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Friday, January 23, 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.

Will your cropping pattern change in 2009? IL Extension’s Darrel Good says many farmers are still waiting for fertilizer prices to come down, commodity prices to give stronger signals, and cost estimates and price guarantees from crop insurance. His newsletter is here.

Will more corn or beans be needed? Good says the answer depends on: the level of consumption next year, the magnitude of stocks at the end of the current marketing year, and US average yields in 2009, but the question won’t be answered before planting time.

For corn: Good says repeating 2008 acreage of 85.982 mil. and a trend yield of 153 bu. would produce 12.04 bil. bu. Combined with the 1.79 bil. ending stocks from 2008, such a crop would still provide a 490 mil. bu. surplus with a 12.53 bil. bu. consumption. He contends that corn acreage needs to be maintained at least at 2008 levels of 86 mil.

For beans: Good says repeating 2008 acreage of 75.718 mil. and the trend yield of 42.3 bu. is reached, then a crop of 3.164 bil. bu. would be produced. He says with the 225 mil. bu. carryout, soybean use during the 2009-2010 marketing year would have to exceed 3.204 bil. bu., which he doubts, to warrant increased soybean acreage in 2009.

Set sales targets, advises marketing specialist Jim Hilker at Mich. St. because there is plenty of corn, “$4.00 being a good starting target to consider for both this year and next. Of course you can average into $4.00 by staring a bit below and hoping to price some of it above. The other target you need to set is how much you want to price at each price target and time period, don't get carried away, but consider making significant sales.”

Soybean pricing depends on the Argentine drought in Hilker’s mind. “The drought in Argentina both makes that a hard decision, but also may be an opportunity. Futures were only willing to pay four cents a month storage, which would only cover those with on farm storage and no production loans due. And the $9.60-70 price being offered for old crop is above what fundamentals would project at this time on known information.”

Potentially the most damaging aspect of (the Jan. 12 USDA) reports for the corn market is that the weaker demand doesn’t look like it will be a one year phenomenon, says Matt Roberts at Ohio State. “Combined with higher initial inventories for next year, these reports remove much of the worry about the 2009 crop year—not only will there be a large carry-in to buffer any production shortfalls, but demand will be weak.”

Unlike corn, says Roberts, “There is no evidence of a broad-based, dramatic slowdown in soybean demand.” There is softness in domestic crush, but exports are stronger. He says, “These reports provided a tremendous amount of support to soybean demand.”

Matt Roberts says, there does not appear to be much hope for higher prices in the short or intermediate term. He says corn acreage could drop 2 mil. from 2008 and corn prices would still move lower. He agrees with Darrel Good, “There is no compelling scenario in which the soybean market ‘needs’ additional acreage.” And he says compared to the battle “for” acres of the past 3 years, weak demand will cause a battle “from” acres.

Roberts believes undesignated acres may be destined more for wheat than for corn or soybeans. “This leads me to believe that we may have already seen the strongest of the winter rally, and prices will decline from this point to $3.80-$4.00 for the Dec ’09 CBOT contract, where they will wait to gain a better handle on farmers’ planting intentions.”

Strong grain prices may create problems for some farmers with the new Adjusted Gross Income rules that determine farm program payment eligibility says Steven Johnson at Iowa St., and he says there are some new financial reporting forms required by FSA.
1) CCC-902I, which is a “Farm Operating Plan for Individuals.”
2) CCC-902E, which is a “Farm Operating Plan for Entities.”
3) CCC-926, which computes Average Adjusted Gross Income.

As a refresher, Johnson says, “For commodity and disaster programs, the AGI limitation was reduced from the 2002 law’s $2.5 mil. from all sources to a 3-year average non-farm AGI of $500,000. For 2009, those 3 years will consist of taxable years 2005, 2006 and 2007. An individual or entity that exceeds this $500,000 non-farm AGI average shall not be eligible for such programs. Also, under the new regulations, an individual or entity must have a 3-year average AGI under $750,000 per year from farm income in order to qualify for direct payments issued under the Direct and Counter-cyclical Program.”

Cattle feeders are being hurt by ethanol plants that are shutting down and diminishing the volume of wet and dry distillers’ grains that are available. Nebraska livestock economist Darrell Mark says, “Feeders can’t simply remove it from rations once cattle have been fed this highly palatable feed. Given strong local demand and reduced supply, the cost of distillers’ grains has increased dramatically relative to corn (despite absolute prices dropping).” Read more.

Pork producers are intrigued with the 2008 broiler production, which was down 0.7% for the year and 5.8% for the 4th quarter. MO livestock economists Grimes and Plain say the cutback is big in absolute terms and historically. They say the pork-poultry cross demand relationship is high and “Therefore, this reduction in poultry supplies and higher prices should be positive to pork demand.” Read more.

Returns to cattle feeders in 2008 were a minus $130 per head according to the Livestock Marketing Information Center, and the worst going back into the 1970’s. That is based on feeding out a 750 lb. steer in a commercial feedlot. Grimes and Plain say, “Due to the weakening feeder-calf prices and high costs, some cow-calf producers did not cover cash costs of production in late 2008.” Returns are in the 20th month of red ink.

Livestock production will be down in 2009. The Grimes and Plain Outlook says:
1) Beef producers will continue to reduce the cattle herd in 2009 and into 2010.
2) Pork production will decline 2-3% in the first quarter of 2009, and 3% for the year.
3) Chicken and turkey production will decline 3%, an unusual two year decline.

Should corn silage get extra N? That was the question to be answered in a 4 year IL study involving continuous corn, corn-soybean rotations, and varying rates of N.
1) Silage yield and crude protein were higher in Sb-C than in C-C rotations.
2) Silage yield and crude protein rose in both rotations up to 180 lbs. of N.
3) Neutral detergent fiber decreased in both rotations with increasing N rates.
4) Results were minimal or inconsistent for other silage quality parameters.

Delayed weed control means lost corn yield to weed specialist Bob Hartzler at Iowa St. Early season weed competition reduced the biomass of the ear shoot up to 85%. He says allowing weeds to compete for an additional week when corn was growing from V4 to V5 resulted in a 63% increase in lost yield because ear shoots begin at the V5 stage. Read his analysis.

If non-GMO soybean premiums have caught your attention, please, please remember that Roundup is not an option for weed control. Some farmers will need a refresher on weed control for non-GMO beans. You can do it from home with the help of Ohio State’s weed management fact sheets. Find them here.

For maximizing grain yield and profitability, soybean variety selection is the single most important factor. In a free webcast presentation titled Soybean Variety Selection, WI Soybean Extension Specialist Shawn Conley discusses variety selection criteria and other related yield-maximizing factors. This recording, which can be viewed through mid-February, is provided by the non-profit Plant Management Network.

Your grain bins may be out of sight, but should not be out of mind. MO Extension’s Charles Ellis says cooler air along the sides settles, and is warmed at the bottom, where it carries moisture to the top and releases it for the benefit of insects and mold. The top surface moisture condensation will lead to rapid spoilage as the outside air warms. He suggests aeration.

The Clean Water Act has broadened, thanks to a federal court ruling on FIFRA-regulated pesticides that might find their way into water. Although EPA may have found the chemicals were not environmentally harmful, the court ruled that pesticides are not exempt when they leak into water. Iowa St. specialist Roger McEowen says the court may have been confused. Read more.

Mark your calendar if you are buying, selling, or renting Cornbelt farmland. The Chicago Farmers Farmland Investment Fair is set for Feb. 7 at Joliet (IL) Junior College. Speakers will focus on farm management, ownership issues, production alternatives, and the Farm Bill. Registration and trade show information is here.

Posted by Stu Ellis on 01/23 at 01:35 AM | Permalink

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