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Showing posts from April, 2016

Farm Economy Beginning to Show Signs of Stress

This is the third year of a financial crunch on the farm. It follows on the heels of a series of tremendous seasons since 2006. The extra money, from then, is now starting to run out.

The financial stress in the ag sector may really begin to show this fall if low commodity prices persist says the Director of the TIAA CREF Center for Farmland Research on the Univeristy of Illinois campus, Bruce Sherrick.

Quote Summary - It is already affecting cash rents and land prices some. However, on a percentage basis not as much as the current cash prices (would suggest) for delivery within this year at least.

Sherrick says a a couple of things have happened which explain this buffering. The last several years have been really quite good for agricultural incomes. So, farmers have pretty strong balance sheets. It is easier to weather a downturn, says Sherrick, after a few good years, than a bad year after a few bad years, “We are seeing, clearly, working capital crunches beginning to hit people. This is the first year that is material, and lenders are seeing and uptick in volume. As we’ve adjusted to more normal stocks, we are into a period were we think, ”this might be the last year were people can really just stand for what’s going on without making some major changes in how they manage cash rents, or inputs, or financial structures".

This does not mean the price of farm land will plummet. Long term interest rates are very, very low and the rate of turnover in farmland is supper small.

Money is cheap and farmland for sale is scarce.

Quote Summary - If you look at the number of acres that sell, maybe around 2% transfer per year within the agriculturally intense states. Only half of that moves outside of a family. The market is thin, and this helps buffer or slow down changes in farmland values because of changes in short term farm income. The low interest rates help people pay for a longterm investment with a stable cash return that can be rented for perhaps 3% of its value on a cash basis.

Farm land doesn’t look like such a dire situation, then, when you step back from it. It also has shown, very reliably says Bruce Sherrick, a positive correlation with inflation. Even if the price of commodities stay relatively low, it may be that the price of farmland, as an owned asset, will help farms stay afloat.

Ukraine Aiming to be World's #2 Ag Exporter

APK-Inform reports Ukraine to take the second position for agricultural products exports, following the USA.

Ukraine has rather good prospects for strengthening the positions of domestic agricultural commodities on the world market, declared the Verkhovna Rada deputy, President of Ukrainian Agrarian Confederation, Leonid Kozachenko.

According to him, in order to hold up its status of agrarian superstate, Ukraine has to invest at least 70 bln USD in the agricultural industry, and enlarge the production volumes of foodstuffs.

Ukraine will consume nearly 20% of the produced commodities, and export the remaining volumes, which will significantly replenish the state budget. Ukraine requires nearly 10 years of consolidated and stable work for development of effective public policy, deregulation and fight against corruption, to achieve the reporting objective. Only in such case, in the future Ukraine can confidently reach the second position following the USA by exports of agricultural products, said the President of Ukrainian Agrarian Confederation.

National New Era Cash Price Midpoints for Corn & Soybeans

The ag economists at the University of Illinois have updated their work predicting the “New Era” long range cash prices for corn and soybeans.

Seven years ago Darrel Good and University of Illinois colleague Scott Irwin predicted the average cash price for central Illinois corn and soybeans would be $4.60 and $11.20. It started with a simple idea. The last time the price of corn and soybeans had really changed was during the 1972/73 crop marketing year says Scott Irwin.

Quote Summary - Right. The first era was a $1.28, the second era was $2.36. The price jumped about 90%. We took that as our starting point and then realized this magnitude of jump made some sense given the market and other modeling exercises. We decided it seemed a reasonable estimate and to go with them. The equivalent numbers now are $4.35 on corn and $10.44 on soybeans.

As it turns out, those are pretty close to the actual national average monthly cash price over the first eight years of the new era. Corn has averaged $4.39 and soybeans $10.61. The fundamental question today, says Irwin, is “are these numbers still good or was the ”new era“ a temporary uptick in the market”. He is confident the numbers are solid, but cautions it was a one time move up from the old era. Pragmatically he means farmers cannot market their crop today the way they did as the move was happening.

Quote Summary - And you were rewarded for waiting, almost all the time, to do your marketing as that curve shifting occurred. I think we see the kind of opportunities in the grain markets that might be presented as the more traditional short-crop long-market-tail. If you do get that situation emerging… say corn prices, and I am not forecasting this… but let’s say there is a substantial production problem in the U.S. and corn rallied to $5.00. We wouldn’t expect that to last a long time.

There would be a quick and decisive production response in reaction to such a move in the market. The higher price then, would need to be rewarded sooner rather than later. The current rally in soybeans could be indicating just such a move, however, it would be based on poor weather conditions in South America rather than in the United States.

Quote Summary - Warning lights are flashing, that there may be opportunity ahead. Be prepared with a marketing plan, where you have some really well thought through pricing targets for your operation and be ready to execute when those opportunities arise.

You may read about the new era cash prices Scott Irwin and Darrel Good are projecting on the Farm Doc Daily website. The address is www.farmdocdaily.illinois.edu.

4-H Robotics Competition @ ILLINOIS

Did you know 4-H, that’s the world’s largest youth organization, is into robots. It is, and so are kids. Todd Gleason has more from an amazing robotics competition held in mid-April on the University of Illinois campus in Champaign, Illinois.

Wet Weather Ends in Argentina, Harvest Set to Continue



The price of soybeans have jumped in Chicago in part because of really wet weather in Argentina. That’s a done deal now says meteorologist Mark Russo of Riskpulse out of Chicago, Illinois.

Mark Russo follows agricultural growing conditions around the planet for Riskpulse. He made his comments during the Monday edition of the Closing Market Report from the University of Illinois, online at WILLAg.org.

Illinois Planting Date Studies for Corn & Soybean

It looks like more rain is coming to the corn belt. That'll concern farmers hoping to plant this year's crop. However, they've got time says University of Illinois Extension Agronomist Emerson Nafziger.

There's not huge losses of yield as long as you can get corn planted by the second week of May - Emerson Nafziger, University of Illinois 

The fact is Nafziger would rather wait than put a crop in the ground under not so great soil conditions, "I think it is easy at this time of year to do more harm than good by planting it when you say, " well I don't think this soil is quite ready, but I think we'll have to get started and go." And our goal is to get it planted when it is fit, and as soon as we can when it is fit".

Corn planting date response over 35 Illinois site-years, 2007-2015. Yields are expressed as a percentage of the yield produced by the highest-yielding date at that site.
Nafziger's planting date studies across the state of Illinois over the last nine years put the optimum planting date for corn at April 17th. Planting dates from April 5 to April 25 maximize corn yield within a two bushel range. Corn planted April 30th loses two bushels off the top, and a delay to May 10th puts the expected loss at 8 bushels to the acre.
 

It's clear, by the University of Illinois planting date studies, that soybeans sown in April can do well. This is the case even in southern Illinois, although it's really hard to get a good early stand. Yields in the top two-thirds of the state respond the same way to earlier planting dates. The earliest dates, starting around the 10th of April, have the highest yields and things fall off as time passes, however, Nafziger is a bit cautious about planting so very early. He simply states to start when field conditions are good to go.

Our work is showing the best time to plant soybeans is the last week of April to the first two weeks of May. - Emerson Nafziger, University of Illinois 

The average maximum yield for soybeans over the 23 site years of the study, gathered from 2010-2015, is 67 bushels to the acre. There is a two-and-a-half bushel decline from April 10 to April 30th, four bushels by May 10th, seven bushels for a delay to May 20th, 11 bushels to the end of the month, 14 by the 10th of June, and 19 by the 20th.

Soybean planting date response over 23 trials in central and northern Illinois, 2010-2015. Yields are expressed as a percentage of the yield of the highest-yielding date within each trial.
Interestingly, comments Nafziger, the usual halfway point for soybean planting in Illinois is about May 20th. That is, he says, only because of the wet conditions that keep farmers out of the field. Given all of this, the U of I agronomist says he wouldn't wait after planting corn to start planting soybeans, "We've seen some sizable yield losses with soybeans by planting too early, but by too early I mean the first half of April".

There are two ways to get lower yields from planting soybeans too early. First, there are drought years like 2012. When planting late in 2012 you picked up moisture later in the season to get better yields. In-other-words, too much dry weather during flowering can really do a number of the crop. The other is if it gets really cool early after soybeans have emerged. It can actually keep them physiologically below their maximum yield says Nafziger.

Pragmatically speaking, Emerson Nafziger says as long as soil conditions are good, he'd begin planting soybeans as soon as corn planting is completed and, after some momentary consideration, says he'd move to a soybean field if soil conditions in the next corn field weren't up to par.

Is Fall-Applied Nitrogen Still Present

Corn growers are concerned about the amount of fall-applied nitrogen that might have been lost through the winter and how this might change nitrogen management this spring.

The first question that needs to be asked on nitrogen management is simple says University of Illinois Extension Agronomist Emerson Nafziger. You need to know how much nitrogen the crop will need, then how much is naturally available, and finally, how much should be applied.

“Our best estimate, and this is a bit of a floppy number, is the crop will take up about a pound of nitrogen for each bushel it produces. About two-thirds of that is going to be in the grain and removed by harvest of the crop. The other third will be in the residue. Some of this will get back into the soil, some won’t”, says Emerson Nafziger.

The amount of nitrogen needed then is about 1 pound for every bushel expected. If the expected yield is 200 bushels to the acre, then it will need 200 pounds of nitrogen.

Pay attention to this part.

Nafziger wrote in an article for the U of I’s pest management bulletin on April 18th that the more productive soils in Illinois contain about 3.5% organic matter. A rule of thumb calculation, read it online in The Bulletin, puts the N from this organic matter at 140 pounds. In some years this is apparently all available to the crop, and in others it isn’t.

The N Rate Calculator, which you may find online, tries to average out the low and high organic N years. N added as fertilizer for corn following soybeans in southern and central Illinois should be about 170 pounds, 20 pounds less in northern Illinois.

As for nitrogen loss, Nafziger has this to say in The Bulletin as it relates to his recent nitrogen treatment studies, “ these results show both the risk of N loss and the benefit from delaying some of the N or using inhibitors may be a little less than we’ve thought. Getting data from another year or two will help paint the picture more fully, but these results give some reason to be confident that the N management systems in common use all have good potential to provide the crop with N. Adding costs by changing N management, for example by making another trip over the field to apply late N, may not provide a positive return compared to applying all of the N in one or two earlier trips.”

Nafziger says the corn crop takes up most of its nitrogen in June.

Soybeans, the Switch is On

Ever since USDA released the Prospective Plantings report March 31st, many have been wondering if farmers will decide to switch a few corn acres to soybeans. The higher price of that crop seems to make this more likely.



Farmers told USDA in March they would plant about 82.2 million acres of soybeans this season. This is one percent less than last year, and a million acres or so less than the trade had really expected. Prices have rallied since then and University of Illinois Agricultural Economist Darrel Good thinks that million acres could be back in play, but that it won’t really change much, "I tend to think there will be some modest switching given the price reaction we’ve had since that report was released. Soybeans are considerably stronger than when the survey was done and corn prices are steady to weaker than when farmers were surveyed. I wouldn’t be surprised to see up to a million acres, perhaps, move away from corn to soybeans or perhaps some other crops. Again, a million acres doesn’t alter the supply expectation very much".

However, very much, can result in a pretty good rally. Darrel Good and colleague Scott Irwin at ILLINOIS put together a supply and demand table for this year. They added 800,000 planted acres to soybeans, putting the figure at 83 million even. The two project this could result in a 267 million bushel ending stocks number with an average cash price of $9.45 a bushel for the year. USDA season’s average cash price for soybeans for the 2015 crop is $8.75. It’s important to note that while the ILLINOIS projection uses a larger planted acreage figure, it also includes a much lower average yield. Good says there are two reasons for this.
Quote Summary - Our calculated trend yields for both corn and soybeans would be a little less the USDA. So, we start a little lower than they start. And then we monitor the El Niño episode that tends to be fading pretty quickly right now. This suggests to us an elevated risk of below trend yields this year. We start with a lower trend yield on corn, 166.2, and I would want to fade that three or four bushels in my expectations right now. We’d start at 45.2 bushels on soybeans and fade that bushel or so based on the El Niño.
Actually, the projection is down 1.2 bushels to the acre for a projected nationwide average yield of 44.

University of Illinois 16/17 Soybean Balance Sheet Projection - April 13, 2016
USDA will release its first projection of the current growing season supply and demand tables May 10th. Those numbers most assuredly will not yet update acreage, nor are they likely to include a deviation from trend line based on summer weather predictions.

Implications of Corn and Soybean Planting Progress

Each Monday afternoon during the growing season USDA releases the Planting Progress report. Todd Gleason files this report on how it is assessed by the trade; and how really it is summer weather that make the difference, not the pace of planting.

Nafziger on 2016 Growing Season

Univeristy of Illinois Extension Agronomist talks with Todd Gleason about the amount of nitrogen available to the corn plant during the growing season, how that fertilizer faired over the warm wet winter months, when to plant corn, and if it is ok to plant soybeans earlier than normal.

TTIP & Ag Polices - with Damien Levie, EU Trade Negotiator

There are two trade negotiations under consideration in the United States at this time. We often hear about TPP, or the Trans Pacific Partnership. The other is called T-TIP. Todd Gleason has more on the European perspective of this contentious deal.