Extension Update on Ford-Iroquois Agriculture

A weekly publication of University of Illinois Extension, Nov. 3, 2008

Prepared in part by Stu Ellis, former Extension specialist & Aimee Chandler, Ag Program Coord., Ford-Iroquois Unit

Our address is University of Illinois Extension, 912 W. Seminary, Onarga, IL 60955. 815-268-4051

Our Internet homepage is at www.extension.uiuc.edu/ford

• PSEP Training/Testing will be held on four different dates in the Ford-Iroquois Unit. All sessions will begin at 1:00 p.m. and will be held at the Ford-Iroquois Farm Bureau Building in Gilman. The sessions will be held on Tuesday, December 9; Tuesday, January 20; Tuesday, February 17; and Friday, March 6. To register contact the Ford-Iroquois Extension office or visit our website.
• USDA has revised its October Crop Report reducing corn acreage by 1.2%, soybean acreage by 1.4%, & dropping acreage also for canola, sunflowers, & edible beans, with an increase in sorghum acres of 2.5%. USDA said the adjustment was necessitated by failure of the FSA & NASS computer software to reconcile acreage information.
• Revised corn data projects 78.177 mil. harvested acres, 153.9 bu. average yield and 12.033 bil. bu. production. Planted and harvested acreage dropped 1 mil., and yield declined 0.1 bu. USDA did not adjust any projected use, but reduced ending stocks from 1.154 bil. to 1.088 bil. bu. and added 5¢ to the average farm price, now $4.25 to $5.25. Find details at: http://www.usda.gov/oce/commodity/wasde/latest-revision.txt .
• Revised soybean data projects 74.374 mil. harvested acres, 39.5 bu. average yield and 2.938 bil. bu. production. Planted acreage and harvested acreage both dropped 1.1 mil., but yield estimates were left unchanged. A 30 mil. bu. drop in exports was the only adjustment to use, with ending stocks lowered from 220 to 205 mil. bu. USDA added 10¢ to the season average price estimate which now ranges $9.70 to $11.20 per bu.
• While futures prices have fallen, the basis has narrowed says IL Extension's Darrel Good. He points to an anecdotal cash price that was 40¢ under Dec futures, which was 20¢ higher than recent fall delivery prices, but still 20¢ under year ago levels. His cash bean example is up 60¢ from recent bids, and 15¢ stronger than cash bean prices in late 2007. Read more at: http://www.farmdoc.uiuc.edu/marketing/weekly/html/102708.html
• Darrel Good also says spreads in the bean market have also narrowed to create a carry in the market. The result of the carry and the narrow basis is a return to storage, if farmers can store beans. Good says the return is minimal, and calculated a 50¢ return for 8 months of storage, if summer 2009 basis levels narrowed to 10¢ under. That works out to be a 17¢ return to storage, because 6% interest on $8.30 soybeans would cost 33¢.
• Returns to storage for corn are a slightly better calculates Darrel Good. The Dec to July futures spread is 37¢ putting cash prices at 77¢ under July. If the basis returns to typical levels, he says that puts a return to storage at 62¢ for corn stored 8 months. With 13¢ interest, the true return to storage would be 49¢, even covering commercial rates.
• Update your marketing plan based on the stronger basis, suggests Good. If prices recover as expected over the next six months, then storage would pay off. He says holding corn may be preferable, but at current scenarios, the soybean market may only reward those with a basis contract or a hedge, which are cheaper than storing beans.
• Was the revised USDA report a turning point in the market meltdown? Kansas State marketing specialist Mike Woolverton thinks, "During the summer and early fall, commodity prices have been beaten down by outside influences such as the precipitous oil price drop, a tremendous hedge and index fund sell-off, the credit market freeze, overseas buyers waiting out the down price trends, and the global economic downturn. Now, maybe buyers and sellers can concentrate on supply and demand fundamentals."
• Woolverton says market fundamentals are stronger than prices reflect. He says the world will soon turn to US corn & wheat, & demand will strengthen. He says ending stocks are low by historic standards, the battle for acres will heat up, input costs have to fall more or fertilizer sales will weaken, exports have held up despite credit conditions.
• Look at South America, says Woolverton, who says crops have struggled due to bad weather, wheat in both Argentina and Australia is droughty, financial problems in Brazil have restricted soybean planting, and Argentine farmers are mad at their export taxes.
• Will credit markets and ethanol expansion determine 2009 corn and soybean acreage? Ohio St. marketing specialist Matt Roberts believes ethanol expansion will slow, but he is uncertain how much. Estimating weaker exports and more ethanol demand, Roberts says there may be a need for 2-3 mil. more acres of corn than in 2008. Roberts says soybean acreage in 2009 could be reduced by 1.5 mil. without much difficulty in the market.
• Will there be more profit in planting corn or soybeans in 2009? Declining commodity prices and rising input costs have underscored the need for precise calculations, but as grain prices potentially recover and some input costs soften, periodic calculations may be required as you implement your marketing plan. Consult the crop enterprise budgets offered by Ohio State at: http://aede.osu.edu/Programs/FarmManagement/Budgets .
• Matt Roberts at Ohio State says those budgets show variable costs of $450-$500 per acre to plant corn, and a breakeven price of $4.50 that includes returns to labor and land. For soybeans, the variable cost is $240-$270 with a breakeven inclusive market price of $9-$10. Roberts says unless something changes, he cannot see increased corn acreage. Read more: http://aede.osu.edu/people/roberts.628/extension/newsletter/08v.pdf .
• Be a church mouse and listen to Purdue economist Allan Gray's advice to agribusiness:
  1) If you have a high-priced fertilizer inventory, your tendency is to cover your costs. But farmers know prices have declined, and they will look to a lower priced competitor.
  2) If you have pre-sold nitrogen at high prices, you'll face pressure to give farmers relief.
  3) Elevators earlier this year had to pay out high margin calls, and lower prices are bringing that cash back home. Keep the cash if possible for your financial reserves.
  4) Ag lenders are tightening their credit, and farmers who do not get needed operating credit will be asking ag retailers to help finance the crop inputs needed next spring.
  5) Elevators considering use of their additional working capital to enter the credit business should be diligent in understanding credit worthiness and one's ability to repay.
  6) Agribusiness should not lose focus of serving their best customers at the highest level.
• Wet and cold sums up 2008 weather say Iowa St. specialists, with the statewide accumulation of growing degree days 130 behind the average, and rainfall 7 in. more than average. Interestingly, 85% of that surplus 7 inches fell prior to June 12.
• "Run wide open and don't lift," says grain quality specialist Charles Hurburgh at Iowa State, addressing the need to get all grain out of the field as quickly as possible and deal with moisture issues in storage. Hurburgh says soybeans will not dry any further, and will only rise in moisture now and temperature variations will cause pods to split open.
• If you have wet corn, and lack of drying capacity, Hurburgh has several suggestions:
  1) Dry it to 17-18%, store it with airflow and cool it off, and moisture will drop to 15%.
  2) Dry it to 20%, cool it with aeration, hold it at 17-18%, dry it in the spring or sell it.
  3) Dry it to 20%, store it with aeration, return the batch to the dryer for more heat later.
• If grain drying is your priority, consider these money-savers for this year and next:
  1) Calibrate your grain moisture meter. Meter errors cause under- or over-drying.
  2) Clean grain to remove fines before drying. There's no need to dry unneeded materials.
  3) Full heat drying cuts energy use by 15%. In-bin (dryeration) cuts energy use by 25%.
  4) Add a stirring device to bin dryers to save 20-30% in drying costs.
  5) If you have perforated floors and aeration, combination drying will save 40-50%, if you dry to 20% moisture with high temperature drying and finish with ambient air.
• Soybean rust was found in McLean and Marshall Counties in Central IL, and Jackson and Union Counties in Southern IL, but so far those 4 are the only counties north of the Ohio River with confirmed cases of rust. http://sbr.ipmpipe.org/cgi-bin/sbr/public.cgi .
• If your 2009 bean fields are rife with purple deadnettle over the winter, you are also likely hosting soybean cyst nematode. SCN egg populations can increase 3-5 fold over the winter on purple deadnettle, a winter annual. Ohio State specialists recommend that it be controlled within four weeks of emergence, since SCN eggs will hatch in 4-5 weeks.
• Pork producers continue to send sows and gilts to market, reducing the breeding herd at a modest rate says MO livestock economist Glenn Grimes. He hopes by December the breeding herd will be 5% below last December. Without any demand loss, Grimes says the average cost producer should break even in 2009. He is predicting financial losses on market hogs in the first and fourth quarters and profits in the second and third quarters.
• Breakeven costs for cattle feeders are dropping according to the calculations of Kansas State livestock economist Jim Mintert. His newsletter says even though fed cattle prices are only $90, the recent decline in feeder calves & the 30% decrease in feed costs have pushed breakeven prices down sharply. He says low cost operators may see a profit.
• Cattlemen should be concerned about the risk of prussic acid forming in forage that has been damaged by frost, and the potential for poisoned livestock. The problem remains until sorghum, sudangrass, or sorghum-sudan forages wilt and dry. Prussic acid is fatal to cattle, and IL Extension crop specialist Robert Bellm says there is no immunity.