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Friday, January 02, 2009

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 December USDA crop report made headlines for cutting projections for corn used for ethanol from 4 bil. to 3.7 bil. bu. But Extension’s Jim Hilker at Mich. State says 2009 will still require 700 mil. more bu. of corn used for ethanol than the 2007-2008 marketing year. He says subsidies and mandates remain, but just the rate of growth is slowing.

Hilker says E-85 prices used to be less than the price of gasoline, but that is no longer true. “This is due to wholesale gas prices dropping to around $1.10, while ethanol has dropped to about $1.50 per gallon. At the peak of the oil and corn prices ethanol reached $2.90, about 80% of gas prices at the time. The relatively higher ethanol content in E-85 is one reason the USDA has lowered their forecasted use of corn for ethanol.”

With trend yields in corn and the nearly 1.5 bil. bu. carryover next August, Hilker says 2.25 mil. fewer corn acres will be needed in 2009, but he expects a 3 mil. acre expansion. Hilker’s latest newsletter can be found here.

If you have corn to sell, Hilker says, “The futures market spreads continue to say it will pay five cents a month to store corn, under a hedge if prices drop, and under both a hedge and storing cash if prices rise. However, the nearby basis has tightened to the point where it may no longer help with paying for storage. This tells me that on-farm storage is still a reasonable alternative, and paying commercial storage plus lost interest is not.”

If you have beans to sell, Hilker says, “The futures are telling everybody it will not pay to store soybeans. Of course, with 35 cents-plus nearby basis it is hard to know what that means. My best shot is if you want to stay in the soybean market, use a basis contract, sell cash/forward contract and buy futures, or sell cash/forward contract and buy calls.”

When your bookwork is finished, 2008 will show substantial red ink for hog producers says IL ag economist Dale Lattz. Reviewing records from 5,500 farms, Lattz says hog prices are expected to average about $49.50/cwt in 2008. The sharp increase in corn and soybean prices early in 2008 will resulted in significantly higher feed costs. Feed costs are expected to average about $38.75/cwt and non-feed costs at $19.70. Total production costs would be $58.45/cwt, or significantly above the average price received.

2008 will prove to be less profitable for beef producers than 2007, says Dale Lattz at IL Farm Business Farm Management. Returns to cattle producers were supported by slightly higher finished cattle prices and lower prices paid for replacement cattle. Offsetting the higher finished cattle prices will be significantly higher feed costs. Feed costs rose in 2008 due to higher corn and forage prices. Even with higher finished cattle prices, those higher feed costs will most likely result in 2008 returns below 2007 returns.

Deductions, exemptions, and depreciation are at the top of your mind, and all farmers should beware of many changes approved by Congress late in the year to boost the economy that have implications for farm taxes. For changes in the law and needed tax tables, MN Extension tax specialists have provided extensive information here.

Full time farm employees who received a year end bonus were rewarded with an average of $1,000, but within a range of $50 to $9,000 according to an Iowa State survey. 55% of employees received the bonus, which were based either on volume of commodity produced, commodity quality and performance, longevity, or farm profitability.

Year end bonuses were tallied by Iowa State ag economist William Edwards who notes a bonus does not have to be paid in cash. Appliances, gift certificates, paid vacation or travel. A commodity can also be used, such as a volume of grain or livestock, or grain from acreage to sell. Edwards says current tax laws do not subject payments to employees in the form of commodities to Social Security tax. For ideas about bonus payments, Edwards has a fact sheet here.

Cash rent increases from 2008 to 2009 may be flat says Purdue economist Craig Dobbins, due to the erosion in grain prices and economic meltdown. "So the decision that might have been made in September to pay cash rents in 2009 of $180 to $200 an acre and still have something left over, well, today there's nothing left over and a farmer is in the hole." He says costs and profits should be carefully calculated when negotiating rent.

Purdue’s Craig Dobbins says when meeting with a land owner to discuss cash rental rates, “It's worthwhile to share some information about your costs, how you see your return situation shaping up and letting the landowner know what the margin is potentially going to be for the next year." He says owners should be aware of market price drops. Get negotiating help here.

Production costs are going to be cut where possible says Dobbins. He says this is not the time for a fertility building program. No-till systems will help cut down trips across fields. Money can be saved by ensuring seeding rates are at the proper level.

Are your yield goals reasonable? Profitability can be increased $7.50 per acre by decreasing a yield goal that was 10 bu./A too high, or increased $42.50 per acre by increasing a yield goal that was 10 bu./A too low. NE agronomist Charles Shapiro says the savings comes from a more correct nitrogen application adjusted for reasonable yield. Read his fact sheet.

Profitability is dependent upon the efficient and wise use of fertilizer says KY soil specialist Lloyd Murdock. He offers a checklist for fertilizer profitability:
1) A soil test will indicate if reserves of P and K in the soil are sufficient for profits.
2) If P exceeds 45 lbs/A and K exceeds 250 lbs/A, why add more and raise your cost?
3) If P & K are insufficient, apply them in the row at a half to a third of broadcast rates.
4) When the pH is between 6.2 and 7.0, crops use fertilizers much more efficiently.
5) Manure is cheaper, but good distribution and nutrient testing are the keys to its value.
6) K should be applied each year if vegetation is harvested such as silage, hay, or straw.
7) Sidedressing N on poorly drained soils will improve efficiency and allow lower rates.

Evaluating hybrids can become easier with two principles offered by Purdue’s Bob Nielsen here.
1) Consistent yields 5% above the average yield of trials in which they are entered.
2) Consistently yield at least 90% of the maximum yielding hybrid in a trial.

Purdue’s Bob Nielsen also says look for trials that evaluate hybrids over multiple locations. Multiple testing locations in a single year represent possible weather patterns your farm may encounter in the future. Weather influences hybrid performance more than any other variable, because weather interacts with most of the other yield limiting factors.

Selecting corn hybrids for silage requires different standards than hybrids for grain. MN agronomist Jeff Coulter says check performance data from university seed trials.
1) Silage hybrids should be 5-10 days longer in maturity than hybrids for grain.
2) Consider hybrids with a range in maturity to avoid crop loss from heat or drought.
3) Avoid hybrids with long stay-green ratings because whole plant moisture is too high.
4) Dairy producers should evaluate hybrids by milk per acre and milk per ton here.

December weather has been LaNina weather says Elwynn Taylor at Iowa State. He says it is extraordinary for it to develop this early, which is 3 months earlier than usual. A LaNina peaked last March, contributed to spring flooding, and diminished by mid-May and began to peak again in November, causing all of the snow and cold temperatures.

Will the LaNina remain with us? Taylor says, “The “early peak” of the current LaNina may indicate that the adverse impacts with the large-scale event will dissipate early in the growing season. If so, the above average moisture in the soils of the Cornbelt would be considered as advantageous to potential crop yields.” In the meantime, Taylor there has been near record flooding of some Midwest rivers, instead of January for LaNina years.

Warmer temperatures are on the way says MO climatologist Pat Quinan, who says precipitation predictions are a toss-up for January according to the National Climate Predication Center. Guinan says 10 of the past 15 winters have been warmer than normal with 3 in the top 5 warmest since 1895. Eleven of the past 15 have been wetter than normal. Guinan says 2008 was one of the wettest years which means livestock ponds are full, ground water is in good shape for spring planting, and soil moisture is sufficient.

Corn milling technology can be improved with a new gene inserted in corn that will cause it to stand out under special lighting. The genes can be inserted into the embryo, the starch, or the pericarp coating on the seed and the selected element can be identified under the testing light after the corn has been milled. Iowa State researchers say the individual kernel parts can be identified and segregated easier with the advancement.

Posted by Stu Ellis on 01/02 at 01:45 AM | Permalink

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