What price should corn be to achieve all production goals, be profitable for corn growers, but not punitive to livestock feeders and other users? IL Extension Outlook Specialist Darrel Good suggests the price might be in the $3 to $3.50 range, and to achieve that, the stocks-to-use ratio for the 2007-08 marketing year should be 6%. Read more at: http://www.farmdoc.uiuc.edu/marketing/weekly/html/012207.html .
To balance supply and demand, and try to achieve a 6% stocks-to-use, Good thinks: 1) Prices over $3 will cut livestock feed demand and residual use back to 5.85 bil. bu. 2) Exports will be helped by less Chinese exports, but could stay at 2.1 bil. bu. 3) Domestic processing use and ethanol could increase up to 4.55 bil. bu. 4) Total use might reach 12.5 bil bu., and a 750 mil. carryout, results in 6% stocks. 5) A 12.5 bil. bu. crop means a 155 bu. ave. yield on 80.7 mil. acres, 9.5 mil over '06. 6) The futures market is currently offering $3.80 to motivate that acreage increase.
What price should soybeans be, Darrel Good rhetorically asks, to meet demand and have a comfortable carryout of 250 mil. bu.? He says there will be more imports by China, more production in So. America, and with an increased crush, demand will be 3.14 bil. bu. Given the current stocks, 2007 production needs to be 2.8 bil. bu. With a trend yield, acreage should be 65.8 mil., 7.8 mil. under 2006 acreage. Good says the futures market is offering $7.50, less than twice corn prices, which will cut '07 acres.
If you are warm and wet, its El Nino time! IN climatologist Dev Niyogi says we are in a moderately active El Nino, since a large part of the Pacific is warmer than normal. As a result he is anticipating problems with Asian rust in soybeans this year, since the southern states have not had a killing freeze to keep rust spores further south and east.
The El Nino may result in active spring weather says Purdue's Niyogi. There is a significant amount of moisture in the ground, rainfall could be sporadic and intense, and such rainy conditions could create problems for early season crops and spring planting. 1) The wet fall prevented fall tillage, and spring tillage may be delayed from wetness. 2) Wet weather has decreased residual nitrogen carryover, which corn can't count on. 3) Soybeans could have problems with establishing a stand and fighting seedling blight.
It doesn't happen often, but IL Extension's Gary Schnitkey says this year, "On many farms, it will be possible to insure revenues at levels assuring profits, a situation that occurs rarely when using crop insurance." Schnitkey says profitability can be insured. More: http://www.farmdoc.uiuc.edu/manage/newsletters/fefo07_02/fefo07_02.html .
Given the delicate balance and unprecedented dynamics of the marketplace, Kansas State economist Mike Woolverton says no one can predict with certainty what will happen going forward. "But fluctuating prices during this marketing year will result in potential revenue fluctuations for the average producer in the tens of thousands of dollars. Timing of sales will be critical." He says, "The usual advice to sell grain and oilseeds in increments using forward pricing techniques still applies. At present, it is possible to lock in selling prices on the 2007, 2008, and 2009 crops at well above long term averages. Now is the time for grain and oilseed producers to become proactive sellers."
Watch the futures, says IL Extension's Darrel Good, to see if distant futures pay storage costs. "Now the carry or the spreads will never exceed the costs of storage at the delivery market, but those spreads can be smaller than full carry, smaller than the costs of storage, or they actually can be inverted. (Inverted) futures can be lower priced than nearby futures. It is the magnitude of that spread or carry that is really the signal to market participants whether they should be storing the crop or selling it on the spot market."
Watch the basis, adds Darrel Good, to see, "What the market is offering, then calculate what it would cost you to hold corn from harvest time until May of next year. If that is on farm, the biggest cost is interest on the value of the crop plus some handling in and out of the storage bin. If it is commercially, then you need to add the commercial storage charges to see if the total cost is more or less than the carry that the market is offering."
The CBOT wheat contract is disconnected from the physical markets, says Ohio State economist Matt Roberts. He says the delivery mechanism broke down over the summer, resulting in $1+ basis levels when CBOT-approved elevators stopped taking deliveries. Roberts says problems continue as indicated by the basis, meaning the relationship between futures prices and cash prices is unpredictable. Roberts says wheat growers should only pay attention to cash forward prices available from their local elevators." Read more: http://aede.osu.edu/people/roberts.628/extension/newsletter/f07.pdf .
Lower fuel prices may be attractive for spring field work, but Iowa State Extension's Bob Wisner says that is not good for the corn market. Continued weakness in the oil market will slow expansion in the ethanol industry. Wholesale gas prices have declined 32¢ in the past month and ethanol by 48¢. Wisner says, "The lower ethanol prices, if the decline continues, would lower the maximum price new ethanol plants can pay for corn."
Your soybean canopy is your friend more than you know, says Iowa State agronomist Bob Hartzler. Research on soybean population found "the primary effect of the soybean canopy was on the growth of weeds rather than weed survival. The reduction in weed biomass associated with increases in soybean populations would reduce the potential yield impact of weeds escaping control and reduce the number of weed seeds produced."
A second weed study at Iowa State involved a pre-emergent used before glyphosate. Weed scientist Bob Hartzler says, all of the weeds were established in a narrow strip (2 - 4" wide) directly between the soybean rows. Thus, the soybean canopy was as effective as the herbicide in the area within 12" of either side of the row, but by mid-June the canopy had not developed sufficiently to shade the areas in the row middles." Details and pictures are at: http://www.weeds.iastate.edu/mgmt/2007/cropcanopy.shtml .
Two dozen world trade ministers are meeting feverishly to restart WTO talks that have been in hibernation for the winter. This comes as Canada, Australia, Argentina, Brazil, and the EU have all lodged formal complaints about the US farm program which, they allege, pays US farmers to increase production that depress world market prices.
250 million acres of biotech crops grew around the world last year according to a biotech trade group, which said the acreage was planted by 10.3 million farmers. 90% of the farmers were described as small, resource-poor farmers in the developing world. In the EU, which prohibits most US biotech crops, 6 countries have allowed biotech production, including Spain which has 150,000 acres of biotech crops. Biotech beans are the largest crop with 57% of the world biotech acreage, followed by corn, cotton, and canola.
Early January markets continue to show red ink for cattle producers. Kansas State economist Rodney Jones says in December, "Average break-evens were $95.50 per cwt., which combined with average selling prices of just under $86.50 likely resulted in returns around negative $113.00 per head. Based on average performance (feed conversions and daily gains) early 2007 losses would be expected to range from around $123.00 per head for January closeouts, to around $158.00 per head for February closeouts." He said heavy winter storms reduced feed efficiency 15-20%, costing $50 more loss per head.
Mark your calendar: Dairy operations in need of pasture upgrades can attend a series of 4 Friday teleconferences on your computer beginning Mar. 9. Topics include pasture transition, forage supplements, forage management, and innovation. Participation is limited. Pre-register: (309) 694-7501 or by e-mail at dseibert@uiuc.edu .
Mark your calendar: IL Extension specialists will discuss wheat in crop rotations, nitrogen management, and market outlook at the daylong IL Wheat Forum, Feb. 19 in Mt. Vernon ((I-57 & I-64). Growing season weather, wheat yields, diseases, and a grower panel are also scheduled. Details: http:// www.illinoiswheat.org .
Producers concerned about water quality flowing from field tiles into waterways will want to keep tabs on the results of an EPA contest for students to design filter systems. The challenge is to keep nitrogen, ammonia, atrazine and alachlor out of waterways, using filters made of wood chips, gravel, and activated carbon at the end of field tiles.
The circle is now complete. The Associated Press reports that some ethanol plants are being designed to be powered by methane. The methane would come from cattle feedlots adjacent to the ethanol plant, which produces the distillers' dried grains fed to the cattle. Once the process gets started, it could come close to being perpetual motion.
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 .
