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Friday, November 28, 2008

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.

“A waiting game” is the description of the commodities market given by Kansas St. Extension’s Mike Woolverton. He says there is support for commodity prices on both the supply and demand side, but the constant news of a weak economy, falling stock markets, tight credit, bankruptcies, and bailouts are overwhelming. Read his newsletter.

Corn supplies are adequate, but not excessive, says Woolverton, but he says there is an uncertainty for the demand created by the livestock industry. The 7-10% US production cutback parallels the expected reduction in consumer demand because of the recession. He believes corn will soon become the feed of choice as feed wheat supplies diminish.

Soybean supplies are tight and Brazilian crops are smaller says Woolverton, who also quotes market analysts that soybeans are currently oversold. He says exports have been brisk, China has been a big buyer, and Japan has returned to importing US soybeans.

A market recovery may not happen until after the first of the year says the Kansas St. economist. But he says the speed of the Obama administration in appointing its officials will be an advantage to help the financial markets settle down as soon as possible. He says commodities will be helped when the stock market bottoms and investors return.

“Are you storing corn and hoping?” asks MO Extension specialist Melvin Brees, and if so, is it because of market signals or wishful thinking? Brees says March futures offer a 17¢ premium over December, and that can be eliminated in a single day. But he says watch the basis. The river basis is weak because of soft export demand, but the interior basis is stronger because of ethanol demand, giving mixed signals in the corn market.

US and world corn stocks are tight, says Brees, the least in the US since ’95-’96 and a significant volume of 2008 corn remains unharvested with quality deteriorating. He says the declining stocks indicate more acreage is needed in 2009, but since many farmers are still trying to harvest 2008 corn, it will be hard to get fall fieldwork completed in time.

And what about soybeans? MO Extension’s Melvin Brees says export demand remains strong, but with only a 9¢ spread from January to March there is little opportunity to capture storage returns. He says the basis is currently stronger than typical, and the downtrend in futures dampens his incentive to store beans. Read his newsletter.

If cash is needed, and storage is not providing returns, Brees says sell the cash and buy either futures or options if you believe the market will trend higher. You would still be at risk of meeting margin calls on futures contracts and paying for option premiums.

The stronger dollar and evaporation of Chinese demand for pork have cut potential pork profits to the bone, says Purdue livestock economist Chris Hurt. The $23 collapse in the hog market from Aug. to Nov. parallels the $25 collapse in 1998, the result of demand. But Hurt says recession-conscious consumers will shift from beef to lower priced pork. Read his newsletter.

Purdue’s Chris Hurt expects the 2-3% cut in pork production to push prices above the $48 live price in 2008, and into the low to mid-$50 range by mid 2009. At the same time Hurt believes 2008 cost of production at $53 will average $46 to $48 for 2009, leaving a $14 per head profit. Despite the uncertainties of demand, Hurt says hedging lean hog futures and feed now for 2009 will provide profit opportunities for pork producers.

MO livestock economist Ron Plain expects the IA-MN negotiated price per carcass cwt to be $67 to $72 for 2009. He says the first quarter will average $58-$63, second quarter $70-$75, third quarter $73-$78, and $66-$71 in the fourth quarter of 2009. He says the market dynamics are fewer farrowings, strong export demand, weak domestic demand. On a live hog basis in the Iowa-southern Minnesota market, Plain anticipates the average annual price range of $51 to $55 per cwt for 2009. That would also be slightly above the projected price of $48 to $49 in 2008 and the actual average price of $47.05 in 2007.

A livestock gas tax could be in the offing according to Ohio State’s weekly beef newsletter. It says Nov. 28 is the deadline for comments to the federal EPA about controlling greenhouse gases, including methane produced by livestock. The EPA’s proposed fee is $43.75/ton for emitting greenhouse gases, which would be $175 per dairy cow, $87.50 per beef cow, and $20 per hog. The rulemaking notice apparently slipped by many farm lobbyists, but is not yet law.

When buying or selling hay a quality test will indicate the true value. A sampling probe should be used, with cores taken from the butt end of 20 bales between the twine, and take 2-3 cores from large round bales. Ensure a half pound of sample material is taken, sealed in a plastic bag, protected from the sun, and sent as soon as possible to the testing lab. Labs, probes, and more information are here.

If seed purchase decisions have not been finalized, confirm your thinking at one of the seed variety test websites operated by the Land Grant Universities in the Cornbelt. Find the link to your state’s tests here.

Consider both ‘07 and ‘08 seed performance suggests Phil DeVillez, head of Purdue’s crop performance program. He says always look at multi-year data, since a top-yield hybrid in 2008 might have been low in the ratings for 2007. DeVillez says, “We’ve had two extremely different years and if a variety is at the top in terms of performance in 2007 and 2008, then you can feel confident about it being a good variety for the area.”

Seed selection decisions should include pest resistance, as well as yield and other performance factors. IL Extension pathologist Loretta Ortiz-Ribbing suggests:
1) If you don’t have an insect problem in your area, paying for that trait is a waste.
2) Purchase seed that carries resistance to diseases that have been diminishing yields.
3) Most corn hybrids resist common leaf blights, but are not resistant to every blight.
4) If you have a soil-borne soybean disease or SCN, plant seed that is resistant to them.

“Insects do drown,” says Purdue entomologist John Obermeyer, who tells the tale of mama corn rootworm beetle who lays her eggs in cool and moist soil, but which will also be the last to warm up and dry out in the spring, subjecting her offspring to a threatened childhood. Obermeyer says the impact of drenching rain can be significant if timing is correct. Eggs can survive submerged, but newly hatched larvae need air within a day.

Did you have soybean aphid or spidermite problems in 2008? Purdue entomologist John Obermeyer says not everyone did, and they appeared somewhat unexpectedly. But Obermeyer says scouting paid dividends due to the great variability in aphids and mites. He says the high commodity prices took the question out of whether or not to spray.

Obermeyer says the most interesting insect in 2008 in his opinion were the worms feeding on ears of corn. Fields were planted late; ears developed late, and he says that set the stage for a larger than expected problem with ear worms and western bean cutworms. He says Herculex corn had a better record against the latter than did YieldGard hybrids.

If you want high corn yields, Tony Vyn and Terry West at Purdue have some ideas, which are conclusions from their tillage trials in high quality soils. The details are here.
1) Tillage system choice has less consequence than other management factors.
2) Hybrid selection, optimum plant density, & fertility levels are more important.
3) Conventional tillage is not essential for achieving high corn yields.
4) In corn after corn, fall strip tillage is preferred over chisel plowing
5) Crop rotation still boosts corn yields and, if soil quality, drainage, management, etc. are equal, yield-contest aspiring farmers should still avoid continuous corn.

A “full steam ahead” approach to biomass production to refine for ethanol may not be the best approach says IL soil scientist Michelle Wander, writing in Science magazine. She says it may help control problems with nitrogen, but the impact is not known if marginal land is converted to biomass production instead of more productive land.

Try out these on your friends. MO livestock economist Ron Plain’s market facts:
1) The smallest 75% of U.S. hog farms produced 1% of the hogs.
2) The largest 1% of U.S. hog farms produced 75% of the hogs.
3) Since 1930 the sow inventory has declined 42%, but pork production rose 221%
4) Jan-Sept pork production was 17.25 bil. lbs, up 9.3% over Jan-Sept of 2007.
5) Jan-Sept pork exports were 3.62 bil. lbs, up 65.8% over Jan-Sept of 2007.
6) Jan-Sept pork imports were 614 mil. lbs, down 16.6% from Jan-Sept of 2007.
7) Pork, beef, and poultry production will all drop in 2009, the first time since 1973.
8) In 2007, swine herds with 1-99 head averaged 7.53 pigs per litter.
9) In 2007, swine herds with 5,000+ head averaged 9.28 pigs per litter.

Posted by Stu Ellis on 11/28 at 01:19 AM | Permalink

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