected the market and have attempted to terminate or renegotiate their contracts with farmers.

Over time, typical examples of Force Majeure have included, flooding, earthquakes, volcanoes, acts of war, riots, crime, and other factors of similar serious ilk. The writer of the contract is usually the integrator, and rarely are any parts of it negotiable. Sometimes the company which has written the contract has used a Force Majeure clause to get out of a contract that has not been as profitable as they anticipated. McEowen and Herbold report a frequently used Force Majeure clause in Iowa pork contracts ends with the phrase, “or change in governmental regulations or laws making this agreement illegal.” But they question whether swine flu or COOL is really included.

Pork profits have been non-existent for nearly everyone in the industry due to high feed costs and the decline in the export market connected to the swine flu (H1N1) outbreak. Iowa State livestock economists report monthly losses for the past 18 months on many types of pork operations, which began prior to the COOL law being implemented, as well as the outbreak of swine flu. And the ag law specialists say “It is not an “act of God” that constitutes a force majeure event.”

The Mandatory COOL program, which covered many types of meat other than pork, became effective in mid-March of 2009, and market observers indicated the reduced flow of Canadian origin pigs impacted pricing and availability. McEowen and Herbold say termination letters, sent by integrators refer to the new law as resulting in a situation where the integrator is forced into a contract that is impossible to implement from their side. McEowen and Herbold say the integrators appear to be trying to renegotiate pork contracts that would pay farmers a lower rate, which they add does not fit within the definition of a Force Majeure event.

What does a producer do? While McEowen and Herbold address the laws of Iowa, beware that the growth of popularity of production contracts in the past ten years to manage risk has resulted in several Cornbelt states taking proactive positions to address contract production. Farmers with specific questions may find helpful information from their attorney general or consumer affairs agency, as well as attorneys well versed in agricultural production and contract law. In some states, the farmer who has been raising hogs for the contractor is in a position to file a lien, as a building contractor or mechanic would for unpaid work.

Summary:
Many contracts allow one party to escape their required performance with an “Act of God” clause, which is a portion of Force Majeure that frees a party of a contract from performance because of forces out of their control. However, the long running unprofitability of pork production has resulted in some integrators claiming Force Majeure to escape their obligation to farmers, or at least forcing renegotiation of contracts at lower prices paid to the farmer. Ag law specialists are advising farmers that such practices may not fit the legal definition of Force Majeure.

Stu Ellis

Posted by Stu Ellis at 12:06 AM | Comments (0) | Permalink

July 24, 2009

Cornbelt Update

Cornbelt Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.

USDA is rechecking its corn and sorghum acres in IL, IN, KY, MO, ND, OH, & PA to ensure the Aug 1 crop report is as accurate as possible. NASS will be asking farmers to update acreage to reflect any changes in planted acreage since the June Acreage report. Any changes the USDA makes will be factored into the report released on Aug. 12.

The recent $1.30 loss in corn and $2.20 loss in beans are due to large acreage, but also weakness in financial and energy markets, all of which outweighed prospects for larger exports and tight soybean stocks. That is the opinion of IL marketing specialist Darrel Good who says price and yield prospects will soon show if a low has been established.

Good says the market expects relatively large crops, but there is still room for yield and price uncertainty. Nov bean futures are 20¢ above revenue insurance guarantees, which allows some additional pricing, but Dec corn futures are well below those guarantees. Read more.

Darrel Good says if crop conditions remain as they are and there is no early frost or freeze, then IL weather models point to a nearly 162 bu. corn crop and a 44.7 bu. bean yield. Those weather models are based on the weekly crop condition report that has 71% of the corn crop and 65% of the bean crop in good to excellent condition.

The August crop report will replace USDA’s statistical models with actual field counts, says Mike Woolverton at KS State, and he says early trade guesses would put the crop at record high levels. The records are 160.4 bu. for 2004 corn and 43 bu. for 2005 beans.

But Woolverton is concerned about the weather. He says crops typically maturing in Sept. will not be ready until Oct., and currently the record low day and night temperatures in the Cornbelt are complicating the situation. He says it may take 125 days for 110 day corn to mature. Woolverton thinks the cold summer means frost will come early. Read his newsletter.

At Purdue, marketing specialist Chris Hurt believes the 25 mil. acres of beans planted after May will pull the national average yield down to 41.8 bu. compared to the 42.6 bu. yield projected so far by USDA. Hurt suggests the tight stocks will push August futures toward $11.50, and cash toward $12.00, but he’s quick to say it is risky to expect that.

Storage returns for beans will be positive into January, says Hurt, but not much beyond that because of the anticipation of the South American crop. So for farmers with limited storage, that suggests storing corn over soybeans, and he says an improving economy will help provide a more positive market after the fall harvest. Read more of his newsletter.

Store corn? That’s also the recommendation of MN specialist Ed Usset, who calculates the Dec ‘09 to Jul ‘10 carrying charge at 32¢ or 4.57¢ per month, which is the largest going back to 1990. He says that is four times larger than the interest costs incurred on storing corn, and the market is sending early signals to get ready to store corn at harvest. Read more of Ed’s July 16th blog.

What about ACRE payments? At this point, Purdue’s Chris Hurt says the national soybean price of $9.30 would not allow an IN payment to be triggered, but the futures market average price of $8.70 would trigger a soybean payment about $15 higher than conventional payments. Hurt says if your yields are above average that would tell you to stay out of ACRE. If they are below average, sign up by the August 14 deadline.

2009 could be a high payment year for ACRE say IL ag economists Gary Schnitkey and Nick Paulson, because projections of commodity prices are below benchmark prices. Based on history, an ACRE payment for corn would have been triggered in IL in 32% of years since 1977, but, “Because of higher price variability, it is likely that the payment percentage will be higher in the future than in the past,” say the economists. Read more.

An analysis of IL yields since 1977 found that ACRE payments would have been made:
1) For corn in 1977, 1983, 1984, 1986, 1988, 1991, 1997, 1998, 1999, & 2005.
2) For beans in 1982, 1984, 1998, 1999, & 2000.
3) For wheat in 1977, 1984, 1985, 1986, 1990, 1991, 1996, & 1998.

IA meteorologist Elwyn Taylor believes this season has a lot in common with 1992 and 2004. “Both summers were warm on the West Coast and cold in the Corn Belt. Both had record high corn yields in the Midwest. 2009, even with the shaky start, is set up to have a record high yield. Too early to call this a forecast, but it is worth watching,” he says.

July will be one of the coolest on record believes MO climatologist Pat Guinan. He says the first 22 days averaged 72.2ºF, tying the record with 1924 as the coolest in 121 years of weather records. Guinan says the northwesterly airflow brings cool and dry air intrusions into the Cornbelt. But he says, “July's below-normal temperatures in the region are not an indicator one way or another on trends in average global temperatures.”

Are cool temperatures good or bad for corn? Purdue’s Bob Nielsen says cooler temperatures are preferable to heat when it comes to pollination and grain fill, and GLS development will slow down. On the other hand, fewer heat units means slower corn development, which will further delay the crop that is already behind schedule. He also says cooler temperatures will cause silks to halt the elongation process and result in a mass of scrambled silks at the end of the husk interfering with kernel set. Read more.

“Short corn” is more a psychological issue for you than a production issue, since OH agronomist Peter Thomison says yields will not be adversely affected, unless the canopy allows more sun to reach the ground than the leaves which enhances weed presssure. He says short plants of one hybrid will produce the same as tall plants of the same hybrid.

SmartStaxCorn is the latest headline, following EPA and Canadian approval for the Monsanto and Dow AgroSciences product for next spring. Hybrids with that name will have four different toxins against rootworms, corn borers, and other winged insects as well as tolerance to glyphosate and glufosinate. However, the biggest change for anyone planting SmartStaxCorn will be the ability to reduce the 20% refuge to only 5%. The companies report they will have enough seed for 3-4 million acres for 2010.

Evaluate your corn crop before deciding whether to spend money on a fungicide, says IL specialist Carl Bradley, who says applications have increased in the past two years:
1) Fungal risk is increased if there is substantial corn residue left from the prior year.
2) Late planted corn is more at risk for some foliar diseases.
3) Hybrids with a “fair to poor” rating for GLS have a 6 bu. response to fungicides.
4) Hybrids with a “good to excellent” rating for GLS have a 4 bu. fungicide response.
5) Corn leaves that are wet longer in the day are more susceptible to foliar diseases.
6) Diseases that begin to appear before tassel development are not a good sign.

Scout corn for the appearance of disease on the third leaf below the ear and higher on the plant, says Bradley, then check the seed tags if the hybrid is susceptible to disease.
1) If moderately susceptible, consider a fungicide application if the disease is present.
2) If intermediately susceptible, consider a fungicide if conditions are favorable.
3) If resistant to disease, a fungicide is not recommended, but scout anyway.

High fungicide prices and low corn prices complicate the decision whether to apply a fungicide. IA State specialists say $26-$28 fungicide and $3.25 corn make a tough choice, but researchers “reported a mean yield response of 7.5 bu/acre when gray leaf spot disease severity on the ear leaf was greater than 5% at R5 to R6” growth stages. Read more.

Beware of other issues when you are making a decision on corn fungicide application:
1) Foliar disease pressure can result in stalk quality and standability issues at harvest.
2) If the weather dries up, foliar disease progression will slow or stop without rain.
3) Bacterial diseases are present and will not be controlled with a fungicide spray.
4) Corn with a fungicide will be wetter and more costly to dry at harvestime.

Shabby soybeans and potentially diminished yields can result from a zoo-full of defoliators. Consider a rescue treatment when 30% defoliation has occurred before blooming or when 20% defoliation occurs between bloom and pod filling, if you have:
1) Bean leaf beetles are hitting a second time over large areas of a field.
2) Blister beetles will strip foliage between veins in isolated areas of a field.
3) Grasshoppers focus their attention on areas near sod waterways and fence rows.
4) Green cloverworms may be decimated by diseases before they are problems.
5) Thistle caterpillars feed along roadsides and field edges.
6) Woolyworms come in two generations, primarily in drier years
7) Japanese beetles defoliate beans, but may not reduce yields.

The red alert flag is being hoisted by MN entomologists who are warning soybean growers about the potential for an explosion of soybean aphids in northwestern MN and northeastern ND. They expect population expansion with warmer temperatures and urge producers to begin scouting and only when threshold levels are reached.

Any soybean fungicide should be applied at the right time, and IA State specialist X.B. Yang says the critical time is the R3 growth stage, which is when soybeans begin to set pods. He says if you’ve had good results the past 4 years, chances are positive for this year also. In similar rainy years, over 50% of sprays yielded an economic return and over 70% of sprays resulted in a positive yield. But Yang also says fungicides will not control bacterial leaf blight, and R3 is too late to control white mold with fungicides.

With temperatures below 85ºF, your chances increase for white mold about the time soybeans begin blooming. Scout for wilting leaves, bleached stems, and a fuzzy mold on the plant. The soil-borne fungus can survive for years and appears when environmental conditions are perfect. IL specialist Carl Bradley says there are management options:
1) Some varieties have partial resistance, and those can be on your priority list.
2) Fields with perennial problems can be planted in wider rows and lower population.
3) Domark and Topsin M fungicides are available, but apply it at the flowering stage.
4) Since the fungus can be seed-borne also, avoid bin-run seed from other fields.
5) Contans WG is a commercially available parasite of the mold, which has had limited evaluation. Bradley says it is applied to the soil after harvest or before planting.

If your soybeans look sick, they may have a nutrient deficiency suggests IL specialist Fabian Fernandez in his newsletter. He says soil conditions this year may be magnifying nutrient deficiencies, such as:
1) N deficiency makes older leaves turn pale or yellowish-green.
2) K deficiency is observed as necrosis (death) of the edge of older leaves.
3) Fe deficiency is observed as yellow coloration between leaf veins.

Beans are growing slow because of cool temperatures, but weeds are growing fast because of lots of moisture; and IA weed specialist Bob Hartzler warns you that:
1) Label restrictions are based on growth stage, crop rotation, & harvest interval.
2) Only 2.2 lb. acid equivalent of glyphosate can be applied postemergence yearly.
3) There is a reduced ability of late season treatments to control the weeds.

Check the calendar and count backward from potential harvest to help determine what herbicide you can use on your soybeans. IL weed specialist Aaron Hager provides a list of herbicides with the minimum number of days from spray to harvest, and some have as many as 90 days minimum. Read the list.

IA is catching up with the rest of the Cornbelt. Weed specialist Mike Owen says his research has found, “that Iowa has populations of common waterhemp that are resistant to PPO inhibitor herbicides. We have also identified populations of giant ragweed that appear to have evolved resistance to glyphosate. At this time, we have not documented how widely spread these problems have become or the specific details about the alleged resistance. Research to better describe the weed resistance is underway.”

Stu Ellis

Posted by Stu Ellis at 12:10 AM | Comments (0) | Permalink

July 23, 2009

Brazil May Be Consuming More And Exporting Less

Over the past 30-plus years US soybean growers, have watched their dominance in the world market slowly erode to the benefit of the Brazilian farmers. Demand for US beans typically dries up in March when Brazilian soybeans are available to the world market. Soybean production exploded in Brazil in the past several decades, surpassing that of the US. But buried deep in a new report about socioeconomic shifts occurring in Brazil is an item that will warm the hearts of soybean producers across the US.

All farmers will remember the markets of 2007 and 2008 that took corn and soybeans to historic highs, not only with the help of the weak dollar, but also with the help of growing economic power in developing countries. Such nations as China, India, Russia, and Brazil were seeing more money in the pockets of their consumers, who were demanding more and better food. It was a go-go economy, until the screeching halt midway through 2008. But with Brazil being one of the higher populated nations on the planet, and with extraordinary natural resources, its GDP was expanding at an average annual rate of 12% from 1996 to 2008. Income growth, increased urbanization, and a growing demand for food made it one of the worlds leading consumers of many types of food products, according to the latest issue of Choices magazine, an electronic publication. Constanza Valdez, a USDA economist, and two ag economists in Brazil report that rapid socioeconomic shifts are underway in Brazil and are challenging the farm sector with shifts in demands for commodities and subsequent changes in economic signals. And reading between the lines, those could have a significant importance for US agriculture.

The specialists on the Brazilian ag economy report Brazilian farmers will be challenged to sustain productive growth to meet the increasing domestic demand for food and remain a major world supplier of grains and oilseeds. And they add that the growth of the biofuels industry in Brazil, which is fueled by sugar cane, could affect the availability of grain and oilseeds for both domestic and export markets.

Currently the Brazilian economy is a train that would be hard to slow, according to recent statistics. Per capita income has increased 14% from 2004 to 2007; income distribution is moving toward equality; and in the past four years the middle class has expanded from 42% of the population to 54%. The result has been increased food consumption, based on caloric value, which puts Brazil above the average for upper middle income countries. The economists say domestic consumption of red meats and poultry will rise and require more livestock feed, and there will be increased consumption of wheat and rice. In other words the Brazilians are eating better, have more money to pay for better food, and expect their farmers to supply more and better food instead of exporting the bulk of it. Sugar will shift from a food product to a fuel feedstock, since flex fuel cars have become popular with increased wealth in the country.

For Brazil, the bottom line will be the need to produce 7% more grain and 43% more oilseeds to meet the domestic and foreign demand, not including the demand for biofuels. While Brazilian food output has expanded fourfold since the 1970’s, future growth will slow unless there are solutions to the financial constraints for farmers, the food supply chain, and environmental issues. Additionally, the expansion of biofuels will eat into the volume of commodities that Brazil exports. The economists say, “Demand for soybeans as a raw material for biodiesel will likely increase use of Brazil’s excess crushing capacity and dampen the recent boom in soybean exports. Planned increases to Brazil’s biodiesel mandate from the current 3% of transportation fuel would likely reduce soybean oil exports.”

The Brazilian specialists conclude that Brazil will be able to meet the challenges for domestic markets, but its export potential will depend on its policy toward the expansion of the biofuels industry.

Summary:
For several decades Brazil has nibbled away at the US dominance of global soybean trade. However, economic advances in that nation have allowed domestic demand for food and fuel to increase to the point that more of Brazils agricultural production will be used domestically, and there will be less available for export.

Stu Ellis

Posted by Stu Ellis at 12:17 AM | Comments (1) | Permalink

July 22, 2009

Wheat Market Speculation: A Congressional Issue, Or Simply Revising The Delivery Contract?

Maybe you are a Sherlock Holmes aficionado, or a modern day CSI fan. If you do well with “who done its” and other brain teasers, your sleuthing expertise is needed to solve the whys and wherefores about alleged speculation in the wheat market. Some big names have lined up on either side of the issue, and whether you want to investigate the issue or just want to be a juror, you might find the facts of the case closely connected with your marketing plan.

The US Senate’s Permanent Subcommittee on Investigations, no less, convened Tuesday to listen to witnesses praise and criticize the Committee’s findings of “Excessive Speculation in the Wheat Market.” The report alleges that “commodity index traders made such large purchases of Chicago Wheat Futures that they pushed up futures prices, disrupted the normal relationship between futures prices and cash prices for wheat, and caused farmers, grain elevators, grain processors, consumers and others to experience significant unwarranted costs and price risks.” Committee Chairman Senator Carl Levin said speculative money overwhelmed the market and federal regulators failed to control the problem; and he called for stronger action by the Commodity Futures Trading Commission (CFTC) to place a 5,000 limit on the number of contracts a trader can hold, deny waivers of that limit, and investigate index trading in other markets.

During the hearing, various witnesses took these positions:
• CFTC Chairman Gary Gensler said there had been volatility in the market, it should be free of excessive speculation, and the CFTC looked forward to solving the issues raised by the Senate Committee.
• Chairman Thomas Coyle of the National Grain and Feed Association said increased capital flowing into the market has reduced the effectiveness of hedging by grain elevators, but he did not want increases in regulations to the point of interfering with the market.
• Steven Strongin, Managing Director of Goldman Sachs, said index fund investors provide long term liquidity to the market, and the problem with convergence of wheat futures and cash was a function of the delivery mechanism, not caused by investors.
• Vice Chairman Charles Carey of the Chicago Mercantile Exchange said the CME was committed to solving the convergence issue and consulted with many economists before making delivery contract changes designed to resolve structural problems.

University of Illinois agricultural economists Scott Irwin, Darrel Good, Philip Garcia, and Eugene Kunda also read the Senate Committees report and said, “We find the …evidence neither “significant” nor “persuasive.” And they said the Senate staff dismissed all of the work the CME had done to address the issue of poor convergence of cash and futures by restructuring the delivery contracts for soft red wheat as well as the fact that academic analysis of the problem found that the convergence issue had nothing to do with index trading. The ag economists said the most serious problem with the Senate findings was to equate the flow of index money into the wheat market with actual demand for wheat. They said investors buy and sell contracts without demand for the physical commodity. The Illinois economists said futures for wheat and other commodities rose during the period in question when index funds held large positions in the market, but using accepted economic principles there was little evidence those positions impacted the price movement in the futures market. And they said the Senate Committee report ignored the academic research that indicated index funds were not responsible for the run up in prices, particularly in the wheat market.

The economists said there is persuasive evidence that current delivery markets for wheat are outside of the commercial flow of grain, and when changes were made in the corn and soybean delivery points the magnitude of commercial activity increase sharply. But they said wheat delivery markets are out of position and that causes poor basis and convergence performance, an issue recently addressed by the CME to add delivery locations. They concluded that, “By ignoring this central problem with the CBOT wheat futures contract, the Subcommittee points in the wrong direction in trying to fix problems with the contract. Index funds are a side-show compared to the real problems with the contract.”

Summary:
The lack of convergence between cash and futures has been a problem for the CBOT wheat contract. But has the problem resulted from large positions held by index futures traders or has the problem resulted from contract delivery points being out of the flow of the commercial wheat market? A Senate Committee investigation contends the problem stems from the former and wants more regulation of index traders. Agricultural economists say the problem stems from the latter and changes made by the CBOT and the CME staff are steps toward resolving the issue.

Stu Ellis

Posted by Stu Ellis at 12:31 AM | Comments (2) | Permalink

July 21, 2009

Yields, Price, And ACRE: Working Toward A Decision

How do potential yields look compared to normal? Is the crop getting larger? Will crop prices recover after their recent plunge? Where are prices in relation to crop revenue insurance guarantees? Will revenue from low prices trigger an ACRE payment? And when is that ACRE signup deadline, anyway?

My, you have a lot of questions! But since you only have 25 more days until the August 14th ACRE sign-up deadline, you’ll need to do some significant cogitating about yields, prices, and whether ACRE will benefit your individual farm. And remember, since every farm is a bit different, this year ACRE may benefit you but not your neighbor, and vice versa.

At Purdue, marketing specialist Chris Hurt uses the term “flushed” in his newsletter to describe the corn market, which peaked at $4.67 on June 2 for December futures and has traded under $3.30. Hurt says more acres, improved yields, lower usage, and higher ending stocks have all combined to reduce the value of corn. And that value is one of the elements of the ACRE formula. While crop conditions are better than usual, Hurt says weather forecasts point to a deterioration of the crop size in August. He is expecting a 156 bu. national yield, compared to the 153.4 bu. average that USDA predicts, but he also says acreage is not as much as the June 30 Planted Acreage report projected. The Purdue economist believes that demand will also increase because of lower prices, and that will raise corn prices. He says grain producers might avoid price any corn now, arrange for storage, and expect to see December futures in the $3.75 to $4.00 vicinity.

One question to consider is the potential size of the corn crop based on current crop conditions, which Darrel Good at the University of Illinois says would point to a 163 bu. national average yield, if crop conditions remain steady, and there is not an early frost or freeze. His newsletter suggests the current prices have been a factor of the corn acreage fundamental, along with weakness in financial and energy markets. And for the next several weeks, yield and production prospects will likely determine if a low in prices has been established.

Good believes the markets are quite satisfied with the size of 2009 production, "Corn and soybean markets have priced in relatively large crops, but considerable production and price uncertainty remains. The November soybean futures are now about $.50 above the spring price guarantee for crop revenue insurance products offering an opportunity for some additional pricing of the 2009 crop. In contrast, December corn futures remain well below the crop revenue insurance price guarantees." Those revenue insurance guarantees are $4.04 for corn and $8.80 for beans.

Hurt suggests that corn may be too cheap, based on the potential for increased use and fewer corn acres than USDA believes. But the relative low price of corn is pushing many farmers toward the FSA office to get the appropriate ACRE forms to fill out before the sign-up deadline. Hurt says if yields are 1-2% better than normal, then the US average price has to be $3.70 for ACRE to provide more financial benefits than the conventional program. As a point of information, $3.75 is the midpoint of the current USDA forecast price range for new crop corn. At that point, Hurt says the likelihood is slim that ACRE would make any payment. However, the futures market is projecting a $3.30 season average price, and if that is the case, ACRE would pay about $45 more per acre than the conventional program. That also depends on whether your farm trigger is met, according to Hurt, “If your yields look to above normal this year, then this makes it less likely your own farm will trigger. To the extent your yields look normal or below-normal, then that makes it more likely you will meet your own farm trigger.”

Chris Hurt doubts the USDA’s expected average farm price would trigger an ACRE payment on corn, but he says the low futures prices may make that possible, if, your yields are not as good as your farm average.

If you need more assistance in making the ACRE sign-up decision, a good explanation supplemented by audio can be found here.

Summary:
If you are trying to make the decision on whether to sign up for the ACRE farm program, get a good estimate of how your yields will be in relation to your yield record that is part of the sign-up documents. In addition to your farm triggering a payment, there must also be a trigger pulled by the state average yield and the national average price. While USDA’s price forecast may not be low enough, the average price being projected by the futures market may trigger an ACRE payment. Collect as much data as possible before the August 14 sign-up deadline.

Stu Ellis

Posted by Stu Ellis at 12:17 AM | Comments (2) | Permalink

July 20, 2009

The Dairy Herd Buyout Has Tax Implications.

Dairymen who plan to participate in the buyout program, organized by Cooperatives Working Together, should consult with a tax advisor as part of the process and beware of the various tax liabilities that could result. Dairy herd liquidation is a life-changing event, and without consultation with your farm’s financial advisors, you may not control the changes as you intend.

The dairy herd liquidation program is a cooperative effort with 70% of the US milk supply paying 10¢/cwt to help fund the program. Producers submit a bid per cwt of milk that would take them out of production, and their dairy herd moves to market. More than a quarter million head of dairy cows have previously been retired, taking out more than 5 billion pounds of annual milk production. The latest program is generally parallel to prior programs, but Philip Harris of University of Wisconsin’s Center for Dairy Profitability reports the payments to producers will have tax consequences that should be clear before going into the program.

Producers submit bids, based on hundredweights of milk, will be accepted by the CWT based on a formula that will minimize the cost of reducing production. The regional “safeguards,” which were designed to limit geographical impact, have been eliminated that all producers have the same opportunity for their bid to be accepted. If your bid is accepted, 90% of it is paid when your herd has gone to slaughter. Since 1987, the IRS has been treating the dairy herd retirement programs similarly, and looks to ensure the payments are less than the value of the cattle as milking dairy cows. That value is regularly reported by USDA in its “Agricultural Prices” bulletins. The gross sale price is reported on IRS form 4797.

The balance of 10%, including interest, is paid 12 months later if the producer has not engaged in any commercial dairy production and has not sold any milk commercially. Harris says there is some uncertainty about how the IRS will handle the 10% balance, since the prior program had a 5 year limitation on re-entering production, and this program only has a 12 month limit. He says, “The IRS could take the position that if the total of the CWT payments and the amount received from the
sale on the slaughter market exceed the “Agricultural Prices” value of the herd, then the excess (limited to the 10% deferred payment) must be reported on Schedule F (Form 1040) as ordinary income that is subject to self-employment income.” He suggests that if the 90% plus 10% remains below the USDA’s Agricultural Prices chart, then nothing would be reported on IRS form 1040 regarding ordinary income.

Another element is the program to eliminate bred heifers. They are treated equally in the program, but since they have not been held for the 24 month minimum required in Section 1231 of the IRS code, their sale is considered ordinary income, but not subject to self-employment tax. Harris says the proceeds from the sale of the livestock, plus the bid from the herd liquidation program may put the total beyond the Agricultural Prices quotation provided by USDA. Dairymen and their tax advisors have to decide whether the entire amount should be reported as ordinary income, or whether the payment should be excluded from that with the thought that selling the heifers did not require a 12 month hiatus in production.

Summary:
Dairy operators, who have suffered from low milk and high feed prices, are considering stepping out of the dairy business for the 12 months required by the dairy herd termination program. However, the prices received for selling their dairy cows, plus the payment received for liquidating their herd, may create tax complications. The incentive payments come in two installments and the second may result in additional IRS tax liability issues. The key is whether the total is more than what USDA reports as prices for the sale of dairy cattle.

Stu Ellis

Posted by Stu Ellis at 12:44 AM | Comments (0) | Permalink

July 17, 2009

Cornbelt Update

Cornbelt 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.

Abundant corn supplies. Helped by a larger estimate of corn production and larger stocks of corn, the market is satisfied there will be ample supplies of corn to meet demand says IL Marketing Specialist Darrel Good. He says the futures market expects an average price of $3.25 for new corn, compared to the latest USDA estimate of $3.35 to $4.15. Read more.

Abundant bean supplies. With more acreage, the market is expecting a 3.26 bil. bu. bean crop says Good, which has pushed the futures market projections for the new crop to just under $9 per bu. That compares to USDA’s $8.30 to $10.30 price range. He says old crop bean exports could still grow, pushing carryover to only 70 mil. bu. Good notes the market is not concerned and some rationing of the old crop may be required.

Abundant wheat supplies. With more acreage and a larger yield estimate, the new wheat crop seems to also have ample supplies. Good says the ending stocks should reach an 8 year high of 706 mil. bu. and good weather will bring further price weakness.

So what does that mean for marketing? Darrel Good says the low price of wheat, weak basis, and large futures carry suggests retaining some ownership in the new crop. Additionally, “December 2009 corn futures are well below the price guarantee for crop revenue products which discourages additional new crop sales. November 2009 soybean futures are about $.30 above the crop revenue insurance price guarantee.”

Late planted corn and beans are just getting out of the starting gate, in the words of Kansas State’s Mike Woolverton, who adds that normal first frost dates this year would stunt corn and soybean yields, especially in the Eastern Cornbelt where planting was delayed. Woolverton says, “Extremely tight ending stocks create the potential for the soybean price to explode in the last half of August.” Read more of his newsletter.

The July Supply-Demand report made your ACRE decision for you says Michigan State’s Jim Hilker. He says, “Most of the articles and programs you read and see are going at it backwards. What they should be doing is showing that the market makes the decision to signup, and your job is to figure out how to go about signing up correctly.” Read more of his newsletter.

In Hilker’s calculations, the futures market is predicting a $3.25 national average price, and his chart of low and average yields would result in a payment from the ACRE program. “Even if the state and your farm have an average yield, just the lower prices expected relative to the past two years will trigger ACRE payments of $68.48 per acre if prices do average $3.25 and you have a similar yield to the state yield. If your Olympic average ACRE yield is higher than 138, then you will have even higher payments.”

As a further predictor of prices, Hilker says the options market predicts a 55% chance that 2009-2010 prices will average below $3.25. “There is a 55% chance that to get $68 all you have to give up is $5-6 of direct payments. What I call the breakeven price is $3.65; this is the price where ACRE pays if we are below it and does not pay if we are above with average yields.” Hilker adds, “And $3.15 is at the 50-50 point; the market says there is a 50% chance that you will collect $82.28 or more if the national price is $3.15 or below. At around $2.95, about where new crop bids are, you are reaching maximum payments, and there is at this point a 40% chance that will happen.” Signup deadline is Aug. 14.

Hilker says the odds are even higher that wheat will be eligible for an ACRE payment compared to corn, but things can change. He says there is a 50-50 chance that beans will be eligible for an ACRE payment because current prices are just below the threshold.

Reports of spoiled corn are increasing as bins of 2008 corn are cleaned out. Some of the corn did not reach maturity when harvested and the issues are now resulting in closer grading of samples and increased discount schedules says IA State’s Charles Hurburgh.

Stored corn exceeding 15% moisture should be dried immediately, and moved if showing damage. If blended with #2 corn, Hurburgh said bad kernels can be detected in typical samples and closer scrutiny will be applied by poultry feeders and processors. He says it will take a year or more to move 2008 corn into the market limits of #2 corn.

Hurburgh says 2008 corn will be showing up in the market as 2009 corn is harvested, but he says it is better to move out the old stock and replace it with 2009 corn if you are waiting to price the 2008 crop. He says successful blending will be difficult to achieve because spoilage of the entire lot will quickly occur, creating problems for exporters.

A corn refresher is offered by IL crop specialist Loretta Ortiz-Ribbing for farmers whose vexing problems were addressed earlier this year by her colleagues:
1) If the environment retards corn growth and the plant is older than it appears, any spray application should be keyed on the most restrictive element of plant size or age.
2) If the environment has made corn plants appear to be nutrient deficient, remember that warmer and drier soils may enhance growth and plant appearances may improve.
3) If the weather has prevented either corn or bean planting, planting a cover crop is better than leaving a field fallow to enhance soil microbes and prepare for 2010 crops.

Soybean aphids are off to a slow start this year in the Cornbelt, but entomologists say there is still a long way to go in the growing season. In OH overall densities are low, but some fields are showing signs of infestations. In IA some fields are expected to reach economic thresholds for treatment within the week. Low densities are in IN, NE, & SD.

Corn rootworms are the focus of specialists at IL where roots are being examined for damage. Purdue specialists report low levels of injury, possibly due to the result of very wet soil conditions at the time of larval hatch this spring.

Western bean cutworms are being reported in larger numbers than previously in OH, along with increased numbers in IN. IL corn growers are being urged to begin scouting. If 8% of plants have an egg mass or young larvae, consider a rescue treatment.

Japanese beetles have been reported in various numbers in the Eastern Cornbelt and for the next several weeks, producers are encouraged to scout fields for silk clipping and defoliation of soybean leaves. Japanese beetles concentrate in border rows of both crops and rescue treatments applied to field margins may be sufficient in some cases.

Foliar corn disease and stalk rots could go hand in hand says IL crop specialist Carl Bradley, who says when the disease pressure is severe, the blighted leaves cannot produce enough sugars to fill the ear and then plant robs the stalk of nutrients and that allows other diseases to infect the stalk. He says foliar fungicides may help reduce potential stalk rot, but they will not directly control pathogens that attack corn stalk integrity. Read more of his newsletter.

Eyespot is becoming the fungus of the year in Iowa, because weather began cool and wet, and is a frequent problem in fields of continuous corn. The infected residue allows the fungal spores to move up the corn stalk in the new crop, with yield loss and stalk rot.

Gray leaf spot is become more prevalent in the Cornbelt this year, and much earlier than usual, giving it more time to create problems in corn fields. GLS likes warm and humid weather and can devastate yields if it spreads to leaves above the ear. IA State specialist Alison Robertson says the cornerstone of GLS and eyespot is using resistant seed. Also fungicides can help if applied to fields with disease pressure or hybrid susceptibility.

Dairymen participating in the CWT program will have tax consequences when their bids are accepted for sending their herd to slaughter. WI dairy specialist Phil Harris says there are both deductions and liabilities. Read more.
1) Producers paying the 10¢ per cwt assessment have a deductible expense and it should not be just netted out of milk income reported on Schedule F of IRS form 1040.
2) Slaughter prices received are expected to be less than the value of the cows as reported by USDA, so the first 90% of income is treated as income from the sale of the cows.
3) The final 10% received 12 months later should be treated as ordinary income subject to self employment tax, if it exceeds USDA’s agricultural prices value.

New USDA appointments include administrators of FSA and Risk Management agencies. Jonathan Coppess will be head of FSA, and comes from working on Senate agriculture issues, law school, and an Ohio farm. Bill Murphy will be RMA chief, following a three decade career in federal crop insurance program management.

New appointments in the Univ. of IL College of ACES include Interim Dean Bob Hauser, who replaces Bob Easter who was recently named Interim Provost. Hauser is replaced as Chair of the Ag Econ department by Paul Ellinger, whose appointment is permanent.

Stu Ellis

Posted by Stu Ellis at 5:17 AM | Comments (2) | Permalink

July 16, 2009

Five New Yardsticks Indicate How Your Farm Measures Up Financially

When Dad measured your growth on a door frame, you stood on your tiptoes because you wanted to demonstrate how you had grown. In middle age, we are measured by our belt size, the model of our pick-up truck, or how many acres we farm. But the latter doesn’t really give a good measurement of the financial success of our farm. Lenders have used 16 financial yardsticks for several decades to evaluate our success, but will soon have 21 of them to more accurately assess how we are doing financially.

Lenders and farm financial consultants have a toolbox full of formulas to apply against your financial records to drill down and find out how you are really doing. Even if you don’t have a lender and do not use a financial consultant does not mean you should not conduct your own financial analysis to find out where and how operations could be fine tuned. Economist Tina Barrett of the University of Nebraska outlines the five new yardsticks http://www.agecon.unl.edu/Cornhuskereconomics/2009cornhusker/7-8-09.pdf that have been developed by the Farm Financial Standards Council to determine the financial health of a business.

A measure of liquidity that was adopted is working capital (which is assets minus liabilities) divided by gross farm income. It is called working capital to gross income, and measures operating capital available against the size of the business. You might have a Current Ratio of $1 million; but if working capital was only $25,000, that would not allow financial flexibility. It would show that you could not finance many of your own needs from your own bank account.

If working with a lender, he or she may be interested in your EBITDA score, which is your earnings before interest, taxes, depreciation, and amortization. If the lender wants you to repay a loan quickly, EBITDA will indicate how much money is available for debt repayment.

Since debt repayment capability is the key to success in getting a loan, the Farm Financial Standards Council added three new ways for farms to be graded on their repayment ability.
1) Your capital debt repayment capacity measures all sources of money that would be available to repay a loan. It would include farm and non farm income; after payment of family living expenses and taxes, with depreciation, and interest added back in.
2) The replacement margin measures those operations which have little borrowed capital on their books. It shows the amount of cash available for new principle and interest payments.
3) The replacement margin coverage ratio divides the capital debt repayment capacity by the sum of principle and interest payments plus the cash contribution in the replacement margin. That ratio indicates if there is enough income generated to cover term debt repayments and the cash contribution for new equipment.

Barrett says “The best improvement for these ratios is going to be for operations that don’t borrow much money, but do need to have a measurement for cash available for replacing equipment. In the past, the Repayment Capacity measures have not worked well in these situations.”

Summary:
Farm operations would be difficult to improve if they could not be measured, and the 16 measurements of the Farm Financial Standards Council have been expanded to 21. The new yardsticks provided more analysis capability for farm operations that currently do not have much borrowed money on the books, but need a way to show they have the capacity to repay borrowed money should it be needed.

Stu Ellis

Posted by Stu Ellis at 2:09 AM | Comments (0) | Permalink

July 15, 2009

Gray Leaf Spot: Does Your Corn Have It, Or Are You Lucky?

Are there brownish gray elongated lesions on your corn leaves? If you are not sure, have you seen any crop dusters flying in your neighborhood, spraying your neighbor’s cornfields? If you are still not sure, it may be time to pay a scouting visit to your corn to ensure it is healthy and working hard to produce a girthy ear.

One of the problems that may be appearing in your cornfield is the frequently found fungus known as gray leaf spot. Depending on your weather, the problem could extend from very light to very severe. While gray leaf spot appears periodically, it usually does not appear quite this early in the season, says Tamra Jackson, Plant Pathologist at the University of Nebraska. In her latest newsletter Jackson warns there are indications for “the potential for a severe gray leaf spot epidemic in 2009 if conducive conditions persist. Foliar fungicide applications will likely be required in many high risk fields.”

Gray leaf spot is caused by a fungus that lives over the winter in corn stalks and other infected crops and then appears as the proper climatic conditions develop. Its spores are produced in the crop residue and as rain hits the ground the spores splash up to the new plants and infect the lower leaves of a corn stalk. If humidity exceeds 90% within the corn canopy or if rain or irrigation water is present, the spores will germinate and infect the corn plant. Gray leaf spot does well in temperatures from 70 to 90 degrees Fahrenheit.

Once the spores have infected the plant, they produce lesions and those produce other spores that spread further on corn leaves and stalks with a 14-28 day reproduction cycle that will continue as long as environmental factors are conducive to its growth. Your concern is the fact that the lesions reduce the photosynthetic capacity of the corn leaf and that is translated into a reduction of grain, which Jackson says can approach 50%.

Corn hybrids carry varying degrees of resistance, and while some will be quite resistant to GLS, others can be devastated by the fungus. Genetic resistance fights the fungus by limiting lesion development on the leaves and retards its spread on the plant. If your hybrids are not highly resistant to gray leaf spot, your alternative would be the application of a fungicide that will retard the spread of the fungus. Much of your decision on whether to spray for gray leaf spot will depend on how far the lesions have spread. Jackson says that since the leaves above the ear contributed 70% to its development, those are more important than lower leaves. If the upper part of the canopy is infected at this early stage of crop development, then the decision is easier to make.
If you are about the pull the trigger on having your fields sprayed, ensure that you have gray leaf spot compared to other fungi that may be present, but may not damage a crop as severely. Spraying should be a priority for the fields with the greatest severity of infection, followed by the susceptibility of the corn hybrid. If your weather conditions have been conducive to fungal growth and reproduction, scout for problems that you may have, before you spend the $25-30 per acre for the fungicide and its application cost. At current prices of corn, that will cost 6-7 bushels.

Unfortunately, fungicides deteriorate within three weeks and lose their potency to protect against lesion development and spore reproduction. Since GLS is appearing so early in the season, there may be a necessity for more than one application of a fungicide for sufficient protection to get the crop through the grain fill stage of development.

For more information:
Ohio factsheet
Kansas State factsheet
Purdue factsheet
Illinois research report on fungicides

Summary:
Depending on weather conditions and susceptibility of hybrids, gray leaf spot could be taking a toll on corn yields. Since this is unusually early in the growing season, it gives more time for the upper leaves to be infected, which are the workhorses for putting grain on the ear. Scouting for GLS should be conducted to ensure that is the fungus that might be present, and to have a fungicide applied as needed.

Stu Ellis

Posted by Stu Ellis at 2:03 AM | Comments (0) | Permalink

July 14, 2009

Make Sure Your Soybean Marketing Plan Compensates For The Current Market Dynamics

Planting was stretched out, and so will harvest be quite elongated, but the US soybean crop is still expected to be a record in size, and will supply a large demand base. Using a trend line yield, the 77.5 million acres of soybeans should produce 3.26 billion bushels, and subsequently lower the price forecast for the new crop. The larger US crop will also bolster world production, pushing global ending stocks for the old crop that was at a five year low to comfortable levels. So if you are tweaking your marketing plan for soybeans, there are some significant factors that need to be addressed.

If you have soybeans to sell in the 2009-2010 marketing year, you won’t be alone. Using the National Agricultural Statistics Service numbers, USDA economists report the US is growing its largest soybean crop and there is more acreage in the major soybean producing states this year compared to last year, except IA and NE, where corn acreage grew substantially. KS and ND have record high soybean acreage. The challenge will be in the maturity of the crop because of late planting in many states, which has delayed blooming and pod fill to days with lesser daylight. Currently, two-thirds of the acreage is good to excellent with good soil moisture reserves.

Of the soybeans to be produced this year, nearly one-third, 1.275 billion bushels, will be exported, and slightly more, 1.68 billion will be crushed. At the end of the current marketing year next month, the old crop will have a 110 million bushel carryover that will be available for use in the next marketing year until the new crop is available. The market’s comfort with the supply has been a reason for the $2.50 decline in value of cash beans, and a reason for USDA cutting its range for the season average price to $8.30 to $10.30 per bushel. Fall cash bids are currently in the lower quarter of that range.

While global demand is high, domestic demand is sluggish. It is the same for soybean oil, as prices continue to erode. Although biodiesel has been a mainstay of the soybean oil market, biodiesel exports are only 10% of what they were a year ago. The change resulted from the EU decision to place a countervailing duty on biodiesel imports from the US. That meant soybean oil was in lesser demand to make biodiesel, and the current rate is only half of what it was a year ago. The outlook for the new marketing year is much the same, but there is expected to be a robust export market for soybean oil until South American crops come into play. The USDA economists believe Brazilian and Argentine soybean oil will be used primarily in their domestic markets, leaving a larger global demand to be filled by US soybean oil.

Soybean exports of the old crop continue at a record pace, and the Economics Research Service says shipments are not letting up after setting all times highs the past several months. Old crop soybean exports should reach a record of 1.26 billion bushels. The export demand has left stocks rather tight, and helped old crop prices climb to highs in mid-June, but moderate once the market was comfortable with available stocks.

With the higher acreage for the new soybean crop, acreage correspondingly declined for minor oilseeds, including canola, flaxseed, peanuts, safflower, and sunflower. Crop progress has been slow for them, as well, in part by a wet spring and cool weather where many are produced in the Red River Valley. Yield potential is expected to be limited.

In the global market, stocks are at a five year low, drawn down by exports recorded by the US, Brazil, and Argentina. However the new crop in the US is expected to replenish global stocks. Soybean imports globally are down around the world, except for China which has a surprisingly strong demand for soybeans, and many are being stockpiled.

Summary:
The US soybean market has been driven by a strong export business in recent months, with China being the primary buyer for its purpose of stockpiling. As a result, global soybean stocks are down in the US, Brazil, and Argentina, but the new crop in the US will raise the available supply beginning with the US harvest. When the South American harvest begins, beans and meal should come on to the market, but Brazil and Argentina are using increasing amounts of their own soybean oil. The US has a large supply of surplus soybean oil, in part because of lesser volumes being converted to biodiesel because of European trade policies that cut US exports of biodiesel by 90%. Soybeans will be the major player in the overall oilseeds market this year because of reduced acreage and poor crop development for minor oilseeds.

Stu Ellis

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July 13, 2009

Climate Change And Carbon Credits: Sorting Out The Confusion.

The US House of Representatives narrowly approved legislation addressing climate change and sent it to the Senate, where supporters hope the fall will bring restrictions or costs for releasing carbon dioxide and other greenhouse gases into the atmosphere. The public is divided on the issue of global warming, responsibility for greenhouse gases, and what should be done and by whom. Agriculture currently is one of the major stakeholders in the debate, and can come out either in good shape or bad.

The definition of good shape or bad shape is offered by Luther Tweeten as either mitigating or adapting. Tweeten is the emeritus Chairman of the Ohio State University Department of Agricultural Economics and in a recent perspective does not tell government what do to, but says whatever the choice of government may be, it will have an impact on agriculture. Tweeten cites the Intergovernmental Committee on Climate Change which reports average temperatures are rising, with food production gradually shifting away from tropical and subtropical regions and more into Canada and Siberia over the next century. Because of high populations in the developing countries in Africa and Latin America, Tweeten says such a shift will create hardships among the world’s food insecure people.

Tweeten readily says the science of global warming is unsettled, and scientists cannot agree among themselves. But he says global warming is an unintended consequence of producing energy with the use of fossil fuels that release carbon dioxide and methane into the atmosphere and that traps heat from the sun. While society may suffer the consequences, the market must send the proper signals for efficient resource allocation and private costs must be paid to match the cost to society. He says governments are in control, but the constituents of policy makers are less than enthusiastic about paying more taxes and energy costs to correct any damage. And he adds that greenhouse gases do not stop at the borders of an individual country.

To mitigate greenhouse gases, Tweeten says one solution is to impose a $26 per ton tax at a coal mine or oil well that is designed to offset the $26 cost per ton of carbon dioxide that society has to pay. While no one wants the cost of energy to rise, Tweeten says a cap and trade policy is becoming a popular alternative which would allow heavy energy users to pay for a permit to emit more than their share of greenhouse gases. Following the issuance of permits by governments, a market would develop for the trading of them. But he says the purpose would be to raise the cost of carbon-based fuels to the point that alternative source of energy would be preferred.

Tweeten says agriculture would have a difficult time slowing the momentum, because food production accounts for only 13% of manmade sources of greenhouse gases, and biofuels contribute only minor positive results in the limitation of greenhouse gases. He says a gallon of ethanol requires nearly a gallon of fossil fuel equivalent in the form of motor fuel, fertilizer, pesticides, transportation, and processing. However, he says agriculture would have a modest role by supplying only 300 million tons of carbon credits, which means one ton of carbon stored in the soil for perpetuity. He calculates a farmer could break even by spending up to $1.30 per acre annually to retain the carbon, but would lose money if he has to sacrifice more than one-half bushel of corn to hold or sequester the carbon. He says that means no-till production can be the most profitable enterprise, but then again, it requires more carbon-based chemicals to control weeds.

Farmers would have the option of selling their carbon capture enterprise to industry, but the result would be minimal compared to the overall cost. Tweeten says authorities project a $50 billion cost to control the climate in the year 2035, but carbon credits sold by farmers for $26 per ton would net agriculture only $390 million. While that is only the US, Tweeten says the world’s nations acting individually would be too small to have any positive impact, and many times they have other priorities, such as poverty, disease, conflict, or food insecurity. He suggests the adoption of wide ranging policies that would include development of crop genetics to resist drought and heat stress, better infrastructure for moving crops from production to consumption areas, and high yield crops that will minimize crop area to allow expansion of forests that do a better job of holding on to carbon dioxide.

Summary:
Although there is considerable controversy about global warming, there is public policy momentum to seek changes that would mitigate any rise in temperature due to the burning of fossil fuels that create carbon dioxide and methane. Agriculture cannot do much to reduce emissions of those gases, and even biofuels require fossil fuels for production, refining, and transportation. Agriculture may be able to lend its capacity to retain carbon in the soil by selling carbon credits from no-till agriculture to industries that emit more than their share of carbon dioxide. Such a program may seem significant, but may also be overshadowed other initiatives, such as improved crop genetics for drought resistance and better movement of food from areas of high production to areas of high consumption.

Stu Ellis

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July 10, 2009

Cornbelt Update--UPDATED

Cornbelt 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.

Report day. USDA’s July Supply-Demand Report raised production to 12.290 bil. bu. in correlation with the increased acreage from the June 30 report. The 355 mil. bu. increase will be felt in higher ending stocks which are projected at 1.550 bil. bu. USDA raised feed use by 50 mil. bu. but lowered food and industrial use by 35 mil. Some 55¢ was clipped from both ends of the national average price range, which is now estimated at $3.35 to $4.15 per bu. Read more.

Overall corn demand will be down, in part from lower demand for gasoline that will cut ethanol demand. USDA reported higher profit margins for ethanol producers, but lower use will help add 170 mil. bu. to carryover stocks. Corn exports were raised 50 mil. bu. to 1.950 bil. bu.

Increased soybean production will provide 3.260 bil. bu. for the coming marketing year, and with increased exports and crush, the carryover is projected at 250 mil. bu. The season average price for beans was cut 70¢ to a range of $8.30 to $10.30. Soybean exports are estimated at 1.275 bil. bu., up slightly from June because of increased demand. For the old crop, carryover was left at 110 mil. bu.

ACRE assistance is being provided from a variety of sources for farmers and landowners who are still a bit foggy about the details of the program and uncertain if it will be beneficial this year. The deadline for signing up for 2009 benefits is August 14.
1) Kansas State—Internet-based seminar scheduled for August 4 at 7 p.m.
2) University of Illinois—Internet-based ACRE presentation
3) Ohio State—series of slides, papers, and examples from economist Carl Zulauf.
4) USDA—series of Internet files and fact sheets on details of the ACRE program.
5) Iowa State—ACRE fact sheet and decision aid that estimates payments.
6) Food and Agricultural Policy Research Institute (FAPRI) ACRE decision aid.
7) University of Minnesota--ACRE Fact sheet and worksheet decision aid.

Prepayment for inputs used to be a tool for adjusting expenses on your IRS Schedule F, but IL ag lawyer Jerry Quick says it is now becoming a requirement to get access to inputs and guarantee volume needed. Speaking to a farmer conference, Quick warned in the case of bankruptcy of the input supplier, a farmer who has submitted a prepayment would be an unsecured creditor. He said ensure that you have good documentation about the purpose of the prepayment, amount of the input being purchased, and any delivery arrangements, and if the product was found in a warehouse, access might be easier.

With current production costs, you may find yourself making an appointment with a lender well before you ever anticipated. If so, prepare yourself ahead of time. Economist Danny Klinefelter at Texas A & M suggests being prepared to answer these questions:
1) How much money will you need, not just now, but over time?
2) What will the money be used for, and lifestyle or old debt, are not good answers.
3) How will your overall financial position be affected by the proceeds of the loan?
4) What collateral will be used to secure the loan and what will its value be over time?
5) How will alternative outcomes affect your ability to repay the loan as expected?
6) What risk management measures will you implement to protect the loan?

El Nino trade winds have stopped and reversed in the western Pacific, slowing development of that weather maker. IA State climatologist Elwynn Taylor says it is uncertain if the pattern will increase, and he is calling it neutral through August. Taylor says that means there is a 60% chance of drier than usual weather through September and that would not be bad if the temperature remains below the trend line.

Elwynn Taylor says the Cornbelt is generally caught between two frontal systems that have cut off any flow of weather from the Gulf of Mexico, and that leads him to predict only a 20% chance of having to treat for Asian soybean rust. Taylor notes the Drought Monitor shows drought is beginning in MN & WI, but should not spread further.

Wet and cloudy weather give a mixed message to a corn plant says IL crop specialist Emerson Nafziger. Read more.
1) Higher kernel numbers result from normal to above-normal rainfall in July.
2) Less photosynthesis and sugars cut the processes of pollination and kernel set.
3) Wetness also can encourage leaf disease development.

Vandals did not use an old ear notcher for hogs to decorate your corn leaves, says Purdue corn specialist Bob Nielsen. But he says the curious notches on some corn leaves seem to be linked by genetics more than anything else. The notches occurred while leaves were growing about the V7 stage, and occurred because of rapid growth, not vandals or insects. The leaves apparently were stuck in the plant and damaged on rapid emergence.

Stressed corn—from lack of moisture—will drop yield after 4 days of stress:
1) 5-10% yield drop at the 12-14 leaf stage when the plant begins to flower.
2) 10-25% yield drop during the period of tassel emergence.
3) 40-50% yield drop during silk emergence when ear is trying to grow rapidly.

Japanese beetles have invaded many fields, defoliating bean leaves and destroying corn tassels and silks. Read more.
1) Spray when defoliation hits 30% before bloom and 20% between bloom and pod fill.
2) Spray when beetles reach 3+ per ear and begin to clip silks during pollination.

Corn rootworm larvae may have been loafing if the analysis by Purdue specialists is correct, since they have registered less root feeding and damage than was expected. They say larval populations are down, for one thing. But they also say the larvae are at peak growth currently, and could be eating more, which will show up later as lodged corn.

Corn rootworm adults are beginning to emerge, which means root feeding is coming to an end, but silk clipping and egg laying will just begin. IL entomologists say rescue treatments are warranted if there are 5+ adults per plant and pollination is incomplete.

The wide variation in corn maturity will keep the corn rootworm beetles well fed, believe the Purdue entomologists. The early beetles only had leaves to feed on and will cause no damage. But areas with large populations will see the later planted fields suffering the most damage from silk clipping, and should be regularly scouted.

Are you applying a foliar fungicide on corn? Extensive research in the Cornbelt has occurred along with increasing applications by farmers, with no definitive data that says either do it or don’t do it. IL specialist Carl Bradley says, “The bottom line is that when disease pressure is high enough to reduce yields, most of the fungicide products available for corn will do a good job of protecting against diseases and yield losses.” Read a summary of the research.

Also weighing in on the fungicide issue are Iowa researchers who warn about potential problems with soybeans that follow corn, which has been treated with a foliar fungicide. They report that corn residue bearing the fungicide takes longer to break down, which can be detrimental to the planting of no-till soybeans the following year.

A cadre of specialists from Iowa State is casting doubt on the benefits of combining insecticide and fungicide, which is a service being offered by some crop protection suppliers. Their complaint is that one of the two may not be needed, leading to a waste of money, or in the case of insecticide, destruction of beneficial insects that eat aphids.

Crazytop develops were soils have been flooded after planting and before the 5-leaf stage, and is a disease caused by a bacteria. Iowa State plant pathologists suggest destroying the plants by hand and reducing the buildup of the bacteria in the field.

Dry regions of the Cornbelt may want to scout for two spotted spider mites in soybean fields. OH agronomists are warning that soybeans under moisture stress can be further damaged by mites, unless fields are scouted, and sprayed with rescue insecticides.

Soybean aphids are scattered sporadically around the Cornbelt with some heavy pockets and nearly unseen in other areas. However, IL entomologist Mike Gray says despite low densities in spots, populations can increase rapidly in the absence of natural enemies. So when scouting for aphids, tally the lady beetles and lacewings in your fields also.

Soybean diseases are showing up in scouting, says MO agronomist Laura Sweets.
1) Fusarium: lower leaves yellowing, stunting, main tap root tends to rot away.
2) Rhizoctonia: lower leaves yellowing, stunting, poor root development.
3) Phytophthora: plant off color, wilted, dark brown discoloration on main stem.
4) Bacterial blight: hail damage, small black lesions with light green halo.
5) SDS: leaves in upper to mid canopy have yellow irregular interveinal blotches.
6) Downy mildew: upper leaf bright yellow, lower leaf has downy mildew fungus.

Grain bin moisture should be regularly monitored for good insect control. It may take a week or more of aeration to move a moisture layer through and out of the grain mass, depending on the volume of air moved, the bin size, and the temperature of the air.

Your stored grain may be teeming with life, particularly Indian meal moth in the top 12 in. of the bin if you discover moist, sour smelling grain with thick webbing. If that describes your bin, remove that grain and treat the bin with an insecticide, including the use of pest strips from the ceiling. If you have other vermin, then either use the grain for feed or fumigate it. That may require a professional who applies poisonous gases.

Sprayer calibration should include careful selection of droplet size to achieve accurate, safe, and efficient application of crop protectants. KS ag engineer Bob Wolf says the droplet size created by a nozzle becomes very important when it comes to coverage or protecting nearby areas from the spray. He says nozzle makers are adding droplet size charts. Read more.

Internet innovation at Purdue will be assisting pesticide applicators more easily find problem areas for inadvertent spray drift. A new website www.driftwatch.org can be checked by IN applicators for sensitive sites, such as beehives, certified organic fields, fruits, fish farms, grapes, floriculture or greenhouse production, organic livestock, nursery crops, pumpkins and melons, and tomatoes and vegetables. Sensitive fields or habitats can be located on the Web site by entering an address, town or ZIP code.

Initial pork profitability may come more from lower feed costs than from higher market prices says Purdue’s Chris Hurt. That is because corn and soybean meal prices are dropping faster than production numbers, which are keeping markets depressed. Although farrowing intentions are down 3% this summer and 2% this fall, they are being offset by increased litter size and higher marketing weights. Read his newsletter.

Chris Hurt doubts there will be much reduction in the pork supply, since sows that are culled are the least productive and with lower feed prices in coming months, higher weights will be put on at a lower cost per pound. He is expecting production to drop only 1% over the coming year, which will keep prices depressed for the balance of 2009.

With lower costs of corn, Hurt calculates production costs about $48 per live cwt for the summer and possibly down to $46 for the fall quarter. He’s projecting 2010 production costs to be in the same neighborhood. Hog prices are expected to average in the upper $40’s for the rest of the year, slowly moving into the $50’s by summer of 2010. Hurt says that means $5-7 losses per head this year, and black ink possibly in late winter.

Livestock producers, who lost livestock due to adverse weather, can apply for USDA benefits beginning July 13. Livestock lost as far back as calendar year 2008 will be eligible for benefits if applications are submitted by Sept. 13. Livestock lost during 2009 will also be eligible for indemnification benefits if the claim is filed by Jan. 30, 2010. Contact FSA offices for details and ask about the Livestock Indemnity Program.

Grandpa told you to listen to the corn grow, and this was a good year to not only hear, but also see it grow. KY corn researchers put a tape measure on a corn plant beginning June 3 and ending July 4. It grew between 1.4 and 5.0 in. per day, and grew an average of 10% of its height each day during the V6 stage. Leaves grew 2.5 to 4.0 in. per day, which the researchers calculated to be at a speed of 2.5 to 3.8 millimeters per hour.

Stu Ellis

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July 9, 2009

Are We Entering A 1980's Style Recession?

Are we repeating the farm economy of the 1980’s? With a potentially deadly economic cocktail of surging commodity prices, increasing oil prices, a low and declining value of dollar, high ag exports, inflationary pressures, negative real interest rates, and increasing capital gains, one may sense some déjà vu.

For the most part, most farmers suffered in the 1980’s; tens of thousands lost their farms, some lost their lives, and many lost their families. A large percentage of those who survived are still farming today, with many of them well past their golden years and not looking forward to a re-run of hard times. But what are the implications of the current recession on the farm economy? That was addressed by Michael Swanson, agricultural economist for Wells Fargo, the largest agricultural lender in the US.

Swanson pointed to the relationship between oil, ethanol, and corn as an initial example, saying that energy costs had raised input costs by 30%, but that corn values benefited from the ethanol market being pulled up by oil prices. That had in, icreased farm profits and contributed to higher land values. But at the same time, the recession has reduced vehicle miles driven, pushing down petroleum demand and reducing ethanol output. But Swanson says turning off an ethanol plant is much easier than turning off a feedlot, if the commodity is not needed. Livestock cycles cannot be turned on and off when needed and costs will continue even if the demand is absent. Currently, ethanol prices have floated between the breakeven point for high cost and low cost refining plants. The Wells Fargo economist believes fuel is a wildcard for the row crop industry, since the carbon tax being debated in Congress could inflict collateral damage on crop production. He says if the government hurts the gasoline market, that hurts the ethanol market, and that in turn hurts the corn market.

Swanson says the global economy will help pull up the US agricultural sector because of the strong global per capita real gross domestic product. That points to a “huge future growth” potential for the US livestock industry, according to Swanson. But pork producers should not expect a quick recovery, since futures prices for the next 12 months are within the price range of the last six years for the nearby CME lean hog contract.

Swanson was addressing Illinois farmers on July 8, along with Steve Kruse, Director of Finance and Accounting for John Deere, who said the Wall Street meltdown had a substantial impact on John Deere Credit. He said the credit market dried up overnight, and the subsidiary had trouble borrowing money to be able to loan to its customers. Since then John Deere has “deleveraged” or liquidated its inventory to raise money. But with Deere and Company being a major consumer of steel, it is suffering from OPEC-like consolidations within the global steel industry and its artificial pricing.

Also impacted by the credit market was the Farm Credit system, which sells its bonds to raise money for lending to farmers. Chairman Lee Strom of the Farm Credit Administration that regulates the various Farm Credit banks said the global recession has diminished the interest of foreign investors in Farm Credit debt instruments. While only 6-7% of investors in 2008 were foreign based, foreign banks had been large investors in one of the categories of the Farm Credit short term bonds. (Percentage corrected from earlier post.) And he said the efforts of the US government to resolve the home mortgage crisis is having unintended consequences on the Farm Credit system. He said Congress so far has been willing to allow Farm Credit to regulate it self and remain under control of the House and Senate Agriculture Committees, instead of the Congressional banking and financial regulation committees. Strom said his frequent meetings with Congressional, administration, and Federal Reserve officials result in questions about the health of the farm economy. He says the headlines about the ethanol industry, the dairy and poultry industries, and other challenges of agriculture are getting peoples’ attention who want to know if we are heading into a 1980’s style recession.

Strom says the federal stimulus program has yet to work, since only 10% of the money has been dispensed, at a time when some consideration is being given to a second round of programs. He is anticipating many more home foreclosures when local banks raise interest rates on adjustable rate mortgages, but he does not think the administration will allow major problems to occur as long as unemployment remains at a high level. He said that has impacted much of rural America because many farmers depend on part time jobs that have evaporated, but he hoped the federal stimulus money in USDA’s Rural Development budget would be a positive force.

Summary:
The US economic recovery is a work in progress and agriculture is sharing many of the positive and negative aspects of the recession. The recovery of the global economy will help demand for many US commodity exports, but the administrations climate change legislation may create hardship for the oil industry, and that hurts both ethanol refiners and the price of corn. Agriculture credit is available, but companies that supply credit are having difficulty getting money to loan to farmers.

Stu Ellis

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July 8, 2009

What Is Your Glyphosate IQ; And By The Way, How Are You Using It?

Roundup. Glyphosate. We can’t seem to live without the chemistry, but we may soon find that although it has changed our approach to weed control, we may have to find a new approach. While some weed species and some scattered weed patches have become immune to the toxicity of glyphosate, weed specialists in a half dozen states coordinated their efforts in a Benchmark Study on Glyphosate Resistance Management. Here’s what they found….

Twelve hundred glyphosate users in IA, IL, IN, MS, NC, and NE were surveyed by researchers to find out exactly how they used glyphosate and the timing of the applications. The dominant use was a burndown application ahead of cotton and soybeans. Between 54% and 63% of farmers used one or two glyphosate applications as a post emergent weed control in either continuous corn or corn and soybean rotations. Up to 62% of Roundup Ready soybeans received a double application, but no more than 42% of Roundup Ready corn received a double application. Only 16% used a non-glyphosate herbicide in Roundup Ready beans. 40% of Roundup Ready cotton received as many as three applications.

In addition to the findings of the telephone survey, researchers created 150 test plots of 25 acres each. The farmer was to use his current herbicide program on half of the plot and the university researchers managed the other half of the plot with a program designed to reduce the potential for glyphosate resistance, and rotate alternative herbicides as needed. The jury is still out on the long term field study.

Of the changes that glyphosate has brought to agriculture, one of the more significant is its impact on tillage practices. The tillage research study found that glyphosate was the reason that the number of no-till increased from 25% to 41%, the number of farmers using reduced tillage increased from 38% to 41%, and 92% of farmers using no-till prior to glyphosate have remained with no-till. Of the farmers using conventional tillage, 25% shifted to no-till and 31% shifted to reduced tillage after adopting glyphosate.

Awareness of the potential herbicide resistance with glyphosate may seem to be widespread, but researchers found that not to be the case in another study. About 30% to 40% of farmers were aware of glyphosate resistant weeds in their state, but no more than 30% believed glyphosate resistance was a serious agronomic issue. While as many as 19% reported some resistance on their farm, no more than 65% had taken any action to minimize the resistance.

The Benchmark Study found that as many as 66% of farmers thought weed pressure declined after switching to glyphosate, but as many as 50% thought it remained the same and some indicated weed pressure increased when all tillage systems were considered.

Most weed species, except for morningglory and pigweed species, present before the introduction of Roundup Ready crops continue to be problematic weeds, but to a reduced degree after adopting Roundup Ready cropping systems.

Summary:
The Benchmark Study on glyphosate found the culture of fighting weeds on the farm had changed, and in some cases there was heavy dependence on glyphosate with little use of alternative herbicides. Glyphosate had allowed many farmers to move their tillage practices away from conventional systems and toward no-till. Awareness of potential glyphosate resistant weeds has gaps, and some farmers believe their weed pressure had not declined after switching to glyphosate.

Stu Ellis

Posted by Stu Ellis at 12:39 AM | Comments (0) | Permalink

July 7, 2009

PSSST! The Marriage Between Corn Farmers And Nitrogen Is Really A Triangle Affair.

The Cornbelt is just about to celebrate its golden wedding anniversary with nitrogen, and the love affair has not waned. When nitrogen application came into widespread use about 1960, corn yields substantially increased, but like any marriage, farmers are still trying to figure out what makes their nitrogen partner tick, and fertility researchers at Land Grant Universities are still fully employed trying to help out. What have the marriage counselors found out? Will this marriage last? Has this relationship been faithful?

The quick answer is a recommendation to plan on nitrogen application for a long time to come. There are a lot of years left in this marriage. But the issues at hand focus on the wide variability of yield despite steady nitrogen application and will any of those new nitrogen technologies provide any help by increasing yields?

The issue of yield variability is addressed by University of Illinois researchers who looked at the success of the new philosophy of using the price of corn and the price of nitrogen to dictate the amount to be applied, since many farmers were applying more nitrogen than can be economically justified. Their research over 10 years looked at both c-c and c-s rotations to help find the actual crop need for nitrogen. Even using the optimum N rate, yield differences varied from 5 to 78 bushels for corn following beans, and from 12 to 85 bushels for corn following corn.

The researchers found some geographical differences in their data and reported, “The relationship between economically optimal N rates (EONR) values and the yield at EONR among individual sites from this experiment was surprisingly strong in southern Illinois,” where soils are generally lighter than in the balance of the state, and in central Illinois research plots. However, there were no such relationships found in northern Illinois where soils are similar to central Illinois. And they concluded, “Because the variability over years is due mostly to weather and not to soils or other predictable factors, it will remain difficult to predict N needs even if such a relationship holds up; as we saw in 2008, yields can be much higher than normal in a given year, regardless of how the crop is managed.”

Controlling nitrogen costs were difficult in the last season, causing many farmers to look at alternative methods of getting nitrogen to their corn. University of Illinois fertility researchers evaluated 9 different urea products, finding they require a higher level of management to prevent N loss and lower nitrogen use efficiency (NUE). Part of the reason is the 50% efficiency level that corn has in using nitrogen, allowing the rest to volatilize, leach, denitrify, and otherwise become unavailable for use. The alternatives, tested on both conventional and no-till, included:

1) Liquid urea-ammonium nitrate (UAN) sidedress injected,
2) Urea surface broadcast,
3) UAN surface broadcast,
4) Urea + agrotain© (Agrotain International) surface broadcast,
5) UAN + agrotain surface broadcast,
6) UAN + agrotainplus© (agrotain plus a nitrification inhibitor, Agrotain Intl.) surface broadcast,
7) UAN + 10% v/v CaTs© (calcium thiosulfate, Tessenderlo Kerley) surface broadcast,
8) SuperU© (urea with agrotain and a nitrification inhibitor, Agrotain Intl.) surface broadcast,
9) ESN©® (a polymer coated urea, Agrium US, Inc.) surface broadcast.

The researchers reported the tillage fields had significant responses to increasing N rates, economic optimum N rates, yields, and nitrogen use efficiencies; they could evaluate each product based on pounds of nitrogen per bushel of yield. Generally, the dry urea had a lower efficiency than the liquid urea in conventional tillage. In the no-till fields the urea (only) had a poor efficiency, but the other dry products had a significantly lower efficiency than the urea or the liquid products. And they concluded, “It appears that many of the N sources in this study may provide significant improvements in N use efficiency, especially during wet years. These differences appear to more important with no-till than with conventional tillage systems.”

Summary:
A series of research projects, designed to help increase the efficiency of nitrogen application on corn, appears to point to weather being a determining factor, both for impacting yield response to nitrogen, and for enhancing the availability of various urea products across tillage systems.

Stu Ellis

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July 6, 2009

Increase The Value Of Your Livestock Manure

Manure. Every livestock operation deals with it and depending upon the nature of the operation, manure can either be an asset or a liability. The 2008 Farm Bill directed USDA to evaluate the role of manure as a fertilizer resource, its environmental impact, and its potential as a feedstock for bioenergy. If your operation is producing manure, will it have more value as a fertilizer or energy feedstock?

The environmental and controversial impacts of manure are well known to all livestock operation managers as well as neighbors, both urban and rural. Application limits to cropland, water pollution, odors, and similar issues increase the liability factor exponentially. However, USDA economists say there is an increasing interest in capturing the methane from manure and converting it to electricity. But when that is done, is manure being lost as an inexpensive form of fertilizer? The USDA study found that manure is applied to less than 16 million acres of cropland, about 5%, and corn receives about half of the manure applications, primarily from dairy and hog operations.

Recent high prices for commercial fertilizers make manure more cost effective, except for transportation costs. For large operations, Nutrient Management Plans require time and resources to develop and implement. Once the manure is applied, the primary issue is the nutrient value which can vary and will likely not be in the correct ratio for crop requirements. Handling and stockpiling are always health and environmental concerns.

The USDA economists determined that livestock production costs would rise 2.5% to 3.5% if manure was not applied nearby and had to be hauled any distance. However, as livestock operations enlarge and costs are controlled, the economists doubt that consumers would ever feel the impact of any change in whether manure was diverted from cropland nutrients to energy feedstocks.

Among the potential energy benefits and potential uses of manure are:
1) Dry manure has been a fuel for heat and cooking for millennia.
2) Methane can be captured from biogas and burned for electricity generation, either on farm or fed into the electric grid.
3) Manure can be shipped to a central conversion facility.
4) Methane can be upgraded to natural gas for insertion into a pipeline.

Currently, there are only a handful of energy plants operating at livestock facilities. Less than 3% of dairies have them and less than 1% of hog confinement facilities have them. One Minnesota-based commercial plant uses 6.6% of turkey litter in the US. But on-farm facilities may allow livestock farmers to produce their own electricity and reduce their overall energy costs, with the help of state grants to reduce capital construction costs.

A lactating dairy cow will produce about 150 pounds of manure daily, and if applied to cropland at a rate of 125# N per A, 2.64 acres would be required per cow. But with many dairies expanding in western states without cropland, manure has to be hauled at great expense. Hogs will each produce 1,200 lbs of manure in a finishing operation, and although hog production is widespread in the western Cornbelt, it is also widespread in many states where cropland is insufficient to dispose of the manure as a fertilizer. A broiler will produce 11 lbs of manure, and few poultry operations also have cropland, but the relatively dry manure can be transported at minimal expense. Two-thirds of cattle are fed at operations without cropland, so the 4.9 tons of manure produced per head have to be transported to cropland.

While nearly 16 million acres of cropland depends on manure for a partial nutrient supply at least, the normal process may be interrupted, or the nutrient components changed, if the manure is initially processed by a methane digester. Bacteria in the digester breakdown the manure and emit methane, which is siphoned off for use. The USDA economists say farmers may qualify for carbon credits if they capture methane and prevent its flow into the atmosphere, and those credits would be valued about $5 per ton of manure. But once the methane is produced and used to heat mini power plants, what about the rest of the nutrients? They are still there, and available to supply N, P, and K for crop production. The digestion process reduces pathogens, neutralizes weed seeds, and greatly reduces odors, which may increase the value of the manure.

Summary:
Livestock operations, particularly dairies and hog operations with substantial volumes of slurry manure may be able to benefit by processing the manure in a methane digester. The methane can be used to fuel on-farm electricity generators or upgraded into natural gas for sale. Farmers would be able to obtain carbon credits at a $5 per ton rate. The processed manure can still be utilized for cropland, with little loss in nutrient value, but since the odor has been removed, the manure may take on a greater value.

Stu Ellis

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July 3, 2009

Cornbelt Update

Cornbelt 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.

Mark down these USDA estimates for comparison later in the year. These statistics are the essence of the Planted Acreage and Quarterly Grain Stocks reports from June 30:
1) 2009 corn acreage is 87.035 mil. with harvested acreage projected to be 80.107 mil.
2) 2009 soybean acreage is 77.483 mil. with 76.547 estimated for harvest.
3) Trend line corn yield is 153.4 bu. and trend line soybean yield is 42.6 bu.
4) On June 1, corn stocks were 4.266 bil. bu. and soybean stocks were 597 mil. bu.

IL ag economist Darrel Good says, “The June USDA reports point to a comfortable supply of corn, soybeans, and wheat for the 2009-10 marketing year. The focus in the corn and soybean markets will now turn to summer weather and yield prospects.” Read his newsletter.

Corn yield prospects are improving in IL, IN, & IA say IL economists Darrel Good and Scott Irwin and meteorologist Mike Tannura. Their yield model uses the amount of acres listed good to excellent and depending on various scenarios, they project the national corn yield between 133.3 and 170.2 bu, with a 154.1 bu. average for average weather. Read more.
1) IL corn yield ranges from 138.2 to 172.1 bu. ranging from poor to good weather.
2) IN corn yield ranges from 137.1 to 166.2 bu. ranging from poor to good weather.
3) IA corn yield ranges from 157.1 to 187.0 bu. ranging from poor to good weather.

Early prospects for soybean yields in IL, IN, & IA are difficult to project because of the lateness of planting says the IL group. Their calculations show soybean yields may be:
1) Below trendline in IL, but slightly above the 46.2 bu. three year average.
2) Near trendline in IN, and about the three year average yield of 47 bu.
3) Above trendline in IA, as well as above three year average yield of 49.5 bu.
4) They project a 42.2 bu. national yield on 76.6 mil. acres producing 3.231 bil. bu.
Read more.

Weather will play a major role in the markets says Chad Hart at IA State, given delays in crop development. He adds, “Any weather stress will translate into crop stress quickly and a rebound in crop prices…some have pointed out the similarities to 1983 and the potential for a recovery of La Nina, raising the possibility of a late summer drought.” Read more.

The wheat market fell along with corn and beans following the release of the acreage report because the NASS spring wheat estimate was 675,000 acres more than expected, says Mike Woolverton of KS State. But he says crop development is behind average and only 15% of the crop is headed out, compared to the typical 40% at this time of year.

The 11th Commandment for corn is, “Thou shall not hold unpriced grain in the bin after July 1,” says MN marketing specialist Ed Usset. “Unlike soybeans, your basis risk on unpriced corn held in storage is minimal – the spot market for corn and for new crop delivery are both trading at or near 55 cents under. Your risk in old crop unpriced corn is in the futures price. On 6/26, the Dec’09 corn contract closed at $4.04 per bushel. Since 1990, the December corn contract has traded lower in 2 of 3 years from the first week of July to the second week of October. Even with minimal basis risk, I’m paying attention to the 11th Commandment.” Read more of Ed Usset.

Usset also applies the 11th Commandment to soybeans, and says “The stocks situation in soybeans is tight, and the tightness is reflected in an inverted futures market. The old crop Jul’09 contract is trading at a $2 premium to the new crop Nov’09 contract. The nearby soybean basis in Southern Minnesota is about 55 cents under the Jul’09 contract – or $1.50 over the Nov’09 contract. In about 3 months, when soybean harvest is in full swing, the nearby basis will be about 50 cents under the Nov’09 contract.”

Biotech seed continued its growth into US planters. USDA reported stacked gene varieties comprised 46% of all corn, up from 40% last year. Single genes Bt corn remained at 17%, and herbicide resistant single gene corn declined in market share from 23% last year to 22%. All biotech varieties claim 85% of the US corn acreage, up from 80% for the 2008 corn crop. Herbicide resistant beans make up 91% of the crop.

Hog supplies are starting to decline, says IA State livestock economist Shane Ellis in his analysis of this week’s Hogs and Pigs Report. He says sow inventories are the second lowest on record and the breeding herd is down 2.7% from last June. Third quarter farrowing intentions are down more than 3%, and fourth quarter will drop over 2%. Total pig supplies have not dropped as much because litter sizes are 2.5% higher.

Hopes for improvement in the pork market have been dampened by the H1N1 virus, along with recession-weakened exports. Ellis says, “Eight months ago, there were opportunities to hedge a hog-to-corn margin that would have put a hog producer in the black, but such opportunities do not appear to be available in the near future.” Read more in this newsletter.

Although hog numbers may be declining, weights are still up according to MO livestock economist Glenn Grimes. He says, “Over the last 6 weeks, barrow and gilt carcass weights have averaged 2% higher than a year earlier. Hog slaughter in the second half of 2009 is expected to be down 3% or so. Due largely to fewer Canadian hogs coming south, the June 1 inventory of market hogs weighing less than 60 pounds was down 2.4% even though the March-May pig crop was only down 0.3%.”

Farm diesel fuel prices are 42% under 2008 price levels, according to KS State economist Kevin Dhuyvetter, who tracks fuel prices on the NYMEX Exchange. He says August should be 36% under last year and September about 31% lower. Harvest time prices may approach 2008 levels, only because that was the time oil prices dropped.

Farm operators will be pinched between low commodity revenue and high cash rental rates unless yields or prices or both rise before harvest, says MN farm business specialist David Bau. He says breakeven prices for 165 bushel corn and 48 bushel soybeans are not available, and he is strongly recommending a switch to flexible rental agreements. Read more.

Flexible rent agreements call for a base rent which could be keyed to a variety of indexes. And Bau says, “If you complete a flexible rental agreement with a base cash rent with added payments it will be considered a cash rental agreement with Farm Service Agency in the latest farm bill. But without this base rent you will be share cropping with your landlord who will deserve a portion of the government program payments.”

Many landowners have used the 1031 tax code provision for buying and selling farms and other property, and the middleman which temporarily holds the property in the like-kind exchange is important since he insulates against capital gains taxes. But a recent bankruptcy of a qualified intermediary threw 450 investors and their $420 million into a line of unsecured creditors, since their 1031 documents did not specify “escrow” account. Protect your investment and read more.

Despite the recession, sales of organic certified foods grew nearly 16% last year, with nearly one-third of families spending more on organic food this year compared to 2008. IL ag law specialist Bryan Endres believes the organic industry is poised to flourish based on US-Canadian agreements on June 17 allowing joint certification in each country, which will also allow products to more easily enter the European Union market.

Ponds, which held excess water, may cause disappointing yields for many farmers, who should take the opportunity to mark the pond and seek NRCS help in designing a good drainage system. First, ensure the pond is not going to be determined as a wetland, which will allow drainage work to proceed. IL Natural Resources Specialist Bob Frazee says a good system will drop the water table to 12 in. below the surface in 24 hours.

Soybean aphids have made it all the way to Nebraska where soybean farmers are being urged to scout because of recent optimum temperatures of 70’s to the mid 80’s. NE bug experts say soybeans are more vulnerable to aphids during early reproductive stages.

So how do you fight aphids? A step by step guide.
1) Scout 1-2 times per week, at first checking the tops of 20-30 plants, then downward.
2) During flower and podset, the economic threshold is 250 aphids on 80%+ of plants.
3) Check for natural enemies such as lady beetles which eat aphids voraciously.
4) If the majority of aphids have wings, they may soon leave the field.
5) A honeydew or sooty mold covering of beans means optimum treatment time is past.
6) If a field is treated, leave an untreated test strip as a refuge for beneficial insects.
7) For good treatment coverage, use high water volume (5 gal/A) and high pressure.
8) Pyrethroids have a long residual time, but chlorpyrifos fumes up under the canopy.
9) Alert nearby beekeepers if you spray aphids while soybeans are flowering.
10) Do not add an insecticide to glyphosate just to save a trip through the field.
11) If aphid populations are peaking along with threats of soybean rust, then a tank mix of a fungicide and an insecticide can be effective since both need high water pressure.

Purdue entomologist John Obermeyer is issuing an alert for Indiana farmers to beware of western bean cutworms in cornfields beginning in the next week. Adults are laying eggs, and when they hatch larvae enter the whorl of the corn plant then make their way to the ear and continue eating. Mold will typically form on the corn ear when they leave. Obermeyer says check 20 plants for egg masses and spray if 5-8% are infested. Learn more.

NE may have planted 600,000 more corn acres, but there are increasing fungal problems being reported there. NE agronomists are reporting increased cases of Goss’s bacterial wilt and say farmers “are at increased risk this year because of the abundance of bacterial inoculum that is expected to have overwintered from recent disease outbreaks.” They say rescue treatments for that and several other fungal problems are not available. Read more in the current issue of NE Cropwatch.

Do you use glyphosate or glyphosate? There are dozens of brands and generic herbicides that are glyphosate, and NE weed specialist Stevan Knezevic says they provided more than 90% weed control regardless of the rate, brand name or cost. But he says your challenge is the select the appropriate rate for your weeds, and avoid using it at the highest possible rate. Comparison shop, based on cost per amount of acid equivalent.

Foliar fertilizer has not worked in the past says IA State agronomist John Sawyer, who notes increased interest in applying nitrogen to corn leaves since soil applications have been stymied by the weather and rapid corn growth. He says corn leaves cannot handle 200 lbs of nitrogen per acre, nor substantial applications of phosphorus or potash either.

Foliar fertilizer has not been effective on soybeans either says Sawyer at IA State, when tried both early and late. In fact, leaf burn has diminished yield when used later in the growing season. Early season foliar application increased yields in 15% of trials, by an average of 1 bu. per acre. The most consistent results were from 3-18-18 at 3 gal/A.

Let your voice be heard if the White House “Rural Tour” rolls nearby seeking input from rural Americans about a variety of issues affecting farm families. The rural listening tour began July 1 in Wattsburg, PA with a discussion on rural broadband. Ag Secretary Tom Vilsack will be joined by other cabinet officers familiar with the issues.
1) July 16 at LaCrosse, WI to discuss rural economic development.
2) July 18 at Ringgold, VA to discuss new energy economy & related issues.
3) July 20 at St. John’s Parish, LA to discuss rural healthcare.
4) Aug. 12 at Bethel, AK to discuss rural infrastructure, climate, new energy.
5) Aug. 16 at Zanesville, OH to discuss green jobs and renewable energy.
6) Aug. 17 at Hamlet, NC to discuss rural education.
7) Sept. 28 at Scottsbluff, NE to discuss production agriculture
8) Sept. 30 at Las Cruces, NM to discuss rural infrastructure.
Details are sketchy, but read more.

Stu Ellis

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July 2, 2009

When The Global Recession Ends, Will You Be Ready To Resume?

Is your farm income dependent on the export market? If you are raising sweet corn, pumpkins, and other domestic vegetables, there is probably not much dependency. But if you are raising corn, soybeans, and hogs, there is a substantial impact. Even though hog profits are elusive, $32 of the value of every market hog comes from the export market, and it was higher last year before the global recession hit. One of six rows of corn and one of three rows of soybeans are exported, and so when the recession spread around the world, US ag trade was interrupted and commodity prices were affected.

US agricultural exports reached a high water mark of $115 billion in Fiscal Year 2008 with the help of high commodity prices and wealthy world consumers willing to buy them. But a $20 billion decline from that is anticipated when Fiscal Year 2009 concludes in September, thanks to the recession. USDA’s Economics Research Service Amber Waves newsletter says the overall decline in trade is due to reduced economic growth abroad, exchange rate movements, and declining US spending. Regarding US exports, many of our trading partners are suffering the same economic blahs seen in the US. Compared to mid 2008, economic growth is down:
• Canada-4.5%
• Mexico-7.5%
• European Union-5.1%
• India-3.4%
• China-3%
• Japan-6.8%
• Russia-8%
The USDA economists say, “All major developed economies still slid into recession. The U.S. and the world economy subsequently entered one of the deepest downturns since World War II, with global growth turning negative.” They point to China and say, “In 2009, China’s economy is expected to grow less than 6 percent, largely because reduced consumer spending in developed countries is causing the first annual decline in Chinese exports in 25 years.”

Until the economic slowdown, US ag exports had paralleled global agricultural trade, which grew over 50% from 2000 to 2006, after growing only 25% in the decade of the 90’s. But since late 2008, the stronger dollar has hurt US exports, particularly bulk commodities since they are more expensive compared to commodity shipments from competing sources. While horticultural and processed food exports will only decline 6% this year, there will be a 26% decline in US bulk commodity exports.

The USDA economists do not believe the current problems will be part of a long term problem, since similar recessions have only impacted US exports for no more than 1-2 years. They say, “The long-term trend in U.S. agricultural export growth prevailed despite large swings in the mid-1980s and late 1990s caused by macroeconomic, weather, and policy events. Now, prospects for U.S. and global agricultural trade will clearly hinge on the resumption of global economic growth.” But they are not ready to predict when that will happen. However, fiscal and monetary actions are expected to help world economic growth recover beginning next year, and USDA’s economists project a 2% growth in world GDP and a 5% growth in world trade continuing into 2011 and 2012.

Such resumption in growth and trade will translate into “increased food demand because consumers are likely to consume more food and diversify their diets to include higher value goods such as red meat, poultry, and other livestock products. Rising incomes along with continued population growth is expected to increase trade in both meats and animal feeds. The USDA projections anticipate rising global trade volumes for all major food and feed grains, soybeans and soybean products, and beef, pork, and poultry. With commodity prices remaining high compared with levels preceding the 2008 price spike, the value of U.S. agricultural exports is projected to rise steadily back toward the peak level recorded in 2008.”

So the market demand will be present, but with US farmers be ready? That is the question USDA is considering because of factors left over from the recession, “U.S. agricultural exports will be influenced by the uncertainties of increasing farm costs and limited resources. A key issue in the future will be the ability of U.S. agricultural production to expand to meet future export demand without escalating costs. In conjunction with sustained foreign demand, long-term productivity gains will be a key component in maintaining U.S. export competitiveness.”

Summary:
Grain and livestock commodity prices have certainly softened because of the global recession, pushing meats down to the level of unprofitability, and challenging the profitability for grain producers. However, the economic atmosphere may be changing with a recovery to positive territory in 2010. USDA says farmers will be able to compete again, as long as costs are kept under control and productivity gains can be sustained.

Stu Ellis

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July 1, 2009

Where Did All Of This Corn Come From?

Call it “bloody Tuesday,” because of the USDA acreage and grain stocks reports that caught many farmers and commodity traders by surprise. The June Planted Acreage Report indicated more than 87 million acres of corn, a one million jump from last year and a two million jump from the March Planting Intentions Report. In concert with increased corn production, USDA found more corn stocks on hand than had been calculated, so with the country awash in corn, it is no wonder DEC corn settled down the 30 cent daily limit and lost 92 cents for the month. Where did all of this corn come from?

USDA’s Planted Acreage Report forecasts 87.035 million acres of corn in 2009, up from 85.982 million last year.
IL is up 200,000 acres to 12.3 million acres
IN was steady at 5.700 million acres
IA is up 400,000 to 13.700 million acres
KS acreage declined 50 thousand to 3.800 million
MI was steady at 2.400 million acres
MN was steady at 7.700 million acres
MO is up 300,000 acres to 3.100 million
NE is up 600,000 acres to 9.400 million
ND acreage declined 650,000 to 1.900 million
OH acreage is up 100,000 to 3.400 million
SD acreage is up 250,000 to 5.000 million acres

Those Cornbelt states were responsible for 1.750 million additional acres. However, there were some significant changes compared to the March Planting Intentions report, says University of Illinois marketing specialist Darrel Good, “Acreage exceeded intentions by 100,000 in Illinois, Michigan, Minnesota, Ohio, Pennsylvania, and South Dakota. Acreage is 400,000 less than intentions in North Dakota.” In all, the planted acreage exceeded the intentions report by 2.049 million acres. That was a surprise to many, given the volume of delayed plantings from Missouri to Ohio. In fact, University of Missouri marketing specialist Melvin Brees says, “Surprisingly, especially for those located in the northern counties, corn acreage is up 300 thousand acres and soybean plantings are up 200 thousand acres in Missouri from last year. This is partially explained by a 450 thousand acres decrease in wheat acreage, but surprising given the planting delays and some fields still not planted in North Missouri.”

So how much corn will we produce with such abundant acreage? Good says, “If the U.S. average yield is near the adjusted trend of 153.4 bushels projected by the USDA earlier this month, the 2009 crop would total 12.288 billion bushels, 353 million larger than the early month projection.”

USDA notes the 87 million acres of corn will be the second largest crop planted, but USDA is als quick to say that 97% of the intended acreage had been planted at the time the surveyors tallied their estimates, but the 10 year average is only 98%. “The return of dry, warm weather in late May allowed producers to make rapid planting progress in the Corn Belt and Great Plains, and by May 31, corn planting was 93 percent complete compared with the average of 97 percent. Growers in Illinois, Michigan, North Dakota, Ohio, and South Dakota planted over two-thirds of their intended corn acreage between May 10 and May 31. However, planting progress in Indiana, Illinois, and North Dakota still lagged behind the average pace by 17, 16, and 13 points, respectively.”

While corn production will be more than most folks had imagined, given the wet spring weather and all of the unplanted, or just planted, acres, there is also a considerable volume of corn in storage. USDA’s quarterly grain stocks report put corn on June 1 at 4.266 billion bushels, which is 238 million larger than stocks of year ago levels, and more stocks than traders had guessed. Good says, “Stocks were about 185 million larger than if third quarter domestic consumption had been at the rate projected by the USDA.” With more on hand than anticipated, Good says USDA’s July Supply and Demand Report will possibly raise the corn carryout at the end of August 2010.

Summary:

Cornbelt states have reported that 1.75 million more acres of corn were planted than last year, which contributed to the national 87 million acres of corn The USDA Planted Acreage Report found more corn being planted than what farmers indicated would be planted in the March Planting Intentions Report. Additionally, corn consumption has been less than expected, contributing to larger than normal stocks on hand, and larger carryout this year and next.

Stu Ellis

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