USDA's final Crop Report for 2006 is being released Friday morning. The market is expecting a 10.706 bil. bu. corn crop, which would be 39 mil. bu. under the November estimate and below the 11.112 bil. bu. crop in 2005. Grain traders said their estimate of the 2006 corn yield was 150.8 bu. per acre, down slightly from 151.2 bu. in November.
USDA's final estimate of the soybean crop is expected by grain traders to be 3.235 bil. bu. compared to the 3.204 bil in November. In addition to the production estimates, USDA will also release grain stocks. Timing requirements for this edition of Extension Update prevented publication of the USDA report statistics. However, details of the report will be available at: www.farmgate.uiuc.edu after the 7:30 a.m. CST release.
USDA Chief Economist Keith Collins surprised the grain markets late Wednesday when he said ethanol would consume 1 bil. bu. more corn in 2007 than in 2006. While he said half of that could come from the 900+ mil. bu. carryover, there would be a need for an additional 6.5 mil. acres of corn to supply the additional demand. Collins was testifying at the Senate Agriculture Committee about renewable fuels. http://www.usda.gov/oce/ .
Higher yields and higher prices not surprisingly are leading to higher net farm income, say IL Extension economists. In fact they believe 2006 income will be higher than any of the last five years, and 60% more than 2005 farm income. Read their newsletter at: http://www.farmdoc.uiuc.edu/manage/newsletters/fefo07_01/fefo07_01.html .
The IL farm income study was based on average yields, but because of yield variations, the per farm average ranged from under $50,000 to nearly $120,000. Production expenses were based on a 9% increase in crop expense over 2005 and a 15% increase in fuel expenses. LDP and Counter-cyclical payments for 2006 were estimated at zero.
After three years of profitability, pork producers are entering 2007 with the specter of income that is barely breakeven, and possibly in the red, says Purdue economist Chris Hurt. Over all costs are expected to be 18% higher, including a 62% rise in corn costs. Cost of production was estimated at $47/cwt, with markets expected to average $48/cwt. Read more at: http://www.farmdoc.uiuc.edu/marketing/weekly/html/010807.html .
Pork producers needing corn, have some opportunities to manage costs says Hurt: 1) Acquire as much cash corn as possible for feeding needs through mid-summer. 2) Buy corn futures on the breaks when market prices soften. 3) Buy corn call options on the breaks, when option premium values drop. 4) Set a purchase price range buying calls and selling out-of-the money puts.
Can livestock producers expect corn prices to fade as they did in 1996? Jim Mintert at Kansas State says no. "Demand driven bull markets have more staying power than supply driven bull markets. Although ethanol demand is heavily dependent on government policy decisions regarding subsidies, tariffs, and mandated usage levels, it looks like demand for corn used to produce ethanol will remain strong in the foreseeable future." Read more: http://www.lmic.info/memberspublic/InTheCattleMarket.html .
Wet fall and winter fields should not be worked, even if a light freeze seems to help. Ohio State agronomists suggest living with compaction for 2007 and work the field next fall. They also suggest light spring tillage to work out any ruts remaining from harvest. They recommend a tillage depth of only 2-3 inches and not kicking up wet soils.
If you are working on taxes, don't join other farmers confused over whether CSP payments can be excluded from income tax. They can't, but FSA had distributed some information that suggested CSP payments could be excluded. OH Extension tax specialist Don Breece said stewardship payments are ordinary income, along with incentive payments. However, he said share rent landlords, who report the payments as ordinary income, may not have to pay self-employment tax on CSP payments.
On another tax matter, Purdue tax specialist George Patrick says the domestic production activity part of the tax code can be helpful with a significant deduction. He says a farm family with qualified production activity income of $80,000 could qualify for a $4,800 deduction. More: http://ohioagmanager.osu.edu/resources/TFCW12_2006.pdf .
With grain exports outpacing USDA projections this week, Agriculture Secretary Mike Johanns said exports will be important for the 2007 ag economy, as he spoke to the AFBF convention, "In 2001, agricultural experts said exports had declined for five straight years and were down to $50 bil. Since then exports have risen every single year to a record of $68.7 bil. in '06. In '07, they are expected to reach a staggering $77 bil."
In his same remarks to the American Farm Bureau convention Johanns says the farm economy is quite healthy, "Farm cash receipts increased for the fourth consecutive year in '06 to $242 billion. Now, that's a $42 billion increase since 2001. In 2001, the debt-to-asset ratio was at nearly 15%. In 2006 we reached a significant milestone: the lowest debt-to-asset ratio in recorded history. It is estimated to be approximately 11%."
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 .
