A weekly publication of University of Illinois Extension, Feb. 2, 2007, Vol. 8 No. 41

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• Corn consumption is brisk says IL Extension's Darrel Good, just 20 weeks into the marketing year. http://www.farmdoc.uiuc.edu/marketing/weekly/html/012907.html .
  1) We've sold 856 mil. bu. of corn, 17% more than last year at this same time.
  2) Ethanol could use 4.25 bil. bu. in 2008-09, twice the expected 2007 usage.
  3) Livestock production is slowing, with 3% less egg set, and 9% fewer cattle on feed.
• Soybean consumption is also surpassing the 2006 rate says outlook specialist Good:
  1) Domestic crush is 4.2% higher than last year and meal consumption is up 4.1%.
  2) Soybean exports are up 21%, with exports plus unshipped beans 30% over 2006.
• The market is still looking for the March 30 acreage intentions report, which will indicate corn acreage expansion and how much will come from soybean acres versus other crops. Darrel Good says the price ratio between corn and beans currently favors corn, but he says downside risk for both crops is limited until 2007 acreage is known.
• Having too much corn this year is not likely says Kansas State's Mike Woolverton. "If corn producers plant 12-14 mil. more acres and if growing conditions give record breaking yields across the country, corn price would drop from the current level. One or the other might happen, but the likelihood of both happening this year seems small." Read more: http://www.agmanager.info/marketing/outlook/newletters/default.asp .
• With feed cost up 24%, pork producers are expected to lose $1-2/cwt at a minimum says Purdue's Chris Hurt, who says he has grave concerns about higher 2007 production costs. This will be the 6^th consecutive year of higher pork production with the export market consuming the growth. He says prices will range from low $40's to near $50/live cwt.
• Control pork production costs says Chris Hurt with corn buying strategies. Details: http://www.farmdoc.uiuc.edu/marketing/livestockoutlook/html/013107/013107.html .
  1) Owning corn now may help avoid a higher basis this spring and summer.
  2) Buy CBOT corn futures on the breaks to hedge your feed requirements.
  3) Buy CBOT corn call options on the breaks, to establish a maximum futures price.
  4) Set a price range by buying calls and selling an equal number of out-of-the money puts
• 11,974,000 head of cattle were on feed Jan 1, the largest Jan 1 inventory since this data series has been kept and 1% higher than 2006. Utah State's Dillon Feuz says, "Steer calves on feed were unchanged from 2006, while heifer calves were up 4% and cows and bulls were up 11%. Those are not the numbers one would expect when the nation's cow herd is expanding, so I suspect that the drought has derailed many expansion plans."
• USDA's Farm Bill proposal received a warmer than expected Congressional reception:
  1) The safety net would be based on revenue, not just price, supporting poor yields.
  2) To collect any farm program payments, adjusted gross income can't exceed $200,000.
  3) The three entity rule is eliminated, and the maximum payment is $360,000.
  4) Conservation funding goes up $7.8 bil. and expand wetlands reserve to 3.5 mil. A.
  5) Re-targeted the CRP to more needy areas and increase CSP program funding.
  6) Renewable energy funding is increased $1.6 bil., targeted at cellulosic ethanol.
  7) Beginning farmers would benefit from $250 mil. in direct payments.
  8) Users of 1031 tax exchanges would be prohibited from collecting program payments.
  9) Fruits and vegetables could be grown on base acres to increase fresh food for schools.
  10) Farm programs were rewritten to make them more immune to trade complaints.
  11) Allow users of crop insurance to cover up to 100% of crop loss.
• Ethanol margins have eroded since their peak last summer, says Purdue's Chris Hurt. He says newly constructed plants will be able to pay up to $4.25 per bushel for corn, which will drop to $3.75 later in the summer if ethanol prices drop in line with ethanol futures. This means that ethanol plants will be part of the corn rationing process as well. While they could pay $7.00 for corn last summer, that is no longer the case, says Hurt.
• Ethanol processing margins might go far enough into the red to cause some of the plants to shut down, says Mike Woolverton at Kansas State. "The subsequent decrease in demand for corn would cause price to fall. In order for that to occur, oil price would have to fall more than it has in recent weeks; even then, Congress would likely raise the ethanol-in-gasoline mandate levels to prevent injury to grain producers, farmer/investors, and rural communities that would result from a demise of the ethanol industry."
• Cornbelt agriculture will benefit from a $500 million grant from energy company BP allowing the Univ. of IL and Univ. of Cal. at Berkeley to create an Energy Biosciences Institute designed to develop energy production from biomass, such as miscanthus grass. The research will culminate in greater opportunities for agriculture to produce energy.
• Soybean rust is the subject of a new electronic book published by Extension specialists and found at: http://www.oardc.ohio-state.edu/soyrust/ . However, it comes with a stern warning about the potential for immunity. "Since we have so few compounds and fungicides offer the only means of managing soybean rust for the foreseeable future–it is critical that we follow the guidelines put in place to delay or minimize this happening."
• Kansas wheat, covered with ice from the last winter storm, could be threatened says agronomist Jim Shroyer, who said ice eliminates needed air. He says it will survive up to 20 days longer in the ice if it was dormant. He says extended coatings could thin wheat stands, kill the tillers, kill the entire stand, or it may not do anything.