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November 20, 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.
Corn price strength is due to harvest delays and ethanol according to the calculations of IL marketing specialist Darrel Good, who says favorable blending margins for ethanol and reduced Brazilian imports have allowed prices to move sharply higher. He says, “The EPA ruling on increasing the limit on blending from 10% up to 15% will be important for determining domestic market size moving forward.” The US EPA had wanted to finalize its decision by December 1, but Good doubts that date will hold.
Corn exports have faded, and are below the volume needed to meet USDA’s forecast of 2.1 bil. bu. for the marketing year. However, the rate of feed use is uncertain. Darrel Good says higher rates of feeding may occur due to the poor crop quality, but on the other hand, the poor corn quality may push livestock feeders to use alternative feeds. Read more.
Soybean prices have been supported by strong export business, and nearly 70% of the USDA forecast for the year was reached earlier this month. However, they will fade quickly when South American soybeans come to market early in 2010. The domestic crush has increased and may exceed USDA expectations says Darrel Good. But he says the crush reflects the poor crop quality and lower yield of protein meal and soybean oil.
If you are selling, Good says thank the low value of the dollar and the strength in the US financial markets. While the low dollar allows importers to purchase more, Good says, “There is no historical statistical relationship between the value of the U.S. dollar and the volume of marketing year exports. He expects stronger prices from harvest delays.
Sell the corn carry, recommends MN marketing specialist Ed Usset. He says, “The carrying charges from the nearby December futures contract to the deferred March, May and July contracts are very large – the market is sending a very strong signal to store grain and sell the carry.” Read his thoughts.
How do you sell the carry? Usset suggests a hedge-to-arrive contract. “Selling the carry with a hedge-to-arrive or a futures contract has several advantages including (1) a solid hedge against lower prices in the months ahead, (2) the opportunity to earn a return to storage equal to the size of the carry and a stronger basis next year and, (3) the ability to defer income to next year.” He’s expecting improvement in the basis in the spring.
Late and drawn out harvests mean the basis will be stronger than usual during the harvest period and less likely to appreciate when harvest is completed, compared to a typical year. Purdue’s Chris Hurt says that is a reduced incentive to store the crop, and producers should use pricing alternatives that establish the basis, such as selling cash out of the field, a basis contract, or a minimum price contract.
What are your storage costs for grain? IA grain marketing specialist Bob Wisner says, “The proper use of storage will increase a producer’s income. However, maximum storage income results from selective rather than continuous use of storage facilities.” Calculate your cost.
What is the discount schedule at your local elevator? Purdue economist Corrine Alexander says it may be different from the one down the road, and you should inquire. She asked 6 Midwestern elevators about drying charges and found they ranged from 32¢ to 55¢ per bushel. Additionally, discounts for mold and other quality issues have a wide discount range. Discounts on 10% damaged corn ranged from 5¢ per bushel to 15¢.
But what about low test weight? That issue and others will require a sample taken by a specified professional and tests run by certified labs before the grain is stored. Purdue’s George Patrick says limited discounts on corn are unlikely to result in indemnities, unless your production yield met the requirements specified for your insurance coverage.
Ear rots and other quality issues will trigger insurance payments if claims are filed properly. Purdue economist George Patrick says, “Insurance based on individual farm performance (APH, CRC, RA, and IP) does provide coverage. County‐based insurance (GRP and GRIP) do not cover losses due to quality on individual farms. If the county average yield (GRP) or revenue (GRIP) falls below the guarantee level of a producer, then an indemnity may result.” High levels of mycotoxins are insurable losses also.
If your stored corn is moldy, Purdue’s Linda Mason has several concerns for you. She says the mold in your bin will create more problems if you are unable to dry it down.
1) The hairy fungus beetle and foreign grain beetle feed on mold, not the corn itself.
2) Bins with mold growing are above 55ºF and will allow insects to breed and multiply.
3) Insect issues in the spring can be addressed with a top-dress insecticide or fumigation.
4) Moldy grain should be dried to 12-14% moisture at a lower heat and for a longer time.
5) Sample corn more often than usual, especially if you have warm spots in the bins.
If you are storing moldy corn, MO ag engineer Charles Ellis says moisture migration can exacerbate mold problems in winter. As temperatures drop, warm air can rise in the center of the bin, cooling when it reaches the cold grain near the surface. This results in moisture condensation, leading to rapid spoilage when spring brings higher temperatures.
If your corn is lodging, find out why, and MN specialist Ken Ostlie says it may be rootworms, corn borer, or stalk rots and each produces a different lodging pattern. Read more.
1) Stalk rots weaken the stalk internally and plants break at different heights.
2) Corn borer tunnels weaken the stalk and plants bend over above ground.
3) Rootworm feeding on roots reduces standability and plants will lodge at the roots.
Lodged corn can be a pain to harvest and every field is unique. Ostlie’s offerings:
1) Harvest the worst first to reduce harvest losses and don’t postpone aggravation.
2) Plastic snouts work better than metal, and waxing them may even help.
3) Combine against the direction of lodging, or at worst, crossways of the field.
4) Expect higher moisture levels and extra drying costs. Lodged corn dries little.
5) Post harvest repairs may be higher from plugged headers, rocks, and more wear.
Field losses accelerate after mid-November, and can range from 0.5% to 2% per week of harvest delay, although loses may be higher or lower in individual fields based on a variety of other conditions. Losing 1 ear per 100 feet equals the loss of 1 bushel per acre.
If diplodia was an issue this year, rotate to another crop next year. MO plant pathologist Laura Sweets says the fungus will survive in the corncob and stover and be ready to perform in 2010. She said crop rotation will help prevent repeat problems.
For livestock feeding, moldy corn can be diluted with good corn, soybean hulls, hay, and other feed sources. DDGS is a good feed source, but if it was made from moldy corn, the ethanol fermentation destroys the mold but multiplies any existing toxins threefold.
Large amounts of BCFM are causing some loads of corn to be rejected, and WI ag engineers say adjust your combine to ignore it. Part of that is selecting a ground speed that does not overload the combine. Minimize the material entering the header and set your concave to the approximate diameter of a shelled corn cob.
Have you hired an extra combine and operator to help you get caught up? The cost may have you thinking about the costs of combines versus custom harvesting and thousands of dollars may be involved to your benefit or detriment. IA economist William Edwards has a calculator to help.
Your fall tillage may not happen if soils remain saturated. MN specialists are concerned about compaction and smearing, and those will delay a quick dry out next spring for timely planting. They recommend filling in ruts and keeping your tillage shallow. Read more.
1) “Frost tillage” is for slightly frozen soil. Equipment is supported on a 1” frost layer.
2) Avoid compaction with proper tire air pressure and axle loads under 10 tons.
3) On wet soils, use the lightest tractor that can still get the job accomplished.
4) Spring fields with heavy residue may be good candidates for soybeans or spring wheat.
How much crop residue exists when you plant in the spring? A new IA State website calculates it for you based on the prior crop, types of tillage tools used, and your planter. Just with a field cultivator with 12-20” sweeps and a planter with a furrow opener, only 33% of your bean stubble from the prior crop remains for spring planting. Find the website.
Weedy wheat fields may appreciate your attention. OH weed specialists report, “Herbicides are most consistently effective on winter annuals and dandelion when applied in fall. For most of the herbicides with activity on winter annual grasses, labels specify that control is maximized through application in fall. A dense population of winter annuals may have already suppressed wheat growth by the time a spring treatment can be applied, especially if the spring application is delayed into April.”
Dairy and other livestock producers have been losing money for months, but prospects for turnaround are delayed to 2010. If you have been losing $1,000 per month on a dairy cow or have other losses, IL specialist Dave Fischer says go back to production basics:
1) Maintain working capital, compute a cash flow, and don’t surprise your lender.
2) Maximize income over feed cost, which means keep your efficiency with good feed.
3) Don’t cut costs which will negatively affect livestock performance and health.
4) Liquidate any unused assets which may help provide cash flow for coming months.
5) Care for yourself and your family by maintaining communication and social network.
6) Strategize for the future while looking for opportunities to strengthen the present.
The downturn in meat demand has lasted more than a year say IA livestock economists and the demand for high quality whole cut beef has taken the biggest hit. From Jan. to Sept., spending on restaurants is down 2.6% and home cooked beef is down .5%.
Friday, Nov. 13th was a red letter day for pork producers. MO livestock economist Ron Plain says as of last week, pork producers lost more money in the recent downturn than they did in the price collapse a decade ago. He says for the past 24 months, the average hog lost $19.18 per head, which is a $4.6 bil. loss for the pork industry in those 2 years.
For the next year, Ron Plain of the Univ. of Missouri offers little optimism for pork profitability. He thinks live hog prices will average $43-47, which is up $3-6 from this year, but production cost is now $52, even if it is down from $62 this past summer. The anchors holding back profitability are the references to “swine” flu, weak domestic consumer demand, and a 15% oversupply of hogs, compared to the current demand.
Land values in the Chicago Federal Reserve Bank district rose 2% for the third quarter of 2009, based on a survey of local bankers. But currently, the price of “good” farmland is 4% less than it was at this time last year, and that makes the third successive quarter that land values were less than they were 12 months earlier. Land values in the northern 2/3 of IL dropped 4% from 2009 and IA land values are 7% less than they were in 2009.
Farmland prices will stabilize, 69% of bankers told the Chicago Fed, but 27% expect a decline, and most bankers believe farmers generally will back away from land purchases. The reason for the trend was a diminished earnings stream because of grain markets, lower net cash earnings, and high input costs that will reduce profitability.
The Chicago Fed survey did not find much change in credit conditions from 3 months ago, but 25% of local bankers say there is an increase for non-land loans compared to a year ago. 21% of bankers said repayment rates were lower and 24% of bankers reported an increase in loan renewals and loan extensions compared to late summer of 2008.
Bankers are telling the Fed to expect a surge in forced farm sales and liquidation of assets among financially stressed farmers and particularly livestock producers this fall and winter. Also, IN and IA bankers forecast increases in grain storage construction. Read more.
Posted by Stu Ellis at 12:50 AM | Comments (0) | Permalink
November 19, 2009
Have You Ever Considered Defaulting On A Grain Delivery Contract?
Throughout the long harvest corn prices have stayed in the upper range of prices established in the late summer. The uncertainty of the quality and quantity of the crop has kept the market interested enough to offer prices in the mid to upper level of USDA’s expected price range for the year; and many farmers have forward contracted corn in anticipation of higher prices. The objective for every producer is to forward contract at a profit, and not be challenged if the market moves decidedly higher than his contracted price. That happened in 1995 and 1996 when it turned hedge-to-arrive contracts inside out to the point they were nearly declared illegal. And it recurred in 2008 when highly volatile prices created financial challenges for elevator managers leery of offering forward contracts. There is always a temptation to ignore a grain delivery contract and sell at another elevator if prices go higher. So what will be done by the grain industry to prevent the failure to deliver?
Failure to deliver is the default on a legal contract, and elevators can attempt to recover a financial penalty. However, that will not always cure the ill if grain is needed to fulfill their own contractual obligations to feedlots and processors and it creates a public relations mess. The risk begins with the battle for acres, say ag economists William Wilson and Bruce Dahl of North Dakota State University who offer several suggestions about enticing delivery of the original contracted grain.
Wilson and Dahl say the problem can begin prior to planting, when a producer would react to prices that cause him to ignore a less lucrative contract and plant a crop that would generate more cash than the previously contracted alternative. The National Grain and Feed Association has provided extensive contract language and offered arbitration services. One of its rules does give a producer an option of notifying the elevator manager that he will be unable to deliver, which stops the financial liability from increasing, but does not eliminate it.
Grain merchandisers are also implementing other strategies to secure their financial foundation in case of defaulted delivery contracts.
1) Farmers are required to prepay an amount of cash if the elevator believes there is a risk of default. Such a provision is included in the rules of the National Grain and Feed Association, the Minneapolis Grain Exchange, and the Uniform Commercial Code of the federal government. The MGEX has trading rules that call for a deposit of 10% of the contract value with additional deposits allowed if the contract value increases. Such a provision is similar to the margins that elevators must post to hold hedges for clients. Some larger grain buyers may be considering similar provisions that would help them offset their costs of exchange margins.
2) Other concepts inducing delivery are basis or minimum price contracts that would neutralize a producer against in the increases in the overall price level.
3) Another concept uses an option on a forward contract, in which the producer is guaranteed the maximum price during the contract period if the contract was fulfilled, which discouraged against switching crops prior to planting.
4) Elevators who know the producer as much as possible, including his financial affairs and farm ownership structure is in a better position to protect against a delivery default.
5) Signed contracts will also cause some producers to have second thoughts about defaulting say the economists, who add that elevators may create “no trade” lists of producers who do not perform.
6) Establishing a Master Trading Agreement between farmers and elevators would spell out definitions, expectations, and legalities, and once signed, then grain delivery contracts would be accepted by the elevator.
Summary:
With an increasing number of grain delivery contract defaults resulting from a period of grain price volatility, many elevators and other grain buyers are developing measures to increase the chance of delivery and inducing farmers to deliver the grain that had been verbally committed. Farmers are considered merchants since they are selling a product, and state and federal laws have a variety of buyer protection measures that protect elevators from the loss of expected grain delivery. Many additional efforts have been developed by elevators to protect their interests which penalize farmers who default.
Posted by Stu Ellis at 10:20 PM | Comments (0) | Permalink
What Is The Financial Future Of Your Farm?
Whether you are a livestock producer besieged by high input prices and low market prices, or whether you are a crop producer besieged by high input prices and low market prices, you are being blown apart by a “perfect storm” that threatens to financially devastate your operation. As you begin to look at the end of 2009 and the start of 2010, what is your thought process to evaluate your options?
University of Nebraska farm transition specialist Dave Goeller uses the term “perfect storm” to describe the financial situation of livestock producers in the October 21 issue of Cornhusker Economics and says this the worst financial situation of a lifetime for many of them. Livestock and dairy prices are creating losses that cannot sustain operations and that has created stress on farm families to the point of asking themselves if they can and want to really continue. Those who are not as bad off are asking where to get help to stem the tide. Goeller suggests a systematic way to assess your situation and plan for the future.
Where are you now? Look at your balance sheets for the past several years to identify a trend, determine your solvency, and analyze loan collateral and the need to restructure. Goeller also says evaluate your income and expense records for the past several years to identify trends as well. You probably know if you are profitable, but what are your principle and interest obligations and what does it cost to produce your commodity. Those same financial reports will also indicate trends in family living expenses and the need for non-farm income to sustain your family. Are there some special circumstances that have affected your business such as health, divorce, or family issues? At the same time ask yourself if the business is affecting your personal relationships with spouse, family, and even your lender.
What are your urgencies? Those include deadlines, foreclosures, judgments and other legal actions that need immediate attention. What are your timelines and who is making decisions on those. Goeller also says you need to look objectively at your business, and if assets are worth keeping or whether they should be liquidated to reduce debts. He says make other necessary changes in the business that are identifiable.
Where do you want to be? This is a decision only you can make, which will determine where you and your family will be, and what may happen to long held family farmland, and your reputation. Set your long term goals on paper, for both your family and your farm if it to remain intact.
How will you get there? Goeller says your range of options extend from doing nothing to totally liquidating your farm business, with a wide range of options in between. On either end of the range there will be impacts such as potential action from creditors if you do nothing, to extensive tax consequences if your sell out. The intermediate options include: tweaking to improve performance, limited sale of assets and rental of some land, restructuring loans or refinancing, and adding non-farm income.
Goeller suggests completing a cash flow projection for each option under consideration, as well as evaluating the alternatives and how they impact your long term goals. The process will require additional information, and a significant challenge is collecting that information and when it will be used for making a decision. He says keep your lenders and anyone else informed that needs to know your plans. (Don’t sell your farm without telling your spouse.) And your network of family and friends should be on the lookout for signs of stress, such as a change in sleep patterns, irritability, alcohol abuse, a change of eating habits, and any other significant changes in your personality and lifestyle.
Summary:
Just like the early 1980’s financial stress is again hitting large numbers of farm families who are having difficulty meeting financial demands in the wake of low commodity prices. With that financial pressure, farmers and ranchers need to evaluate their financial position, determine their goals, and how they are going to reach them; which may include a wide range of alternatives.
Posted by Stu Ellis at 12:09 AM | Comments (0) | Permalink
November 17, 2009
How High Will Corn Yields Go?
If your spring planting was not delayed, and if the corn had matured before cold temperatures stopped that process, and if wet weather had not jeopardized your harvest, what would your corn have yielded? Most farmers in the Cornbelt would have been generally happy with 2009 yields, if they would have occurred in a normal weather year. That may cause some of your minds to wander this winter wondering what the prospects are for trends in corn yields.
USDA economist Paul Heisey has also been wondering about prospective corn yields and what technology can produce. His article in USDA’s electronic magazine Amber Waves points to the need for investment in research to boost corn yields to the levels that will meet demand. From his vantage point at USDA, Heisey looks at food security, bioenergy production, and climate change dynamics that will determine the need for potential yield increases. And he says yields will support crop prices and influence food security.
The issue of yields and prices came to a head in 2008 when the need for corn to produce ethanol was seen by the consumer as pushing up food prices and was seen by the livestock producer as a negative toward his profitability. Both would have been insignificant blips with a larger corn yield to supply all levels of demand. Some economists are also looking at the change in climate as a threat to sufficient corn production if weather variations continue to increase. That is why Heisey is urging more corn yield research funding.
The USDA economist points to the 180 bushel goal for national corn yields by 2016 being promoted by the National Corn Growers, and he says that is doable. But he says it would required a 6 bushel increase in the national yield annually to reach the 300 bushel yield that some in the industry are targeting for 2030. He calls that “unprecedented.” Corn yields have moved higher since commercial hybrids were introduced in 1930, and bolstered by commercial fertilizers. But as fertilizer use has declined, yields have continued upward, due to genetic improvements, nitrogen application, and population increases.
“Is there a ceiling on corn yield?” Heisey rhetorically asks. There currently is no indication of that as technological improvements have shown. Seed corn with multiple genetic traits have increased yields, and Heisey says that will continue with the addition of other traits that increase photosynthesis, and withstand drought challenges or changing levels of gasses in the atmosphere. He says long growing seasons would increase yields, but higher temperatures, less rain, and uncertain pest issues would tend to reduce yields.
Heisey says the yield trend line has moved toward a steeper angle. Looking at Illinois corn yield records, he says there was a 1 bushel per acre average increase annually from 1940 to 1957, when the trend shifted to 1.7 bushels per year from 1960 onward, until the 2016 goal was reached that would see a 2 to 3.5 bushel per acre increase annually. The economist looked at results from the NCGA corn yield contest that documents 360-370 bushel yields with intense management strategies; and noted the practices may not be profitable in commercial farming. He says current research seems to be reducing the gap between those contest yields and commercially profitable yields. Heisey says the application of science to agriculture has lead to impressive gains without any sign of deceleration with the result being robust yield growth in the foreseeable future.
Summary:
Corn yield trends have been steadily rising, possibly at an increasing level in recent years, but where will they top out? That is not possible to say under the current scenario of science being applied to corn breeding. That is resulting in fewer pests to retard yields and increased inputs to enhance yields. While reaching an industry goal of 300 bushels per acre by 2030 may be attained, it will require impressive gains in yields.
Posted by Stu Ellis at 12:16 AM | Comments (0) | Permalink
November 16, 2009
Zero Capital Gains Taxes. Are You Ready To Take Advantage?
You are approaching the year 2010 when there will be a zero tax on property that would normally be subject to a capital gains tax when it is sold. For example, if you sell a farm in 2010 for more than you paid for it, the gain would not be subject to a capital gain tax, if you are in the 10% or 15% tax brackets for ordinary income. Yes, 2010 is all of next year, so why should you be concerned about that in the next 45 days? We’ll tell you why.
Several years ago changes in the US tax policy ratcheted down the rate charged on capital gains until the tax rate was zero percent for some tax payers in the year 2010. Holders of farmland would be some of those taxpayers that may benefit from the tax free year that will arrive in 45 days, according to agricultural law specialist Roger McEowen of Iowa State University. His recent newsletter describes the benefits, who will benefit, and may be a good reference to begin a conversation with your tax advisor. McEowen says, “This zero percent rate became available beginning in 2008 and raises significant planning questions and opportunities for lower-income taxpayers, and other taxpayers that can utilize tax management strategies to minimize income to take advantage of the zero percent rate.”
After December 31, 2010, the capital gains tax rate will be placed with higher rates, such as the 20% rate for property held a short time or 10% on property held for more than 12 months.
McEowen says the people who would most benefit from the zero percent rate are retirees, prospective retirees, semi-retirees, and other low income taxpayers that would include children.
1) Taxpayers that are fully employed or with higher rates of income will likely be in tax brackets higher than the 15% rate, and will not be eligible for the zero percent rate on capital gains.
2) Persons contemplating early retirement may have the option to generate retirement income by selling property that would not be subject to capital gains.
3) Retirees on modest incomes may be in a lower tax bracket, making them eligible for the zero percent tax on capital gains.
4) Semi-retirees who have engaged in tax planning may be able to implement a sale of property to benefit their retirement.
5) Children who are in low tax brackets because of lack of income, but who have interest in gifted property, may be able to take advantage of the provision.
But what about farmers? McEowen says if there is a plan to sell property that would trigger a capital gains tax in 2010, there is significant tax planning that should be done before the end of 2009. Your goal should try to keep 2010 tax liabilities in the lower tax brackets by minimizing 2010 income.
1) Use expense method depreciation for purchased farm equipment.
2) Accelerate income into 2009 with earlier than normal commodity sales or defer expenses into 2010 such as delaying normal prepays until after the first of the year.
3) Elect farm income averaging if 2010 income would be higher than the prior three years. That would take some of the 2010 income and spread it backward to years that may not have had high tax liabilities.
McEowen reminds you about the basis you have in the property, and that will have to be determined. If it is farmland, your basis is the purchase price, but that is also adjusted upward if you have improved the land such as installing drainage structures. If the property is timber, and you have planted trees, the cost of the trees is added to the original cost of the timber ground. If you have inherited the property, your basis is the valuation of the land in the estate of the person who left you the property in their will. If the farmland was received as a gift, your basis is the same as the basis of the person who gave you the farmland.
Summary:
Capital gains taxes have always been an issue for agriculture because of substantial amounts of money paid and received for equipment and farmland. The opportunity afforded by a period of zero percent capital gains in 2010 may benefit farmers and farmland owners who are either liquidating property, planning to retire, or are in other transitional processes. Tax advisors should be consulted about the opportunities. If plans are made to take advantage of the tax situation, there may be significant tax adjustments that may need to be considered prior to the end of 2009.
Posted by Stu Ellis at 12:22 AM | Comments (0) | Permalink
November 13, 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 fine tuned its yield estimates earlier this week, but most market watchers are waiting for the 2009 Final Report to be issued in January. With the monthly estimates now in place, IL marketing specialist Darrel Good says the market will be watching the pace of harvest, crop progress in South America, and how the market perceives the demand. Read more.
There were ups and downs when USDA looked at the 2009 corn crop:
1) The average yield dropped 1.3 bu. to 162.9 bu. per acre
2) State average yields dropped 5 bu. per acre in IL, IA, and MS.
3) State average yields increased in CO, KY, MN, TN, and WA.
4) Brazilian corn acres, yield, and production estimates were reduced by USDA.
5) USDA estimates were cut 50 mil. for exports and carryout dropped to 1.625 bil.
6) The estimated price range for the marketing year was raised 20¢ to $3.25 to $3.85.
There were ups and downs when USDA looked at the 2009 soybean crop:
1) The average yield was raised 0.9 bu. to 43.3 bu. per acre.
2) USDA increased its state estimates by 3 bu. per acre for IN and KS.
3) Average yield estimates were lowered by AR, GA, MS, TX, and IA.
4) The So. American soybean crop estimate was raised 80 mil. bu to 4.623 bil.
5) So. American crops began with early dryness, but will be helped by El Nino.
6) USDA raised export estimates slightly due to more imports by China and the EU.
7) USDA raised ending stocks to 270 mil. bu. and the national average price to $9.20.
There were ups and downs when USDA looked at the 2009 wheat crop:
1) the 2009 wheat harvest was adjusted down 4 mil. bu. to 2.216 bil. bu.
2) More wheat in the Russia region will mean US exports will drop by 25 mil. bu.
3) USDA raised its estimate for wheat carryout by 21 mil. bu. to 885 mil. bu.
Corn demand remains high says IA St. economist Chad Hart, with 4.2 bil. bu. headed to ethanol plants. “Crude oil prices have risen to the upper $70s per barrel range and this has helped ethanol margins remain positive over the past few months.” He says based on production so far this year, 2009 ethanol production should reach 10.8 bil. gal. Read more.
Soybean demand is export-focused says Chad Hart at IA St. Currently, USDA is expecting soybean exports from the new crop at 1.305 bil. bu., which would surpass the 2008 record, and Hart says the sales pace has been strong. China has already booked over 500 mil. bu. of US beans, equal to the amount that would be produced in Iowa.
Update your marketing plan. MI St. economist Jim Hilker reports:
1) Mar corn has an 80% probability of being $3.10 to $5.19, with midpoint at $4.01.
2) Jul corn has an 80% probability of being $2.86 to $5.92, with midpoint at $4.11.
3) Dec corn has an 80% probability of being $2.64 to $6.57, with midpoint at $4.16.
4) Mar beans has an 80% probability of being $7.99 to $11.75, with midpoint at $9.68.
5) Jul beans has an 80% probability of being $7.22 to $12.91, with midpoint at $9.65.
6) Nov beans has an 80% probability of being $6.59 to $13.63, with midpoint at $9.47.
“My post-harvest strategy for soybeans this year is straightforward; sell every bushel at harvest,” says MN marketing specialist Ed Usset. He says there is no carry in the market and no incentive to store. He says the harvest basis is good, and a $1 premium is too expensive for at-the-money July call options. Read more.
However, there is carry in the corn market, says MN economist Usset. “The current carrying charge of 32½ cents from December to July will cover interest costs of holding grain in storage nearly four times over. According to my records, the current corn carry of 370% of interest costs at harvest time is the fourth largest since 1990 (2001, 2004, and 2005 were slightly larger). To him a “large” carry is 140%, and that is exceeded now.
Grain marketing tip#1. OSU’s Steve Prochaska says “Grain marketing should be based upon probabilities. This may seem like gambling, but a farmer who plants a crop in the spring is using a probabilistic approach. A farmer believes that there is a good chance a crop will be produced to market in the fall. This type of thinking is based on probability.”
Grain marketing tip#2. OSU economist Steve Prochaska says, “Farmers cannot consistently predict major market moves and therefore should not speculate excessively.” And he adds, “Grain marketing should be based on your risk bearing ability. If you have many debts to service, you should not allow marketing opportunities to pass when the total costs of production can be paid and therefore debt be serviced.”
Four weeks remain before the end of the insurance period for Cornbelt row crops such as corn and beans, and IA St. ag economist William Edwards suggests a call to your crop insurance agent with a harvest update. Additional time for harvesting must be requested before Dec. 10. USDA will not cover damage to the crop after that time, but will allow extra time to complete harvest so insurable damage can be evaluated.
Financial pressure is increasing on farmers, and ag economists in MN say there has been a 55% increase in the number of notices filed by lenders that are eligible for farmer-lender mediation services. In the past year there have been nearly 1,200 requests for mediation, which is an 86% increase over 2008. MN Extension reports that $322 million in farm loans are now in mediation, which is more than double the amount in 2088.
Large changes in feed costs and market values are causing the financial stress, says MN economist Brian Buhr, and he says, “Many well-managed operations are experiencing financial stress.” MN law requires mediation be offered before foreclosure proceedings.
Wet corn is a problem for everyone and KS St. specialist Dirk Maier says don’t worry about getting it to 15% moisture right now. He says use a 2-stage method to drop the moisture to 19-20%, transfer it to another bin and let the moisture even out through the grain. After 6-12 hours, turn on the air, remove 2 points of moisture and it can be stored through the winter. Use a warm spring day to drop the moisture to 15% for the summer.
Corn kernels can be damaged with high heat says Maier. Heat over 200ºF can be used on corn over 18% without damage. But if that level of heat is used to drop moisture levels to 15%, then kernels are damaged. He also says don’t remove more than 5 points of moisture per hour, or the quality of the corn will deteriorate. Frost damaged corn that has test weight at 50# or less should not be stored long and sold by springtime.
Harvest wet, or let it dry? If you are in a quandary over whether to harvest and pay for drying or let it field dry, OSU agronomists retrieved a study they made several years ago:
1) Results showed that nearly 90% of the yield loss associated with delayed corn harvest occurred when delays extended beyond mid-November.
2) Grain moisture decreased nearly 6% between harvest dates in Oct. and Nov. Delaying harvest after early to mid Nov. achieved almost no additional grain drying.
3) Higher plant populations resulted in increased grain yields when harvest occurred in early to mid-October. Only when harvest was delayed until mid-November or later did yields decline at plant populations above 30,000/acre.
4) Hybrids with lower stalk strength ratings exhibited greater stalk rot, lodging and yield loss when harvest was delayed. Early harvest of these hybrids eliminated this effect.
5) The greatest increase in stalk rot incidence came between harvest dates in October and November. In contrast, stalk lodging increased most after early-mid November.
6) Harvest delays had little or no effect on grain quality characteristics such as oil, protein, starch, and kernel breakage.
7) In this study, yields averaged across experiments, populations and hybrids decreased about 13% between the Oct. and Dec. harvest dates. Most of the yield loss, about 11%, occurred after the early-mid Nov. harvest date.
If you are greeted by ruts when harvest is over, consider fall repairs if the ground is dry enough. IL crop specialist Dennis Epplin says ruts will hold water and crop residue will not be spread evenly. He says level, non-HEL ground can be tilled with some difficulty, but HEL ground may require special repair treatments when the soil is dry enough. He says consider seeding a temporary cover crop if conditions permit and consult NRCS.
Let weeds in wet fields go until spring. That’s the recommendation of MO weed specialist Kevin Bradley, who says attempts to spray will tear up fields, and the spray used this fall can be used early in the spring. And he says that will address any problems with winter annuals and will have some impact on early summer annual weeds. Bradley says colder temperature inhibits the effectiveness of glyphosate and other herbicides.
Spread your fertilizer this fall or next spring, but OSU agronomists say avoid spreading it on frozen ground, “Applications made to fields with any appreciable slope can result in significant fertilizer losses. Not only do these losses represent an environmental concern, but they also represent an economic loss for your operation.” They also recommend that P & K be brought up to critical levels, even if you had good yields this year at low levels.
Soybean aphids were counted in high densities in August and September, but when they arrived on their winter homes on buckthorn, they unexpectedly died, apparently from a fungal infection. OSU entomologists admit they do not know what that means for 2010, since there was a large mortality and lack of egg deposition, and they say remain alert.
2010 budget #1. NE economists say, “The price of diesel fuel used in the 2009 budgets was $4.00 per gallon, compared to $2.00 per gallon for the 2010 budgets. While this price for fuel may be a little low for 2010, using a round number such as $2.00 allows for easy adjustments should prices change.” They say adjust to your own situation.
2010 budget #2. NE economists say from 2009 to 2010, fertilizer prices have changed even more than fuel. “The largest negative price change has been for 10-34-0, which went from an estimated price of $6.84 per gallon in 2009, to $1.90 per gallon in 2010. While changes in other fertilizer prices have not been as dramatic, the average of fertilizer prices used for the 2010 budgets is about 37% of the 2009 budget prices.”
2010 budget #3. NE economists looked at herbicide prices and report, “The change in herbicide prices are a mixed bag. The price of glyphosate dropped from $0.35 per ounce in 2009 to $0.16 (46 percent of 2009) in 2010, while AAtrex 4L® increased from $4.75 per pint in 2009 to $6.00 (126 percent of 2009) in 2010.”
2010 budget #4. “The price of seed utilizing new GMO technology appears to be higher than for those numbers available in past years. However, since fewer refuge acres are required and projected yields are greater using these new hybrids, the extra price for seed may be wholly or partially offset. The 2010 estimated crop budgets show similar cost per unit of production, using the new GMO technology verses the technology of prior years.”
Stability in land prices is being forecast by IL ag economist Gary Schnitkey based on a survey of farm managers and farmland appraisers. He says half expect land prices to decline slightly and 32% expect stable prices. Based on that, Schnitkey says cash rents that rose nearly 30% in the last four years should stabilize between 2009 and 2010 levels. He says cash rent rarely falls, and it would take 2 years of low returns to drop rents down.
Livestock producers concerned about corn quality, molds, and values of damaged grain will want to connect with a webinar being presented Nov. 18 and Dec. 1. Both will be held from 12 noon to 1 p.m. over the Internet. Topics to be covered include molds and mycotoxins, storage alternatives and use of proprionic acid, value of wet corn, feed value of immature corn. Find registration details here.
With problems of moldy corn, “Farms that feed their own corn absolutely need to test this year to avoid these problems,” says MO swine specialist Marcia Shannon. She says if corn has more than 5ppm of vomitoxin pigs will start vomiting, and will refuse to eat if the corn has more than 10 ppm. Breeding disruptions will occur in the breeding herd.
Posted by Stu Ellis at 12:08 AM | Comments (0) | Permalink
November 12, 2009
Are You A Farmer, Or Are You Really A Biological Manufacturer?
So, you think you are a farmer? That is the 20th century label for your job. If you are going to survive in the 21st Century, you will need to become a biological manufacturer and implement a new set of production principles that have been used by successful industries that make foods, durable goods, and every type of widget that consumers want. In other words, change your thinking today to survive tomorrow.
Tomorrow’s farmers will use a variety of business models, which may seem foreign to you in their name, but which are not far from what you are doing everyday in your management activities. Don’t stop and instantly sell the farm, just make some modifications to convert from farming to biological manufacturing. That is what Purdue ag economists Mike Boehlje and Allan Gray suggest after evaluating several large operations that have successfully implemented some of those industrial business models. Their report looks at a variety of different concepts.
Attribute driven products. Many Cornbelt farmers may already be doing this under other names. It is the effort to grow a crop or an animal that will have a specific characteristic desired by a customer. Have you produced high oil corn, low linolenic soybeans, or other products for a processor that required product differentiation and needed identity-preserved grain? Non-GMO grain or organic vegetables contain those attributes and they are eventually branded, advertised, and packaged separately from a commodity. Margins are higher and erode less by market forces than general commodities.
Systems approach and operational procedures. Systemization is becoming more frequent in agriculture with the operation of standard operating procedures. You are controlling the biological processes of crop and livestock production, for example with a routine vaccination or fungicidal application. Precision crop farming is a larger example of employing a “system” to make your production practice a routine practice.
The systems approach also includes scheduling and process control which is nothing more than facility utilization, flow scheduling and process control. Undoubtedly you are using all of your grain storage facilities, and under normal profitability your livestock production facilities are utilized with a strict flow of animals. If you have irrigation facilities, you are controlling the growth process of your crops by turning on such a moisture control system. Fine tuning those systems will improve your manufacturing bottom line by eliminating inefficiencies.
Raw material acquisition. This role of a purchasing agent in a manufacturing plant is not much different from your selection and purchase of crop inputs. However, improved management of that process can reduce expenditures if you are obtaining more quotes from suppliers. The economists say this approach emphasizes more of a business orientation than keeping a good relationship with the local fertilizer dealer. However, they say that relationship is best defined in the contractual relationship of both parties rather than a social relationship. Another part of the materials acquisition process is the optimal selection of crop genetics, pest control materials, plant nutrients and other materials that reduces risk and increases profitability. That will come, they say, through a better understanding of the biological process of crop production.
Boehlje and Gray identify three types of technology that a biological manufacturer would find to be critical:
1) Monitoring/measuring and information technology will help you identify how well your crop is growing or what problems have occurred and how to identify those problems. It may include GPS systems, aerial imagery, weather monitoring, soil testing, and a variety of environmental factors within livestock production facilities, as well as sensors on animals and feed nutrient evaluation.
2) Biotechnology and nutritional technology is the process of manipulating the factors that affect the desirable attributes in the crop or the livestock. Combining environmental factors with mechanical technology is a process control approach that would be used in an assembly line. Your products may not move down an assembly line because they are rooted, but that doesn’t make any difference.
3) Process control technology allows you to make changes at the proper time to ensure there is no deviation from the desired goal. If the environment in a hog confinement building is adverse to profitability, then mechanical devices would be turned on the make the proper changes. If soil moisture was declining, process controls turn on your irrigation.
The Purdue researchers also apply a “sustainable closed loop system, used in manufacturing to agriculture, suggesting it is a system that livestock producers could used to recycle manure as a plant nutrient or an energy source.
Boehlje and Gray additionally say farmers have been typically independent producers who purchase inputs and sell commodities with operations financed by equity and limited debt. However, they say increasingly producers are joining with resource suppliers and expanding volume with limited capital outlay on their part, leasing land instead of owning it, and custom farming to expand their revenue from unused resources. The use of creative financing is becoming more common, along with multiple site production units, and precision agriculture to maximize time. The economists provide examples of an Indiana dairy, a Dakota livestock operation, and a South American crop enterprise operating in four countries that have employed most or all of the concepts described in their forecast of the future of farming.
Summary:
The jump from being a farmer to being a biological manufacturer may not be all that big. However, implementing many of the concepts can push many marginally profitable operations well into the black, just by looking at their daily activities from a different perspective. Finely tuned manufacturing principles can be applied to medium and larger sized agricultural enterprises and then used to increase revenue, decrease cost, and maximize profitability.
Posted by Stu Ellis at 12:42 AM | Comments (0) | Permalink
November 11, 2009
USDA: Corn Crop Dropping, Bean Crop Rising.
Along with the market-based adage “big crops get bigger,” is the old saw that “what goes up must come down.” And with those bits of granddad philosophy the estimated size of the 2009 corn crop apparently peaked just above 13 billion bushels and deterioration problems are bringing it back down. At least that is the essence of USDA’s November Crop Report. Beans? Well, they are another story!
From October to November, USDA lowered its estimate of the corn crop from 13.018 billion bushels to 12.921 billion bushels. For soybeans, the projected size of the 2009 crop rose from the 3.250 billion bushels in October to 3.319 billion in November. The market was looking for a 12.940 billion bushel corn crop and a 3.262 billion bushel bean crop. In the November USDA Crop Production report the USDA’s statisticians trimmed 1.3 bushels per acre from the 2009 estimated yield, partially because of 5 bushel drops in the projected yields for IL and IA. However, the average yield for soybeans was raised 0.9 bushels per acre with the help of three bushel per acre hikes in the estimated yields for IN and KS.
In its Supply and Demand Estimate for November USDA did not change its estimates of feed and ethanol use between the October and November reports, however it clipped 50 million bushels from its estimate of exports, leaving total use at 12.980 billion bushels and ending stocks at 1.625 billion, a shade lower than the 1.672 billion in October. The estimated price range was tightened slightly and raised by 20¢, pushing the season average price upward to $3.55.
For soybeans, the crush was raised by 5 million bushels, exports by 25 million bushels and total use was increased to 3.195 billion. That leaves carryout at 270 million, up from the 230 million in October. USDA also added 20¢ to the average price of beans and the midpoint of the range for the season is now $9.20 per bushel.
Globally, corn production estimates were dropped, not only in the US, but also in Brazil, European Union, Russia, Venezuela, and Canada. Yields were cut in most countries, but acreage was also reduced in Brazil. Coarse grain trade, which includes corn and other feed grains, is projected to be only slightly lower because of the lower corn production, and ending stocks for corn around the world are also estimated to be lower.
Global oilseed production estimates were raised by USDA less than 1%, but helped upward by greater production in the US and South America. Production for the 2009-2010 marketing year are expected to be 1 million tons higher in Brazil because of increased acres, and a half million tons higher in Argentina because sunflower acres are being shifted to soybeans. Global oilseed stocks are forecast to grow 4% because of increased stocks in the US, Brazil, and China. Chinese soybean imports are expected to increase slightly in the new marketing year.
For the balance of the year, University of Illinois marketing specialist Darrel Good says, “Price patterns will now reflect the pace of harvest, which has accelerated rapidly over the past 10 days, the progress of South American crops, and perceptions about the strength of demand. The declining value of the U.S. dollar, higher crude oil prices, and advances in the stock market have been encouraging for demand prospects. Still, soybean prices appear to be a bit over valued in light of the large South American crop prospects. Particularly puzzling is the movement from an inverse to a small carry in the futures price structure given prospects for large supplies next spring.”
At the University of Missouri, marketing specialist Melvin Brees looked at both the crop estimates and the harvest progress report and added, “Monday’s crop progress report showed corn harvest at only 37% complete compared to the average of 82%. This suggests the possibility that additional cuts could be made to expected corn production. Soybean harvest is 64% complete compared to an average of 92%. Most in the market will continue to watch the weather and harvest progress.”
Summary:
The corn crop may be diminishing in size, while the US soybean crop continues to enlarge, as projected by the USDA’s November Crop Report. With IL and IA losing 5 bushels from their estimated corn yields, the national average yield dropped slightly, but the national soybean yield grew with the help of higher yield prospects in IN. Only minor adjustments were made in the supply and demand balance sheets, but the reduction in the corn carryout helped raise the season average price by 20¢ per bushel. Globally, corn production, trade, and carryout will all be lower for the current marketing year. But global soybean production trade and carryout will all be higher for the new marketing year, helped by bigger yields in the US and more acreage in Brazil.
Posted by Stu Ellis at 12:22 AM | Comments (0) | Permalink
November 10, 2009
How Will Prices React To Corn Quality Issues?
USDA reported late Monday that 37% of the 2009 corn crop had been harvested, a 12 point jump in the past week, but still less than half of the five year average for this time of year. Many Cornbelt states made significant progress, including 12% in IL and NE, 23% in IN, and 16% in IA. Soybean harvest also progressed significantly, with 75% of the crop now in the bin, versus only 51% last week, but we are still behind the 92% average for the past five years. Early Tuesday (Nov. 10) USDA will release its November Crop Report, some of which may address quality issues because of the late maturing, somewhat moldy, and light test weight crop. But how will prices react as that crop comes to market?
The 2009 harvest is the slowest in recent history. While that has been a function of delayed maturity and record October rainfall, the quality of the crop is an issue of concern for Iowa State University farm management specialist Stephen Johnson. His October newsletter says damage from the freezing temperatures on immature corn may be worse than for other slow maturing crops. He says the comparative years in 1985, 1992, and 2004 all generated yields that exceeded the trend by at least 8%.
Johnson says the cool July enhanced pollination and the cool August prevented moisture stress during grain fill; and he says that is a recipe for a high yield. But the slow maturing crop was susceptible to freeze damage, something that was not the case in the other years. Thus immature corn will have a less dense kernel and subsequently, lower test weight, which could be down to 45 pounds per bushel. That is far below the 56 pounds for #1 corn or 54 pounds for #2 corn. Additionally, he said high moisture levels lower test weight and only serve to raise drying costs and shrink loss.
So where will low test weight and potentially moldy corn go to market? Johnson says much of the lower quality corn will become livestock feed and that will compete with wheat for feed use near feed lots. But he says it is hard to predict whether the light weight corn will be bearish or bullish on cash prices. On the surface, says Johnson, low quality corn does not store well, and will find its way to the market quicker than higher quality corn. Thus, cash prices could be under pressure this winter as the low quality corn is marketed.
Johnson says the processing industry will carefully scrutinize what they are receiving, and will be tough on grading the corn. He says that is where the corn germ is extracted and heat damage from high temperature drying will impact the area where the corn oil is located.
Gross revenue and profitability are also questions raised by Johnson because most farm budgets were not prepared for high costs of drying and shrink, as well as lower market prices because of quality discounts. He says yields still appear large for most of the Cornbelt, the discounts will deter many farmers from being too quick to harvest if there is going to be high drying charges. Johnson says the quality issue will be resolved in the cash market via basis adjustments, as well as higher standards for quality when loads are found with excessive amounts of moldy corn. If that is the case, Johnson urges farmers to keep in communication with lenders, input suppliers, and grain merchandisers.
Summary:
Significant progress was made toward harvest in the past week, but projections will soon be addressing the size of the crop in the wake of quality deterioration. Farmers with corn of lower quality may be shipping that to livestock feeding facilities, due to expected discounts at processing plants. The lower quality grain will be coming to the market first, and basis levels will be reflecting the lower quality.
Posted by Stu Ellis at 12:31 AM | Comments (0) | Permalink
November 9, 2009
Animal Welfare Groups Want To Change Your Production Practices
A year ago Proposition 2 in California was approved by voters and spelled the end to the California egg industry because it caused the abolition of common production practices. Voters in other states have spoken out, and in some caused significant changes in the way livestock are raised. Last week Ohio voters approved Issue 2 on the ballot, which was a pro-active move by the Ohio livestock industry to pre-empt an effort by the Humane Society of the US to change livestock production practices in that state. The public debate over what livestock producers should and should not do to raise their animals has barely begun.
The heavily financed Humane Society of the US (HSUS ) has been a strong proponent in the debate that has caught the public ear in many states, as well as the attention of lawmakers, and petition passers. Agricultural economists F. Bailey Norwood and Jayson Lusk at Oklahoma State University believe the livestock production industry has not taken enough of a role in the debate and the industry has suffered from that reluctance. Writing in the current issue of Choices Magazine, Norwood and Lusk believe the debates will “play out in the ballot box, state and federal legislatures, and courtrooms.”
The economists say the animal welfare groups have focused on farm animals and how they live, and the livestock industry has focused less on the farm, and has said the activists want to convert everyone to veganism and that the activists have not used scientific evidence but are waging the debate to elicit public emotion. And the economists contend those latter issues are “red herrings.” The Oklahoma State researchers say the claims of the activists “are carefully documented by scientific studies while also appealing to emotions with pictures and videos of miserable-looking animals in small cages. These publications go into great detail documenting and articulating practices that they believe the public will deem undesirable. Although some of these pictures and videos do not represent the average farm, they are real events and that matters.”
Economists Norwood and Lusk point to the United Egg Producers, which have defended their welfare standards are based on “sound” science whereas the farm practices sought by HSUS are not. They say the UEP standards for egg production are based on recommendations of an independent scientific committee, but the HSUS has presented other scientific studies saying cage free eggs are superior to cage eggs in terms of animal welfare. The economists say their own research found that “consumers believe confining animals to small cages is inhumane and that they believe cage-free systems provide higher levels of well-being.” Labeling the livestock industry arguments as “the red herring strategy,” the economists contend that consumers are asked to disregard those beliefs and accept that “science” shows animal do not suffer in cages. They acknowledge that any change will cost money and rhetorically ask if consumers will pay the cost, which they say is the real debate that should be held.
Interviewing consumers across the US, they asked if animal feelings were important and if so, should they be considered. The statistics indicated 29% of consumers found animal welfare to be of little importance and 69% said animal should not suffer, but society has no obligation to ensure animals are “content and happy.” Those same consumers were also asked if government has a role in regulating animal welfare. Given five choices and the option for multiple answers, the survey found 58% supported anti-cruelty legislation, 25% would ban farm practices the majority of citizens oppose, 55% would allow firms to voluntarily label their food as “animal compassionate” if they adhere to high welfare standards, 49% would force all food companies to indicate the level of animal care on their product labels, and 9% chose none of the above.
Norwood and Lusk suggested the agriculture industry engage HSUS in an effort to promote food differentiated by animal welfare, then the groups could save money now being spent to catch the public attention. The economists say it is unlikely to assume the groups will agree, but say there apparently is no common ground at present.
Is there a public good in the debate over animal welfare? Norwood and Lusk say the issue is one of public ethics of how animals are raised, and that affects social norms. And since there are conflicting views, they do not believe the matter will be resolved very soon, and will not be resolved without a bitter battle that will be in the public, legislative, and judicial arenas. They say there is a general support for laws banning “cruel” practices, but there are arguments about what constitutes cruelty, even if one third of consumers do not care about the feelings of animals.
The bottom line, Norwood and Lusk believe, will be for the HSUS to introduce new referenda, target food retailers, file lawsuits and appeal to public sympathy for animals. And they say animal agriculture will fight back by introducing legislation prohibiting such referenda, all of which will result in “a patchy, incoherent set of laws and court rulings to emerge.”
Summary:A handful of states have taken legislative action to control livestock production practices, as the result of efforts by the Humane Society of the US to appeal to consumers and voters about how animal agriculture should conduct its business. Both sides present their scientific arguments, but the expensive debate is expected to continue unabated in the press, the courts, and in legislatures. Currently there is no common ground between the two sides.
Posted by Stu Ellis at 12:46 AM | Comments (0) | Permalink
November 6, 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.
Fair weather allowed harvest progress to be made this week, but the market will be wondering just how much when it is announced Monday afternoon. Combines were slow to get into the field because soils had to dry as well as grain. With elevators removing 10 points of moisture or more from the corn, instead of 5 points or less, the volume of grain to be dried caused many elevators to observer shorter hours of dumping grain.
The most rapid weekly corn harvest rate in recent years was 16% says IL Marketing Specialist Darrel Good, who says fast harvest paces usually occur in the middle of harvest. He says if 25% of the crop had been harvested by Nov. 1, another 16% this week would mean it will take 5 more weeks to complete the corn harvest. But he is quick to say that cannot be sustained, because of weather, storage, and shipping dynamics.
The most rapid weekly bean harvest rate in recent years has been 20 to 24% of the crop says Darrel Good. And he says if 50% of the soybeans were harvested by Nov. 1, then it still appears to him that soybean harvest could still extend into December. Read his newsletter.
The Nov. 10 USDA Crop Report will be important in determining the impact of harvest conditions, says Good, who notes that crop diseases, low test weights, above average field losses, and quality deterioration have all become potential problems. And he says extreme weather in some areas may result in increased acreage that is abandoned.
Don’t wait for corn to dry very much says IL agronomist Emerson Nafziger. He says, “Expect on average for grain moisture to change very slowly in November. Expecting it to drop by as much as a point per week is optimistic.” While the weather has been damp since maturity, upright ears have trapped water and cobs are holding onto water. He also says test weights will rise 2-4 lbs. when they are taken after the corn has dried down.
As corn weathers in the field, expect yield losses says Nafziger. He says kernel weight will drop if mold is growing on and in kernels. Ears that are vertical will capture water and base kernels will begin to sprout in warmer temperatures. But he says two big threats are stalk failure that will allow ears to fall to the ground and a quick dry down in good weather that will weaken cobs to the point of losing kernels at the combine header.
Many elevators are reporting low test weights on corn, and some loads have been discounted. Purdue agronomist Bob Nielsen says there is little research that correlates test weight with yield, and there is no indication that low test weight corn is an inferior livestock feed. Nielsen says test weight and moisture content go in opposite directions, since the dry matter in the corn is heavier than water. Drier corn has higher test weight.
Why is test weight low this year? Purdue’s Bob Nielsen says there are several reasons:
1) Late season foliar disease and cool Sept. temperatures reduced photosynthetic activity.
2) The October freeze damaged late developing and immature corn and stopped grain fill.
3) Ear rots damaged kernels, causing light weight and chaffy grain with low test weight.
Do you harvest or wait for dry down? IL agronomist Emerson Nafziger says if the crop is standing well, then waiting for the loss of a few more points of moisture may pay, even though it is risky. He says 200 bu. corn at $3.50 with drying and shrink valued at 4¢ per bushel will save you $8 per acre for each point of moisture that is removed naturally.
Harvest it or leave it for the winter? Northern Cornbelt producers may weigh that thought, but WI specialists say the real question is: “Will the revenue lost by winter crop damage be less than the cost of drying this fall?” Their table demonstrates that a 20% to 37% yield loss that could be expected will not offset drying charges after harvest. Read more.
The drying process will also help maintain quality, according to MN ag engineer Bill Wilcke, who prefers the use of high temperature drying over low temp systems. He says, “Higher temperature dryers aren’t likely to run hot enough to kill the molds, but they do slow mold growth by reducing the grain’s moisture content. The agitation of the grain during high-temperature drying is also likely to rub off some kinds of molds.”
On-farm drying equipment may require more than the normal amount of maintenance because it is being used around the clock. Ontario ag engineer Helmut Spieser suggests checking interior drier screens daily to prevent material buildup. He says that prevent airflow and that will reduce throughput. And that buildup also causes dryer fires.
What is your drying temperature? Your initial thought is to raise the temperature on high moisture corn to maintain dryer capacity. But if corn is not increasing in test weight after it has passed through the dryer, then the drying temperature is too high. Spieser says drop the plenum temperature in increments to gain test weight. He says since every kernel has a different moisture content, each pass through the dryer will reduce the moisture by the same amount, but since each was starting at a different moisture they will not all be uniform after drying. Spieser says manage that with adequate aeration.
Here is Spieser’s checklist for successful grain drying practices:
1) Higher drying temperatures usually result in lower grain quality
2) Reduce drying temperatures to maintain or increase test weight
3) Monitor immature corn for caramelization (if the milk line remained)
4) Kernel to kernel moisture content will vary both before and after drying
5) Storage aeration should bring wetter and drier kernels to nearly the same moisture
6) Keep kernel temperatures below 120oF to 140oF
7) Consider two-stage drying: 18% in the field and 15% in the bin
8) Two stage drying will allow the drying season to proceed
New corn to be fed to livestock may need to be tested for mycotoxins, which could cause critical health issues for cattle. Those come from a variety of molds, which have reduced test weight, and degraded both the quality and nutrient content. However, to test the grain, the critical issue is obtaining a sample that is representative of the corn destined to be fed. Small amounts can be taken periodically from a combine or grain card until a sufficient amount is collected. Have it tested within a week at a reputable laboratory.
Both molds and mycotoxins in corn can cause herd health issues. MN livestock specialist Jim Linn said certain animals are more susceptible, “At heightened risk for mold and mycotoxin health and disease problems are young animals, breeding animals and lactating dairy cows, with swine and poultry species more susceptible to these problems than ruminants. Mycotoxins in large doses can cause acute health, reproduction and production problems. However, the most likely scenario with feeding of moldy and/or mycotoxin containing feeds is a higher incidence of general, chronic health problems, poor reproduction and overall poor animal growth or milk production.”
But how much can be fed? That varies according to age and specie of the animal says MO specialist Marcia Shannon, who first recommends buying clean grain for your livestock. “Thus, some moldy feed may be fed to beef cattle. Feeder cattle should be able to safely consume levels five to 10 times higher than swine and dairy. Thus, ruminants older than 4 months can withstand 10 to 20 ppm of vomitoxin. Signs of toxicity with vomitoxin/ deoxynivalenol (DON) are usually feed refusal or feed intake reduction. At concentrations of 5 to 10 ppm vomitoxin vomiting is observed in swine. Read her newsletter.
Once more around with corn molds. Many farmers are continuing to find molds in corn which can be summarized.
1) Diplodia ear rot (white) has been widespread, but does not produce mycotoxins.
2) Giberella ear rot (pink) is also present and creates vomitoxin or DON and zearalenone.
3) Fusarium is less prevalent (white starburst) and produces fumonisin toxins.
4) Penicillium (blue-green) affects the kernel embryo and produces mycotoxin.
5) Cladosporium (blue-eye mold) grows when kernels killed early and harvest is delayed.
6) When combining moldy corn adjust for minimum damage and maximum cleaning.
7) Moldy grain should be dried below 15% for long term storage.
8) Moldy grain should always be tested for mycotoxins before being fed to animals.
9) Adding a mycotoxin binder to feed can reduce the impact of toxins in digestion.
10) DDGS can also contain mycotoxins, but are much more concentrated than in corn.
Crop insurance policies protect you against grain quality problems, in case your grain is low grade, low test weight, excessive kernel damage, musty, or have mycotoxins that reduce its use as a livestock feed. MO economist Ray Massey recommends contacting your crop insurance agent for help in documenting your problem with samples collected by an adjustor. Those samples need to be obtained while the grain is still in the field. Read more.
Regardless where you are in the Cornbelt, you may have issues related to the late maturity of crops and challenges in harvesting because of inclement weather. MN Extension specialists have assembled a wide variety of resources from numerous universities to address those problems at a special website.
Crop specialists in MN, where immature crops are a significant issue, are telling farmers to put their priority on soybeans, regardless of moisture levels. And they say store them with a high volume of air continuously for several months, and closely monitor any low temperature drying to ensure against further deterioration of soybean quality. They say the alternative is leaving them in the field and watching the pods shatter.
Combine adjustments can reduce many problems in harvesting immature corn that has a low test weight with kernels prone to breakage. Many of those are provided by ag engineer Helmut Spieser of the Ontario Ministry of Agriculture. Read those here.
1) Reduce cylinder speed and open concaves.
2) Leave fines in the field, rather than in the bin where they enable mold growth
3) Not much field drying occurs at this time of the year with cooler temperatures.
If frost killed soybeans before maturity, they may still have a green color from the chlorophyll that did not degrade with maturity says MO’s Bill Wiebold. And he says some of it will remain even through long term storage, coloring the oil when the soybeans are processed. He says frost damaged beans will store, but will have a higher moisture content and should be aerated. Over time they will shrink and become more oblong, and that should be considered when adjusting a combine to harvest immature soybeans.
The saga of soybean aphids has a new chapter. Densities were impressive when they left soybean fields to find buckthorn, leading entomologists to expect significant egg- laying and a large 2010 population. But a survey in MI and IN found dead aphids, apparently the victims of a fungal disease. The aphid specialists believe that if that is the same in other parts of the Midwest, there may not be large numbers of aphids next spring.
Wet weather may bolster winter annual weeds, but MO weed specialist Kevin Bradley says your inability to apply a fall herbicide will not be that important. He says, “Our research indicates that applications of residual herbicides made in the early spring can provide similar levels of winter annual weed control as applications of these same herbicides in the fall. In addition, our data indicate that early spring applications of residual herbicides provide better control of emerging summer annual weed seedlings than fall herbicide applications.” He adds that many winter annuals germinate twice.
Unharvested seed may soon prepare itself for planting due to the wet weather, if it is warm enough. MO specialist Bill Wiebold says it only takes temperatures over 50º for corn to sprout in the husk, damaging its quality. “During germination, seeds release enzymes that break down carbohydrates, proteins and fats. This breakdown releases free sugars, amino acids, and fatty acids. These simple compounds spoil easily in storage.” Read more.
October was the second wettest and fifth coolest in Missouri, says state climatologist Pat Guinan. Looking ahead, he says, “The latest winter outlook for Missouri calls for above normal temperatures for the northwestern half of the state and equal chances for above, below and near normal temperatures for the rest of Missouri. Below normal precipitation is anticipated across far southeastern sections with equal chances of above, below and near normal precipitation for the rest of the state.”
With wet weather on both ends of the growing season, did corn rootworm create havoc? The preliminary results from corn root ratings collected by IL entomologists indicated that about all of the efforts to control rootworm were successful when compared against the untreated test plots. Read more.
What were some of the lessons learned about controlling corn rootworms?
1) Low densities could be the result of saturated soils or more acres planted with Bt corn.
2) Wet weather did not seem to reduce the effectiveness of soil insecticides.
3) Bt hybrids generally performed well, but not always better than soil insecticides.
4) Bt hybrids combined with soil insecticides resulted in very low root damage.
5) Data is still being tallied on which options provided the best economic sense.
6) Planting Bt hybrids in 2010 is a field by field decision, based on 2009 scouting.
Your priority on harvesting may sacrifice soil compaction, and that will be a long term problem says MO specialist Kent Shannon. He says shallow compaction of 12 inches or less can be corrected with tillage, but heavy loads on combines, trucks, or grain carts will compact soil to depths unreachable by tillage, and will remain wet late into next spring. Shannon says tire inflation pressure is one solution, and with selecting the proper tire, a 200 HP tractor may cause no more surface compaction than a 50 HP tractor.
Just because you had a good crop this year does not mean you can save money by avoiding P & K application before the 2010 crop according to OH fertility specialist Robert Mullen. He said many producers skipped P & K when P cost $1,200 per ton and K was over $1,000. Mullen says P has dropped to under $400 per ton and K is about $500, but both will be needed in 2010, especially if they were skipped earlier this year. He says if input costs are still a budget problem for you, look at the results of a soil test.
Fall or spring, your P & K application will produce the same yield. That is the opinion of MO soil fertility specialist Peter Scharf who also warns that if you did not get a P & K application prior to the 2009 crop, there is a potential for yield loss in your 2010 crop. But he says in the case of wheat, fall is the time when P nutrition makes the difference. Read more.
Consumer demand for pork is strong, but just how strong is an enigma to MO economists Glenn Grimes and Ron Plain. They quote USDA as saying there has been a 4% increase in demand for Jan-Sept compared to last year. Grimes and Plain doubt that degree of strength, but say consumer demand is as strong or stronger than 2008. They also challenge USDA’s way of measuring demand. They argue that credit should be given to the tonnage sold at lower prices, not just tonnage sold at regular prices.
Over 208,000 head have been removed from the US dairy herd so far this year, but OH dairy specialist Cameron Thraen says another 200,000 needs to be removed, so the national herd can drop under 9 million head. He says, “That will put farmers in a more stable position of balancing the domestic use market with only a small international component." He says the current $12.20 cwt price should rise to $15.00 in 2010.
Posted by Stu Ellis at 1:22 AM | Comments (0) | Permalink
November 5, 2009
Will Wheat Markets Recover In The Long Term?
Wheat producers harvested a bonanza in crop revenue the past two years, but wheat prices have been sluggish along with the US and world economy. Which of the Jekyll and Hyde personalities will wheat producers see in the next decade? Will prices be high as commodity buyers purchase acreage; will prices be low because of slack demand; or will they be somewhere in between? Let’s polish the crystal ball.
Assuming the wheat economies for the US and world remain healthy in the next ten years and demand remains strong, prices for wheat will recover from the current low levels. That is how ag economists Richard Taylor and Won Koo at North Dakota State University look at the future for wheat growers. Their forecast calls for increased wheat trade and prices over the next ten years.
To establish a baseline of wheat production, consider the fact that over the past 20 years world production has increased from 521 million tons to 612 million; with the EU the largest producer, followed by China, and the Former Soviet Union. The US produced about half of what was grown in the EU, and other significant producers included Canada, Australia, India, and Argentina, with all of those countries supplying 84% of world production. Last year world trade was 101 million tons, and that represented 17% of world production, with the US among one of the major exporters. Taylor and Koo report a dramatic change in the world wheat market in the past decade with government policies encouraging production, but the market has been impacted by the ethanol industry. During that time world export prices floated between $3 and $5, but beginning in 2007, surpluses fell to 30 year lows before a slight recovery last year.
Another dynamic in the wheat market is the increase in yields of 422% in China and 203% in India. Worldwide yields are up 128% in the past five decades. Total production has increased by 520% in India and 403% in China, and 73% in the US. The EU produced 5.2 tons per hectare in 2008, while China was at 4.71 and the US was at 3.05 tons per hectare.
Based on production trends, Taylor and Koo project world wheat trade to increase nearly 24% from the 73 million tons exported in 2008 to more than 90 million in 2018. They say, “The high wheat prices seen in 2007 and 2008 should not return because the recession lowered demand and increased production increased supply and carry-over stocks. All wheat prices are expected to return to more normal levels and slowly increase throughout the projection period.”
By 2018 US production is expected to increase 24% above the average of the past 3 years, but will be much lower than production of the late 1990’s. They expect a 52% increase in soft red wheat because of the low starting point from short acreage in 2008. Total wheat harvested is expected to increase from 51 million acres to nearly 58 million in 2018, with yields rising from 41.3 bu. to 46.8 bu. per acre. At the same time, exports and ending stocks are expected to increase.
Canadian production is expected to increase 5% over the recent production, but domestic consumption will rise along with exports and ending stocks for the next 10 years
European Union production will increase 6.7%, consumption by 5%, but exports are expected to decrease because newer member countries are not wheat exporters, but importers. EU ending stocks are expected to rise through 2018.
Australian wheat production will grow 90% through 2018 because the recent baseline was a series of droughty crops. Wheat consumption will rise 4%, and exports will rise 114% because of the recent crop failures.
Argentina will see production drop 9% from the recent average, but rise 30% over the droughty 2008 crop. Consumption will rise 16%, but exports will drop 26%, and ending stocks will rise 13%.
Importing countries across Asia will curtail their purchases nearly 50% over the next 10 years, but that is because of the shift in India from being both an importer and exporter depending on its own production and surplus stocks from year to year. China will continue to be a major importer, but is also a substantial producer of wheat.
Summary:
The future of the wheat market is largely dependent upon the economic recovery, and if the predicted income growth does not occur, then import demand for wheat will grow slower and prices will be softer. Prices are not expected to return to levels of 2006-2008, but the weak dollar will encourage foreign demand and prices should return to the $4.90 to $5.40 range. World exports will rise and African countries will be a growth market.
Posted by Stu Ellis at 12:57 AM | Comments (0) | Permalink
November 4, 2009
What Is The Health Of The Crop Insurance Industry?
With all of the crop production problems that have beset the Cornbelt this year, you may have a close relationship with your crop insurance agent. Not that you will be picking out curtains or anything like that, but this has certainly been a year for frequent communication and it has not come to an end. You may even be wondering about all of the claims that will have to be paid, and if crop insurance companies can weather the current storm. That’s a good question, too!
The crop insurance industry continues to diminish in size annually with companies buying each other. But are they making money and are the companies that you expect to send you an indemnity check in good financial health? Iowa State University economist Bruce Babcock conducted a health check up on the crop insurance industry after the USDA reported high profitability and the industry disagreed. USDA’s Risk Management Agency said the average annual rate of return on equity within the industry since 2000 has been 19%, which was 72% more than what might have been expected. In response, the insurance industry said the crop insurance industry is not as profitable as the property and casualty industry and there is more risk in crop insurance. This tit-for-tat is not new and causes Congressional inquiries into crop insurance that are frequently not clearly answered.
Economist Babcock says a simple and reasonable measure of profitability indicates, “that industry subsidies could be reduced by more than a billion dollars without adverse impacts on program effectiveness.” He says the big difference between crop insurance and unsubsidized insurance is that about 80% of the premium revenue is paid by taxpayers in return for the requirement to sell crop insurance to all farmers who want to buy it. And Babcock says that makes good reason to question the fact about a 72% rate of return above what might be otherwise expected.
While crop insurance products and premiums are the same from one company to another, because of federal equality requirements, there is some competition among the various crop insurance carriers. And Babcock says, “Those companies that are best at using the government-provided reinsurance make more money than others. In addition, companies compete with each other for market share by competing for crop insurance agents' books of business.” He says those companies that pay higher commissions to independent agents will tend to increase their market share. Thus, Babcock says, if all else is equal, examine the commission structure to find out which companies are doing well and which are trying to cut losses.
His examination of crop insurance agent commissions found that in the past 8 years, commissions have held between 15.5% and 17% as a percentage of total premiums paid. But in the same time, he says the dollar amount of commission paid per policy sold has increased fourfold. Adjusting commissions to general wage inflation, Babcock says, “the amount by which agents were able to increase their compensation because of increased profits of the crop insurance companies in 2008 was $1,015 per policy.” He multiplied that amount by the 1.148 million policies sold in 2008 to arrive at $1.165 billion, which he contends is overcompensation of crop insurance agents. And Babcock feels that’s an excessive support of the crop insurance industry.
If Babcock’s $1.165 billion is cut from industry revenue, there would be about $2 billion left from underwriting gains and expense reimbursement. He suggests that underwriting gains could be returned to the Risk Management Agency, or RMA could cut expense reimbursement to $426 per policy, and save $500 million per year in commissions. But he doubts that Congress would cut such a program that has pumped money into the pockets of crop insurance agents who live in rural areas. Nevertheless, he believes the same level of service can be provided to farmers at a much lower cost.
Summary:
Crop insurance companies and their agents will have a lot of work this fall, but they will be compensated for it. With an average commission exceeding $1,000 per policy, crop insurance agents could serve as an indicator of the health of the industry. While the industry says it is in challenging financial times, USDA disagrees, however there are difficulties in determining which side is correct. If agent commissions are the only inequitable factor, the financial health of the industry could be determined by those commssions.
Posted by Stu Ellis at 12:35 AM | Comments (0) | Permalink
November 3, 2009
Harvest Delays Mount, Crop Quality Declines, And USDA Alerts Farmers About Crop Insurance Issues.
Late October weather was not much different from mid October weather, subsequently very little progress was made last week toward completion of corn and soybean harvest in the Cornbelt. With the majority of crops remaining in the field, along with expected quality deterioration, many farmers may be calling their crop insurance agent in coming days to find out what happens if the crop is still in the field and the coverage has ended.
USDA’s Crop Progress report Monday afternoon indicated that 94% of the corn crop is mature, compared to the 99% average for the past five years, but only 25% of the crop had been harvested as of November 1. And that is well behind the 71% average for 2004 to 2008.
Within the Cornbelt, ND has only 2% of its crop harvested, but only 60% of it is mature. MI is 10% harvested, SD and MN are at 12%, and WI is at 13%. NE and IA are 18% harvested, IL is 19%, but IN and OH are in the mid-20% range. During the past week, no state advanced its harvest more than 7%, and most were only in the 3% and 6% range, except for the fact ND made no progress at all in harvesting corn.
Soybean harvest, nationally, advanced only from 44% last week to 51% this week, but most of that was in the southern soybean belt. Across the Cornbelt, harvest progress ranges from 29% in WI and 35% in IL to as much as 69% in NE and 82% in OH. Other Cornbelt states fall in the middle. Substantial harvest progress of 10% in the Dakotas, 11% in IN and 12% in MN. However, only 2% progress was made in IL and 4% in WI.
As the weather-weary fall wears on, crop quality continues to deteriorate. While 18% of the corn remained in the excellent category, the amount of corn rated as good faded from 51% last week to 49% this week with more acreage pushed into the fair and poor ratings. For soybeans, 15% of the crop remained in the excellent category, but the amount of acreage rated as good dropped from 50% last week to 48% this week with acreage being shoved into the poor and very poor ratings.
Although the deadline is 5 weeks away for the end of the insurance period for Cornbelt row crops, such as corn and soybeans, many farmers are fearing they may push hard against that deadline unless there is more opportunity for crops to dry out, for soils to dry out, and for harvesting equipment to get another chance to do its work. USDA’s Risk Management Agency (RMA) Monday released a statement advising farmers what to expect with their crop insurance policy if crops are not out of the field by the December 10 end of their insurance policy. RMA says, “The most important action you can do is to contact your crop insurance agent to report a loss, indicating your harvest is delayed because of adverse weather, which is an insured cause of loss.” But RMA says normal harvest practices must be carried out if possible. Interestingly, RMA says the cost of drying wet crops is not covered.
When December 10 arrives, and crops are still in the field, RMA indicates, “you may request additional time to harvest beyond the calendar date for the End Of Insurance Period (EOIP), from your crop insurance company.” USDA says its procedures allow crop insurance companies to authorize farmers to additional time to harvest, so any claims can be settled on the basis of harvested production.
You would qualify for extra time to harvest when 1) you give a timely notice of the problem to your agent, 2) your crop insurance company documents that the delay was due to an insured cause of loss, and 3) you can demonstrate that harvest was not possible due to insured causes, and 4) your delay in harvesting was not because you did have enough manpower and equipment to complete harvest by the December 10 deadline.
RMA is careful to say that just because you are given additional time to harvest does not mean the coverage period is being extended past December 10. It says you are being given extra time to harvest to determine the extent of any loss. If you lose some of the corn due to lodging or beans due to shatter loss, that would be covered, but if any of your crop is lost because of something you could have avoided, then that would be deducted from your indemnity check.
The Risk Management Agency urges you to document your field conditions and the action you are taking, and adds that you must make every effort to harvest your crop during the extended period. If you still do not get the crop harvested during the extended period, RMA says the crop is uninsurable.
Summary:
Very little harvest progress was made for either corn or soybeans during the past week in the Cornbelt due to inclement weather. More progress was made in harvesting soybeans than corn, however the majority of both crops remain in the field as of November 1. The extended harvest may well push against the December 10 end of the crop insurance period for corn and soybeans in the Cornbelt, and the USDA has alerted farmers to notify their crop insurance agent about their harvest progress so a potential extension can be made to harvest the crops beyond the deadline. USDA is not extending the deadline, but is allowing extra time to determine what the potential loss may be for insured crops.
Posted by Stu Ellis at 8:23 PM | Comments (2) | Permalink
November 2, 2009
I Have All Of This Wet Grain And I Need Help!
Farming is usually fun. But flooded fields, deteriorating crops, and the potential for substantial quality discounts have combined to take the fun out of farming. You are lying awake at night concerned when you can return to the combine cab, whether your dryer is doing the job, and how much field loss you can sustain before profitability disappears. We can’t do much about the weather and your bottom line, but let’s tackle the issue of grain quality.
You probably have many questions you would like to ask regarding grain drying procedures, shrink, test weights, and many other issues related to grain storage and whether the 2009 crop can be stored without quality deterioration. Helping answer those questions is Charles Hurburgh, grain quality specialist at Iowa State University. His recent newsletter will probably address many of the issues you already have.
1) Should fans be shut off during rainy weather to avoid pumping humid air into the grain? Hurburgh says keep the air moving, especially if you are using heat, because you do not have an unlimited amount of time and space to dry grain, and when you return to the field, you will need space to store wet grain that needs to be dried. If you are not using heat, keeping the fans going will depend on the moisture level of the grain. If corn is below 17% and beans are below 15%, the fans can be shut off if the outside air is below 50ºF. If the moisture is higher than those levels or the air temperature is warmer, then the fans should be kept running. He says, “Grain picks up moisture from the air at about one-fourth the rate at which it dries so rewetting over short periods is not usually an issue.”
2) If corn moisture is higher than the upper 20% range and the dryer cannot keep up with the demand on it, what options are there? Hurburgh says don’t count on much more drying in the field, and if ears are pointed up, some kernels may begin to sprout. He says natural air and low temperature drying will still work, but that is a slow process, and natural air will not finish drying this fall. Hurburgh says there is a solution, but it requires a lot of management, time, and labor. He suggests heated air drying for batches, then shifting it to a cooling bin, while another batch is transferred to the dryer bin. He says dry corn down to 24%, cool it, hold it at steady moisture with natural air, then redry it to below 20% moisture, and use natural air to finish the job.
3) What is the impact of low test weights for corn? Kernels did not fill completely with the lack of maturity of the corn crop, and test weights of dry corn are in the 52 lb range and the loss of weight per acre is about 5%. He says low test weight corn spoils faster, breaks more, and there will be storage issues next spring and summer. He says the problem should not be a concern to ethanol refiners, but livestock feeders should test for mycotoxins and should expect lower protein levels.
4) Soybean moisture levels are too high for storage, so how should they be dried? Hurburgh says beans will probably not dry much more in the field than they have at this point, and 15% moisture soybeans handle about like 17% moisture corn. He says natural air drying is best for soybeans, and November air should be able to dry them to 13.5%, which is sufficient for winter storage. If heated air is used, set a target for 14% moisture and hold with aeration or whatever is acceptable to the market. He says elevators are drying corn and are not set up to drying a second crop simultaneously. And he says if elevators have a few wet beans, they are blended with dry beans, if they have sufficient quantities. Hurburgh says crushers cannot handle wet beans because they will not split correctly and the hulls are hard to remove.
5) Why are elevators charging more for drying and increasing shrink levels? Hurburgh says elevators are not set up for drying beans, and that is best left to on-farm systems. Elevators attempt to calculate shrink by determining the remaining dry bushels after moisture is removed, and the lot of grain can be identified for settlement. Drying grain to the market acceptance level of 15% for corn and 13% for soybeans removes 1.18% percentage points for moisture for corn and 1.15% for soybeans. If the elevator is charging a 1.4% shrink factor, they are capturing 0.22% for a handling allowance, and that increases for each percent of moisture removed. Hurburgh says scientific tests have shown that grain elevators lose about 1% in storage and handling, and that loss is about 0.5% for on-farm storage beyond moisture removal. He says problems arise when discounts are levied for shrink, and it should be used for weight only since farmers need to know exact bushels delivered for production records. Hurburgh says drying costs charged by the elevator need to cover the variable costs of operating the dryer, plus the fixed costs return to the dryer investment. Farm dryers will have lower variable costs, but the fixed costs must be calculated as well, and that may equate what is charged by the elevator.
Summary:
Corn and soybeans may not dry much more in the field than they already have dried, and when the crops are stored on the farm, then care must be taken to avoid spoilage because of moisture levels that are too high for storage. Wet soybeans should not be dried with heat if possible, but outside air should maintain them through the winter. Corn will need heat to help remove moisture, but batch drying may be the only alternative for many farmers. Remove moisture in stages, hold with air flow, and then return to a drying bin for more heat as space is available. The inability of the crop to fully mature may result in lower test weights for corn, and that means breakage and potential storage problems. Commercial storage may result in shrinkage being applied to settlement sheets, which is an attempt to determine both water loss and handling loss.
Posted by Stu Ellis at 12:34 AM | Comments (0) | Permalink
