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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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3:03 radio self contained

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.