This document printed from the University
of Illinois Extension Extension Update on Ford-Iroquois Agriculture at http://www.extension.uiuc.edu/fordiroquois/
January 7, 2008
January 7, 2008
Karen S. Moore
County Extension Director
Ford/Iroquois Unit 912 W Seminary Ave
P.O. Box 163
Onarga, IL 60955-0163
Phone: 815-268-4051
FAX: 815-268-4058 ksmoore@illinois.edu
Wheat and soybean prices have outdistanced corn in recent weeks, but Marketing Specialist Alan May at South Dakota State says farmers have real homework to do, "This represents the corn market's desire to buy acres at a time when many are predicting that 2008 corn acres will decline due to higher fertilizer prices and a more rapidly improving soybean and wheat market. It will be important in the weeks and months ahead to legitimately evaluate the costs v. returns of a corn enterprise compared to other crops."
If you have old crop corn to sell, Alan May says the returns to storage are substantial, with the help of the carry in the market. Using a forward contract, May says, "You will establish a floor price today for your corn and have protection against any price decline during the storage period. The drawback is that if corn prices continue to move higher, you would not be able to take part in that rally on the corn in the cash forward contract."
If you don't want to forward contract, May says write a marketing plan that calls for periodic sales, "You could simply set a series of target prices you would sell corn as the market moved higher and sell all or portions of your old crop corn. It would be strongly encouraged that if you are currently storing corn with no price protection, you should at least have a "back-stop" price that may be 40-60¢ or more below the current cash price."
The soybean market does not offer such a clean profit on forward contracts, says May, "You could commit to a cash forward contract on soybeans currently in storage for delivery in the next three to four months and possibly capture a price higher than today's current price. However, due to the high value of soybeans and the corresponding interest costs, you may not be able to cover the cost of storage over the storage period."
Beware of the inverse market for soybeans says May, "There is an inverse value of $1.00 when you compare the November '08 soybean futures contract with the nearby March '08 contract. This means that new crop bean prices are a full dollar less than the spot cash bid on old crop beans. Don't make the mistake and assume new crop values match old crop values. However, with new crop soybeans prices (offered by many elevators at profitable levels), there is no time like the present to make some sales."
Budget an extra 30-40% for spring diesel fuel costs. That's the projection of Kansas State economist Kevin Dhuyvetter, who analyzed futures prices for crude oil. He says March will be about 42% above 2007, April and May will be 31% higher than 2007. He says they will taper off during the year, but will not drop below 2007 futures prices. Visit his price analysis charts at: http://www.agmanager.info/energy/PriceForecasts.pdf .
A $29 per head loss for farrow to finish operators in November was calculated by Iowa State economist John Lawrence. He says, "Losses on hogs sold in December are expected to nearly as large. Given corn and soybean meal prices predicted for 2008, cost of production for farrow-to-finish operations is projected to be near $70/cwt carcass weight or in the mid-$50/cwt live weight." He says 2008 will be a negative return year. His newsletter is at: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ .
Pork exports will set a record in 2007, says Lawrence and he is expecting a 10% increase in 2008. "The lower wholesale pork prices and weaker US dollar has increased the pace of exports in the fourth quarter." Lawrence says demand remains strong: 1) 4Q production was up 9%, but wholesale prices dropped only a little more than 10%. 2) Cold storage inventory climbed only 1.6% indicating strong consumption trends.
The holidays interrupted hog marketing, says MO economist Glenn Grimes. "The record high hog slaughter for the week of Dec. 22 contributed to pulling the average live weight of barrows and gilts in Iowa-Minnesota down 0.7 lbs per head to 268.5 lbs. This weight was also 0.7 lbs per head below a year earlier. However, average weights are likely to increase for the two holiday-shortened weeks ending Jan. 5.
Grimes says hog slaughter is at capacity. "Our estimate is for total slaughter in 2008 to be near 113.5 million head. If fourth quarter slaughter is close to farrowing intentions, slaughter in the fourth quarter will be up only about 1%. This number is getting close to the level that could mean not enough slaughter capacity, but unless we lose some of today's capacity, we will likely be able to get by without much of a problem."
A forage analysis is important when feeding livestock. IL Extension's Jim Morrison says it indicates values for many dry matter nutrients, but first needs a good sample. 1) Acid detergent fiber calculates digestibility, and the lower the number the better. 2) Neutral detergent fiber will indicate forage intake, and again, lower numbers are better. 3) Crude protein value is 6.25 times the N content, and larger numbers are desired. 4) Dry matter is the percent that is not water, and the value should be 100%. 5) Relative feed value ranks digestibility and intake potential, the higher the better. 6) Relative forage quality parallels RFV, but includes digestible fiber.
Forage tests will only need a few grams of material from the tons you may purchase, but should be a representative sample. For sampling and evaluating forage tests, Morrison says additional information can be found at the National Forage Testing Association brochure: http://www.foragetesting.org/files/UnderstandingForageQuality.pdf .
Your volunteer Bt corn should be controlled, or your fields may begin incubating corn rootworms. Purdue entomologist Christian Krupke warns that volunteer Bt corn in your soybeans creates a continuous opportunity for corn rootworms to become immune to the Bt toxins. He says stronger, tougher-to-control rootworms will result, since they are feeding on maverick Bt corn plants which may not carry the intensity of the Bt toxin.
Entomologist Krupke says the rootworm adults that survive the Bt toxin are larger and lay more eggs than those susceptible to the Bt gene. If you have a rootworm concern, and have a problemcontrolling volunteer Bt corn, Purdue weed scientist Bill Johnson suggests the use of Assure II, Select Max, Fusion or Raptor, tank-mixed with glyphosate.
On your tax return, Purdue economist George Patrick says there is a tax liability on conservation payments. "In general, these payments are ordinary income that is subject to income and self-employment taxes. In the case of some cost-sharing payments, there may be an offsetting deduction, or some payments may qualify to be excluded from income." Read more at: http://www.agecon.purdue.edu/extension/pubs/TAXPLAN2007final.pdf . 1) Conservation Stewardship Program payments are ordinary income and require SE tax. 2) Depreciation may not be eligible on practices that are funding with cost-sharing funds. 3) Cost-share payments are offset with expenditures, reducing income & SE tax liability. 4) CRP rent is ordinary income and subject to SE tax as of 12/06. 5) Payments from EQIP, WRP, CREP, are ordinary income and subject to SE tax.
With higher commodity sales income in 2007, many farmers will benefit from income averaging, that allows amended returns from the past two years to absorb some 2007 income at lower tax rates. Purdue's Patrick says it is all still subject to the Alternative Minimum Tax. However, Congress recently adjusted the AMT upward for 1 year.
You have probably received your Ag Census form in the mail. If you are ambivalent about completing the form, USDA reminds everyone that it is a mandatory form, and farms not completing a form will be called or visited by enumerators who will collect the necessary data. It seeks information about agriculture unavailable elsewhere, and will be published in early 2009. Find out more at: http://www.agcensus.usda.gov .
Phakopsora pachyrhizi is more commonly known as Asian Soybean Rust, and you have been preparing for its onslaught of your soybean crop since 2004. Luckily, it has not created havoc in your neighborhood. However, there is a new strain of soybean rust that has been found, called Phakopsora meibomiae, which has also been found in South America and the Caribbean on kudzu and other typical hosts. In future warnings the pachyrhizi will be known as the aggressive strain, and meibomiae as the mild strain. If you are keeping track, the first 2008 Asian rust finding was Jan. 3rd in northern Florida.
