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Friday, February 13, 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 South American soybean crop has deteriorated from dry weather says IL Extension marketing specialist Darrel Good and the result will be cuts in exports and ending stocks. Argentine production will be down 150 to 200 mil. bu. from January, and Brazilian beans will be down 75 mil. bu., but without much impact on expected export business. In the meantime, he says US soybean exports have been strong, helped by Chinese demand.

Argentine corn production, most of which is exported, will be reduced from 590 mil. bu. last year to 355 mil. bu. this year. Brazilian corn production is expected to be 15% down from the 2 bil. bu. crop last year. US corn exports have picked up slightly, but Darrel Good says shipments lag behind the pace needed to reach USDA projections. Read more.

USDA’s February Crop Report held few changes, says Kansas State specialist Mike Woolverton. Despite trade expectations for adjustments in the corn balance sheet, USDA left the January numbers in place. Woolverton speculates that the lack of change in ethanol demand reflects USDA’s thinking that better times are ahead for ethanol refiners.

The strength in soybean exports helped USDA push soybean carryover down to 210 mil. bu. at the end of the current marketing year. Woolverton says USDA might have dropped the carryout to 205 if the domestic crush had been more robust. The lower ending stocks pushed upward the USDA price range to $8.75 to $9.75 per bushel. Read more.

Kansas State’s Woolverton says planting decision time is near, but wet fields in the Eastern Cornbelt may delay fieldwork, giving producers more time to decide. He says the world weather impact may cause some price bullishness that may offer good selling opportunities, but the harvest soybean to corn price ratio is at 2.23, under the long term ratio of 2.3. The next report on March 11 may give more guidance for decision making.

The La Nina weather pattern is still waffling says meteorologist Elwynn Taylor at Iowa State, who advises that it needs to be watched closely because we are nearing the end of the cycle that could bring a drought. He’s not predicting one, but says 23 years is the record long gap between major droughts and 23 years after 1988 is 2012.

Elwynn Taylor also advises farmers to watch the weather maps for precipitation in Arkansas beginning February 15. He says if the next 45 days are wet, there is an 80% chance at lease that the planting season will be wet. But he says if Arkansas is dry for the next month and a half, the chance for a dry planting season is also at least 80%.

Climate extremes are often blamed on global warming says KY soybean specialist D.B. Egli, but he says every farmer knows there is a lot of variation in the weather, and he wondered if global warming will affect corn and soybean yields this year. His weather station at Henderson, KY, indicated summer rainfall in the past 31 years ranged from 5 in. to 15 in. and high temperatures ranged from 94 degrees in 1980 to 84 degrees in 2004. He says the 31 years of records don’t show any evidence of warmer, wetter, or drier.

Is your corn still in good condition? Iowa State grain quality specialist Charles Hurburgh asks because last fall’s soft, wet corn has only half the storage life as normal #2 corn. Elevators and farmers who stored 24% moisture corn, but kept it below 30F with aeration, should have good quality corn. But he says unaerated bins and piles may be spoiled. He says the active period for grain spoilage begins in mid to late February.

Hurburgh says corn over 17% which cannot be maintained below 30F has to be dried or sold because it will spoil rapidly. And he says ethanol plants will reject mold damage, as should livestock feeders because of the potential for mycotoxins. He says the bottom line is act now to check the quality, and either dry the crop or move it out of storage.

Crop insurance premiums and indemnities reached record highs last year and could be duplicated this year says Iowa State economist William Edwards. He says calculate your needs carefully because high input prices and lower indemnity prices means you will have to choose a higher percentage level of coverage to protect production costs.

The Biotech Yield Endorsement which had limited availability in 2008 has been extended to other Cornbelt states, and not only covers YieldGard, but also Herculex and Agrisure genetics. Discounts averaged 13% or $3 last year if 75% of your insurance unit was planted to eligible hybrids. However county-level GRIP and GRP is not eligible.

USDA subsidies have been changed for some crop insurance policies which may cause you to adjust your decisions on coverage. William Edwards at Iowa State says whole farm and enterprise units used to have lower premiums than basic and optional units. For 2009 they will have the same dollar value subsidy, which will be 55% for basic units, 77% for enterprise units, and 80% for whole farm units when selecting 75% coverage.

Hog producers who have balanced their books are finding they averaged $47.85 per cwt in 2008, according to an IL Extension study of hundreds of farm records. Economist Dale Lattz said feed costs averaged about $38.75 per cwt, and non feed costs were $19.70, with total costs of production at $58.45. He is expecting production costs to drop during 2009, and says breakeven prices may be seen, depending on corn and bean prices.

If you are cutting back on pork production, MO livestock economist Glenn Grimes says keep going. With pork demand down 3.5% last year, the weaker demand and high feed prices means the hog herd needs to be reduced more than it has been. Grimes says there is a need to cut the breeding herd at least 5% and maybe 10% if demand remains weak.

Milk prices are in the tank and IL Extension’s Mike Hutjens says the reason is the recession here and abroad, the strong dollar, fewer meals eaten away from home and a decline in dairy exports. Compared to the $19 per cwt last November, Hutjens says the price of raw milk by the end of February will probably be in the neighborhood of $13.

Dairy managers should consider several strategies says Hutjens, including the use of by-product feeds to cut feed costs by 9 cents per pound, maintain milk yield, increase quality premiums, and sign up for the MILC program to get $1.20-$1.50 more per cwt.

A soybean fungicide application paid off 55% of the time in 2008 and 40% of the time in 2007 says IL Extension pathologist Carl Bradley. That is based on contracted price, and the increased yield needed to break even from the fungicide cost. Bradley says 2008 yields were –8 to +12 bu. compared to control plots, with the average at 2.6 bu./A.

Bradley’s guide for application indicates a higher risk for fungus when planting back to back bean crops, susceptibility of the soybean variety to frogeye leaf spot, increases in wet and humid weather, and when you are not monitoring for crop diseases.

If your fields are typically wet like many in 2009, some nitrogen application research at Iowa State may be valuable. Using a wet research plot, Agronomist John Sawyer reports, “The fall timing resulted in a yield increase to the highest applied N rate (200 lb N/acre), but the spring/sidedress response had an economic optimum rate at 173 lb N/acre. With the wet spring/early summer conditions, the fall application was apparently more at risk of loss than the spring application. However, due to loss of soil-derived nitrate with the wet conditions, the overall N fertilization requirement was also increased.”

Killing weeds under 4” should be your goal if you want to maximize corn yield, says WI weed scientist Chris Boerboom, but he adds, that does not seem to be happening. He says a 2008 survey found over 75% of fields receiving glyphosate had an average weed height of 6”, which meant some weeds were well over that height, and cutting yield.

Research on corn yield loss from weeds, indicates weeds more than 6” when sprayed have already eaten 6.5% of your corn yield. Boerboom bases that calculation on 150 bu. corn at a $4 price, which he says means a loss of $39 in profits. Read his newsletter.

You’ll need your best binoculars to see 10 years ahead, but that is what the USDA’s Office of the Chief Economist reported this week, in its Agricultural Projections to 2018:
1) Prospects for agricultural will depend on the global economy and the US recession.
2) Over the next several years, livestock will continue to adjust to higher feed prices.
3) The global ag economy will continue to respond to US and EU demand for biofuels.
4) US ethanol refining will slow, but demand will remain high, and affect farm prices.
5) Expansion of EU bio-diesel raises demand for vegetable oils in global markets.
6) Steady economic gains support increases in consumption, trade, and prices.
7) Net farm income will decline from the recent highs, but will remain strong.
8) US retail food prices rise more than inflation through 2011, then fade lower.

Posted by Stu Ellis on 02/13 at 01:49 AM | Permalink


High Transportation and Feed Cost may have Helped the Hog Guy! (We are not experts on any subject. We used a lot of general values in our calculations. A transparent view of the pork industry is not easily available. Had the conclusion not been so contrary to current thought, it would not been submitted. We welcome any corrections one might have. It is not good to start with a disclaimer.) Sixty eight dollar lean hogs with $6.00 corn had the red ink flowing for the independent hog producer last year. Loses would have been greater if the export market had not been so strong. Exports help hold prices up as the industry produced a huge amount of pork. Without the exports the pork industry may be financially looking like the ethanol industry. We contend the reason exports were so strong was because of the high freight rate and high grain prices. China, which was used in our model, looking at $80 per ton freight rates, $6.00 corn and $0.99 per pound pork (meat) found they could import the meat as cheap as they could buy and import the feed to produce the hog (6 pounds feed to produce one pound edible meat). Had the grain price and freight rates (transportation cost) not been that high this may not of happened. Freight rate have dropped (the container rates have not so our conclusion is flawed should a substantial amount of feed be shipped by this mode) and so have feed prices. Those changes appear to make it cheaper for the Chinese to feed their own hogs. It will take some time for them to increase production. So export of pork may drop somewhat slowly as feed prices drop. The independent producer has a chance to make some money this year to but the prices may not be as high as expected as exports slow up. Record per head loses have been reported by independent hog producers last year. The finger has been pointed at high transportation and feed cost as the main cause. We are wondering had the feed and transportation cost not been as high as they were, would the independent hog producers loss less with lower feed, transportation and lower exports. Our simple model indicates probably not.

Posted by: Freeport, IL at February 13, 2009 9:09PM

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