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Friday, August 28, 2009

Cornbelt Update


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

Despite a big 12.7 bil. bu. corn crop, demand is strong and both USDA and FAPRI are projecting a nearly 12.9 bil. bu. demand. MO marketing specialist Melvin Brees says carryover may well be 1.6 bil. bu., which is large, but he says not excessive, and with the large demand the ratio of ending stocks to usage will be below average. Read more.

There are positives and negative “ifs” which impact the grain market says Brees,
1) Corn use could be limited by increased DDGS feeding if ethanol refining increases.
2) USDA’s corn export projections will be met, if world demand consumes its stocks.
3) Soybean exports should remain strong, if China’s appetite for soybeans remains.

Don’t be mislead by USDA price estimates of $3.50 for corn and $9.40 for beans for the marketing year. Melvin Brees says those estimates include grain that had been forward contracted at higher price levels earlier in the year and they do not suggest that cash prices will return to higher levels. He says that is a corn/soy price ratio of 2.7 to 1 and current new crop futures are suggesting almost 3 to 1. Since the market indicates it wants more soybeans, South American farmers will respond to that message first.

Store or sell? Brees says that decision may be depend, in part, on the ability of the crop to mature. He says if it matures without damage, then watch for market signals for storage. He says new crop corn is breakeven at best and March corn has a 13¢ premium over December, but that won’t cover storage costs, unless the corn/soy ratio changes.

The downside risk for soybean prices could increase says Melvin Brees. He says the November to March spread is 10¢ which offers no return to storage and if the US crop escapes the frost only to see production increases in South America, that downside risk will increase. He is not yet ruling out an improvement for post harvest basis gains. He’s looking at selling beans at profitable prices and storing corn, if a decision has to be made.

Soybean exports would be helped if China keeps buying says SD marketing specialist Alan May. He says USDA may have to increase its export projection if that happens, “The challenge for soybeans however, is that the projections for world production and supplies are higher for this coming marketing year and while demand for US soybeans remains strong, the balance of world supplies will determine where US exports settle.”

Most corn should have silked by now, which OH agronomists say means maturity is 7 to 8 weeks away, and with temperatures averaging 60º lows and 80º highs, that 20 GDD credit should get corn from the blister stage to maturity in 52 days, from the early dough stage to maturity in 39 days, from the early dent stage in 25 days, and full dent in 12 days. If temperature averages drop to 55º and 75º, then GDD accumulate at 15 per day.

If your corn is in the early dent stage today it needs 510 Growing Degree Days to reach black layer and be safe from frost, despite potential 30%+ moisture. The potential for accumulating that many GDD’s depends on your latitude. If you are north of the OH-MI border, your average frost date of Oct 10-20 will provide 538-622 more GDD’s.

If your corn is in the early dough stage today it needs 775 more GDD’s to reach the black layer safety threshold. While you may not have that much heat remaining in the season, Purdue agronomist Bob Nielsen says late planted corn has the ability to adjust its maturity requirements and reach black layer 200-300 GDD earlier than expected.

Do you have Blunt Ear Syndrome? It is also known as “beer can” ears, and makes corn ears about that size, but no one knows why. Purdue’s Nielsen says he’s leaning toward the effect of a cold shock during ear size determination that either injures the ear shoot or changes the hormonal balance within the developing ear shoot. If you find BES, fill out his questionnaire.

September temperatures should parallel the prior segments of the growing season in the mind of OH meteorologist Jim Noel. He says, “Temperatures should return toward normal or even slightly above this week and then resume the below normal tendency by this weekend into next week followed by normal the week of Sept. 6-12. Also, note that after a very cool weekend, indications are this coming weekend into early next week will be quite cool too with some lows in the 40s by early next week!”

July had record cool temperatures, but what happened to yields in parallel crop years? That is what IA meteorologist Elwynn Taylor has been studying and he reports:
1) Seasonal heat accumulation trends in 1992, 2003 and 2004 through mid-August all experienced significantly colder weather than average, similar to the current season.
2) Crops have a yield advantage with early heat and late season cool temperatures.
3) In 1992 crops were immature when it frosted early and grain quality was an issue.
4) In 2004 Sept was dry with above average GDD and yields were highly variable.

Elwynn Taylor says, “The delay in reaching silk and setting pods is an issue and although we are filling kernels and pods now, we are racing the season to get to maturity. Barring an early frost, things should be OK, but dry-down may be an issue as it was in 1992. The difference is that August 2009 has been more favorable for grain fill.” Read more.

The world’s farmers will converge on the Farm Progress Show Sept. 1-3 at Decatur, IL. The all-weather Progress City site has been expanded to accommodate more companies with bigger exhibits. BASF and Bayer have exhibits for the first time, joining Monsanto and Dow which have substantial biotech layouts. Attend marketing seminars, get a free health check-up, and watch livestock and horse handling demonstrations. Yes, there will be harvest and tillage demos, since an early planted corn field is ready to combine. Find maps, ticket details, exhibitor lists and more.

Equity losses for pork producers may be exceeding those from 1998-99, says Purdue livestock economist Chris Hurt, who says the current downturn is longer and more severe. Part of the reason is the slower reaction to cut the breeding herd, which has only dropped 3%, compared to 10% a decade ago. But why has the industry reacted slowly:
1) High feed prices are the current problem, and they have not declined as expected.
2) The export surge by China was a one-time event, and demand has diminished.
3) The current pork producers have not had to make such a large adjustment downward.
4) The industry has enjoyed profitability and built equity and decided to live off of it.

Pork production will remain in the red this fall and winter with prices in the $40-42 range and production costs near $45. Chris Hurt says if prices rise to the upper $40 range next spring with costs just below that level, then profit opportunities may appear early in 2010. For the balance of next year, Hurt expects $2 to $5 profits per head.

Regarding pork exports, they were 14% of production for Jan to June, compared to 17.8% for the same period last year. Most of the decline in pork exports is attributed to the H1N1 flu, falsely called “swine flu,” says MO economist Glenn Grimes. During that time frame, imports from Canada were down 33% compared to year ago levels.

Although meat prices are stronger they are not being passed onto the producer. Grimes and his colleague Ron Plain say processors and retailers are the only segment of the industry benefitting. For the first 7 months of the year the processor and retailer margin for beef was up 9.6% from 2008, and up 15.4% for pork processors and retailers.

Lower commodity prices are holding down inflation in the grocery store says Purdue economist Corrine Alexander. She says 2010 food prices would increase 2.5% to 3.5%, not the 5.5% increase seen in 2008 when corn approached $8 and wheat was $13. She says restaurant prices rose 3.2% in July 2009 over 2008, much less than normal. Regarding meat, she says meat prices can’t rise with domestic supplies so high.

If alternatives are needed for 2010 credit sources, FSA has a variety of lending options for farmers who cannot obtain credit from commercial banks or the Farm Credit System. Details are here.
1) Direct loans finance land & buildings up to $300,000, with 50% coming elsewhere.
2) Operating loans finance input purchases & living expenses up to $300,000,
3) Emergency loans help recover from disaster, restore property, and pay living costs.
4) Beginning farmers can get direct and guaranteed loans to start up an operation.
5) FSA loans will help socially disadvantaged farmers buy and operate family farms.
6) Youth loans of up to $5,000 help age’s 10-20 finance income producing enterprises.

Farm Storage Loans are also now available from FSA which will cover grain storage. The loan limits have been raised to $500,000 and the loan term has been extended from 7 to a 12 year payoff period. Funds will able be available for the construction stage.

Were you able to cover your production costs for old crop wheat? USDA thinks 90% of farmers were able to, based on the $6.80 average marketing year price. A global wheat shortage and adverse weather bolstered the US wheat market. USDA says that 25% of producers had production costs of $3.20 per bu. or less, and 75% had production costs of $5.17 per bu. or less. Costs did not include labor and land, but read more.

What is your debt load per acre? You may never have figured it, but that is a tool used by South American farmers, who say the average Mato Grosso farmer has $50 per acre in debt servicing, on top of his $65 per acre production cost for soybeans. Because of the heavy debt cost, policy initiatives may be developed to reduce Brazilian interest rates.

Soybean rust has been on the move in the early part of August, but remains in AR & MS as its most northern reaches. Confirmed infestations are only a few counties south of the major parts of the Midwestern soybean belt, meaning soybean growers should monitor the alert system: . It will help make decisions on rescue treatments.

More disease problems are showing up. MN plant pathologist Dean Malvick is warning soybean growers that yields may decline from Sudden Death Syndrome, Brown Stem Rot, downy mildew, and white mold. He says the weather is favoring those fungi and there is no effective treatment that can be applied at this time in the growing season.

In NE the problem is grasshoppers which are decimating newly emerged wheat. Specialists are warning farmers to plant high risk fields as late as possible with the hope populations will decline after a frost. Seeding rates are also being recommended along field margins to compensate from a partial stand. Foliar insecticides are alternatives.

Another NE problem is Goss’s Wilt in corn, particularly in the western counties where high winds, hail, sandblasting, and other issues occurred to create tissue wounds that allowed bacteria to enter. Severe yield losses are associated with the disease. The problem cannot be controlled with foliar fungicides, but use resistant hybrids next year. Compare the symptoms with your own crop.

If you are concerned about soybeans being delayed and not maturing before a frost, agronomist Mike Staton is telling MI farmers that the vast majority of MI soybeans should mature before a killing frost. His rule of thumb is that for every 3 days of planting delay, physiological maturity is delayed by only one day. He says with shorter days, soybean plants are moving through reproductive stages more quickly than normal.

Soybean aphid thresholds are causing OH entomologists to scratch their heads, if the aphids arrive in the late reproductive stage. They do not yet have a good handle on economic injury level, and say the 250 aphid per plant threshold earlier in the season is likely too low for late season infestations. They say monitor the population trends.

Check your calendar and geography for the optimum date for seeding alfalfa, to ensure it has 6-8 weeks of growth before a killing frost, says IL crop specialist Jim Morrison. Cool-season perennial grasses can be seeded 1-2 weeks later. Warm-season perennial grasses should not be seeded until the spring. Review all of his recommendations. Morrison suggests you create a forage replay checklist which would include:
1) Ensure there is no residue carryover from previously applied herbicides.
2) Have perennial weed problems been adequately controlled?
3) Corrective limestone and fertilizer should have been applied.
4) No-till forage seedings can be successful, and plant at the spring seeding rate.
5) Use high quality seed and fresh Rhizobium innoculant.

Posted by Stu Ellis on 08/28 at 01:35 AM | Permalink

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