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Friday, January 30, 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.

Soybean exports continue to climb, says IL Extension’s Darrel Good, and USDA is forecasting nearly as many shipments as last year, which would put sales at 1.1 bil bu. Good says the rapid pace of Chinese purchases has pushed totals 39% above 2008. He says to reach USDA estimates, shipments will not have to match last year’s pace. Dry weather in Argentina has reduced its crop potential, reducing US export competition.

Corn exports, says Darrel Good are at 617 mil. bu., which is 412 mil. behind 2008 at this date. That results from declining demand from major buyers, which may be buying corn in other global markets, and feeding low quality wheat from other nations. USDA’s corn export forecast is for 1.75 bil. bu., but Good doubts the goal will be reached. Read his newsletter.

Same stocks, but a new price level, says Extension Specialist Jim Hilker at Michigan State. “The bottom line is that expected 2008-09 ending stocks were put at 1.790 bil. bu., up 316 mil. from the Dec estimate. The 1.790 bil. is 15% of use, in the old days an ending stocks-to-use ratio of 15% would have meant a $2.25 price. But the increase in inelastic ethanol demand, and a floor caused by the ethanol mandates, has changed the corn pricing model.” Read more.

Wheat stocks are plentiful, says Jim Hilker at Michigan St. “With the projected ending stocks-to-use ratios for both 2008-09 and 2009-10, supplies are projected to be more than sufficient the next two years. However, while the projected US 2008-09 ending stocks of 655 mil. bu. are ample, and the 2008-09 projected world ending stocks are much improved from last year, projected 2008-09 world ending stocks are still relatively tight.

Mike Roberts’ market observations from VA Tech contain grain selling strategies:
1) Lack of technical strength is a contributing factor keeping corn under $4.00/bu. Wait and see where these prices are headed before pricing any more of the 2009 corn crop.
2) Forecasts for better weather in Argentina and producers did not seem to be turning loose of many beans. It might be a good idea to price binned soybeans on upticks.
3) Argentinean government was reportedly blocking exports to protect food supplies amidst an ongoing drought. It would be good to hold off pricing any more wheat.

Planting decisions should be based on market signals, says MO Extension specialist Melvin Brees. He recalls the 2007 January corn/soybean futures price ratio near 1.9/1, which favored corn. But the 2008 signal had a January soybean corn futures price ratio of 2.5/1 that favored soybean production. Corn acres grew in ‘07 and soybeans in ’08. Read more.

Brees says, On Jan 15 “March corn of $3.65 and beans $9.95 (put) the bean/corn price ratio near 2.7/1. When compared with the last two years, this appears to heavily favor soybeans. However, nearby (March ‘09) corn futures are discounted when compared with new crop (December ‘09) futures prices. This “carry in the market” suggests weak nearby demand and a market that is willing to pay more for corn next year.”

Brees says, “In contrast, the soybean market is inverted with nearby futures prices about 35 cents higher than new crop (November ’09) futures prices. This signals stronger nearby demand for soybeans with less concern about next year’s crop supplies. Comparing new crop corn futures price ($4.11) and soybean prices ($9.61) (Jan 15), the soybean/corn price ratio is about 2.3/1. For much of the Cornbelt, this price ratio is probably a neutral signal, unless corn production costs are especially high.”

Brees leaves some final words of wisdom. “(For either corn or soybeans), profits are likely to be harder to come by in 2009 than they were in 2008 and wishful thinking should be avoided in setting price goals. During an uncertain economic climate, capturing potential profits when they are offered may be important.

Fertilizer prices are stabilizing, but vary widely at dealers and farm supply companies according to Purdue economist Bruce Erickson, who says the US demand is at the mercy of whatever happens in other parts of the world. He says 47 % of the N and 45% of the K needed for use in the spring of 2009 came into the US during the period of lower prices.

Fertilizer delivery could be a problem, since less than the usual amount was applied in the fall, and more will have to be transferred into retail dealerships, which may have problems getting timely deliveries this spring. That is the thought of Purdue’s Erickson, who says the delivery network will be strained with a high demand for spring fertilizer.

Fertilizer pricing depends on the dynamics in the price of corn between now and planting time says Purdue economist Alan Miller, who adds that nitrogen prices have returned to levels that would bring natural gas prices into play again. He says natural gas prices have been relatively low, but if they increase, so does the cost of nitrogen. Read more.

Urea and UAN prices have declined slightly to become more competitive with anhydrous ammonia, causing some farmers to question the value of one over the other. Purdue agronomist Jim Camberato says urea can be applied faster than ammonia, but is typically not as good a source of N. He says Urea is often inferior to UAN when surface-applied, but equivalent or slightly better than UAN when incorporated into the soil. Read his fact sheet.

Cut your production costs with help from audio, video, and fact sheet resources provided by NE Extension. The frequently updated website offers efficiency improvements on cropping systems, machinery management, production management, irrigation, pest control, fertility, and harvest and storage issues. The site also features production budgets for 11 crops.

Mark your calendar. USDA’s deadline is February 27 to sign up for any financial assistance from various crop disasters between 2005 and 2007. Producers with crop or pasture damage must complete an FSA-840 application at local FSA offices.

With a 35% drop in dairy prices, dairymen are urged by OSU dairy economist Cameron Thraen to sign up for the Milk Income Loss Contract (MILC) program begun in the 2002 Farm Bill. He says the record high returns for the past two years are history, and the MILC program can provide a counter-cyclical type of payment during the grim 2009 milk economy, if you sign-up one month before you plan to enter the program. Read more.

If you need DDGS, go to Indiana, says Purdue economist Frank Dooley. He says the Indiana ethanol industry will reach a 1 bil. gal. capacity and those ethanol plants will produce enough distillers’ dried grains to feed IN livestock three times over. Dooley says that means an annual production of 900,000 tons of DDGS, when 300,000 are needed. He says the relative high price of $100 per ton has not given indications of softening.

Ethanol proponents have some new ammunition to use from research at Nebraska:
1) Corn ethanol directly emits an average of 51% less greenhouse gas than gasoline.
2) Ethanol produces 1.5 to 1.8 units of energy for every unit it takes to make ethanol.
3) 10-19 gal. of ethanol are produced for every gal. of petroleum used to grow corn.

Many Cornbelt farmers may be surprised to find 80% of their soybean fields infested with soybean cyst nematodes as are fields in IL. Nematologist Terry Niblack says if a field has been SCN free, it will not be for long, and said IL was completely infested by 2005, after SCN was found in only 1 county in 1962. Niblack says soil sampling is the only way to know if SCN is present, since it can cause an undetected 30% yield drop.

SCN is easier to keep suppressed than it is to reduce the impact says Extension specialist Niblack. She adds, “If the field is planted to a confirmed SCN-resistant variety and SCN populations are increasing, that's proof that adaptation or a "race shift" has occurred. SCN-resistant varieties do not have the same levels of resistance and there are no immune soybean varieties.” She says rotate crops, varieties and sources of SCN resistance.

Given the moisture saturation of soil, MO Extension’s Laura Sweets is concerned about the potential for seed decay, seedling blights, and root rot problems for both corn and beans this spring. She says that favors pythium, rhizoctonia, and fusarium fungi problems for both corn and beans, and phytophthora problems for beans. She recommends using seed with high germination rates and fungicides, if not pre-applied.

All of that information you provided to the USDA in 2007 for the Ag Census, will be published on Feb. 4 when the results of the Ag Census are released. County-level data is the smallest unit that will be detailed, and will show the changes in agriculture from 2002 when the last Ag Census was taken until the latest one nearly two years ago.

Posted by Stu Ellis on 01/30 at 01:45 AM | Permalink

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