March 31, 2008

2007 Cost to Grow Corn and Soybeans

Posted by John Fulton at 8:26 AM | Permalink |

March 31, 2008

Extension Update from Stu Ellis

• Monday will be busy at USDA's lock up with the Prospective Plantings Report and the Quarterly Grain Stocks Report. IL Extension's Darrel Good analyzes them at: http://www.farmdoc.uiuc.edu/marketing/weekly/html/032408.html
• The market is expecting a forecast of 87 mil. acres of corn and 70-71 mil. acres of soybeans. Darrel Good says, "That estimate compares to 2007 acreage of 93.6 mil. and 63.63 mil., respectively. Intentions for spring wheat are expected to exceed 2007. The planting intentions estimate will provide a benchmark for anticipating actual plantings."
• 6 mil. acres shifted last year after the report says Good. "Recent price changes that include much lower soybean futures and an extremely weak new crop soybean basis have shifted potential profitability significantly in favor of corn over soybeans in much of the Midwest. At the same time, generally cool and very wet conditions in some areas may lead to anticipation of corn planting delays and a swing to more soybean acres."
• Purdue's Chris Hurt agrees with Darrel Good, saying there has been a reversal in new crop futures. "During the last three weeks, market prices for corn have actually increased the incentive to raise corn as soybean prices dropped more sharply." He believes the report will be bullish for corn with surprisingly low acres with a resulting corn rally.
• It will be the opposite for beans, says Hurt, who believes there will be so many bean acres forecast by USDA that it will be a bearish report for soybeans. "The markets and the financial incentives provided by the grain prices, as well as the costs are very dynamic. Producers have some tough decisions to make this year, but they need to take a step back and make the best decisions they can." He recommends planting more corn.
• The USDA survey was taken about March 1, and Hurt says at that time new crop soybean futures were peaking at $14.66, but since then beans have collapsed more than has the corn market, and there has been a reversal in new crop futures.
• Also Monday is the Grain Stocks Report, which will detail the actual feed use in the past 3 months. The December report pointed to record feed use, and Monday that trend will either be confirmed or prior estimates adjusted. Good expects corn use about 4% more than 2007 levels, helped by the large livestock herd and growing ethanol refining.
• USDA wraps up this week with the Quarterly Hogs and Pigs Report, following Friday's market close. The December report indicated the pig crop was 4% more than the prior December, pointing to a large feed demand this spring. The forecast could have a significant impact for both corn and hog prices, if hog production remains strong.
• Has your elevator quit offering forward contracts? Many have backed away from routine marketing tools because of margin calls and high loan levels to service their CBOT hedges in a volatile market environment. That leaves producers to manage their own price risk with futures contracts, but that requires substantial margin money also.
• It leaves a lot to be desired, but MO marketing specialist Melvin Brees says an option strike price minus the premium cost will lock in the bulk of a forward contract, then use a basis contract at the elevator to manage the balance of the price risk. He acknowledges that the expensive premiums and weak basis bids won't come near lofty futures prices.
• The combination of buying and selling options may help manage price risk at a lower cost, but Brees says you should understand that risk is not eliminated, and selling an option incurs a futures obligation that could be exercised by the buyer. Read more: http://www.fapri.missouri.edu/farmers_corner/mktng_newsletter/CurrentDM.pdf
• There is a 72% chance of corn yields being under the trendline this year says Iowa State meteorologist Elwynn Taylor. He says the La Nina weather pattern may have peaked, he's not sure, but he says the crop yield risk for 2008 is still very real. Taylor says the chance for a sub trend yield is 72%, but only 60% if La Nina fades before June.
• Continuous corn tillage research compared a coulter chisel plow with either deep tillage shanks or a mini-moldboard plow at the Northern IL Agronomy Research Center. The more intense tillage produced an average 207 bu. compared to the 204 for the coulter chisel plow, reports IL Extension agronomist Jim Morrison in the 2005-2007 study.
• Continuous corn fertility research reported by Morrison resulted in a 208 bu. average yield with more intense fertility, which included 320 lbs. of N, 172 lbs. of P, and 270 lbs. of K. Compare that with a 203 bu. average yield from 220 lbs. N, 92 lbs. P, and 150 lbs. of K. The cost of the additional nitrogen would have been more than the value of 5 bu.
• Continuous corn population research at the Northern IL Agronomy Center compared 32,000 with 40,000 plants per acre. Results indicated the higher population yielded 206 bu. compared with 205 bu. per acre for the lower population. Comparing all three trials indicates that inputs for continuous corn do not need to be different from rotational corn.
• With more stacked trait corn being sold this year, more refuge acres will be planted. IA State entomologist Jon Tollefson says the 20% acreage refuge should have been planned by now. "The refuge must be grown the same way the Bt rootworm corn is; that is if the rootworm corn is corn on corn, then the refuge must also be continuous corn. If the rootworm corn is rotated corn, the refuge should also be corn grown in rotation.
• Accurate records will help you avoid federal penalties or falling profits, says IL Extension's Dennis Epplin. He says troubleshooting problems are easier with reliable records about EPA registrations of restricted pesticides used on specific fields, as well as fertility levels, yield maps, planter settings, tillage, weed maps, and herbicides used.
• An IL natural resources economist has a dim view of ethanol production and policy. Madhu Khanna says federal energy policy takes corn away from the export market, and the additional corn production comes at the expense of wheat and beans, which are also needed in food exports. She says corn-based ethanol reduces carbon emissions only 15-20% per gal. relative to gasoline, (but) energy crops could reduce emissions by 80-90%."
• No-till fields need to be clean says Iowa State weed specialist Bob Hartzler, and first identify the weeds at: http://extension.missouri.edu/explore/regpubs/ncr614.htm . Then:
  1) Winter annuals are easier to kill now in the vegetative stage, before going to seed.
  2) Kill the weeds 10 days before planting to avoid damage to your crop.
  3) Adding 2, 4-D to glyphosate improves the consistency of control on many annuals.
• What is your weed control program for corn? MO weed specialist Kevin Bradley has evaluated 37 different trials over the past 5 years. "In 64% of the trials, the highest corn yields were obtained with a 2-pass program consisting of a pre-emergence herbicide followed by a postemergence herbicide. A 1-pass postemergence program that also contained a residual herbicide provided highest corn yields in 29% of the trials, whereas in 7% of the trials a 1-pass pre-emergence herbicide program provided highest yields."
• Planting may get blamed for compaction problems this year according to a Purdue specialist, who says the cool wet conditions leave the soil at risk of compacting with minimal fieldwork. Corey Gerber says that restricts root growth, jeopardizes moisture and nutrient uptake, and can bring on diseases and insects as seed sits in the cold soil.
• Going to the field before the soil is ready can be costly in terms of having a good crop this year, say soil specialists at Iowa State. They say that saturated soils make it too wet for suitable working soil conditions. Other problems include soil compaction induced nutrient deficiency such as potassium, root development and ultimately yield reduction.
• Soil compaction can occur during any field operation, even wintertime manure spreading or spring anhydrous ammonia application. Under wet conditions, the use of heavy equipment can significantly change soil structure and cause soil compaction. Operating in wet conditions and especially doing extra tillage will increase fuel use per acre as well.
• Do you really understand the reason for high fertilizer prices? WI soil scientist Carrie Laboski says the main reason is that fertilizer is a world commodity and demand is up:
  1) Demand for N, P, & K are up 14%, 13%, and 19 % respectively from 2001 to 2006
  2) US producers have to compete with farmers from China, India & Brazil for fertilizer
  3) US nitrogen demand is higher because of the 15 million acre increase in corn in '07
  4) We import 50%+ of N, 90%+ of K, but we are the largest exporter of phosphate.
  5) The weak dollar increases the cost of good imported into the US.
• For several years IL agronomists have grown soybeans in an atmosphere that resembles the high carbon dioxide atmosphere 50 years from now. The purpose was to create high yielding soybeans. An offshoot of the research found that insecticides will need to be developed also. It seems the high carbon dioxide air grows more and bigger bugs.

Posted by John Fulton at 8:10 AM | Permalink |

March 31, 2008

March Precipitation

Here is the March precipitation summary for Logan County Extension on the left, and the National Weather Service station on the right.

Station IL-LG-11 IL-LG-2

Posted by John Fulton at 7:56 AM | Permalink |

March 7, 2008

Extension Update from Stu Ellis

• Grain prices will remain high over the next decade, fueled by high crude oil prices and new bioenergy mandates. That is the opinion of FAPRI which says, "New biodiesel mandates in the Americas and Europe almost double the price of biodiesel, pushing it to $6.00 per gallon with the doubling of net trade over the next decade." FAPRI says ethanol prices will fall in the next 5 years, then increase to a projected $1.52 per gallon.
• FAPRI's expectation for corn prices is about $5 per bu. for the rest of the decade from ethanol, livestock, and export demand. Vegetable oil prices are expected to increase 1-3% annually for the rest of the ten year period. China is forecast to continue importing soybeans and will buy 57% of the world soybean trade at the end of the ten year period.
• Tight US and global wheat stocks have pushed up prices says Daniel O'Brien at Kansas State Extension. He says world supplies declined 6% over the past 3 years, and in the same period, wheat trade declined 9%. But global stocks have declined 26%, causing humanitarian organizations to be concerned about wheat availability in poorer countries.
• Interestingly, O'Brien says non-US wheat exports have declined 17% in the past 3 years, but US exports have increased 20% & 32% in the past 2 years. "This reinforces the idea that the US has been the primary source of available wheat for world exports during the 2007/08 marketing year – a fact that exacerbated the recent increases in US wheat prices."
• Foreign wheat production will depress US exports, says O'Brien, raising US ending stocks to 538 mil. bu. for the next marketing year. However, he says US wheat prices are expected to be about $7, compared to the $6.65 per bu. in the current marketing year. He says that is due to the uncertainty about wheat production prospects here and abroad. http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/IFO_2008/ifo030108.pdf
• La Nina's days may be numbered, says Iowa State Meteorologist Elwynn Taylor, and he says that diminishes the risk of a serious Midwest drought. The changes underway in Pacific water temperature also suggest a good season for the High Plains. Taylor says the weather pattern may be shifting toward an El Nino. He adds that weather conditions in the US continue to reflect a La Nina, but the peak intensity has passed. Nevertheless Taylor says it is too early to write off a drought just because La Nina was diminished.
• Midwestern snowfall could make this one of the 10 wettest winters. MO meteorologist Pat Guinan says there is still snowpack in IA, WI, and northern IL with soils near the point of saturation. He says MO will have one of the wettest winters since 1895, and IL expects to have its third wettest winter. He says average temperatures are near normal.
• Name your poison: excess pork production or high feed prices. Without a choice, Chris Hurt at Purdue says the North American pork industry is on pace for the most damaging financial year ever. And his latest newsletter he says there seemingly is no cure until the breeding herd is cut. http://www.farmdoc.uiuc.edu/marketing/weekly/html/030308.html .
• But that is not happening. Livestock economist Hurt says sow slaughter is not rising, and the high rate of farrowings will extend through Feb, with high volume marketing through next Sept. First quarter losses are forecast at $34/hd, and expecting prices to improve in the spring and summer, Hurt says expect a $47/live cwt average for the year.
• Unprecedented volatility is how Hurt describes feed prices, pushing finishing costs near $60 this summer. That would yield a $27/hd loss, compared to the 1998 losses of $15/hd. Hurt says lean futures suggest higher cash prices, and using them provides hedging opportunities at $54 for the third quarter of 2008 and $52 for the fourth quarter of 2008.
• On the positive side, pork exports were at a record level of 3.14 bil. lbs. in 2007, up nearly 5% from 2006. Beef exports were 1.43 bil. lbs., which is slow expansion but only 50% of 2003 levels. Poultry exports were 5.77 bil. lbs. Iowa State economist Shane Ellis says compared to 1990 exports, beef is up 42%, poultry up 405%, and pork is up 1,242%.
• Despite corn prices, feeder cattle prices are strong. NE livestock economist Darrel Mark says from 1980-2005 a $1 increase in corn meant a $9 drop in feeder calf prices. But for 2006 & 2007, Mark says, "Feeder cattle prices have been less responsive to corn prices compared to the previous 16 years. In fact, a $1/bu corn price increase only led to a $3/cwt drop in feeder cattle prices on average during 2006 and 2007."
• Why have feeder calf prices stayed relative strong despite high corn prices? Darrel Mark has 3 reasons. http://www.lmic.info/memberspublic/InTheCattleMarket.html
  1) Calf supplies are very tight as a result of liquidation in the cow herd
  2) Ample bunk space in feed yards
  3) Feeding of ethanol byproducts which improves performance, and lowers cost of gain.
• Beef demand at the consumer level for the 3 month period of Nov 2007 to Jan 2008 was down 1.8% from a year earlier, say Glenn Grimes and Ron Plain at Missouri. The weakness is probably due to high energy costs and large competition meat suppliers. The good news about demand in the beef industry is that live fed cattle demand for these 3 months of Nov to Jan was up 2.6% from 12 months earlier. Large exports of beef and population growth are probably the main reasons for the stronger live fed cattle demand.
• If planning spring wheat, consider when heads will fill. Kansas St. agronomist Jim Shroyer says that is a hot, dry time in Kansas and the wheat will have low test weight and shriveled grain, along with low yields. He says if spring wheat is still on your agenda, choose a variety with early maturity, with resistance to leaf diseases. He says it is not realistic to anticipate hard red spring wheat anywhere will draw Minneapolis prices.
• IA Weed specialist Bob Hartzler chuckles at the DowAgro Sciences ads for SureStart, Sonic, and Durango, about being new herbicides, and says they are combinations of 6 herbicides, none of which is less than 15 years old. Hartzler says they are still good weed management tools and will slow down glyphosate resistance. He nominates the ad for the "Hall of Shame." http://www.weeds.iastate.edu/mgmt/2008/old%20herbicides.htm .
• Your corn fields are not the only fields where excess rainfall has floated corn stalks toward drain inlets. And you need to know they are not going to decompose before planting. Purdue agronomist Tony Vyn says drainage and yield will be reduced.
  1) Spread them back out with a tillage tool or blade, preferably on frozen soil.
  2) If the residue is no more than 2" thick, tined tow cleaners can do the rest.
  3) Burning the residue is an option, but move the pile away from plastic drain tiles.
  4) The residue can be buried, but that's hard if it is in a low wet spot.
• Speaking of flooded areas, did your soybeans produce enough N before being flooded out that will be sufficient to take a nitrogen credit for this year's corn crop? Ohio State agronomists say the nitrogen present comes from biomass degradation, because an insufficient amount would have been produced by the soybean nodules to benefit corn.
• Wooly and fluffy fields interfere with planting if you are a no-tiller, so burn-down is one of your critical decisions in the spring. The Purdue weed crew says glyphosate or paraquat will do, but give 7 days for the glyphosate to work. However, with glyphosate resistant horsetail around, the Purdue specialists recommended a pint of 2,4-D ester. However, that delays soybean planting by 7 days, or 30 days if more than a pint is used.
• Out smart the bugs, if you can, suggest Ohio State entomologists, and that means judicious use of preventative measures. http://corn.osu.edu/index.php?setissueID=220#B
  1) For rootworms first use transgenic seed before insecticides and seed treatments.
  2) Corn borers can be controlled with transgenics, if you really need to control them?
  3) Flea beetles and Stewart's wilt can be controlled with resistant corn hybrids.
  4) If plowing under heavy weed growth, seed treatment is needed for seed attackers.
  5) For fields with a lot of black cutworm, alternate transgenics with seed treatments.
  6) Seed treatment will not manage bean leaf beetle populations, so don't waste money.
  7) If beans are food grade, use foliar sprays for bean leaf beetles after emergence.
• Monthly prices for diesel fuel are computed to be 40% more than 2007 prices, based on fuel futures, through planting season. For the balance of the growing season, diesel prices will be at least 30% more than last year, comparing month to month says Kansas St. economist Kevin Dhuyvetter. http://www.agmanager.info/energy/PriceForecasts.pdf

Posted by John Fulton at 10:34 AM | Permalink |