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Tuesday, May 31, 2016

Corn Prices to Reflect Summer Wx & Demand Strength

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Corn Prices to Reflect Summer Wx & Demand Strength
Darrel Good, Agricultural Economist - University of Illinois

Summer has arrived and so has the critical three month period in which the nation’s food supply will be established. The commodity markets will follow weather conditions, crop ratings, and weather forecasts in order to form yield expectations. Todd Gleason reports the starting place is typically to assume a normal growing season.

University of Illinois Agricultural Economist Darrel… 3:33 radio
3:48 radio self contained

University of Illinois Agricultural Economist Darrel Good starts each growing season, generally speaking, in the same way. He analyzes the market using a normal growing season conditions. This calculation for corn puts the University of Illinois 2016 national average yield at 166.4 bushels to the acre. One of the factors that influences the direction and magnitude of early yield adjustments is the timeliness of planting, recognizing that yield potential is reduced if planting is delayed beyond the “sweet spot” for obtaining maximum yields. The timing of that sweet spot varies by region says Darrel Good, but Illinois has been using May 20 as the national break point for “late planted corn” since 1986.

Good :23 …yield near trend value should not yet be altered.

Quote Summary - We calculate the percent of the crop planted after May 20 for the 30 years from 1986 through 2015 ranged from four (2012) to 47 (1995) percent and averaged 18 percent. While the percent of the crop planted late in some states (Indiana and Ohio) was well above average this year, the percent of the crop planted after May 20 in the 18 major producing states this year was calculated to be 17 percent. This is very close to the long term average and suggests that the expectation of a U.S. average yield near trend value should not yet be altered.

A second factor Good monitors in order to adjust his yield expectations is the USDA’s weekly crop condition ratings. Those ratings tend to be biased early in the season, with ratings tending to decline as the growing season progresses. Good thinks the early ratings are not always a good forecast of final ratings. Still, the market is interested in the condition of the crop as it compares to ratings in earlier years. Crop conditions ratings have been available for the 21st week of the year 17 times out of the last 30 years. This year makes 18 out of 31. On average, 71 percent of the crop was rated in good or excellent condition for that week, in a range of 43 (2002) to 79 (1994) percent says Good.

Good :38 …ending stocks to less than about 10 percent of use.

Quote Summary - While the market will focus on crop size, it is important to ask how much the price of corn will actually be influenced by the size of the crop. Our recent modelling of the relationship between the marketing year average price of corn and the year-ending stocks to use ratio suggests prices tend to be relatively stable over a wide range of ending stocks-to use ratios. That is, for a given level of consumption, the size of the crop has a relatively small impact on the marketing year average price of corn unless the crop is small enough to reduce ending stocks to less than about 10 percent of use.

Over a wide range of corn supply, the more important determinant of price, writes Darrel Good on the FarmDocDaily website, is the strength of demand. In this case, demand does not refer just to the amount of corn consumed, but instead includes the price users are willing to pay.

Good :15 …demand has been weak for the past two years.

Quote Summary - Strong demand reflects a willingness to pay a “high” price for a given level of consumption while weak demand reflects a willingness to pay a “low” price for that consumption. Corn demand has been weak for the past two years.

The weather-reduced Brazilian corn harvest has recently provided some demand strength for U.S. corn and a modest price rally. Still, as Darrel Good indicated in his FarmDocDaily column last week, summer weather could provide additional price strength, at least temporarily. He says stronger demand, in the form of more robust economic growth and higher livestock prices, would provide for a more permanent price increase.

Thursday, May 26, 2016

University of Illinois Weed Science Field Research Tour

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VOICER (radio & tv)
University of Illinois Weed Science Field Research Tour
Aaron Hager, Extension Weed Scientist - University of Illinois

The Extension scientists on the University of Illinois campus in Urbana-Champaign have scheduled their annual field day. The Weed Science tour is set for Wednesday June 29th says Aaron Hager.

Hager :24 …plots on the Animal Sciences tracts.

Quote Summary - It’ll be at the South Farms and will begin roughly between 7:30 and 8:00 o’clock in the morning. It will be very similar in terms of format to what we’ve done before. We’ll all gather around the South Farms at the Seed House for a few introductory remarks and comments, and then everybody will get back into their vehicles and we’ll car pool across Windsor Road and look at some of the research plots on the Animal Sciences tracts.

Again, the 2016 University of Illinois Weed Science Field Day is Wednesday, June 29th at the University of Illinois Crop Sciences Research and Education Center, the South Farms, located just to the east of the State Farm Center (Assembly Hall).

Coffee and refreshments will be available under the shade trees near the Seed House beginning at 8:00 a.m. Cost for the Urbana weed science field tour is $10. The event will conclude around noon with a catered lunch.

The tour will provide ample opportunity to look at research plots and interact with weed science faculty, staff, and graduate students. Participants can compare their favorite corn and soybean herbicide programs to other commercial programs and get an early look at a few new products that soon will be on the market.

Monday, May 23, 2016

Will Summer Pricing Opportunities Materialize for Corn & Soybeans

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Will Summer Pricing Opportunities Materialize for Corn & Soybeans
Darrel Good, Agricultural Economist - University of Illinois

The very low price of corn and soybeans, and predictions for even lower prices later in the year, has farmers worried. They’re wondering, even hopeful, if a summer weather rally could offer up a pricing opportunity. Todd Gleason reports Darrel Good tries to answer this question in the May 23rd Weekly Outlook on the FarmDocDaily website.

There are a couple of factors the online article addresses…
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There are a couple of factors the online article addresses. The first is pretty simple. Boiled down Darrel Good says a supply problem in South America is a demand boost for North America, in this case for both corn and soybeans.

Good :13 …appears exports may exceed these higher projections.

Quote Summary - Weekly exports for both crops continue to be larger than needed to reach the USDA’s most recent export projections for the year. So, it appears exports may exceed these higher projections.

The second primary factor creating uncertainty in the commodity markets is planted acreage in the United States. The trade clearly has been concerned about total global soybean production this year, and has consequently rallied the price of soybeans in Chicago by $2.00 a bushel. This rally, along with corn planting delays in the eastern corn belt might be enough to cause a substantial acreage switch from corn to soybeans thinks Darrel Good, and if does happen, and there are fewer prevent plant acres than normal, it is possible total corn and soybean acreage in the June USDA report could be greater than the projection made in March.

Given all of this, summer weather in the Midwest will be the primary price driving factor concedes Good.

Good :45 …would be expected this summer.

Quote Summary - The largest uncertainty in both markets is the likely level of yields here in the U.S. this year. At this stage in the growing season there is little indication of how yields may deviate from trend values, estimated by USDA at 168 bushels for corn and 47.6 bushels for soybeans. We continue to believe there is a higher than normal risk of yields falling below trend value due to the history of warmer, drier summers following extremely warm winters. That risk may also be elevated by the rapidly fading El Nino event. If this assessment is correct, higher corn and soybean prices would be expected this summer.

…providing a better opportunity for pricing 2016 production. Here’s how Darrel Good sees this playing out. He says the risk of waiting for a summer price rally before aggressively pricing the 2016 crops is probably larger for soybeans than for corn for several reasons. First, soybean acreage is likely to exceed intentions so that production could still be large even with a modest shortfall in yields. Second, soybean yields may be less vulnerable to stressful summer weather than corn yields. Third, soybean prices have increased more than corn prices in recent weeks and are now at a relatively high level compared to corn prices. Fourth, November 2016 soybean futures are now trading near $10.40, above the spring price guarantee of $9.73 for crop revenue insurance. Fifth, with trend yields, current new crop soybean prices are high enough to generate positive returns to owner -operators, those with crop share rents, and those with modest cash rents.

In contrast, corn acreage may be less than intentions, yields are more vulnerable to adverse summer weather, recent price strength has been modest, and December 2016 futures are currently trading only modestly above the spring price guarantee of $3.86 for crop revenue insurance. While waiting for a price that offers a positive return has some risk, the risk for corn seems limited over the next several weeks says Darrel Good.

Good :40 … of the price rally, should it occur.

Quote Summary - If a summer price rally does occur, producers will likely want to aggressively price the 2016 crop. In addition, history suggests that a weather market would also result in opportunities for pricing 2017 crops and beyond. A weather market would likely result in smaller price increases for those crops than for the 2015 and 2106 crops, similar to the recent price pattern. From the close on March 31 to the close on May 20, July 2016 corn futures gained almost $0.39, while December 2016 and December 2017 futures gained $0.31 and $0.24, respectively. From the close on March 1, July 2016 soybean futures gained $2.10, while November 2016 and November 2017 futures gained $1.79 and $0.88, respectively. Still, prices for those deferred crops could move to levels reflecting positive returns for most producers. How aggressively to price multiple crops depends on the magnitude of the price rally, should it occur.

One final note here, Darrel Good, as you may have made noticed, thinks pricing out this year’s soybean crop on the current rally is likely a good idea. He’d be far more patient with corn.

Tuesday, May 17, 2016

$4.20 Corn Needed to Stabilize Grain Farm Income

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$4.20 Corn Needed to Stabilize Grain Farm Income
Gary Schnitkey, Extension Agricultural Economist - University of Illinois
link to article online

Grain farmers throughout the Midwest are suffering through a third straight year of losses and prices don’t look to go high enough, yet, to stabilize net incomes. A University of Illinois study suggests the cash price of corn needs to be $4.20 a bushel to make that happen. Todd Gleason has more…

It’s been a rough couple of years and grain farmers…
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2:13 radio self contained
1:59 tv
2:19 tv cg

It’s been a rough couple of years and grain farmers need higher prices to stabilize their operations. Stable means $60,000 in on and off farm income on a 1500 acre corn and soybean farm in central Illinois says University of Illinois Agricultural Economist Gary Schnitkey.

Schnitkey :25 …see gains in net income and financial stability.

Quote Summary - To have that happen prices have to be a $4.20 for corn, $10.20 for soybeans. If we have those prices, and lower yields, then we can expect to see financial working capital deteriorate and we are above those we can expect to see gains in net income and financial stability.

That is to say, if the price of corn is $4.20 and the crop is below average, the farm wouldn’t be financially stable. By the way, the $60,000 net income isn’t an arbitrary number.

Schnitkey :25 …between financial stability and not financial stability.

Quote Summary - No, we look at our Illinois FBFM records and at that level we farmers able to make investments that need to be made, withdrawing some level of for family living expenses, and for repaying debt. So, this is the breakeven level between financial stability and not financial stability.

The key to quantifying this work says Gary Schnitkey is to look at prices in August. This is because we’ll be close enough to harvest to have a pretty good idea about actual cash prices for the crop, and looking forward to the 2017 season.

Schnitkey :10 …cutting costs for the 2017 production.

Quote Summary - So, if we are $4.00 and below corn prices, then we are going to have to look pretty hard, again, and cutting costs for the 2017 production.

It all means grain farmers throughout the nation may need to be wary of the price of corn in Chicago, and take advantage of rallies as they happen.

Thursday, May 12, 2016

Marestail Control Prior to Planting

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Marestail Control Prior to Planting
Aaron Hager, Extension Weed Scientist - University of Illinois
link to article online

Farmers in Illinois, other states too, are struggling to control glyphosate resistant weeds. Todd Gleason has more on marestail.

Marestail can be one of the most challenging…
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1:20 radio self contained

Marestail can be one of the most challenging under no-till conditions prior to planting soybeans. More often than not farmers are using a tank mix of glyphosate and 2,4-D (two-four-dee). Sometimes the problem is that the weed is already too big to control, at others says University of Illinois Extension Weed Scientist Aaron Hager is its just that the 2,4-D isn’t doing the job any better than the glyphosate.

Hager :37 …of the tank mix that still has activity.

Quote Summary - Well, there are some alternatives that can be used for control of mares tail in a burn down scenario. A product called Sharpen could be included with glyphosate/2,4-D to try to increase the efficacy on the marestail and if that is the case be sure to include a methylated seed oil with any application that has Sharpen with it. Or alternatively you could switch completely over to something like a glufosinate product, like a Liberty or Interline containing product or something like Gramoxone. Either of those will typically perform better when used in combination with metribuzin and probably 2,4-D in the tank as well.

Tillage is another option, however, Hager says to delay it until field conditions are suitable and be sure to till deep enough to completely uproot all existing vegetation.

Wednesday, May 11, 2016

Summer Weather, El Niño, & Corn Yields

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Summer Weather, El Niño, & Corn Yields
Scott Irwin, Agricultural Economist - University of Illinois

The agricultural economists at the land grant university in Illinois have gone through 56 years of weather data to see if there is any connection between the current El Niño event and trend yields for corn. Todd Gleason has more…

The ag economists at Illinois say the trend…
2:59 radio
3:13 radio self contained

The trend yield for corn has been going up 1.8 bushels per yer for about 50 years say the number crunchers from the University of Illinois. It means, under normal weather conditions with a little adjustment upward, this year’s corn crop should average 166.2 bushels to the acre nationwide.

U.S. Average Corn Yield, 1960-2015
U.S. Average Corn Yield, 1960–2015

The 166.2 is the norm, but it lives within a range that would be indicative of really good years like 2004 and really bad years like 2012 says U of I’s Scott Irwin.

Irwin :14 …doesn’t happen every year that we call El Niño.

Quote Summary - And now what we want to ask is if we should skew our expectations of this risk given this outside factor that doesn’t happen every year that we call El Niño.

ILLINOIS’ research suggests the answer to this question is a qualified yes. The qualification is that the El Niño event is measured strictly as an effect of water temperature in the Pacific Ocean near the equator and that only the most extreme of these events, those a full degree or more centigrade above the norm for three months running, would be considered strong enough to regularly have a real measurable impact on U.S. crops.

Irwin :39 …we called the pre-season periods for corn production.

Quote Summary - The warmest one, to date, was 1997/98 and it peaked at 2.3 degrees centigrade above normal. So if you take the same period and you estimate trend yields going back to 1960 there were 11 El Niño episodes where we were at least one centigrade degree above normal and, this is the key, we filtered the data so that these spikes had to occur in what we called the pre-season periods for corn production.

This would be from September to March prior to the crop year. It is exactly what has happened this year and the spike is more than two degrees centigrade. It’s a really big one.

Irwin :14 …four to five bushels below trend.

Quote Summary - What we find is, in these big spiking El Niños that occur in the pre-season period, that corn on average is about 4 to 5 bushels to the acre below trend.

Having said that, Irwin points to a large range of occurrences from 11 bushels above trend in 1992 to 23 bushels below trend in 1982. 1988 and 2012, the two worst drought years, also count under this construct.

Trend Deviations for U.S. Average Corn Yield, 1960-2015
Trend Deviations for U.S. Average Corn Yield, 1960–2015

The model used very reliably predicts summer heat waves, however, it is not so great at determining the amount of rainfall. Recall the reference Irwin made to the 1997/98 pre-season El Niño, the largest on record, similar to this year. The national corn yield was 3 bushels to the acre above trend. The heat wave came, it was just very last in August and early September after the corn crop had been made.

Monday, May 9, 2016

What's with all the Yellow Flowers in the Fields

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What’s with all the Yellow Flowers in the Fields
Aaron Hager, Weed Scientist - University of Illinois

If you’ve been driving around a good part of the nation you’ll have noticed a lot of yellow flowers in the fields. Todd Gleason has more on this springtime show.

Mostly you’ll see these yellow flowers in fields…
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1:27 tv
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You’ll see the bright color in fields stretching from Texas east to Florida, northward along the Atlantic coast to Virginia, and back west to Nebraska. It’s butterweed says University of Illinois Weed Scientist Aaron Hager.

Hager :14 …these very bright showy yellow flowers.

Quote Summary - And butterweed is typically a species that germinates in the fall. It will overwinter as a small rosette of leaves and then about late April to the early part of May it bolts and produces these very bright showy yellow flowers.

The bad news for farmers is that because the plant has flowered it is going to get much harder to control.

Hager :37 …made during the rosette stage or early growth stages.

Quote Summary - So, when you see the flowers of these winter annual species, that typically means these plants are nearing the completion of their life cycle. So, we see the bright yellow flowers now, but in a few weeks those flowers would be replaced with a white tuft of seed at the top of the plant. Many times on the larger plant, simply because of how large they are and how close they are to completing their lifecycle, some of the burn down herbicides can tend to struggle as compared with the level of control we would see when these applications are made during the rosette stage or early growth stages.

No doubt farmers will find a way, they always seem to, to control these yellow beauties. In the meantime you might take a ride and enjoy the show.

Summer Weather, El Niño, & Corn Yields

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Summer Weather, El Niño, & Corn Yields
Scott Irwin, Agricultural Economist - University of Illinois

The agricultural economists at the land grant university in Illinois have gone through 56 years of weather data to see if there is any connection between the current El Niño event and trend yields for corn. Todd Gleason has more…

The ag economists at Illinois say the trend…
2:59 radio
3:13 radio self contained

The trend yield for corn has been going up 1.8 bushels per yer for about 50 years say the number crunchers from the University of Illinois. It means, under normal weather conditions with a little adjustment upward, this year’s corn crop should average 166.2 bushels to the acre nationwide. The 166.2 is the norm, but it lives within a range that would be indicative of really good years like 2004 and really bad years like 2012 says U of I’s Scott Irwin.

Irwin :14 …doesn’t happen every year that we call El Niño.

Quote Summary - And now what we want to ask is if we should skew our expectations of this risk given this outside factor that doesn’t happen every year that we call El Niño.

ILLINOIS’ research suggests the answer to this question is a qualified yes. The qualification is that the El Niño event is measured strictly as an effect of water temperature in the Pacific Ocean near the equator and that only the most extreme of these events, those a full degree or more centigrade above the norm for three months running, would be considered strong enough to regularly have a real measurable impact on U.S. crops.

Irwin :39 …we called the pre-season periods for corn production.

Quote Summary - The warmest one, to date, was 1997/98 and it peaked at 2.3 degrees centigrade above normal. So if you take the same period and you estimate trend yields going back to 1960 there were 11 El Niño episodes where we were at least one centigrade degree above normal and, this is the key, we filtered the data so that these spikes had to occur in what we called the pre-season periods for corn production.

This would be from September to March prior to the crop year. It is exactly what has happened this year and the spike is more than two degrees centigrade. It’s a really big one.

Irwin :14 …four to five bushels below trend.

Quote Summary - What we find is, in these big spiking El Niños that occur in the pre-season period, that corn on average is about 4 to 5 bushels to the acre below trend.

Having said that, Irwin points to a large range of occurrences from 11 bushels above trend in 1992 to 23 bushels below trend in 1982. 1988 and 2012, the two worst drought years, also count under this construct.

The model used very reliably predicts summer heat waves, however, it is not so great at determining the amount of rainfall. Recall the reference Irwin made to the 1997/98 pre-season El Niño, the largest on record, similar to this year. The national corn yield was 3 bushels to the acre above trend. The heat wave came, it was just very last in August and early September after the corn crop had been made.

Wednesday, May 4, 2016

Falling Cattle Prices, Where Is the Bottom

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Falling Cattle Prices, Where Is the Bottom
Chris Hurt, Agricultural Economist - Purdue University Extension

The price of cattle has been on a downward spiral for months and ranchers and farmers are wondering when it’ll hit bottom. Todd Gleason has more on the coming prospects for the price of beef.

Cattle prices have had a rough spring…
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3:22 radio self contained

Cattle prices have had a rough spring. After peaking in late 2014 and early 2015, prices have been adjusting downward from very lofty peaks writes Purdue University Extension Agricultural Economist Chris Hurt on the FarmDocDaily website. He says this is because back then high prices and the lure of profits caused beef producers to build the national herd.

Hurt :14 …downward price pressure is expected this summer.

Quote Summary - Expanding beef production and a remarkable recovery in total meat supplies continues to put downward pressure on cattle prices. Unfortunately, more downward price pressure is expected this summer.

Beef production, this year, is up three percent. About one percent of that three is from more cattle, the other two comes from heavier market weights. The weights have averaged 1378 pounds in the first four months of the year. This is 26 more pounds than last year and 48 pounds more than two years ago at this same time.

So, more cattle are coming to market and each one of them weighs more, but it’s not the only factor pressuring the price of beef cattle says Hurt.

Hurt :22 …6% more pounds per person, just in the last two years.

Quote Summary - There is also more competition for beef this year as meat supplies recover from 2014 lows. Factually, meat supplies are up by 13 pounds per capita in the United States since 2014. This over 6% more pounds per person, just in the last two years.

With the cash price of finished cattle already in the mid-$120s, the futures market is suggesting declining prices will continue into the summer and beyond. Current futures forecast are for finished cattle prices to average about $122 in the second quarter and then drop toward an average of only $112 in the third quarter and $113 in the final quarter of 2016. These are in sharp contrast to USDA forecasts $20 higher for the final two quarters of the year. Perhaps prices somewhere between these two extremes are most likely thinks the Purdue ag economist.

One thing is clear, cattle prices are adjusting to more moderate levels after the spike of 2014 and early 2015. This adjustment process is of large magnitude and markets have lost their historic benchmarks. For these reasons, there are dramatic differences of opinion about the level of longer-term prices.

Hurt :22 …for finishing 500 to 600 pound calves

Quote Summary - I think this means that cattle finishers need to remain cautious about overpaying for calves. Iowa State University’s calculated cattle feeding losses for closeouts in March 2016 were still estimating losses of nearly $300 per head for finishing calves for finishing 500 to 600 pound calves.

Cow-calf producers need to reconsider their expansion plans says Hurt. With current live cattle futures prices and with feed prices showing signs of some strength, calf prices are less likely to be high enough to provide profitable returns from retention of more heifers. Overall, it appears that the expansion of the beef herd will begin to slow in the second half of this year.