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Friday, February 20, 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.

Corn and soybean prices will be driven by acreage this spring believes IL Extension’s Darrel Good, but he says acreage uncertainty stems from questions about profitability, cost of production, and declines in winter wheat and cotton acreage. Read his newsletter.

Darrel Good says biofuels will play a role in determining the need for corn acreage, but sorghum is replacing corn as a feedstock in some ethanol plants in the Southern and Central Plains states. He says the federal biofuel mandate calls for 10.5 bil. gal. in 2009 and 12.0 bil. gal. in 2010, but marketing years don’t line up and the use of sorghum puts a new twist into the analysis of how much corn acreage is required for ethanol refining.

Overall, ethanol’s thirst for corn will be large, with at least 3.6 bil. bu. this year, 4.0 bil. bu. next year and up to 5 bil. bu. by the 2015 marketing year. Good thinks 2009 planted corn acreage needs to parallel 2008, but bean acres may not need to expand. However, he expects the Mar. 31 Prospective Plantings to predict more soybeans.

Despite periodic positive news, the grain markets have regularly been rewarded with losses every day says South Dakota Extension marketing specialist Alan May. “What is at play here is the heavy pressure of outside markets; particularly crude oil, the dollar index market and the stock market. As these markets continue to either weaken or simply remain stagnant, grain commodities ignored the positive news of stronger corn export sales and expectations of greater export volume of soybeans.”

Brace yourself for a weekly storm, advises OSU meteorologist Jim Noel, because we are in a weather pattern that is typical for this time of year. He says weak La Nina conditions are getting weaker and should be gone by spring. But he says all of the ice on the Great Lakes makes for a cooler and wetter spring in the Eastern Cornbelt.

Farm program eligibility depends on your Adjusted Gross Income (AGI) and Adjusted Gross Farm Income (AGFI), so compute it carefully says Iowa St. ag law specialist Roger McEowen who provides a factsheet.
1) A non-farm AGI cannot exceed $500,000 to receive farm program payments.
2) An AGFI cannot exceed $750,000 to receive direct and counter cyclical payments.
3) An AGI cannot exceed $1 mil. to get conservation payments unless 2/3 is farming.
4) The average for the AGI for 2009 is the average for tax years 2005, 2006, & 2007.
5) AGFI is net farm income, plus sale of capital goods, rentals, and royalties.
6) AGI and AGFI are reported to FSA on Form CCC-926 and page 3 gives guidance.
7) AGFI is a “net income” concept, not a producer’s gross farm revenue.

Caution is being advised by TN Extension economist Daryll Ray if farmers are considering the USDA’s ACRE program. He’s not convinced of its benefits, and says:
1) The 2009 price guarantee is the average of 2007 & 2008 prices, but 2008 is unknown.
2) Are farm and state-level yields used in revenue estimates really attainable?
3) Signing up for ACRE requires proof of income, so farmers will surrender their 1040.
4) Converting to ACRE irrevocably through 2012 is another headache.
5) Obtain the paperwork and study it well before the June 1 deadline for signing up.
6) Get legal help in defining “active involvement” is your farm is a partnership.
7) Assemble your records in one place to document yields and acreages.
8) Calculate worst-case and other scenarios for your farm using your own data.
9) Your calculations should include the low end of USDA’s estimated price range.
10) Base your decisions on your own farm, not on the estimates of other farms.
11) Obtain opinions from your CPA and banker about their perception of risks.

Is there an advantage to leasing farm equipment? NE Extension’s Tim Lemmons says among the advantages: lower up-front, down payment costs compared to purchasing; payments often are less than traditional loan payments; less liability on the balance sheet; equipment available for short-term needs; access to and use of latest technology; and lease payments are considered production expenses for tax purposes.

Is there an advantage to buying farm equipment? Nebraska’s Tim Lemmons suggests: owned equipment may be easily replaced or sold at the owner's discretion while replacing leased equipment may be more difficult; owned equipment has asset value and may be used as collateral against other loans; purchases do not require security deposits, although down payments to secure financing may be higher; purchased equipment has no use limitations while some leases specify the number of hours a machine may be used before a penalty is imposed; and increased asset value on the balance sheet.

Increases of soybean seed price of 25%-100%+ may push some farmers to plant bin-run seed, but WI soybean specialist Shawn Conley says 90% of soybeans are glyphosate tolerant and federal patent laws prohibit that. He expects an increase of field monitoring this year to “catch” growers who recycle their soybeans into the planter box.

Soybeans that are not herbicide tolerant fall under the Plant Variety Protection Act says Conley, and while that allows seed to be saved for planting, it restricts the amount of seed that someone can save to an amount that would serve the needs of his own farm. Read more.

But planting bin-run seed can create agronomic issues, and if the seed was not harvested with the intent of being seed the following year, there will likely be quality issues related to harvest timing, storage conditions, and handling says Conley. He says if you are planting bin-run seed, have it custom cleaned or conditioned, including the application of seed treatments and inoculants, if the law allows for that seed variety.

Adverse winter weather can have an adverse impact on young livestock says Extension veterinarian Russ Daly, particularly problems that may not show up for some time after cold spells and blizzards. He warns of frostbite, pneumonia, and several viruses that can incubate for several days then be aggravated by other stressors such as weaning and transporting. He suggests consultation with local veterinarians to diagnose problems.

The sagging global demand for beef may be out of the hands of the beef industry to control according to a study by Kansas St. and Michigan St. livestock economists.
1) While price is important, small price adjustments have minimal impact on consumers.
2) Recent food safety recalls adversely affect domestic and foreign demand by 2.6%.
3) Consumer influence by health articles linking fat and heart disease cut demand by 9%.
4) The media frenzy about low carbohydrate diets boosted beef demand by 2%.
5) Convenience of preparation benefits poultry and pork, but hurts beef demand.

So, what should the beef industry do to bolster demand? Researchers decided:
1) Conduct research that identifies positive impacts from consumption of beef.
2) Present those findings to health professionals, nutritionists, and consumers.
3) Develop production or processing techniques to enhance beef nutritional qualities.

Is the US beef herd overestimated? That is possible say MO livestock economists Glenn Grimes and Ron Plain, who say if that is correct, there is no further need to reduce the cow herd further. They say those who doubt USDA numbers believe the cut in the cow herd has been covered up by the speedup in marketings of steers and heifers by putting them on the market earlier, even though they had reached market weight. But Grimes and Plain side with USDA’s statistics and the benchmark 2007 Ag Census.

It is too early now, but it may be time to order legume seed for bolstering pasture vitality with the help of frost seeding. The seed depends on freezing and thawing for soil incorporation along with later winter moisture. IL crop specialist Jim Morrison says medium red clover provides the best success but requires inoculation and proper pH.

Taking a soil test will allow you to make educated decisions on your farm rather than adding fertilizer that is not needed, particularly on pastures, says KY forage specialist Ray Smith. In pastures approximately 80% of the nutrients consumed in the forage are returned to the pasture in the manure and urine. Therefore, fertilizer requirements on pasture are lower than for hayfields, but this is only true in well-managed rotationally grazed pastures where manure and urine are equally distributed throughout the pasture.

Has your poly tank failed and created a catastrophe? They are versatile and tough, but failure is a potential, so inspection and maintenance need to be part of your routine in using them. Get poly advice.

Have you lost a poly tank while traveling down the roadway? Securing a poly tank is not hard, but must be done correctly because lost cargo is not easy to reload on a truck or trailer. There are governmental requirements for securing loads, including poly tanks. Get the proper techniques.

Posted by Stu Ellis on 02/20 at 01:33 AM | Permalink

Comments

We Zoodoo! Do you? When one is under distress and neither the solution nor possibly the cause is known, are the times when one is most willing to seek unconventional remedies. In this light Voodoo grain marketing was incubated. However not wanting to offend anyone, the term Voodoo has been change to Zoodoo. (Our stress and presumably yours is very real. We are not making light of the subject to mock the current situation or state of affairs. The attempt at humor is to illustrate our methods are untested, most likely unconventional and maybe should be read more as a fairy tale / nightmare than any kind of creditable report. However we turned to Zoodoo to find answers to our questions.) Zoodoo starts with the dipping of a live roosters feet in black ink. We allowed him to scratch across the option section of Barons. The tarot cards have been place on the table. Individuals are seated facing in the direction of the drain of the bathtub in the upstairs bathroom. A lone candle is lit in drape darkened room. We are ready to Zoodoo. National Cotton Council on February 13, 2009, estimated intended acres planted to all cotton to be 8.11 million acres this spring. That estimate is 1.3 million acres less than the 9.41 million acres planted in 2008. Soft Red Winter (SRW) wheat planting is expected to be down 2.9 million acres. We estimate 1.7 million of those acre would of possibly been double cropped with soybeans. So the net acres available for corn or soybean planting this spring from SRW would be 1.2 million acres. (We are not 100% sure that is the way USDA accounts for a crop planted after another in the same growing season but it appears to be so.). Corn and soybean are expected to gain 0.5 million acres from CRP. Total increased acres available are expected to be 3.0 million acres. Initially, we thought the land of cotton would provide the largest challenge for forecasting corn and soybean planted acres. They have the potential of switching rather large acreages with the loss of winter wheat and cotton ground. However when corn or soybean acreage changes were limited to 125% of the largest acreage planted in the last ten years, all cotton states needed at least 100% of record level of both corn and soybeans to make up for lower wheat and cotton acres. In the 17 cotton growing states, a 25% or less change in corn planted acres from the record high (prior 10 years) planted acres occurred two thirds of the time (67%). In soybeans it happened 88% of the time. Interesting to note, of the 25 ten year histories review for each cotton state, five (5) of the seventeen (17) cotton states did not increase their soybean acres above the record (prior 10 years) high planted acres. This might go against conventional wisdom (if wisdom was conventional you would think it would be more common) that cotton states are more likely to switch to soybeans. The largest National change in corn was 14.5% which occurred in 2007. The largest national change for soybeans was 9% which occurred in 1997. That is not to say The Land of Cotton does not have room to change to their acreage mix. We are just saying their infrastructure may be more limiting than the corn-belt states. Our guess for 2009 is 163.5 million planted acres of corn and soybeans. In 2008 we planted 161.7 million acres of corn and soybeans. So the tarot cards are not including all the newly available 3.0 million acres from cotton and soft red winter wheat. Weather, as always, will guide the acres planted and their allocation. Zoodoo allocates 87.5 million acres planted to corn (86.0 million acres in 2008-09) and 76.0 to soybeans (75.7 million acres in 2008-09). Remember the goal of Zoodoo is to provide an answer no matter how wrong. Our rooster scratching on the commodities options page provides the bases for a price outlook. Past experience indicates this approach works best when the bird is run across the page more frequently. The ability to project future events appear to be limited. The price we are trying to project is based upon conditions, attitudes and behaviors at the time of projection not at the time in the future for which a price is being projected. This has resulted in worthless projections in the past. But this is Zoodoo, where a wrong answer is always better than no answer. The pricing model is based upon a relationship between ending stock and price (supply and an assumed demand). If the price is known there is a corresponding ending stock. Knowing an ending stock number and assumed supply, one can calculated the use. Soybean use was Zoodooed at 2,990 million bushels for Early January pricing environment, 2,930 million bushels for Mid-January and 2,850 million bushels for Early February for soybeans when NASS long-term production projection was used. Corn had a use of 13,100 million bushel for early January, 12,900 Mid-January and 12,600 million bushels for Early February. Very roughly 1.75 million bushels of use is associated with $0.01 change in price for soybeans and 10 million bushels of corn equaled a penny (with current price environment). Should acres switch from NASS’s production number to the Zoodoo planted guess, corn has room to move up almost a dime per bushel from early February price. Soybean could see about a dollar and a quarter drop from early February (about $0.65 drop from today’s close). A return to a more normal use projection for soybeans indicates a fifty cent decline (or up a dime from tonight’s close) in price. Each million acre decline in planted acres should equate to a $0.15 increase in corn price and about a quarter for soybeans. (Remember once acres are confirmed total production and consumption will guide price not just acres alone.) The price decline this past week appears to be related to be decline in use and increase in expected planted acres for both corn and soybeans. Zoodoo has not relieved any anxiety nor has it provided a solution. It has shown the possible cause; too many acres and too little consumption. USDA will have their annual outlook forum February 26-27. It is expected a preliminary indication of expected planted acres will be announced at that time.

Posted by: Freeport, IL at February 23, 2009 9:09PM

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