The low levels of soil moisture around the Cornbelt could create additional problems for soybean producers whose fields may have high levels of soybean cyst nematodes.  SCN can be found in many fields in many states.  But Iowa State University Plant Pathologist Greg Tylka says it has the potential to cause “devastating yield losses” if 2012 remains dry.  He says, “Population densities can increase very rapidly within a single growing season, and dormant eggs can survive for more than a decade in infested soils in the absence of soybeans.”  He says yield losses can be quite severe in dry years, but unnoticed in wet years.

Tylka says in dry years the juveniles seem to bury themselves deeper in soybean roots than in more normal moisture conditions.  Subsequently, they will interrupt the root functions of the plant more than normal.  But in doing so they are getting better nutrition, and Tylka says that leads to more eggs and higher SCN population densities.  So the drier the soil, the greater the population, and the greater the damage they will create.

Tylka, who is concerned most about Iowa, speaks for researchers in many other states where SCN is a problem.  He says it has been at least 20 years since a significant SCN outbreak, and many producers have become complacent.  Subsequently, Tylka says many farmers have been growing susceptible soybean varieties with good yields, and due to adequate moisture, there has not been a problem.  But he says that could reverse itself, and result in greater problems this year with low moisture levels in the soil.

He is calling for increased vigilance as the 2012 planting season begins, and adds that if you are planting soybeans in fields where there has been a problem in the past, then plant varieties that are resistant to SCN.  But not all varieties are equal, even if they are labeled as resistant.  He suggests you check with either state soybean groups which have listings of SCN resistant varieties or with state extension program offices.

Summary:
If soils remain dry in 2012, then there is a greater chance for yield reductions in soybeans from soybean cyst nematode.  While populations may frequently be high, they will create the most damage in drying years. Solutions include planting resistant seed beans. 

In the mid-1970’s farmland values across Iowa, Illinois and other states bordering Lake Michigan recorded annual increases of more than 20% per year, with 1976 climbing nearly 30%.  Not since those years have land values in corn country jumped as much as they did this year.  Chicago Fed agricultural economist David Oppedahl says land prices reported in Iowa and Indiana outpaced the rest of the District.  For 2011, Iowa recorded a 28% increase, Indiana was 27%, Illinois was at 21% and Wisconsin at 18%.  There were insufficient land sales in Michigan to make an estimate.

However, the fourth quarter of 2011 saw a distinctive slowdown with all states with single digit increases and a 4% increase for the Chicago Fed District.  But he says the bankers he surveyed do not believe that land prices have topped, “This kind of momentum may carry the current upward trend in farmland values into 2012. With 43% of the responding bankers expecting agricultural land values to increase from January through March of 2012 and only 2% expecting a decrease, the survey responses provided support for the notion that farmland values will continue to rise in early 2012.”

There was no surprise what Oppedahl says was fueling the higher land prices.  He cited USDA’s reports on higher farm income in 2011 and expectations for 2012.  He said in the Chicago Fed District and across the Cornbelt, corn and soybean operations were key drivers of profitability.  But he says along with the profitability is volatility that warrants caution by agricultural decision-makers, “During the past two years, average corn prices ranged between $3.41 per bushel in June 2010 and $6.88 per bushel in August 2011. Similarly, monthly soybean prices averaged $9.39 per bushel in March 2010 and peaked at $13.40 per bushel in August 2011. These wide swings in prices make risk-management strategies even more vital for agricultural enterprises, whether or not there is a higher level for agricultural prices in the era ahead.” 

In the Kansas City Federal Reserve District economist Jason Henderson said the more than 250 bankers he surveyed reported that “robust bidding” by farmers spurred the record sales he saw, but that just enticed land owners to put more land up for auction than what might have been seen. Henderson reported that farmers bought 73% of the land sold in the Kansas City district.  Nebraska saw the greatest increase at 38% for non-irrigated land and 36% higher for irrigated land.  His district includes Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri. 

Summary:
Land values are uniformly rising throughout the Cornbelt and the Great Plains, thanks to farmers being the primary buyers and to the value of commodities.  Higher prices for grain have spurred the most significant demand for land since the 1970’s.  However, the higher bids come with warnings about the need for risk management.

Estate planning for the agricultural community has become an emergency, not just because of the tax laws, but tax laws combined with the rising value of farmland. Iowa State University farm management specialist Kelvin Liebold offers a variety of issues to begin your family discussion about farm succession planning. He says not every farm will be appropriate for a transfer process because the younger generation has no interest in continuing the farm business.  That issue has to be identified early in the discussion.  At that point the discussion may end.  But if it does not, Liebold will help with the continuing challenges of shifting farm assets to the next generation.  However, he and all others who are currently speaking and writing on the topic will say that family communication, along with goal setting, needs to be accomplished before any visits to attorneys, financial planners, or insurance salesmen.  They need to be on your team, eventually.

Leibold says the succession plan needs to address the transfers of labor, management, assets, and all of the barriers to those and the risks that can consume the process.  Who is going to control the decision making and what is the hierarchy of control.  The older generation may not want to give up very fast or very much, but the transfer must be made with comfort to all involved.

One of the challenges is stability versus growth, and that will be a function of how many families are involved.  There was only one in the oldest generation, there may have been more than one family in the next oldest generation, and there may be several families in succeeding generations.  The decision on stability versus growth will be molded by a series of personal goals and business goals, and those are functions of investments, expectations for financial return, and what the business is really capable of doing.

Younger generations may not have much capital to invest, but they have time and energy and that should be compensated, but how?  That is a question that needs an early answer.  The management transition may occur over time, with younger generations taking more responsibility and older generations taking less.  Leibold says if the older generation is pushing toward a management transition, that could be one of the best things that could be done.

How do you transfer assets?  A younger generation farmer cannot afford them, but with the help of time and good planning, such a transfer is possible.  Leibold gave several examples:
1) The control of machinery is often transferred by lease or by sale. It may be a trade in return for labor, it may be a rental on a per use basis, and rates can vary.
2) Another method is the “buy and trade” where the older party allows for the sale of the equipment to be stretched out over time and the younger party to stretch out the time to purchase a line of equipment.
3) Another strategy is the “trade and buy back” where the older party trades in the tractor on the new one and then the younger party buys the old one back from the dealer.
4) Sometimes the older party will want to sell all of his equipment on contract, but which has to be carefully crafted for tax purposes for both parties.
5) Another method is to lease the equipment with the valuation adjusted each year.
6) The transfer of livestock can be at an inventory time such as the start of the fiscal year or when the inventory is lowest.
7) If you sell part of the breeding herd and jointly own livestock you need to realize that you may now look like a partnership with the associated benefits and liabilities.
8) There are some beginning farmer programs to encourage and assist in purchasing land.
9) Leasing land may be a more viable strategy with farmer tax credit programs to provide incentives to lease to beginning farmers.

Leibold says there are a bushel of tax issues that accompany the transition process for farmland, but one that will help is the “special use valuation” if the estate is structured properly.

A conference on farm succession planning is set for February 23, from 9 a.m. to 3 p.m. in Decatur, Illinois, to help families get started with the process.  Details are available at:  www.agri-legacy.com .

Summary:
Transition planning has been successfully done by many farm families, but a legal and financial team must be assembled to help with the process.  Family communication must be initiated, with many questions to eventually resolve, such as transferring labor, management, assets, and control of the farmland.

When the USDA’s January 1 Cattle Inventory was initially released, market analysts saw a 1% increase in heifer retention and sounded the trumpets for a turn around in the decline in cattle numbers.  Yes, there was a percentage increase, but livestock economist Glynn Tonsor at Kansas State University says the percentage does not tell the full story, “This is the first year-over-year increase estimated since 2006 and has signaled to many that the national beef cow herd may have initiated its expansion.  However, a deeper analysis importantly reveals that this increase is largely being driven by historically low retention signaled by the January 2011 report.  Narrowly, this year’s estimate of 5.21 million heifers being retained is actually the lowest observed (besides 2011) since 1986 when 5.17 million heifers were held back as replacements.”

Tonsor says there may be an expansion being initiated in cattle country, but—to paraphrase an old poultry producer—don’t count your calves until they are born. And he says any rebound in inventory to the point of millions of additional head, may be a thing of the past.

Iowa State livestock economist Shane Ellis says one of the keys to the future is the number of beef cows, and the USDA report puts that number under 30 million.  He adds, “The supply of beef feeder cattle continues to decline, while cattle on feed inventories are slightly higher than a year ago. While numbers are up, the supply of finished animals is expected to be substantially lower nearly every quarter of 2012. Beef heifer retention was up slightly from last year but was still 4 percent lower than the quantity seen at the beginning of 2010. In short, cattle numbers are still lower, beef supplies will be down, and while there are early signs of an expansion beginning to phase in we may see declining beef supplies for the next 3 years.”

In round numbers, the USDA’s 2011 calf crop was 35 million, which implies 35 million head of beef cows, not counting multiple births.  But there were only 29.9 head of beef cows at the first of the year.  6 million went to slaughter and 5 million heifers were retained.

Ellis says cattle currently in feedlots will likely turn a modest profit, compared to some deep losses last fall.  And he says, “Cattle marketed in March through June will likely produce the largest returns for the year. Based on recent futures market prices, fed cattle may reach $130/cwt. during late April and May, and then remain north of $125 for the duration of the summer. By November there could be a reemergence of $130/cwt. fed cattle to finish out the year. Keep in mind that these cattle prices are likely to deteriorate with any major disturbance in the general economy.”

The economy is the primary driver for any downward pressure on cattle prices.  Employment declines, a tougher time for consumers, and other recessionary indicators will be the dark clouds on the horizon, he says.

Summary:
While percentages may indicate a reversal of the decline in cattle numbers, actual numbers, rather than percentage changes from prior periods point to a continuation of the contraction in the beef industry.  Feedlot steers may be profitable, compared to last year, but economic stresses could soften profitability.

The White House budget overview for the US Department of Agriculture outlined many efforts to streamline the department, reduce expenses from duplicative programs, but also to spend more on research, promotion of biofuels, and improvement of water quality.  Regarding biofuels, “This Budget provides $19 million in assistance to agricultural producers and rural small businesses to complete a variety of projects, including renewable energy systems, energy efficiency improvements, and renewable energy development. Finally, the Administration proposes over $200 million to continue support for the development of homegrown, advanced biofuels that have the potential to reduce America’s dependence on foreign oil and to bolster our rural economies.”

There were several significant cuts in the budget, including trimming crop insurance, eliminating the direct payment program, and cuts to the Conservation Reserve Program.  Here are the details proposed by the White House on Monday.

1) Commodity Payments to Farmers would be cut $22.668 bil. over 10 years.  The budget message said, “Providing income support payments to farmers that are experiencing near record incomes is not prudent. In fact, more than 50 percent of direct payments go to farmers with more than $100,000 in income. Economists have shown that direct payments have priced young Americans out of renting or owning the land needed to enter into farming. In a period of severe fiscal restraint, these payments are no longer defensible.”

2) Conservation Reserve Program would be cut $997 mil. over 10 years.  The budget writers proposed that, “CRP will be capped at 30 million acres by 2013 (saving an estimated $977 million in outlays over 10 years) by gradually reducing the acreage enrolled in the program through attrition. High commodity prices have lowered demand for enrollment in CRP as more farmers look to increase planted acres.”

3) Crop Insurance Program would be cut $7.6 bil. over 10 years.  What is proposed is a combination of cuts in premium subsidies and payments to crop insurance companies for administering the program.  “The Administration is proposing to lower the crop insurance companies’ ROI to meet the 12 percent target, saving $1.2 billion over 10 years.  The Administration, therefore, proposes setting the cap on administrative expenses at $0.9 billion (2006) adjusted annually for inflation, which would save $2.9 billion over 10 years.

For premium subsidy changes, the Administration proposes to reduce the premium for catastrophic (CAT) coverage policies, which will slightly lower the reimbursement to crop insurance companies. The premium for CAT coverage is fully subsidized for the farmer, so the farmer is not impacted by the change. This change will save $255 million over 10 years.

In addition, the Administration is proposing to reduce producers’ premium subsidy by two basis points for all but catastrophic crop insurance, where the subsidy is greater than 50 percent. This will have little impact on producers. Most producers pay only 40 percent of the cost of their crop insurance premium on average, with the Government paying for the remainder. This cost-share arrangement was implemented in 2000, when very few producers participated in the program and “ad-hoc” agricultural disaster assistance bills were passed regularly. The Congress increased the premium subsidy for buy-up coverage by over 50 percent at the time to encourage greater participation. With current participation rates, the deep premium subsidies are no longer needed. This proposal is expected to save $3.3 billion over 10 years.”
Among the other budget cuts and consolidations

4) $5 million is cut from the Agricultural Marketing Service by eliminating the Microbiological Data Program.  “It is has a low impact and is not central to the core mission of AMS, which is to facilitate the competitive and efficient marketing of agricultural products.”

5) $2 million is also cut from the Agricultural Marketing Service by eliminating the Pesticide Recordkeeping Program. “PRP is a lower-priority program because it is not central to the core mission of AMS.”

6) All $1 million would be cut from the Electric Guaranteed Underwriting Loan Program. “This program is entirely duplicative of the Rural Electric and Rural Telecommunication loan programs administered by RUS. In addition, over the past several years the Electric Guaranteed Underwriting program has had only one active applicant and very few actual disbursements.”

7) Cut all $20 mil from ag, forestry, and fishing programs of the National institute of Occupational Safety and health of the Centers for Disease Control.  “AgFF is one of 10 sectors that CDC has been focused on over several years. There have been positive accomplishments from this program. However, given the relation to CDC’s mission and the ability to have a national impact on improved health outcomes, the AgFF program has been designated as a low priority program and proposed for elimination.”

8) Farm Service Agency Discretionary Conservation Programs would lose all $5 million.  “The Hardwood Tree Reforestation Pilot Program and Grassroots Sourcewater Protection Program are lower-priority programs and duplicative of other private lands conservation programs administered by the Department of Agriculture.”

9) Health Care Services Grant Program would lose all $1 million.  “Health care services, health education, and health care training programs are not programs that USDA has experience evaluating or implementing. HHS, however, has expertise in this area and has programs that support similar goals. For example, HHS allocates over $2 billion for a Health Center grants program that supports services to the underserved in rural as well as urban areas.”

10) Pest and Disease Programs would see a cut of $54 mil of the $816 million budget.  “Examples of programs that are being reduced or eliminated are: Johne’s Disease; Cotton Pest; and Chronic Wasting Disease programs. These reductions will allow the Department of Agriculture (USDA) to focus on areas where it can achieve success.”

11) Public Broadcasting Grants would be cut $3 million and eliminated.  “Moreover, the USDA Public Broadcasting Grants program is duplicative and significantly smaller than the digital conversion activities of Corporation for Public Broadcasting (CPB). Since CPB funds a variety of public broadcast needs, including digital conversion, future needs should be funded through CPB.”

12) Research, Education and Extension Grants would see a cut of $31 million.  “The Department of Agriculture (USDA) funding for research, education, extension, and integrated grants is awarded through competitive peer-reviewed grants, and formula programs largely to land grant institutions and other programs based on purposes defined in authorizing legislation. However, there are some programs that are of lower-priority, and are also relatively small in size and do not have a large impact. The 2013 Budget eliminates funding for 15 of these programs (10 in research and education, three in Extension, and two in integrated), saving about $31 million.”  The grant programs targeted for elimination include:  Animal health, rangeland restoration, critical agricultural markets, supplemental and alternative crops, Farm business management, capacity building for non Land Grant colleges, policy research grants, rural health and safety, forest products, food animal residue avoid database, methyl bromide transition program, sungrants, youth organizations, water quality, and potato breeding.

13) Rural Business Opportunity Grants would have a cut of all $2 million.  “The Administration proposes to eliminate funding for the lower-priority Rural Business Opportunity Grants (RBOG) program because many of the activities funded under RBOG can be accomplished though the Rural Business Enterprise Grants (RBEG) program.”

14) High Energy Cost Grants would lose all $10 million.  “The Rural Utility Services Electric Loan Program and High Energy Cost Grants program are duplicative, having similar goals to provide reasonably priced electric service to rural residents. Low-interest electric loans are available to most rural areas with more favorable rates in areas where borrowers have low revenue per kilowatt sold and the average per capita income of residents is below the State average. In contrast, only Alaska, Hawaii, the territories, and a few isolated areas within the continental United States qualify for the grant program based on their high energy costs. The areas eligible for grants are also eligible for low-cost electric loans through RUS.”

15) Rural Multifamily Housing Preservation Grants would have all $4 million cut.  “Since 2006, USDA has found that multifamily housing preservation is achieved more efficiently through these revitalization strategies rather than preservation grants. Collectively across multiple programs, the funding for multifamily housing preservation activities within USDA’s Rural Housing Service is increased overall by $7 million for 2013.”

16) Rural Single Family Housing Grant Programs would lose $22 of $60 million. “It is expected that some of the shortfall in funding will be made up from additional funding in their related direct loan programs and the small amount of carryover balances that regularly occur in these programs.”

17) Single Family Housing Direct Loans of $43 million would be cut by $4 million. “The program has struggled to make a measurable impact due to straight-lined funding levels, an allocation process that diminishes loan making ability by broadly distributing funding, and a labor-intensive review process. At the same time, USDA has effectively used the guaranteed single family housing loan program to provide needed assistance to low-income borrowers.”

18) State and Volunteer Fire Assistance Grants would have a cut of $15 of $99 million.  “Other programs provide support to State and local fire organizations including USDA’s community facilities program and the Department of Homeland Security Firefighter Assistance Grants programs (Assistance to Firefighter Grants and Staffing for Adequate Fire and Emergency Response Grants). These other programs can support the purchase of equipment, training of personnel and staffing.”

19) Water and Wastewater and Community Facilities Loan Guarantees would be eliminated with a cut of all $6 million.  “The defaults in these programs have been much higher than initially projected. In addition, there has been very limited demand for the water and wastewater loan guarantees. Meanwhile, the direct loan programs have very low defaults, while serving much lower-income communities.”
20) Watershed Rehabilitation Program would lose all $15 million.  “The program has provided an incentive for communities benefiting from the program to allow residential and commercial development in vulnerable floodplain areas in and around watershed structures. This increased development has contributed to the deterioration of the structures and increased the financial risk of structural failure.”

21) Economic impact grants would lose all $6 million.  “The Budget proposes no funding for the duplicative economic impact grant program, which are grants for communities suffering from high unemployment and out-migration to finance community projects such as fire stations, medical clinics, and day care centers. These activities can be funded with the Department of Agriculture’s (USDA’s) community facilities grant program.”

22) Additionally, the White House wants to save $240 million over 5 years through USDA office consolidation.  It says, “USDA reviewed all of its operations, from headquarters to field offices, to determine what offices could be closed or consolidated. In some cases these offices are no longer staffed nor have a very small staff of one or two people, and many are within 20 miles of similar USDA offices. In other cases, advances in technology have reduced the need for brick and mortar facilities. The end result is a plan that will create optimal use of USDA’s employees, better results for USDA customers, and greater efficiencies for American taxpayers.”

Summary:
The Fiscal Year 2013 budget proposal calls for a savings of $7.955 bil. from USDA cutbacks in 2013.  Some of those were not a surprise, such as the planned elimination of the direct payment program, but there were many other cuts that were surprises.  Throughout the federal budget there were many other departments with rural service programs that were being cut.  The Congress has to consider the budget, and with the political dysfunction in Washington, many changes are expected, but there could be programs that are cut even further. 

Wheat acreage is declining and the rate of decline is accelerating, believes Kansas State University economist Michael Langemeier. His research shows a 5.5 million acre decline in wheat acreage in Kansas since 1981, along with a nearly 2 million acre decline in sorghum acres.  But during the same time frame, the acreage was nearly all replaced by corn and soybean production.

From 1981 to 2011:
• Kansas wheat acres declined from 13.9 million to 8.4 million
• Kansas sorghum acres declined from 4.25 to 2.35 million
• Kansas corn acres increased from 1.35 to 4.85 million
• Kansas soybean acres increased from 1.54 to 4.3 million
Langemeier says total crop production in Kansas dropped from 21 to 19.9 million acres during the 30 year period, with wheat acres slipping from 66% of the crop mix in 1981 to 42% in 2010.  Grain sorghum dropped from 20% to 12% of the crop mix.  In the same period, corn acres rose from 6% to 24%, and soybean acres increased from 7% to 22%.

During the same 30 year period, national wheat acres dropped from 88.3 million to 53.6 million, which is a 39% reduction. But corn has not displaced most of the lost wheat acres in that period.  Langemeier says in the 30 years corn acres increased by 4 million and soybeans increased 10 million acres.

Using data from the Food and Agricultural Policy Research Institute at the University of Missouri, Langemeier from 2011 to 2017, corn acreage is expected to increase by 3.9%, while soybean acreage holds steady and wheat acreage declines by 2.6%.  With the increased acreage, corn yields are expected to climb 4% through 2017.  However, wheat yields are expected to increase only 1% while acres decline.  The FAPRI economists expect wheat prices in the next five years to increase by 27.5%.

Langemeier says the relatively higher trend yield for corn is driving the increase in corn acres, while the relatively lower trend yield is driving the reduction in wheat acres, despite the higher potential price.

Within the state of Kansas, Langemeier says wheat will remain an important part of the crop rotation in all areas of the state.  In the eastern area wheat and beans are double cropped, so a further decline is not expected.  In central parts of the state, wheat production has the greatest chance of decline, but will be rotated with sorghum or rotated with corn and soybeans.  In the western part of the state, wheat will continue with a fallow rotation or with a third year of a feed grain added to the rotation.  That will drive a continued decline in acres in the middle of the wheat belt.

Summary:
It may not show it on the grocery store shelves yet, but wheat has sustained a 40% decline in acres in the past 30 years, both nationally, and in the prime wheat state of Kansas.  Wheat acres have given way to both corn and soybeans.  While wheat yields and prices are expected to increases, it will not be as fast as corn yields and prices, subsequently producers are opting for a more profitable crop.

The February 9, 2012 World Agricultural Supply and Demand Estimates from USDA project a 50 million boost to US corn exports because of reduced production in Argentina, along with stronger corn business from importers in recent weeks.  Ending stocks for the 2011 corn crop will be reduced by 45 million bushels to 801 million, and USDA tightened the expected price range by a dime to $5.80 to $6.60. 

The lower Argentine production set several dominoes falling, in addition to the increased US exports.  USDA expects the 4.5 million ton (177 million bushels) shortfall from Argentina to create a greater demand for corn from Ukraine, Brazil, Russia, and the EU.  The predicted Argentine crop is now 22 million tons in the USDA forecast.  The WASDE report indicated “high temperatures and extensive dryness during pollination in late December and early January resulted in irreversible damage to early corn in the central growing region.”  But USDA added, “Late planted corn, which has been on the increase in recent years, will help offset some of the earlier losses, but additional rainfall is needed to stabilize production prospects.”

The USDA Supply-Demand Report for soybeans was a carbon copy of the January report, without any changes being made on US numbers.  Ending stocks were retained at 275 million bushels with no shifts in use.  However, USDA said lower soybean production estimates in South America is expected to be reflected by increased US exports in the second half of the marketing year.  USDA did tighten the range by 15 cents for soybean pricing to $11.10 to $12.30.

Globally, oilseed production was reduced by 4.9 million tons (294 million bushels) from the January estimate, with lower production in Brazil and Argentina.  The WASDE report said, “Despite widespread rains in recent weeks, the extended hot, dry period during planting and early crop development limited plantings and reduced yield prospects.”

USDA also cut US wheat ending stocks in the February report by raising exports by 25 million bushels, due to increased export demand for competitively priced feed wheat.  Ending stocks for wheat were lowered to 845 million, and USDA raised the expected price range on the bottom by 20-cents to $7.15 to $7.45 per bushel.  Globally, wheat stocks were raised 118 million bushels due to increased production in India, Morocco, and Kazakhstan.

Summary:
The latest USDA supply demand report indicated lower South American crop production would result in greater corn export business in the US in the near term, and greater soybean export business for the US in the longer term.  While corn ending stocks were lowered to 801 million bushels, no changes were made in the soybean balance sheet.  For wheat, greater demand for US feed wheat will lower ending stocks to 845 million bushels.

The problem began innocently enough, since centuries of agriculture were rooted in the theory that soil inversion between crops was good for the soil and the ensuing crop.  All of our grandfathers were applauded if corn stalks were buried out of sight.  Following World War II the chemical industry began to produce herbicides that helped with weed control along with conventional tillage, which interrupted weed growth.  But along the way the weeds got smart, and their genetic changes allowed germination to be triggered by sunlight or being near the surface of the soil as tillage churned them upward, says CAST, the Council for Agricultural Science and Technology.  In the latest CAST issue paper authors say weeds not only adapted to tillage but have adapted to herbicide chemistry, and a variety of actions need to be implemented from USDA on down.

The creation of the Soil Conservation Service was designed to reduce soil erosion and water runoff, which developed into conservation tillage that allows at least 30% of the soil surface to be covered by plant material such as corn stalks.  That was distilled into no-till, and refined to mean that no more than 25% of the soil surface could be disturbed for either planting or nutrient injection.  That kept weed seeds near the surface for future germination. The evolution of cropping systems created glyphosate-resistant crops through genetic engineering and the elimination of the need for tillage and cultivation equipment.  In the process, weeds have not only become tolerant of tillage practices, but tolerant of the new chemistry.  And the CAST researchers report, “In addition, federal policies and programs in many instances play a significant role in the election of crops and conservation programs that are implemented. These governmental programs in turn can play a major role in weed selection and weed management practices chosen in response to these weed populations.”

The Natural Resources Conservation Service, successor to the Soil Conservation Service, and the soil and water conservation districts worked national and locally to assist farmers in the implementation of conservation practices for soil and water.  They have been focused in recent years on the prevention of tillage on highly erodible land.  Using the tools provided by the Conservation Reserve Program and the Conservation Security Program, agencies provided incentives to take land out of production, which would encourage continued weed growth.

Less tillage, more herbicides, and more policies have lead to increased instances of herbicide resistance by weeds.  197 species of weeds are now reported to have resistance to some type of herbicide, with a third found in the US.  Most of those have ALS resistance, Glyphosate resistance was being recorded prior to the development of GR crops in the mid-1990s.  Its attractiveness stemmed from the herbicide, the job it did on non-resistance weeds, improvements to the soil, and the simplicity of using only one herbicide.  CAST says, “Grower adoption of conservation tillage. With the evolution of HR weeds and the resultant inability to maintain weed control, however, the continued inclusion of conservation tillage systems is threatened.”  And the CAST authors add, “Glyphosate-resistant weeds pose the greatest threat to conservation tillage since its adoption and in some instances have caused farmers to change their conservation tillage practices or, in a few more limited situations, have eliminated conservation tillage where it once thrived.”

Producers are now faced with the conflict of having to use tillage or soil conservation practices that allow herbicide resistant weeds to thrive.  CAST reports that the close collaboration of FSA, SWCDs, and NRCS has developed sound conservation programs to save the soil and keep water from erosion.  But, disagreement is inevitable believes CAST and as commodity prices rise many farmers may abandon their conservation efforts in an effort to plant more land into lucrative crops.  Currently, organizational policies do allow specific efforts to eradicate weeds in no-till and other conservation-designated area, and reintroduces the soil conservation practices. 

Diversity of herbicide use is the key to controlling weeds that are becoming tolerant of primary herbicides and overtaking crops being planted into areas that are non-productive because of weeds.  Rotation of herbicides can be a valuable practice in an effort to avoid problems with the increasing number of herbicide tolerant weeds, but there are even problems with that practice.  The CAST weed specialists outlined a trio of measures they said were abandoned when glyphosate arrived:
• herbicide tank-mixtures,
• rotation of alternative herbicides with glyphosate, and
• preemergence-applied residual herbicides.

“The changes in herbicide use were attributable to the initial effectiveness of glyphosate, the marketing message for the technology, and the belief by many that glyphosate resistance in weeds would never be a major concern. Rotation of herbicides, however, specifically when the mechanisms of herbicide action (MOA) are considered, is an important tactic to mitigate and manage herbicide resistant weed populations. If only rotation of herbicide modes of action is practiced as the tactic to manage herbicide resistant weed populations, however, the evolution of herbicide resistant weed populations will only be delayed.”

CAST endorsed mechanical weed control strategies as part of an integrated weed control program, particularly if no other herbicide approach is feasible.  While the researchers say there are many cultural strategies, including: variable planting time and crop seeding rate; crop rotation sequence; planting configuration; choice of crop cultivar; nutrient management optimization; and cover crops, mulches, and intercrop/relay crop systems.  But they say the adoption of these is fair to poor.  And the risks that must be considered include weed management strategies along with mechanical control options.

With the growing resistance of weeds to many herbicides, the CAST researchers are calling for a national set of policies to be implemented:

• Herbicide-resistant weeds pose one of the most significant threats to soil conservation since the inception of the USDA NRCS.
• Some weed species have resistance to herbicides such that they have forced growers to include or intensify tillage if they are to remain economically viable in their farming operation. In most soil conservation tillage situations, however, the objectives of conservation tillage can still be met even in the presence of HR weeds.
• The NRCS and NACD must realize and support the value of developing integrated management programs, perhaps including tillage, for the management of GR weeds. Additionally, the NRCS and NACD should assist in determining when and how to implement tillage to complement conservation tillage systems, thus having minimal impacts on soil quality and the environment.
• The NRCS and NACD should work to qualify and promote HR weed best management practices (BMPs) in the suite of existing conservation programs such as the EQIP.
• The NRCS and NACD should strongly encourage HR weed BMPs to be high-priority practices qualifying for land stewardship programs.
• Stronger educational programs are needed that demonstrate how HR weeds can be best managed without losing the tremendous conservation gains attained in recent decades.
• More research is needed on how to best meet the needs of HR weed management, while at the same time meeting soil conservation compliance goals.

Summary:
The resistance of weeds is growing to many herbicides and many farmers have abandoned practices that either use tank mixes of different herbicides, pre-emergent herbicides, or rotation of different herbicides.  Agricultural policies have been to move away from mechanical weed control as part of the effort toward conservation tillage.  However, tillage and cultivation need to be part of the program to eradicate herbicide resistant weeds.

The non-land costs, which are estimated by Iowa State University, are $4 for corn and $9.67 for soybeans.  But any profits need to be used for any land payments and a return to labor and management.  Iowa State marketing specialist Chad Hart says the current market would allow a $1.50 margin on both corn and soybeans.  And while he says that is good, it is also highly volatile and looking at his pricing charts for grains, it is apparent that prices are variable.  And he says the 2012 planting season will bring two major dynamics in the grain market, and neither is a domestic issue that your congressman can solve.
1) The global economy has been wrenching the markets for many months, particularly European debt issues, Chinese inflation, and slow job growth in the US.  Hart says demand has been friendly to both corn and beans, particularly with ethanol for corn and exports for soybeans, but neither has been dependable.  Additionally, he says global stocks are relative high with 30% for wheat, 24% for soybeans, and 15% for corn.
2) Global weather is creating some questions about the future supply, says Hart.  La Nina continues to be an unwelcome in-law, and has been camping in the fields of South America for it growing season.  The impact there has helped US crop prices as spring planting nears.  Domestically, soil moisture levels point to potential lower yields and increased price support.
Hart says the opposite impacts of both have whip-sawed the market and he expects that to continue along with price volatility since neither issue will soon be resolved.  Just like price patterns in 2011, Hart says price patterns in 2012 will reflect higher prices in the summer and fall However, he says commodity prices for the new crop will still allow profitability, based on production cost estimates of $4.41 for Corn and $10.96 for soybeans.  That allows about $1 per bushel for each to pay rent and feed your family.

Hart says he expects 2012 to be a profitable year, but also one with great swings in prices and potentially dramatic, which increases the necessity of risk management tools.  He says, “Crop insurance is always a good risk management tool, but given the current weather situation and outlook, it may be doubly important this year. With the chance for lower yields also comes the likelihood for higher prices, so marketing tools that leave upside price potential should be attractive for 2012 as well.”  One way to achieve that is with options, using puts to establish a price floor and capture possible higher prices.

Summary:
2012 shapes up to be a volatile market year with prices driven down by the global economy and driven up by global weather issues.  Prices remain profitable for both the old crop and new crop, but the new crop should also be accompanied by a crop insurance policy due to the chance for lower yields.
 

A lot of emphasis is put on the trend line, and it is only an average of yields over time.  High yields get higher and low yields get higher also, consequently the trend line slopes upward and has risen from about 60 bushels per acre in 1960 to 160 bushels per acre in 2012.  There is a fancy formula for the trend line, but don’t lose any sleep over understanding what it means.  But the interesting issue is whether the 2012 corn yield will recover from two years of substandard performance and bend the average back up.  If not, the trend will not climb quite as fast, if that is important to you.

University of Illinois ag economists Darrel Good and Scott Irwin analyzed the ups and downs of corn yields and contend that the rate of climb in the trend line has not really increased in recent years, although the period of 2003 to 2009 recorded yields above the trend line.  But they say several of those in the middle of that period may be below the trend, if the trend line had bent upward at a greater increase.

Interestingly, the last 50 years has seen 60% of the yields above the trend line and 40% of them below the line.  However, the above average yields were not as high above the trend line compared to how low the below average yields fell below the line.  Consequently, fewer yields, such as 1983, 1988, and 1993 weighed down the average to a substantial degree.  When yields are above the trend line the average is 5.6 bushel above, but when they are under the trend line the average is 8.6 bushels below.  And the reason for that is weather, say Good and Irwin.  When the weather is bad, it is really bad, but when it is good, it is good, but not that good.

The question on your mind and the minds of traders, merchandisers, cowboys, ethanol refiners and billions of other end users around the world is whether the 2012 crop will bounce back after two years of sub-par performance.  The economists looked at the number of times above trend line yields followed each other, the number of times below trend line yields followed each other, and how often they reversed themselves from year to year.  On the below trend line yields, there was one period of four years, but on the above trend line runs, there were periods of four, five, and seven years.

Looking at the chance for a three-peat for a below trend line yield this year, Good and Irwin say there are three other periods of two year runs below the average.  Two of those were followed by a third year below the trend line before a fourth year spiked above it.  But the third case began a four year run of below average corn yields.

Summary:
The national average corn yield this year is anyone’s guess, along with whether the yield will be above or below the trend line.  Good yields are more frequent than poor yields, but when yields are poor they are more significant than the good yields.  Frequently, yields in successive years will stay either above or below the trend line, with a slight tendency toward annual reversals.

The question about multiple year crop rotations arises with the recent results of corn yields from continuous corn and corn after corn.  You probably have not been bragging about those to your friends lately, and declining yields for multiple year corn can be blamed on a variety of reasons.  But University of Illinois Farm Management Specialist Gary Schnitkey has penciled out multiple year crop budgets which indicate decisions one year may be hurting your revenue in future years.  He suggests looking at longer run impacts from yearly cropping decisions.

Schnitkey evaluated a trio of crop rotations:
1) Corn after soybeans, which resulted in a 198 bu. corn yield, on $505 non-land costs.
2) Corn after corn, which resulted in a 188 bu. yield, on $520 non-land costs.
3) Continuous corn, which resulted in a 180 bu. yield, on $520 non-land costs. 
When planted within the rotation with corn, soybeans yielded 56 bu. for a corn after soybean rotation, but the beans yielded 59 bu. after two years of corn. 

Based on a $5.35 corn price and a $11.85 soybean price, Schnitkey calculated crop returns to labor, management, and land at:
$578 for corn-after-soybeans,
$510 for corn-after-corn,
$467 for continuous corn,
$390 for soybeans-after-corn, and
$425 for soybeans-after-two-years-corn.

Schnitkey’s yields and revenue are likely different than yours, so plug in your yields and prices, and then use those in developing a three year revenue projection for your crop.  As revenue changes from year to year, based on a different crop mix, Schnitkey’s three rotations created average annual revenue of:
$484 for corn-soybeans
$504 for corn-corn-soybeans,
$467 for continuous corn.

He says switching from a corn-corn-soybean rotation to continuous corn will produce a $16 per acre higher return in the first year, but $23 lower return in the second year and $37 lower returns in the third year.  Consequently a switch from continuous corn to a corn-corn-soybean rotation would produce a $14 lower return in the first year, a $23 higher return in the second year and a $37 higher return in the third year.  And Schnitkey says, “Key to the above calculations are the assumptions concerning yield drags for corn-after-corn and continuous corn. Lower yield drags will cause the profitability of more intense rotations to increase.”

Consider also the prospect of different commodity prices in future years.  His calculations were based on forecast averages for 2012, but Schnitkey says in coming years prices will likely be lower, and he calculated the rotations based on $4.50 corn and $10.50 soybeans.  Those generated a $362 return for a corn-soybean rotation, a $364 return for a corn-corn-soybean rotation and a $299 return for continuous corn.

Summary:
Crop rotations generate a specific return to management and land, but they could be quite different if extended over a multiple year period.  When yield drag is considered for multiple year corn, and lower revenue is considered for soybeans, some wide variations can be generated for revenue.  Producers may want to consider multiple year revenue projections as they consider crop rotations.

Keeping your stored grain safe is the same challenge a small town banker may have.  The vault may only hold several hundred thousand dollars, but to a farm family that may be the entire years’ income and the last thing you want to happen is being forced to sell it at salvage value.  Your crop insurance policy does not cover grain that might spoil in the bin.  And the odd winter weather we have had puts in jeopardy some of the stored grain and creates challenges for farmers who need to keep the air flowing.

In the next several days your state climatologist will be issuing his or her report on January weather and how much warmer it may have been compared to other years back to 1895.  That should be a reminder your grain bins may need more attention than usual.  University of Nebraska ag engineer Tom Dorn points out a number of issues that you want to put on your checklist, if your stored grain is still a work in progress. 

Dorn says a lot of grain went into the bin in good condition, because early maturity and harvest conditions produced dry grain.  But the warm fall temperatures meant grain went into the bin too warm to maintain the quality of the grain; and it should have been cooled to about 40º F as outside temperatures fell.  But the grain should not be cooled to the point of freezing.

If your grain is cool, but still higher moisture than you would like going into the spring, Dorn says wait for a warmer day with low humidity to turn on the fan for more aeration.  But he says there may be some times when putting air into the grain will also put more moisture into it. Whether that happens depends on the temperature of the grain.  He says, “When the air temperature is 50ºF and the relative humidity is 50%, the dew point temperature is 32º, and when the grain temperature is lower than the dew point temperature, air will condense moisture onto the grain until the air stream warms the grain mass above the dew point temperature.”  He is concerned about the development of frost in the grain, which not only adds moisture but retards air movement through the grain.

If you have had blowing snow drop into the top of your bin, warmer temperatures will convert that to moisture in the grain and home to insects and mold, so beware of any snow that has made its way into the bin.  When you check the bin, open the roof hatch, then turn on the fan and climb back up.  Dorn says let the air hit you in the face.  If the air is warmer than expected, more moist than expected, or condensation underneath the bin roof you have a problem.

Dorn says run the fans long enough to uniformly cool the grain and to do that use a probe with a grain thermometer.  Probe down 3-4 feet, probe several feet in from the bin wall, and probe several spots in the center of the bin.  If the temperature readings are more than 8º apart, run the fan until the temperatures are more uniform.

As the weather warms the temperature of the grain must be helped to warm up as well.  Warm it in stages up to 40º, and if the moisture is too high for spring and summer storage, then do some additional drying on days of low humidity.  Keep the corn within the typical range of day and nighttime temperatures.

Summary:
Unseasonable temperatures during the winter may have created problems within grain bins, in case the stored grain was above the typical 15% moisture for corn and 13% for soybeans.  Because of the value of the grain, farmers should keep close watch on the quality and be prepared to aerate it if spoilage is a potential.  Check the quality frequently, probe the grain to determine uniformity of temperature, and aerate the grain if there is a more than 8º variation.  Beware that introducing warmer air into cooler grain can cause condensation or even frost, both of which will create further problems.

Global ethanol production has increased substantially in the past decade to provide an alternative to fossil fuels, and many governmental policies around the world indicate that trend may continue, says a recent article in Amber Waves, an electronic magazine from USDA’s Economics Research Service.  Their focus was on Brazil, which is the world’s second largest ethanol producer, behind the US.  But Brazilian ethanol is produced from sugarcane, instead of corn or biomass.  The reason is an increased capacity to produce cane and supportive government policies for the conversion to ethanol. “But Brazil will need to sustain production growth in the ethanol sector in order to meet increasing domestic demand and maintain its export share,” say the USDA economists.

But before ethanol, which was a large market for sugarcane in the 1970’s, was the global sugar market, and Brazil is the world’s largest sugarcane producer.  With the introduction of ethanol, the conversion was easy with a good climate, abundant land and labor, public demand and public policies that were supportive.  Continual production improvements have made sugarcane a large and profitable crop.  In 2010 ethanol was consuming 55% of the sugarcane being produced in Brazil.  The allocation of how much sugarcane goes to ethanol and how much to sugar production is determined by cane millers based on expected sugar and ethanol prices and the market demand.  There are 430 plants that convert sugarcane into ethanol in Brazil, a doubling of production in the past decade.  27 billion liters—7 billion gallons—of ethanol was produced in Brazil in 2010.

By 2008 Brazil was exporting 19% of its production, but that was a peak, and numbers have declined to 7% in 2010.  But once a supplier of 62% of global exports, that volume has declined substantially due to strong domestic demand for ethanol and increased global sugar prices which pulled more of the sugarcane away from the ethanol refineries into the sugar refineries.

(Jib, one of the frequent commenters here suggested that a Brazilian policy toward increased sugar production would have a positive impact for the US ethanol industry.  He said, “World production of sugar, on average, may have a hard time meeting consumption. Brazil is projected to have to move from producing 1 in 5 pounds of the world’s sugar in 2006 to 1 in 4 by 2015. The increased sugar demand for non-fuel consumption may keep it out of fuel production. This may help keep US corn moving into US ethanol production. Brazil’s great plan of supplying the world ethanol could find a delay with the increasing food demand.”

In response, University of Illinois marketing specialist Darrel Good said, “World sugar production problems and high sugar prices have cut into Brazilian ethanol production for more than a year now and is on-going. U.S has picked up that ethanol export demand.  Eventually, high sugar prices will result in surplus production and a return to Brazilian ethanol exports—just don’t know when.”

Brazil has government policies promoting ethanol, including flex fuel cars, mandatory blending targets, tax exemptions, and other incentives, along with incentives to sugarcane producers to ensure ethanol is produced.  However, Brazil also has some long term plans for ethanol exports, helped by a target of increasing ethanol production by 45% over the coming decade.  But the ERS economists say, “However, Brazil’s ability to provide the bulk of the world’s import needs will depend on its domestic ethanol demand, world sugar and oil prices, Brazil’s currency exchange rate, and the capacity of its infrastructure to move ethanol to ports.” 

World sugar prices are a key to whether Brazil becomes an ethanol competitor to the US.  USDA says, “When the sugar price is high, more sugarcane is used for sugar; lower sugar prices favor conversion of sugarcane to ethanol. In late 2010, when the world sugar price fell to under 14 cents per pound from a 29-year high of 30 cents per pound earlier that year, the share of sugarcane used for ethanol rebounded.”

The economists say in the future, sugar and crude oil prices will need to remain at levels that encourage ethanol production, if Brazil is to be an ethanol exporter.  But as Darrel Good notes, high sugar prices will encourage higher production and Brazil may be producing both sugar and ethanol for export.

Summary:
Brazil has an abundant supply of sugar cane and has been a global supplier of sugar, as well as a recent supplier of ethanol made from sugar cane.  Brazil had been seen as a significant competitor to corn-based ethanol in the US, but more US is being shipped to Brazil than is Brazilian ethanol coming to the US.  Future pricing of sugar and oil will influence whether Brazil becomes a sugar exporter or an ethanol exporter.

Before putting numbers on paper, let’s see what is driving corn prices.  University of Illinois marketing specialist Darrel Good suggests there are many drivers for corn prices.  While some are in a forward gear, others are in reverse, they are all going at different speeds, and some of them could turn on a dime.  It takes a firm hand on the steering wheel and some strong vision to get to the destination.  But you have to beware of the hills, curves, and chuckholes.

What are those factors driving old crop prices:
1) Old crop prices are being supported by a good rate of consumption, and some uncertainty about how much corn South American will contribute to the world demand.
2) Basis levels have been strong, and unusually strong in some areas where local consumption is at a high level.
3) Corn stocks are at a five year low, and when the marketing year is finished next August, the carryover is expected to be at 6.7% of the use.
4) Ethanol has lost its tax credit, but not its octane, and the blending economics indicate there is still strong demand.
5) Corn export projections were recently raised by USDA, because of lower potential exports from Argentina.  And if weather continues to deteriorate, the crop could decline further and exports projections will have to be further adjusted.
6) Demand from China has been steady, with weekly purchases.
7) Domestic feed use has been at a low level because of reduced livestock production.

What are factors driving new crop prices:
1) Since March 2013 futures are lower than March 2012 futures, the market is anticipating a large new crop, resulting from better weather and increased acreage.
2) Inventory is expected to build with a return to trend line yields.
3) Planted acreage may increase 2 million over 2011 to 94 million, with the help of expiring CRP contracts.
4) Harvested acreage could jump 3 million to 87 million.
5) A trend line yield of 160 bushels would produce a crop just under 14 billion bushels, and

Good says demand would have to increase by 10% to avoid any further build up of stocks.
That is your road map, but as you travel that road, there will be some detours along the way, and there will be some areas of open road and better speed.  So what is your strategy to get to the destination?  Michigan State University marketing specialist Jim Hilker first suggests a look at your balance sheet and cash flow projections to find out how much risk you can bear.  Every farmer will be different, so look at your own situation to determine how much downside risk is reasonable, and not reasonable.  Hilker offers his forecasts of probability of corn prices.  For December 2012 corn, there is a 30% chance they will be less than $4.70, there is a 50% chance corn prices will be less than $5.38, and a 70% chance they will be less than $6.18.  Another view is that there is an 80% chance is that December futures will fall between $3.85 and $7.54.  Watch where the current price is in that range to determine the chance for higher or lower prices.

Hilker says there may be both upside and downside potential of risk, but you have pricing targets that you can set, knowing the chances of prices reaching certain levels.  With the $5.38 midpoint of the probability range, set your price targets high enough to reach profitable pricing levels, but also set your sell stops above levels where downside risk is too great.  Hilker says there is a good deal of market support below the $5.80 level, and strong resistance in the $6.60 range.

Summary:
Old crop corn prices have fluctuated within a $1 range and new crop prices have floated in an 85¢ range, all driving by a variety of factors including South American weather, livestock feeding, ethanol production and other factors.  Marketing will depend on the amount of risk that can be taken by the producer.  Determine your risk that can be assumed, and set price targets within the probability range of corn prices.

The January 20 Cattle on Feed Report indicated 11.9 million in feedlots, 3% above year earlier levels, with December placements 6% below prior numbers and December marketings 2% below prior levels.  Other disappearance was 40% above December of 2010, which includes death loss, movement back to pasture, and shipments to other feedlots.

With hefty numbers in feedlots, will there being enough feed?  USDA’s latest Feed Outlook says even though more cattle were in feedlots, there is more corn in the bin, and enough to offset lower sorghum production.  The feed grain supply for the current marketing year is forecast at 358 MMT, with total feed use for the current marketing year at 334 MMT, reflecting higher corn exports.  Domestic use is expected to be 290.5 MMT, down slightly reflecting lower projected feed use and lower sorghum supplies.  Barley and oat production was unchanged.  Wheat feeding is only addressed in passing “because of decreasing in projected feeding.”

Animal numbers are slightly higher, with grain consuming animal units forecast at 93.7, up from 93.3 million projected in December.  Higher beef and pork production than was expected, but less poultry production is anticipated.

1) Corn projections have been raised slightly to 12.358 bil. bu., which is down by 89 mil. bu. from last year, but reflects increased acreage and lower yields.  Feed use of corn is project at 4.6 bil. bu.  September to December stocks disappearance was estimated at 1.838 bil., bu. down 233 mil. bu. from year ago.

2) Corn used for ethanol production was estimated at 5.0 bil. bu. up slightly from the same period a year ago, but increased production was attributed to blenders trying to get as much out of the VEETC tax as possible, which expired at the end of the year.  And ethanol production is expected to slow early in 2012.  Corn use will be about 5 bil. bu. and ethanol exports will grow slightly.  Exports will be slightly larger to 1.650 bil. bu. and ending stocks should be 1.127 bil., resulting in an increase in feed stocks to 4.792 bil. bu.

3) Sorghum production is estimated at 214 mil. bu., down 132 mil. from year ago levels.  Production is down as a result of less acreage and less yield per acre.  Consequently lower sorghum for feed use is 20 mil. bu. less.

4) USDA lowered the price range for corn by a dime, and it now stands at $5.60 to $6.60 for the current year.  USDA says strong demand from ethanol producers and tight supplies still exist.

Hay stocks on farms at the first of December totaled 91 mil. tons, down 11% from year ago levels.  Disappearance for the May to December period totaled 62 mil. tons, and hay stocks declined everywhere except for the upper plains states.  The declining supply was attributed to many livestock producers feeding it earlier than planned.  All hay production totaled 131 mil. tons, down 10% from last year.  Dry weather in the southwest reduced the production area to the smallest since 1930 and production to the least since 1925.

Following unusually dry conditions across the central and southern Plains states, which kept hay production down, abundant late August and early September rain promoted increased growth in many pastures and hayfields, increasing production from year earlier levels.

USDA says the termination of the ethanol blenders’ credit is not expected to affect demand and price considerably, however discretionary blending above the mandate could be negatively affected.  While the renewable fuels mandate will keep ethanol production at a strong level, the production above the mandate, which is now being exported, may see lower levels of profitability and may be subject to reduction.  Subsequently, USDA says that may be reflected in a lower demand for corn, but to a small degree.

Summary:
The shortage of pasture and rangeland in the southern plains that sent a larger than usual number of cattle early to feedlots, has moderated with the help of some rains.  Nevertheless, there is still some tightness in both supplies of feed grains and hay.  Feed grain production is lower due to less corn and sorghum yields, and hay production is down because of the weather.  Ethanol production will consume larger than normal supplies of corn, and in fact, some reduction could be observed.