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Friday, January 01, 2010

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.

Happy New Year to you and your family. Before everyone gathers around the kitchen table for breakfast or the TV to watch parades and football, hold a family ceremony to throw away the 2009 calendar, which is a happy thought for many Cornbelt crop and livestock producers. Extend a welcome to 2010. May you have a great year!

Market signals have been blurry, say KS St. economists, particularly at this time of year, “Speculative traders minimize market exposure so they can spend the holidays with their families without too much worry. Domestic commercial users dial operations down for the holidays. Overseas buyers adopt a wait-and-see attitude. Between ballgames and family dinners, farmers sell newly harvested crops as the weather allows.” Read their newsletter.

What would you sell your acres for? That may be a question to ponder, thinks KS St. economist Dan O’Brien, “Competitive bidding for new crop acres between US corn and soybeans is likely to occur. However, if production problems occur in the southern hemisphere, US grain markets are likely to be extremely volatile in the spring months, setting the stage for strong weather-driven grain markets in 2010.”

“It feels like we will probably see corn prices get back above $4 per bushel at some point," says Purdue marketing specialist Chris Hurt, who adds that, "Storage seems to be the best strategy on corn from this point because there are very good prospects for an overall increase on corn prices." Hurt says ethanol production will continue to grow in 2010 and 2011 as the world economy recovers and wants more corn exported.

Soybean prices will not climb much higher in Hurt’s mind because of a sufficient carryover and a global production increase of more than one billion bushels of beans coming from South America. Hurt says the strong US soybean prices spurred extra production in South America and we will return to high global inventories of beans.

Regarding a marketing plan for beans, Hurt says the higher inventories mean prices are less likely to increase as time goes on. He believes with a large South American crop, “There’s a possibility that we would see prices very flat in the wintertime and then even decrease as we enter next spring and summer.” That is, unless there are weather issues.

Investors could enter the bean market, if inflation were to return, says Chris Hurt. He says if they aggressively buy, prices would move higher and defy the fundamentals.

SURE, the permanent disaster program, will be implemented beginning Jan. 4 at FSA offices for farmers who suffered crop losses in 2008. Prerequisites include having crop insurance or NAP coverage on the crop, farming in a county or contiguous county declared a disaster area, and a crop loss in excess of 10%. If approved, a SURE payment could come as early as January. It would equal 60% of the difference between the SURE farm guarantee and total farm revenue, which includes crop sales and insurance claims.

For accrual basis farming operations, IA State economists offer a comprehensive set of closing inventory prices to help measure financial progress on your farm for 2009. It will also help to complete a balance sheet when your lender asks for it. Find it here.

The Dec 1 Hogs and Pigs Report indicated the inventory was down 2%, with market hogs down 1.8%, and the breeding herd down 3.5%, which was the same as last year. IA St. economist John Lawrence says 9.7 pigs per litter, plus a 1.6% decline in the Jun-Aug pig crop, slight increases in carcass weights and more Canadian pig imports mean the change in pork production will not be as pronounced as the change in farrowings.

The neutral to bearish report indicated that while farrowing intentions were off 1.9% and the decline in the breeding herd, producers are getting more litters per female per year. Lawrence expects IA-SoMN live hogs to average $49-52 in 2010, with lean hogs at $66-71. He says the cost of production for farrow to finish operators will be $51-51 for live hogs and $69-70 for operators selling lean hogs. His prediction is for losses in the first and fourth quarters of 2010, and profits in the second and third quarters of 2010.

MO livestock economists Glenn Grimes and Ron Plain generally agree with Lawrence on prices. In their weekly newsletter, they say, “We expect the Iowa-Minnesota base carcass price to be $60or a little more in the first quarter and in the upper $60's to about $70 in the second quarter.” Read more.

Speaking of the reality of the pork market in 2010, John Lawrence says, “A possible purgatory is that prices are high enough to cash flow and keep people in business, but not profitable enough to recover the lost equity of the last two years.” Read his newsletter.

Consumer demand for pork remains strong, say Grimes and Plain. For Jan to Nov, consumer demand rose 3.1% for pork, but dropped 2.7% for beef and 3.2% for poultry. Consumer demand for turkey was up 4.5%. There was a 4.4% drop in demand for live hogs, which they say is due mostly to lower exports for the hog industry.

Nitrogen update: Urea prices are well below the highs of last year but on an uptrend above $400 per ton. With minimal anhydrous ammonia applied in the fall, inventories are high with dealers asking $350 to $400 per ton, and periodic bargains. China’s export tariff may decline, and Russia’s shipping costs will decline with a new tanker terminal.

P & K update: DAP prices are back to 2006 levels with quotes under $330, says NE soils specialist Gary Hergert. Potash prices have decline slowly but are down to $400 per ton, and less in some markets. Hergert says fertilizer is bargain priced if you comparison shop. Read more.

“Unprecedented” is how OSU crop specialists describe the extent of fungal toxins being found in 2009 corn at livestock operations and at ethanol refining facilities. They say discounts begin at 3 ppm of vomitoxin and rejection of the load if it is above 7 ppm. The specialists say there have been problems with ear rots in prior years, but the incidence and severity this year and the associated mycotoxins is more severe and widespread. Read more on testing and feeding limits.

Do fungicides increase soybean yields? Purdue plant pathologist Kiersten Wise says some field trials have shown as much as a 2 bu. increase, but others have shown no yield benefit. She says fungicide should not be an automatic decision, but if scouting shows disease symptoms on susceptible soybean varieties, then a fungicide may be warranted.

The white mold on soybeans was an issue for many Cornbelt farmers, but Wise says once its symptoms are noticed, then it may be too late for fungicides to be effective. The decision to apply a fungicide should be based on a number of factors, such as previous crop, yield potential, weather conditions and application cost, says Purdue’s Wise.

Low-len soybean contracts with Asoyia at Iowa City may be in limbo, after the company closed its doors in mid-December. The company has not yet filed for bankruptcy, but farmers with 80,000 acres of 2009 beans under contract with the company may be wondering. IA State ag law specialist Roger McEowen says, “The nature and extent of Asoyia’s contractual relationships with soybean growers is not known.” He says consult with your attorney and watch for any mail from Asoyia.

Did your Christmas list include automatic guidance systems for planting? When you move in that direction, Purdue agronomist Tony Vyn suggests a checklist for success:
1) What level of precision is needed for each field operation, both seasonal and year to year, and what financial benefits will the technologies give a specific cropping system?
2) Ensure the system purchased has upgrade capability, as new technologies develop.
3) Cheaper systems won't save as much as the higher quality guides and monitors.
4) Upgrade equipment must be compatible with your current equipment.
5) Use a dealer with knowledgeable technicians who can assist with any questions.

If your fall tillage was weathered out, think about vertical tillage for the spring. Purdue agronomist Tony Vyn says it is an option that uses straight coulters, harrows, and rolling baskets to fluff the soil surface with shallow penetration and no soil inversion. He says it is best suited for poorly drained fields with high clay content and dries more slowly.

Vertical tillage leaves more surface residue than a field cultivator or disk, but less than no-till. Vyn says delay tillage until the soil is dry enough and keep operations shallow. He says deep tillage in wet soil will cause smearing and compaction, and if that is followed by a hot dry spring, you have created root-restricting layers of soil.

Monitor roof stress from snow, say MN ag engineers Larry Jacobson and Kevin Janni, because a roof may be able to support the 20 pounds of snow per square foot than it was designed to accommodate, but after 30 days, they say fatigue sets in and it may collapse. They acknowledge that removal is neither easy nor very safe, but should be done.

Posted by Stu Ellis on 01/01 at 03:59 AM | Permalink

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