When USDA released the February Supply and Demand Report Tuesday, feed grains ending stocks were lowered with the help of increased domestic use of corn and increased export interest for US sorghum. Corn use was raised 100 million bushels to 4.3 billion because of increased ethanol production, helped by higher prices for fuel and for distillers dried grains. In fact USDA estimated 16% more corn went to ethanol plants in November and December than in the same period in 2008. While ethanol prices have softened, lower corn prices have allowed plants to retain the profitability. In addition to increased use of corn for ethanol, USDA added 50 million bushels to its estimate for corn exports, subsequently reducing ending stocks by 45 million bushels. Feed use was kept at 5.55 billion bushels, and ending stocks dropped to 1.719 billion bushels. Statisticians knocked a nickel from each end of the price range for the marketing year, which extends by 25 cents from either side of $3.70.

Globally, higher corn production in Argentina was partially offset by lower corn production in the European Union. Bigger yields in South America and more acreage boosted corn production estimates by 2.2 million tons over January. Corn trade was raised slightly, but lower US corn exports were more than offset by a 1.5 million ton increase in Argentine exports. Global ending stocks are being drawn down by 2.1 million tons for corn.

USDA clipped 35 million bushels from prior estimates of the soybean surplus, dropping it to 210 million bushels for the old crop, helped by more exports and a higher crush rate. US soybean exports were raised to a record 1.4 billion bushels as demand continues to be strong. The crush was raised by 10 million bushels to 1.72 billion because of strong global demand for soybean meal and lower amounts of protein from the 2009 soybean crop. Despite slower soybean oil use resulting from the loss of the $1 per gallon credit on soydiesel, USDA retained its level of estimated used due to last week’s announcement by the EPA that biodiesel mandates would remain. Subsequently, USDA knocked 20 cents off the expected price range for soybeans, which now stands at $8.70 to $10.20 per bushel. The range for soybean meal was raised $5 per ton, and the range for soybean oil was cut by 2.5 cents per pound.

Globally, soybean production estimates were raised 1.6 million tons, helped by improved production prospects in South America. Soybean and oilseed trade was raised because of continued imports by China. Global oilseed stocks held steady.

Instead of cutting the carryout, USDA increased the US wheat carryout because of wheat imports coming into the Southeastern US for feed purposes. Despite low wheat prices and a low dollar, wheat imports are increasing by 5 million bushels over January, and that pushed the carryout up to 981 million bushels. Domestic wheat exports were left unchanged and USDA narrowed the estimated price range by a nickel on both ends, and it now extends a dime on either side of $4.85 per bushel.

Globally, wheat supplies were boosted because of increased production in South America and Ukraine. Global wheat trade volume was also raised, as were ending stocks.

Looking at the impact of the report, University of Missouri marketing specialist Melvin Brees reports wheat ending stocks remain burdensome and fundamental factors remain negative for wheat prices. He says the larger Argentine corn crop and the large Brazilian soybean crop will also provide abundant global stocks. Those factors, plus expiring CRP contracts, reduced wheat acreage, weakening oil prices and the stronger dollar will all contribute negatively to grain prices. He’s expecting marketing uncertainty and price volatility.

Summary:
Domestically, more ethanol consumption of corn and more export demand for US soybeans were seen as bright spots in the February Supply and Demand Report from USDA, but burdensome wheat supplies and large corn and bean crops in South America will help put downward pressure on grain markets. They are expected to be volatile.

The Purdue 2010 Outlook is divided into many areas, each created by a member of the Ag Econ staff. Before we look at specific commodities and input prices, today we’ll focus on some of those macro economic factors, to present the “big” picture. And that picture may not be pretty, since the Purdue forecasters begin by saying, “The party’s over.”

Larry DeBoer begins with a prediction that 2010 will be less economically exciting than 2009, but it will be hard on almost everyone. Consumer confidence, he says, is not recovering and spending will only grow a bit and that will retard GDP growth. He says the housing market has bottomed and investment spending will not decline much, but will not grow much either. Compared to the global economy, the US economy will not recover as fast, although our exports will edge higher, helped by the lower value of the dollar. DeBoer says GDP will grow only 2.1% over inflation, which in insufficient to reduce unemployment, and he expects it to remain about 10%. He’s not expecting the Fed to raise interest rates with such high unemployment, and with inflation about 1% during the year. While the recession may be over, DeBoer says it will take years to climb out of the deep economic hole.

Farm exports, which were a staple of the 2007 and 2008 boom years, will not help much say economists Phil Abbott and Phil Paarlberg. While the dollar value is beneficial, the global buyers have pulled back, both on dollar value and tonnage. Ag exports will fall nearly $18 billion from last year, a result of grain tonnage falling 25%, but soybean tonnage rising 12%. Ag imports will begin to rise which will diminish the ag trade balance. A slack foreign demand is a function of world GDP falling 1.4% last year and 2010 growth at only 2.5%. Abbott and Paarlberg say the recession has led to reduced consumer spending, lower imports and lower prices worldwide. They report that world trade could contract 10% in volume and 20% in value this year, compared to last year, which saw similar trends. The economists say nations have avoided trade protectionism, something not done during the Great Depression, and have been living up to their World Trade Organization commitments for the most part. Those WTO talks continue, despite a stalemate. They add that global economic growth will be the determinant about the speed of recovery for ag exports, but exchange rates and trade financing will be important in shaping that recovery.

Helping the US farm economy will be the potential payments from the ACRE program later in the year. Purdue economist Roman Keeney says the way the formula was created, farmers would have the chance to see a $4 support payment, rather than the $2.35 from the Counter cyclical program. However, while nearly all farms have registered for most farm programs, the complexity of the ACRE program caused it to only draw a few subscribers. Keeney says those farmers who did not sign up, will have a chance to do that in June, but any payments will be delayed to the fall of 2011.

Purdue economist Corrine Alexander expects 2010 to return to a 2.5% food price inflation, following a year of lower prices due to fewer exports and higher domestic surpluses. She expects food price inflation to depend on weather conditions and the pace of the global economic recovery. Grocery prices will climb faster than restaurant prices, because restaurant labor and overhead costs will hold them back slightly. Food price inflation will depend upon the direction of ingredient costs and energy costs, both a function of the global economy. Currently, they are below the record highs of 2008 which will lead to only moderate inflation in 2010.

Summary:
The recovery of the US agricultural economy is tied in many ways to the speed at which the global economy recovers. That will determine both domestic and export demand, as well as the exchange rate which determines the value of the dollar. The US economy is not expected to return to normal as rapidly as some nations, with continued high unemployment, low inflation, and low interest rates. US farm exports will be held back by the global demand, both in volume and value, however, unlike the Depression, trade protectionism is at a minimum. The farm economy will be helped by the ACRE program, for those who signed up, despite its complexity, since payments will likely be larger than the default program. Food prices will begin to rise in grocery stores, but they will still be tied to the global economy, along with energy costs.

A variety of factors has resulted in a declining share of the consumer market for the beef industry. Per capita consumption is not what it used to be for cowboys, and larger shares have been claimed by other meats say a group of University of Missouri economists in a study of retained ownership for cow-calf producers. Supply chain marketing has accompanied changes in consumer demand for specific products, unseen and unheard of a couple decades ago. The economists say tighter vertical coordination has been adopted to address production quality, animal quality, price risk, product consistency, and consumer friendly retail prices. They suggest that cow-calf producers are an important part of the beef supply chain that is responsible for starting the process toward quality beef, and may be interested in participating in the rewards for the risk in boosting their genetic investment.

The MO economists studied 188 cattle producers to analyze the economic linkages and found that younger producers and those with registered cattle are interested in performance-based management using feedlot and carcass data are more interested in retained ownership. Using studies that indicated premiums of $31 to $75 per head could be obtained for “producers of cattle with known feedlot performance, carcass potential, or both might be better off retaining ownership of their calves or marketing them in a way that communicates the information … directly to the buyer.” Of the 188 cattlemen, 36% were interested in retaining ownership through a feedlot and 20% had registered cattle. Over half of the sample was interested in using carcass and feedlot data in cow herd management decisions. They assume that higher quality cattle enhances one’s interest in retaining ownership, finding it was used the least by those with less than 19 head and used the most by those with more than 100 head. They also discovered:
• Registered cattle significantly increases interest in retained ownership.
• Purebred cattle have a significantly negative impact.
• Purebred producers may not emphasize quality as much in their management.
• Producers interested in feedlot and carcass data for herd management decisions are more interested in retained ownership.
• Interest in retained ownership through a feedlot increases the length of actual retained ownership.

The economists conclude that cattle quality, as measured by ownership of registered cattle, significantly increases interest in retained ownership, as does interest in performance-based livestock management. They say the results are similar to the character of the pork and poultry industries and explain the vertical organization of the supply chains.

Looking at the parallels with the pork industry, the MO economists say those pork alliances demonstrate that claims to price premiums should be shifted from finishing units to farrowing units, which is the stage that most impacts the profits throughout the integrated system.

Summary:
Quality from the start increases the chance for quality at the end, and good beef genetics from the cow-calf herd will mean quality livestock leaving the feedlot. Cow-calf producers have a stake in the output at the end, and may be interested in retaining some degree of ownership after calves are weaned. Those producers who may be more interested than others in retained ownership are those who have registered cattle, which shows higher quality genetics, as well as younger producers and those who have interest in performance data generated at the slaughter plant.

Grain price declines since the first of January have been 13% for corn and 9% for soybeans says marketing specialist Chad Hart at IA St. He says the USDA was not the only bearish report pulling the market down, but energy prices have declined and they have been a major driver for crop demand through biofuels over the last couple years.

Chad Hart says while energy prices had rebounded during 2009, those prices have backed off recently. “Gasoline and ethanol prices have also worked their way down in January. Another factor is the recent strength of the dollar. The recent outlook and data for the general economy has been on the upswing. This has resulted in the dollar rebounding to hit levels it hasn’t seen since last August.” Read more of his newsletter.

Ironically, the stronger dollar has not depressed the export market, and Hart says, “Corn exports ramped up over last year’s pace in mid-December and have continued to exceed that pace. Soybean exports are running over 300 mil. bu. ahead of last year. In fact, here we are 5 months into the marketing year and soybean exports are still ahead of corn exports.” Hart says the large South American crops will eventually limit that.

Early in Jan. the futures market was bullish and USDA outlooks were bearish. Hart says that has reversed itself. He says current futures-based estimates of old crop prices are $3.47 for corn and $9.18 for beans, below the USDA forecast of $3.70 for corn and $9.65 for beans. He says new crop futures are $3.75 and $8.78 for season averages.

2010 production costs will be less than last year, and ironically, you can thank the fertilizer dealer. USDA’s fertilizer price report indicates an average anhydrous ammonia price in of $519 per ton, DAP price of $436 per ton, and a potash price of $511 per ton. The 2010 ammonia price is 37% lower than the January 2009 price of $803 per acre. DAP and potash prices are approximately 40 percent lower than year earlier prices.

But those fertilizer prices are increasing, says IL farm management specialist Gary Schnitkey. Since lows were hit in October he says anhydrous has increased about $90 and DAP has risen $55, but potash has declined about $65. Schnitkey expects further increases in costs, with fertilizer cost for corn at $100/A and $50/A for soybeans. Read more.

Fertilizer prices may rise, says Schnitkey, “Due to wet weather, little fertilizer was applied during fall 2009. This could lead to more fertilizer applications in the spring, potentially leading to supply and manufacturing bottlenecks. These bottlenecks then could lead to higher prices so as to ration fertilizer applications. This possibility, along with general energy price uncertainty, leads to the sizable risks of rising fertilizer prices.”

If you are calculating expected nitrogen needs for 2010, review some of the data being reported after 4 years of recent field trials on corn response to nitrogen fertilizers. Read the report.
1) The optimum agronomic N rate (AONR) was 186 lbs/A and it produced 196 bu./A.
2) The average AONR for corn/corn was 47 lbs more than for corn/soy.
3) Average corn/corn yields were 20 bu./A less than for the corn/soy yields.
4) With 40¢ N and $3.50 corn, the optimum economic N rate (EONR) was 168 lbs./A.
5) The EONR on all corn/soy tests was 18 lbs. less than the AONR.
6) The average yield on EONR sites was only 0.5 bu./A less than the AONR.

MO farmers raised a near record corn crop, but MO agronomist Peter Scharf says it could have been 25% larger had not the crop run out of N. And he says that cost farmers 113 mil. bu. because of N leaching and nutrient deficiency. He says pay attention to the color of corn early in the season, since rescue N can add 50 bu. more per acre.

What are you taking to your appointment with the tax preparer? MN ag business specialist Robert Holcomb suggests making a comprehensive document checklist:
1) A copy of the most up-to-date accounting report for tax year 2009.
2) Documents that describe commodities sold with deferred payment contracts
3) Government payments documents that have been received with FSA payments.
4) Crop insurance documents showing benefits plus withheld premiums.
5) IRS documents W-2s and 1099’s showing income received.
6) Accrual basis taxpayers should take a complete inventory list.
7) Records of medical, dental, property tax, education, and health insurance expenses.
8) Determination of personal portion of utility, fuel, and vehicle expenses.
9) A copy of last year’s tax return and accounting records.

Is there vomitoxin in your stored corn? OSU plant pathologist Pierce Paul says, “Vomitoxin can increase in storage if environmental conditions are suitable, vomitoxin won’t be reduced because it’s stable, and I know of no fungicide or other chemical treatment that has been used effectively to reduce vomitoxin in stored grain.”

There is no control for ear mold rots or mycotoxins that can be used either in the field or in the bin, says Paul. “I know that some farmers may be desperate to reduce vomitoxin levels in stored grain, but they should avoid buying into the strategies that these chemical treatments work.” He says there are some agents that bind the toxin and make it inactive to allow the corn to be fed to livestock, but he says those work better for aflatoxin.

Moldy corn can develop in storage when bin temperatures are above 40 degrees Fahrenheit and grain moisture is above 15 to 20 percent. Moldy grain increases the chances of vomitoxin. To avoid high variations of vomitoxin levels during testing, growers should pull multiple samples from multiple locations.

Another 1% drop in the beef herd was the bottom line on the latest USDA report, which Purdue economist Chris Hurt says that means a 5% decline over the past 4 years. Beef supplies to the consumer will decline this year, but exports will climb 10% compared to last year. That would make an 81% retracement since BSE in 2003.

Chris Hurt predicts prices for finished steers to reach into the low $90’s this spring and trade either side of $90 this summer. He believes moderating feed prices will benefit calf prices and help them to rise into the $115 to $120 range the second half of 2010. By the way the 2009 calf crop dropped 1%, according to USDA, and is the smallest since 1950.

The Cattle on Feed report was encouraging also to MO economists who looked at the number of heifers on feed. “In Jan. 2006, there were 55 heifers on feed for every 100 steers in feedlots. In Jan. 2010, there were 59 heifers per 100 feedlot steers. The steady increase in the proportion of heifers on feed correlates with a decline in heifers being retained for breeding and is a strong indicator the cow herd will continue to shrink.”

Are US cowboys being hurt by imported beef? No, say NE researchers who report on consumer choices that are made between lean grass feed beef that is imported and more marbled beef produced in feedlots. They say the statistical evidence is 0.01% price decrease for either choice or select beef for 1% increase in imports. And they conclude the 2003 BSE event did not trigger higher prices in the US market.

It’s your choice, Purdue economists tell dairy producers about whether to switch to organic production. They found that organic dairy producers ended up with 13% less milk compared to conventional methods. On the other hand, they found organic producers cut up to 22% from their production costs by growing their own feed. Feed for organic milk is more costly to buy, but if you are growing your own, the price is less.

Pastures can be improved and renovated with frost seeding in February or early March which will allow freeze-thaw cycles to provide shallow coverage of seed and help in remain in place prior to spring rains. IA St. agronomist Steve Barnhart says snow seeding does not work the best, since you want the seed on the soil at the start.

Think about the bugs when you make decisions which crops to plant as feedstock for biofuels plants, says MI St. entomologist Doug Landis. He’s urging more biodiversity that will include crops which provide better pest suppression and pollination. For example he says predator insects in soybeans provide $240 mil. worth of pest control.

What is your sorghum IQ? Purdue agronomist Gebisa Ejeta says it is the world’s fifth most important crop and has the potential to be a feedstock for US biofuels. He says it has a lot of genetic diversity that helps its economic value, producing a lot of biomass and a lot of sugars for ethanol production. But he says it lacks regional production, and with only 18 mil. acres being grown, it is not centralized enough for an ethanol crop.

Ejeta, a World Food Prize Laureate, is improving the genetics of sorghum to make it a better producer in developing countries, where environmental conditions vary widely. He says the international knowledge base for sorghum has expanded and he is importing it from overseas to use in his research that will benefit US producers of sorghum.

The headache that was 2009 is still hanging on in the form of musty, low test weight corn, some of which will only be of salvage quality when some farm bins are opened and checked this spring. Ohio State University specialists have produced a series of question and answer newsletters that may help you protect your investment and minimize your risk in losing a bin or many bins full of corn.
The initial newsletter explored the depth and impact of the problem with ear molds that produced mycotoxins. They outlined the threat to human and animal health in the case of vomitoxins and others, which they say will be identified with sampling. Different ages and species of livestock have different tolerance levels, but when the toxins appear in distillers grains from ethanol plants, the concentration is three fold that of shelled corn. The OSU specialists urge protection for anyone handling the corn and recommend masks, goggles, and gloves. Samples should be taken of suspect grain from different parts of the bin to assure that toxins can be ruled out, or to determine the seriousness of the contamination. They provide information on sampling and test kits that can be used for mycotoxin tests.

The second newsletter explores methods for minimizing problems while the moldy corn is in storage, which includes regular monitoring of the grain during storage, and warns that toxin levels can increase over time if storage conditions are inadequate. The specialists remind you that the grain is alive, respiring, and aeration is important to keep it dry and cool to prevent pockets of warmth to foster mold and toxin development. While air circulation will retard mold development it will not reduce any toxin concentrations. Testing of the grain becomes an important issue because the results of the test will determine where it can be marketed. The specialists recommend tests that provide a specific level of toxin on a parts per million basis, rather than a tests that indicates it is less than or more than a certain level. They say the ELISA kits are calibrated against the more sophisticated quantitative lab equipment upon which elevators base their grading. They recommend taking samples and sending them to various elevator to compare the results.

The third Ohio State newsletter on moldy corn and mycotoxins address questions about what to do for 2010 seed corn. While you may already have your seed purchased, you may have questions about its susceptibility to molds, since many Cornbelt fields have been infected, regardless whether they belong to you or your neighbors. The specialists say the widespread problems with molds in 2009 suggest one of two things, “either most of the hybrids are susceptible or a few susceptible hybrids occupied most of the acreage.” They say hybrids vary in their susceptibility, but differences could stem from the stage of growth of the corn when the mold spores arrived. They suggest that your own observations from last year would be useful in applying to selection of 2010 seed. But they warn that susceptibility in a single field may be a function of either the corn or the environmental conditions, and they add that your seed corn supplier may have information on ear rots and mycotoxin problems. The specialists also say that compared to foliar diseases, ear rots are more rare; no hybrid is resistant to every disease; the Gibberella spores will always be present; and to plant other hybrids if you had heavy infection in 2009. Additionally, they recommend against continuous corn in fields that were heavily infected, along with planting corn after wheat which could have harbored a similar fungus. The spores can travel like pollen, and can move from field to field in the air, as well as to fields that did not have any fungal problems in 2009. Another concern is the fact that crop residues in no-till fields can harbor fungal ear rot spores and they believe that shredding stalks or shallow tillage will promote spore decomposition.

One of the most challenging questions is the relationship between fungal problems and Bt corn. The Ohio State specialists believe there are more problems with corn stover when planting into stubble on high yielding fields. The potential answer is the increased stalk strength or some impact on the microbial community in the soil that inhibited the breakdown of the stover. But based on research at other universities, it is not believed that Bt genes have any connection.

Summary:
The cold weather may have provide a respite against the problems with moldy corn and mycotoxins in your stored grain, but when the weather warms the issue will have to be addressed. The grain should be regularly checked because it may need wintertime aeration to avert problems. The moldy grain may already have a limited marketability, and samples should be checked for the presence of toxins. When preparing for 2010 planting, it may be difficult to determine which hybrids are susceptible and which are not, but seed companies may be a resource for that information. With heavy infestation in 2009, many fields may have spores ready to infect the 2010 crop, something that could be exacerbated by heavy amounts of corn stover that are harboring the spores.

When your neighbor reads this you’d better duck and then accuse him of doing the same thing to you. In fact, the cultivation of biotech crops around the world has impacted every farmer because of their efficiency, and efficiency leads to lower market prices. At least that is the 5 second version of an in-depth study by economists who researched the impact of biotech crops on market prices. The group included agricultural economists in the United Kingdom, University of Tennessee, Iowa State University and the Washington-based International Food Policy Research Institute. Their findings may initially put you on the defensive until you think about it for a while and understand their conclusions.

Biotech crop traits were planted on approximately 300 million acres of global cropland in 2008, with the driving concern being the food security, biodiversity, and the agricultural environment. It has provided farmers with productivity improvements through a combination of yield improvements and cost reductions. But the economists say it is a challenge to assess the impact of biotechnology on market prices. They examined the production impacts of biotech crops and quantified the impact of biotech traits on prices of corn, beans, canola and other crops produced in North and South America and the European Union.

For insect resistant corn, the economists looked at the success of Bt traits to control European corn borers and corn rootworm, with a yield increase from 5% in the US to 24% in the Philippines. Based on global production, such traits have added 47 million tons of corn production.

For herbicide tolerant soybeans, the primary impact is to provide less expensive weed control, but better weed control has resulted in higher soybean yields, with a 30% yield increase in Romania alone. The practice has allowed a shorter production cycle in South America, where some farmers have been able to expand their production to an additional soybean crop that has added 53 million tons in Argentina and Paraguay.

For herbicide tolerant corn, the benefit has been easier weed control with a resulting higher yield in some parts of the world. Argentina increased its corn yield by 9% and the Philippines added 15% to yields.

The economists computed all of the yield increases, the amount of acreage planted to biotech seed, and the impact on the crop if the biotech seeds had not been used. The latter indicated a 2.5% drop in corn yields in the US, for example. Then the economists applied the increased production against pricing models to determine how much of an impact there were on prices as a result of the more abundant crops. They found that if biotech traits were no longer used, prices would increase by 5.8% for corn, 9.6% for soybeans, 2.7% for wheat, 8.9% for soybean meal, and 5.2% for soybean oil. They totaled that up to an additional $25 billion in crop income, if biotech traits were no longer used, with $9.82 billion for corn and $5.24 billion for wheat.

The economists say the downward world price represents a loss of income to the farmer and a gain to consumers. But they also say there has been a $33.8 billion gain for farmers from 1996 to 2006 because of the adoption of biotechnology. If the biotech gains had been taken away, global corn production would have dropped 1.2% and soybean production would have dropped 2%. Without the biotech crops, the economists estimate an additional 6 million acres would be brought into production, but total production would still fall by 14 million tons along with world grain trade. With the lower production, the economists calculate that the cost of global consumption of the non-biotech cops would increase by $20 billion.

In the US corn production would fall by 3% without the biotech traits, or 424 million bushels. The economists believe that soybean production would increase because of increased plantings from the resulting competitive relationship between corn and soybeans. That would mean an additional 88 million bushels of soybean production.

Summary:
The increase in production efficiency with the use of seed with biotech traits to provide insect resistance or herbicide tolerance has resulted in more bushels being available to the market. More production means a lower price in most markets. The result of growing use of biotech crops has lead to a $25 billion dollar loss to farmers over the past 10 years, but a gain for consumers. Even without the use of biotech seeds, production would have increased, but not enough to replace the loss.

When releasing the FY 2011 budget, the White House called for a freeze on discretionary spending for the next three years, in an effort to reduce the deficit. The big ticket items in federal spending, including defense, Social Security, and interest, are not subject to the freeze, but many of the USDA programs fall under the category of discretionary spending. The USDA budget proposal is rather tedious to read, and may take quite a while to decipher the messages between the lines, but it offers some direction for agriculture to take until it gets to Congress. At that point, the steering wheel may be turned one way or the other and some course corrections may be made. Until then, there are some budget proposals that are notable, compared to FY 2010 appropriations:

1) $3 million more for the National Agricultural Statistics Service to improve the quality of county-level estimates, funding by elimination of a ten year land ownership survey and cancellation of the census of aquaculture.
2) $42 million more for the Ag Research Service to fund bio-energy, world hunger, obesity, and climate change research, with $53 million in cuts from prior year Congressional earmarks.
3) $166 million more for the Agriculture and Food Research Initiative, in which researchers compete for funds for the most worthy research projects, while the guaranteed perennial research funds to universities was retained at $215 million. The budget eliminated $141 million in funding of university research proposed by Members of Congress.
4) $21 million less for Extension funding of agriculture, horticulture, and 4-H educators.
5) $700 million more to make crop insurance indemnity payments, but reduce the reimbursement rate to crop insurance companies and save $8 billion over the next 10 years.
6) Up to $160 million less for the Market Access Program that promotes US commodities overseas, and instead promote generic American products overseas, and reform the program so it will save $366 million over the next 10 years.
7) Reduce the cap on Direct Payments from $40,000 to $30,000, and reduce the payment cap to $24,000 for those producers who signed up for the ACRE program.
8) Tighten payment eligibility by moving the Adjusted Gross Farm Income eligibility limit from $750,000 down to $500,000, and make the change over a three year period. The budget message said there was a need for more fiscal responsibility and that necessitated re-examination of payments to wealthy individuals.
9) $500 million more would be added to the Wetlands Reserve Program and $629 million more for the Conservation Stewardship program, all to enroll more acres.
10) Eliminate the Resource Conservation and Development program and save $50 million.
11) Reduce $59 million from the Rural Development Agency
12) Increase $63 million for the Foreign Agriculture Service to help with exports.
13) Increase the Food and Nutrition Service by $2.8 billion, up to $75 billion, the largest segment of the USDA budget.

Summary:
The budget proposed by the White House and the Secretary of USDA will be analyzed and undoubtedly modified when it gets to Capitol Hill. In the meantime many farm organizations and their lobbyists will be pushing and pulling to increase certain line items at the expense of others. Significant in the administration proposal were the concept to reduce Direct Payments and ACRE payments that were set in the 2008 Farm Bill, and to raise funding for agricultural research, in a year in which discretionary spending was being held in check.

Grandpa was raising corn when the national average was less than 100 bushels per acre, but it seems the 2009 average of 165 took quite a jump upward. The trend yield for 2010 is about 158, and it hasn’t been all that long ago when the average yield was quite a bit less for corn. University of Illinois farm management specialist Gary Schnitkey analyzed yield trends for corn, beans, wheat, and alfalfa, and went as far back as 1960. The good news is that current yields are higher than they were in 1960. The news that causes you to scratch you head is the varying rates at which yields are increasing for those crops.

In his Farm Economics Facts and Opinions newsletter Schnitkey examined the yield trends for Illinois, but they are probably close to representative for much of the Cornbelt. He says growth rates vary tremendously from year to year, ranging from a high of 68% in 1989 (compared to the 1988 corn yield) to a low of -44% in 1988 (compared to the 1987 crop.) On the example of corn, Schnitkey says corn has a 1.9% annual growth rate from 1960 to 2009. Within the 1960’s when corn yields averaged 87 bushels per acre, a 1.9% growth rate equaled 1.7 bushels per year. In the latest decade, when the average yield was 162, the growth rate of 1.9% equaled a 3.1 bushel per year increase.

But that rate was not applicable to other crops. For the past 50 years, the yield growth rate for beans was 1.1%; for wheat was 1.5%, and for alfalfa it was 0.8%. When Schnitkey looked at recent decades, he found that from 1990 to 2009 corn yields increased 22% while bean yields increased 8%. Interestingly, the 1960’s were the decade that saw the greatest yield increases at 4.3% for corn, 2.7% for beans, 3.9% for wheat and 2.5% for alfalfa. The latest decade saw yield advances that were minimal compared to the 1960’s. While corn yields increased 2.3%, bean yields increased only 0.7%, wheat yields declined 0.7%, and alfalfa yields declined 0.5%.

Why would yields in recent years take a second place to yield increases of 50 years ago? Schnitkey suggests that declining growth rates may reflect a change in public priorities away from increased productivity to placing more research emphasis on environmental and other societal concerns. While private funded crop research is quite high tech, it takes a long time to obtain government approval of new technologies that increase yields. And he suggests the “fears” of adopting biotechnology have lead to even longer approval processes. Additionally, he says there is more emphasis on soil conservation, lower fertility rates, and other demands of society that do not result in higher crop yields.

Schnitkey believes that the higher rates of increase in corn yield, compared to beans, wheat and alfalfa, have resulted from the biotech advances in corn breeding, as well as farmer adoption of that technology. The 84% of IL corn acres planted to biotech corn hybrids in 2009 compares to zero acres of that type of corn in the 1990’s. He adds that increased productivity has provided many benefits, including lower food prices for the consumer and high growth rates will continue that trend.

Summary:
Over the past 50 years there have been increases in the yield of major crops, but not all at the same rate. Corn yields have advanced at a more rapid pace than beans, wheat, or alfalfa, but the rate of increase was even higher in the 1960’s than it was in the latest decade. Changes in priority away from productivity may have been the reason as research money was channeled elsewhere. Nevertheless, the yield advances have benefited the consumer with lower costs.

6.2 mil. of unplanted wheat acres and 2.4 mil. acres of expiring CRP contracts will be opened up to other crops this spring and IL marketing specialist Darrel Good says it is difficult to anticipate the magnitude of total planted acreage since it has varied by 13.1 mil. over the past 10 years, but expands in years of high prices and good returns.

Your acreage decision depends on whether fall tillage was completed, extent of rut damage from the wet fall harvest, flexibility resulting from any fall fertilizer application, prospective net returns from competing crops, and if the spring comes early. Read his newsletter.

Darrel Good says it is easier to calculate corn acres required than anticipate farmer thinking. Subsequently, he uses a formula for use to determine US corn needs:
1) A comfortable carryout is 1.5 bil. bu. and Sept. 1 we’ll have 1.764 bil. bu.
2) Consumption may be 13.25 bil., so with the carryout, we’ll need 13 bil. bu.
3) Use a trend yield of 158 bu. that is weather adjusted over the period of 1960-2009.
4) Such a yield would required 82.3 mil acres for harvest, and planted acres of 89.5 mil.

Your unharvested corn is part of the 5% of the national crop still in the field. KS St. economist Dan O’Brien multiplied unharvested acres with state yields and computed the total in: NE, 112.3 mil. bu.; IL, 104.7 mil. bu.; MN, 86.7 mil. bu.; SD, 84 mil. bu.; ND 68.7 mil. bu.; WI, 51.5 mil. bu.; IA 49.6 mil. bu. O’Brien further calculates the total US crop still in the field as close to 665.3 mil. bu.; 630 mil. bu. in the 18 major corn states.

Heavy snow remains in most of the unharvested cornfields, says IA St. marketing specialist Bob Wisner, looking at the western and northern parts of the Cornbelt. The amount of field losses for December corn has not been observable, as well as the amount of grain being lost where the corn remains standing. USDA will be surveying farmers in the next few weeks to prepare an updated report scheduled for release on March 10.

Dan O’Brien at KS St. says snow atop the saturated fields will mean soil moisture problems. He says, “The likelihood of an extended period of extremely wet field conditions during the late Feb. through April is growing more likely. With those prospects comes the associated possibility that farmers will have a difficult time harvesting corn remaining in the field prior to March-April 2010.” Read more.

If all or part of the corn remaining in the field did not make it into the marketplace, how would the grain market respond? O’Brien suggests that a smaller supply would tighten the carryover and reduce the stocks to use ratio. His view is that the average price would rise to $3.85 with a 200 mil. bu. decline, and a $4 average price with a 400 mil. bu. drop.

ACRE payments may be made and may not, and if you are trying to keep track, use the new ACRE payment calculator developed by IL farm management specialist Gary Schnitkey. The calculator will help you project your state yield and the market price for various crops. But to be able to collect an ACRE payment, your own farm revenue must be below the farm guarantee.

Crop budgets will need to include a premium for crop insurance, and how do you know how much to budget? Thanks to Schnitkey’s Crop Insurance Premium Calculator, Cornbelt farmers will be able to determine their premium, based on their state, crop, county, type of crop insurance selected, level of protection desired, and whether you use irrigation. Your premium and guaranteed revenue, and BYE endorsement are detailed.

Diesel fuel budgets will have to be adjusted to reflect higher prices than in 2009. KS St. economist Kevin Dhuyvetter says Feb. prices are about 55% higher than Feb. 2009. April will be about 50% higher than last spring, but the difference begins to decline, since the 2009 prices were climbing. Harvest season prices, based on futures, are 15% more.

SURE, the permanent disaster plan, may provide a payment for crop problems in 2008 or 2009, if your farm was in a declared disaster area and you had crop insurance coverage. KS St. risk management specialist Art Barnaby will conduct a webinar to explain the process of applying. There will be a fee charged for the Feb. 19 webinar. Details.

If you are planting a new biomass crop don’t mothball your sprayer. Biomass crops have their own corps of bugs that will have to be addressed with pest control measures:
1) Switchgrass is attacked by a stem-boring caterpillar that destroys tillers.
2) Miscanthus attracts corn leaf aphids and sugarcane aphids that transmit viruses.

It may change your thinking about no-till or continuous corn, but Purdue agronomist Tony Vyn says young corn plants are shorter in no-till fields and in corn after corn fields because of the competition for nutrients and the fight for water and sunlight. Vyn says a 14% yield loss can be attributed to the competition. What is happening is that, “Leftover corn residue creates patches of soil with lower temperatures and different water and nutrient content. Seeds planted there are at a disadvantage.” Some plants will dominate and grow to their full potential and the dominated plants reduce the overall yield.

Unintended consequences can result with the use of certain herbicides incorporated into newly limed soil. High soil pH can boost the activity of atrazine, metribuzin, and chlorimuron, which is good for controlling weeds, but bad if your crop is injured. OSU weed specialists warn against application of chlorimurons after a fall lime application. Read about several other herbicide label advisories.

Nitrogen loss will be high if urea or 28% UAN is applied to recently limed soils, since the high pH creates ammonia, which evaporates and is lost to the crop. OSU specialists say the problem is worst in warm, no-till fields. Read more.

Where are land prices going? In MN, they are all over the place says MN economist David Bau, who said a survey of 14 agricultural counties found they ranged from 27% higher to 37% lower, with an average of 0.8% higher. He says the driver will continue to be farm profitability, which is determined by grain yields and livestock prices. He expects land prices to increase if cash rental rates rise and interest rates decline.

Your manure pit is full and the ground is frozen. What do you do? There is no law against winter spreading of manure, but a good plan is needed. IL manure specialists have some ideas.
1) Do neighbors have empty manure tanks where yours can be transferred?
2) Only apply to frozen or snow covered ground with a slope of 5% or less.
3) Apply to fields with the best absorption possibilities and least saturation.
4) Apply to fields with some residue or a cover crop.
5) Do your neighbors have such fields and will they accept your contribution?
6) How little can you remove from your manure pits to avert a crisis?

Despite dependence on US economic recovery, the beef industry is in a good position as far as supply goes, says UT livestock economist Dillon Feuz. He says beef and dairy cow herds are smaller, fewer cows will have fewer calves, and fewer feeder calves will enter feed lots next fall, which will help calf prices. He says global economies are also improving and that will support higher prices from the export market consumer. Feuz is also looking for a more profitable 2010 in his newsletter.

Stronger meat demand depends on lower unemployment and economic growth, says MO livestock economists Glenn Grimes and Ron Plain who say that is evident with the 5.7% GDP growth recently reported. They forecast a 4-5% decline in hog slaughter compared to 2008, when hog carcass prices averaged $63/cwt. Supply is dropping, but they say demand has to rise. Read more.

Don’t fill in the manure pits yet, from those abandoned hog buildings; you may need them for the next generation of biofuels production. MO ag engineers outline your plan:
1) Algae are grown in water-filled tanks, reproducing and feeding on sludge.
2) Brine shrimp eat the algae and convert it into a high quality protein and oil.
3) Tilapia fish consume the algae to prevent overproduction and clean the water.
4) Shrimp are harvested and processed, with waste going to an anaerobic digester.
5) Algae-fed shrimp can produce up to 500 gal. of biodiesel per acre per year.
6) Do the research first on the idea. Your lender needs time to get up to speed.

You will laugh so hard, your eyes will water when you read the recount of IL Emeritus agronomist Marlowe Thorne about the 1969 attempt by Univ. of IL protestors to destroy the corn in the Morrow Plots, the historical research field in the middle of the IL campus. Proactively, he welcomed the Viet Nam War student protestors, upset with military use of defoliants, to the “First Student Field Day at the Morrow Plots.” And it gets better! Find it at the “Emeritus Corner” in the January 2010 U of I Agronomy newsletter.

Commodity buyers pass risk down to the farmer. Input suppliers pass risk down to the farmer. And risk is where the buck stops, right at the farm gate. University of Nebraska Farm Management Specialist Doug Jose says some of the old tools to manage risk just don’t work anymore and in the recent issue of Cornhusker Economics he suggests that agricultural managers find a way to position themselves for the new year by focusing on working capital, building business relationships, and tax planning.

The issue of working capital is one of the basic elements of farm financial analysis and helps determine the financial viability of an enterprise. Jose says many operations lack liquidity and have to sell assets to gain some degree of solvency. He says the current financial climate has declared that “cash is king,” and that tells a farmer to measure his working capital. That is the difference between current assets and current liabilities and needs to be related to the cash needs of the business. Jose says if gross farm income is $400,000, then $100,000 of working capital is sufficient, but not sufficient if gross farm income is $800,000. He says some financial consultants prefer to relate working capital to operating expenses and recommend the ratio of working capital to operating expenses be 50%. Jose says if you have too much, your cash is not working hard enough, but if you have too little, there is not an adequate buffer against risk.

Another way to manage risk is enhancing business relationships, which can mutually benefit both parties, and reduce counterparty risk which has become a serious issue. Jose says that occurs when negotiated transactions are not completed and can occur when one entity goes out of business. He also points to fertilizer purchases and says there is counterparty risk to both the farmer and the supplier if the planned purchase falls through for whatever reason. The development of good business relationships may involve the sharing of confidential information with each other, so both entities are fully aware of what is at stake and making a commitment to follow through so both will benefit.

Jose also recommends a thorough process of estate and tax planning, particularly since many farms had record net income over the past two years, but also for livestock operations that have serious financial issues to manage. He says if profits are available, it is a good time to actively invest those for retirement. He urges farmers to investigate the change of traditional IRAs to Roth IRA and check with a tax planner or farm accountant for guidance. He says livestock producers who are projecting low net farm income and have traditional IRAs may be eligible for a tax break.

Summary:
Financial challenges to all of agriculture can become multiplied if crop and livestock operators do not have a good handle on their financial position. Numerous resources are available to serve as yardsticks for measuring financial performance. Working capital is one of those that will help a manager determine if is money is working hard or is insufficient to serve as a buffer against more risk. Additionally the development of business relationships will help parties understand the challenges of the other and the result of failed business transactions. Tax planning is also a key tool to financially manage a farming operation in times of high financial risk.

While it may or may not be a case of “buying sight unseen” the purchase of tractors from used equipment catalogs and on eBay, many farmers have been satisfied buyers and others would not go there under any circumstances. But for those willing buyers who have experience, would you be apt to pay more for the same tractor if it were listed in a catalog or on eBay? Economists Genti Kostandini and Liz Holland of the University of Georgia and Elton Mykerezi of the University of Minnesota researched the determinants for prices paid on eBay and from the Farmers and Consumers Market Bulletin, which is a publication focused in Georgia, in an effort to find out what made equipment more valuable and what made it less saleable. While eBay and local auctions both use the bidding process, auction attendees have an advantage. That advantage is absent with the use of the used machinery catalog, but potential buyers are at an equal disadvantage.

The economists describe the eBay process of how long an item can be up for sale, along with reserve prices and minimum bid increments. Both the buyer and seller are then rated by each other for the benefit of other eBay participants in the future. The online auction also provides a warranty against fraud. The printed Georgia catalog has an 89 year history with items listed up to 28 days.

Researching the listings of 359 tractors on eBay from April to September 2009, the economists also looked at 117 listings in the Bulletin. They interviewed 300 farmers, who were asked for the least price they would accept, as well as complete details about the tractor they had listed. The economists report 34% of the eBay listings resulted in a sale, as did 23% of the Bulletin listings. A 2008 study found a positive relationship among price, auctions ending on a weekend and tractor horsepower. However, there was a negative relationship between engine hours and price.

The economists report the starting price appears to influence the final price on eBay and an increase of $1 in the starting price raises the final price by 29 cents. Online auctions with a reserve price added $1545 to the final price. Seller reputation was not statistically significant, possibly because of the $50,000 warranty available, and only 4 of the 208 auctioned on eBay surpassed that value, with only 1 of them selling. The more bids, the better, say the economists, with one additional bid generating an additional $150 to the selling price. Engine hours and the presence of air conditioning were the top priority for the eBay buyers, with one additional hour lowering the final price by 83 cents, and tractors with air conditioning received an additional $2915 toward the final price.

If the seller is a dealer, that will chop $1429 from the final price. The starting price does not have a significant impact on the final price, and the presence of a reserve price does not generate a higher price. The Bluebook price appears to have a negative effect on the probability of a sale and the longer the auction period the less likely on the probability of a sale.

Results from the printed catalog suggested that John Deere, Kubota, Massey Ferguson, and Long tractors have a higher probability of a sale. But the economists found that the prices generated on eBay for the tractors that sold were not that much different from the tractors sold through the Bulletin. The 2008 study, comparatively, found that eBay auctions draw a significantly lesser price than those at a live local auction.

Finally, the economists compared exact same tractor makes and models with equal hours to determine if tractors in the Bulletin would draw a higher price than what the eBay sellers said they were willing to accept as their least price. One determining factor was distance between the buyer and seller because of cost of inspection and shipping. While there was only a handful of comparable sales, the economists conclude that “this simple exercise suggests that farmers may benefit by using eBay as a potential outlet for their tractors.”

Summary:
While tractors sold at typical farm auctions might bring a bit more than the same tractor offered for sale on eBay, the Internet auction house is not going to see much difference in price for the same tractor that is offered for sale in a printed catalog of used machinery. There are many factors that add and subtract from the value of a tractor in the way it is presented on the Internet auction service, but the final selling price is going to be close to a used machinery catalog, which means the Internet is a useful tool in buying used farm equipment.

Ethanol can be produced from both the wet and dry corn milling industry, since both provide the means to remove the starch component of the corn kernel. But the type of process will determine the characteristics of the remaining product, says Kansas State Economist Daniel O’Brien. His updated research paper is based on November 2009 data from the US Census Bureau and other sources. He says November 2009 saw 90-96 million bushels of corn per month being used in the wet milling industry, a three-fold increase in less than three years. But in the dry milling industry the consumption of corn grew from 105 million bushels per month to 227 million bushels per month.

In the wet milling process, a bushel of corn produces 12.5 pounds of corn gluten feed and 2.5 pounds of corn gluten meal, in addition to the 31.5 pounds of starch which is converted to sugars and alcohol. In the period of May 2007 to November 2009, wet corn gluten feed production increased, but production of corn gluten meal and corn gluten feed declined along with corn germ meal. O’Brien says wet corn gluten feed made up 44% of the wet corn milling co-product, with corn gluten at 30%, corn germ meal at nearly 16% and corn gluten meal at 10%.
1. Corn germ is removed from the kernel and oil is removed from the germ, with corn germ meal remaining. It is 20% protein with an amino acid balance good for swine and poultry.
2. After the starch is removed, the balance of the kernel is composed of bran and fiber which becomes corn gluten feed and can be sold wet or dry as a complete feed for dairy, beef, poultry, swine, and pet foods. Dried pellets are 21% protein. Wet feed is 45% dry matter and is perishable in 6-10 days.
3. Corn gluten meal is starch and gluten that is dried to 60% protein. Some starch can be removed in other processes.

In the dry milling process, a bushel of corn produces 18 pounds of distillers dried grains with solubles. The ground wet corn will have its starch washed out, with distillers, wet and dried grain and dried grains with solubles remaining. Dry mills produced about two billion pounds of distillers wet grains per month in the 30 months prior to November 2009. In the final month of the period 44% of the weight of the co products were in the form of distillers wet grain, along with nearly 39% distillers dried grain with solubles, 14% distillers dried grains.
1. Condensed distillers solubles are 29% protein, and range from 25% to 50% dry matter. It is used as a highly palatable feedstuff to supplement forages. When the feed is subjected to centrifugal force to expel the water, the remaining portion is called wetcake.
2. Distillers dried grains with solubles are a product of the wetcake and the condensed solubles from the stillage process. It contains all of the nutrients in corn except for starch, and has three times as many nutrients as shelled corn. Commonly called DDGS, it is 27% protein, 11% fat and 9% fiber and can be fed to nearly all livestock species.
O’Brien says the availability of the US Census data on the various feedstuffs from the corn milling industry is valuable in establishing feed value, but could become more available on a regional basis. He says changes in the corn milling industry will impact the continued availability of various feed products.

Summary:
Livestock feeders who are challenged with profitability, have a wide variety of corn-based feeds which are widely available around the Cornbelt and may compete with shelled corn. Of the half dozen different products available at wet and dry corn million plants, they offer a wide nutrient profile that a producer can tailor with other feeds to produce an economical, yet balanced ration.

Farmers will automatically respond by saying farmland would have been the better investment. But others will look back on the bullish market of several years ago and point to that as the better choice. Economist Mike Duffy of Iowa State University used a recent newsletter to compare the two potential wealth-building choices. He says since 1990 the estimated average value of Iowa farmland has more than tripled from $1214 to $4371 per acre. On the other hand the S&P Index lost 32% of its value from 2000 to 2008, but its climb from 1990 had been impressive with an increase of over 100% from 1990 to 2009. Duffy went back as far as 1960, and with lessons learned, offers some thoughts about the future.

The value of the investments has to be divided into two parts says Duffy, one of which would be the capital gain or increase in value and the second will be yearly returns. Both may have some fees that have to be paid. For farmland, Duffy says those costs are a farm management fee, taxes, maintenance, and insurance. For both farmland and the stock market, the initial investments bought a specific amount of an investment. In 1960, the average farmland was selling for $261 per acre, so 3.83 acres were purchased, with annual net rent returns being used to buy more farmland. In 1960, a $1,000 investment would have purchased 17.6 shares of the S & P Index. Duffy says annual returns for farmland ranged from 2.8% to 7.9%. For the S & P Index, the annual returns ranged from 1.2% to 5.4%.

At the end of 2009, an investor would have 32.87 acres worth approximately $143,672 or they would have 75.58 shares of the Standard and Poor’s worth approximately $83,805. While that represents only 58% of the value of the farmland investment, Duffy says there are periods since 1960 that returns to the stock market have been higher. He says for the most part, land has shown higher returns over the past 49 years.

Duffy notes that if the investments had been made in 1970, the land investment in 2009 would have been worth $58,456 and the stock investment would have been worth $39,029, with the latter being 67% of the former. If the initial investments would have been made in 1980, the $1000 investments would have purchased only .48 acres of land worth $8314 today or 7.49 shares of stock worth $17,365 today. He says the timing of the investments makes all the difference, and land would have been a better investment in all years except from 1974 to 1984.

Looking ahead, Duffy rhetorically asks what will happen to land investments in the next several years? He says the value of land is determined by its income earning potential and crop prices will have several factors that influence their value, such as oil prices, crop yields, production costs, the economic recovery and other issues. With land being purchased by older buyers, the transfer of ownership to the next generation will mean more landowners and probably more out of state land owners who may want to sell. Duffy says too much land being offered for sale could become a problem at some future time. And he says the performance of the stock market could be a function of the economic recovery and government ownership of companies, with a growing deficit, the balance of trade, and other issues. He says only time will tell whether land continues to outperform the stock market.

Summary:
Depending upon the year when an initial investment was made, farmland might outperform the stock market, and in other years, the stock market would be a better place than a farmland auction to invest your money. In the future farmland prices will depend on crop income, which is dependent upon many factors, including the recovery of the economy. Just the same, the economic recovery will have a great influence on the value of stocks, if you are considering an investment today.

Crop prices have declined since last week’s USDA production and grain stocks reports, causing curiosity if there will be a recovery prior to South American crops becoming available. IL marketing specialist Darrel Good says prospects are less than encouraging. Read more.

Soybean supplies are 322 mil. bu. more than a year ago, but stocks were only 61 mil. bu. more, which means continued heavy exports to Darrel Good. But he says the feed, seed, and residual use is double that of a year ago, which leads him to believe that the 2009 crop may have been over-estimated. He looks for confirmation in late March.

Corn supplies in the stocks report implied a nearly 7% increase in domestic feed and residual use for the first quarter of the marketing year, which Good says is curious because of poor livestock margins and large increases in the availability of DDGS. He says the large level of use may also imply an over-estimate of the 2009 corn crop.

Wheat supplies were also large in the USDA report, and Darrel Good says the large decline in planted acreage offers some opportunity for a recovery in wheat prices during the next marketing year. He says a smaller wheat harvest could allow for a recovery in the SRW basis that has been extremely weak for the past three years.

The lower wheat acreage and additional acres released from the Conservation Reserve may be a problem for the corn and bean markets, says Good. He says a few more corn acres could be needed for the expected increase in the rate of consumption next year, but large soybean supplies growing in South America means no need for more bean acres.

If you have corn to sell, MI St. marketing specialist Jim Hilker suggests monitoring cost of storage, “At this point the market is still saying it will pay for on farm storage, but not commercial storage. Consider watching for 2009-10 pricing opportunities if you still have most of your 2009 corn crop unpriced, and if the market makes a good attempt at filling the recent gaps. These new numbers have great implication for the 2010-11 projections.”

If you have beans to sell, Hilker at MI St. says, “While I don't expect soybean prices to change a much without new information out of South America, consider setting some pricing objective near previous highs, especially if you have a lot of 2009 soybeans unpriced. At this point, unless we have some significant basis appreciation the market is saying it will not pay for storing soybeans, unless you can honestly store for 3¢/mo.”

If you have wheat to sell, Hilker expresses surprise at the bullishness of the wheat seedings report, but admits that ending stocks in June will be nearly 49% of projected use, “How quickly things can change, just two years after the world experienced two years of very poor world wheat crops, and stocks to use levels were lower than at any time in modern history, and the world now has plentiful supplies. I guess that is what happens when you follow two very poor world wheat production years with the two largest world wheat production years and a weaker world economy.” Hilker’s marketing comments for grains and livestock are here.

USDA will pay out claims for the SURE permanent disaster program if you had a crop loss in 2008. IA St. farm management specialist Stephen Johnson says benefits could reach $100 per acre for some farms. He says the better your crop insurance coverage, the more likely you are in collecting a crop disaster payment, if your county is eligible. Read more.

If you are budgeting, and needing help with reasonable costs and revenue projections for a variety of crops, NE economists have assembled a collection of crop budgets on grains, oilseeds, forages, small grains, and other crops here.

Despite 2009, you may owe taxes anyway, believes OH St. specialist Dianne Shoemaker, who says if you are current on bills by using your savings, those expenses are deductible for 2009, but if you have open accounts, those expenses are not deductible. If you are regularly caught in that situation, you might shift from cash to accrual.

Shoemaker says if you used milk income, and sales of cull cows to pay your family living expense, that means your production expense might be in open accounts. Family living expense is not deductible, and your deductible expenses were not paid. Read more.

Foreign consumers are whetting their appetite for US pork, says MO economist Glenn Grimes, “Pork exports during November totaled 383.2 mil. lbs., 11.3% more than 12 months earlier and the largest monthly total since October 2008. Although 2009 pork exports were down compared to 2008, last year was easily the second best year ever for US pork exports. US pork exports in 2010 are expected to be close to the 2008 record.” Find Grimes’ hog market comments here.

The beef market is also going to the export party says MO economist Ron Plain, “For the first month since September 2008, US beef exports were larger than imports during November. The US exported 172.6 mil. lbs. of beef and imported 169.1 mil. lbs during the month. During the first 11 months of 2009 beef exports were 3% lower than in 2008 and imports were 7.5% higher. USDA is forecasting a 10% hike in 2010 beef exports.” Find Plain’s beef market comments here.

Smithfield Foods will close its John Morrell hog slaughter plant in Sioux City, IA in April, but IA St. livestock economist John Lawrence says the 4 million hogs will go to other slaughter plants without much impact, other than higher transportation costs for producers. He says the plant closing will bring slaughter capacity into line with national production levels, and adds that there are 7 other plants within 100 miles of Sioux City. Read more.

Manure digestors may have an expense associated with them, but they may also produce a revenue stream. WI researchers say as more of them are in operation, livestock farmers have increased interest in the production of a marketable soil amendment for non-farm use. In other words, let the anerobic digestor kill the pathogens in the manure, then sell the compost to urban gardeners as soil amendments full of neutral bio-solids. Read more.

2, 4, 6, 8, who needs another trait? That is what IA St. agronomist Roger Elmore is asking, given multiple-traited corn, which he says is “one size fits all.” Elmore says every field is different in some aspect, and every corn farmer manages his cornfields different from his neighbors, which seem to say one seed does not need to do everything. Read more.

Advantages to multiple traits do exist says IA St. agronomist Roger Elmore:
1) Corn with the SmartStax traits can be grown with only a 5% refuge.
2) If the refuge yields are poor, then fewer acres protected the overall yield.
3) Stacking multiple traits for above-ground insects increases the species controlled.
4) More traits for the same pest may delay development of pest resistance.

Disadvantage of multiple traits also exist says Elmore:
1) Refuge areas can produce comparable yields if insecticides control pests.
2) Increasing the traits attacking one pest will not improve pest control or yield.
3) Two traits preventing one pest does not mean resistance will not evolve.

If you have weeds, and there was plenty of opportunity in 2009, then you may need some professional help. And you can find it here. Weed specialists have completed their evaluation of new chemistry and tank mixes, and provide an extensive herbicide analysis, as well as management strategies and recommendations to reduce herbicide resistance:
1) Iowa State University
2) Purdue University

Producers of biomass crops for energy production can obtain payments authorized by the 2008 Farm Bill, however it is limited to crops grown for that purpose and the payment is designed to help offset costs. A production payment could reimburse up to 75% of the cost of establishing the crop. Another program will offset the cost of harvest, storage, and transportation, and would match the market price up to $45 per ton. The program will only be available in certain areas, as yet unannounced by USDA.

The USDA wants to approve the entire process, and requirements call for the operator of the ethanol refinery to certify the process, as well as producers applying for the matching payments. The payments apparently will not be applicable for cornstalks.

Sorghum could be a good crop for refining into ethanol, says Purdue agronomist Gebisa Ejeta, because it produces a lot of biomass and the stalks produce a lot of sugars. However, the World Food Prize laureate says the limitation of sorghum is its lack of regional production. Ejeta says while 18 mil. acres have been grown, it is not centralized. Read more.

USDA statisticians reported significant acreage declines for both hard red wheat and soft red wheat when the Wheat Seedings report was released on January 12. But few people are getting concerned, and certainly not the marketplace. Apparently the fall weather that prevented wheat planting was fortuitous since demand for wheat has fallen. The USDA says exports will be down 50 million bushels in the wake of strong foreign wheat trade, and US ending stocks will be growing along with lower domestic and foreign demand. Is US wheat going the way of oats?

Agriculture Department economists writing in the latest Wheat Outlook describe the abundant stocks, lack of exports, growing carryover, and the $2 drop in prices just since 2008/09. The wheat price was part of the reason for skimpy planted acreage that totals barely more than 37 million acres, according to USDA economists. HRW acreage was less than 28 million, down 12% from last year, and down 700,000 acres in Kansas alone, which is the least since 1957. SRW acreage is under 6 million acres, with record low acreage in IL, IN, MO, and OH. IL acreage is down 59%, a 500,000 acre plummet from 2008/09.

Curiously, world wheat production is up by 2.3 million tons to 676 million for the 2009/10 production year. Russia reports record high production in some regions, along with large production increases in Brazil. With high production also come high global stocks that are expected to reach 196 million tons. That level of stocks has only been surpassed once. Even though consumption has increased, stocks are still expected to reach a 30% ratio with use for the current marketing year, up 18% from two years ago.

Global wheat trade in the coming year will be down only fractionally, while some countries that are exporting more are being offset by others that will be exporting less. For example, “The projected 1.5-million-ton increase in Argentine exports to 3.0 million is offset by a decline in U.S. exports, down 1.5 million tons to 22.5 million.”

USDA economists say, “While the world is awash in wheat, and exporters are becoming increasingly competitive trying to expand into nontraditional markets, U.S. domestic prices remain high enough to weaken U.S. export prospects. High stocks and a stocks-to-use ratio not seen since 1987 seem not to have the expected market effect on prices. It appears that high domestic prices are being supported, in part, by investment activity, with buying grains considered a hedge against future from inflation. Institutional buyers have been rebalancing investment funds at the end of the year, buying wheat contracts, and therefore supporting prices.” Some farmers may rhetorically ask, if prices are above what they should be, how much of a wheat acreage decline would there be if prices were not being propped up by investors?

Summary:
What plantings are at a 97 year low in the US while global wheat production has increased, and global stocks are at a 30% stocks to use ratio. US wheat stocks will grow next spring, despite the low production. US domestic consumption is down, along with foreign consumption of US wheat, but overseas demand is still strong. USDA says US wheat producers will not be much of a player in the global wheat trade during the coming year, in part due to high prices.