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Friday, December 19, 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.

The battle for acreage had begun at this time last year as corn and soybean prices rose to record levels to ensure sufficient supplies. But IL Extension Specialist Darrel Good says the 2009 battle may be just keeping acreage in crop production, instead of letting it return to abandonment. Good says 9 million acres were added to the crop base between 2006 and 2008, and unless prices increase, some of it will revert to prior uses.

Darrel Good says 2009 corn use will be 12.185 bil. bu. which is 588 mil. bu. less than last year, and the carryover is nearly 1.5 bil. He says if use expands to 12.8 bil. in the 2009-2010 marketing year, then additional acres will need to be planted in 2009. Read his newsletter.

Following the bearish December 11 crop report, prices began to rise, and have come upward significantly since the release of the report, with the help of higher prices for crude oil and predictions of lesser corn acres in 2009. Good says those forecasts are premature, but he says a late harvest and inclement fall weather have given farmers more than the usual amount of flexibility on what crops can be planted in the spring of 2009.

Corn gained more than 40¢ in the past week and VA Tech Extension’s Mike Roberts says the forecast for less acres was one cause, “One report stated that some analysts are expecting corn acreage to fall by as much as 3.6 mil. acres in 2009. We'll see. If input costs are high and corn prices stay relatively non-profitable at these levels it just may happen. Producers try to go where the money is . . . just like anyone else.”

The National Weather Service says the La Nina will not likely last past February. Iowa State meteorologist Elwynn Taylor says, “That is long enough for a winter a lot like the one we had last year. This does not mean serious flooding as in the past spring, but it does include the risk of that as well. If it is gone by March, there would not be as much chance of extreme weather as in the past spring with its record tornadoes and flooding.”

Land price inflation may be slowing, says Iowa State economist Mike Duffy. He says the average price of land has risen for 9 consecutive years, but the indicators point to a slowing as the national economy battles recessionary pressures. He says lower grain prices and higher production costs mean lower net revenue, which moderates values.

But land values will not go into free fall, says Iowa State’s Duffy, who says the price trends of the 1980’s will not be repeated. He expects a return to more normal conditions and not “unbridled exuberance” seen over the past 24 months. He expects a retreat from the high prices, but is uncertain where they will go in the next year or so.

There is something about US pork that foreign consumers like, and they can’t get enough of it. For the first 10 months of the year, pork exports are nearly 61% higher than last year, and 21% of the total of US pork production is being exported says MO livestock economist Glenn Grimes, and he adds that pork imports are down nearly 17%.

Cow-calf operators who missed the Oct. market high, may have a second chance to sell their calves for similar prices, but Utah State economist Dillon Feuz says it may be in 2009. He says live cattle contracts have increased in the past 10 days, and another $5 will put them back at Oct. levels. And he expects cash cattle prices to increase as well.

Tax implications could be significant by not selling any 2008 calves and selling twice in 2009. Livestock economist Feuz says there may not be much money made on the calves, but operators should talk to their tax advisor to avoid undue tax consequences.

The net worth statement or the accrual net income statement you will soon prepare should have a value of the commodities on hand to give a complete picture. Iowa St. economists suggest:
Crops: $3 corn, $8 beans, $4.65 wheat, $30 per ton corn silage, $115 per ton alfalfa hay.
Livestock: $85 heifers, $95 steers, $43/cwt hogs, $110/cwt feeder pigs, $800 cows.
Pasture: $60/A improved, $40/A permanent, $15/animal/month.
Labor: $2,700/month operator labor, $1,700/month unpaid family labor.

The rate of return on your farm goes up by acreage and gross farm income, but if you use statistics from MN farms, the largest operations do not have the best rate of return. Bob Craven of MN Extension reports rate of return on farms with $500,000 to $1,000,000 have a 15.8% rate of return, which falls to 14.2% for farms over $1,000,000. Farms with 2,000 to 5,000 acres have a 16.9% rate of return, compared to 16.3%, not only for the 1,500, to 2,000 acre group, but also for those with 5,000 to 10,000 acres.

Soybean cyst nematode continues its devious march across the Cornbelt, and NE plant pathologist Loren Giesler urges soybean growers to use SCN resistant varieties of soybeans, and once they are in your crop planning, rotate the source of the resistance. He says don’t let SCN reach a level that makes soybean production unfeasible in that field.

Missouri about washed away in 2008 says state climatologist Pat Guinan. He says statewide average precipitation is almost 16 in. above normal, which is the largest above-normal departure from the norm in the US. Guinan says if Dec. has more than 2.56 in. of precipitation, it would surpass 1993, which averaged over 55 in. of precipitation. He says most of MO had more than 50 in. of precipitation, but some parts had more than 70 in.

Posted by Stu Ellis on 12/19 at 06:14 AM | Permalink


Flexibility of corn on corn is going to be dependent on a non La Nina Spring. A lot of work, including harvesting in some fields, needs to be accomplished for timely planting.

Posted by: Freeport, IL at December 19, 2008 12:12PM

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