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Wednesday, December 9, 2015

U of I Extension Food Safety Training for School Lunch Program

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U of I Extension Food Safety Training for School Lunch Program
Jennifer McCaffrey, Family and Consumer Sciences - University of Illinois Extension

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The Illinois State Board of Education has awarded four and half million dollars to University of Illinois Extension. The money will be used to help with the state’s school lunch program. Todd Gleason has more on how Extension plans to improve health and nutrition for nearly two million school aged kids.

The State Board of Education will use…
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The State Board of Education will use University of Illinois Extension to provide foodservice training and education to about 4000 school lunchrooms. Family & Consumer Sciences educators will create and deliver training on child nutrition standards and the cafeteria environment. The four-and-a-half-milion-dollar, three year effort starts in January with a monthly webinar series. A web training portal will follow in March. Schools interested in training can also contact Extension for onsite customized sessions and technical assistance says University of Illinois’ Jennifer McCaffrey.

McCaffrey : …to assist the food service staff.
Quote Summary - Because our staff are spread out across the state we can work with schools in their local area. So, we will be able to provide training onsite as well as provide technical assistance to the food service staff.
McCaffrey is Assistant Dean for Family and Consumer Sciences and says research shows kids make healthier choices when food is prepared and presented in an appealing way.

Mc Caffrey :34 …consequently eat it.
Quote Summary - All of us, including children in a school cafeteria setting, often start eating with our eyes. What looks good, what looks appealing, is what we want to put on our plate and that is where it all starts. If fruits and vegetables are shiny and out front and center catching our eye, students are more likely to eat them. This is what we want. When the food looks good and more appealing they are more likely to put it on their plate and then to consequently eat it.
This is really important because about half of the one-point-nine million Illinois kids that eat school lunches are eligible for free or reduced-price lunches, and USDA research shows kids that eat lunch from the school tend to consume more nutritious foods than those that do not. U of I Extension over the next three years will help Illinois schools build even better more nutritious menus and to put those items right out front for healthier kids.

Tuesday, December 8, 2015

Ethanol Production & 2016 Corn Consumption Prospects

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Ethanol Production & 2016 Corn Consumption Prospects
Darrel Good, Agricultural Economist - University of Illinois

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Commodity traders are generally thinking last week’s EPA RFS rule making will cause more bushels of corn to be turned into ethanol next year. Todd Gleason reports University of Illinois Agricultural Economist Darrel Good is more doubtful.

Let’s start by building a corn for ethanol baseline…
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Let’s start by building a corn for ethanol baseline to see why. The EIA, the U.S. Energy Information Administration, says U.S. production of fuel ethanol in 2014 totaled 14 billion 313 million gallons. That was about a billion gallons more than in 2013, and nearly 400 million gallons more than the record setting year of 2011. So, 14.313 billion gallons of ethanol were produced in 2014. During the first nine months of this year, writes Darrel Good on the Farm Doc Daily website, EIA shows production 3.6 percent larger than during the same 9 months last year. It appears October and November were on that same track, and while December looks to be off a bit, it should leave the yearly consumption at a whooping and record setting 14.745 billion gallons says U of I’s Good.

Good :21 …use corn as a feedstock.

Quote Summary - Production at that level will require about 5.25 billion bushels of feedstock, mostly corn, for conventional ethanol production in 2015.

So the baseline is big, but let’s start back figuring for 2016 corn usage to make ethanol. U.S. EPA just released biofuels volumes for 2016. Those standards point to conventional ethanol consumption of 14.5 billion gallons for 2016. It’s about a 500 million gallon year-to-year increase says Good, however there is a second related factor. That factor is the blend wall, or how much gasoline is actually consumed in the United States .

Good :40 …from that nearly 14 billion gallons.

Quote Summary - Based on EIA projections, consumption is expected to increase from 139.38 billion gallons in 2015 to 139.96 billion gallons in 2016. That expected increase of 580 million gallons follows an expected increase of 2.9 billion gallons in 2015. The conventional ethanol mandate of 14.5 billion gallons, then, reflects an expected small increase in the E–10 blend wall and a “push” to include larger quantities of higher ethanol blends (E–15 and E–85) in the domestic fuel supply. If the 2016 gasoline consumption forecast is correct, the E–10 blend wall will be 13.996 billion gallons.

Now, since some gasoline is consumed without ethanol and some with higher ethanol blends, the effective E–10 blend wall is actually thought to be 9.9 percent of consumption or 13.856 billion gallons. Here’s the back figure. Subtract from this number imported ethanol, add in a few additional E85 gallons, and total 2016 consumption of conventional ethanol says Darrel Good is not roughly 500 million gallons more than this year, but rather about the same as this year - though that 500 million gallon gap will still have to be filled.

Good :58 …will have to meet the rest of it with advanced fuels.

Quote Summary - The difference between the RFS requirement of 14.5 billion gallons and the projected consumption of 13.903 billion gallons (597 million gallons) would have to be met with some combination of retirement of RINs stocks, additional quantities of E–85, or blending of additional quantities of advanced biofuels.

This outcome is very different from the initial reaction that an increase in the implied conventional ethanol requirement from the preliminary to final rule making for 2016 of 500 million gallons would result in a measurable increase in feedstock - corn - consumption.

Friday, December 4, 2015

4 Step Weed Control Plan for Corn or Soybeans

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4 Step Weed Control Plan for Corn or Soybeans
Aaron Hager, Extension Weed Scientist - Univeristy of Illinois

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Since the 1960’s farmers have been using herbicides to control weeds. Frankly, herbicide formulations haven’t changed that much and the weeds have managed to find ways to adapt. Todd Gleason has this four step plan from the Univesity of Illinois to control them in corn or soybeans.

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Some weeds have become resistant to the herbicides farmers use to control them. Others have lengthened their germination period, emerging later in the season, avoiding early spring control methods. University of Illinois Extension Weed Scientist Aaron Hager has a four step plan farmers can use to maintain a competitive edge in corn or soybeans. It starts by planting into a weed free seedbed.

Hager :22 …vegetation without adequate control ahead of time.
Quote Summary - It is easy to achieve a weed free seedbed by either replant tillage, burndown herbicide or a combination of those two. Given the challenges of weather and of resistant populations it is advisable not to plant into existing weed populations or any green vegetation without adequate control ahead of time.
Step two in the plan is to select an appropriate residual herbicide. Be sure it provides very good control of the most problematic weed species in a given field. Pay attention to the label, says Hager, and always apply the recommended rate for the spectrum of weeds in the field.

Hager :28 …timely application of a post herbicide.

Quote Summary - The third step is to make timely post emergence applications. Base those on just not the number of calendar days after planting, but rather base those post decision on adequate scouting. So, return to the fields about two weeks after crop emergence. Scout the fields and determine the weed size, crop development stage and make the decision on a timely application of a post herbicide.

The final and fourth step is to go back to the field seven to ten days later and evaluate how well the post emergence herbicide application worked. It may be that another germination of a weed species warrants a second application. This won’t be know without a return trip.

Hager :13 …significant challenges later in the growing season
If we fail to go back and look at how well the product performed, or the level of crop injury we see soon after that application, we could have some very significant challenges later in the growing season.
The days of set-it-and-forget weed control have ended. Todays farmers must scout fields for competitive weeds before during and after the growing season.

Thursday, December 3, 2015

EPA's RFS Decision will push Biodiesel Usage

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EPA’s RFS Decision will push Biodiesel Usage
Scott Irwin, Agricultural Economist - University of Illinois

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The United States Environmental Protection Agency is beginning to comply with the letter of the law as it pertains to biofuels. Todd Gleason reports this could be a boon for biodiesel made from soybeans.

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EPA this week announced it would force oil companies to find more ways to use renewable fuels. This is something the oil industry has resisted saying it was too difficult to use much more than the ten percent ethanol blend already found in gasoline. This is called the blend wall and is actually less than the total number of gallons of renewable fuels congress mandated be used in 2016 when it originally wrote the law.

Since not all cars can burn greater than 10 percent ethanol in gasoline, and the amount of gasoline used in the United States is less than the renewable fuels mandate required by law, there is a renewable fuels gap left…something like a billion and half gallons. EPA hasn’t moved to force oil companies, yet, to find a new ways to fill that whole gap, but it closed it up big time and that’ll leave companies scrambling says University of Illinois Agricultural Economist Scott Irwin.

Irwin :10 …be higher ethanol blends, E15 or E85 or biodiesel.

Quote Summary - And so, the really interesting question is what will fill the gap. Will it be higher ethanol blends, E15 or E85 or biodiesel.

There’s an easy answer to this question says Irwin.

Irwin :52 …get more biodiesel with soybean oil and other animal fats.

Quote Summary - At least for the next couple of years, biodiesel. Soybean oil prices since the low last August are up 25% and soybean prices are up just 3%. And meal has tanked over that same time period. One way or another it is beneficial to ag. Either I’m wrong and you get more ethanol in the form of E85 or you get more biodiesel with soybean oil and other animal fats.

The market is and has been for sometime forecasting the next winner in the biofuels industry and it appears at this point to be biodiesel made mostly from the soybean.

Wednesday, December 2, 2015

An Early Jump on Computing ARC-CO Payments

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An Early Jump on Computing ARC-CO Payments
Gary Schnitkey, Agricultural Economist - University of Illinois
FarmDocDaily Source Article

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Farmers and their bankers can get a jump on just how much income to expect from the ARC County program next fall. Todd Gleason has more on how NASS county yields can be used to anticipate the payments.

Farm income is down dramatically…
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Farm income is down dramatically. It means farmers will be going to bankers for production loans this winter. Those loans will be used to plant next season’s crops. The bankers will be looking for every clue they can to help them make solid lending decisions. One source of income they’ll want to calculate comes from the farm programs. However, the ARC County payments won’t be figured until the fall. It is possible to estimate these payments by substituting NASS county yields for the FSA computed yields says University of Illinois Agricultural Economist Gary Schnitkey.

Schnitkey :41 …county yields will look like.

Quote Summary - So, there are likely to be 2015 ARC County payments, but this will depend upon county yield levels. FSA calculates those yields, but not until the autumn of 2016. However, we can use NASS yields to come up with a pretty good estimate of the FSA county yields. NASS will release its yields in February of this year. This will give us a pretty good feel for the 2015 ARC County payments because we’ll have a pretty good ideas of what the FSA county yields will look like.

NASS county yields do vary from the FSA numbers, but not by much. NASS calculates yields by dividing production by harvested acres. These are both numbers the agency collects via a statistical estimate. FSA uses a different calculation says Schnitkey.

Schnitkey :12 …will always be less than NASS yields.

Quote Summary - FSA does the same thing when NASS data exists, but it adds to acres the RMA failed acres. So, FSA yields will always be less than NASS yields.

Again, because FSA adds failed acres into the calculation the resulting yields are less than the NASS county yield averages. It means the NASS county yields, again those will be released in February, will provide a conservative estimate of the ARC County payment.

Schnitkey :14 …depends on the number of failed acres.

Quote Summary - If they use the NASS yield they’ll most likely be underestimating the payment because usually FSA yields are bit lower than NASS yields. It depends on the number of failed acres.

Again FSA yields are lower than NASS county yields because production is divided by harvested and failed acres, not just the harvested acreage figure used by NASS. There is an Illinois state map of the average county difference on the FarmDocDaily website.

Tuesday, December 1, 2015

FEFO - An Early Jump on Computing ARC-CO Payments

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FEFO - An Early Jump on Computing ARC-CO Payments
Gary Schnitkey, Agricultural Economist - University of Illinois

The Farm Service Agency (FSA) computes county yields used in calculating Agricultural Risk Coverage—County Option (ARC-CO) payments. FSA yields differ from county yields released by the National Agricultural Statistical Service (NASS). While different, NASS yields will be useful in estimating 2015 ARC-CO payments when they are released in late February 2016. FSA likely will not release FSA yields until autumn of 2016. Many farmers, lenders, and landowners will desire payment estimates before the autumn. In many cases, NASS yields can be used to arrive at realistic estimates of ARC-CO payments. To aid in ARC-CO payment estimation, the average differences between FSA and NASS yields are reported in this article for corn in Illinois counties.

Tuesday, November 17, 2015

Corn Seed Costs from 1995 to 2014

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Corn Seed Costs from 1995 to 2014
Gary Schnitkey, Agricultural Economist - University of Illinois

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The price of seed corn has gone up a lot over the years. Not as much as the price of farmland, but as Todd Gleason reports, it is no distant second.

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Over the eight years from 2006 to 2014 the per acre cost of seed corn increased 164 percent. The really big increases came in the first four years, ’06, ’07, ’08, and ’09…which happens to correspond with the primary the build out of the ethanol industry in the United States. Gary Schnitkey thought these numbers, pulled from the state’s aggregated FBFM - that stands for Farm Business Farm Management - record keeping service were pretty interesting. So, he decided to look at the increase and think about the seed corn industry.

Schnitkey :40 …we’ve had some pretty large increase since then.

Quote Summary - It’s interesting. Between 1995 and 2006 seed cost increased at an average annual rate of five percent. Then from 2006, through 2007, 2008, and 2009 we had double digit seed cost increases. Since 2010 the increase is back to five percent. So, we saw really large increases in seed costs when corn begin to be used for ethanol more and we’ve had some pretty large increase since then.

The cost of seed in the mid–1990’s as a percent of revenue was about 10 percent. Today, even after backing off from the annual increases, the cost as a percent of revenue takes a bigger portion of the pie, about 13 percent.

Admittedly, Gary Schnitkey says the options a farmer has to control seed cost are limited. They could purchase lower cost hybrids, but they might give up yield in that case. Or they could cut population rates and plant fewer seeds per acre.

Schnitkey :56 …tried by seed companies up to this point.

Quote Summary - The only real way to get a substantial cut in seed cost is for the companies to reduce the price of seed. That doesn’t seem likely at this time. Having said that, seed costs are revenue to the companies. Over the past several decades seed revenue has increased a lot not only from a cost or price per acre perspective, but from the total number of corn acres planted and this has caused significant revenue increases. Today seed companies are looking at more modest revenues from their seed businesses, such as Monsanto, Dupont and Syngenta. To some extent this is causing the merger discussions. There is less growth, and merging is one way of keeping the revenue streams going.

This is one of the reasons Schnitkey thinks the merger discussions are happening. Somewhat interestingly, he points out, lowering seed cost has not been a strategy tried by seed companies.

Tuesday, November 3, 2015

Four Step Weed Control Plan for 2016

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Four Step Weed Control Plan for 2016
Aaron Hager, Weed Scientist - University of Illinois
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Farmers battling herbicide resistant weeds are running out of control options. University of Illinois Extension Weed Scientist Aaron Hager has this four step recommendation.

Really a good four step plan for weed control… 2:00 radio & tv
…very significant challenges later in the growing season.

Aaron Hager is an Extension Weed Scientist at the University of Illinois. You may read detailed information of his four step weed control plan online. Search for “bulletin” and “University of Illinois”.

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Monday, November 2, 2015

Sideways Price Pattern to Continue for Corn

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Sideways Price Pattern to Continue for Corn
Darrel Good, Agricultural Economist - University of Illinois

The price of corn has been choppy, but trading sideways. Todd Gleason reports it is a trend likely to continue for sometime.

USDA’s forecast of this year’s corn crop has…
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USDA’s forecast of this year’s corn crop has been very stable since it was first made. It started at 168.8 bushels to the acre in August, dropped to 167 and half in September, and then rebounded to 168 last month. The total production forecast declined by only 131 million bushels, slightly less than one percent, from August to October. In addition, the USDA estimate of September 1 stocks of old crop corn came in almost exactly as expected. New yield and production forecasts will be released on November 10. Changes from the October forecasts are expected to be modest says Darrel Good. So, there’s not been much happening on the supply front to move the price of corn around. This leaves the University of Illinois agricultural economist considering demand, and there isn’t much there either.

It leaves corn is what he calls a choppy sideways pattern.

Good :35 …either in South America this year or the U.S. next year.

Quote Summary - March 2016 corn futures have traded in a sideways pattern, with a range of about $0.95 over the past year, about $0.40 over the past four months, and about $0.15 over the past three weeks. The current price is near the low end of that range. A broad sideways price pattern is expected to continue through the winter months. A test of the high side of the price range will likely require a threat on the supply side, either in South America this year or the U.S. next year.

USDA will update corn supply and demand figures next Tuesday (November 10, 2015). Reports on ethanol usage are due this month, and the grain stocks report in January will provide a feed usage guidepost for demand.

Thursday, October 29, 2015

Farmland Prices and Farm Solvency Then & Now

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Farmland Prices and Farm Solvency Then & Now
Gary Schnitkey, Agricultural Economist - University of Illinois

Years of low commodity prices, and losses on the farm, have some wondering whether the agricultural boom-bust cycle of the 1970’s and 80’s is repeating itself. The balance sheets, as Todd Gleason reports, say probably not.

There are some big differences between the farm crisis…
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There are some big differences between the farm crisis of the 1980’s and the current situation in middle America. Then, as now, commodity price had slumped after soaring for a few years. The price of farmland had skyrocketed, too, just like now. However, unlike today interest rates were high and farmers were deep in debt when the price of farmland finally bottomed 42 percent below its high. Gary Schnitkey wanted to know what would happen today in that kind of worst case scenario. So he ran the numbers.

Schnitkey :25 …

Quote Summary - The solvency issues today differ. If we look at the same sort of price decline on farmland, actually a little bit bigger (50%), that we had during the 1980’s and applied that to the typical balance sheet on our farms today, what we would see is the debt to asset ratio go from point-two-zero, which is what it is today, to point-two-six.

This is an increase, and it would cost the typical grain farmer in Illinois $1300 an acre, but it would not lead to insolvency or bankruptcy issues.

Schnitkey :32 …are not being subjected to that price decline.

Quote Summary - A lot of this has to do with the lower debt now. We typically have much lower debt to asset ratios. Also, many of our farms own a relatively small portion of their land base. A typical grain farm in Illinois has about 26% of its acres owned. So, even if that 26% declines in value, there are still a lot of acres controlled that are not being subjected to that price decline.

Over a seven year period in the 1980’s the value farmland fell 42%. The University of Illinois agricultural economist used a decline of 50% for his calculations. The resulting debt to asset ratio moved the needle from the great to ok mark; not even as bad as the early 2000’s on the farm.

Wednesday, October 28, 2015

World Health Organization Oversteps with Red Meat Assertion

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World Health Organization Oversteps with Red Meat Assertion
John Erdman, Food Scientist & Professor Emeritus - University of Illinois

While it has been known for quite sometime that processed meats… things like bacon and sausage and jerky… might slightly increase your risk of colorectal cancer. A professor emeritus of food science at the University of Illinois says the World Health Organization may have thrown up too much of a red flag on them, and certainly did so on red meat.

Erdman :19 …overstep their bounds a little bit on that.

Quote Summary - The W-H-O report then went into the red meats, the unprocessed meats, and suggested there is an increased risk of certain cancers. I think they did overstep their bounds a little bit on that.

The W-H-O report admits it was unable to say the 800 studies they looked at correlated eating red meat with the development of cancer. The increased risk of contracting colorectal cancer from eating processed meat every day, puts the total risk at about one in two-million.

Interview with Illinois Professor Emeritus on W-H-O Red Meat Release

Interview with Illinois Professor Emeritus on W-H-O Red Meat Release
John Erdman, Food Scientist & Professor Emeritus - University of Illinois

Discussion with Food Science Professor Emeritus John Erdman about the World Health Organization’s red meat, processed meat as carcinogens 2015 release.

Crop Insurance Undercut by Budget Deal

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Crop Insurance Undercut by Budget Deal Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

The federal government is expected to vote on the budget deal, maybe as soon as today. If it goes through unchanged one of the safety net programs for agriculture, crop insurance, will most definitely fall to the axe says University of Illinois Ag Policy Specialist Jonathan Coppess.

Coppess :11 …getting changes at this hour is an uphill climb.

Quote Summary - I’ve heard that this saves about three billion dollars and that it is part of a big budget package. Getting changes at this hour is an uphill climb.

Coppess is in Washington, D.C. today. He says the deal would not eliminate crop insurance, but might force premiums higher, and shrink the number of places capable of providing it.

Crop Insurance S.R.A. Capped at 8.9% Under Budget Deal

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Crop Insurance S.R.A. Capped at 8.9% Under Budget Deal
Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

The federal government is expected to vote on the budget deal, maybe as soon as today. If it goes through unchanged one of the safety net programs from agriculture will most definitely fall to the axe. Todd Gleason has more on what will happen to crop insurance.

University of Illinois Ag Policy Specialist Jonathan Coppess…
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University of Illinois Ag Policy Specialist Jonathan Coppess is in Washington, D.C. He says the deal would require the Obama Administration to renegotiate the Standard Reinsurance Agreement or S.R.A. and take 3 billion dollars out of the crop insurance program over a ten year period.

Coppess :44 …getting changes at this hour is an uphill climb.
Quote Summary - And within that renegotiation put a cap if you will, or a limit on the rate of return for crop insurance companies at a very low rate, about 8.9%. What is surprising about this is that it seems the ag committees were not consulting, and I think you’ve seen the reaction from the ranking members and the chairs that they oppose this move. So, as of going into last night they were talking to leadership to see if they could get this revised somehow, but I’ve heard that this saves about three billion dollars and that it is part of a big budget package. Getting changes at this hour is an uphill climb.
The change, says Coppess, would not mean the end of crop insurance, but rather some serious changes in how the program is priced and delivered to farmers around the nation.

Coppess :28 ...could be a real problem with the program down the road.
Quote Summary - So that is the big concern. If you set the rate of return to low. It is just not possible for the companies to stay in. And we are still trying to sort out and dig through this determine exactly what it may do. It should have implications for reinsurance. This is always the issue with crop insurance. If you want to look for savings, it is much more complicated than making changes to a program to get savings. There is a lot more to it and this is an indicator of one of our worst fears going all the way back to the super committee in 2011; that budget negotiators will make cuts to programs without fully understanding the ramifications just because they can save money. This could be one of those instance where what looks like savings up front could be a real problem with the program down the road.
If the deal goest through Coppess thinks some of the companies approved to provide insurance may have to get out. It might also increase the cost to the farmer. It could even impact the ability of the private system to deliver crop insurance.

Tuesday, October 27, 2015

SPOT NEWS: World Health Organization Classifies Red Meat "Probably" Carcinogenic

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SPOT NEWS
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World Health Organization Classifies Red Meat “Probably” Carcinogenic

Red meat causes cancer. That’s what the headlines are saying, but as you’ll hear from Todd Gleason the W-H-O study doesn’t quite come to that conclusion.

Monday (October 26, 2015) the World Health Organization suggested…
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Monday (October 26, 2015) the World Health Organization suggested it would be good to limit the amount of red and processed meat we consume. There has been quite a firestorm in the media declaring “red meat causes cancer”.

That’s not actually what the W-H-O said in its press release. It actually classified the consumption of red meat as “probably” carcinogenic to humans. Going on to point out that processed meats, things like ham & sausage or hotdogs & corned beef, if eaten every day does increase the chance of getting colorectal cancer by 18%.

Again - red meat, steaks, pork chops and the like, “probably carcinogenic” but the 800 studies reviewed were inconclusive as a whole; processed meat - “carcinogenic”, but you’d need to eat about two ounces of it every day to increase your chance of getting colorectal cancer by 18%.

How dangerous is processed meat, then? WHO, in the paperwork, points to estimates by University of Washington’s Global Burden of Disease Project. It is an independent academic research organization that attributes about 34,000 cancer deaths per year worldwide to diets high in processed meat. By comparison the Center for Disease Control estimates 6 million people die from tobacco causes worldwide; 480,000 in the United States from smoking cigarettes.

FEATURE - World Health Organization Classifies Red Meat "Probably" Carcinogenic

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FEATURE
World Health Organization Classifies Red Meat “Probably” Carcinogenic

Red meat causes cancer. That’s what the headlines are saying, but as you’ll hear from Todd Gleason the W-H-O study doesn’t quite come to that conclusion.

Monday (October 26, 2015) the World Health Organization suggested…
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Monday (October 26, 2015) the World Health Organization suggested it would be good to limit the amount of red and processed meat we consume. There has been quite a firestorm in the media declaring “red meat causes cancer”.

That’s not actually what the W-H-O said in its press release. It actually classified the consumption of red meat as “probably” carcinogenic to humans. Going on to point out that processed meats, things like ham & sausage or hotdogs & corned beef, if eaten every day does increase the chance of getting colorectal cancer by 18%.

Again - red meat, steaks, pork chops and the like, “probably carcinogenic” but the 800 studies reviewed were inconclusive as a whole; processed meat - “carcinogenic”, but you’d need to eat about two ounces of it every day to increase your chance of getting colorectal cancer by 18%.

So, what does W-H-O mean by “probably carcinogenic”? Fortunately the press release, which you can find online, has links to the classifications. Red meat falls into group 2A: The agent is probably carcinogenic to humans.

Here’s the definition verbatim - “This category is used when there is limited evidence of carcinogenicity in humans and sufficient evidence of carcinogenicity in experimental animals. Limited evidence means that a positive association has been observed between exposure to the agent and cancer but that other explanations for the observations (technically termed chance, bias, or confounding) could not be ruled out.”

Processed meats are in Group 1: The agent is carcinogenic to humans. Again here’s the definition: “This category is used when there is sufficient evidence of carcinogenicity in humans. In other words, there is convincing evidence that the agent causes cancer. The evaluation is usually based on epidemiological studies showing development of cancer in exposed humans. Agents can also be classified in Group 1 based on sufficient evidence of carcinogenicity in experimental animals supported by strong evidence in exposed humans that the agent has effects that are important for cancer development.”

W-H-O happens to put asbestos exposure and smoking tobacco into Group 1, however, the processed meat paper work explains this does NOT mean these are all equally dangerous. The classifications describe the strength of the scientific evidence (what the research reports studied say) rather than assessing the risk.

How dangerous is processed meat, then? WHO, in the paperwork, points to estimates by University of Washington’s Global Burden of Disease Project. It is an independent academic research organization that attributes about 34,000 cancer deaths per year worldwide to diets high in processed meat. By comparison the Center for Disease Control estimates 6 million people die from tobacco causes worldwide; 480,000 in the United States from smoking cigarettes.

Monday, October 26, 2015

Beef: High Prices Cure High Prices

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Beef: High Prices Cure High Prices
Chris Hurt, Purdue Extension Agricultural Economist

The adage that the cure for high prices is “High Prices” sure looks right for the beef market this year. Todd Gleason has more with Purdue Extension Agricultural Economist Chris Hurt.

The price of beef cattle reached a record high…
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The price of beef cattle reached a record high of about $170 for a hundred pounds in late 2014 and early 2015. It has plummeted since, dropping 50 bucks. Interestingly, hogs took a similar nose dive from mid-last year to this year and it seems likely the price of eggs, which skyrocketed last spring because of Avian Influenza, is destined for the same fate. Or so thinks Purdue Extension Agricultural Economist Chris Hurt. He says it is all part of agriculture’s boom/bust cycle.

Hurt : …now seeking to better evaluate equilibrium.

Quote Summary - When analyst look back on these boom/bust price patterns, the supply and demand data never seem to fully justify how high prices go in a period of shortage, nor how quickly they fall afterward. The tendency for prices to “overshoot” on the upside and then to “undershoot” on the downside is repeated often. The excesses on the upside may be related to the human emotion that is inherent in agricultural markets when there is uncertainty with regard to food shortages. Regardless, cattle markets seemingly overshot to the upside, then undershot to the downside, and are now seeking to better evaluate equilibrium.

Certainly some of the roller coaster price action in the cattle markets can be explained by basic supply and demand relationships captured by the statement “the cure for high prices is high prices” says Chris Hurt. Here’s how that has happened in the beef market; with higher cattle weights, sharp increases in beef imports, declining beef exports, and by consumption shifts due to high retail beef prices.

Hurt : …as well as for supply of our industries.

Quote Summary - Retail beef prices probably have also contributed to the record drop in finished cattle prices this year. Retail beef prices rose to a high of $6.42 per pound in May (USDA). These record high prices sent signals to consumers to consider looking for beef substitutes and they found them in growing pork supplies at declining prices and abundant chicken at prices similar to those in the previous year. Again, given time, high prices provide a cure for high prices for demand as well as for supply.

After cattle prices have seemingly overshot and undershot, the market is now attempting to find the “correct” equilibrium. Of course that “correct” price is never known and one of the primary functions of markets is to discover it.

Hurt : … the highest cattle prices on this cycle are behind us.

Quote Summary - Using current futures prices as a forecast suggests a strong recovery will occur into the end of 2015 into the low $140s. Then, prices would be expected to reach their 2016 highs in late winter or very early spring in the mid-to-higher $140s. Seasonal weakness would drop prices back to the mid-to-higher $130 by the end of summer. Most likely, the highest cattle prices on this cycle are behind us.

Finished cattle averaged near $155 in 2014. They are expected to be near $150 for 2015 and then moderate even more into the high $130s or low $140s for 2016.

Meanwhile high prices are continuing to do their job of stimulating expansion of the cow herd, with female slaughter (heifers and cows) so far this year down ten percent. Indeed, given enough time thinks the Purdue agricultural economist, high prices will solve the dilemma of high prices.

Friday, October 23, 2015

Argentina's Presidential Election Important for Soybean Market

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Argentina’s Presidential Election Important for Soybean Market
Michael Cordonnier, Soybean and Corn Advisor - Hinsdale, Illinois

This Sunday’s presidential election in Argentina is important to soybean farmers in the United States. Todd Gleason has more.

The vying candidates have differing views… 1:09 radio 1:13 radio self contained

The vying candidates have differing views on the commodity export tax. If it is removed, South American agricultural expert Michael Cordonnier of Soybean and Corn Advisor says farmers in Argentina will plant corn rather than beans.

Cordonnier :28 …will go out there and plant some more corn.

Quote Summary - That would be a game changer in Argentina. If they take off those export taxes, the farmers would like to plant more corn. Because right not there are six times more acres of soybeans than corn. They want to rotate more because the government is forcing them to have a mono crop of soybeans. So, if they take off the export tax. I think instantly the farmers will go out there and plant some more corn.

It is springtime in Argentina. The leading opposition candidate opposes the export tax. Argentine presidential elections take place Sunday, with a possible runoff election slated for November 22, if needed. Cordonnier made his comments during Commodity Week, a radio program produced at the University of Illinois.

Wednesday, October 21, 2015

2016 Farmland Price Outlook

2016 Farmland Price Outlook
Todd Kuethe, Agricultural Economist - University of Illinois

While farmland prices likely will continue to see downward pressure into 2016, the capitalized values do not suggest the price of farmland is too high or in a bubble. Todd Gleason has more from the agricultural economists at the University of Illinois.

Three agricultural economist at ILLINOIS have written…
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Three agricultural economist at ILLINOIS have written an article about the value of farmland for the Farm Doc Daily website. It, in simple terms, says two things. First, the price of farmland is not too high, or even in an economic bubble. Secondly, the downturn in commodity prices does not point to a situation like the farm crisis of the 1980s. Here’s one of the co-authors of the article, Todd Kuethe.
Kuethe :41 …those movements always getting pushed down the line.
Quote Summary - So the two parts to that are, first, obviously cash rents. Which we expect to come down as incomes decline. Although the rental market is relatively sticky. It does not move as fast as income in aggregate moving. So, we expect to see downward movement, but not a bottom-falling-out drastic movement in cash rental rates. The second side is the interest rate. The Federal Reserve continues to state it expects to raise rates in the future, with those movements always getting pushed down the line.
Kuethe and his colleagues used the capitalization value to make their assessment. They say small increases in interest rates could have a dramatic impact on capitalized value. Because farmland is a long-lived asset, farmland faces larger potential price decreases than other assets if interest rate increases occur that translate to changes in the real capitalization rate. On the other hand cash rents would have to fall considerably before the capitalized value is below the current farmland price. This is because while farmers actually held the line on what they paid for farmland, cash rents did not hold that same line. Farms, for a while, were worth more than the top prices, but cash rents rallied most of the way. Those can drop back and not have any effective impact on the underlying value of the farm. Here’s what Todd Kuethe thinks will happen in 2016.
Kuethe :24 …as fast as the appreciation was leading up to it.
Quote Summary - I think we will continue to see downward pressure. Those declines will be slight and within a few percentage points. We won’t see a corrective response that is as fast as the appreciation was leading up to it.
It being the new higher price of farmland. You may read more on the Farm Doc Daily website.

Tuesday, October 20, 2015

The Regular Climate Pattern of Brazil

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The Regular Climate Pattern of Brazil
Mike Tannura, tStorm Weather - Chicago, Illinois

They say it is best to keep your friends close and your …let’s go with competitors in the soybean market… even closer. Todd Gleason has this story on how weather patterns in Brazil generally unfold year in and year out.

The Brazilian climate is unique…
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The Brazilian climate is unique. It is unlike anything that occurs in the United States. However, this country is poised to become the world’s most productive source of soybeans. It is expected to unseat the U.S. in 2017, though that could happen as early as next year. Farmers in the state of Mato Grosso grow most of soybeans in Brazil. Their winter months, unlike what happens in the United States from New Orleans to Minneapolis and Columbus to Omaha, are bone dry says University of Illinois alum and agricultural meteorologist Mike Tannura.

Tannura :20 ..somewhere around ten inches of rain per month. .

Quote Summary - Remember their winter is in June, July, and August. During that entire period they only receive from one to maybe one-and-one-half inches of rain. You go forward into the middle of their summer, which would be again December, January, and February, and they are getting somewhere around ten inches of rain per month.

Crops in the United States are strained in the summer if more than 6 inches of rain falls per month says Tannura. His Chicago based company, tStorm Weather, specializes in agricultural weather forecasting. During the spring time he says U.S. farmers plant on schedule, by the calendar, when the weather is open. This is not how things work in Brazil.

Tannura :30 …is going to rain, it is a matter of when.

Quote Summary - Since it is basically bone dry during the winter, you need some rain in the beginning of the season to get planting started. If you don’t, the seed will just sit there and it won’t do anything. It needs moisture. They have a very sandy type of soil that is unique to them as compared to us. This is a monsoonal type climate that they move into. They do not see longterm droughts as frequently as happen in the United States or the rest of the world. So it is not a matter of if it is going to rain, it is a matter of when.

A delay in the rainfall doesn’t have a great impact on the first crop planted for the season. This is generally soybeans. However, a delayed planting does have an impact on the second crop Brazilian farmers plant. Sometimes this is corn.

Tannura :13 …rain at the end of its growing season.

Quote Summary - If the early crop, being planted now or shortly, is sown way too late, then the second crop may have problems because it would not get enough rain at the end of its growing season.

The take away then is this. Soybean farmers in Brazil will plant a crop every year. It could be delayed as they wait for rainfall to replenish soil moisture…even deep into December. Brazil rarely suffers growing season droughts, so that first crop is likely to be a good one. The second crop, should the first have gone in late, is far more suspect and could seasonally run out of water.

Monday, October 19, 2015

Which Way for Soybean Prices

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Which Way for Soybean Prices
Darrel Good, Agricultural Economist - University of Illinois

Soybean prices have been on a roller coaster over the past three months. Todd Gleason has more on which direction is most likely to maintain control.

The price swings reflect changing expectations…
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The price swings reflect changing expectations about the size of the U.S. soybean crop, uncertain U.S. export prospects, and the potential impact of the weather as it relates to El Niño. Depending on how those factors unfold, soybean prices could move substantially in either direction over the next six months. Here’s the case University of Illinois Agricultural Economist Darrel Good says that can be built if one believes the price of soybeans will move lower.

Good :40 …as was the case this year.

Quote Summary - The case for lower soybean prices starts with the expectation that the U.S. average soybean yield for the crop currently being harvested will exceed the 47.2 bushels forecast in the USDA October Crop Production report, resulting in a larger crop forecast. That expectation is based on continuing reports of high soybean yields in many areas as harvest progresses. In addition, there has been a history of the final soybean yield estimate in January exceeding the October forecast in years when the September forecast exceeded the August forecast and the October forecast exceeded the September forecast, as was the case this year.

That pattern has happened 11 times in the past 40 years, with the January estimate above the October forecast in nine of those 11 years. Those expecting lower prices, also, point to the potential for another record soybean harvest in South America. Early estimates put Brazil on pace for a 100 million metric ton crop, much of which would be exported to China. That combination would point to U.S. soybean exports during the current marketing year less than the current USDA projection of 1.675 billion bushels. A larger crop estimate and smaller exports, then, would point to larger year-ending stocks and lower prices.

Naturally, there is the other side of the market. The one that points to a higher price for soybeans.

Good :45 …shortfall in production there based on the El Niño weather event.

Quote Summary - The case for higher soybean prices starts with the expectation that harvested acres of U.S. soybeans will be less than the USDA’s October forecast, limiting any future increase in the estimated size of the crop. The second argument for higher prices is that export demand for U.S. soybeans has actually been quite strong in recent weeks and points to stronger overall export demand. While current export activity is encouraging, the potential for U.S. soybean exports this year will hinge at least in part on the size of the 2016 South American harvest. Those friendly to soybean prices have expectations of a shortfall in production there based on the El Niño weather event.

This friendly stance is enhanced by what some see as the tendency for USDA to underestimate U.S. soybean exports early in the year. USDA’s forecast of marketing year exports in the October WASDE report, factually, have been less than actual exports in 17 of the past 25 years. The difference was 50 million bushels or more in 14 of those years and exceeded 150 million bushels in five years. Finally, those building a case for higher prices point to the end of the El Niño. It could result in late summer weather that is adverse for U.S. soybean yields.

As for Darrel Good, well he sums it up this way. The uncertain soybean supply and consumption prospects suggest soybean prices may continue to trade in the wide range of the past three months. Fairly dramatic changes, however, would be required to alter prospects for abundant U.S and world inventories and push prices above the high experienced in July. Prices at that level will likely only be generated by production issues and are not expected in the near term. Modest short-term rallies based on other factors, however, are more likely.

Don't Bet the Cash Rented Farm on a Loss

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Don’t Bet the Cash Rented Farm on a Loss
Gary Schnitkey, Extension Agricultural Economist - University of Illinois

It is very difficult to give up a farm, even one that is losing money because the cash rent is too high. Todd Gleason has a few simple guidelines one might follow to help them make that decision.

Those farmers thinking they can withstand a loss…
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Those farmers thinking they can withstand a loss on a farm next year because the cash rent is too high should put things in a longterm perspective to see if it is viable strategy. First and foremost says University of Illinois Agricultural Economist Gary Schnitkey realistic expectations of future returns should be used.

Schnitkey :28 …question if those rents are sustainable. If they are not, then lower those rents.
Quote Summary - It is about long run prices. It has been suggested $4.60 corn and $10.60 soybeans. Some years we will be above that and some years below that. But if we are looking at our cash rent levels and plug in $4.60 corn and $10.60 soybeans and there are losses, or only small gains, then you must question if those rents are sustainable. If they are not, then lower those rents.
Here’s the thing about using the long run corn and soybean mid-point prices. Those are calculated for thirty years worth of trade. USDA’s price outlook through 2020 doesn’t even get close. It’s a lot more like current prices and that’s a whole different set of expectations. Even if you thought, “just one more year, and the cash rent will come down to a more reasonable level”, that might not be the case.

Schnitkey :44 …high yield level compared to other parts of the corn belt.
Quote Summary - At our long run prices, $4.60 for corn and $10.60 for soybeans, an appropriate cash rent for central Illinois would be about $250 per acre. That cash rent would generate a loss at the budgeted prices we are using for 2016, which are $3.90 for corn and $8.90 for soybeans. So, if we are at those prices even a $250 cash rent would cause losses. Rents would need to go below $220 per acre in central Illinois. Obviously this is at a very high yield level compared to other parts of the corn belt.
Even if a farmer believes the University of Illinois long-run prices of $4.60 corn and $10.60 soybeans are accurate, there could be a relatively long period in which prices are below the long-run average. These risks suggest using a variable cash rent lease might be the best answer.

Schnitkey :25 …it allows the landlord to share the upside.
Quote Summary - Variable cash leases vary the cash rent based on revenue. There is a base cash rent and if revenues go above a specified level the landlord will get more return. This is a good idea in this time of low prices because things happen in agriculture and it allows the landlord to share the upside.
You can read more about the risks of high cash rent farmland and variable rate leases on the Farm Doc Daily website.

Thursday, October 15, 2015

Africa and Soybean Trials

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Africa and Soybean Trials
Abush Tesfaye, Jimma Agricultural Research Institute - Ethiopia
Godfree Chigeza, International Institute of Tropical Agriculture - Zambia

The nations of Africa have struggled to feed themselves for decades. There are some places, like South Africa, that have successfully adapted some of world’s primary crops. Corn is a good example. Soybeans are also grown in Africa, but they’re not particularly high yielding varieties. Todd Gleason reports soybean breeders from three African institutions have been visiting the United States in hopes of making some improvements.

The Soybean Innovation Lab is on the third floor…
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The Soybean Innovation Lab is on the third floor of Mumford Hall at the University of Illinois. It is just an office space in the agricultural college. Well, not really just an office space. The lab works to find better ways for Africa to feed itself and grow local economies. This is much easier said than done. For instance, this fall three soybean breeders came to Illinois to learn how to set up better field trials. They face some unique and basic problems

Tesfaye :09 …there are no companies doing these envelopes.

Quote Summary - We cannot easily access the envelopes in our condition. We do not have many breeding programs, so there are no companies doing these envelopes.

That’s Abush Tesfaye (uh-bush tess-fay-ee) from Ethiopia and you heard that right. He can’t get envelopes… the little seed packet sized manila envelopes. It’s the way plant breeder keep different seeds separated from each other. They’ll have to make their own from cloth. But that’s not the biggest problem says Godfree Chigeza (chih-gay-zuh) from Zambia.

Chigeza :10 …is infrastructure. Moving from one site to another site.

Quote Summary - I think the major challenge for Africa is infrastructure. Moving from one site to another site.

Africa doesn’t have an infrastructure. There are so few roads it takes longer to get from one field to another, than it does to plant, care for, and harvest the field. Although they don’t have much equipment to carry. Here at Illinois U of I plant geneticist Randy Nelson took some time to show the Africans a how to use a one row push seeder.

Natural Sound :21

Nelson discussing hand held seeder.

The African breeders hope to adapt higher yielding varieties with the aid of the Soybean Innovation Lab. It is the fastest growing crop on the continent. Farmers with 2 to 10 acres are growing it to feed their chickens and send their kids to school. They grow other crops to feed themselves says Zambia’s Godfree Chigeza, but the soybean is meant to improve their lives.

Chigeza :07 …for farmers to move from being the poor, from poverty, they need also to have income.

They can raise and eat chic peas and maize and they do, but with the soybean they can sell and reinvest in their families. If you’d like to learn more about the Soybean Innovation Lab you can find it online. Just search Google for Soybean Innovation Lab.

Wednesday, October 14, 2015

The Corn Crop is Unlikely to be Overestimated

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The Corn Crop is Unlikely to be Overestimated
Darrel Good, Agricultural Economist - University of Illinois

After the Crop Production report was released last week some of the trade began to discuss the possibility USDA had overestimated the size of the U.S. corn crop. Todd Gleason reports this is not very likely.

The USDA’s October 9 Crop Production report forecast…
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USDA’s October 9 Crop Production report forecast the 2015 corn crop at about 13.6 billion bushels. That was down 30 million bushels from September and 660 million bushels smaller than last year.

Commentary following the release of the report suggests some believe the corn crop is even smaller. One of the factors cited as evidence the crop may be smaller than forecast is the strong basis levels in many markets. This seems the make some sense. The argument is that a crop as large as forecast, particularly in the face of a rapid pace of harvest and a large soybean crop, would not support such a strong basis due to the resulting strong demand for storage space. That argument, however, is not completely supported by the current estimates of crop supplies thinks University of Illinois Agricultural Economist Darrel Good.

Good :29 …from December 1, 2012 to December 1, 2014.

Quote Summary - Basis levels are generally determined by the supply of storage space and an array of factors that determine the demand for storage capacity. Harvest-time basis levels at the point of producer delivery may be receiving some additional support this year from the recent expansion in grain storage capacity. The USDA’s December Grain Stocks report, for example, estimates that permanent storage capacity (on- and off- farm) increased by nearly 550 million bushels from December 1, 2012 to December 1, 2014.

Additional capacity has been added in the past year. Basis levels at the farm may also be receiving support from the lack of widespread transportation delays and the increasing use of delayed pricing contracts. Both of these factors allow for more rapid movement of corn through the marketing channel. Darrel Good says the lack of widespread transportation issues may reflect, in part, the dominance of the domestic corn market relative to exports resulting in a larger portion of the crop moving by truck rather than by rail where delays are more common.

Good :41 …

Quote Summary - Basis levels are also influenced by the pace of corn consumption. A more rapid pace of consumption, all else equal, tends to strengthen basis in order to make storage less attractive. Domestic ethanol production in September and early October 2015 was nearly five percent larger than that of a year earlier, supporting the domestic demand for corn. Domestic feed demand for corn has also likely been supported by the four percent increase in the hog inventory this fall and the slightly larger number of cattle on feed, dairy cattle, and broiler placements. On the other hand, the pace of export shipments is well below that of last year. The relative pace of consumption in the various segments of the corn market may explain part of the regional differences in basis patterns this year.

Since corn basis levels and patterns are determined by a complex set of supply and demand factors, it seems to be a stretch to conclude generally strong harvest time basis levels this year point to a smaller corn crop than currently forecast writes Good in his Weekly Outlook. It can be found on the Farm Doc Daily website.

He says history is also not on the side of a smaller yield forecast than the 168 bushel forecast of last week. In the 40 years from 1975 through 2014, the USDA yield forecast increased from September to October, as it did this year, in 24 years. The January yield estimate was below the October forecast in only four of those 24 years. While higher corn prices as the marketing year progresses are possible, then, price increases are not likely to be generated by a smaller U.S. production forecast. Instead, Darrel Good says prices will be influenced by the pace of consumption and the development of the South American crop.

Monday, October 12, 2015

Working Capital on the Farm

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Working Capital on the Farm
Gary Schnitkey, Extension Agricultural Economist - University of Illinois

Low commodity prices are quickly eating into the reserves farmers built up over the last several years. Todd Gleason has more on agriculture’s ‘working capital’.

Farmers built up working capital reserves over…
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Farmers built up working capital reserves over a six year period lasting from 2006 to 2012. Those reserves have been tapped each year since then in order to keep operations running smoothly says University of Illinois Agricultural Economist Gary Schnitkey. However they’re still well above the average from little more than a decade ago.

Schnitkey :25 …2004 when it was average close to $200.

Quote Summary - The average grain farm enrolled in the Illinois FBFM record keeping service had $588 of working capital per acre at the end of 2014. Working capital is current assets minus current liabilities. This is up considerably from 2000 to 2004 when it was averaging close to $200.

Those numbers are a bit deceiving. The spread isn’t $388, but in an equivalent world more like $188 per acre. Meaning today’s farmer has about fifty percent more working capital than his counterpart of the early 2000’s. That was at the beginning of this year says Schnitkey.

Schnitkey :15 …erosion of half of the working capital that exists out there.

Quote Summary - And we are estimating something like an $80 loss in working capital for this coming year. So, we are likely to see an $80 loss or roughly an erosion of half of the working capital that exists out there.

By this coming year, he means the end of the current marketing year for the crop just harvested and things begin to spiral from there. If 2016 is like 2015 then the working capital left on the farm will be very similar to the turn of the century period.

Schnitkey :26 …income and subtract out family living withdrawals.

Quote Summary - To come up with working capital you look at the income from the farm, subtract out land costs, any changes in financing that happened during the year, and any machinery purchases, then add back in other income and subtract out family living withdrawals.

Here’s how that calculation differs across acreage classes in Illinois. On owned acres working capital is down $11 this year from last. Working capital for cash rented property is estimated to be down by $121 per acre. Working capital on share rented acreage declined by $72.

Friday, October 9, 2015

TPP Will Create 76,000 Ag Related Jobs

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VOICER
TPP Will Create 76,000 Ag Related Jobs
Tom Vilsack, U.S. Secretary of Agriculture

The Obama administration is working to inform the public about the benefits of the new trade deal called the Trans-Pacific Partnership. To that end the U.S. Secretary of Agriculture has been talking about job creation. In general the U.S. Trade Representative’s office reports every billion dollars of U.S. exports creates fifty-eight-hundred jobs. However, Tom Vilsack says every billion dollars worth of agricultural exports creates sixty-five-hundred jobs.

Vilsack :33 …supporting thousands of good paying jobs.

Quote - And those jobs are generally higher paying jobs. Anywhere from 13 to 18% higher in income. So, this is really about creating jobs and it is estimated, anticipated, there will be about 130 billion dollars in additional trade will take place in terms of our exports going to other countries. Nine-percent of that, on average, is usually agriculture, so you can do the math. You are talking about billions in ag exports, stabilizing farm prices, which will help to stabilize the rural economy in those towns where farmers are doing better and at the same time supporting thousands of good paying jobs.

By Secretary Vilsack’s math the agricultural exports would create about 76,000 U.S. jobs. TPP as a whole is expected to create nearly three-quarters of a million U.S. jobs.

Thursday, October 1, 2015

Sell on Short Term Rallies - Darrel Good Interview

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Sell on Short Term Rallies - Darrel Good Interview
Darrel Good, Agricultural Economist - University of Illinois

Wednesday, September 30th USDA tallied how much of last fall’s harvest was still left in the bin. Todd Gleason spoke with University of Illinois Agricultural Economist Darrel Good about the figures. He started the conversation by asking which of the numbers were most important.

There are three numbers I think everybody looks…
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That was Todd Gleason talking with University of Illinois Agricultural Economist Darrel Good by the final Grain Stocks report for the 2014/2015 marketing year.

Wednesday, September 30, 2015

Limited Pork Expansion

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Limited Pork Expansion
Chris Hurt, Purdue Extension Agricultural Economist

The nation’s hog farmers have done a nice of job of not over reacting to last year’s record profits. Todd Gleason reports they’ve limited their expansion plans and consequently should see a good bottomline again for this year, and maybe next.

For all of 2015, pork supplies are expected to be…
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For all of 2015, pork supplies are expected to be seven percent higher than in 2014. That year the price of pork averaged $76 mostly because the PED virus wreaked havoc on the industry. This years supplies have been farm more stable and supplies for 2016 should only be about one percent higher than in 2015. Hog prices are expected to average about $51 on a live weight basis for this year. Current projections for 2016 are for a similar average price and it means hog farmers will make money says Purdue Extension Agricultural Economist Chris Hurt.

Hurt :29 …that further expansion plans remain moderate.

Quote Summary - After the record profits of 2014, there has been concern that the industry would over-expand. At this point that concern has not developed with supply and demand anticipated to be in balance for the coming 12 months. This also serves as a warning to the industry to make sure that further expansion plans remain moderate.

There seem to be growing threats in the future for the meats sector. Those include, says Chris Hurt, the continued expansion of total meat supplies into 2016 and 2017 with a rapid ramp up of poultry and increased beef production.

Hurt :63 …world economic growth and a strong U.S. dollar.

Quote Summary - The large drop in finished cattle prices in recent weeks suggest that retail beef prices could begin to drop this fall and provide added competition for pork. In the longer run, beef supplies will continue to expand for multiple years. Potential weakness of meat and poultry exports is also a concern with slowing world economic growth and a strong U.S. dollar.

A strong dollar makes it more difficult to sell U.S. products overseas as they become higher priced. Speaking of price, feed prices will remain low for the next 9 months due to strong yields for 2014 and 2015 crops and weakened exports. Animal product producers will want to take advantage of harvest price lows this fall states Hurt. However, he thinks longer-term, managers need to remain aware that low feed prices are not guaranteed if weather should turn more adverse in some important growing areas.

Thursday, September 24, 2015

Decreasing 2016 Cash Rents on Professionally Managed Farmland

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Decreasing 2016 Cash Rents on Professionally Managed Farmland
Gary Schnitkey, Extension Agricultural Economist - University of Illinois

Cash rents on professionally-managed farmland are set to decrease next year. That’s the conclusion of a survey in the state of Illinois. Todd Gleason has more…

Each year, the Illinois Society of Professional Farm Managers…
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Each year, the Illinois Society of Professional Farm Managers and Rural Appraisers asks its members how much, on average, they’re collecting for cash rent for the current year, and their expectations for next year. The survey provides a really good indicator of rents on professionally-managed farmland says Gary Schnitkey from the University of Illinois.

Schnitkey :16 …down $32 from the 2015 rent.

Quote Summary - We looked at that and for excellent quality farmland, 190 plus bushels per acre, the farm manages said rents in 2016 would be $318 per acre which is down $32 from the 2015 rent.

Schnitkey helps to develop the survey and tally the results. Those can be found on the Farm Doc Daily website categorized for farms with corn yields less the 150 bushels to the acre to those over 190. The move to lower cash rents is needed, and doesn’t surprise Schnitkey.

Schnitkey :34 …that farm managers say they’re charging.

Quote Summary - Farm managers rents to react more quickly to turns in operator and land returns. So, they come down and go up faster than the average cash rent. So, I am not surprised that they are coming down, but would note the amount of the decrease probably won’t leave the farmer with any return because the operator and land returns are still below the cash rent that farm managers say they’re charging.

The first year the Illinois Society collected cash rents on professionally-managed farmland was in 2007. The average was $183 per acre and $17 higher than the overall average for the state. The professional farm managers cash rent peaked at $396 in 2013. This would be the third year in a row they’ve dropped cash rents, but that trend does not translate to the state as a whole. Last year was the first year state wide cash rents in Illinois decreased.

Wednesday, September 16, 2015

How to Read the FSA Acreage Dump

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How to Read the FSA Acreage Dump
Darrel Good, Agricultural Economist - University of Illinois

Today (Wednesday September 16, 2015) the Farm Service Agency released a new set of numbers. While these are preliminary figures of acreage and crops, Todd Gleason reports they do offer a hint of things to come in future official USDA estimates.

First, it is really important to understand these numbers are raw…
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First, it is really important to understand these numbers are raw and come with no explanation. They are simply a monthly dump of the aggregated acreage figures reported to the FSA by those participating in federal farm programs. Participation requires them to report the number of planted, failed, and prevented plant acres of each program crop. These numbers are updated by FSA from August to January. University of Illinois Agricultural Economist Darrel Good explains how the raw numbers make their way into the official USDA reports.

Good :46 …tend to come together at the end of the season.

Quote Summary - NASS, the official estimator of major crops, basis their estimates on surveys of producers with the final estimated based on a very large agricultural survey in December, but they do use what they call administrative data, primarily this FSA data, to tweak their own estimates of planted acres. This is because theirs is based on a sample. They are not doing a census of acreage. Historically there has been a close relationship between the acreage reported to FSA an actual planted acres as reported by NASS. They use those numbers and so by definition they tend to come together at the end of the season.

Remember that’s not until January. So, it makes reading too much into the latest FSA numbers difficult, but it does offer what Darrel Good calls ‘hints’ as to what changes might be coming. USDA NASS will incorporate the FSA figures into the October 9 Crop Production report. However, that will be from an updated set of FSA figures that the public won’t actually see until October 14.

Good :51 …in October whether that happens or not.

Quote Summary - At this juncture, I think there is a tendency to try and read too much into what the FSA reports are saying in terms of trying to anticipate how NASS is going to change final acreage. Having said that, we do see through September of this year that the difference between the estimated of planted areas by NASS (for soybean) and certified acres reported to FSA so far is a quite large margin. Whether it narrows considerably in October or not is the question. If it doesn’t then there is may be a bit of a clue there that NASS will have to lower its estimated of planted acres of soybeans this year. But again that is just a clue you are trying to read out of the data and we’ll see in October whether that happens or not.

Typically the FSA acreage for soybeans is 1.5 to 2 million acres lower than USDA’s final number. The current FSA figures are off by 4.6 million acres. The October 9 Crop Production report could change, but we won’t know exactly why or if it needs to change more until the FSA report is released five days later.

Thursday, September 10, 2015

$100,000,000 of Blender Pumps for 21 States

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$100,000,000 of Blender Pumps for 21 States
U.S. Secretary of Agriculture Tom Vilsack
Paul Jeschke, Farmer & Illinois Corn Marketing Board - Mazon, Illinois

The U.S. Secretary of Agriculture held nothing back on the University of Illinois campus yesterday (Thursday Sept 10) when he talked about bio fuels and blender pumps for 21 states. Todd Gleason has more from the U of I’s Energy Farm just south of the Urbana-Champaign campus.

The Secretary of Ag came to the U of I campus…
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The Secretary of Ag came to the U of I campus to talk about two things. The importance or agricultural research and blender pumps. However, he started his press conference with a shot over the bow of the oil industry. He thinks it is fearful of competition from farmers. Competition that Tom Vilsack says is making gasoline more affordable.

Vilsack :22 …to create job opportunities in rural places.

Quote Summary - They know it is reducing the cost of gasoline to consumers by about $2.50 for every barrel of crude oil that is used in gas production. They know it is better for the environment, reducing emissions. And they know that it helps to stabilize farm economy and to create job opportunities in rural places.

To that end the Obama Administration has decided to free up $100,000,000 of federal funds, matched with another $100,000,000 from private partners to help develop the infrastructure to handle higher blends of ethanol.

Vilsack :14 …all for E15, E85, and higher blends of ethanol.

Quote Summary - Twenty-one states will be involved in expanding and providing assistance to petroleum marketers and convenience store operators to expand the number of pumping systems that will all for E15, E85, and higher blends of ethanol.

USDA wants to double the number of blender pumps available. He expects an additional 5000 pumps and systems to be installed. Consumers will need to be aware of the pumps and how they work, but Paul Jeschke an Illinois corn grower from Mazon says it shouldn’t really cause any problems.

Jeschke :23 …use at least E15 with know major problems in their opinion.

Quote Summary - As a general statement, cars made after 2001can probably burn E15 alright, but they should consult their owners manual and the local dealer they do maintenance with. EPA has determined most cars built after 2001 can use at least E15 with know major problems in their opinion.

The roll out of new blender pumps and systems will take some time. Consumers can expect to see the build out begin within the next year.

Tuesday, September 8, 2015

2016 Cash Rents May Need to Drop $100

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2016 Cash Rents May Need to Drop $100
Gary Schnitkey, Extension Agricultural Economist - University of Illinois

Farm income this year is going to be dramatically lower than in the past. Next year doesn’t look any better even on highly productive central Illinois soils. Todd Gleason reports farmers must cut costs to survive, and that cash rents may need to come down by as much as one-hundred-dollars per acre.

Let’s start with this year’s income from an…
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Let’s start with this year’s income from an acre of corn. Today a central Illinois farmer that raises 200 bushel corn can expect, on average, to be paid $3.65 for each bushel. That’s an income of $730 per acre, plus any government payments - let’s make it $800 even. These are the numbers being used by Gary Schnitkey at the University of Illinois.

Schnitkey :41 …just be in the same ballpark of breaking even.

Quote Summary - We have $800 of revenue, and we have been running $580 of non-land costs; everything from seed, fertilizer, chemicals, overhead, and machinery costs. The 200 bushel land would be running (for cash rent) right at $300 per acre. The total expenses then are $880 an acre. Roughly then, if we want revenue at the same level as costs, on cash rented acres costs would need to drop by $100 per acre just to breakeven.

Cash rents on highly productive central Illinois soils - as the numbers stand today - need to come down sharply just so farmers can breakeven. There aren’t really any other expenses where the costs can be cut.

Schnitkey :42 …that’s just $30 of your $100 cost.

Quote Summary - We’ve already built in reductions for fuel costs. Even if you looked at halving the fuel cost it would be just $10 an acre. It is something, but not a lot. Fertilizer costs may come down some. We haven’t seen new nitrogen, DAP, and potash bids yet for this year, but they may come down $20. Seed is an open question, but no one is predicting large costs cuts there. So, even if you squeeze another $30 of non-land costs reductions out of the budget. That’s just $30 of your $100 cost.

…just to breakeven next year on some of the best corn producing farmland on the planet.

Friday, September 4, 2015

Labor Day (First Monday in September)

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Labor Day (First Monday in September)
Source: US Embassy Stockholm Sweden
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I’m Todd Gleason for University of Illinois…
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I’m Todd Gleason for University of Illinois Extension with a history of Labor Day in the United States. It’s adapted from a story found on the United States Embassy to Sweden’s website.

Eleven-year-old Peter McGuire sold papers on the street in New York City. He shined shoes and cleaned stores and later ran errands. It was 1863 and his father, a poor Irish immigrant, had just enlisted to fight in the Civil War. Peter had to help support his mother and six brothers and sisters.

Many immigrants settled in New York City in the nineteenth century. They found that living conditions were not as wonderful as they had dreamed. Often there were six families crowded into a house made for one family. Thousands of children had to go to work. Working conditions were even worse. Immigrant men, women and children worked in factories for ten to twelve hours a day, stopping only for a short time to eat. They came to work even if they were tired or sick because if they didn’t, they might be fired. Thousands of people were waiting to take their places.

When Peter was 17, he began an apprenticeship in a piano shop. This job was better than his others, for he was learning a trade, but he still worked long hours with low pay. At night he went to meetings and classes in economics and social issues of the day. One of the main issues of concern pertained to labor conditions. Workers were tired of long hours, low pay and uncertain jobs. They spoke of organizing themselves into a union of laborers to improve their working conditions. In the spring of 1872, Peter McGuire and 100,000 workers went on strike and marched through the streets, demanding a decrease in the long working day.

This event convinced Peter that an organized labor movement was important for the future of workers’ rights. He spent the next year speaking to crowds of workers and unemployed people, lobbying the city government for jobs and relief money. It was not an easy road for Peter McGuire. He became known as a “disturber of the public peace.” The city government ignored his demands. Peter himself could not find a job in his trade. He began to travel up and down the east coast to speak to laborers about unionizing. In 1881, he moved to St. Louis, Missouri, and began to organize carpenters there. He organized a convention of carpenters in Chicago, and it was there that a national union of carpenters was founded. He became General Secretary of the United Brotherhood of Carpenters and Joiners of America.

The idea of organizing workers according to their trades spread around the country. Factory workers, dock workers and toolmakers all began to demand and get their rights to an eight-hour workday, a secure job and a future in their trades. Peter McGuire and laborers in other cities planned a holiday for workers on the first Monday in September, halfway between Independence Day and Thanksgiving Day.  On September 5, 1882 the first Labor Day parade was held in New York City.

Lower Pork Costs Driven by Lower Meal Costs

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Lower Pork Costs Driven by Lower Meal Costs
Chris Hurt, Agricultural Economist - Purdue University Extension

The retail price of a pork chop is getting cheaper. Todd Gleason reports the price of soybean meal is one of the reasons for the decline.

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Soybean meal is an important but an “economically” secondary feed ingredient in hog diets compared to corn. Purdue University Agricultural Economist Chris Hurt thinks soybean meal costs, as a feed ingredient, have been about 22 percent of the total costs of raising hogs over the past decade. This compares to 32 percent for corn. In recent years soybean meal has been high priced. For the calendar years of 2012, 2013 and 2014 USDA reports that Decatur, Illinois high-protein meal has had annual averages between $440 and $480 per ton. But with a record U.S. soybean crop in the fall of 2014 and with the second largest crop likely coming this fall, Decatur prices may drop to about $350 per ton and then, as fall turns to winter, even further to average near $325 per ton for calendar year 2016. He says it would be the lowest annual meal price since 2007.

Hurt :24 …per live hundredweight due to the meal price reduction.

Quote Summary - How much have lower soybean meal prices contributed to lower hog production costs? From 2014 highs at $480 per ton to the projected $325 in calendar 2016, costs of production would drop by $5.40 per live hundredweight due to the meal price reduction.

Livestock producers may adjust the corn to meal ratios in diets somewhat depending upon the prices of these two primary feed ingredients. For example, the 2012 drought caused corn prices to be very high relative to soybean meal prices. This relationship caused some shifting to higher protein diets because meal was relatively lower cost than corn. Then for the 2013 and 2014 crops, corn shifted to be cheaper relative to meal. This caused some to reduce their protein levels. In the coming year, corn and meal prices are returning to a more normal long-term relationship.

Hurt :34 …feed costs from 2012 to 2015 and 2016 is a major reduction.

Quote Summary - Estimated total costs of production for a hundredweight of live hogs reached the highest calendar year average in 2012 at $67 per live hundredweight. That dropped to an estimated $51 for 2015. Current projections for 2016 are that total costs will remain about $51. For 2016, lower meal costs are offset by somewhat higher anticipated corn costs, keeping total costs similar to 2015. Clearly a $16 per hundredweight drop in feed costs from 2012 to 2015 and 2016 is a major reduction.

Record costs of production was a contributor, says Purdue University’s Chris Hurt, to higher retail prices. These topped out in September 2014 at $4.22 per pound for USDA’s composite pork average. Of course, PED death losses also contributed to reduced pork production in 2014 as well. Lower priced feed and better control of PED has resulted in higher pork production and as a result consumer pork prices have now fallen to $3.77 per pound.

Given this, Hog producer margins are expected to be near breakeven for both 2015 and 2016. Estimated costs are near $51 and expected live hog prices are near $50. This means a $1 to $2 loss per head. Breakeven implies that supply and demand are close to an equilibrium and that all resources are receiving a “normal” rate of return. This implies that producers have little financial incentive to expand, or to contract. It also means that the lower feed costs over the past few years have been built into more pork production and consumers will now be the beneficiaries of reduced retail prices.