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March 31, 2006
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
USDA’s Prospective Plantings Report confirmed the expected shift from corn to soybean acreage, but the shift was even greater than anticipated. Here is a summary:
1) 78 mil. acres are intended for corn, but traders expected at least 80 to 81 mil.
2) If realized, that would be 5% under 2005, and the least since the 75.6 mil. in 2001.
3) 76.9 mil. acres are intended for soybeans, but traders only expected 73 to 75 mil.
4) If realized, that would be 7% above 2005, and the largest ever soybean acreage.
5) 57.1 mil. acres are in wheat, the least since 1971, continuing the downward trend.
Large acreage shifts are expected across the Corn Belt, according to USDA’s report:
1) IL corn acres are down by 700,000 and soybean acres are up by 600,000.
2) IA corn acres are down by 300,000 and soybean acres are up by 300,000.
3) IN corn acres are down by 400,000 and soybean acres are up by 500,000.
4) OH corn acres are down by 300,000 and soybean acres are up by 150,000.
5) NE corn acres are down by 300,000 and soybean acres are up by 300,000.
6) ND wheat acres are down by 1.2 mil. and soybean acres are up by 1.2 mil.
USDA’s Grain Stocks report indicated more corn and beans on hand than at the same time a year ago. Corn stocks totaled 6.99 bil. bu., up 3%. The Dec/05-Feb/06 disappearance was 2.83 bil. bu. compared with 2.70 bil. bu. during the same period last year. Bean stocks totaled 1.67 bil. bu., up 21% from a year ago, and the largest Mar 1 stocks volume ever. Quarterly disappearance was 834 mil. bu., down 10% from 2005.
Reduced corn plantings and rapidly increasing consumption will magnify the importance of the 2006 growing season, says U of I Marketing Specialist Darrel Good. With consumption having the potential to balloon to 11.5 bil. bu. in 2006-07, a crop of at least 10.4 bil. bu. is needed to maintain an ending stocks-to-use ratio of 10%. He says a 142 bu. yield is needed, 5% below a trend yield for 2006. Darrel Good believes prices could be quite volatile during the growing season if periods of adverse weather surface.
Insured acreage is unknown, but USDA has revealed the number of crop insurance policies that were sold, and, for example, IL farmers increased their use of GRIP by 194% for corn and 64% for soybeans. For the 2006 crop year, there was a 6% increase in the total number of crop insurance policies sold for corn and 4% for soybeans, compared to 2005 crops. Nationwide, 1,960,738 policies were sold.
April 14 is the deadline in the latest CRP signup. USDA will match soil types on your land to an index of environmental benefits, based on what you plan to do with the acreage and your proposed rental rate. Visit USDA's website, or consult your local FSA/NRCS staff.
Farmers are among a myriad of managers who supervise employees applying crop protection chemicals. If that includes you, obtain a copy of “How to Comply,” a new publication detailing management’s responsibilities in Worker Protection Standards.
1) Print the manual from EPA's website.
2) Or print a 2-page summary of WPS requirements, instead of the 141 page manual.
If Avian Influenza is a concern, be assured that our food is safe; USDA is keeping ahead of any potential outbreak. Here are a number of information resources to consult:
1) Biosecurity for the Birds
2) Understanding Avian Influenza
3) Purdue University
4) US government website for a pandemic outbreak
5) Extension’s emergency disaster network
What is the WTO, and why does it affect me? Answers to those typical farmer questions are provided by U of I Ag Policy guru Bob Thompson, since world trade is being negotiated at the same time as a new US Farm Bill and will likely prevent renewal of some farm program subsidies. He says LDP’s & CCP’s will be converted into funding for conservation, rural infrastructure, research, or some form of farm revenue assurance. Read his FAQ's here.
This just in…Sen. Ag Cmte Chr. Saxby Chambliss says the delays in settling on new world trading rules are causing him to rethink the 2007 Farm Bill, and extend the 2002 Farm Bill provisions until everyone knows what will be in the new WTO trade rules.
One of the more amazing collections of information to originate at USDA was released this week. It is all of the comments made by speakers at the USDA’s Farm Bill Listening Sessions. Thousands of suggestions were categorized into 41 subject areas. Read them here.
With all the new soybeans that will need a home, it is timely that April is National Soy Foods Month. Soybean promoters will travel widely to tell you how to consume more soybean products. Order a soy foods cookbook at 50% off during April.
The “Good Old Days” were tough in agriculture, and you really don’t want to relive them. But the Illinois Agriculture Historic Preservation Society will rekindle memories. This fledgling group has some artifacts to share, programs to present, and a museum to build someday. Visit its website, and share your information. Oh, yes; pass along this information to Grandpa, and put him in charge of contributions.
Posted by Stu Ellis at 1:24 PM | Comments (0) | Permalink
March 30, 2006
How Would You Reduce Production Costs?
The 2007 Farm Bill has moved to the front burner at 14th and Independence, S.W., in the District of Columbia. The comments of more than 4,000 speakers at 52 USDA Farm Bill Listening Sessions were sorted into 41 pigeon holes and summarized by USDA. The summaries represent the notes taken when those 4,000+ farmers and agribusiness folks stepped up to the microphone at all 52 of the listening sessions around the nation and spoke their deepest convictions about the state of agriculture today. The entire staff of the farm gate writers, researchers, and production assistants (1) will pour over these and USDA’s subsequent analysis papers to provide some early hints at what the 2007 Farm Bill will look like. Yes, Congress writes the legislation, not USDA, but Congressional committees are just beginning their own hearings and are just now learning what USDA heard last summer and fall. ‘That said; let’s find out what the Secretary heard about production costs.
“Many participants expressed concern over rising costs of fuel, fertilizer, and other energy-related inputs. They noted these cost increases were having a negative effect on farm profitability and on the competitiveness of U.S. producers in world markets.” That is how USDA characterized the overall observations on production costs, which should not come as a surprise. USDA economists reported agricultural production costs had climbed nearly 13% from 2002 to 2005, slightly more than prices paid for finished goods as reported by the Producer Price Index. USDA’s estimation of farm expenses included a 61.5% rise in fertilizer and 200% jump in fuel costs. Those increases came when prices received by crop producers were flat when 2005 was compared with 2002. Farmers at the Listening Sessions told USDA such conditions were making it difficult for some farms to continue, and for new people to enter agriculture.
Looking at the inflated energy costs, farmers gave USDA suggestions on “how higher energy and energy-related input costs could be minimized through various incentives or programs (typically through the tax code) to increase renewable or alternative energy sources, achieve greater energy efficiency in production systems, or bolster domestically produced input use.” Some wanted support prices linked to production costs, or payments to offset such costs.
Regarding fertilizer costs, suggestions for relief included:
1) provide incentives to increase domestic production of fertilizer
2) provide subsidies to farmers who reduce fertilizer use.
Regarding energy costs, suggestions for relief included:
1) Stronger promotions for domestic biofuels and solar energy use
2) Fuel tax credit for transporting commodities, or rebates on fuel costs
3) Increased focus on energy reduction and greater energy efficiency
Other novel ideas include:
1) Redesign Direct Payments so they can only be redeemed for purchasing inputs
2) Monitor worldwide input costs, and compensate farmers when US costs are higher
3) Higher subsidies for crop insurance would lower premium costs
4) Provide USDA funding for chemicals that are needed to control invasive species
5) Eliminate government regulations that increase production costs
There were many other novel ideas, some of which will never see the light of day.
Summary:
To its credit, USDA made a significant effort to listen to anyone who wanted to weigh in on the process of creating a new Farm Bill. Anyone could speak, diversity was encouraged, and any idea was welcome. By displaying the thousands of comments, USDA is ensuring that every idea is on the table and up for discussion. Of course, everyone is concerned about production costs increases, so there is no controversy here. However, there are some intriguing ideas both here and on USDA’s website, which will draw fans like iron filings to a magnet. The USDA will not be able to do much to address high production costs other than report aggregate production expenses. It will take legislation from the Congressional Energy committees to do the most good to reduce fuel bills and fertilizer expenses.
Posted by Stu Ellis at 1:40 PM | Comments (0) | Permalink
March 29, 2006
Dragons, White Knights, and Farm Program Policy
If you are going to battle with a dragon, you’d better have some good ammunition. Many farmers have wished for that ammunition when they are confronted by the media or farm program critics who fire away with statistics that put agriculture in a bad light. For most of us, we can only wish for a response that seemingly never comes. But coming to the rescue is a knight on a white horse from the distant land of Massachusetts, where farm program benefits are few and far between. But that doesn’t matter, when the objective is a fair fight on a level playing field, an objective which he shares with Corn belt agriculture.
Tim Wise is a specialist in public policy at Tufts University in Massachusetts, and he’s become concerned about the ricochet of misfired statistics which can wound good agricultural policy. He dispels a half dozen myths about agriculture that are not only heard often in discussions, but are in position to be building blocks for the 2007 Farm Bill.
#1—Counting part time farmers. Of the 2,122,524 (2003 data) farms in the US, Wise says 1.4 million are “are categorized by ERS as Rural Residence Farms. This is a heterogeneous group that includes “Limited Resource” farms, “Retirement” farms, and “Residential/Lifestyle” farms. The main characteristic unifying these three is that the heads of household on these farms do not list their main occupation as farming.” But of the 654,175 farmers who list their occupation as farming, Wise says 54% of family farmers and 67% of large commercial farmers received farm program benefits, which is much more than offered in criticisms by the Environmental Working Group of USDA. Wise concludes, “It remains true that the only farmers who are eligible for commodity program payments are those growing a limited set of most of the largest crops; these notably exclude fruit and vegetable crops. It is also true that these programs are highly skewed, with the largest farmers receiving a disproportionate share of the benefits. But they are not nearly as skewed as some suggest. It is false to suggest that the vast majority of full-time family farmers are excluded from federal farm programs. A significant majority receive such benefits.”
#2—Beware of misleading averages. Wise says the statistic that average farm household income is 118% more than average US household income is incorrect, since farm households includes those above, which are rural homes, but not necessarily farm households. Wise says households must be comparable, and, “small family farmers are the large majority of farmers trying to make a living from farming in the United States. Most of those had farm sales under $100,000. In 2003 they barely covered costs from their farming operations, and even with off-farm earnings they had incomes of only $49,435, (which is) 86% of the U.S. average (for household income).
#3—Look at off-farm income for what it is. Wise says many producers could not survive without off-farm income, but “if our goal is to evaluate the need for and efficacy of farm programs it is misleading to look beyond the farm.” Addressing the cost-price squeeze, he says, “Farmers as a whole have seen nominal prices for their products fluctuate a great deal but remain roughly the same as they were a decade earlier. Meanwhile, the prices they pay to run their farms have risen quite steadily, roughly at the rate of inflation.” As a result, “The majority of family farmers operate on the edge of viability, squeezed between low prices for their products and rising prices for their inputs. They stay above the poverty line by supplementing meager farm incomes with off-farm earnings. Off-farm earnings in effect subsidize farm operations for many farmers.”
#4—Land owners absorb many farm program benefits. Wise notes that “45% of U.S. farm land is rented, and the majority of agricultural landlords are not in farming. It has been shown that landowners capture a significant portion of the value of government payments in their lease arrangements with farm operators. Much of the value of farm payments is ultimately capitalized into land values, so farmers benefit more to the extent they own their land.” However he says, “With nearly half of U.S. farm land leased and not owned by the farmers, it is misleading to assume that farmers are the ultimate beneficiaries of farm programs.”
#5—Farm program payments parallel production capability. Wise says farm program payments should not be an isolated statistic. “U.S. program benefits are concentrated among the largest producers not because they have succeeded in capturing a disproportionate share of those payments but because they control a disproportionate share of the land and production in agriculture and most payments are tied to land or production.” And he adds, “The concentration of farm payments, in this context, is caused primarily by the concentration of land and production in the hands of a relatively small number of large farmers. It may be necessary to address the root causes of this concentration in order to meaningfully address inequities in U.S. farm programs.”
#6—Data on farm subsidies are misleading. Several years ago, thousands of farmers, who had lived in anonymity, were publicly identified by the Environmental Working Group along with the amount of farm program payments they received. Wise says even the EWG admits the data is not perfect. Wise says the EWG identified the top 20 entities receiving farm program payments, but none was an individual family farm. Eleven were corporations or partnerships, 5 were Indian tribes or groups, and two were cooperatives. The other two were a non-profit group and a conservation trust. Wise says, “While EWG states that only 40% of farmers got any payments at all, some 82% of these mid-sized family farmers received payments, and those payments kept them right around the U.S. average household income. Data from the most commonly cited source on farm subsidies suggests that the top 20% of farmers are getting an inordinate share of farm benefits. On closer examination, the top recipients aren’t farmers at all; some are cooperatives and Indian tribes, who share those benefits among their members; others are conservation trusts; some are corporations. These high payments to corporate farms may well represent an abuse of farm programs, but they are neither typical of farmers nor representative of a significant part of the farm sector.”
Summary:
Too often, agriculture is depicted in a bad light, due to public policy that is designed to ensure US consumers have an unlimited supply of high quality, inexpensive food. In return for participating in those farm programs, farmers become a statistic that can be easily skewed in any direction a critic may choose to travel. As the US embarks on debate on new farm policy, agricultural interests must ensure the statistics are used appropriately, and the taxpayer can understand the purpose and returns of US farm policy.
Posted by Stu Ellis at 6:00 AM | Comments (0) | Permalink
March 28, 2006
And What's in Your Grocery Cart?
Just like the declining balance in your checking account or your line of credit, there is a declining balance in US agricultural trade. In 2001, the US exported $13.7 billion dollars more food products than it imported. In 2002, the balance was $12.3. In 2003, the balance was $10.3 billion. In 2004, the balance was $9.7 billion. In 2005, the balance was $4.7 billion. Last November, the forecast for FY 2006 was for a $3.0 billion trade surplus. In February, the forecast was for only a $1.0 billion trade surplus for agriculture. Logically, you can ask yourself, what is happening here?
The bottom line answer is that despite record levels of US agricultural product exports, there has been an increasing level of food products coming into the US from foreign nations. The EU-25, Canada, Mexico, Australia, and Brazil remain the top suppliers of food products in demand by US consumers. Canada ($11B), Mexico ($9.8B), Japan ($7.6B), the EU-25 ($6.8B), and China ($5.4B) remain the top five destination markets for US agricultural exports. Our NAFTA neighbors, plus the European Union regularly trade money and goods with the US and it has been that way for several years.
Looking at the statistics assembled by the USDA’s Economic Research Service (ERS) there is a wide diversity in the product mix that results in the declining balance, not just the loss of beef exports to Japan, or reduced soybean sales.
ERS says exports to Canada and Mexico are currently growing from horticultural sales, but Mexican consumers are demanding a wide range of US ag products. Exports to Canada are up from livestock products, grain, and feed. Trade with Asian countries is up from beef and horticulture, but is offset from reduced demand for US soybeans. Sales of beans are also down to Europe, but that is offset from increased sales of nuts.
On the import side of the ledger, fresh produce has been a major demand commodity during the winter, since domestic fruits and vegetables are not in season. But ERS says alcohol (a true agricultural commodity) is also a product of a finicky consumer. “Beer imports are sensitive to weather changes. At a time when large U.S. brewers have sought to counteract the slide in domestic beer sales by cutting prices, younger consumers and aging baby boomers continue to increase purchases of premium-priced beer, wine, and spirits. Imported wine and wine products, including bulk wine, bottled wine, sparkling wine, vermouth, wine must, cider, and other fermented beverages keep rising largely in response to consumer demand for increased variety.”
There is another anomaly which raises the value of imported products, and that is the increasing cost of sugar. ERS economists say imported confections are costlier, and the import value of cocoa products will climb also. “Just as demand for crude oil keeps world petroleum prices high, world demand for sugar as a base for ethanol production raises prices of products that use caloric sweeteners like candy, cookies, and ice cream.”
In the livestock sector, cattle from Canada and Mexico continue to increase, and most will be feeder calves headed to US feedlots. Both beef import value and volume are down from lower beef prices and smaller expected imports from several markets. Import value and volume for swine and pork are up, comparable to 2005.
While waiting in the grocery check-out line, look at the country of origin of the products that are in your shopping cart:
1) The EU-25 is projected to export $13.6 billion to the U.S. in 2006, supplying processed foods and beverages such as wine and beer, fruit and vegetable products, cheese, olive oil, and snack foods.
2) Canada’s shipments to the U.S. is forecast at $13 billion in 2006, consists largely of snack foods, red meat, fresh and processed vegetables, canola oil, and live farm animals.
3) Imports from Mexico are expected to be $8.6 billion in 2006, led by beer, fresh and processed fruit and vegetables, snack foods, and live animals.
4) The next largest suppliers are Australia at $2.6 billion, followed by New Zealand, Brazil, and China at $2 to $2.1 billion. Australia ships beef, wine, and beer. Brazil supplies tropical fruits, juices, and coffee beans. China exports processed fruits and vegetables, juices, snack foods, fresh vegetables, tree nuts, spices, and tea.
Summary:
For years, farmers have been praised for their efforts in producing the exports that reduce our trade imbalance. Bask in that praise while you can, since that scenario may soon be history. Even with a record high value of exports in the wake of reduced soybean and beef exports, the ag trade surplus is being threatened by the hunger of US consumers for imported products. During the balance of 2006, the demand for fresh fruits and vegetables will be supplied domestically. But when USDA issues its forecast for 2007, the agricultural trade balance may well be a negative number, just not as big as the imbalance for non-farm goods. This may be only a small part of a bigger economic picture, but may give rise to a number of policy issues, such as country of origin labeling, foreign market access, and monetary policy.
Posted by Stu Ellis at 2:44 PM | Comments (0) | Permalink
March 27, 2006
The Crop Scouting Season Is Upon Us
The full impact of our warm winter temperatures will not be known, but one of the first warnings coming from researchers is to be on the lookout for corn flea beetles, which should have overwintered nicely, thank you. Once your seedlings are up, flea beetles will descend, scratch the leaf surface, and infect the plants with bacteria that will cause a disease known as Stewart’s Wilt. If your operation has had mild temperatures this winter, read on…
There are two issues here: the insects and the bacterial wilt. Depending on whether you produce commercial hybrids, seed corn, or sweet corn, you will have a varying interest in these issues. But depending on where you farm in the Corn belt will also determine your need to beware.
Let’s first look at the geography. Examine the temperature maps that indicate the potential for a severe outbreak. That area includes all of Missouri, the southern halves of Illinois and Indiana, and nearly all of Ohio. North of that territory is probably safe from a severe outbreak, but farmers should beware of the potential for some damage.
Flea beetles—scouting
Agronomists at Ohio State recommend scouting several times per week as corn spikes emerge, when they are most susceptible to the flea beetle activity. If your corn is not tolerant to Stewart’s Wilt, Ohio State says, “The suggested action threshold for wilt-susceptible varieties is low: treatment is suggested if there is an average of 6 flea beetles per 100 plants. The suggested action threshold for wilt-tolerant varieties is much higher: treatment is suggested if there is an average of 2 beetles per plant and 25 percent of the stand is damaged by heavy leaf-feeding.”
If you don’t have the time, use yellow sticky traps as your hired labor. Mounted 2 feet above the ground, 9 feet inside the field, your threshold for action is 8.5 beetles per trap per week.
The prediction for potential problems comes from the average temperature for the past three months, known as the flea beetle index. Ohio State’s Crop Observation and Recommendation Network (CORN newsletter) says, “For those growers wishing to take preventive action against flea beetle, commercially applied insecticide seed treatments Cruiser and Poncho, or the grower applied products Concur and Latitude, are labeled for flea beetles.”
Disease—treatment
University of Illinois agronomists say, “During the feeding process, adult flea beetles disseminate the bacterium which accumulates in and clogs the vascular system of the plant, affecting water and nutrient movement. Susceptible corn plants may become infected by E. stewartii at ant time during plant growth, and two phases of Stewart’s wilt will occur on corn. Some plants are infected in the seedling stage, whereas others may not be infected until tasseling or later. Most varieties of commercial field corn are resistant to the wilt phase of this disease while many are somewhat susceptible to the leaf blight phase. However, many seed corn inbreds and sweet corn hybrids have varying susceptibility to Stewart’s wilt.”
Sweet corn can become infected early and either wilt or have stunted growth. If the infection is not until later, harvest will already have occurred and the disease is a non-factor.
Management—Seeds and insecticides
Plant resistant hybrids. If you cannot, delay your planting date to avoid the flea beetle emergence in the spring. Scout early and often, consider seed treatment and foliar insecticides. “Systemic seed treatments provide early season control against the corn flea beetle. The use of systemic seed treatments has been shown to reduce corn flea beetle feeding and Stewart’s wilt infection.”
Management--scouting
There are two phases of Stewart's wilt: seedling wilt and leaf blight. "The seedling wilt stage occurs when seedlings become infected at or before the V5 stage. The growing point is easily infected. The vascular system becomes plugged with bacterium, causing the seedling to wilt, become stunted, and die. Infections of older corn plants usually result in the development of the leaf blight phase of Stewart's wilt. This phase is characterized by long, yellow to chlorotic streaks with wavy margins along the leaves. The late infection phase, or "leaf blight phase," of Stewart's wilt occurs after tasseling and is generally not a concern in sweet corn because ears are harvested before damage occurs."
Photographs of flea beetle damage and Stewart's Wilt infection
Iowa State’s recommended economic thresholds for flea beetle control with a foliar insecticide are as follows: “In commercial hybrid corn prior to stage V5, 50% of plants with severe feeding injury and five or more beetles per plant; in seed corn on susceptible inbreds, 10% of the plants with severe feeding injury and two or more beetles per plant. Several insecticides are registered. The thresholds originally were based on insect feeding damage alone; therefore, somewhat lower thresholds may be appropriate for genotypes very susceptible to Stewart’s disease.”
Summary:
Warm temperatures the past three months have provided a good opportunity for problems with flea beetles in early corn. Flea beetles transmit a bacterial disease known as Stewart’s wilt. While many commercial hybrids have resistance, some hybrids do not. Also susceptible are inbred seed corn lines, and sweet corn. Scouting should be a priority, and if the flea beetles are above economic thresholds, rescue treatments are available. There are also other management options, including delaying planting dates.
Posted by Stu Ellis at 4:02 PM | Comments (0) | Permalink
March 24, 2006
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
Statewide, March 2005 through Feb. 2006 has been the driest March-Feb. period in the last 75 years and the 3rd driest since 1895, says the IL Drought Task Force. “Much of northern and western IL remains in a severe drought. Streamflows increased temporarily, but have declined. Water levels in reservoirs in western and central IL have increased, but are still below full pool. Soil moisture below 20 in. and shallow groundwater levels remain below normal and are causing low baseflows in rivers and streams.”
What about 2006? The IL Drought Task Force says indicators point to the possibility of a dry summer and it expects a more rapid deterioration in water resources than occurred in 2005. The Task Force says southern and east-central IL are drought free. Read the Task Force report.
You don’t know your well is low until it goes dry. If you are concerned enough to start conserving well water, begin with laundry, showers, and toilets, which consume 80% of your household use. Decreasing water usage in these and other areas will reduce overall water needs. More.
900 mil. bu. and dropping. That is the USDA forecast for soybean exports, and Darrel Good hints USDA may be optimistic. The U of I marketing specialist says, “As of March 16, exports totaled about 671 mil. bu., 200 mil. less than on the same day last year.” China’s purchases, 46% of all soybean exports, are running 22% behind the pace of 2005.
Darrel Good says the soybean crush is 2.2% better than last year, with good export demand for meal, but protein content was down for the 2005 crop. Subsequently, the oil content was up, and oil stocks are at record levels in the face of soft oil export demand.
Darrel expects USDA’s report next week to predict 74.1 mil. planted acres, which is 73 mil. harvested. With normal weather and a 42.8 bu. trend yield, production would be 3.124 bil. bu. If consumption exceeds the 2.782 bil. expected this year, ending stocks in August 2007 would be 670 mil. Darrel Good says stocks at that level would be a $5.30 average marketing year price, based on the speculative demand seen for the 2006 crop.
Don’t check your calendar for the first bug infestation; check the IL degree-day calculator website which indicates the amount of heat units that have been available to hatch insect eggs. Visit the website. Select an insect, select a reporting station near you, and have it predict your area’s insect egg hatch.
When your crop scouting detects insect problems, visit the U of I insecticide website, which evaluates alternative products and applications. The 2004 & 2005 reports cover corn rootworms, Japanese beetle grubs, soybean aphids, two-spotted spider mites, corn earworms, black cutworms and bean leaf beetles.
Farm program payments are under pressure from budget deficits and world trade reform, and a reduction would impact land prices, says U of I ag policy specialist Bob Thompson, “There is a great deal of concern about cash rents. They’ve been blown all out of proportion because of the capitalization of the farm program payments and 1031 exchanges into the price of land. Now, would land prices crash if we had a significant change in our farm programs? I think it depends entirely on how they would be done.”
Federal funding is ending for the AgrAbility Unlimited program which provides appliances to allow disabled IL farmers to continue farming, as well as help older farmers with arthritis, heart problems, blood pressure and back problems continue working. 70 volunteers work the state and provide assistance. IL lawmakers last year unanimously passed the IL AgrAbility Act, but did not appropriate any money for it.
What does test weight have to do with the quality of soybeans? U of I grain quality specialist Lowell Hill says “not a thing,” and he’s glad USDA is considering a change. Hill says test weight is “informational,” along with moisture, seed size and hylum color.
Soybeans should be graded only on foreign material, fines, broken kernels, and total damage, defined as mold or any bacterial deterioration, discoloration or damage by heat, says Lowell Hill. Also included would be acid value, as currently measured and reported as milligrams of potassium hydroxide per gram. Hill suggests that non-grade standards for soybeans could include compositional attributes such as oil and protein where the optimal levels might differ depending on price relationships and the end use.
Impact, Inteon, Stout; what are they? U of I weed specialists have analyzed the new products on the market, identifying their blended ingredients, and giving guidelines on application rates and timing. Visit the website.
Fuel #1. U of I researchers have developed a new way to dry mill corn, which uses less energy, yields more ethanol, and results in two new high value products: corn germ and corn fiber. These two products are separated from the corn starch before it is fermented.
Fuel #2. The new U of I ethanol production process increases the value of corn, since the germ and fiber can be recovered. Ag engineer Vijay Singh says corn germ sells for 11-15 cents per pound; corn fiber oil sells for $8-10 per pound. With the conventional dry grind corn milling process, the distillers dried grain (DDGS) is valued at 3-4 cents per pound.
Fuel #3. Another U of I researcher is taking the corn fiber from the distillers dried grain, and using it as a feedstock to produce an even higher octane corn-based fuel. With the help of bio-engineered bacteria, costs have been reduced in the production of butanol, which does not absorb water like ethanol and can be transported by pipeline.
Posted by Stu Ellis at 4:07 PM | Comments (1) | Permalink
March 23, 2006
No Seedling Vigor? What's Lurking in the Shadow of those Clods?
Are you a little foggy on the definition and purpose of a “bioassay?” You’ll not only want to learn what it is, but will want to do one, particularly if you had some droughty conditions on your farm last year. If you were short on moisture in the 2005 crop year, one of your concerns this spring should be the potential for your crops to get stung by the herbicides that may still be lying in wait in your fields. Corn doesn’t typically grow well in the presence of soybean herbicides, and soybeans really don’t like your weed control program for corn either. Yes, glyphosate may be an exception where you plant both Roundup-Ready corn and soybeans, but if there are some other weed management chemicals present, be prepared for seedling damage if you were dry in 2005.
Herbicide carryover can devastate your revenue, about as much as a large carryover of corn or soybeans. But the impact of herbicide carryover is something you can control. Weed scientist Kevin Bradley at the University of Missouri says, "Depending on where you are in the state, carryover could be an issue.” His colleague, Aaron Hager at the University of Illinois agrees, and adds, “Reduced weed control was one obvious outcome of the dry growing season, but herbicide degradation and dissipation also can be reduced when soil moisture is limited. Reduced herbicide dissipation in soils may result in herbicide residues high enough to injure susceptible rotational crops.” Specifically, the crops you are planning to plant in a few days.
Hager says, “Dry soils can enhance herbicide adsorption to soil colloids, rendering the herbicide unavailable for plant uptake and degradation by soil microbial populations. Some herbicide rotational intervals are increased if a specified amount of precipitation is not received by a certain date.”
Bradley says the lack of rainfall is one issue, but the herbicide is another. "The type of herbicide applied to the previous crop is one of the most important factors that will determine the likelihood of injury." Consider the potential damage on soybeans from the atrazine you used on the corn in that same field last year. “Herbicide application rate and timing may influence the likelihood of injury to the 2006 soybean crop. In general, the higher the rate and the later the application, the greater the risk of injury. If a producer made a late atrazine application last fall, there may be concern about planting soybeans in that field this year."
If you are planting corn in last year’s beans, your glyphosate is a non-issue because of its degradation. But if you used other herbicides, Bradley warns, “Carryover is possible with protox-inhibiting herbicides such as Reflex or Flexstar." And Hager says, “Harmony GT XP (thifensulfuron) and Classic (chlorimuron) are both in the sulfonylurea herbicide family, but Classic is inherently more persistent in the soil. Rotational crop-planting intervals range from 0 to 45 days after application of Harmony GT XP, while the range is 0 to 30 months for Classic.”
So how do you know if you are going to suffer from herbicide carryover? Hager says look at the labels of the chemicals you used last year. That will give you a good idea. For safety, Bradley suggests doing a bioassay. "Collect soil from the field you suspect and from one you don't, plant soybeans in it, and see what happens," he said. "A little experiment like this can help avoid a 1,000-acre mistake." And Bradley says, “If there is carryover herbicide present, the injury will appear as yellow-white blotches on the interior of the first true leaf. If you see this, plant corn in that field, and don’t even fool around with it."
Step-by-step instructions on how to set up an herbicide bioassay experiment can be found online.
Summary:
Not every Cornbelt farmer will be affected by the potential for herbicide carryover in 2006. However, it is a real problem for row crop farmers in the plains, and parts of Missouri, Iowa, and Illinois. If your soils were dry, and herbicides were applied late, it is better to be safe than sorry when you are counting on your crop to emerge with vigor this year.
Posted by Stu Ellis at 8:16 PM | Comments (0) | Permalink
March 22, 2006
Walking Soybeans: Yesterday and Tomorrow
Most of us have memories of walking soybeans. With the advent of glyphosate-resistant soybeans, you thought those days were only a fleeting memory and something you could describe to your grandkids. If the trend continues, your grandkids may be walking beans, too, and maybe even the current farming generation. More and more weeds are appearing in Roundup-Ready bean fields throughout the Cornbelt, and that is upsetting to farmers who’ve gotten used to seeing clean soybean fields.
This edition of the farm gate will focus on the increasing numbers of marestail, giant ragweed, and lambsquarters that are being found in bean fields, and then offer some strategies for addressing your problems. If you find this helpful, thank Mark Loux and Jeff Stachler at Ohio State University.
The OSU weed whackers say, “We know that some instances of poor control can be attributed to generally poor management of glyphosate, due to the tendency for some growers to over-simplify their approach to weed management in order to reduce the number of applications and costs. Lambsquarters and giant ragweed can both be generally tough to control with a single postemergence treatment. Growers who omit preplant burndown treatments, apply when weeds are large and old, and use rates too low for the weed size and age, place themselves at risk for control failures.” Whether or not that applies to your situation, let’s shift away from the blame, and talk about how serious the glyphosate resistance might be. “While we typically observe about an 8X level of resistance to glyphosate in marestail, our greenhouse research indicates that the level of resistance in lambsquarters and giant ragweed is more on the order of 1X to 4X. So, plants can survive glyphosate rates up to 3 lbs ae (acid equivalent) of glyphosate per acre, but they usually suffer substantial injury even at lower rates.”
Don’t quit farming just yet! Loux and Stachler say, “The expression of the low level of resistance is variable, so that the resistant populations may be controlled under appropriate management of glyphosate (small plants, high enough rate, multiple applications) and when environmental conditions are favorable.” Develop a system for weed management that does not rely solely on glyphosate in both corn and soybeans. The OSU report recommends, “reduce the reliance on glyphosate alone for weed control), such as rotation of Roundup Ready systems with non-Roundup Ready systems, use of tillage or a multiple-herbicide burndown program to start the crop weed-free, use of preemergence herbicides, and combination of glyphosate with other postmergence herbicides.”
Now, that is the overall system; but what about specific treatments for each of those three weeds?
1) MARESTAIL (horseweed) Apply burndown herbicides when plants are small – less than 4 inches tall. Refer to the cited newsletter for recommendations on pre-plant burndown, as well as strength of glyphosate, and what to do about a post emergent treatment.
2) LAMBSQUARTERS - Most effective preplant burndown results from a combination of glyphosate plus 2,4-D ester. Refer to the cited newsletter for recommendations on pre-plant burndown, as well as strength of glyphosate, and what to do about a post emergent treatment.
3) GIANT RAGWEED - Most effective preplant burndown results from a combination of glyphosate plus 2,4-D ester. Refer to the cited newsletter for recommendations on pre-plant burndown, as well as strength of glyphosate, and what to do about a post emergent treatment.
Summary:
If you have marestail, giant ragweed, and lambsquarters in your soybeans, your neighbor probably has them as well, because of their growing resistance to glyphosate. Your plan of action should be to blend weed management systems, as well as create a burndown and postemergent treatment plan that includes herbicides with other modes of action along with your glyphosate application. Without a strategy for success, you will spend a lot of time trying to find a hardware or farm supply store that still carries weed hooks.
Posted by Stu Ellis at 4:00 PM | Comments (0) | Permalink
March 21, 2006
Growing Your Farm Income, Without the Challenge of Marketing
What is your job in this world? Is it growing corn and raising hogs, or is it producing revenue to feed and clothe your family? If you don’t know, ask your spouse. Now that you have the correct answer, let’s continue this conversation, which may have begun with your lender earlier this year; and that next question is: Are you efficient at using assets to generate income? Sure, you can only raise one crop of corn in a given year, and only one pig can occupy a given space at a time. But how many pieces of your machinery are sitting idle in your machine shed unless you are using them on your fields? If the answer is “all,” this conversation has a long way to go. Sit back, warm your coffee, and let’s talk.
A wise old fellow (he only looks older than I do) once taught me about “asset turnover ratio,” which indicates how efficiently you are making money with your assets, such as land, equipment, and financial resources. We’re not going to delve into your financial records today, so don’t pull up your spreadsheet. But think about the machinery assets you have which could be generating more income if they could be put to work. The direction we’re going will get you into the sideline business of custom farming for fun and profit. (It’s no fun, if you don’t make a profit!)
The guaranteed way to make a profit is knowing your costs in owning and operating the equipment that could be used to generate revenue. You should know your costs. But if you don’t, work on that issue another day, and let’s get some ball park numbers that will get you where you need to go. Ag economists at Iowa State ran some calculations after numerous interviews with folks who performed custom work, others who hired it, and others who were on both sides of the transaction. He provided an extensive list of custom farming tasks, not just tillage, planting and harvesting. The list also includes snow plowing, crop scouting, power washing, and fence building.
The Iowa State resource also includes instructions for calculating pure machinery rental rates, so the custom farming rates can be broken down into their basic formula elements.
University of Illinois provides a variety of fact sheets that identify machinery costs and expenses. Those fact sheets are for forage, tractors, harvesting, and field operations. Use these fact sheets to build your own machinery cost analysis. With the detailed breakdown of costs, modifications can be made to fit your farm. If you use these fact sheets to charge someone for custom operations, be sure to add 15-20% as a return to labor and management (also known as profit.) Without that, you will be farming for nothing, literally and figuratively.
Since fuel prices have risen substantially since the U of I fact sheets were prepared, authors Gary Schnitkey and Dale Lattz, provide suggestions for modifying those costs based on increased fuel costs.
If you want to develop your own means of calculating machinery costs, try the free software available from Ohio State University. University of Illinois Extension also has a similar software program available.
Summary:
After serving quality time sitting in the county ag advisors chair, one of the most frequent questions was from landowners wanting to know what it would cost them to have a particular farming operation done on their property. That means the farm operator with idle machinery is in demand, and has a potential market if you have the drive to pursue it. Those who should be pursuing such relationships are young farmers wanting land to rent, and older farmers, who may have lost farmland in a cash rent bidding war. There is nothing wrong with custom farming, except undercharging and losing money.
Posted by Stu Ellis at 2:05 PM | Comments (1) | Permalink
March 20, 2006
Green Acres: In More Ways Than One
With current US budget deficits, pressure is on Congress to reduce farm program payments, despite the current state of the farm economy. And with the current negotiations for improved trade access, pressure will be on the US to curtail many farm support programs, despite the current state of the farm economy. With two lightning rod issues that have the potential to send a jolt into the pants pocket of many farm operators, alternatives have been suggested that would base farm income transfer programs on conservation practices. While many Cornbelt farmers receive substantial commodity program payments, will those same folks qualify for “green” payments? USDA’s Economic Research Service has some doubts.
In a five part series of briefing papers, the economists at USDA’s Economics Research Service looked at the ins and outs of a major shift in US farm policy. In a report that focuses on potential tradeoffs in combining income support and environmental objectives in a single program, ERS said, “If policymakers choose to focus green payments on the current recipients of farm income support, these payments would not address the same environmental issues or direct funds to the same producers as current conservation payments. In 2003, only 43% of conservation payments went to farms that also received commodity payments.” Any shift would be a significant redistribution of payments, and ERS says soil erosion problems may still not be solved, “Building green payments around commodity programs would risk excluding some producers who face environmental challenges, particularly in the livestock sector. On the other hand, starting with conservation programs could lead to a significant redistribution of income support efforts.”
If a shotgun approach is not going to work, what about targeting program payments to where they can yield the greatest gain? Targeting, specifically, would involve:
1) Eligibility, such as land that has a particularly high environmental value.
2) Incentives, such as providing higher payments for higher quality land.
3) Ranking, which would base eligibility on a variety of environmental benefits
4) Overall cost, which may exclude some participation because of high costs.
5) Geographic, which would determine if a program were applied nationally or statewide.
The ERS staff believes, “Targeting mechanisms have helped conservation programs deliver greater environmental benefits by choosing program participants based on criteria that reflect program goals. Since 1990, when targeting schemes were initiated in the CRP and EQIP, program managers have become more sophisticated in designing targeting schemes that achieve a wide variety of environmental and social goals.” The report suggests that targeting could have a better impact, if better data existed, public preferences were known, and the public’s perception of long term change.
Since the Conservation Reserve Program began with the 1985 Farm Bill, landowners offered to set aside those acres, based on a submitted rental bid, which the USDA could either accept or reject as costing too much for the benefit achieved. One of the five ERS reports examines the potential benefits of allowing farmers to "bid" for the activity they will undertake and the level of payment they would receive for it. One immediate problem is the fact fewer bids have been submitted, and that results from the fact that USDA’s acceptable rental rates have remain static for the past 10 years, while land prices have gone up. The ERS analysis of the bidding process indicates it is still a workable one that provides the most cost effectiveness, “So it is bidding for costs, allowing farmers to submit the payment levels they would require under their contract that holds the most untapped potential for enhancing conservation program cost effectiveness. If farmers compete for limited funds through such bidding, the cost effectiveness of the enrolled contracts would be higher. Furthermore, the cost to program managers of determining the appropriate payment levels for eligible practices on participating farms would be much lower. The end result would be more environmental gains for each conservation dollar spent.”
The next issue for debate is whether land should be permanent retired, or focus on environmental “fixes” on land that will remain in production. The Economics Research Service says, “Use of conservation practices on working lands may achieve environmental benefits at lower program cost (less than the full agricultural value of land), since land remains in production. A wide range of environmental concerns can be addressed on the vast area of U.S. farmland and ranchland in active production, subject to funding availability. Improved practices can help maintain the long-term productive capacity of agricultural resources and the viability of agricultural activities.” However the conclusion is there needs to be a combination of both initiatives, “All of these measures suggest a trend toward greater integration of working-land and cropland retirement initiatives. A comprehensive policy that better integrates land retirement and working-land initiatives offers the prospect of enhanced cost-efficiency in achieving conservation goals.”
Finally, public policy should decide whether farmers will be paid for conservation practices or to link payments to environmental performance. USDA’s ERS says, “None will achieve the same potential environmental gain and cost savings as a “pure” performance-based program. But with careful design, the costs and benefits of practice-based programs can be improved significantly.” USDA’s research has found “A $1-billion program with payments for improved performance produces over 5 times the reduction in soil erosion (nearly 110 million tons versus 20 million tons) than if payments are provided for good performance. Further, the advantage of the “improved performance” program increases with program size.”
Summary:
If, and the “if” is big, farm policy shifts to conservation-based income transfer programs, which would be more acceptable to the US taxpayer and not be lightning bolt for trade complaints, many farmers will find themselves in a vast new world of the unknown. While most of the Cornbelt now has updated soil maps, and with the help of GIS programming, the transition will be eased. However, if Loan Deficiency Payments still exist, they will certainly have a “green” requirement attached to them.
Posted by Stu Ellis at 4:22 PM | Comments (0) | Permalink
March 17, 2006
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
Happy Holiday to one and all! No, not St. Patrick’s Day; but National Agriculture Day! Monday’s observance culminates year-long preparations by your industry to tell your story: http://www.agday.org/ . Hitch up your getalong, snap your galluses, and be proud!
1) Agriculture is America’s #1 export, worth $43.5 billion, and 1/3 of crop acres.
2) US consumers spend the least percentage of their annual income on food, only 9.3%.
3) Farmers use reduced tillage practices on more than 72 million acres to prevent erosion.
4) More than 15 % of the US population is employed in farm or farm-related jobs.
You are to be saluted and thanked from the bottom of everyone’s heart (and stomach!)
US corn exports are now projected at 1.9 bil. bu., 50 mil. more than projected last month and 86 mil. more than exported last year, says Extension’s Darrel Good. And he adds, “The robust pace of export sales suggests we might still exceed 1.9 bil. bu. for the year.
Domestic corn use will be revealed 3/31 in USDA’s Stocks report. Darrel Good says, “If use this year is following a typical pattern and use is on track to reach the USDA projection of 6 bil. bu. for the year, use during the Dec-Feb period should have been near 1.6 bil. bu., about equal to that of a year ago. Processing is more predictable, and Darrel says if the trend holds, we will use 727 mil. bu. in the Dec-Feb period, 90 mil. over ’05.
March 31 is also the release date for USDA’s planting intentions report, and Darrel says the market expects a decline of 1.5-1.7 mil. corn acres. Planted acreage of wheat, cotton and especially soybeans is expected to exceed 2005 acreage. Darrel Good says with such large US & world surpluses of beans, “It is a little surprising that the markets are not aggressively discouraging an increase in soybean acreage.” (Bidding down bean prices.)
Total corn use this year will be near 10.9 bil. bu. and maybe 11.5 bil. next year. Darrel projects stocks at the end of the next marketing year at 1.75 bil. bu., given current expectations. An inventory at that level would project an average farm price of about $2.15 per bu. Extension’s Good says the CBOT currently reflects a price of about $2.50.
Corn yields still have downside potential. That is the analysis of U of I Extension Farm Management Specialist Gary Schnitkey, who says many counties in NE & western IL had yield losses last year greater than 10% below trend. 2005 was the biggest shortfall since 1995 for many, and he says central & eastern IL counties have not had a large yield drop recently. His analysis suggests it is only a matter of time before that happens (in any location that has not recently suffered from drought).
Schnitkey adds, “It is clear that improved and genetically modified hybrids have increased trend yields over time. It is not clear that percent yield shortfalls are reduced by improved hybrids. Having said that, some of the yields in northern and western counties may have been worse, had improved or genetically modified hybrids not been in use." Read his newsletter.
Commodity fund traders have been an important element in supporting soybean prices during the last several months despite large supplies, says Bob Wisner at Iowa State. He adds, “Whether fund traders can insulate prices from negative market fundamentals during the late supper and fall remains to be seen. Someone will have to store and finance the large carryover stocks (barring widespread weather or disease problems). That job, with current farm programs, has to be done by farmers and their lenders. Ag lenders historically have been uneasy about financing long-term storage of grain when prices are well above government loan rates and there is no protection from lower prices.”
Anyone producing soybeans will want to attend the “Science of Soy” forum, 3/27 at the Urbana (IL) Holiday Inn. Topics include: SCN, livestock nutrition, soybean breeding, weed management, biodiesel, Asian rust, & biotech. Registeror call: 888/826-4011.
If soybean rust is a concern, consider the message of Billy Moore, an Extension Plant Pathologist at Mississippi St. Univ. He says fear mongers had predicted yield loss, but,
1) The EPA has acted expeditiously in approving new fungicides, unseen in 40 years;
2) There have been no turf battles between northern and southern producers;
3) Extensive publicity efforts have kept growers well-informed about the disease;
4) For the first time a lot of farmers have begun scouting fields to see what’s happening.
Survey results of 1,300 Indiana farmers indicated 67% are planting soybeans 1-3 weeks earlier than they did 10 years ago, say Purdue agronomists. However, the earlier planting is occurring in the central and northern parts of the state, not in southern IN. Respondents said yield improves with earlier planting, and weather was reason #2.
The latest case of BSE was just a 24-hour news event says Purdue Marketing Specialist Chris Hurt, and should not undermine beef prices or export volume. He says keep BSE in perspective: Testing began in 2004, 50 mil. head have been processed, 3 cases found.
If you have cattle, IL Extension Beef Specialist Justin Sexten strongly urges rotational grazing which utilizes 35-50% of available pasture. If cows move every 7 days to a new pasture, you increase forage production by 50-60%. Overgrazing is cut, forage yield and quality are increased, along with better gain per acre and better manure distribution.
Round numbers: A new ethanol plant will be constructed in ND by US BioEnergy, which will produce 100 mil. gals. of ethanol annually. In doing so, it will use 37 mil. bu. of corn (2.7 gals. of ethanol per bu.), and produce 320,000 tons of distillers grains.
Ag Ed folks are telling their story at the IL State Capitol, saying agriculture is the largest IL employer, 25% of the IL civilian workforce is employed in ag; 69% of IL job growth is related to agriculture, and 9% growth is projected in the next decade. Ag Ed enrollment has doubled over the past decade to 26,488; 55% are urban students, 34% are female.
Posted by Stu Ellis at 1:04 PM | Comments (0) | Permalink
March 16, 2006
The Tractor Seat Bounce: How High Will It Go? Will There Even Be One?
When you head to the field in the spring, what happens to the market? That “tractor seat bounce” usually occurs. Will it happen in the corn market this year? Will it happen in the soybean market this year? Several of the prominent Extension Marketing Specialists have been focused on outlook recently, and we’ll visit with them to see if you should leave some sell orders with your elevator manager.
At Purdue, Chris Hurt is optimistic about corn prices, albeit with some qualifications. “Price prospects for corn continue to improve as usage grows; however, there remain massive old crop stocks that will continue to constrain price increases. The growth in usage is driven by robust foreign purchasing of corn since mid-January and by the rapid expansion of ethanol capacity.” Chris says USDA continues to push upward its projections on corn exports this year, and ethanol plant construction is at a feverish pace with good profit margins for ethanol producers. But he also says the USDA report at the end of the month could be bullish for the market also. “Watch the Prospective Plantings report on March 31. That is likely to show the intentions to plant corn as down 3% or more this spring with soybeans up 4% to 5%. This may result in new crop corn prices moving upward in relationship to new crop beans such that final corn acreage is closer to a 2% reduction.” He feels cash corn will be modestly higher into May.
If you talk to your elevator manager, Chris Hurt believes “The December futures target can now be raised to $2.60 per bushel with a reasonable likelihood to see $2.70 this spring. Prices above this level would likely require further weather concerns this summer. Also keep in mind that my “best guess” of harvest prices with a normal weather this summer is for December futures to be in the $2.10 to $2.25 range. Thus, current new-crop pricing opportunities may be $.40 to $.50 higher than where we may be in the fall if reasonably normal weather occurs.”
If you are modifying your marketing plan, Darrel Good at the University of Illinois suggests looking at some of the details in USDA reports and watch for trends:
1) The robust pace of export sales suggests that exports for the year might still exceed 1.9 million bushels by 20 or 25 million bushels.
2) If domestic consumption (feed, etc.) this year is following a "typical" pattern and use is on track to reach the USDA projection of 6 billion bushels for the year, use during the Dec-Feb period should have been near 1.6 billion bushels, about equal to that of a year ago.
3) If domestic processing (ethanol, etc.) this year is following a normal seasonal pattern and use is on track for reaching the USDA projection of 2.985 billion bushels, use during the second quarter should have totaled about 727 million bushels, 90 million more than during the same quarter last year.
That’s usage, but what about prices. Darrel says, “It appears that U.S. corn stocks at the end of the 2006-07 marketing year could be reduced to about 1.75 billion bushels, under current production and consumption expectations. An inventory at that level would project to a 2006-07 marketing year average farm price of about $2.15 per bushel. The futures market currently reflects a 2006-07 marketing year average farm price of about $2.50.”
The next two months, says Bob Wisner at Iowa State University, may be a prime time to achieve some of your marketing goals, as you watch for reduced exports from China and Argentina and increased exports from the US. “Last year during the March 3-May 5 period,, weekly U.S. corn sales averaged 0.856 million metric tons (33.7 million bushels). Average sales during the same period this spring exceeding year-ago levels would suggest a further upward revision in USDA’s projected season total exports will be needed. That, in turn, would be a positive influence on the corn basis, allowing local cash corn prices to move closer to the futures price in Iowa during the planting season.”
Corn market fundamentals outlined by Wisner, Good, and Hurt are just about the opposite for the soybean market. Wisner suggests “Whether (commodity) fund traders can insulate prices from negative market fundamentals during the late supper and fall remains to be seen. Someone will have to store and finance the large carryover stocks (barring widespread weather or disease problems). That job, with current farm programs, has to be done by farmers and their lenders. Ag lenders historically have been uneasy about financing long-term storage of grain when prices are well above government loan rates and there is no protection from lower prices.”
So do you market beans now? Chris Hurt at Purdue puts it in this perspective: “New-crop prices are expected to be under downward pressure. If a normal weather summer should develop, cash prices in central and northern Indiana would be expected to be under $5.00 at harvest time with LDP’s once again working. This thought makes it a bit more palatable to consider forward pricing with November 2006 futures above $6.00. A further soybean price fear can be instilled with the reminder that in the three years previous to 2003, November soybean futures price lows were from $4.20 to $4.50 for the years of 2000, 2001, and 2002. Ending stocks for the 2006 crop, with normal weather this summer, are expected to be larger than for any crop from 2000 to 2005.”
Summary:
Spring rallies and tractor seat bounces usually occur when farmers have more on their minds than marketing. But not having the market on you mind this spring may be an expensive lesson for your operation and family. Our trio of marketing specialists are all bullish on corn and bearish on beans. You could do worse than to visit now with your elevator manager about selling beans, and planning for scaled up sales on corn while you are on the planter.
Posted by Stu Ellis at 2:58 PM | Comments (0) | Permalink
March 15, 2006
Farm Progam Payments: Growing Uneasiness
The next 18 months will put US farm policy on the doorstep of every US taxpayer, as well as food and agricultural interests worldwide. With information resources provided through the Internet, the farm program payments received by every farmer could be revealed for public scrutiny, and debate will heat up on who should receive how much and under what circumstances. For farmers whose household income is above the US median average, funded partly by off-farm income from spouses who work just to get health insurance, many taxpayers and urban legislators will demand to be heard and the typical Cornbelt farm family should brace itself for a Katrina-sized political storm.
At a time when farm program payments are being protested by college students, rock music personalities, and NASCAR interests, as reported in the March 14th edition of the Wall Street Journal, residents of RFD America are awaking to find their livelihood and income up for public debate. That does not match well with the psyche of a farmer who chose his or her lifestyle because of the independence and privacy it offered. Nevertheless, the policy development process of the 2007 Farm Bill will shed substantial light on demographic and economic trends in agriculture; and those were the subject of a report issued also March 14th by USDA’s Economic Research Service on “Growing Farm Size and the Distribution of Farm Payments.”
Based on 2003 statistics, ERS says non-family farms only contributed 14% of US agricultural production, but the majority of production came from family farms that are large and growing in size. “A more striking shift is toward very large family farms (sales of at least $500,000, in 2003 dollars), which accounted for nearly half (45 percent) of production in 2003, up from 32 percent in 1989.”
Farm numbers peaked in the early 1930’s in the US and have been declining, and subsequently, farm size has been increasing. But ERS says the age of farmers is an issue of concern. “Among the principal operators of smaller commercial farms, those with sales between $10,000 and $250,000, the share who are age 65 or older has risen sharply since 1989, suggesting that many are near retirement and not simply transferring the farm to younger operators.” Additionally, USDA statistics indicate smaller farms are losing money and larger farms have higher profitability. “The pattern (losses among small farms, and a strong relation between margins and farm size) holds in earlier years, and suggests that there are strong financial pressures driving production toward larger enterprises.”
It does not take an agricultural economist to know that fewer, but larger farms, will be receiving a larger share of the total of farm program payments distributed by USDA. “(A)s production of traditional program commodity crops shifted to very large farms, commodity payments also shifted sharply. Farms with less than $250,000 in production value (2003 dollars) received 63 percent of commodity payments in 1989; by 2003, they received 43 percent of payments. But farms with at least $500,000 of production received 32 percent of all commodity payments in 2003, up from 13 percent in 1989.”
Farm household income in 2003 was $68,500, compared to the US median household income of $59,100. Farms with sales under $250,000 generally have a viable farm income, but their household income is healthy because of off-farm income. By 2003, half of the farm program payments distributed by USDA went to households with income above $75,772. “(T)he apparent shift in commodity payments to higher income households is being driven by shifts of production to the largest class of farms (over $500,000 in sales), whose households have substantially higher incomes.”
Summary:
USDA’s ERS staff says, “In short, commodity payments are being shifted, through structural change, toward relatively high-income households.” While this should come as no surprise to anyone involved in Cornbelt agriculture, its implications will be upsetting to taxpayers, to advocates for a major shift in US trade and agriculture policy, and to many headline seekers who want to weigh in on a controversial issue. Local media may want to explore farm program payments with farmers in their coverage area, and those farmers should be ready for some probing questions.
Posted by Stu Ellis at 11:34 AM | Comments (0) | Permalink
March 14, 2006
Turn Your Livestock Out to Pasture, Not Your Pasture Management
Ah, Spring! Winter annuals are exploding with vigor in your fields, but on the positive side, pastures are beginning to green up, and that means management opportunities and responsibilities for your livestock herd. Since you want to avoid calls to the vet, wondering why you have sick cattle; and you want to ensure healthy forage for the herd, let’s take a look at some of those risk management issues.
Help your cattle avoid grass tetany, which you may call “staggers.” Extension beef specialist Justin Sexten at the University of Illinois says it “is generally observed in older, high-milk producing animals grazing N-fertilized cereal or grass pastures.” Grass tetany is the shortage of magnesium in the blood stream, which can be supplied by legumes or a feed supplement. If you do not provide a mineral or grain supplement, the legume option can be achieved with some frost seeding, and that also provides increased N to your pasture.
If you choose the legume option, manage against pasture bloat. Sexten says, “Lush legume pastures are generally associated with bloat due to favorable foam formation properties such as high soluble protein and moisture levels combined with low fiber concentrations.” And remember:
1) Maximum 40% legume in the pasture.
2) Provide hay to hungry animals prior to pasture turnout.
3) Turn out at midday to avoid bloat caused by dew.
When is your pasture really ready for spring turnout? Jeff McCutcheon with Ohio State University Extension recommends 6-10 inches of forage. That will catch plants at the point when they are growing, but before quality is reduced from the onset of the reproductive stage. But if you are grazing rotationally, the first turnout may need to begin earlier than the 6-8 inch stage so “spring flush” does not get ahead of you. If you start earlier than 3 inches, McCutcheon says, “Remember that the first growth is fueled by the reserves stored in the roots and crown. Depending on the previous fall those reserves could be low, so the reserves could have been used up keeping the plants alive through winter. The reserves may be just enough to fuel two to three days of growth. Cutting off those first leaves may mean no more growth from that plant.”
If you are out of hay, and pastures have not grown past the 3 inch mark, Ohio State’s Chris Penrose suggests the use of your hay fields, if they were not grazed last fall. That not only provides forage, but helps keep it trimmed until you have time to bale after corn and bean planting is finished. Penrose adds, “Finish early grazing of hay fields in mid to late April, prior to stem elongation, and yield loss on the hay fields will be minimal. Keep in mind when early grazing, especially with cattle, to keep an eye on wet fields for pugging or mudding up.” Essentially, he says you are extending the grazing season backwards.
What about the quality of your forage, and how do you get rid of wild oats, downy brome, and other weeds that deteriorate your brome quality? Since they are grasses, their seeds will last several years, and repetition may be required. That is the first lesson offered by Agronomist Bruce Anderson at the University of Nebraska.
He says 1 pint of glyphosate per acre should control the undesirables before your warm season grasses start growing. If you have cool season grasses, gramoxone is his choice, but not applied until seed heads of the weedy bromes are about to appear. Anderson adds, “Although you will lose some early grazing, your good grass will start to regrow after two or three weeks.”
Summary:
Warm weather makes everyone and their livestock feel frisky. If hay reserves are about gone, pasture turnout time is near, but there are health management concerns for the livestock, and crop management concerns for the forage. Plant development must be observed. Earlier needs for turnout could be achieved with the help of hayfields. The critical issue is ensuring the health of the livestock is ensured, with a proper ration and timing of turnout.
Posted by Stu Ellis at 12:57 PM | Comments (0) | Permalink
March 13, 2006
Are You Planting for Today, or for the Future?
Are you planting more beans and less corn? Or are you staying with your typical rotation and let someone else make the predicted acreage shift? If you make the change to more soybean acres, are you doing it “because that is the thing to do?” Are you doing it because energy and production costs have risen for corn? And if you are making the change, are you trying to escape costs, and let revenue fall where it may? Are you looking at the end of the marketing year, as well as the start of the production season?
The educated folks at several universities in the Cornbelt want you to consider what will likely be complexion of the market, before you make any final and unalterable decisions by putting seed in the ground.
Agricultural economist Melvin Brees at the University of Missouri office of FAPRI (Food and Agricultural Policy Research Institute) has been speaking widely about corn and soybean supply and demand with respect to the current and next marketing year. His presentation makes several significant points that will impact the decisions of many corn and soybean growers:
1) Corn use in the current marketing year will be 10.835 billion bushels, which is a record high. While US corn ending stocks will be the most in the past 18 years, world ending stocks will only be at an average for the past decade. The US, Argentina, and China produce 63% of the world’s corn and are responsible for 88% of the worlds corn exports. However, China has curtailed exports because of need, and Argentine production is droughty. While we have a burdensome supply, there is strong export and ethanol demand.
2) Soybean ending stocks will be at a record high of 565 million bushels at the end of the current marketing year in August. World ending stocks are also at a record high level. The US, Brazil, and Argentina are responsible for 82% of world production and 92% of world exports. South American production will be at a record high this year. The market signals to produce and store show price prospects well below a five year average.
3) If soybeans are planted into soybean stubble, crop rotational benefits will be lost, yields will be less, P&K will be needed, increased disease problems may occur along with the risk of weed herbicide resistance.
Agricultural economist Darrel Good at the University of Illinois used his February 20 newsletter to raise similar questions about the shift toward more soybean acreage.
1) Ethanol will increase its consumption of corn. While that is an estimated 1.6 billion bushels this year, it is expected to climb well over 2 billion bushels next year. With a trend yield in corn, that would be a need for more than 2.5 million acres of corn.
2) Expansion of US livestock production will also require more corn. Darrel Good says, “A modest 2 percent increase in feed use would be 120 million bushels.” Even with the additional distillers grains from ethanol production, there will be a net increase of 60 million bushels of corn needed, which is the equivalent of 400,000 acres.
3) Prospects for larger corn exports have improved with a short crop in Argentina and China’s conversion of its exports to domestic use. The additional exports that will have to come from the US would represent 225 million bushels or the equivalent of 1.5 million acres.
Summary:
While planting decisions remain with the producer, those decisions should be made with the help of knowing the potential marketing outcome of the decision, and not just information based on production costs. As Brees says in his presentation, use facts based on cost of production per bushel, and not cost per acre. In his newsletter, Good suggests that the market needs to react to the potential shift.
Posted by Stu Ellis at 4:07 PM | Comments (0) | Permalink
March 10, 2006
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
At the midpoint in the marketing year, Extension Specialist Darrel Good says there are positives for corn: 1) weekly exports have averaged nearly 60 million bushels, 2) Japan has accelerated its rate of purchases, 3) Chinese exports are slowing, and 4) dry weather in Argentina has significantly reduced the size of the crop there. Darrel says exports may exceed USDA’s projection of 1.85 bil. bu. and even increase for the next marketing year.
At the midpoint, the weighted average farm price of corn is estimated at $1.89, very near the $1.90 middle of the USDA’s forecast price range. The average Cen. IL cash bids have ranged from $1.635 to $2.14, a 50-cent range that is historically low. New highs in the spot cash price are possible, says Darrel Good, if weather concerns persist into the spring.
At the midpoint in the marketing year, Darrel Good says the soybean picture is not as rosy: 1) exports plus outstanding sales lagged last year’s total by 22%, 2) for the year, the USDA projects a 17.5% decline in exports, 3) most observers believe that the South American crop will be record large, 4) soybean oil stocks as of Jan. are nearly 60% larger than stocks of a year ago, and were at the highest level since August 2002.
At the midpoint, the weighted average farm price of soybeans is estimated at $5.73, high in the USDA price range. The average cash price of soybeans in Cen. IL has ranged from $5.15 to $6.055. The range of $.905 is very low by historical standards, and has been less than $1.10 only twice in the last 32 years. A new high would require some significant concern about the ‘06 crop, but favorable weather could result in a new cash price low. Read more.
Crop insurance decisions must be made by March 15. If you favor a revenue product, but are unsure of spending as much as 30% more premium for a harvest price option, Extension Specialist Gary Schnitkey says if you aggressively hedge more than 30% of your production; consider a product with the increase. Read his latest newsletter.
Your selected coverage level also makes a difference. Schnitkey says, “Often, the premium on a revenue product with a guarantee increase at a 75% level will cost as much as a revenue product without a guarantee increase at an 80% coverage level. From a risk standpoint, it will often be better to take the revenue product without the guarantee increase at the 80% level, than the guarantee increase product at the 75% level.”
If your crop insurance is the group risk income plan, Schnitkey’s recommendation is to always purchase the product at the 90% coverage level. Premiums and payments can be lowered by reducing the protection level. He says aggressive hedgers may wish to consider GRIP-HR, while non-aggressive hedgers may consider GRIP-NoHR.
USDA’s Supply/Demand report brought corn stocks down 50 mil. bu. due to increased exports to Asian markets. Domestic use remained steady; however the price range for the 2005-06 year was raised to $1.85 to $2.05 per bushel, up 10 cents on the low end. Lower soybean exports to China and Europe caused USDA to raise ending stocks to 565 mil. bu. The average season price range was tightened 20 cents on the bottom to $5.40 to $5.80.
La Nina or no Nina? Iowa State University’s Elwynn Taylor says it may not come to pass, but we’ll know by the end of the month. He’s giving a slight edge (56%) to having the La Nina and a below trend crop yield. “If the La Nina comes into place the odds change to a 70% chance of a below trend yield.” But Elwynn Taylor says, “The past few weeks give some indication of a turn toward normal Midwest precipitation.”
Farmland values in the Chicago Federal Reserve District climbed 10% in 2005, after the 12% increase in 2004. Prices were up 13% in WI, 10% in IL & IA, 9% in IN & 6% in MI. There was a “strong demand for farmland by investors, particularly for recreational purposes, tax-deferred exchanges, and a limited number of farms for sale.” 30% of the bankers surveyed say land prices will continue to climb, but 68% say they will be steady.
Interest rates on new operating loans in the Chicago Fed District averaged 8.02% on Jan. 1, 34 basis points higher than last Sept. Real estate loans averaged 7.25%, up 23 basis points from Sept. Interest rates were lowest in IL, which compensated for the effects of the drought. With operating loans averaging 7.67%, IL was the only state below 8%. However, bankers tightened collateral requirements in both IL & IN.
Veterinarians in IL are reporting increased cases of Post-Weaning Multisystemic Wasting Syndrome in pigs, which has been laying low for the past 9 years, but which has hurt pork production abroad. U of I Extension Vet Larry Firkins says symptoms are weight loss & jaundice, with a 10-15% mortality rate. There is no commercial treatment or vaccine, but read his comments.
Just back from Brazil, Marketing Specialist Bob Wisner at Iowa St. expects soybean acreage there to level off for several years. Economic stress has pulled marginal land out of production, and some bean acres will be shifted in sugar to feed the ethanol industry.
Summertime getaways invigorate and can educate as well. Extension’s sustainable ag staff invites you on several IL day trips.
1) May 4, Carthage, grass-fed organic beef and dairy at Oak Hills Organics farm.
2) June 5, Mendota, Piedmontese beef that is free of added growth hormones.
3) July 12, Flanagan, aquaculture equipment for fish and culinary herbs.
4) Aug. 9, Naperville, nutritional health and environment at the Green Earth Institute.
5) Sept. 13, Champaign, organic fruit orchard, goat dairy, & cheese processing.
6) Oct. 5, Anna, Cobden, Makanda area to visit several specialty food producers.
Posted by Stu Ellis at 2:03 PM | Comments (0) | Permalink
March 9, 2006
US Farm Subsidies?! What About Those Other Nations? What Are They Paying Out?
The farming community is the target of considerable criticism about USDA farm program payments. Taxpayers, who pay less at the grocery store because of them, will toss periodic barbs at their local farmer. Other nations around the world will fire similar shots at US farm policy because of those subsidy programs. For the US taxpayer it is a policy choice of either paying on April 15 or a little throughout the year at the weekly trip to the food store. But for the other nations, most of which participate in various degrees in financial support for their agricultural programs, it is not much more than a pot and kettle name-calling episode. Just how pervasive is the practice of national support for its agricultural industry and for its consumers? Read on….
Dr. E. Wesley F. Peterson at the University of Nebraska calls attention to an international report which says that more than $1 billion per day is spent by developed countries to keep their food production industries in the black. The Organization for Economic Cooperation and Development (OECD) is composed of high income, westernized nations of the world, and recently entered the world trade debate over demands for reducing farm supports versus market access. The OECD report entitled AGRICULTURAL POLICIES IN OECD COUNTRIES: MONITORING AND EVALUATION, 2005, (by the way, the highlights are 77 pages, compared to the entire report of 250 pages) compare what US farmers receive from the government, versus our worldwide counterparts, from the late 1980’s to the early part of this decade. Worldwide, support for agriculture has dropped slightly during that period from 40% to 30% of farm income.
For 2004, those industrialized nations in OECD provided $279 billion to farmers, and spent another $66 billion on such things as agriculture research, infrastructure to help farmers, education, marketing, as well as food stamp support to consumers. Another $33 billion was spent by taxpayers in those countries to assist consumers, whether they are people who ate the food, or the processing industries that converted raw products into finished goods for the store shelves. Tallied, that $378 billion is more than $1 billion per day.
In addition to the income transfers, other government policies that increase prices actually take the form of a trade barrier, which makes food products imported from the US more expensive.
Peterson says, “In 2004, the $378 billion total support to agriculture was split about evenly between transfers from consumers through trade barriers and transfers from taxpayers through government budgets. Of the $378 billion total, the United States accounted for about $109 billion (29 percent), the European Union (EU) for about $151 billion (40 percent), and Japan for a little less than $61 billion (16 percent). If one does the same exercise for the $280 billion in support for producers (leaving out our general services and consumer subsidies), the U.S. transfers $46.5 billion, the EU transfers $133.4 billion and Japan transfers $57.3 billion. In both cases, these three were responsible for 85 percent of the total transfers in OECD countries.”
At the OECD office in Paris, such transfers are seen as financial excesses distributed to farmers in wealthy countries. Yes, the US is considered a wealthy nation, but with 750,000 Cornbelt farmers relying on farm program payments to offset low commodity prices, and net farm income forecast to drop another 22% next year, the typical US farmer is not wealthy. Nevertheless, the World Bank and the World Trade Organization have said if farm subsidies in the OECD countries were eliminated, developing nations would be able to sell food products freely and would be less dependent upon foreign aid. Subsequently, many of those developing nations have opposed free trade, until subsidies in OECD countries are eliminated.
So, where do the OECD member nations fall on the scale of support for agriculture?
Australia: Support to producers fell from 8% in 1986-88 to 4% by 2002-04, with 34% of the benefit in diesel fuel rebates.
Canada: Support to producers has fallen by one-third between 1986-88 and 2002-04, and now stands at around 22%. Support would have declined more, if not for a special support program indemnifying producers from the loss of livestock markets from BSE.
European Union: Support to producers has decreased from 41% in 1986-88 to 34% in 2002-04, compared to an OECD average of 30%. Since 1986-88, there has been a significant move from market price support to payments based on area planted and animal numbers.
Iceland: Support to producers has fallen from 77% in 1986-88 to 70% in 2002-04. However it is still more than twice the OECD average. Prices received by farmers in 1986-88 were over 4 times higher than those received in the world market. By 2002-04, the gap had decreased to just over 3 times.
Japan: Support to producers has declined from 61% in 1986-88 to 58% in 2002-04. However it remains almost twice the OECD average. Japanese policy makers are discussing a new farm and food plan which will be a shift away from a support system based on individual commodities to a multi-commodity system in which support will be concentrated on the largest and most efficient and stable farms.
Korea: Support to producers has decreased from 70% in 1986-88 to 63% in 2002-04, but it is still double the OECD average. The support level varies widely across commodities, from 33% for eggs to 76% for rice and 89% for oilseeds.
Mexico: Support to producers was 21% in 2002-04 as compared to 3% in 1986-88 and 28% in the more stable currency period 1991-93. This is below the OECD average of 30% in 2002-04. Prices received by farmers in 2002-04 were 17% higher than those received in the world market.
New Zealand: Support to producers was 2% in 2002-04, down from 11% in 1986-88. Support is very low across all commodities. Poultry and eggs are supported due to sanitary measures at the border. Prices received by farmers have been aligned with those on the world market since 1988.
Norway: Support to producers has changed little between 1986-88 and 2002-04 at around 70% (68% in 2004). This is more than twice the OECD average. Support is very high across all commodities. In 1986-88 prices received by farmers were 4 times higher than those received in the world market; in 2002-04 the difference had fallen to below 3 times.
Switzerland: The level of support to producers declined from 78% in 1986-88 to 71% in 2002-04, still more than twice the OECD average. Support is very high across all commodities. Payments based on historical entitlements, area and per farmer witnessed the largest increase. These are subject to environmental cross-compliance requirements.
United States: Support to producers decreased from 22% in 1986-88 to 17% in 2002-04 and remained
below the OECD average. Support for general services (funding for research, infrastructure, crop insurance, etc.) provided to agriculture has increased from 25% of total support in 1986-88 to 32% in 2002-04.
Summary:
More than $1 billion per day is distributed by the OECD nations as a means of ensuring an adequate food supply. US farm programs at this point are declining more rapidly than farm support programs in other OECD nations, as we prepare for new trading rules that will look with disfavor on trade distorting farm payments. While the $19 billion proposed in the 2007 fiscal year budget for farm program payments, US farmers will be benefiting from crop insurance programs, agricultural research, and even from the nearly $50 billion that will be spent on food stamps. Many of those will be acceptable to both the OECD and the World Trade Organization, but others will disappear in the 2007 Farm Bill.
Posted by Stu Ellis at 9:42 PM | Comments (1) | Permalink
March 8, 2006
What Will Be Going Through the Mind of the Urban Congressman During Farm Bill Debate?
Secretary of Agriculture Mike Johanns and Deputy Secretary Chuck Connor traveled to nearly every state to listen to farmers and agribusiness as the 2007 Farm Bill is being prepared for Congressional consideration. Members of the House Agriculture committee have heard the testimony of farmers at the first of a series of hearings around the nation about the 2007 Farm Bill. While it is appropriate the USDA and the Congressional agriculture committees tour the countryside, 90% of the Members of Congress who vote on the Farm Bill have few constituents from farm country. Instead of attending those hearings and listening sessions, how will they prepare to vote? One thing they will do is read the latest report from the Congressional Research Service (CRS), such as this one:
The CRS briefing paper, written by Jim Monke, Analyst in Agricultural Policy of the CRS Resources, Science, and Industry Division, says “The 109th Congress is facing several issues regarding the farm commodity programs including budget reconciliation, payment limits, planting flexibility, and resolution of international trade disputes.”
CRS initially notes that subsidy programs cover 25 commodities that represent about one-third of gross farm sales; and commodities not receiving subsidies, such as meats, poultry, fruits, vegetables, nuts, hay, and nursery products represent about two-thirds of farm sales. CRS acknowledges, “producers of these commodities, however, may be affected by the support programs because intervention in one farm sector can influence production and prices in another. For example, program commodities such as corn are feed inputs for livestock.”
In a parallel to a recent report by the White House Council of Economic Advisors, CRS contends the need for farm supports has changed over the years, “When farm programs were first authorized in the 1930s, most of the 6 million farms in the United States were small and diversified. Policy makers reasoned that stabilizing farm incomes using price supports and supply controls would help a large part of the economy (25% of the population lived on farms) and assure abundant food supplies. In recent decades, the face of farming has changed. Farmers now comprise less than 2% of the population. Most agricultural production is concentrated in fewer, larger, and more specialized operations. In 2002, about 7% of farms accounted for 76% of the sales (these 151,000 farms had average sales over $1 million). Most of the country’s 2 million farms are part-time, and operators rely on off-farm jobs for most of their income.”
Urban Members of Congress, reading the CRS report, will quick ask themselves and staff members, “Why are farm subsidies needed,” in light of all of the policy issues being faced:
1) The Deficit Reduction Act of 2005 recently became law and reflected “concern over the ability or willingness to fund the 2002 farm bill” and requires reductions of $2.7 billion over five years for USDA mandatory programs, $1.7 billion in cuts for commodity programs, $934 million in cuts for conservation spending, $620 million in cuts for research, and $419 million in cuts for rural development. The Member of Congress may remember that “no reductions to food stamp spending were included in the conference agreement.”
2) In February, the administration proposed “FY2007 Budget Reconciliation which reduces farm commodity spending by $1.1 billion in FY2007 (a 6.2% cut) and $7.7 billion over ten years. The Administration proposes tightening payment limits, making a 5% across-the-board cut to all direct payments, charging an assessment on dairy and sugar marketings, and allowing USDA to adjust purchase prices of surplus dairy products to minimize outlays.” A Member of Congress, disconnected from rural America, may think those are reasonable budget cuts in a time of record deficits.
3) The issue of payment limits always will remind an urban congressman of abuses that show up on 60 Minutes. CRS says, “Federal deficits and public awareness of large payments reaching a small number of large farms have focused congressional attention on the issue. In the 109th Congress, S. 385 and H.R. 1590 would tighten the limits to a total of $250,000 from the current limit of $360,000, and would count toward the limits the use of commodity certificates and loan forfeiture which are currently unlimited.
4) The CRS report reminds Congress “planting flexibility was created in the 1990 farm bill to allow farmers to respond to market signals when choosing crops, but has restrictions to protect fruit and vegetable growers who do not receive direct subsidies.” CRS says some Midwestern farmers felt penalized because their history of growing fruits and vegetables reduced their soybean bases under the 2002 farm bill. Additionally, CRS says world trade officials say they would be happy with the ability of US farmers to plant fruits and vegetables without restriction and there would be less chance of trade penalties.
5) Regarding international trade, the CRS report says the US has been closely examined by the World Trade Organization for commodity price supports, and “some findings affect programs that the United States had considered WTO compliant, and thus may influence the development of the next farm bill."
Summary:
Reading the relatively brief report by the Congressional Research Service, the typical urban Member of Congress can’t be faulted for looking at farm programs and questioning their current and future need, potential for abuse, negative impact on the budget, and threat to resolving international trade difficulties. With that mindset, the 2007 Farm Bill will be written, and its provisions may look different than what most farmers would prefer.
Posted by Stu Ellis at 6:01 AM | Comments (2) | Permalink
March 7, 2006
If Your Fields Are Dry, You Are Not Alone
Let’s get serious. There is a lot of fieldwork underway in parts of the Cornbelt. Tillage and anhydrous ammonia application, to name two. Corn is probably already in the ground in the southern latitudes, and the more adventuresome Cornbelt farmers will be racing to catch up by the end of the month. There is a reason for the name “Racehorse Flats.” As some farmers prepare to deposit expensive seed into refrigerated soils, let’s explore some of the latest reports about the availability of soil moisture, and locations where corn will quickly germinate, and other locations where seed corn will be stored in the soil, instead of planted.
The USDA’s Weekly weather and Crop Bulletin, issued for the current week, provides a good summary of farm activities in the Cornbelt, but when you look deeper into the individual state reports, there is a great concern about soil moisture conditions at the start of the planting season. Nearly everywhere there are reports of moisture levels being below the comfort levels of most farmers. No doubt grain traders will soon be looking at these same reports, which from time to time have an influence on the market.
Illinois: "Topsoil 20% very short, 47% short, 32% adequate, 1% surplus. Winter wheat 1% very poor, 7% poor, 18% fair, 63% good, 11% excellent. February temperatures averaged near normal for the state, while precipitation averaged 1.93 inches, nearly an inch below normal for the month. The biggest concern around the state was the lack of subsoil moisture. Many farmers are hauling water for livestock and wells since farm ponds are very low and tiles are not running. More rainfall will be needed this spring to improve subsoil moisture conditions."
Indiana: "The average precipitation was 1.74 inches which was .54 inches below normal. Some farmers are concerned about the very dry conditions."
Iowa: "Soil 25% very short, 38% short, 35% adequate, 2% surplus. Most areas of Iowa reported above average temperatures with below normal precipitation during February. Consequently, concerns about future pest populations remain. Lack of moisture remains a concern with Spring arriving soon."
Kansas: "Topsoil 50% very short, 45% short, 5% adequate. The State experienced normal to above normal temperatures most of February. Precipitation was very light throughout the State during the month."
Michigan: "There were some reports concerning the lack of snow cover, rain could hurt soil moisture conditions this spring and summer. Other reports mentioned adequate rainfall, which were soaking into the soil due to a lack of frost. Still other areas were seeing pooling of water on the fields from too much rain."
Minnesota: "Above average temperatures, below average precipitation, in February, left snow cover inconsistent throughout most of the state. Northern areas reported coverage of 12 inches or more, while central, southern areas reported very little snow cover."
Missouri: "Weather during February was dry in nearly all areas with precipitation averaging 0.50 inch, well below the 30-year normal of 1.90 inches. Pastures are particularly in need of rain to begin spring growth, many stock ponds have low water levels or are dry, particularly in the west-central and southern counties. Some farmers in the driest areas have been culling their cattle herds more than usual due to shortages of both hay and water. Planting is expected to begin earlier than normal in the southeastern counties if warm, dry conditions continue."
Nebraska: "For the month of February 2006, precipitation averaged less than 50% of normal with the exception of the Northwest which was near normal. February precipitation was light with an exception of a heavy snowstorm in the northern Panhandle. Since September 1, accumulated precipitation is below normal for all districts."
Ohio: "The February 2006 average temperature for Ohio was 30.90, 0.9 0 above normal. Precipitation for the state averaged 2.26 inches, 0.57 inches below normal."
South Dakota: "A few February cold snaps brought temperatures down closer to average for the month, with precipitation totals remaining below average for the majority of the state."
Wisconsin: "Precipitation in northern areas was between 0.37 inches in Eau Claire, 1.24 inches in Green Bay. Southern parts of the state received 0.70 inches in La Crosse to 0.91 inches in Milwaukee. Many areas are experiencing below normal precipitation for the winter season. Snow cover was present in northern counties during most of February."
Summary:
For 99% of the Cornbelt, except for those Missouri Bootheel farmers, an early jump on corn planting may be restricted by concerns of soil moisture shortages. Certainly there are spots with perfect conditions, and no one will fault those who can take advantage of it. However, putting expensive seed in soil that has insufficient moisture to germinate it will be an expensive lesson in futility. Life is simpler if you plow around the stump, and your corn will come up better if you wait for water. It will rain. And if it doesn’t, you have crop insurance, don’t you? Don’t you?
Posted by Stu Ellis at 4:05 PM | Comments (0) | Permalink
March 6, 2006
Hey! Another Crystal Ball! Let's See What This One Predicts.
“Expenses are up. Revenue is down. So what else is new?” That’s been the mantra of farmers for many years, and they just keep coming back for more, year after year. (Or at least 90% of them do.) The coming year will continue to give farmers about as much fun as they can stand, says the Food and Agriculture Policy Research Institute (FAPRI) staff at the University of Missouri, who briefed Members of Congress last week about the prospects for the agriculture economy as they prepare to write the 2007 Farm Bill. So what is the prognosis?
FAPRI’s report was painted with a lot of red ink for agriculture, although some farms, some commodities, and some parts of the rural economy will be in the black.
Macroeconomic factors:
1) Energy prices will peak in 2006, with fertilizer and fuel costs beginning a slow decline in 2007, but remain above levels of the past 10 years.
2) The dollar will weaken against other currencies, but that will mean US farm exports will be more attractive to foreign buyers.
3) Interest rates will continue upward to 7%, with a subsequent negative impact on farm income.
Corn:
1) Corn prices will be lower for the marketing year, despite greater demand. Corn exports will see slow growth because of costs, and they will be surpassed in 2007 by ethanol in its consumption of corn. Corn profitability has decline with higher production costs, even with larger LDP checks. Despite declining farm program payments, corn acreage is expected to increase with the help of increased yields.
2) Ethanol production will continue to increase and will remain close to the volume mandated by Congress. Both ethanol and gasoline prices are expected to slightly decline in the next 6 years.
Wheat:
1) Wheat acres will increase in 2006, taking some from corn, but over the coming decade, wheat acreage may decline as it competes with corn for acres. Wheat exports will decline along with the softening acreage, and reduced domestic demand.
2) Rising wheat yields and profitability will occur after 2007, but stagnate with the competition from corn.
Soybeans:
1) With large supplies, 2006 prices will be low unless demand unexpectedly increases. Strong South American supplies will also depress US soybean export volume. A projected decrease in soybean returns after the 2006 crop will cause acreage to shift to corn.
2) Soybean oil demand will slowly increase with the growth of biodiesel. Low soybean meal prices will help fuel the increase in poultry and livestock production and meal consumption will increase. Soybeans will continue to be crushed for their meal value, and crush margins will remain steady.
Land:
1) After a slight acreage decline in 2006, land planted in corn will slowly increase over the next decade, rising to 86 million acres, compared to the 80 million in 2006. After a bump up to 73 million acres in 2006, soybean acreage will slowly decline to 70 million acres in 2015. Wheat acres will rise above 58 million in 2006, and slowly decline to 56 million in 2015.
2) Acreage planted in 12 major crops will remain generally constant at 250 million acres. CRP acreage will dip slightly into 2009 with contract expirations, but remain steady at 38 million through the end of the 10 year baseline.
Livestock:
1) Cattle profitability the past two years will spur expansion of the herd, peaking at 103.5 million head in 2012. Prices that peaked in 2005 will slowly decline through 2012, and turn upward through 2015.
2) The Sow herd will remain in a slow decline through 2015. Despite losing a half million sows during that 10 years, pork production will grow 2.4 billion pounds with the help of production efficiencies. Pork prices will range from $40 to $50, but profit margins will be slim because of higher costs for feed and other inputs. Pork export growth will slow from its phenomenal pace the past two years.
Farm Income:
1) the value of program crops peaked in 2004 and will bottom in 2006, before beginning a slow climb upward. The value of other crops will continue a steady growth. Cash receipts from cattle will soften over the next 5 years, but other livestock receipts should remain firm.
2) Production expenses increased sharply the past three years and will continue upward this year. Energy prices are expected to decline in 2007 and level off. Interest expense will climb from higher rates and land values.
3) Net farm income declines by $16.8 billion in 2006 because of reduced cash receipts and increased production costs. After a further smaller decline in 2007, net farm income generally increases in nominal terms but declines in real terms after correcting for inflation.
There are some asterisks in this report:
Farm program provisions set to expire in 2007 are assumed to continue throughout the baseline. Loan rates, target prices, and direct payment (DP) rates are all held constant between 2005/06 and 2015/16.
Summary:
The farm economy for the past couple years has felt the impact of federal deficits, and more recently the effects of hurricanes and supply/demand pressures on petroleum. If those issues are non-factors, and the current farm program remains in place, the FAPRI staff predicts that gyrations in the agricultural economy will slowly decline, and positive growth will occur over the coming decade.
Posted by Stu Ellis at 7:11 PM | Comments (0) | Permalink
March 3, 2006
Extension Update
Extension Update is a weekly summary of news from Extension, government, and other attributable sources, focused on marketing, farm management, and other issues that are of interest to Midwestern farm owners and operators.
The crop insurance sign-up deadline is March 15, for either registering for the first time or for switching between insurance products. There are numerous decision aids at which will help you compare various plans and how they would impact your farming operation. Also, visit the crop insurance section for good backgrounders.
Many of the income-based crop insurance products utilize the performance of DEC corn and NOV bean contracts on the CBOT during the month of February, as the determinant for the spring guaranteed price. They will be approximately $2.59 for corn and $6.18 for soybeans. However, the official determination should come soon from USDA.
Group Risk Income Protection (GRIP) crop insurance has attracted the interest of many farmers who believe the higher guarantees mean greater chances at indemnity checks, if there is a shortfall in their production compared to county average yields. Ag economist Gary Schnitkey says the release of 2005 county yield statistics will give producers an indication of how the risk management tool would have worked for them. Read his analysis.
After lagging behind last year through mid-January, weekly US corn export sales have exceeded 1 mil. tons (39.4mil. bu.) for several weeks. Bob Wisner at Iowa State says the sharp decline in Argentine crop prospects is the reason. At this point, corn exports for the marketing year are up 10% from 2005. USDA is forecasting a 2% increase for the entire marketing year, but Wisner says he’s projecting a 4% increase and that may be too low.
Continuing to lag behind last year are soybean exports and Wisner says that reflects bird flu concerns in southeastern Asia, Turkey, and several European countries. With reduced consumption of chicken meat and declining profitability, there is diminished demand for soybean meal as poultry feed. Wisner thinks the impact on demand for soybean meal has been considerably less than the decline in US bean export sales.
Just back from South America, Bob Wisner at Iowa State University says crops looked good and farmers appeared to be doing a good job of managing Asian soybean rust. He quoted industry contacts who expect production to be up 10.3% or 202 mil. bu. from last year. The upcoming South American harvest and lagging export sales are cautions that US soybean prices may have additional downside risk this spring and in late summer.
If you are wrestling with application rates for anhydrous ammonia, there are several resources available to help you reconcile high priced nitrogen and low priced corn:
1) Iowa State’s N calculator
2) USDA decision aid for application alternatives
3) Oct. 24, Nov. 7, & Feb.15 blog postings.
The eastern Cornbelt has 9 new ethanol plants under construction and many more on the drawing board, and Chris Hurt at Purdue says the growth of the ethanol industry will impact corn prices, as well as how livestock feeders incorporate distillers’ dried grains. Read his comments.
Regarding those corn prices, Hurt says new corn demand will compete with current corn use, and/or corn supply must increase substantially through greater production with more corn acres and fewer soybean acres. He suggested a 60-40 split could meet current feed demands, current processing demands, and the new growth in demand for ethanol expected by 2008. But he admits that has major implications for the soybean industry.
Regarding those livestock feeds, Hurt says the distillers’ grains are best used by cattle, but the feed is in the eastern Cornbelt, and the cattle are in the western Cornbelt. The product has a lesser value to the pork and poultry industries, and creates problems with high phosphate manure. Purdue’s Hurt says, “This could mean some restructuring of the location of the US and the world animal industries.” And he adds, “The impact of corn ethanol is a ‘big event’ that could influence animal industries, perhaps for years to come.”
USDA could do better, but on the whole, estimation of crop yields over the past 36 years has been good, say U of I ag economists Darrel Good and Scott Irwin. They say there is “apparent continuing misunderstanding of the USDA's motives, methods, and procedures used to arrive at the production forecast for US corn and soybean crops.” They suggest that USDA collect more input from the grain industry about potential crop size. Read their report.
Fighting weeds just got easier with computer software assembled by Cornbelt Extension specialists, who say it will predict yield loss based on various weed infestations. The software analyzes crop growth and weed density, and prescribes a herbicide treatment plan, identifies 60+ weeds with photos, alerts the user on which herbicides could reach ground or surface water, and determines if weeds are spreading in a field with a PDA module for in-field use. Learn more and obtain it for $50.
USDA’s soybean rust website confirms 21 cases of rust on kudzu in AL, FL, GA, & TX. The Internet location for the most accurate information.
Pork producers are joining corn and soybean growers in the elite fraternity of farmers who can supply fuel to the motoring public. University of Illinois ag engineers say crude oil can now be produced from hog manure in a continuous flow refining process, once limited to a batch process. They have been able to thermochemically convert 70% of the manure solids into crude oil, giving farmers $10 extra revenue per hog from 21 gal. of oil per head. There is no word when sheik outfits and OPEC memberships will be available.
Posted by Stu Ellis at 5:06 AM | Comments (0) | Permalink
March 2, 2006
The Next 10 Years Give You Plenty of Reasons to Stay in Farming
Do you plan for the distant future, near term, or not much farther than lunchtime? Is your tenure in agriculture on solid ground, and you’d like to make some long term financial plans? Or do you just need something to temporarily steady yourself, while you plan for the future? A rather exhaustive study of international commodity supply, demand, trade, and general economic factors was presented to Congress today by the Food and Agriculture Policy Research Institute (FAPRI) staff at Iowa State University. With the help of dozens of tables and graphs, and short comments, the World Agricultural Outlook indicates strong growth in agriculture for both the US and the world, meaning there is a future for those who want to plan for it. The details are right here!
The FAPRI report was presented to Congress in preparation for the debate on a new Farm Bill. Although Congress and USDA need to have good information for planning purposes, so do you. It is 72 pages long, but it is an easy read with all of the graphics. It is organized by commodity, and specific summaries are easily found.
Macroeconomics:
• North American economies will grow 2.6 to 4% over the next decade with only moderate inflation.
• Asian economies will grow at a 3.7% average pace in the next decade, with Japan lagging and both China and Vietnam leading the way. Inflation will be low in Asia. Most Asian currencies will appreciate in real terms against the dollar.
• South American economies will average nearly 4% growth in the coming decade with moderate inflation. Both the Argentine peso and Brazilian real will depreciate in value over the next ten years, along with moderate inflation.
• In Europe, the economies of the 10 new member states will grow twice as fast as the current 15, and with currency appreciation against the dollar, they will not be as competitive with the US.
• The value of world crop trade will grow about 3.5% annually, but with other countries experiencing more exports than the US, our overall share of the world export trade will fall from 17.6% to 15.6%.
• World meat trade will grow similarly, and the US share, which dipped under 20% with the loss of the Japanese beef market, should climb back to 24% of world trade in the next ten years.
Wheat, corn and soybeans:
• Per capita consumption of wheat will decline, but with population growth total consumption rises, along with a 1% increase in the growth rate for wheat prices in the next ten years. The US share of the export market stabilizes at 25%.
• Corn stocks will slowly decline with resulting price improvement. China’s stocks will drop, its exports will halt, and Chinese corn use will substantially increase. Domestic feed and food use will both increase, as will international demand for more feed corn, and the US share of the corn export market will increase.
• Soybean production will increase 24% in the coming 10 years, with Brazil producing 34% world supply and 30% for the US. Brazil’s share of the export market grows from 38% to 51% in the coming decade, while the US share drops to 27%. China will soon overtake the US in soybean consumption. While China’s soybean production remains steady its processing capacity will double, driving by demand from its expanding livestock industry.
Ethanol:
• The world price for ethanol grew last year due to higher gasoline prices, but with lower gas prices expected, ethanol prices will decline through 2010 and then increase gradually into 2015 because demand will outpace production.
• Brazilian ethanol exports are expected to double in the next ten years to 1.2 billion gallons.
• The European Union’s mandated demand for ethanol use will surpass production, and its trade will shift from being a 9 million gallon exporter in 2005 to a 121 million gallon importer in 2015.
Meat:
• Driven by rising incomes, meat demand will increase due to increased per capita meat consumption. Pork consumption is greatest, followed by poultry, then beef, but poultry consumption will increase at a 1.9% annual average.
• World beef trade will grow by 3%, with production growing only 1.7%. Brazil will see the biggest grow with productivity improvements and increase its share of world trade by 7% because of currency values.
• Chinese beef consumption will outpace production, due in part to restrictive production, health issues, and poor genetics.
• Helped by BSE in beef and AI in poultry, pork trade has grown 10% the past two years, and will grow 2.4% over the next decade. China will cut its pork tariffs and imports will be driven by growing coastal demand.
Summary:
Improved world economics and growing economies in heavily populated areas will mean increased demand for food and the ability to pay for it. However, currency values and production improvements in nations such as Brazil will mean it will grab an increased share of world trade, some at the expense of the US. China will have difficulty meeting its demand for food, and will shift from being a periodic exporter to a steady importer. The FAPRI report contains summaries of numerous other commodities, including sugar, rice, and many dairy products.
A parallel report by the FAPRI staff at the University of Missouri, which focuses on domestic agriculture economic factors, will be featured on the farm gate next week.
Posted by Stu Ellis at 1:37 PM | Comments (0) | Permalink
March 1, 2006
How Much Confidence Do You Give to USDA Crop Production Reports?
USDA’s Planting Intentions report the end of this month and the Planted Acreage report at the end of June are market movers, but not as much as the monthly Crop Production reports for corn and soybeans that begin in August. Steeped in controversy, USDA crop reports are seen as quite valuable by some farmers, curiosities by other farmers, and a complete detriment to the agricultural economy by yet other farmers. Because the yield estimates are tweaked monthly, criticism is hurled by those who would say, “USDA didn’t get it right the first time, so why even do it?” Let’s take a look at the crop reporting process, and then open the floor for your discussion.
“There is clearly a need for a better understanding of all aspects of the USDA crop production forecasting process.” Truer words could not be said, and these come from ag economists Darrel Good and Scott Irwin at the University of Illinois. They have completed an analysis of USDA crop reporting over the past 35 years. In brief, their conclusion is that USDA does a good job, it is misunderstood by many, and improvements in the data collection process could be made. But let’s explore those findings further.
As you may already know, crop production surveys are based on an interview with farmers, as well as yield estimators who measure field samples. Good and Irwin say, “The USDA has determined that farmers tend to make conservative (low) yield predictions, especially early in the season, so the survey results for each month are compared to survey results at the same time during the past 10 years and the final average yields for those years. Thus, the final farmer-reported yield for a given month is adjusted to reflect that fact that farmers consistently are conservative over time.”
Overtime, field conditions changes, and that causes yields to rise and fall say Good and Irwin, “Early in the season, the yield indications are influenced by assumed relationships between plant counts and fruit numbers, and an assumed fruit weight adjusted for moisture content and harvest loss. As the season progresses, fruit counts become known. At the end of the season, plots are harvested, and yields are calculated based on actual grain weights and harvest losses.”
Looking at 35 years of data for corn and soybean forecasts, compared to the final crop estimate, Good and Irwin say there is dependable consistency. “The analysis to this point indicates that the pattern of changes in USDA corn and soybean production forecasts has been relatively stable over time and that the private sector partially to fully anticipates the changes. However, there is still the question of the accuracy of monthly USDA forecasts.”
In conjunction with USDA crop reports, private firms offer their projections and grain traders prepare for any “surprise” in the USDA forecast. However, “Market surprises tend to be largest in August and smallest in November for both corn and soybeans. This makes sense as there is more uncertainty about crop conditions earlier in the growing season. There does not appear to be any obvious trends in market surprises across crop years, with the possible exception of an increasing magnitude of market surprises associated with October soybean forecasts.”
Good and Irwin make several concluding observations:
1) On average, USDA corn production forecasts were more accurate than private market forecasts over 1970-2005. One exception in corn was the August forecast over 1985-2005.
2) The forecasting comparisons for soybeans were somewhat sensitive to the measure of forecast accuracy considered. One measure showed that private market forecasts were more accurate than USDA forecasts for August regardless of the time period considered. Another measure showed just the opposite.
3) USDA corn production forecasts had the largest impact on corn futures prices in August and recent price reactions have been somewhat larger than historical reactions. Similar to corn, USDA soybean production forecasts had the largest impact on soybean futures prices in August with recent price reactions appearing somewhat larger than in the past.
4) There is nonetheless room for improvement. In particular, the USDA may want to consider expanding the scope of the subjective yield surveys to incorporate a wider range of market and industry participants.
Summary:
With firsthand experience in taking several hundred farmers through the USDA lock-up, many tales can be told about farmer believability of the reports, their thoughts about the necessity of the reports, and questions that are raised about the estimation process, as well as allegations of USDA’s political motivations. The Good and Irwin report evaluates the crop reporting process, finds it reasonably accurate, and suggests that more data might be collected from a wider variety of sources, other than just fields and farmers.
Posted by Stu Ellis at 10:27 AM | Comments (1) | Permalink
