This document printed from the University
of Illinois Extension Ag Update at http://www.extension.uiuc.edu/macon/
Extension Update
December 1, 2006
You never dreamed of $4 corn. What do you do about it? Chris Hurt at Purdue says, "Pricing some now provides extraordinary returns for most with reasonable yields. Then a diversified strategy that may involve pricing in 6 to 10 events through next July might be considered. This is an averaging strategy that will enable one to take some of the current strong margins, but also be able to take advantage of higher potential prices.
Price for delivery as far into the future as storage costs can be covered, says Hurt. For example the DEC-MAR spread is 13 cents, and that covers storage costs, but the MAR-MAY spread won't cover commercial storage, but may cover on-farm storage costs.
If you have beans to sell, Purdue's Hurt says, "Storage returns do not look particularly attractive for soybeans. Futures premiums are now reflecting about 5¢ per bushel per month through the storage season and interest cost is about 4¢ per month." Hurt is anticipating higher prices for soybeans something during the next 6 to 9 months.
For commercially stored beans, Hurt says sell them by around the first of the year and then decide whether to speculate for higher prices by replacing ownership with futures or call options. For on-farm stored beans there will be more of a tendency to keep them in storage until next spring and early summer. Read his latest soybean newsletter at: http://www.agecon.purdue.edu/extension/prices/grains/soybean.asp?ID=36 .
USDA's ag statisticians will be interviewing 77,000 producers the next two weeks to determine final production numbers and on-farm stocks. The data will be collected both by mail and by telephone, and include final harvested acreage, yield, and production. The information will be released in the Jan. 12 Crop Production and Grain Stocks reports.
Transportation could become tight for ethanol plants as more come on line, at least in shipping out ethanol and distillers' dried grains. An Iowa State University study of 20 ethanol plants found that managers were becoming concerned about logistics, since they only have on-site storage for 5% of annual corn use and 2.5% of annual DDG output.
USDA spends about $1 bil. to ship US commodities around the world in various food aid programs, but any farmer benefit is a myth, according to Cornell economist Chris Barrett. "That myth is exploited by a small group of organizations that really do profit from food aid programs, especially the shippers. Again, almost half of the budget goes to freight cost and, to a small degree, some of the larger agribusiness concerns that sell into the system. And they too make money in part because of the shipping restrictions."
How will pork producers respond to the $1.25 increase in corn prices and $32 increase in bean meal prices since Sept? Purdue's Chris Hurt says it is hard to predict, but the market is expecting short term liquidation of the breeding herd, and that will reduce the number of hogs in the coming year and increase pork values about 20 months away.
Hurt's prediction of higher pork prices in 20 months is based on similar prior events. It is "the length of time from the peak corn prices until lean hog futures make their next high. On average over the past five high corn price events, that has averaged about 20 months, but has ranged from as short as 10 months to as much as 36 months." Read his newsletter: http://www.farmdoc.uiuc.edu/marketing/weekly/html/112706.html .
Pork producers–13,000 of them–will be surveyed by USDA ag statistics staff over the next two weeks to gather data about market hog, breeding stock, and farrowing intentions. The data will make up the Dec. 1 Hogs and Pigs Report released Dec. 27.
Livestock interests are pushing to get legislation passed when Congress returns next week that will exempt livestock operations from EPA Superfund regulations. This would halt a move to have manure considered toxic, and make livestock operators pay fines for having the manure cleaned up from their farm. The exemption will soon expire.
Don't expect much change in farm programs, just because Congress has changed, says Purdue ag economist Allen Gray. He says, "Under current market conditions with commodity prices being so high, it might not be too hard to keep those programs in place because they are not going to be as costly as they would be if we had low commodity prices." More: http://www.agriculture.purdue.edu/aganswers/story.asp?storyID=4356 .
Purdue's Gray also says Congress will favor biofuels. "That is, that biofuels are part of our overall strategy for energy independence in the United States. I think the Democrats are likely to push that agenda a little bit harder. They are probably going to be a bit more in favor of subsidizing the use of corn ethanol, extending the renewable fuels standard and developing cellulosic ethanol. They'll also likely be more favorable to biodiesel."
Land Grant University specialists and USDA are introducing new methods to answer questions and provide information. The Internet-based system quickly links you with the right specialist to provide information, regardless of where you and the specialist may be. So far the "eXtension" system has completed work on one topic and nearly on a second: 1) HorseQuest, with horse information and news is at: http://www.extension.org/horses . 2) Financial Security for All will be at: http://www.extension.org/personal+finance .
800 million hungry people are not acceptable to Univ. of IL economist Gerald Nelson who says biotech and information technology will reduce that number. Nelson says, "There will also be those with moral or ethical objections to genetic modification, but over time, their numbers will likely decline as benefits from individual GM crops become more widespread and well known." He says GMO issues have improved US regulations.
Looking at the future, economist Nelson says, "A combination of global positioning systems, precision agriculture, automated farm implements and vastly improved data collection and analysis may make it possible in the next 50 years for a farmer to grow 20 or 30 different crops--instead of just two or three--that mature at different times and require different applications and seasons." Read more: http://hir.harvard.edu/ .
If giant ragweed presents a control problem, weed specialists at Purdue and Ohio State may have a solution. PRE herbicides can reduce the giant ragweed population and slow the growth of emerging plants, which creates a wider window of time of POST application and increases POST herbicide effectiveness. Glyphosate is more effective on small plants. PRE herbicides also reduce yield loss from early-season weed interference. A factsheet is at: http://www.btny.purdue.edu/weedscience/2006/GiantRagweed06.pdf
85% of IL cropland had acceptable levels of soil erosion in 2006, and while that percentage has been static since 1997, there has been a slow improvement in meeting erosion goals for the other 15%. IL Extension's Bob Frazee says most of the cropland out of tolerance is within 1-3 tons per acre of the point of erosion equilibrium. He says with slight tillage adjustments 96% of IL cropland could meet erosion tolerance levels. IL tillage improvements reached the 85% mark after being at only 59% in 1982.
No-till rose to 33.1% of all IL land planted with corn, soybeans, and small grains, while conventional tillage dropped to 31.2% in 2006, the first year ever that no-till acreage exceeded conventional tillage. The shift was attributed to the increase in no-till soybeans, spurred by fuel costs and glyphosate efficiency. 16.7% of IL corn is no-till.
Rural America is the center of the renewable energy world, and IL has now become the 20th state to adopt a renewable portfolio standard. It is a game plan for getting a percentage of the total energy generation done by renewable energy, says IL Extension ag engineer Ted Funk. He says IL now ranks 16th in wind energy production, above CA.
Farmland values continue upward, but the Chicago Fed economists say the rate has slowed. Their 3rd quarter survey ranged from a loss of 2% in IL to 1% gains in IN, IA, and WI. The year over year increase was reported at 7%, compared to a minimum of 9% gains for the past 10 successive quarters. It seems subdivision building has slowed down.
Credit conditions deteriorated in the Chicago Fed District in the 3rd quarter, with 6% of bankers reporting loans being paid off and 19% reporting lower rates of pay off. Also loan extensions and renewals were also higher than the comparable period of 2005.
Interest rates in the Chicago Fed District averaged 8.73% on new operating loans, with a low of 8.47% in IL and 9.15% in MI. Real estate loan interest rates averaged 7.82%, ranging from 7.65% in IA to 8.46% in MI. Primary reasons for loan applications included operating loans at 41% and grain storage construction loans at 17%.
The Kansas City Fed also reported a slowing of the upward rate of land price increases. The increases were the least since 2004, with the slow down attributed to financial losses related to the drought in the Plains along with higher farm operating costs such as fuel.
The Extension Update on Central Illinois Agriculture is e-mailed on Friday to selected subscribers and is also on the Internet (at www.extension.uiuc.edu/macon/agupdate/ or www.farmgate.uiuc.edu .) It is created weekly by former Extension Specialist Stu Ellis, who remains reachable at: shellis@uiuc.edu .
