University of Illinois Extension will host identical workshops at two locations on how to develop income-producing ventures for landowners with under-utilized acreage.

"Putting Small Acreages to Work" will provide information for people interested in starting or expanding small scale farm enterprises. The workshop will be offered in Quincy on Wednesday, February 7 from 6:00 to 9:00 p.m. at the Adams/Brown Extension office and on Saturday, February 10 from 9:00 a.m. to noon at the Extension Center in Springfield. "Whether people want to sell a few vegetables at a roadside stand or tickets to a corn maze, it needs to be carefully thought out," said Deborah Cavanaugh-Grant, University of Illinois Small Farm and Sustainable Agriculture Extension Specialist. "There are always aspects such as liability insurance and other issues that people may forget to plan for. This workshop will cover those kinds of details."

University of Illinois experts and successful producers who are already growing, producing, and researching specialty crops and livestock will present information on creating and sustaining alternative enterprises. Cavanaugh-Grant said that the workshops will offer the kind of practical, no-nonsense, hands-on advice needed when considering crop production, market development, and other important business options.

To register for the Quincy location, visit www.extension.uiuc.edu/adams
or call 217/223-8380 before February 2.

To register for the Springfield location, contact Donna Cray (217) 241-4644; dcray@uiuc.edu before February 5, 2007.

Corn and soybean prices appear to have moved into a sideways-to-lower trend for now as little new fundamental information is flowing into the marketplace, said a University of Illinois Extension marketing specialist.

"That will change over the next few weeks as USDA reports are released and as the South American growing season progresses," said Darrel Good. Good noted that several USDA reports with implications for corn and soybean prices will be released over the next four weeks. Markets will obviously react to other developments, but these reports will provide important fundamental information that will be helpful for refining price expectations.

The monthly Cattle on Feed report to be released on January 22 and the quarterly Hogs and Pigs report to be released on January 27 will be important for assessing domestic feed demand for corn and soybean meal. "The rate of placement of cattle into feedlots and the production intentions of hog producers will be of particular interest," said Good. "Those estimates will reveal whether producers have responded to the sharply higher feed prices and lower livestock prices of the past two months."

Four reports will be released on January 27 – the annual Crop Production report, the quarterly Grain Stocks report, the monthly World Agricultural Supply and Demand Estimates report, and the annual Winter Wheat Seedings report.

"The production report will contain the final estimates of the size of the 2006 corn and soybean crops." Good noted. "Historically during the 1970-2005 period, there has been a small positive relationship between the change in the production forecasts in November and the change in January. The smaller forecast for corn and larger forecast for soybeans in November of this year suggests the market may be anticipating a smaller corn and larger soybean estimate again in January.

"The primary focus should be on the eastern Corn Belt, where wet conditions and delayed harvest may have negatively affected production. Because of strong demand and prospects for dwindling. U.S. and world stocks, the production estimate for corn will be especially important."

The report of December 1 inventories of corn and soybeans will provide additional information about the rate of domestic use of those crops. Good added that, again, the report will likely be more important for corn as it will allow the calculation of the first quarter feed and residual use.

"The market is aware that corn exports have been large and that domestic processing use of corn is expanding rapidly, but this report will provide the first look at the largest component of use," he said. "For the 2006-07 marketing year, the UDSA projects a 1.4 percent decline in domestic feed and residual use. The report will indicate whether livestock producers have started adjusting to tighter margins or whether that adjustment is yet to be made."

The monthly update of world supply and consumption projections will reflect new information in the Crop Production and Grain Stocks reports and will reflect any other important developments around the world.

"Following the larger corn production forecasts for South America and the larger soybean production forecast for Argentina this month, the market will be especially interested in the January projection for these crops," he said. "In addition, any changes in prospective Chinese corn exports or soybean imports would be important."

Good noted that the estimate of winter wheat seedings will clearly be important for wheat price prospects, but may have strong implications for corn and soybean prices as well.

"It is expected that the report will show a large increase in seedings of hard red winter wheat due to the relatively high prices experienced during the fall seeding season," he said. "Expectations for soft red winter wheat are mixed. Anecdotal information suggested that producers in the eastern Corn Belt and the Southeast intended to increase acreage in response to high prices.

"The focus may be on Indiana, Ohio, and Kentucky to see if the wet fall weather had an impact on seedings. The magnitude and location of winter wheat seedings will have implications for spring-planted crops, particularly for the challenge to increase corn acreage by at least 10 percent in 2007."

Corn and soybean prices began their march higher in mid-September. The average cash price of corn in central Illinois reached a low of $2.09 on September 12, and a high of $3.67 on November 30.

"That price stood at $3.455 on December 15," said Good. "For soybeans, the low of $5.045 was established on September 6, and the high of $6.60 was reached on November 30. That price was $6.38 on December 15."

Caution seems warranted in increasing cash rents for 2007, said a University of Illinois Extension farm financial management specialist.

"Leases that allow rents to adjust or cash leases with short lease periods are appropriate in times of price uncertainty," said Gary Schnitkey. "Moreover, long-run increases in commodity prices do not automatically translate into farmers having long-run higher returns or risk reductions."

Schnitkey and colleague Dale Lattz prepared the report, "Are Increasing Cash Rents Justified?" which can be accessed on University of llinois Extension's farmdoc website at http://www.farmdoc.uiuc.edu/manage/newsletters/

Verbal reports indicate that 2007 cash rents on some land tracts are increasing over 2006 levels. Portions of these increases likely result from projections of higher commodity prices, Schnitkey noted.

"While future contracts do suggest higher prices, there is considerable uncertainty whether the high prices actually will occur and whether they are sustainable," he said.

The report discusses historical precedents for the current situation. Both corn and soybean prices increased and reached higher plateaus in the early 1970's but later demonstrated considerable variability. It was prepared using data from the Illinois Farm Business Farm Management (FBFM) Association, which involves 6,000-plus farmers throughout the state.

"Currently, there is a reasonable possibility that corn and soybean prices will be considerably higher than historical averages," he said. "Futures prices suggest that cash prices could average $3.20 for corn and $6.90 for soybeans over the next several years. Much of this increase is attributed to increased demand for corn in ethanol production.

"Good arguments can be made that biofuel uses may result in permanently higher prices, similar to the situation in the early 1970's. Conversely, it is also possible that crop production increases or reduced demands could result in commodity prices nearer historical levels."

Before the prospects of ethanol production caused an increase in expected prices, profitability of crop production in 2006 and 2007 was expected to be near average to slightly below average due to cost increases, "Hence, commodity price increases were needed to maintain historic return levels," he said.

Schnitkey and Lattz made two recommendations in their study.

First, use of lease arrangements that allow payments to landlords to adjust to return situations seem warranted. These arrangements allow landowners to share in higher returns if higher commodity prices actually occur in the next several years.

"If higher prices do not occur, payments to landowners are maintained at manageable levels," said Schnitkey. "Lease arrangements in this category include share-rent, share-rent with supplemental payments, and adjustable cash rent leases."

Second, increasing cash rents on the prospect of higher commodity prices should be undertaken with caution.

"If rents are increased as a result of commodity prices, the length of the lease should be kept short, perhaps only a year in length," said Schnitkey. "Higher prices have a reasonable prospect of occurring in 2007. Higher prices in 2008 and beyond are less certain.

Changes found in the USDA's latest world production and consumption forecast were generally expected, with no surprises observed, said a University of Illinois Extension marketing specialist.

"The changes in world production forecast and the relate changes in forecasts of year-ending stocks do not alter the fundamental picture significantly, but do reflect a marginally more abundant supply situation," said Darrel Good. "The markets will continue to monitor the rate of U. S. exports and exports sales and anticipate the

January 12 reports of December 1 grain stocks, 2006 winter wheat seedings, and final 2006 U.S. production estimates.

"Following the sharp increase in prices since mid September, some consolidation would not be surprising over the next four weeks. The major issue will continue to be U.S. producer planting intentions for 2007."

Good's comments came as he reviewed the USDA's December report of World Agricultural Supply and Demand Estimates, which contained only a few changes for the balance sheet for U.S. crops. However, forecasts of South American corn, soybean, and wheat production exceeded the November forecasts. For the 2006-2007 U.S. wheat marketing year, the USDA increased the forecast of domestic food use by five million bushels, reduced the forecast of exports by 25 million bushels, increased the forecast of year-ending stocks by 20 million bushels, and reduced the midpoint of the forecast of the marketing year average price by five cents.

"At 900 million bushels, U.S. wheat exports are expected to be 109 million less than exported last year, at the lowest level since 2002-2003, and at the second lowest level since 1971," said Good.

As of December 7, twenty-seven weeks into the marketing year, cumulative U.S. wheat export inspections totaled 441 million bushels, 102 million less than the total of a year ago. Unshipped export sales as of November 30 totaled 162 million bushels, compared to 184 million bushels on the same date last year.

"The year-over-year decline in exports is distributed among most major buyers, with only Egypt buying more U.S, wheat than at this time last year," said Good. "By class, the largest decline is for hard red winter wheat, while sales of soft red winter wheat are larger than those of a year ago."

For feed grains, the USDA made no changes in the 2006-2007 marketing year projection of consumption of U.S. corn, but increased the midpoint of the projection of the marketing year average farm price by 10 cents to $3.10.

Similarly, no changes were made in sorghum consumption forecasts, but the average price forecast was also increased by 10 cents. The projection of barley exports was increased by five million bushels and no changes were made in oats balance sheet.

For soybeans, the balance sheet projections were unchanged from November, but the midpoint of the projection of the marketing year average farm price was increased by 20 cents to $6.10. For soybean oil, the estimate of stocks at the beginning of the 2006-2007 marketing year (October 1, 2006) was increased by 48 million pounds, to 3.019 billion pounds.

"The forecast of soybean oil production was increased by 90 million pounds, to a total of 20.205 billion pounds, reflecting a slightly larger oil yield expectation," said Good. "The projection of marketing year oil exports was increased by 100 million pounds and the projection of year-ending stocks was increased by 41 million pounds.

"The marketing year average price is projected in a range of 26 cents to 29 cents per pound, compared to the November price projection of 24 cents to 28 cents. The only changes in the soybean meal balance sheet were a 6,000-ton reduction in the estimate of stocks on October 1, 2006 and an equal increase in the projection of meal production for the current marketing year." More significant changes were registered for production prospects outside of the United State, particularly for Argentina.

"The current Argentine wheat crop is now forecast at 522 million bushels, 35 million larger than the November forecast and 16 million larger than last year's crop," Good said. "The projection of Argentine wheat exports was increased by 37 million bushels. The Argentine corn crop is forecast at 748 million bushels, 59million larger than the November forecast and 126 million larger than the 2006 harvest.

"Finally, the 2007 Argentine soybean crop is forecast at 1.543 billion bushels, 26 million larger than the November forecast and 55 million larger than the 2006 crop.

Other significant changes included a 37 million bushel increase in the estimated size of the Canadian wheat crop and a 39 million bushel increase in the projected size of the 2007 Brazilian corn crop.

"The projection of world stocks were increased for wheat, coarse grains, and oilseeds," Good said.