Farmland Prices and Farm Solvency Then & Now

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.

World Health Organization Classifies Red Meat “Probably” Carcinogenic

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. Download Audio

The Regular Climate Pattern of Brazil

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.

Don't Bet the Cash Rented Farm on a Loss

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.

Africa and Soybean Trials

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 Corn Crop is Unlikely to be Overestimated

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. This is not very likely.

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.

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.

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.

Working Capital on the Farm

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’.

Joaquin Could be Powered by Midwest Storm

The hurricane bearing down on the east coast of the United States may find new strength from a system in the middle part of the country.

Joaquin is a unique weather system as hurricane’s go. First, it has developed really fast. In less than three days its gone from nothing to really something says meteorologist Mike Tannura from t-Storm weather in Chicago, Illinois.

Quote Summary - This hurricane, at this point, is expected to have sustainable of 140 miles per hour. It would need to get to 155 miles per hour to reach a category five status.

Category five is the highest level possible. The key to it maintaining strength is the eye of the hurricane. If it stays in tact then Joaquin will be dangerous. Even if it doesn’t the system is going to move northward and interact with a different weather system already moving through the Midwest. If the two combine Tannura says a worst case scenario develops for the east coast.

Quote Summary - Then we would end up with a storm system similar to hurricane Sandy back in 2012. Now hurricane Sandy was a major storm. It was really big. We aren’t expecting that big, but something similar where you take a nontropical system in the Midwest and combine it with a tropical system in the Atlantic Ocean and striking somewhere along the east coast from North Carolina to Washington, D.C.

The other scenario has the two remaining independent systems. If this happens then Joaquin would run a parallel line to the east coast, but remain off shore. Either way heavy rains will fall, three to six inches, from South Carolina to New York City. Tannura says we won’t know until tomorrow, or maybe Saturday morning, if the storms will combine.