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Monday, February 27, 2017

Estimated 2016 ARC-CO Payments

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Estimated 2016 ARC-CO Payments
Gary Schnitkey, Agricultural Economist - University of Illinois

The National Agricultural Statistics Service (USDA-NASS) has released the county yields for the 2016 crop year. Todd Gleason tells us these, along with some other estimates, can be used to project the ARC-County (ark) payments farmers and landowners around the nation will receive in October.

ARC-County payments are part of the federal…
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ARC-County payments are part of the federal government’s safety net program for American farmers authorized in 2014. The final calculations for the payments to be made this fall won’t be completed for another six months, but Gary Schnitkey from the University of Illinois says there is enough information available to make a good guess at the numbers.

Schnitkey :16 …there are some larger payments as well.

Quote Summary - There are some larger payments on ARC-County for corn. Those occur mainly in the eastern corn belt. Ohio gets larger payments. Along the Ohio River there are some larger payments, and down the Mississippi River there are some larger payments as well.

These are the exceptions across the nation. Schnitkey says a rough rule of thumb is that those areas with county-wide corn yields seven percent above average will not receive a payment. Most counties fall into this category. The same goes for soybeans. Wheat producers mostly east of the Mississippi River, however, may receive a substantial ARC-County payment. There are maps of the projected corn, soybean, and wheat ARC-County payments on the farmdocDaily website.

Friday, February 24, 2017

Estimated 2016 ARC-CO Payments

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Estimated 2016 ARC-CO Payments
Gary Schnitkey, Agricultural Economist - University of Illinois

FOR BROADCAST

(Thursday, Feb 23, 2017) Yesterday the National Agricultural Statistics Service (USDA-NASS) released the county yields for the 2016 crop year. These, along with some other estimates, can be used to project the ARC-County (ark) payments farmers and landowners around the nation will receive in October. Todd Gleason has more from the University of Illinois…

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FOR WEB

Read Full Article

On February 23rd, the National Agricultural Statistical Service (NASS) released county yields for the 2016 crop year. With these yield estimates, fairly accurate estimates of 2016 Agricultural Risk Coverage at the county level (ARC-Co) can be obtained. We present maps showing estimated payments per base acre for corn, soybeans, and wheat. Also shown are maps giving 2016 county yields relative to benchmark yields. A table showing estimated payments per county in Illinois also is presented.



Procedures Payments for 2016 are still estimates and will vary from those presented here for the following reasons:

• Farm Service Agency (FSA) uses different yields than NASS when calculating ARC-CO payments. Where NASS data is available, the NASS yield generally will be higher than those used by FSA. As a result, estimated payments should be viewed as conservative.

• Market Year Average (MYA) prices are not known because the marketing year does not end until August for corn and soybeans and May for Wheat. MYA estimates used in these projections are $3.50 per bushel for corn, $9.60 per bushel for soybean, and $3.85 per bushel for wheat. Ending MYA prices are likely to vary from these estimates.

• Sequestration amounts may differ from those used here. The ARC-CO payments estimated here use the 6.8% sequestration reduction applied to the 2014 and 2015 payments. The sequestration amount may differ from the 6.8% estimate.





Thursday, February 23, 2017

Global Trade of Agricultural Commodities Expected to Grow

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Global Trade of Agricultural Commodities Expected to Grow
Robert Johannson, Chief Economist - United States Department of Agriculture

China purchases two-thirds of the soybeans traded on the planet. Todd Gleason has more on this and other markets for U.S. crops.

Over the next ten years, USDA expects global soybean…
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Over the next ten years, USDA expects global soybean trade to increase by 25% and that Chinese purchases will account for 85% of the increase. The numbers were presented at the Agricultural Outlook Forum in Washington D.C., (today, Thursday, Feb 23, 2017) by USDA Chief Economist Rob Johannson. He says the projections are based on the assumption the number of middle-class households in China will double to nearly 250 million by the year 2024.

Johannson :14 …India is expected to triple by 2024.

Quote Summary - Those households will start demanding more meat, protein, and processed foods in their diet. And looking to other potential markets that could provide significant new demands for food commodities, we note that the number of middle-class households in India is expected to triple by 2024.

Johannson says the United States has not had nearly as much success in opening new markets in India as it has in China. He thinks poultry, eggs, fruit, and milk have the greatest potential. The estimated annual growth in poultry meat, he explains, could exceed eight percent. That kind of livestock trade across the planet the Chief Economist explains will require grain and oilseed farmers to expand acreage.

Johannson :10 …to meet the increase in trade demand.

Quote Summary - Based on projected yield growth, the world will need to allocate about 50 million more acres of corn, wheat, and soybeans at U.S. productivity growth levels to meet the increase in trade demand.

The United States says Johannson is expected to remain the world’s largest exporter of corn over the next ten years with the U.S. share between 38 and 39 percent. Brazil is expected to remain the world’s largest soybean exporter with its share of exports growing to over 50 percent by the year 2026.

February Application of NH3 O.K.

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VOICER
February Application of NH3 O.K.
Emerson Nafziger, Extension Agronomist - University of Illinois

The warm weather in the Midwest has farmers itching to go to the field to get some pre-season work done. University of Illinois Extension Agronomist Emerson Nafziger says it is ok to apply anhydrous ammonia to corn acres.

Nafziger :16 …that’s the most important thing.

Quote Summary - It is o.k. to do it. I would liken it more to a fall application than a spring application. The good news is soil conditions are pretty good right now because we haven’t had much rain (across the state) in February. That’s the most important thing.

Again, Nafziger says as long as soil conditions are good, a late winter anhydrous ammonia application should work just like a fall application.

Wednesday, February 22, 2017

2017 Corn Prospects

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2017 Corn Prospects
Todd Hubbs, Grain Markets Specialist - University of Illinois

The grain marketing specialist at the University of Illinois has been thinking a lot about the coming growing season. Todd Gleason has more on how the balance sheet for corn may look.

A balance sheet is just what it sounds like…
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A balance sheet is just what it sounds like. It adds up on the available supplies and then subtracts all of the demand. It is often times called a supply and demand table. The grain markets specialist at the University of Illinois has been developing his S&D table for corn. It starts, says Todd Hubbs, with the number of acres he believes farmers will plant this year.

Hubbs :19 …it may even come in a little bit higher.

Quote Summary - When I look forward into 2017/17 on the supply side I see a reduction in corn acreage. I put it at 91.5 which is a 3.5 million acre reduction from 2016. It could be more than that, the numbers are all over the place, but that’s a fair estimate. It may even come in a little bit higher.

The first number, then, in the new crop corn balance sheet is 91.5 million acres with an expectation that 83.2 million of those will be harvested. Hubbs uses a trend-line yield of 169 bushels to the acre despite the fact the last three growing seasons have produced above average yields.

Hubbs :14 …have is about 14.1 billion bushels for 2017.

Quote Summary - I’m going to stick with the trend expectations for right now. I don’t think it is time to abandon that kind of thinking. So when you put those two together the crop projection I have is about 14.1 billion bushels for 2017.

When you add USDA’s 2.32 billion bushel corn carryout from this year and 50 million bushels of corn imports for next year to the 14.1 number, it tallies 16.4 billion bushels of total supply.

Hubbs :40 …strong exports we’ve seen of ethanol over the last year.

Quote Summary - On the demand side, I actually see ending stocks coming down in 2017/18 from what they are in 2016/17. We’ve had really strong consumption. I see corn used for ethanol trending up a little bit. We’ve seen a gradual move up year-over-year for the last five years. Now while we don’t see massive growth in it, there is a slight (upward) trend in it. I put it at about 5.4 billion bushels mainly based on Energy Information Agency (EIA) expectations of gasoline consumption, gas prices, and the relatively strong exports we’ve seen of ethanol over the last year.

While the number of bushels of corn used to make ethanol is trending higher in Todd Hubbs’ balance sheet, corn exports are lower. He’s thinking 1.95 billion bushels because Brazil should fill back in the export hole its poor corn crop created last year. Oh, and that number also assumes there won’t be a trade policy problem in the coming year. The remaining demand figure is domestic usage called feed and residual. The University of Illinois number cruncher puts it at 5.5 billion bushels. These all add up to 14.3 billion bushels of demand. When you subtract it from the available supply, 2.131 billion bushels are leftover. Right now Todd Hubbs thinks each of those bushels of corn will be worth $3.70 in the cash market.

2017 Corn Prospects | an interview with Todd Hubbs

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2017 Corn Prospects | an interview with Todd Hubbs
Todd Hubbs, Grain Markets Specialist - University of Illinois

sources
FarmDocDaily Article
Congressional Budge Office (CBO) Projections
USDA Long-Term Projections, February 2017

by Todd Hubbs, Grain Specialist - University of Illinois

The time of year to develop corn balance sheet projections for the upcoming crop year is upon us. As we approach the halfway point of the 2016–17 marketing year, decision making regarding planting and new crop marketing get determined. The expectations for corn in the 2017 crop year put forth in this analysis show lower production leading to decreased ending stocks in 2017–18. The magnitude of reduced ending stocks provides important implications for corn prices moving through 2017–18.

Current market consensus projects farmers to plant fewer corn acres in 2017 than the 94 million acres planted in 2016. As discussed previously, numerous factors point toward greater soybean acreage and lower corn acreage in 2017. These include lower winter wheat seedings, a lower cost of production for soybeans, and the current perceived price advantage for soybeans over corn. Congressional Budget Office (CBO) projections for baseline farm programs released last month set planted acreage at 91.5 million acres. Current USDA long-term baseline projections to 2026 have 2017 planted acreage for corn at 90.0 million acres. A reduction of 3.5 million acres from 2016, which places planted acreage at 91.5 million acres, is used in this analysis. Planted acreage at 91.5 million acres would lead to around 83.2 million acres harvested for grain in 2017.

Yield expectations typically use trend yield analysis to generate yield projections for the next crop year. National average corn yield came in above trend for the last three growing seasons and culminated in an estimated 174.6 bushels per acre in 2016. CBO projections place 2017 corn yield at 170 bushels per acre. USDA long-term baseline projections set 2017 yield at 170.8 bushels per acre. We find a linear trend of actual U.S. corn average yields from 1960 forward to be the best fit. The trend explains 89 percent of the annual variation in corn yields from 1960–2016. Weather conditions, as one would expect, impact yields. Bad weather reduces yield by more than good weather increases yield. Since this is the case, trend estimations can understate yield expectations in an average weather year. The trend estimate for 2017 is 166.8 bushels per acre. By adjusting the trend estimation for weather influences, we generate a national corn yield expectation of 169 bushels to use in this analysis. At this yield level, the 2017 crop projection is 14.1 billion bushels. By including the current projections for ending stocks by the USDA of 2.32 billion bushels with 50 million bushels of imported corn, the 2017 corn supply comes in at 16.4 billion bushels. The 2017 corn supply estimate is approximately 509 million bushels less than the current marketing year supply estimation.

2017–18 marketing year expectations for consumption exceed projected production, which leads to a lower level of ending stocks by the end of the marketing year. The size of the decline is important for determining price as we move through the next marketing year. Exports, ethanol production, feed and residual, and other domestic uses determine the consumption of corn. U.S. corn exports vary considerably from year to year. In the last decade, corn exports ranged from a low of 730 million bushels in the 2012–13 marketing year to 2.44 billion bushels in 2007–08. Corn exports will be influenced by trade policy, world corn production, economic growth, and exchange rates. Current 2016–17 marketing year corn export projections sit at 2.225 billion bushels, which were helped by lower corn production in South America in 2016. Current corn production projections for Brazil (3.41 billion bushels) and Argentina (1.44 billion bushels) are up 29 percent and 26 percent respectively in 2017. World production projections come in 8 percent higher for 2017. While U.S. corn exports will continue to be strong, 2017–18 projections reduce corn exports in this analysis to 1.95 billion bushels on larger foreign corn production.

Corn used for ethanol production will be impacted by EPA rulemaking related to implementing RFS mandates, gasoline consumption, and ethanol exports. An expectation of increased fuel ethanol requirements and slight increases in gasoline consumption with a positive ethanol trade balance provide support to the continued increase in corn used for ethanol. Corn used for ethanol expectations increase to 5.4 billion bushels in the 2017–18 marketing year. Other domestic uses for corn do not vary significantly from year to year. With a slight increase, other domestic use expectations provide 1.45 billion bushels of corn use.

The pace of corn consumption for feed likely will continue to show strength in the 2017–18 marketing year. Livestock production growth in many sectors provides support for corn feed use during this marketing year. Despite strong livestock production, several factors may limit corn feed use moving forward. The increase in ethanol production increases distiller’s grain availability. Increased availability of feed grains across the board may suppress some corn feed use. Residual use of corn could be reduced if the 2017 crop is smaller than the 2016 level. Feed and residual use might be near 5.5 billion bushels.

Current expectations for corn consumption in the 2017–18 marketing year are 14.3 billion bushels. Ending stocks would be 2.131 billion bushels, which is 189 million bushels lower than the current 2016–17 marketing year projections. Based on the analysis of corn production and consumption expectations, season average market price comes in at the $3.65 - $3.75 range for the 2017–18 marketing year.

Casting a Data Science Company | an interview with Robb Fraley

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Casting a Data Science Company | an interview with Robb Fraley
Robb Fraley, Chief Technology Officer - Monsanto

Monsanto used to be a chemical company that made herbicides. It then transitioned to a genetic-traits company that produced seeds. Now, as it is set to merge with Bayer, the Chief Technology Officer for Monsanto looks to be casting the St. Louis based agricultural giant into the data-science world of Apple and Samsung. Todd Gleason has this interview with Robb Fraley from the 2017 Illinois Soybean Summit in Peoria.

Wednesday, February 15, 2017

2017 Projected Incomes on Illinois Grain Farms

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2017 Projected Incomes on Illinois Grain Farms
Gary Schnitkey, Agricultural Economist - University of Illinois

A new article from the University of Illinois projects lower farm incomes in the state this year. Todd Gleason has more…

Net incomes for Illinois grain farms are projected to be lower…
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Net incomes for Illinois grain farms are projected to be lower this year than last. If this University of Illinois estimate holds, writes agricultural economist Gary Schnitkey on the farmdocdaily website, the weakening financial position of farms in the state will worsen. The last half decade has really changed the financial picture for farmers says Schnitkey.

Schnitkey :35 …enough to maintain the financial position of farms.

Quote Summary - So we had high incomes from 2010 to 2012 and every year since 2012 we’ve been on a downward trend through 2015. This is when we hit a $500 per farm average net income on Illinois grain farms enrolled in FBFM. This is very low and the lowest through the entire period we’ve examined. Obviously this is not enough to maintain the financial position of farms.

Schnitkey evaluated FBFM net income records going back to 1996. FBFM stands for Farm Business Farm Management and is a record keeping service for farmers. The service has not yet summarized net incomes for 2016. However it is projecting a substantial rebound.

It appears net income for grain farms in the service will average somewhere between forty and fifty-thousand dollars. There are three primary reasons for this says Schnitkey.

Schnitkey :34 …along with very good ARC County payments.

Quote Summary - What lead to it was higher than trend line yields. USDA estimates the statewide corn yield at 197 bushels per acre. Just three bushels off the record yield set in 2014 of 200 bushels. Soybean yields averaged 59 bushels. It is a record setting yield. Both of those record setting yields lead to higher incomes in 2016 along with very good ARC County payments.

Those are two of the three factors leading to a better 2016. The high yields and sizable ARC County payments - that’s the farm safety net from Washington D.C. - aren’t likely to be repeated this season. The third factor very well could be repeated. It is lower input costs including cash rents and fertilizer. It won’t be enough thinks Schnitkey.

Schnikey :20 …something in the $20,000 range per farm.

Quote Summary - For 2017 we used trend yields and commodity prices of $3.80 for corn and $9.90 for soybeans that resulted in lower incomes for the year. Probably something in the $20,000 range per farm.

Schnitkey cautions it is very early in the season, and that at this same time last year 2016 was projected to be a very, very bad year. It rebounded. It is also important to note that while higher than 2015 incomes, the projected 2016 incomes do not result in the building of financial reserves on most Illinois farms. Schnitkey believes most farms will continue to see the erosion of working capital, potentially leading to the need to refinance outstanding operating loan balances.

Monday, February 13, 2017

2017 Soybean Prospects

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2017 Soybean Prospects
Todd Hubbs, Agricultural Economist - University of Illinois

Farmers around the nation are expected to plant more soybeans than usual this spring. There are many reasons this might be the case, but only one price outcome if things on the planet remain the same. Todd Gleason has more from the University of Illinois.

Supply and demand drive price…
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Supply and demand drive price. It is a simple concept, and one farmers deal with every day. However, trying to forecast supply and demand is much harder. Todd Hubbs from the University of Illinois starts each season by considering where price might go if supply and demand remain as expected. He’s posted his 2017/18 marketing year soybean forecast to the farmdocdaily website. The agricultural economist says there are three things he sees.

Hubbs :23 …for 2017/18 based on those numbers.

Quote Summary - Increased acreage. Increased ending stocks. Lower prices. Now, just how much lower is the question. Because we still have the whole growing season ahead of us this is very high-level speculation. I’m putting the average farm price for soybeans in 2017/18 from $8.90 to $9.10 based on those numbers.

Having said that, Todd Hubbs believes two things could mitigate the price decline. A bad crop year in the United States is one of them, better than expected soybean exports from now until fall is the other. He thinks USDA’s 2.05 billion bushel soybean export figure for this marketing year is right and, if it is, he says the ending stocks should be 420 million bushels.

Hubbs :38 …I’m sticking with that four-twenty.

Quote Summary - We’ve seen strong exports. It would be nice if the ending stocks number would come down, but I believe there is good reason to have caution now. This is based on what’s happening in Brazil. If we see U.S. exports exceed 2.05 billion bushels we will see a smaller ending stocks number for the 16/17 marketing year. It would be nice for prices. I think it will be one of the keys to price moving forward, but right now I’m sticking with that four-twenty.

And if that number doesn’t move, and the U.S. has a good soybean crop well says Hubbs.

Hubbs :08 …that’s where I’m bringing it in at.

Quote Summary - That’s it. I don’t see any other way out of this scenario, and that’s the most likely scenario. So, that’s where I’m bringing it in at.

Bringing it in with a lower price that should, in theory, stimulate greater consumption.

2017 Soybean Prospects | an interview with Todd Hubbs

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2017 Soybean Prospects | an interview with Todd Hubbs
Todd Hubbs, Agricultural Economist - University of Illinois

There are three points University of Illinois agricultural economist Todd Hubbs says farmers need to remember about soybeans this year; acreage, stocks, and price.

The Mild Winter & Spring Insects

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The Mild Winter & Spring Insects
Kelly Estes, Entomologist - PRI ISWS - University of Illinois

The very mild winter in Illinois has caused many people to wonder if there will be more bugs to contend with this spring. Todd Gleason has more on the outlook with a University of Illinois based entomologist.

Stink Bugs Invading Illinois Homes

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Stink Bugs Invading Illinois Homes
Kelly Estes, Entomologist - PRI ISWS - University of Illinois

A new kind of stink bug is making a big move in Illinois. Todd Gleason files this report on why people are finding the shield-shaped insect in their homes, and how the bugs may impact yards, gardens, and farms.

Monday, February 6, 2017

Consider Using ARP for Soybeans

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Consider Using ARP for Soybeans
Gary Schnitkey, Agricultural Economist - University of Illinois
farmdoc daily source article

It seems likely the price of soybeans at harvest this fall could be much lower than it is now. Todd Gleason reports one of the options a farmer might consider because of this potential is choosing a different crop insurance plan.

Federal crop insurance comes in two basic revenue protection…
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Federal crop insurance comes in two basic revenue protection forms, R-P and A-R-P. R-P stands for Revenue Protection and A-R-P stands for Area Risk Protection. The difference between the two says University of Illinois Agricultural Economist Gary Schnitkey is simple enough to understand.

Schnitkey :23 …rather the farm yield for RP.

Quote Summary - RP is what most people buy, Revenue Protection. It is a farm level product and makes payments based on what happens to farm yields. ARP is a county level product. So, it makes payments on what happens to county wide yields, county revenue, but it is the county yield that is entered into the equation rather the farm yield (as is the case) for RP.

It is the available coverage level under the ARP federal crop insurance option that put Schnitkey’s mind to work when he was considering how farmers should use the risk management program this season.

Schnitkey :23 …guarantee would cover more of that price risk

Quote Summary - So, ARP? The reason why I think farmers should consider it is because they have a 90% coverage level in ARP versus only 85% on ARP. This year, you know, we are probably looking at some more downside risk on soybeans and a 90% guarantee would cover more of that price risk.

Moving up to a 90% coverage level increases the price below which crop insurance payments occur. Given a $10.20 projected February price and a 90% coverage level, harvest prices below $9.18 a bushel for soybeans in November ($10.20 x .90) would generate payments, given that the harvest yield equals the guarantee yield. The $9.18 price compares to an $8.67 break-even price at an 85% RP coverage level, and an $8.16 break-even at an 80% coverage level.

There are some caveats when switching from RP to ARP.

Schnitkey :13 …prevented planting or replant payments.

Quote Summary - The thing you give up is farm level coverage. So, you want have your individual yields covered and you also want have prevented planting or replant payments.

Again, ARP does not have prevented planting or replant payments while RP does. The coverage on ARP begins when the crop is planted. Because ARP uses county yields in its calculations, a farm may not receive a payment if the farm has a poor yield and the county does not. The relative premiums on RP and ARP vary across counties. Not all counties will have a 90% ARP premium that is lower than the 85% RP policies.

Finally, here’s an important note about the crop insurance guarantee from Gary Schnitkey. The CME Group soybean contract for November 2017 delivery currently is trading around $10.20 per bushel. A $10.20 per bushel projected price would be $1.35 higher than last year’s projected price of $8.85 per bushel. In and of itself, a higher projected price will offer additional revenue protection on soybeans without the need to consider the merits of RP versus ARP.

Saturday, February 4, 2017

UofI Alum Propst Elected IPPA President

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UofI Alum Propst Elected IPPA President
Jason Propst, Hog Producer & President IPPA - Neoga, Illinois

A University of Illinois Animal Sciences alum has been elected president of the Illinois Pork Producers Association.

New Fertility Products for the Hog Industry

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New Fertility Products for the Hog Industry
Rob Knox, Extension Swine Specialist - University of Illinois

Farmers raising pigs around the planet are always looking for ways to improve the productivity of their breeding herds. They have long used artificial insemination to increase fertility and improve genetics. Todd Gleason has more on the latest technologies in this area.

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If, like me, you visit with livestock producers very often you’ll soon land on the topic of the breeding herd. More likely than not the discussion will involve some novel approaches to increasing fertility. For instance I once covered some research that involved garage door openers. Turns out that if you can track how often a heifer is being mounted by its lot companions - other heifers - then you can better time when to put the bull in the pen. Just put the garage door opener on the heifers back and set up a computer to track how often and when it is clicked. That’s pretty simple technology. There’s some really intense stuff, too. I learned just a tidbit during the Illinois Pork Expo this year. Rob Knox told me about Post Cervical and Artificial Insemination…that’s P-C A-I for short, among other things.

Knox : ….into the market production animals.

Whoa… it is possible to increase fertility and improve genetics at a cheaper cost by using a new artificial insemination method that requires smaller amounts of semen. Cut to the chase - it’s possible to breed more sows with the same amount of semen. Consequently the farmer can purchase better genetics with which to improve the herd.

Rob Knox, by-the-way, is an Extension Swine Fertility Specialist based on the University of Illinois campus in Urbana-Champaign. It was at this point in the conversation that I started thinking about the improved fertility rates and the potential for this technology to be transferred into people. It happens all the time in animal sciences - blood pressure medicine is a good example - it came from work done at the University of Wisconsin to control rodents in dairy barns. So I asked Knox if P-C A-I might be used in humans. Turns out, the technology transfer went the opposite direction in this case.

Knox : …and a lot of that work came from the human side.

Cool stuff, huh, brought to you by science, research and discovery. How about that.

Friday, February 3, 2017

Online Financial Planning Webinar & Course

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Online Financial Planning Webinar & Course
Kathy Sweedler, Extension Consumer Economics - University of Illinois

There are two financial planning resources young people can access online from the University of Illinois College of Agricultural, Consumer, and Environmental Sciences. The first is a one-hour long webinar. The second a four-week course. Both are free of charge, although for a small fee a certificate can be earned from the course work.

Don't Wait Until You're Stressed to Open a Savings Account

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Don’t Wait Until You’re Stressed to Open a Savings Account
Kathy Sweedler, Extension Consumer Economics - University of Illinois

The time to start a savings account is today. Choosing to start saving when you are already under financial stress simply does not work.

Thursday, February 2, 2017

Corn Consumption Update

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Corn Consumption Update
Todd Hubbs, Agricultural Economist - University of Illinois

A University of Illinois agricultural economist has been thinking about the supply and demand for corn in the United States and elsewhere. Todd Gleason files this update on how fast the big crop harvested last fall is being used.

U.S. farmers harvested more than…
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U.S. farmers harvested more than fifteen billion bushels of corn last fall. That’s a very, very big crop. It is expected there will be more than the usual amount leftover from it by the time the next crop comes in. Todd Hubbs has been thinking a lot about that and how the corn crop is used. He says exports have been strong. Factually 69% of what USDA thinks will be shipped out, has either been shipped or booked, already. And, we’re not even half-way into the marketing year.

Hubbs :28 …it is a wait-and-see scenario in my mind.

Quote Summary - So, meeting that 2.25 billion bushels USDA projected for exports looks feasible right now, but we do have the South American crop coming on to compete. So far exports look strong. I am a little concerned about some of the policy issues surrounding our export market, but at this point it is a wait-and-see scenario in my mind.

Exports are the smallest primary component of corn consumption at a projected two-and-a-quarter billion bushels. Next up is ethanol at five-billion-three-hundred-twenty-five million. Those numbers suggest this sector is booming.

Hubbs :29 …will be pretty strong in the near-term.

Quote Summary - We’ve had record levels of ethanol production at over a million barrels per day for the last two months. The ethanol industry is putting out an incredible amount of ethanol. However, over the last couple of weeks we’ve seen ethanol stocks start to build. Which means the ethanol margins are starting to deteriorate. We could see production slow down some, but I still think the consumption pace we see for ethanol will be pretty strong in the near-term.

The last and largest segment of corn consumption to explore is feed usage. USDA in January estimated five-point-six billion bushels of corn would be fed to livestock. It is a really hard number to calculate says U of I’s Todd Hubbs.

Hubbs :30 ….has been reduced by 50 million bushels.

Quote Summary - You never know how much corn is being consumed as we move through the marketing year. Still, livestock numbers are up almost across the board. The hog herd is up. Broiler placements and egg settings are up one to two percent a week. So, when we look at the livestock sector there is a lot of livestock production going on. Having said that, the initial number USDA projected at the beginning of the marketing year has been reduced by 50 million bushels.

Some of that is because of competition to use the corn in the ethanol industry and some because of substitution. There is more available sorghum to feed and it can be cheaper than corn. In the near term Todd Hubbs says the consumption pattern should keep the price of corn in Chicago mostly in its current trading range. That’s somewhere between $3.40 and $3.70 per bushel.

Wednesday, February 1, 2017

Assessing Argentina Soybean Yield Risks | an interview with Todd Hubbs

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Assessing Argentina Soybean Yield Risks | an interview with Todd Hubbs
Todd Hubbs, Agricultural Economist - University of Illinois



by Todd Hubbs, Scott Irwin, and Darrel Good
source article

We recently began a series of articles to evaluate the history of corn and soybean yields and deviations from trend yield in Brazil and Argentina. The objective of the yield analysis is to provide a basis for forming expectations about the likely yields of the 2017 crops. The first six articles focused on the alternative sources of historical yield estimates, the selection of the appropriate series to use in the analysis for both corn and soybeans, the selection of the best-fitting trend model for each commodity and country, trend yield deviations in each country for corn, and trend yield deviations in Brazil for soybeans (farmdoc daily, November 2, 2016; November 9, 2016; November 16, 2016; December 14, 2016; December 15, 2016; and January 12, 2016). Today’s article examines soybean yield trend estimates and trend deviations for the Argentinian soybean crop. Since Argentina is the world’s third largest producer of soybeans and is the largest exporter of soybean meal and oil, yield and production prospects have important price implications.

Background

We begin by providing some perspective on regional soybean production in Argentina. The production map of Argentina from the USDA/FAS gives a visual sense of the concentration. The top three soybean production provinces consist of Buenos Aires, Cordoba, and Santa Fe. Table 1 presents soybean production by country from 1971 through 2016 and gives an indication of overall growth in soybean production in the world, and Argentina in particular. Soybean production in Argentina grew rapidly in the early 2000’s with a significant jump in 2001. Figure 1 presents the soybean acreage for Brazil and Argentina provided by USDA/FAS estimates from 1978–2016. Both nations exhibited large growth in soybean acreage over the sample period with Argentinian acreage leveling off at the end of the period. Current estimates place Argentina soybean acreage at 48.1 million acres this year.





Figure 2 presents the annual soybean yields in Argentina for the period 1978 through 2016. As previously discussed in the farmdoc daily article of November 16, 2016, we chose a linear trend to fit the soybean yield data for Argentina. Note that these yield estimates are provided by the USDA’s Foreign Agricultural Service (FAS) and are based on past trends, expert opinion, industry intelligence, and AgMin, the Argentinian Ministry of Agriculture, estimates. Yields have obviously trended higher over time. The linear trend indicates annual average yield increases 0.37 bushels for Argentina. A linear trend explains about 49 percent of the annual variation in actual yields in Argentina. The historical soybean yields in Argentina show large variation around the trend with an extended period of above trend yields from 1998–2003. The linear trend since 1978 explains a much smaller percentage of yield variation than is the case for the U.S. (81 percent) and Brazil (79 percent).



Historical Deviations

Historical deviations for Argentine soybean yields for the period 1978 - 2016 are shown in Figure 3. Over the 39-year period, the average soybean yield in Argentina was above trend in 22 years and below trend in 17 years. The largest deviation below trend was 9.79 bushels per acre in 2009. The largest positive deviation from trend was 5.80 bushels per acre in 1998. The average positive deviation was 2.66 bushels while the average negative deviation was –3.44 bushels. The deviation from trend is asymmetric with more years of positive trend deviation and larger magnitudes associated with negative trend deviations. This differs substantially from soybean trend deviations for Brazil. Since 2012, Argentinian soybean yields demonstrate a wide variation around trend with significant yield loss in 2012 and a large positive deviation in 2015. Based on the historical trend deviations, the unconditional probability of a negative deviation is 43.6 percent. If a negative deviation occurs, the unconditional probability of a negative deviation of greater than two bushels is 65 percent, and there is a 29 percent probability of a greater than four-bushel deviation. The probability of a negative yield deviation greater than two (four) bushels, then, is 28 (13) percent. Based on the historical trend deviations, the unconditional probability of a positive deviation of greater than two bushels is 59 percent, and there is a 23 percent probability of a greater than four-bushel deviation. The probability of a positive yield deviation greater than two (four) bushels, then, is 33 (13) percent.



Implications

An examination of the national average soybean yields in Argentina for the period 1978 through 2016 reveals an upward yield trend with substantial annual variation. The estimated linear yield trend points to a 2017 average soybean yield of 42.2 bushels per acre, 1.10 bushels below the 2016 average. Based on the projections of harvested acreage in the USDA’s January 12, 2017 World Agricultural Production report, yield at trend value for Argentina points to a 2017 crop of 2.03 billion bushels, 57 million bushels (2.73 percent) smaller than the 2016 crop. Using estimates of the historical yield trend deviations, we estimate there is an unconditional probability of 62 percent of a two bushel trend deviation. A trend yield deviation of two bushels per acre would add or subtract approximately 96 million bushels to our projection of Argentina’s 2017 production.

The USDA projects the 2017 Argentinian yield at 43.57 bushels per acre (1.37 bushels above the trend value) and production at 2.094 billion bushels, 7 million bushels larger than the 2016 crop. The USDA estimated production level for Argentine soybeans is 64 million bushels larger than implied by a trend yield. Recent reports in Argentina indicate severe flooding in many growing regions with the potential to reduce production by 100–150 million bushels. If the production reduction materializes in Argentina, 2017 will produce yields well below trend estimates. In the next article, we will examine the impact of La Nina events on Brazilian and Argentinian soybean and corn production.

Iowa Court Decision on Field Tiles | an interview with Jonathan Coppess

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Iowa Court Decision on Field Tiles | an interview with Jonathan Coppess
Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

The Iowa Supreme Court has ruled drainage districts in the state cannot be sued for the cleanup of nitrates in drinking water. Justice Thomas Waterman authored the majority opinion, writing that policy deciding who pays for nitrate removal is the jurisdiction of Iowa lawmakers. This was a win for the drainage districts says University of Illinois Agricultural Policy Specialist Jonathan Coppess. However, he says the Clean Water Act implications of the suit, about whether or not field tiles are point sources that can be regulated, remains to be addressed.

“So the big question under the Clean Water Act, as I understand it, is the Des Moines Water Works is claiming that the agricultural stormwater exemption under the Clean Water Act does not apply to drainage districts. In this case, because once it comes through the pipes it becomes a point source.” –Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

Again, the decision in the Iowa courts is that only lawmakers in the state can determine who pays for the cleanup of nitrates from drainage districts. It did not address issues related to whether or not field tiles should be subject to regulation under the Clean Water Act.