University of Illinois Extension Macon County
Resource Review
http://web.extension.uiuc.edu/macon/rr/
For more information, please contact:
Macon County Unit
2535 Millikin Parkway
Decatur, IL 62526
Phone: 217-877-6042 / Fax: 217-877-4564
E-mail: macon_co@extension.uiuc.edu
In September 2003, the USDA projected a 2003 crop of 9.944 billion bushels, marketing year total consumption of 9.9 billion bushels, year ending stocks of 1.064 billion bushels, and a marketing year average farm price in a range of $2.10 to $2.50. The final crop estimate of 10.114 billion bushels was 170 million larger than the September forecast. USDA projects marketing year total consumption at 10.31 billion bushels, year ending stocks at 901 million bushels and the marketing year average farm price in a range of $2.35 to $2.55. That reflects the fact that over half the crop has already been priced by producers.
Use of corn in all three categories is expected to be sharply larger this year than use last year and use projected at the beginning of the marketing year. At 5.8 billion bushels, projected feed and residual use is 201 million larger than use last year and 175 million larger than the September projection. Similarly, projected domestic processing use of corn, at 2.51 billion bushels, is 170 million larger than use of last year and 35 million larger than the September projection. Finally, U.S. corn exports are now projected at 2 billion bushels, 408 million more than exported last year and 200 million bushels above the September projection.
It now appears that consumption of U.S. corn during the current marketing year will exceed the record crop of 2003, resulting in a draw-down in stocks of 186 million bushels. It also appears that the market for U.S. corn could expand during the 2004-05 marketing year. Domestically, that expansion will likely come from continued growth in ethanol production.
U.S. export prospects for 2004-05 are supported by indications that China will continue to reduce the magnitude of corn exports. If that is the case, the U.S. will likely experience additional growth in sales to South Korea, Indonesia, and Malaysia. Chinese corn exports averaged 340 million bushels per year from 1999-00 through 2001-02, jumped to 600 million bushels last year, and are projected at 315 million bushels for the current year. China maintained a very aggressive export subsidy program in the face of declining production and dwindling stocks. China is expected to maintain a modest corn export program over the next several months, but may not have exportable supplies as early as the last half of 2005. Some are projecting Chinese imports late next year. All else equal, U.S. corn exports should increase as Chinese exports decline.
There may be a few factors that temper the rapid rate of growth in world corn consumption and U.S. exports being experienced this year. Two factors to monitor include world wheat production, which has been very small the past two years, and South American corn production.
It now appears that the market for U.S. corn could expand in 2004-05, if supplies are available. Without a significant increase in acreage, and a repeat of the record average yield of 2003, U.S. production in 2004 could easily fall short of the current and expected rate of consumption. The current environment of small stocks and growing consumption could result in extremely volatile and generally high prices as the 2004 planting and growing season unfolds, and perhaps well into the 2004-05 marketing year. Prices could move to levels not experienced since the mid-1990s, if they are not de-railed by widespread animal disease problems or similar events that significantly undercut demand.
- Dr. Darrel Good
Market Protection: What Do I Do Now?
The prices for corn and soybeans are currently at levels that are a lot better than have been available in some of the years past. The question that came up last week was, "How do I take advantage of these prices without selling the crop that I haven't harvested?" One alternative is to buy a put option on the Chicago Board of Trade. When you "buy a put" you are purchasing the right to sell a quantity of grain (normally, 5000 Bu.) at a given price (strike price).
To do this you need an experienced commodity broker. Talk to other people and get referrals from folks that have worked with an individual. Then interview the broker and explain that you are hedging to protect your interests from price changes. Get to know the individual and talk to more than one broker and find some one you are comfortable with, and who is knowledgeable. When you decide on a broker, you will have to fill out some paper work and make a deposit to open an account.
Next you will have to decide what month you want to buy and you are willing to pay for a put option. Generally, the fall corn crop is based off the December contract and the fall soybean crop is based off of the November contract. Normally the "strike price" that are near the current futures cost more than the "strike price" that is below the current price. If the market goes down, the your put option will increase in value while the value of your cash grain will decrease in value. If the market goes up, the value of the "put" will decrease in value while your cash grain will increase in value. Your goal is to obtain price protection from a market decline.
Options are designed to provide price protection similar to hedging with a futures contract, but at a much lower cost. If you would like to know more about the use of options and the Chicago Board of Trade visit the Board's website at: www.cbot.com and click on the "Education" menu, then go to publications. You can download or order a wide range of information on using futures option in a farming operation.
With enough interest, Extension will schedule an education workshop on options and their use in a marketing plan.
Crop Insurance
The deadline to sign-up for crop insurance is March 15. Remember last year until farmers got into the fields it looked like a record corn crop and a record bean crop. Most folks were really surprised by what they found. The individuals which had crop insurance that provided protection for yields were pleased. The farmers who had crop insurance that provided protection of yield and price were elated.
The bottom line is that no one can predict the future. If the farm operation is financially sound enough to take a year of total crop failure and that is an expectable risk it is a reasonable management decision. If you do not have crop insurance, because you didn't think about it or you don't want to take the time to look at the options you are only fooling yourself. If you are going to farm for the long term, you must really examine what crop insurance means to your operation.
FAST Tools on the www.farmdoc.uiuc.edu website has a new Excel spreadsheet that will allow you to put your farm numbers in the computer and allow you to play the "what if game." The spreadsheet will let you look at a combination of market pricing and crop insurance to judge the impact of a decision. The spreadsheet can be down loaded from the website or a limited number of CD's are available that can be pick up at the Macon Office, 2535 Millikin Parkway, Decatur.
(If this issue of Resource Review arrives before March 2, make plans to attend Extension's workshop on Crop Insurance at 9:00 a.m., March 2, in the Extension Conference Center.)
Your Well: Birth to Death
Anyone with a well will want to attend a March 10 seminar addressing issues with water wells. Speakers will discuss obtaining a permit, maintaining water quality, diagnosing and treating problems, and sealing unused wells.
The program will be at the Richland College Shilling Center, beginning at 7:00 p.m. There is a $5 fee per family to attend, and pre-registration is requested by calling 877-6042.
The workshop is a joint effort of Extension, Macon Co. SWCD, and the Macon County Health Department.
Impact of Farm Conservation Programs
Ever wonder if farm conservation efforts really make a difference? Are your grass waterways and filter strips paying off, in terms of better water quality and for your bottom line? A recent study involving nearly 20,000 acres of productive Illinois farmland reveals the impact that such programs can have in the implementation of best management practices (BMP's). Those results will be presented at the Allerton Park Conference Center on March 9 at 10:30 am. Jack Huggins of The Nature Conservancy, Kathy Judd of NRCS, and Doug Gucker of Piatt County Extension are featured speakers. A $10 fee covers the presentation, lunch, and handouts.
Registration before the date is required. For more information or to register, call Allerton at 217-762-8132 or email allertonpark@uiuc.edu. (Use "registration" as the subject line.)
Women in Agriculture State Conference
The first Women In Agriculture State Conference is scheduled for March 5 and 6 in Bloomington, IL. On March 5 the association and leadership meetings will be held in the Radisson Conference Center. The meeting is open to all Illinois farm women. An evening Banquet on March 5 will celebrate 30 years of Illinois Agri-Women as an organization in the state. Interested farm women are invited to sign up and attend this event as well.
On March 6 the program will be held at the new 1st Farm Credit Service building, 2000 Jacobssen Drive, Normal. Registration begins at 8:30 a.m.
Speakers will address
Global Impact on the Midwest
Managing Money on the Farm: When You Have It and When You Don't
The methamphetamine problem in rural Illinois and other legal issues affecting farm families
Current issues within the Illinois Department of Agriculture
Farming with the Family: Multigenerational Family Farms and Transition Issues.
Registration fee is $25 for one or both days. For more information or to register contact Ruth Hambleton at (618) 242-9310.
Sponsors of this program are Illinois Agri Women, Illinois State University, University of Illinois Extension, Annie's Project, and Illinois Risk Management Agency.
Websites? You Ask, You Get Them
Here are a number of valuable Extension websites to help you manage your farm for the coming year. But wait! You need not re-key them into your web browser. Since the Resource Review also appears on the Macon Extension Unit website, all you have to do is go to: www.urbanext.uiuc.edu/macon and in the Resource Review listing, find this article, and save any of these websites that you would like to further explore or use.
