A weekly publication of University of Illinois Extension, Jan. 25, 2008, Vol. 9 No. 40

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• Sky high futures prices, but a mediocre cash price has plagued the soybean market for nearly 2 years, and IL Extension Marketing Specialist Darrel Good says the fact that futures and cash prices do not converge at delivery points "implies that the delivery mechanism is failing to some extent." And he says that may continue for a while.
• Darrel Good says, "Persistence of futures prices above cash value at maturity may indicate that the extremely large speculative activity in the futures markets is holding futures prices artificially high and that the delivery mechanism is not robust enough to force convergence of cash and futures prices." He says the weak basis is more than just transportation, storage cost and availability, insurance, and interest on a high value crop.
• The wide soybean basis has affected short hedgers, because the basis has not improved as expected to cover storage costs. Some elevators have also taken steps to limit futures margin exposure by curtailing use of hedge-to-arrive contracts, and forcing producers to hedge themselves. http://www.farmdoc.uiuc.edu/marketing/weekly/html/012208.html .
• Farm stored corn will benefit from the carry through July, says Michigan State's Jim Hilker. "We have the smallest world coarse grain ending stock projected in 3 decades; it is hard to set a strategy. One could consider selling smaller amounts on up market days and spread remaining 2007 crop sales over the next six months. If you are paying commercial storage, check out a basis contract, and see if you can use the same strategy."
• Hilker's price probability for corn is an 80% chance for March corn to be between $5.28 and $4.51, with a 10% chance it will be either above or below those levels. The 80% probability range for December corn is from $3.56 to $6.72.
• Hilker's price probability for beans is an 80% chance for March beans to be between $13.62 and $11.21, with a 10% chance it will be either above or below those levels. The 80% probability range for November beans is from $8.78 to $16.02.
• Hilker's price probability for wheat is an 80% chance for March wheat to be between $11.04 and $7.76, with a 10% chance it will be either above or below those levels. The 80% probability range for December wheat is from $5.72 to $12.58.
• If you are nervous about market volatility, MO economist Melvin Brees suggests selling cash grain and re-owning it with options. "Put options or various option spread strategies can also work, but premiums are ex­pensive. The premium cost often results in considerable cash outlay and produces protect­ed price floors well below current prices. However, in most cases these still represent prof­itable prices."
• Given the huge supply, retail pork prices aren't doing badly, say MO economists Glenn Grimes and Ron Plain. "December pork prices at retail averaged $2.859 per pound, up 9.1 cents compared to 12 months earlier. Domestic pork demand ended 2007 on a strong note. The growth in pork demand was stronger in the fourth quarter of 2007 than the other three quarters. This is a good lead-in to 2008. Hopefully, high energy prices and rising unemployment won't disrupt the trend." http://agebb.missouri.edu/mkt/bull1c.htm
• Grimes and Plain also say, "The feed situation appears to be impacting on fed cattle prices. Short pastures pushed a lot of feeder cattle into feed yards during the fourth quarter of 2007 and high corn prices are keeping the feeding periods fairly short." They also report continued high cow slaughter because of dry pastures and high feed costs.
• Spring is not far off, if it is time to frost seed your pasture and Iowa St. agronomists say Feb. & Mar. is time to do that because of the freeze-thaw cycles giving seed a shallow cover. Red clover gives the best success, when spread on the thinnest, least vigorous areas. But they say success requires average or better rainfall and growing conditions. Read more at: http://www.extension.iastate.edu/Publications/PM856.pdf .
• Avoid high N expense on pastures by inter-seeding a legume crop that transfers 20% of its N to surrounding grass. MO agronomists say legumes, such as red clover or lespedeza can provide 50-300 lbs. of N per acre. Potash and pH are important, since legumes need high soil tests. http://ppp.missouri.edu/newsletters/ipcm/archives/v18n1/a1.pdf .
• If your pasture needs N, fertilize when the plant can respond and maximize forage utilization, since it only pays if you can increase beef or milk production or hay sales. MO agronomist John Lory suggests that "manure nitrogen is typically 50-60% available when it is surface applied but 100% of manure phosphorus and potassium is available to the crop." More: http://ppp.missouri.edu/newsletters/ipcm/archives/v18n1/a2.pdf .
• Soils that have a history of adequate or perhaps even a little excessive P and K fertilization resulting in a high soil test levels are unlikely to benefit (yield-wise) from the inclusion of P and K in a starter fertilizer, say Ohio St. agronomists Robert Mullen and Edwin Lentz. Soils that are below the established critical value in P and K can benefit, especially if broadcast applications were not made the previous fall or in the spring.
• Don't forget to update your records if you are a certified applicator and have used restricted-use pesticides this year. They should include product name and EPA number, amount applied, location, acreage, date, crop, and certification number of the applicator. Information and forms are at: http://www.ams.usda.gov/science/sdpr.htm .
• Corn, which can deliver Vitamin A, is being bred at the Univ. of IL where researchers have discovered genetics that can steer the corn plant's biochemistry to produce higher levels of the vitamin. The corn is being prepared for use in Sub-Saharan Africa and the Americas, where 17-30% of children under 5 years of age have a Vitamin A deficiency.
• Popcorn growers will have to become more educated about the crop they have. You are not just growing popcorn anymore, but there are three main groups. Iowa St. and USDA researchers compared 29 traits and grouped them into: North American Yellow Pearl, which contains most commercial varieties; North American Pointed Rice; and North American Early Popcorn. More is at: http://www.ars.usda.gov/is/pr/2008/080111.htm .
• Soybean seed quality is being questioned by Ohio St. specialists Anne Dorrance and Jim Beuerlein. "Much of the seed supply in the eastern Midwest has lower than normal quality due to a stressful growing season and being harvested at low moisture. Physical damage caused by harvest and handling is causing low vigor and more abnormal growth in germination test than normal." They recommend several steps you can take:
  1) A fungicide treatment will protect against early season seed rot.
  2) Fungicide returns best on fields with poor drainage, no-till, or continuous soybeans.
  3) Fungicide will protect against seed-borne diseases, such as phomopsis.
  4) When buying seed, ask for results of a cold germination test on the seed.
• Low germination rates may be seen on seed beans, or at least less than the typical 92% floor. WI Extension's John Gaska says some may be marketed as low as 80% because of environmental adversity in 2007. The result is thin seed coats which are damaged during the conditioning process. Gaska says while a seed treatment might be needed, he is not a strong advocate, since further handling can further damage the seed coat.
• If 180,000 drilled seed beans emerge at a 90% rate, but only 80% of the original seeds germinate, the plant population is below 130,000 per acre. Gaska says, "Under most environmental conditions 129,000 plants/acre would produce 100% yield potential, however if we do not achieve our assumed 90% emergence rate due to poor early season growing conditions we rapidly approach stands where yield loss may occur."
• Germination tests can be performed by state crop improvement agencies, or at home. Count out 100 seeds, fold them into a damp paper towel, seal in a zip lock bag, and store in a warm location out of the sunlight. Count the seeds with an intact root and shoot after 5 days. Repeating that 4 times with seeds selected from random bags is a better test.
• Growing switchgrass? Iowa St. Economist Mike Duffy tallies the $113.66 per acre production costs at: http://www.extension.iastate.edu/agdm/crops/html/a1-22.html .
  1) Establishing the crop, prorated over 11 years is $34.26 per acre.
  2) Re-seeding the crop 25% of the time, prorated over 10 years is $6.18 per acre.
  3) With a 4 ton per acre yield, the per ton production cost would be $82.23.
  4) The need to store it requires a building, with costs estimated at $16.67 per ton.
  5) Transportation to storage is $6.10 per ton, then $8.65 per ton to the plant.
• The success of switchgrass, says Duffy depends upon available markets, and the economic incentive for producers to change their rotation systems to allow a permanent field of switchgrass. He says the CRP could play a role, if green payments were added to the CRP rent, then production costs could be reduced, but erosion control would remain.